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Redrow plc
Redrow House, St. David’s Park, Flintshire CH5 3RX
Telephone: 01244 520044
www.redrow.co.uk
2018
ANNUAL REPORT
REDROW ANNUAL REPORT 2018
Highlights
£1,920m
£1,660m
£380m
85.3p
£315m
70.2p
£1,382m
£1,150m
£864m
£250m
£204m
55.4p
44.5p
£133m
28.3p
14
15
16
17
18
14
15
16
17
18
18
14
15
16
17
18
18
18
£1,920m
Revenue
+16%
£380m
Profit before tax
+21%
85.3p
Earnings per share
+22%
28p
17p
5,913
5,416
28.5%
26.0%
4,716
4,022
3,597
22.8%
23.7%
18.0%
10p
6p
3p
14
15
16
17
18
14
15
16
17
18
18
14
15
16
17
18
18
18
28p
5,913
Dividend per share
Legal completions (inc. JV)
+65%
+9%
28.5%
ROCE
+10%
Award highlights
Contents
STRATEGIC REPORT
GOVERNANCE REPORT
FINANCIAL STATEMENTS
01 Highlights
02 Our Investment Case
04 Our Strategy
06 Our Business Model
08
14
16 Chairman’s Statement
Chief Executive’s
18
Review
Thriving Communities
Our Markets
22 Operating Review
48
52 Risk Management
Financial Review
60 Corporate Governance
104
Report
Independent Auditors’
Report
62 Board of Directors
70 Audit Committee Report
76 Nomination Committee
78
Report
Placemaking and
Sustainability
Committee Report
80 Directors’ Remuneration
Report
96 Directors’ Report
102 Statement of Directors’
Responsibilities
110 Consolidated Income
Statement
110 Statement of
Comprehensive Income
111 Balance Sheets
112 Statement of Changes
in Equity
113 Statement of Cash Flows
114 Accounting Policies
119 Notes to the Financial
Statements
143 Glossary
SHAREHOLDER
INFORMATION
144 Corporate and
Shareholder
Information
145 Five Year Summary
Find more information at:
redrowplc.co.uk
COVER IMAGE: BURCOTE PARK, TOWCESTER
01
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02
Redrow plc Annual Report 2018
STRATEGIC REPORT
Our Investment Case
Successful leadership team
Redrow has a strong, experienced and successful
leadership team and is committed to developing the
next generation of homebuilders.
Placemaking
We focus on delivering high quality homes and
creating community and physical environments that
help promote people’s sense of wellbeing.
15%
£184m
of workforce on structured
training programmes
committed to fund improvements
to local communities
32%
1,102
of divisional directors appointed in
the year from internal promotions
affordable homes delivered to our
communities
Quality and customer service
By listening to and understanding our customers’
requirements, we continue to evolve our product
and customer service. We focus on quality,
differentiation and value for money for customers.
89.1%
customer
recommendation
5th consecutive year
Top 100 Apprenticeship Employer
Excellent product range
Redrow has an excellent product range which
continues to evolve.
Expertise in land buying
Redrow has the expertise and resources to ensure
that the right land opportunities are taken to deliver
targeted geographic expansion.
A strong and efficient balance sheet
Redrow has net assets of over £1.4bn. The Group is
focused on delivering superior levels of return on
equity and return on capital employed from an efficient
use of its capital base.
£1.7bn
revenue value of private
reservations secured in the year
Creating
communities
a key focus
c7,500 plots
acquired to add to current land holdings
2,727 plots added
28.0%
return on equity
28.5%
from forward land to owned land holdings
return on capital employed
Our benchmark for
success in 2020
£1.9bn
£1.7bn
£1.4bn
c£2.2bn
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TURNOVER
£315m
£250m
c£430m
£380m
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PROFIT BEFORE TAX
70.2p
55.4p
95.0p
85.3p
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EPS
28.5%
26.0%
23.7%
25+%
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ROCE
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Our Strategy
MEASURE
2020
OBJECTIVES
To create long-term sustainable value for all our stakeholders by
developing thriving communities with high quality homes that
provide a better way to live.
Developing
Thriving Communities
We develop thriving communities by creating better
places to live. There are three strands which support
this work:
• Nature for People – increasing biodiversity on our
developments and connecting communities with
nature on their doorstep;
EPS
DPS
Revenue
KEY PERFORMANCE
INDICATORS
2018
2017
• EPS increasing
to 95p
85.3p
70.2p
• DPS of 32p
28p
17p
• Revenue increasing
to c£2.2bn
£1,920m £1,660m
• Placemaking for Wellbeing – our innovative
Placemaking framework sets out eight design
principles, which define how we achieve
sustainable development on all our sites; and
• Homes for All – building the right homes, in the
right places to create cohesive and thriving
communities.
Sales Outlets
• 150 outlets
132
132
Monies
committed
to fund
improvements
to local
communities
• Continued
investment in local
communities
£184m
£163m
• Affordable
homes delivered
1,102
1,014
Building Responsibly
Ensuring our sites are safe places to work, live and
visit is central to our build operations. As we
continue to help deliver much-needed new homes,
we are also striving to constantly improve our
quality and customer service, whilst working to
protect the environment. The themes which
support this activity are:
• Working Safely and Considerately – creating
healthy, safe and considerate working
environments;
• Putting Customers First – putting our
customers first and striving for excellence in all
that we do; and
• Managing Resources – creating homes of
enduring quality and working to minimise our
environmental impacts.
Valuing People
ROCE
• ROCE of 25+%
28.5%
26.0%
Land holding
years
• Maintain land
holdings at c4 years
4.5 years 4.5 years
Waste diverted
from landfill
90% or more
customer
recommend
rating
Private
reservation rate
(excluding PRS)
• >95%
96.8%
95.4%
• HBF 90% customer
recommend rating
89.1%
88.9%
• Maintain an
appropriate balance
in availability of
product in the right
locations
0.67
0.68
Our aim is to inspire future industry talent and to
support our colleagues at every stage of their
career. The two strands which support this work are:
Number of
trainees
• Maintain level of
trainees at 15% of an
increasing workforce
343
328
• Valuing and Developing People & Partners – by
training and developing people to succeed;
driving Redrow colleague and partner advocacy
and improving the wellbeing of Redrow’s people
and creating an inclusive workplace; and
• Inspiring the Next Generation to Build –
collaborating with partners to positively impact
people and communities through education and
engagement activities.
Accident
incident rate
by site
• Accident incident rate
by site maintained at
0.3 or below
0.35
0.30
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Our Business Model
Our strategy is achieved by channelling our resources through
our strategic principles and ensuring these are embedded in
our relationships with our primary stakeholders.
Building
Responsibly
V
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Land, Plan
nin
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Thrivin g
Co m
m u nitie
Custo m
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e r v i c e
Creating long-term
sustainable value
&
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S
&
ercial
m
INPUTS
Land Holdings
Our People
Our Placemaking Skills
Our Financial Resources
S
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Construc t i o n
e KPIs
Com
a n a g e m ent
Risk
M
OUPUTS
Customers
Communities
Suppliers & Subcontractors
Employees
Shareholders
INPUTS
Land Holdings
The quality and location of our land holdings is a vital component to enable us to deliver sustainable and profitable
growth. Our experienced land teams focus on the investment in and promotion of strategic land together with shorter term
opportunities receptive to the value we can add through our master planning, placemaking and technical expertise.
Our People
Our employees are at the heart of our business and our continued success and growth is achieved through the talent,
hard work and dedication of our people.
Our Placemaking Skills
We recognise that the setting of our homes is of equal importance to the quality and design of the individual homes
themselves. We aim to ensure our developments enhance the natural features of the landscape as well as connecting to and
sharing amenities with local communities.
Our Financial Resources
Appropriate financial resources are a key enabler to support the delivery of our strategy. We ensure that our strategic
delivery is regularly and clearly communicated to our investors and our relationship banks.
OUTPUTS
Customers
07
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Our customers are fundamental to our business and we take great care to research their needs, listen to their feedback and
evolve our carefully designed new homes as lifestyles evolve.
Communities
We adopt a collaborative approach, engaging with community stakeholders to ensure our developments become thriving
communities, delivering better places to live.
We work closely with our experienced suppliers and subcontractors to maintain a strong and reliable supply chain delivering
quality products and workmanship.
Suppliers & Subcontractors
Employees
Our employees are fundamental to our business; we invest in attracting and retaining talented people with a key focus on
training and development to enable our people to build rewarding careers and deliver succession planning for the future.
Our Shareholders are the primary providers of financial resources enabling us to create long-term sustainable value.
We aim to provide a balance between capital growth and dividend income to our Shareholders.
Shareholders
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Thriving Communities
Creating places for people to
enjoy now and for years to come.
WOODFORD GARDEN VILLAGE, CHESHIRE
09
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Woodford Garden Village is
set to be one of the biggest
developments in the North
West over the next ten years;
delivering over 900 new
homes, as well as a host of
brand new facilities all
within easy reach of central
Manchester.
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At Redrow we believe in building better places to live.
Our passion for design, sustainability, innovation and people
ensures we bring this vision to life.
Our extensive experience helps us to understand the wants
and needs of growing communities and we use this unique
insight to ensure we’re always improving what we do.
Our distinctive high quality homes sit together, with fantastic
community facilities and within stunning natural settings or
vibrant city suburbs to form a whole new place for people to
live and a place to feel proud of.
We are incredibly passionate about what we do and we hope
our developments will inspire the next generation of
housebuilders and form new communities that provide people
with a better way to live.
Based at the historic former aerodrome at Woodford
where iconic aircraft such as the Lancaster and
Vulcan bombers were manufactured, phase one of
this landmark development consists of 145 high
quality homes in a range of sizes from two to five
bedrooms. Sensitive to its idyllic rural location, the
development will feature significant acreage of
public open spaces; including traditional village
greens and promenades that will create a superb
environment for years to come. This major
development required significant planning and all
elements were carefully considered to ensure
Woodford retained its iconic history and provided
the community with attractive outdoor spaces that
can be enjoyed all year round.
Using traditional garden village principals we have
been able to design a thriving community that has
enhanced the surrounding environment. The homes
fit seamlessly with the local vernacular, the tree-
lined avenues create a picturesque place to live and
the classic village green, parks and play areas
provide room to grow.
This has not only opened up the space for all to
enjoy but it has encouraged those living here to
lead a healthy and active lifestyle.
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Thriving Communities continued
EBBSFLEET GREEN, KENT
PLASDŴR, CARDIFF
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Ebbsfleet Green is more than a
place to live; it’s a place for
living. This 100 acre site in Kent
has been developed into a
sustainable community where
everyone feels connected to
the environment and each other.
Since its inception, every element of Ebbsfleet
Green has been carefully considered, from looking
after the heritage of the site, to building new streets
that connect residents to the wider area.
The development has provided 920 new homes,
which all sit within an attractive setting that’s linked
by footpaths, cycleways and tree-lined avenues.
There’s something here for everyone, with three
distinct villages, a selection of starter, affordable
and family homes and a combination of properties
from our Heritage, Abode and Regent collections.
The vibrant village hub is at the heart of the
community, designed to bring people together and
provide them with everything they need for
everyday life. A picturesque village green sits at its
centre, with space for communal gatherings and a
chance to enjoy a breath of fresh air. One third of
the development has been left for public open
space and sports fields, enabling residents to
stretch their legs and encouraging them to lead a
healthy and active lifestyle. The allotments and
orchards have also been designed with
sustainability and healthy living in mind.
The village also has space for a community centre, a
primary school, shops, a new hotel and a pub.
Although all of this is within walking distance,
transport connections have been carefully planned
including the bus route that runs through the
development linking residents to the wider area.
All of this combines to create a special community
that enriches the lives of all who live here.
One of our most ambitious
projects to date, this £2bn
garden village will deliver
7,000 homes on over 350
hectares of land over the next
15-20 years.
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Our vision at Plasdŵr is to create a world-class,
sustainable community that blends the history of
the area with the best of modern living, all within a
stunning country park setting.
A key factor in our master plan has been developing
sustainable transport links. Rapid growth throughout
the area has led to a lot of congestion within Cardiff
and the surrounding area. Our challenge has
involved helping to solve the city’s housing
problems whilst trying to avoid adding to the
transport problems. To achieve this we have worked
closely with The City of Cardiff Council to ensure
that Plasdŵr complements the Local Transport Plan.
pounds in new bus lanes in and around Plasdŵr and
developed safe cycle routes and cycle superhighways.
This all combines to encourage local residents to
adopt sustainable transport habits from the day they
move in.
Residents will also have access to a range of
excellent facilities on their doorstep including four
primary schools, a secondary school, a health
centre, shops, leisure centres, pubs and restaurants.
This will not only provide people with places to go
and things to do, it will also result in around 3,000
new jobs so residents can work, rest and play
without ever leaving the community.
We have supported extra bus services and new bus
stops throughout the development to ensure residents
are within walking distance of affordable and reliable
public transport. We have also invested millions of
With our ability to see the problems of the present and
develop solutions for the future, our vision of an
innovative new garden village has truly been brought
to life at Plasdŵr.
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Thriving Communities continued
COLINDALE GARDENS, NORTH LONDON
AMINGTON GARDEN VILLAGE, TAMWORTH
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By opening up the site,
transforming it into a new
neighbourhood and
connecting it to the
surrounding streets, Colindale
Gardens is uniting the area as
a thriving community.
Colindale Gardens in North London, is a 48 acre site
formerly owned by the Metropolitan Police. Within a
decade more than 6,000 people will live at
Colindale Gardens. In addition to the 2,900 new
homes, across 24 blocks of apartments and
townhouses with a residents’ gym and concierge
service, there will be a new neighbourhood centre
with commercial and retail space.
The scheme is designed around a network of
outside spaces including walkways, cycle paths,
large open green spaces and the central four acre
park – effectively a modern village green for the
new community.
Around £143m of community benefits are being
provided as a result of the development. These
include a primary school, a health centre, a new
neighbourhood centre, a nursery, nine acres of
public open space and community financial
contributions. £11m will be invested in transport
around the development including enhancements to
Colindale tube station and bus routes in the local
area.
Amington Garden Village
reflects Redrow’s commitment
to put the natural environment
at the heart of its
developments as part of the
ethos of creating thriving
communities.
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Redevelopment of the 60 hectare, former golf
course site was a complex undertaking. The 1,100
home scheme has potential for up to a decade of
production.
Amington Garden Village is a prime example of
Redrow’s placemaking principles of creating
sustainable developments which are great places to
live.
Amington Garden Village offers everything from two
bedroom properties to substantial five bedroom
family homes. The result is a community which is
home to first time buyers, families and rightsizers.
A landscape strategy was drawn up to outline how
25 hectares of land would be retained and
enhanced as public open space for recreational use
by the wider community. The design aims to retain
existing good quality trees and hedgerows and will
be enhanced by the addition of new trees, shrubs,
hedgerows and wetland planting.
A new community woodland which will include
footways and cycleways will be created in the south
west of the development of c8 hectares along with a
community orchard and an equipped play area.
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Our Markets
PLANNING
The Government finally published the National Planning
Policy Framework (NPPF) at the end of July, after nearly
three years of consultation. There are a number of
measures within it that should speed up the delivery of
housing across the country, including a standard
methodology for calculating housing need, a new
housing delivery test, and requirements on councils to
meet their housing needs, to produce local plans and
keep them up to date. In addition, regulations come into
force at the beginning of October that provides planning
permission for the development of land may not be
granted subject to a pre-commencement condition
without the written agreement of the applicant to the
terms of the condition. This should help to reduce the
number of unnecessary conditions being imposed on
planning permissions enabling developers to get on site
and deliver housing more quickly.
The number of applications granted in 2018 was down
2% on the previous year. This was disappointing given
the need for new homes and reverses the gently
increasing trend seen over the past few years.
MORTGAGE APPROVALS
Mortgage approvals remain one of the key indicators of
the level of activity in the housing market. Approvals in
the calendar year 2017 were broadly in line with 2016.
Even with the base rate increases in November 2017 and
August 2018, mortgage rates remain at near historically
low levels.
Seasonally adjusted figures for January 2018 to June
2018 average 64,000 approvals per month, a 3%
reduction on the equivalent period in 2017.
HOUSING SUPPLY
NHBC new build starts totalled 134,500 in the year to
March 2018. This compares to 140,100 in the equivalent
period last year, a 4% decrease.
This reduction primarily reflects a significant decrease in
new build starts in Inner London zones.
RESIDENTIAL TRANSACTIONS
Residential transactions in England and Wales fell by c2%
in the 2017 calendar year compared to 2016 but with still
c1.1 million residential property transactions of £40,000
or above completed during 2017. This reflected a weak
secondary market.
There were c48,000 Help To Buy equity loan
completions in the year to March 2018. This was a 21%
increase on the prior year to March 2017 (39,800).
15
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Chart 2
Mortgage approvals
calendar year (No. - ‘000)
736
769
806
798
796
Chart 4
NHBC build starts, all sectors
(England and Wales) (No. - ‘000)
Chart 6
House Prices Nationwide
House Price Index (£ - ‘000)
40
30
20
10
500
400
300
200
100
Q4
15
Q1
16
Q2
16
Q3
16
Q4
16
Q1
17
Q2
17
Q3
17
Q4
17
Q1
18
Q2
18
London Average
UK Average
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Source: Bank of England, CML
0
Q3
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Q4
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Q1
16
Q2
16
Q3
16
Q4
16
Q1
17
Q2
17
Q3
17
Q4
17
Q1
18
Chart 1
Planning applications
granted to March (No. - ‘000)
349
360
373
386
379
Chart 3
Mortgage approvals 2018
(seasonally adjusted) (No. - ‘000)
67
64
63
63
64
65
14
15
16
17
18
Source: Department for Communities and
Local Government – District Level applications
Jan
Feb
Mar
Apr May
Jun
Source: Bank of England, CML
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Chairman’s Statement
“I am delighted to report that Redrow has once again delivered
another year of strong growth and record financial results.”
generation which resulted in the Group moving from
a net debt position of £73m at the end of the previous
financial year to a positive cash position of £63m at
the end of June 2018.
Our Return on Capital Employed also improved from
26.0% to 28.5% and Return on Equity from 27.7% to
28.0%.
In March 2017 we announced our intention to
increase our dividend payout ratio to 33% over the
medium term. Due to our ongoing strong cash
position the Board is proposing a final dividend of
19p per share for 2018 (2017: 11p), making 28p per
share for the full year an increase of 65% on the prior
year. This equates to a payout ratio of 33% (2017:
24%), achieving our target ahead of plan.
Subject to shareholder approval at the Annual
General Meeting, this will be paid on 13 November
2018 to shareholders on the register as at close of
business on 21 September 2018.
MARKET
Despite the uncertainty surrounding Brexit, demand
for new homes continues to be robust, and overall
house price inflation has moderated to a sustainable
2%. We entered the current year with a strong order
book of £1.14bn, an increase of £110m over the
previous year.
Mortgage availability is excellent, and with low
interest rates by historic levels, the mortgage market
remains very competitive.
Help to Buy continues to support home buyers and
the housing industry. In the last financial year 1,794
of our private reservations were secured through
Help to Buy, a similar level to the previous year.
LAND AND PLANNING
During the year we added 7,455 plots to our current
land holdings. Of these, 2,727 were converted from
our strategic land. As a result, net of completions
and re-plans, our current land holdings increased by
1,530 plots to 27,630 (2017: 26,100). Our strategic
land holdings also increased by a net 4,300 plots to
30,700 (2017: 26,400).
Growing the number of outlets in line with the
increased land holdings remains a challenge as the
journey from ‘outline planning permission’ to
‘implementable planning permission’ remains as
bureaucratic as ever.
STEVE MORGAN
Chairman
I am delighted to report that Redrow has once again
delivered another year of strong growth and record
financial results, achieved by completing 5,913 new
homes (including our Croydon Joint Venture), an
increase of 9% on the previous year.
FINANCIAL RESULTS
Group turnover rose by 16% to £1.92bn (2017: £1.66bn)
as a result of the increase in legal completions to
5,913 together combined with a 7% rise in average
selling price to £332,300 (2017: £309,800). The
increase in average selling price was mainly due to
the relatively faster growth of our southern
businesses.
Gross profit at £469m was £64m above the 2017 level
and gross margin was in line with last year at 24.4%.
With firm control of costs, operating expenses only
increased by £4m to £87m, resulting in operating
expenses reducing as a percentage of turnover from
5% in 2017 to 4.5% in 2018.
Operating profit was £382m, up 19% (2017: £322m),
with an operating margin of 19.9% (2017: 19.4%).
Pre-tax profits were £380m, up 21% (2017: £315m)
including a £5m after tax contribution from our
Croydon Joint Venture. Earnings per share increased
by 22% to 85.3p (2017: 70.2p).
This excellent trading performance and tight control
of working capital enabled us to achieve strong cash
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The gross development value of our total land
holdings now stands at £20bn giving Redrow an
outstanding platform for continued growth.
PEOPLE
As we continue to grow the business we continue to
add to our workforce, creating a further 100 jobs in
2018. We now directly employ 2,300 people (2017:
2,200), with many thousands more supported
indirectly through our subcontractors and suppliers.
We have recruited 173 (2017: 150) new apprentices,
trainees and graduates in the last year making 343
in total, an industry leading 15% of the workforce.
We have been awarded a Top 100 Apprentice
Employer by the National Apprentice Awards for the
fifth consecutive year.
Our excellent growth record is due to the ongoing
commitment and hard work of the whole Redrow
workforce together with our subcontractors and
suppliers, for which I thank them.
CURRENT TRADING AND OUTLOOK
We have excellent products, especially the
Heritage Collection, and demand for our homes is
strong. Despite Brexit uncertainty and the
exceptional summer weather, sales revenue in the
first 9 weeks is in line with last year. We expect to
continue to grow our land holdings and increase the
number of average outlets in the current year by 5%
to 130 (2018: 124).
Redrow is committed to growing our output to help
the country’s requirement to increase the number of
new homes built. We have a very strong forward
order book, first class land holdings, an excellent
balance sheet and we are able to react quickly to
changing circumstances. However, there is no doubt
that clarity over Brexit and the future of Help to Buy
would improve market sentiment. Given that clarity,
we will continue to deliver.
STEVE MORGAN
Chairman
3 September 2018
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THE FAIRWAYS, HERNE BAY, KENT
18
Redrow plc Annual Report 2018
STRATEGIC REPORT
Chief Executive’s Review
“Another year of exceptional results.”
from Forward Land was again strong and accounted
for 2,727 of the plots acquired.
The average size of site acquired in the year was
around 180 plots as we took advantage of being
able to secure some larger opportunities. These
larger sites were generally acquired on more
favourable terms and relieve pressure on future
outlet replacement. They also allow us to make full
use of our award winning product range to both
create great places to live for everyone and to
appeal to a wider market.
We have a reputation for designing individual
homes that are attractive and meet the modern-day
needs of our customers. But of equal importance is
their setting. In recent years we have focused on
ensuring our developments enhance and make the
most of natural features as well as connecting to
and sharing amenities with local communities.
Developing thriving communities by valuing people
and building responsibly have become the key
pillars of our operational strategy. Over the course
of the last year these principles have been
embedded into the business.
THRIVING COMMUNITIES
Redrow 8 is a suite of placemaking design principles
we have adopted to ensure our developments
include all the key requirements to create great
places. It is consistent with Building for Life 12 which
is a government-endorsed standard for well-
designed homes and neighbourhoods.
We recognise that the quality of the places we
create can have a lasting impact upon the health
and wellbeing of those who live in our homes. We
have recently joined the NHS Healthy Towns
Network which is an initiative to improve the health
of those living on new housing developments. We
are also supporting the Wellcome Trust in their
research project to explore how urban development
can impact long-term health.
We know our customers are increasingly more
concerned about the environment in which they live.
Nature for People is our way of increasing
biodiversity. We have a long-standing relationship
with the Bumblebee Conservation Trust and we
have recently established a new partnership with
The Wildlife Trusts to help us develop a strategy to
achieve a net biodiversity gain across our
developments.
JOHN TUTTE
Group Chief Executive
CONTINUED GROWTH AND EXPANSION
The Group’s successful growth strategy continues
to deliver exceptional results. Legal completions
(including JV) increased by 9% to 5,913 in the year
with revenue rising by 16% to £1.92bn and profit
before tax up 21% to £380m (2017: £315m).
We have continued to expand our geographical
coverage. Our new East Midlands division made its
first full year trading contribution and our Southern
divisions continue to grow strongly as we target
increasing our market share in this area of high
demand. Colindale Gardens, our flagship
development in North London, also made a
significant contribution delivering its first
completions.
To underpin our future growth we have announced
the launch of a new division in Thames Valley and
reorganised our Greater London operations into
East and West divisions to focus on growth in the
capital. We have also re-structured Harrow Estates
to draw on its wealth of experience to help manage
and support our group-wide forward land activities.
INVESTING IN PLACES
The land market remained attractive throughout the
year, we acquired 7,455 plots and, after taking into
account legal completions, land sales and replans,
our owned and contracted land holdings with
planning increased to 27,630 plots (2017: 26,100
plots) representing 4.8 years of supply. Pull-through
As well as building much-needed new homes we
make significant contributions to the infrastructure
of the wider communities in which we work. Last
year we estimate we committed £184m to fund local
improvements including new schools, community
centres, medical and sporting facilities, footpaths
and cycleways and attractive areas of open space.
Our annual employee satisfaction survey that
achieved a record response, reassured us that
overall we are a highly respected employer with
95% of our people saying they are proud to work for
Redrow. This said, we continue to look at ways to
improve the working environment and we have
recently launched a number of initiatives around
communication and health and wellbeing.
VALUING PEOPLE
In response to our continued growth we created
around 100 new jobs during the year: we now
employ just under 2,300 people directly and many
more times this through our supply-chain.
Training and developing the next generation of
housebuilders remains high on our agenda. 15% of
the workforce are trainees on structured training
programmes and I am delighted that we retained
our listing as a Top 100 Apprenticeship Employer.
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WOODFORD GARDEN VILLAGE, CHESHIRE
20
Redrow plc Annual Report 2018
STRATEGIC REPORT
Chief Executive’s Review continued
We have a number of strategic partnerships with
colleges across the country and the first students
will enrol this year on our dedicated housebuilding
degree which has been developed in conjunction
with Liverpool John Moores University and Coleg
Cambria.
We are a Patron of the 5% Club which is a movement
of FTSE employer-members working to tackle
critical skills challenges. Its members represent the
gold standard of training and skills development
across all industries.
THE MARKET AND OUTLOOK
The new homes market remained fairly stable
throughout the financial year despite a continuing
weak secondary market that in particular affects
sales chains in the upper-end of the price range.
The Group secured just under 4,500 private
reservations in the year representing £1.7bn of
revenue. With the exception of Central London,
where we only have a handful of properties to sell,
we continue to see encouraging levels of demand
for our homes.
BUILDING RESPONSIBLY
Our responsibility to work safely and considerately
is a top priority for the business.
During the year we restructured our Health, Safety
and Environmental Management teams. Resources
have been increased and reorganised into two
distinct areas of responsibility: compliance through
regular site audits and development to improve
overall health, safety and environmental
management.
NextGeneration is an independent organisation
which benchmarks the UK’s top 25 housebuilders
on their sustainability performance. During the year
we retained our Gold standard and moved-up into
third place in the rankings. We are also Gold
members of the UK Green Building Council.
Outlet openings were as predicted weighted
towards the second-half. Although the Group
opened 53 new outlets in the year, these were more
than offset by closures that ran ahead of forecast
including a few ongoing temporary closures due to
planning and land drawdown delays. We operated
from an average of 124 outlets in the year. As our
larger sites come on-stream, we expect to open and
close fewer outlets in financial year 2019. As a
consequence, we are forecasting a small increase in
the average number of outlets that will be operating
throughout the year.
We live in challenging political and economic times.
We can however draw comfort from knowing there
remains a strong demand for new homes supported
by both a competitive mortgage market and the
highly successful Help to Buy scheme.
Quality and customer service is also a high priority
for us. We are currently rolling out a tablet based
quality control system to replace traditional
out-dated checklists. This system will archive
inspections and images and allow direct
communication with contractors to better manage
standards and quality.
We are well-placed to meet the challenges ahead.
Our focus on design means our homes are desirable
and in sought-after places and we have entered the
new financial year with a record order book. We
have some excellent new sites in the pipeline that
will underpin current sales rates as they come
on-stream.
In the annual HBF customer satisfaction survey we
retained our four stars rating with a recommendation
level of 89.1%. With the improvements we are
making in this area of our business, our
recommendation level is currently trending above
90%.
We continue to explore opportunities to improve
productivity through the use of more offsite
manufactured components. On our Padcroft
development in West Drayton we are using services
pods and in two of our divisions we are trialling
modular garages. These innovations not only
reduce reliance upon site based skilled workers but
also give more certainty over costs. During the year
we estimate that build costs increased by around 4%
with spikes in some material costs being offset by
easing labour cost pressures.
I am confident given the talent, dedication and
commitment of our team and wider workforce, we
remain in a strong position to overcome any political
and economic stumbling-blocks to deliver excellent
results in 2019 and beyond.
JOHN TUTTE
Group Chief Executive
3 September 2018
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COLINDALE GARDENS, NORTH LONDON
22
Redrow plc Annual Report 2018
STRATEGIC REPORT
Operating Review
LAND, PLANNING & DESIGN
Using our planning and design skills to
develop our quality land holdings into
thriving communities is fundamental to
our strategy and continued success.
OWNED AND CONTRACTED
LAND BY GEOGRAPHY (PLOTS)
2018
North
Central
South
Greater London
2018
5,331
7,848
10,356
4,095
27,630
FORWARD LAND BY CATEGORY (PLOTS)
2018
Land owned without planning
Land contracted without planning
Options with housing allocation
Options with realistic prospect
2018
2,973
2,722
12,257
12,748
30,700
PLACEMAKING
Over the past 40 years or so we have completed
hundreds of new communities setting our high
quality and distinctive homes within attractive
landscaped spaces. Creating great places to live
has become part of our culture and we are proud
to develop communities that will leave a lasting
legacy. We continue to take an expanding and
leading role in the delivery of a new generation of
Garden Villages with self-contained communities
that include schools, amenities and homes set
within a network of streets and accessible green
spaces. Our Woodford, Ledsham, Amington,
Ebbsfleet and Plasdŵr Garden Villages are all
under construction and the first families have now
taken up occupation. These new communities
provide an exciting benchmark for the quality of
new large-scale communities across the country.
The Government has introduced a number of
initiatives to tackle the under supply of homes but in
doing so, they have made it clear that the standard
of design must not be compromised. Government
has also reaffirmed its commitment to placemaking
in the new draft NPPF which promotes early and
effective engagement throughout the planning
process with a focus on quality design. At Redrow
we are well-placed to respond positively to this new
agenda and have recently finalised our own set of
placemaking principles. “Redrow 8” draws on our
many years of experience of delivering high quality
distinctive places. We have distilled the key
elements that make our much-loved communities so
successful to create a scorecard to benchmark the
quality of the places we design. A “Redrow 8”
design manual will be launched this year which will
communicate our placemaking approach to
customers, local authorities and other stakeholders.
The principles contained in “Redrow 8” will ensure
that all of our developments continue to meet high
placemaking standards. One of these principles,
“Streets for Life”, has been applied effectively at
Woodford Garden Village to design a network of
attractive ‘shared surface’ community streets.
“Homes for All” is another of the the eight principles:
at our development at Wilton Hill, we are providing a
wide range of house types together with 44 homes
for former service personnel, the first time in the UK
that a development has been built to specifically
address the needs of veterans by supporting them
into independent living in an integrated way.
LAND
The Group acquired 7,455 plots with planning
permission during the year to add to our owned
and contracted land holdings, which more than
replenished our 5,718 record legal completions.
After land sales and the impact of replans, we
ended the year with 27,630 plots in our owned and
contracted land holdings, a 6% increase on the
preceding year closing position (2017: 26,100).
Forward land again made a healthy contribution
comprising 37% of the 7,455 additions across 17
sites, backing up its c60% across 22 sites
contribution in 2017. The Group was very successful
in the year in securing new forward land
opportunities and we increased our forward land
holdings by 16% ending the year at 30,700 plots
(2017: 26,400 plots). Approximately 40% of our
forward land holdings are allocated for housing in
Local Authority Plans.
Given the ongoing importance of forward land to
the business, Harrow Estates has been restructured
during the year and has assumed responsibility for
overseeing and strengthening further the Group’s
forward land holdings.
BRINGING BENEFITS TO THE LOCAL
COMMUNITY
Last year our developments delivered significant
value to the wider community: building education
facilities, community centres, transport infrastructure
and health centres. In total we committed £184m to
local communities through infrastructure and
affordable homes and provided c93 hectares of
public open space. At Badbury Park, Swindon for
example, in addition to funding the construction of a
school and community centre, we are also setting
land aside for allotments. On our Bloxham Vale
development in Banbury, in addition to creating play
areas, allotments and public open space, we are
making significant investment in education allocating
c£3m for primary and secondary school facilities.
CREATING HEALTHY PLACES TO LIVE
Pressing health challenges such as obesity, mental
health issues, physical inactivity and the needs of
an ageing population, are strongly influenced by our
physical environment. New housing developments,
if planned and designed correctly, can provide an
opportunity to encourage healthier behaviours,
reduce ill health and encourage greater
independence and self-care. “Placemaking for
Wellbeing” is an increasingly important part of our
strategy. Health and urban design is a complex
issue so we have been supporting the UPSTREAM
research project, funded by the Wellcome Trust, to
explore how those responsible for urban
development can factor long-term health outcomes
into their decision-making.
We have also become members of the newly
formed NHS Healthy Towns Network. The purpose
of the network is to explore how new housing
developments can achieve better health outcomes.
This follows on from the Healthy Towns Programme
where the NHS are working with ten demonstrator
sites across England to shape the health of
communities. We are currently building homes on
the Ebbsfleet development, Kent which was one of
those ten developments. When completed the
Ebbsfleet Green development will have a wealth of
health, leisure and community facilities ranging from
a new park, including sports pitches and tennis
courts, community allotments, a local shop,
community facilities and a community hall.
Our Herne Bay development, Kent is another
fantastic example of designing a development to
encourage active and healthy lifestyles. At the heart
of the development is a sports hub of around 15
acres which includes multiple sport pitches and
tennis courts. The site will include a doctors surgery,
health centre and also a residential care home.
Cycle routes and footpaths inter-connect the
development with the local area and the coast.
We are also working, as a business, to support local,
regional and national events that help to foster positive
behaviour change around living healthier lifestyles. We
were proud to be the main sponsor of three cycling
SOCIAL HOUSING
LEGAL COMPLETIONS (NO.)
1,102
1,014
834
634
571
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Operating Review continued
events; Bike Chester, Bike Oxford and Bike Bath which
encouraged people in those areas to get on their
bikes. Over 3,000 cyclists took part in the three
events, raising thousands of pounds for local charities.
NATURE FOR PEOPLE
Careful protection of species and habitats has
always been a key part of our development
activities. We also know that enhancing existing and
creating new natural spaces on our developments is
good for wildlife and also provides valuable
opportunities for people to enjoy and connect with
nature. Our new placemaking design principles
have Nature for People at their heart, with a focus
on designing communities with blue and green
infrastructure, accessible natural spaces, use of
native species and which strive to achieve
biodiversity net gains.
During the year we were delighted to be awarded
one of CIRIA’s Big Biodiversity Challenge Awards for
the creation of hedgehog highways at our
Glenwood Park development, Barnstaple. Several
more of our developments have since followed suit
and we’ve also delivered our ‘Give a Hog a Home’
campaign across several divisions, creating
hedgehog highways and donating hedgehog
homes to schools and new home-owners to help
this struggling, beloved species.
ACHIEVING GAINS FOR NATURE
During the year, we commissioned consultants to
undertake a pilot project examining how our current
design approach is impacting biodiversity at several
of our existing developments. The project gave us
good insight into the key considerations for
achieving biodiversity ‘net gain’ and will inform the
development of our new biodiversity strategy, which
is being developed in partnership with the Wildlife
Trusts and the Bumblebee Conservation Trust. The
aim of the strategy will be to enrich biodiversity –
leaving nature in a better condition than when we
found it - and connecting communities with nature.
We are proud to continue our longstanding
partnership with the Bumblebee Conservation Trust,
helping to provide habitats for these important
pollinators and to raise awareness among
customers and the communities in which we build.
For example, at our Saxon Brook development,
Exeter we have created large areas of colourful
wildflower meadow as well as providing bee-
friendly planting throughout the development. The
Trust has been providing training to the landscapers
and the management company to ensure
maintenance of these natural spaces results in a
positive legacy for the future. We are also working
with the new community to create a new Bee Group
to survey and advocate for bumblebees locally.
As we develop our new biodiversity net gain strategy,
we are collaborating with DEFRA and Natural
England, sharing our experiences and are discussing
partnering on several projects to establish the
financial implications of biodiversity net gain for
developers and examining wider outcomes for
people as well as nature. We are also members of the
Greater Manchester Biodiversity Net Gain Task
Group, working to develop and implement a roadmap
for net gain in Greater Manchester.
Already providing a lasting legacy, for example, is
Heathlands, a development on a former claypit at
Buckley, North Wales which won the Landscape
Institute’s 2017 Award for Science Management and
Stewardship. Working with North East Wales Wildlife
and an ecology consultancy we designed and
implemented a detailed restoration scheme to
enable the infilling of the unsafe lagoon, the
re-vegetation of the landscape and conversion to a
multi-pond nature reserve. Long-term sustainability
of the nature reserve was secured through the
financing of a warden and management plan.
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OAK LEIGH GARDENS, CLITHEROE, LANCASHIRE
26
Redrow plc Annual Report 2018
STRATEGIC REPORT
Operating Review continued
LAND, PLANNING & DESIGN
STRATEGY IN ACTION:
Developing with a
community focus
In 2015, Redrow acquired a significant 59 acre
brownfield development site in Bedfordshire.
This former vehicle storage facility, which was
owned and operated by General Motors, had
all of the components required to create an
inspired and ambitious development of new
homes. Great transport links through road and
rail, proximity to an urban centre while
maintaining a softer more rural feel, and an
aspirational setting all informed the decision
that this was a great site for Redrow.
From the very start, the principle of ensuring a
lasting legacy to the community who had lived
and worked alongside the development was
key. Redrow worked closely with key
stakeholders such as Central Bedfordshire
Council, General Motors, and the local
community to evolve the designs and add value
through the principles of placemaking and
urban design. Redrow selected the Heritage
Collection to use at Caddington, building on the
site’s existing rural feel and providing a sense of
longevity to this important local site.
One of the foundation stones of the
Caddington Woods development was the
community trust, CASE (Caddington And Ship
End). CASE is a registered charity created by
the key stakeholders, specifically for the
Caddington Woods scheme. This incredibly
innovative concept harnesses rent values of
the affordable homes to provide benefit to the
community. 46 of the affordable homes have
or will be permanently endowed by Redrow to
the trust, and the properties will then be
rented to local authority tenants in the usual
way. The key difference with this scheme
however is that the revenue derived from this
will be invested back into the community
through CASE.
The CASE community trust will deliver some
specific objectives, including the provision of a
bespoke bus service. Instead of a one off
contribution by a developer through the
standard Section 106 mechanism, the CASE
community trust will support projects like the
bus service in perpetuity, in turn helping to
assist local authorities in their objectives,
delivering vital local services, and building
thriving communities.
Redrow will also be constructing a state-of-
the-art community centre, which will be
handed to the trust to run, with the intention
that this building will be at the heart of a
thriving community.
The income derived from these properties is in
fact substantial, over a 20 year period the trust
will deliver:
•
•
•
•
£2.6m investment into bespoke bus
services;
£1m investment into the woodland and
landscaping;
£1.25m into on-site community
development through youth work;
£400,000 into grants to the local
community/parish;
• Full operation of a community centre; and
•
Leaving a sinking fund after 20 years of
£1m for continuously upgrading and
improving the CASE community trust
properties, community centre, play area
and open space.
These costs are net of all management costs.
Discussions have already taken place with
Central Bedfordshire Council to look at the
opportunity to expand schemes like this one
across the county and beyond.
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Operating Review continued
COMMERCIAL & SYSTEMS
We continue to manage our resources
efficiently as we grow, working closely with
our suppliers and subcontractors to deliver
increasing numbers of our quality homes.
GROWING OUR BUSINESS RESPONSIBLY
It is important that as we grow, we do so in a
responsible and sustainable manner. During the
year John Tutte took a seat on the newly formed
Council for Sustainable Business. This council has
been established to provide a sounding board on
how businesses can help achieve the aims of the
Government’s 25 Year Environment Plan. It will focus
on building positive momentum inside the business
REVENUE (£M)
1,920
1,660
1,382
1,150
864
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17
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LEGAL COMPLETIONS (NO.)
5,718
5,319
4,716
4,022
3,597
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16
17
18
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community and acting as a bridge between
government and industry.
GOLD AWARD FROM NEXTGENERATION
For the third year running we achieved a Gold
Award from NextGeneration, moving up a place into
third position in the UK’s top 25 housebuilders.
NextGeneration are an independent organisation
which benchmarks housebuilders on their
sustainability performance. Our high score of 80% is
up 3% on last year and was calculated by assessing
the environmental and societal impact of our homes
and developments.
REVENUE
The Group’s revenue continues to grow, reaching
£1.92bn this year (2017: £1.66bn), an increase of 16%.
The sale of homes accounted for all but £20m of
revenue, which was attributable to land sales in
2018 (2017: £12m).
c£2.5bn of turnover per annum. We have
announced the launch of a new Thames Valley
division to further underpin our future growth.
LEGAL COMPLETIONS
We delivered a new record of 5,913 legal
completions (including our Joint Venture) in 2018, a
9% increase on 2017 levels (2017: 5,416).
Social housing accounted for 19% of legal
completion volumes, in line with the previous year.
Apartments represented 21% of private legal
completions excluding our Joint Venture and 22%
of private sales revenue. This compares to 16% and
19% respectively in 2017. This increase reflects the
increased contribution from Greater London,
notably the first completions from our Colindale
Gardens development in North London. All the 195
completions from our Joint Venture development
Morello in Croydon were apartments.
Revenue has increased by 122% since 2014 and
profit before tax by 186% in the same period. The
Group has 14 homes operating divisions at present
and these have further growth potential to deliver
OUTLETS
The Group had 124 active outlets on average
through 2018, which was in line with 2017 levels
and we closed the year on 132 (June 2017: 132).
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Operating Review continued
WOOLTON FIELDS, LIVERPOOL
Communication is key in any business and we have
recently launched a new Redrow intranet “Engage”
which is mobile compatible and facilitates the use of
video content to make communication more
dynamic and efficient.
During the year we undertook a major initiative to
better understand the health and wellbeing risks of
our employees and subcontractors. The results will
help shape our strategy going forward.
IMPROVING OUR SYSTEMS AND
PROCESSES
We are continually striving to increase our
effectiveness by improving our systems and
processes to better support our business as it
continues to grow, evolve and adapt to change.
We have a dedicated team of in-house Systems
Accountants and IT specialists including a digital
team, systems analysts, software developers, IT
security officers and help desk experts at our Head
Office led by our Chief Information Officer. The team
work closely with Group and the operational
business to deliver improved management
information and systems improvements. Major
systems improvement projects are sponsored by a
member of the Executive Management Team.
An example of this is the Quality Review of
Construction undertaken during the year sponsored
by Matthew Pratt, a Regional Chief Executive.
The team also supported the business to comply
with the increasing levels of statutory reporting
requirements providing information for example for
Gender Pay reporting and Payments reporting
introduced in the year.
Also from a reporting perspective we produced,
completely in-house, our online half-yearly report
for 2018. Our digital, marketing and finance teams
worked together to enable Shareholders and other
stakeholders to more easily access key information.
We are building on this achievement with our
interactive online 2018 Annual Report.
Site openings in total were in line with forecast but
site closures were slightly higher than forecast due
to better than expected sales rates.
RESPONSIBLE SOURCING AND
PROCUREMENT
We look to bring social and economic benefit to
communities by creating sustainable business
opportunities with local enterprises. 92% of the
goods and services we procure are local to our
developments.
We are committed to procuring goods and
services in a sustainable and responsible manner,
working with our supply chain to deliver long-term
mutual benefit. We continued our partnership with
Supply Chain Sustainability School (SCSS), an
initiative providing free learning and development
to our supply chain partners. We are actively
encouraging our subcontractors and suppliers to
sign up and participate in the school. During the
year, with the support of the SCSS, we carried out
a gap analysis of our procurement practice against
the international sustainable procurement
standard ISO 20400. During the analysis session
an action plan was developed with responsibilities
assigned across Redrow to continually improve
our approach to procurement.
The World Wildlife Foundation (WWF) have once
again awarded us ‘Three Trees’ status for the third
assessment period in a row for our use of
sustainably sourced timber. At present our
responsibly sourced and credibly certified timber
stands at 99.94%. The accolade places Redrow
among the top 40 companies in the country using
Forest Stewardship Council (FSC) certified and
other responsibly sourced timber and paper
products.
VALUING AND DEVELOPING PEOPLE AND
PARTNERS
During the year we expanded our Human Resources
Department to create a dedicated Engagement
Team. The team will specifically focus on evolving
our engagement with employees, suppliers and
subcontractors and the wider community together
with a focus on health and wellbeing.
We again undertook a major employee engagement
survey in 2018. This was delivered on our behalf by
Employee Feedback Ltd with individual responses
being completely confidential. This survey achieved
an extremely pleasing 90% response rate (2017:
88%) and provided much useful feedback which we
shared across our business via workshops in all our
divisions and Group departments. 95% of
respondents were proud to work for Redrow.
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Operating Review continued
COMMERCIAL & SYSTEMS
STRATEGY IN ACTION:
Health kiosks project
RATIONALE
At Redrow, Valuing our People and
Partners is important to us. This is
evidenced by us recently setting up a new
engagement team within our HR function
with a dedicated resource to focus on
Health and Wellbeing. We already offer a
range of benefits, services and initiatives
to our employees and intend to carry out a
comprehensive review of our Health and
Wellbeing offering. In order to do this, we
wanted to understand the health risks of
our employees and supply chain, looking
at the whole picture around physical,
mental, social and financial. This would
enable us to develop a Health and
Wellbeing offering which was evidenced
based so that future initiatives were much
more targeted, their impact could be more
measurable and that would enhance the
relationships with our supply chain
partners.
APPROACH
The challenge for us was that having no
data on the current health risks of our
employees or supply chain, how were we
going to get this valuable information. We
worked with a specialist consultant to
explore various ways of how we could do
this and ultimately agreed that to be able
to reach as many people as possible, the
best approach was to have health kiosks
in our divisions and sites which would
provide a snap shot of the current health
risks for our employees and supply chain.
Over a 4 week period, health kiosks were
strategically located at our divisions and
sites supported by a Redrow lifestyle
questionnaire which was available at the
kiosk. A mobile app was also developed
that included the online lifestyle
questionnaire that was available for those
who couldn’t attend the kiosk and was
sent as a link to our supply chain partners.
As well as our employees and supply
chain partners getting involved with the
initiative, we went a step further to enable
them to register onto a digital platform
which provided their own dashboard, set
their own health and lifestyle goals,
communicate and set challenges with
friends and colleagues and access lots of
resources and information to help improve
their health and wellbeing.
RESPONSE
We enjoyed a fantastic response with 51%
of our employees and 461 of our supply
chain getting involved either by using the
kiosk or completing the online
questionnaire. 96% said they would
recommend the kiosk to a friend with 83%
saying that using the kiosk would inspire
them to make lifestyle changes to improve
their health.
LEARNING
The initiative focused on a wide range of
health points: physical exercise, emotional
wellness, sleep, smoking, nutrition,
alcohol, chronic health conditions as well
as health metrics such as heart age, blood
pressure, BMI and body fat. Our key
health risks from this process have been
identified as smoking, indications of poor
nutrition as well as very low levels of
physical activity. These risk factors were
reflected in the cardiovascular risk and
health metrics taken at the kiosk.
GOING FORWARD
We now have a fantastic robust data set
to work with and, along with our other
data such as absence, we have now
developed a 2 year road map which
outlines what we will be doing to focus on all health
and wellbeing areas, in particular focusing on the
high risks identified by this project.
We will be undertaking a communication campaign
to our employees and supply chain to raise
awareness of what we will now be doing to support
them and how they can get involved with initiatives
that we will be offering.
Improving mental health in the construction industry
is an area that we are already working to tackle
through developing partnerships with like-minded
organisations and one way in which we have
already committed to is to train Mental Health First
Aiders within the business.
To support our supply chain, we will be working with
our benefit providers to see what benefits we can
extend to our partners. The Employee Assistance
Programme is one that we will be extending in
September.
We were really keen to offer a
greater range of initiatives and
benefits to improve the health
and wellbeing of all our
employees and supply chain.
We challenged our newly
created Engagement team to
set a strategy based on real
needs so we can ensure
targeted spend for the best
results. We are very pleased
with the approach and the
results and look forward to
rolling out enhancements this
year and next.”
Karen Jones
Group HR Director
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Operating Review continued
COMMERCIAL & SYSTEMS
STRATEGY IN ACTION:
Build quality review
We pride ourselves on ensuring the
highest quality of our new homes.
Providing a first class product and
excellent levels of customer service goes
to the heart of what we strive to achieve.
ability to instantly deal with issues whilst
communicating the greatest amount of
detail of the issue and the required
solution quickly, with the ability to track
and monitor the process.
In order to provide excellent levels of
service we must first provide a quality
product and it is important that this is
delivered at all stages, so the customer
has confidence that it is not just what they
see as a finished product but also that we
have taken pride at achieving this level at
every stage of the build.
Site management has changed
dramatically over the last few years with a
strong emphasis on health and safety,
accurate programming, build quality and
customer service, all of which needs to be
sustainable for the future.
With the ever evolving tasks of a site
manager, we conducted a review of the
role with a target on increasing the
amount of time our site teams have to
review quality and the benefits that has. In
order to achieve this we needed to review
what tasks we could remove, improve or
simplify.
Following the review of the role of the site
manager, we removed any work that we
felt was not adding any benefit to the
business, or had simply become a
redundant task. We then wanted to
reduce the time our teams were taking to
complete simple tasks.
We work with a constant moving factory
base on a building site, therefore we
wanted our site managers to have the
ability to work from any part of the site
when inspecting quality or safety matters.
We also wanted the teams to have the
We felt the solution involved an increased
use of technology. We therefore rolled out
the use of a new ipad based system to all
of our site managers and assistant site
managers last year, a significant
investment by the Group.
We also developed our own internal
applications to be used on the ipad to
allow the site managers to record
inspections instantly. The use of this
technology, with simple to use apps,
allows our site managers to highlight any
areas of quality or safety concern and
instantly provide photo evidence which is
then directed to the subcontractors and
the trade on site. With the use of a simple
photo, a brief description and a targeted
subcontractor portal, faults are recorded
and action is required via the portal to
evidence the rectification of the works.
Works can be monitored to ensure
remedial action is carried out and data
showing common issues can be
highlighted and addressed with the
contractors.
We also record areas of good quality and
completed works that can be referred
back to by our customer service teams,
also helping the customer understand
what has been put into the fabric of the
building.
The initial results are showing that more
time is now available to our site teams to
proactively deal with faults and we have a
system that will help us review the data
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for common faults. Drawings are also stored on the
cloud and can be instantly e-mailed to the
contractors own device, again significantly reducing
the amount of time involved.
We use the data produced, together with that of any
external audits, to allow us to target our training for
our teams and close the loop to ensure repeated
problems are identified. A bi-monthly quality panel
meets to discuss the issues with a target of closing
the loop through training, changing materials,
general alerts or changing our details.
Over time it is expected that this investment in
technology will improve our communications with
our trades, give us a fully monitored system
identifying common faults, and ultimately reduce the
number of faults that can occur with a new home.
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Operating Review continued
CONSTRUCTION
To meet the demand for new homes,
the construction industry must work with
Government and the wider community
to inspire the next generation to build.
INSPIRING THE NEXT GENERATION
AT REDROW
At Redrow we are committed to training and
development and are evolving our learning and
development programmes to better support our
business as it continues to grow and evolve.
During the year we were pleased to launch the first
housebuilding degree course in the UK in
conjunction with Liverpool John Moores University
and Coleg Cambria.
We have also developed a careers app designed
using augmented reality to show the housebuilding
environment and career opportunities available in
housebuilding. It was launched at the Careers Live
shows in Birmingham and Liverpool in March 2018.
We again maintained our proportion of our
workforce on structured training programmes at 15%
and have been listed as a Top 100 Apprentice
Employer in the National Apprenticeship Service
awards for a fifth successive year.
This year our focus was on further improving the
quality of our training course days rather than the
quantity of attendees and as a result we delivered
c6,500 training days, a small reduction on the 6,800
in 2017. A significant proportion of our training is
delivered at our Tamworth Training Centre, at
dedicated training facilities at our Colindale and
Daresbury offices or at our Head Office.
We created c100 new directly employed jobs in the
year, ending the year with c2,300 employees. Our
business benefits many more employees
throughout our supply chain.
BUILDING RESPONSIBLY
We became Gold Leaf members of the UK Green
Building Council (UKGBC) in 2018 reinforcing our
commitment to building sustainable homes and
communities. UKGBC is part of the World Green
Building Council network, a global network of over
70 national Green Building Councils transforming
the built environment.
Building homes can be impactful on the areas
surrounding a development. As part of our
commitment to creating considerate working
environments we became corporate members of
Considerate Constructors Scheme (CCS), a non-
profit-making, independent organisation founded by
the construction industry to improve its image.
Regular scored assessments are carried out, by CCS
monitors, to assess if sites are being run in
accordance with the Scheme’s code of practice. At
our Lyon Square development, Harrow, we achieved
an exceptional score of 45 out of 50. The site team
was praised by the CCS Assessor for its innovative
multi-purpose illuminated signage board which
promoted the credentials of the company while
portraying the industry in an extremely positive light.
Home energy use is responsible for over a quarter of
UK carbon dioxide (CO2) emissions. At Redrow we
build energy efficient homes that not only reduce the
environmental impact of carbon emissions but also
save our customers money. Our homes are designed
and constructed to optimise the performance of the
building fabric as part of a ‘fabric first’ approach. This
minimises heat loss through floors, walls, roofs and
windows. Energy performance in homes is measured
using the Standard Assessment Protocol (SAP) rating,
which shows the energy performance of a property
on a scale of 1 to 100, with A to G. The average SAP
rating for a Redrow home this year was 84 (B Rating),
compared to the national average of a UK home of
59 (D rating).
Redrow are one of the partners supporting Barclay’s
bank ‘Green Home Mortgages’ offering which
provides lower mortgage rates for new Redrow
homes in the energy efficiency bands from B – A.
This scheme is part of the Energy Efficient
Mortgages Action Plan (EeMAP) which is intended to
incentivise and channel private capital into energy
efficiency investments.
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CONSTRUCTION
STRATEGY IN ACTION: House building degree course
In 2018 Redrow launched the first
Housebuilding degree with Liverpool John
Moores University and Coleg Cambria.
The programme was launched in February
2018, with 14 Redrow employees embarking
on the programme. At present the degree is
only open to Redrow employees. Redrow
are hoping to open the degree out to the
housebuilding industry going forward.
The three year degree gives candidates a full
overview of housebuilding skills including
housebuilding quality, surveying, land
purchase, Health & Safety, law and project
management.
Six modules will be delivered over each year
using a variety of assessment methods
including examinations, coursework and a
final year dissertation project. Each year
there are six block weeks of classroom
learning which will be taught in partnership
between Coleg Cambria, LJMU’s department
of the built environment and Redrow
business experts with additional time through
virtual learning, site visits and practical
learning.
Any Redrow employee with a level three
qualification or five years’ experience in the
housebuilding industry can be nominated to
the programme, Redrow are hoping to have
around 15 employees each year on the
programme.
The first two years will form a foundation
degree with the final year topping up to
become a full degree in BSc (Hons)
Construction Management – Housebuilding.
We are delighted
to be working in
partnership with
Redrow and
Liverpool
John Moores
University on this
innovative and
exciting new
qualification.”
Nick Tyson
Assistant Principal
Coleg Cambria
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Operating Review continued
MANAGING RESOURCES EFFICIENTLY
As well as ensuring our sites are safe and operate in
a manner that is considerate of the local community,
we are mindful of our responsibilities in caring for
the environment. In our work protecting and
enhancing biodiversity on our developments, and
reducing our use of energy, waste and water in our
activities, we are striving to become environmentally
net positive. We have maintained our ISO14001
certification this year, with regular audits by the
British Standards Institute, as we continue to reduce
our environmental impact across the business.
WASTE AND RECYCLING
We are producing 10.63 tonnes of waste per 100m2
of build (2017: 10.65 tonnes/100m2). We are
strengthening our focus on reducing waste with the
commencement of a new waste minimisation
project, investigating the root causes of waste and
taking steps to tackle these.
Ensuring we minimise the amount of waste going to
landfill remains a priority for us, with the amount
diverted from landfill increasing again this year to
96.8% (2017: 95.4%). At our North West division, the
appointment of a new project engineer focusing on
management of soils and excavated materials has
resulted in c93,000 tonnes of materials being
re-used and diverted from landfill.
We continue to work with our suppliers on
increasing recycling rates, with c23,000 paint cans
being recycled in 2018, and we have been sharing
our experiences of this successful project with the
HBF to help increase recycling rates across the
whole industry. We also continue to work with
Community Wood Recycling – a social enterprise
who collect and reuse waste timber at the same
time as providing jobs and training for
disadvantaged people.
The issue of packaging waste has been high on our
agenda for a number of years and we have
arranged numerous take-back schemes, where
suppliers take responsibility for recovering and
recycling packaging waste from our sites. This year
we have gone back to our suppliers and re-
engaged them on the issue of single-use plastic
waste. We are looking to work with them to develop
resource efficiency programmes which embrace the
principles of the circular economy as a means of
eliminating avoidable plastic waste. We are also
active members of the HBF Waste Forum, working
in partnership with other leading housebuilders to
tackle waste across the sector.
Each year since 2010 we have disclosed information
about our carbon emissions, carbon strategy and
reduction programmes to the Carbon Disclosure
Project (CDP). In our most recent submission we
have been awarded a ‘B’ grade which reflects our
positive management of climate-related issues,
including awareness and taking actions to reduce
our impacts.
We are working to further reduce our carbon
emissions, of which a significant contributor is use of
diesel for site activities. Our diesel generator project
is currently reviewing use of diesel generators on
sites, including reducing the length of time they are
required on site, ensuring they are sized correctly
for their required purpose and examining hybrid
generators. In addition, in our Yorkshire division we
have been trialling new energy efficient site cabins,
coupled with new eco-heaters and solar
photovoltaics. Early results indicate significant
energy and carbon savings will be achieved by
rolling the system out across the business.
Our 2018 Greenhouse Gas (GHG) emissions
expressed in relation to the quantity of build we have
undertaken are 2.48 tonnes of CO2e per 100m2 (2017:
2.5 tCO2e/100m2). Our GHG emissions are
independently verified to a limited level of assurance.
HEALTH & SAFETY
Redrow remains committed to improving our overall
Health, Safety and Environmental (H,S&E)
performance. During the year we significantly
restructured the teams, both increasing resources
and reorganising into two distinct areas of
responsibility: Assurance & Compliance and
Development to better support this commitment to
improvement.
A new Group Health, Safety & Environmental
Director was appointed during the year to facilitate
the restructure and to build on the positive work
already achieved by the existing team. The
Assurance & Compliance side of the new structure is
a dedicated set of H,S&E inspectors whose primary
objective is to ensure that all live developments
receive an internal scored inspection that identifies
both areas for continued improvement as well as
areas achieving recognised operating standards.
The Development side provides the divisions with
dedicated H,S&E Managers who will provide more
front end engagement and support in terms of
pre-planning of H,S&E issues on future
developments. They also provide assistance and
guidance on the practical application of recognised
operating standards and the sharing of best practice.
Subcontractor engagement remains essential to
promoting a positive health & safety culture. We
continue to support our supply chain by organising
and hosting events during the year in our divisions.
Our all accident figure for 2018 was 3% lower at 382
than the previous year (2017: 393) despite a 9%
increase in legal completions. There was however a
small increase in reportable accidents resulting in
an increase in our accident incident rate to 0.35
(2017: 0.30).
BUILD OUTPUT
Build handovers increased by 12% in the year as the
Group continues to improve and smooth our
productivity to meet our growth targets. We work
closely with our suppliers to manage pressures,
notably this year in the material supply chain.
In 2018 Redrow received five commended and one
highly commended safety awards from the NHBC.
The NHBC H&S Awards are the UK’s only health
and safety awards scheme for home builders and
provides us with external acknowledgement of our
commitment to improving our overall H,S&E
performance.
Colindale Gardens remains the largest single
development within the Group and delivered its first
legal completions in the year whilst continuing to
make excellent progress on further phases. There are
currently c650 homes under construction there and
on an average day a workforce of c600 is on site.
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Operating Review continued
SALES & MARKETING
At Redrow we have a reputation for
building award winning homes.
SALES EXCELLENCE
Once our customers arrive at a Redrow development
they can truly experience the Redrow lifestyle.
Our sales centres are carefully designed to showcase
the Redrow collections and our unique, immersive,
virtual reality development plans enable people to
make the most informed decision about their ideal
house style and position on the development.
Redrow sales staff are highly experienced and
undergo regular refresher training in product
specification and understanding who our key
suppliers are. Sales excellence and customer service
ON-LINE TO ON-SITE
Redrow’s sales and marketing strategy combines
traditional, proven sales and marketing methods with
the very latest techniques in targeting prospects
based on analysis and insight.
Extensive research into the demographics and
behaviours of our target segments results in finely
tuned marketing campaigns that generate high
volumes of quality traffic to our website.
The resultant campaigns are extremely cost effective
and utilise those channels which our customers
increasingly choose as their preferred method of
communication. Often this will be a social media
channel, however traditional forms of media are still
used to ensure that we always invest appropriately in
our brand where it is cost effective. This strategy is
reaping significant rewards.
A CONSISTENT EXPERIENCE
The vast majority of our customers’ first contact with
Redrow is through our consumer website www.
redrow.co.uk and their experience when they arrive
is carefully designed to ensure consistency of service
across all channels and devices with almost 60% of
website visitors now being generated from mobile
devices. This ‘Redrow experience’ is very important
in communicating the strength of our product ranges
and conveying our brand purpose ‘To create a better
way to live’.
Features on the website include augmented reality
floorplans and 3D development layouts to assist
people in visualising the Redrow lifestyle. Further
tools within My Redrow help customers choose their
options and upgrades to personalise their Redrow
home. Our My Redrow system has been shortlisted
as a finalist in the BESMA awards (The British
Excellence in Sales Management Awards) in the
category of “Award for Innovation in Sales”.
Intuitive navigation through the website ensures that
our customer experience is enjoyable and helpful
and our ambition is to encourage the maximum
number of people to visit our developments as well
informed as they can be on our products, brand and
communities.
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skills are honed through frequent mystery shopping
surveys and each year our very best consultants will
be awarded the prestigious title of Sales Consultant
of the Year in their division.
more effectively. Great care has been taken to
ensure that the user interface is as intuitive and
responsive as possible so that the specific needs of
our customers are always satisfied.
Sales Excellence Champions regularly meet to
develop new customer initiatives and many beneficial
ideas are also generated at the Annual Sales
Conference where approximately 450 sales staff
come together to explore ways in which the customer
experience can be enhanced.
CUSTOMER RELATIONSHIP MANAGEMENT
(CRM)
Timely, empathetic and compliant communication is
essential in an increasingly crowded media world.
Redrow has committed thousands of man-hours into
ensuring that all communications are GDPR compliant
and has also invested in sophisticated CRM systems to
personalise dialogue with prospects and customers.
In addition, our sales and build management system
has been extensively re-engineered to enable sales
staff to service the specific needs of our customers
AWARD WINNING SHOW HOMES
Redrow show homes set a benchmark that is the
envy of the industry. Redrow have an in-house
dedicated team of professional interior designers
who meticulously design and create show homes that
are truly inspirational. Customers often comment on
the exceptional interior design and independent
commentators recognise Redrow as the leader in the
field. This has been reflected through more than
eight interior design awards in the year and glowing
comments from customers. These show homes
perfectly showcase the product and transform our
customer’s dreams into reality. This is the point where
most people fall in love with a Redrow home.
Many developments now feature show villages such
as Woodford Garden Village, Cheshire where there
are seven house styles on show.
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Operating Review continued
SALES & MARKETING
STRATEGY IN ACTION:
Lifestyle homes
“We don’t style any bedrooms specifically for children in the
Lifestyle Homes range but we do create desirable guest bedrooms
as we know our customers like to have family and friends to stay.
“By ensuring our Show Home interiors are in line with our
customer research we can capture the imaginations of potential
purchasers and make them feel instantly at home as soon as they
walk through the door.”
It is a process that is proving very successful and one of the
reasons why the Lifestyle Homes have been so popular since
their launch.
In the same way our technical team has created our
Lifestyle Homes in response to the evolving needs of our
customers, our interior design team has undertaken
extensive research to ensure the Show Home interiors are
also in tune with how our purchasers want to live.
Our Lifestyle Homes have evolved the layouts of some of
our most popular Heritage Collection designs to feature a
smaller number of larger bedrooms, each with its own
en-suite, and other luxurious features such as dressing
areas to master bedrooms.
Having launched the collection a year ago – driven by our
findings that not all home buyers want a ‘traditional’ family
home – we’ve now been able to analyse exactly who has
been buying the designs.
Our research suggests that the average Lifestyle purchaser
is in their late 40s, either with no children or children who
are older or have left home.
Additional research into the interior design preferences of
those customers has further informed how we create our
Show Homes.
Meticulous research and planning by Emma Brindley, Head
of Interior Design and her team has arrived at the personas
of the purchasers who would choose to live in the homes.
“It’s really about understanding our customers – their jobs,
interests and consumer behaviour – and reflecting their
aspirations and needs in the interiors we create,” says
Emma.
“We’re discovering that many people aren’t precious about
bringing pre-loved items of furniture from their previous
homes; they are generally making a completely fresh start,
buying everything new, and opting for a contemporary look
and feel.
“We know our target audience is style conscious and trend
aware, with exacting standards, so bedrooms and
bathrooms are luxurious and reflect boutique hotel styling.
Some of the designs, such as the Leamington Lifestyle,
feature vast master suites with generous en-suite
bathrooms and dressing rooms, and the look we create is
extremely high-end with a focus on opulent fabrics and
elegant furniture.
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Our “Inspirational
Homes” magazine
showcases interior
design trends and
styling advice
together with
features on our
developments.”
Emma Brindley
Head of Interior Design
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Operating Review continued
CUSTOMER SERVICE
We are committed to providing customer
service comparable with the very best
from the retail and services sectors.
RESERVATIONS AND ORDERBOOK
The Group secured £1.7bn of private reservations in
the year (2017: £1.6bn) and ended the year with a total
order book including social of £1.1bn (2017: £1.0bn).
PRODUCT
We are proud of our reputation for designing
attractive homes that meet the modern-day needs
of our customers. Outside Greater London, our
divisions continue to focus on our award winning
Heritage Collection and this year it contributed 72%
of the Group’s private sales revenue (2017: 75%). We
appreciate that homebuyers’ needs and aspirations
differ which is why we have added the Lifestyle
Collection to our Heritage range. Lifestyle
Collection homes are just as spacious as our family
homes but have been redesigned with fewer yet
larger bedrooms and have proved a popular
addition to our product range.
The Heritage Collection is complemented by
bespoke product which represented 28% of private
sales revenue in the year (2017: 25%). Bespoke
product features more strongly in the South and
Greater London uses bespoke product exclusively
as each development is specifically designed to
reflect the sites constraints whilst preserving the
best of its individual character. The contribution
from Greater London increased this year
representing £296m of our homes sales revenue
(2017: £218m) with the first completions from our
flagship Colindale Gardens development in North
London.
ORDER BOOK (£M)
1,144
1,030
899
594
535
14
15
16
17
18
Private reservations per outlet per week were 0.67
excluding PRS, in line with the previous year on a 52
week like for like basis. This 2018 rate increased to
0.70 with PRS included. The cancellation rate
remained consistent with the previous year at 15%.
CUSTOMER FEEDBACK
We achieved a 89.1% HBF customer recommend
rating in 2018 (2017: 88.9%), a modest improvement
in a year during which our legal completions
increased by 8%. Our current recommendation level
is trending at over 90%.
Customer Service training is an integral part of our
induction programme for new starters. Our
Customer Service Culture course is accredited by
the Institute of Customer Service.
We are committed to providing customer service
comparable with the very best from the retail and
services sectors. To achieve this we are constantly
improving our customer experience, a recent
example being the addition of a customer “Hard
Hat” tour.
“My Redrow” is our online members area designed
specifically for customers. It provides a secure
personalised dashboard supporting their customer
journey. “My Redrow” option choices and upgrades
enable our customers to personalise their new
home and these extras accounted for £20m of sales
in the year, in line with the previous year.
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SALES CENTRE AT PARC PLYMOUTH, CARDIFF
46
Redrow plc Annual Report 2018
STRATEGIC REPORT
Operating Review continued
CUSTOMER SERVICE
STRATEGY IN ACTION:
Hard Hat tours
Hard Hat tours are an exciting opportunity for Redrow homeowners to
view their property, quite literally from the inside out. They are arranged
just after the first fix stage of the housebuild. This is when the property is
watertight and cables and pipework for the various services have been
installed, but before the internal walls have been plastered.
At this point, customers can begin to appreciate the layout and room sizes,
really understand what goes into building their new home and check the
placing of all their optional extras and upgrades.
Hard Hat tours have helped to further improve the positive relationship
between our customers and their site and customer service managers,
who personally lead the tours.
This open dialogue has given us more opportunity to better manage
customer expectations throughout the home buying process.
Ultimately, our commitment to continual improvement, and the introduction
of Hard Hat tours, has helped to deliver happier customers with improved
customer recommend and net promoter scores across the Group.
Matt Grayson
Group Communications Director
I had no idea what goes on behind the scenes
and it was nice to see that. You can start to
visualise where to place things. It’s been great.
It’s given me a good understanding and you can
appreciate the time it actually takes for the
house to be ready.”
Rebecca Scott
Redrow Customer
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48
Redrow plc Annual Report 2018
STRATEGIC REPORT
Financial Review
“Earnings per share have increased by 22% in the year to 85.3p.”
REVENUE BY GEOGRAPHY (£M)
There was also a £5m after tax contribution from our
Joint Venture on the Morello, Croydon development
(2017: £1m) which delivered 195 legal completions in
(2017: 97). This Joint Venture development is now
complete.
As a result, the Group delivered a record profit
before tax of £380m (2017: £315m) in the year with
basic earnings per share up 22% at 85.3p (2017:
70.2p).
TAX
The corporation tax charge for the year was £72m
(2017: £62m). The Group’s tax rate for 2018 was 19%
(2017: 19.75%). The normalised rate of tax for the
year ending 30 June 2019 is projected to be 19%
based on rates which are substantively enacted
currently.
The Group paid £74m of corporation tax in the year
(2017: £56m) following 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, which will
bring our instalment payments forward by four
months.
DIVIDENDS
The Board has proposed a 2018 final dividend of
19p per share which will be paid on 13 November
2018 to Shareholders on the register on 21
September 2018, subject to Shareholder approval
at the 2018 Annual General Meeting. This is a 73%
increase on last year. The full year dividend is 28p
(2017:17p) and a payout ratio of 33% of earnings
(2017: 24%). In 2017 we announced our intention to
progressively increase the dividend payout ratio to
33% over the medium term. As a result of our
ongoing strong cash position we have been able
to meet this commitment earlier than expected.
The Group paid dividends of £74m (2017: £44m)
during the year.
RETURNS
Net assets at 30 June 2018 were £1,483m (2017:
£1,235m), a 20% increase. Capital employed at the
same date was £1,420m (2017: £1,308m) up 9%. Our
return on capital employed continued to benefit
from improved capital turn and higher profits and
increased in the year from 26.0% to 28.5%. Return
on equity also increased slightly from 27.7% to
28.0%.
BARBARA RICHMOND
Group Finance Director
PROFITABILITY
The Group once again delivered record financial
results with revenue of £1.92bn (2017: £1.66bn) and
profit before tax of £380m (2017: £315m). This was
achieved by completing a record 5,718 new homes
(5,913 including our Joint Venture).
Total Group revenue rose 16% to £1.9bn. This
comprised private homes revenue which increased
by 14% to £1.8bn (2017: £1.5bn) as a result of a 7%
increase in private homes legal completions and a
7% increase in average selling price, social homes
revenue of £145m (2017: £115m) and other revenue of
£20m (2017: £12m) from land sales.
As a result of the increase in revenue, gross profit
increased by £64m in the year to £469m (2017:
£405m) giving a gross margin of 24.4% in line with
the previous year.
The strong revenue growth has generated an
operating profit for the year of £382m (2017: £322m),
a 19% increase. This represents an operating margin
of 19.9% (2017: 19.4%). This 50 basis point margin
increase is due to tight control of costs leading to a
reduction in administrative expenses as a
percentage of revenue from 5.0% to 4.5%.
Net financing costs at £7m were £1m lower than the
prior year due to the improved cash position in
2018. We had an average positive cash balance
during the year of £22m compared to average net
debt of £67m in 2017.
2018
2017
North
Central
South
Greater London
2018
433
445
740
302
2017
463
360
614
223
1,920
1,660
INVENTORIES
Our investment in land increased by £127m, or 10%
in the year to £1,439m (2017: £1,312m) reflecting the
attractive land market and our success in securing
sites to best utilise our product and placemaking
skills on acceptable terms. Over a third of our
current land holdings additions in 2018 came from
our forward land holdings broadly in line with the
c40% five year average contribution.
Our owned plot cost has increased by £1,000 per
plot to £71,000 at June 2018 (2017: £70,000),
reducing slightly to 19% of the average selling price
of private legal completions in the year (2017: 20%).
Our investment in work in progress increased by
£48m, up 7% year on year to £779m (2017: £731m).
As a percentage of Homes turnover it reduced from
44% to 41% in part benefiting from the first legal
completions off our Colindale Gardens development
in North London.
Land creditors increased by £36m to £387m at June
2018 (2017: £351m) representing 27% of gross land
value in line with the prior year.
RECEIVABLES
Trade receivables decreased by £5m during the
year to £16m (2017: £21m) due to the ongoing receipt
of historic shared equity scheme monies. Other
receivables increased from £21m to £29m partly due
to the timing of the recovery of VAT on land
payments.
EARNINGS PER SHARE (P)
85.3
70.2
55.4
44.5
28.3
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17
18
DIVIDEND PER SHARE (P)
28
17
10
6
15
3
14
16
17
18
ROCE (%)
28.5
26.0
23.7
22.8
18.0
14
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18
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50
Redrow plc Annual Report 2018
STRATEGIC REPORT
Financial Review continued
PAYABLES
Trade payables, customer deposits and accruals
increased by £30m to £452m (2017: £422m) again
reflecting increased levels of production activity.
CASH FLOW AND NET CASH/(DEBT)
Net cash stood at £63m at June 2018 compared to
net debt of £73m at June 2017. This significant
movement reflects a cash inflow generated from
operations of £276m (2017:£189m). This equates to a
cash conversion from EBITDA of 72% in 2018, up
from 58% in 2017. Together with a net £26m cash
inflow from our Joint Ventures, this more than
funded the growth in the business and the increase
in both dividend distributions and corporation tax
payments made in the year.
FINANCING AND TREASURY MANAGEMENT
In the light of the ongoing improving cash position,
on 31 January 2018 we reduced our committed
unsecured syndicated loan facility by £100m to
£250m and extended its maturity from March 2020
to December 2022. We also cancelled a £15m
unsecured bilateral facility.
Redrow remains a UK based housebuilder and
therefore the main focus of its financial risk
management surrounds the management of liquidity
and interest rate risk. Financial management at
Redrow is conducted centrally using policies
approved by the Board.
(i) Liquidity
The Group regularly prepares and reviews its
cash flow forecasts which are used to manage
liquidity risks in conjunction with the
maintenance of appropriate committed banking
facilities to ensure adequate headroom.
Facilities are kept under regular review and the
Group maintains regular contact with its banks
and other financial institutions; this ensures
Redrow remains attuned to new developments
and opportunities and that our facilities remain
aligned to our strategic and operational
objectives and market conditions.
Our current banking syndicate comprises six
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.
CURRENT LAND BY GEOGRAPHY
(NO. OF PLOTS)
CASH CONVERSION (%)
72.0
58.0
50.0
29.0
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16
17
18
2018
2017
North
Central
South
Greater London
2018
5,331
7,848
10,356
4,095
27,630
2017
5,382
6,483
9,963
4,272
26,100
PENSIONS
As at June 2018, the Group’s financial statements
showed a £22m surplus (2017: £2m 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
£24m improvement is mainly due to the increase in
corporate bond yields along with a decrease in the
market’s long-term expectations for inflation which
have served to decrease the liability values. In
addition new census data used for the Actuarial
Valuation at 30 June 2017 was incorporated which
reduced the benefit obligation by £5m.
BARBARA RICHMOND
Group Finance Director
3 September 2018
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52
Redrow plc Annual Report 2018
STRATEGIC REPORT
Risk Management
HOW WE MANAGE RISK
OUR RISK MANAGEMENT PROCESS
BOARD OVERSIGHT
MAIN BOARD
Audit Committee
Nomination Committee
Remuneration Committee
Placemaking and
Sustainability Committee
OPERATIONAL MEETINGS
EXECUTIVE MANAGEMENT TEAM
Divisional Boards
Functional Seminars
Team Meetings
POLICIES FOR IDENTIFYING AND CONTROLLING RISKS
Budgeting & Forecasting
Price & Sales Monitoring
Cost Reviews
Land Bank Management
PROCEDURES AND INTERNAL CONTROLS
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Our Risk Assessment Process
Key Risk Management Objectives:
• To ensure our approach to risk meets the needs of our business and its key stakeholders;
• To effectively communicate our risks and define responsibilities in order to manage risk; and
• To continually evaluate and review the impacts of any potential new risks occurring within our business.
Main Board
• The ultimate responsibility for the effective management of the risks we face in order to achieve our strategic
and financial objectives lies with the Main Board;
• Material risks and principal concerns are identified as part of our risk assessment framework, following a
detailed review of the Company’s strategic objectives;
• These headline risks are then approved by the Board to be included within our risk register;
• The risk register is reviewed formally annually and updated for any new risks identified during our Risk
Assessment processes; and
• It is also presented to the Audit Committee for final review and consideration to ensure that it is appropriate and
reflects our business risks.
• All identified high level risks are then further broken down into components and sub level risks to be considered at
Operational Divisions
Business Policies and Procedures
Authorisation Processes
System Based Controls
the divisional level;
Business Process Reviews
Site Completion Reviews
• The probability and potential impact for each sub level risk is assessed by each Divisional Board; and
• Internal controls are implemented to mitigate, control and continuously monitor these risks.
PEOPLE AND CULTURE
Professionalism
Clear Communication
Qualified Personnel
Pride and Achievement
Interests Aligned with Shareholders
Commitment to Training
BUSINESS RISKS
Risk Owners & Executive Management Team
• Any new risks identified at divisional level are individually assessed and evaluated on their potential impact to
the business and its likelihood of occurrence;
• These risks are then communicated to the Risk Owners who will use this assessment to inform their formal view
on these risks;
• It is then the Risk Owners responsibility to ensure key preventive and detective controls are designed and
implemented to address these risks and ensure their inclusion in our risk register; and
• Group Policies and Procedures are updated to reflect any new or improved key controls or processes.
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Risk Management continued
Risk
Risk Owners
Key Controls and Mitigating Strategies
Risk Movement
Risk
Risk Owners
Key Controls and Mitigating Strategies
Risk Movement
Group Chief
Executive
Housing Market
The UK housing market
conditions have a direct
impact on our business
performance.
Economic uncertainty
has increased with the
lack of clarity over Brexit.
DEVELOPING
THRIVING
COMMUNITIES
Market conditions and trends are being
closely monitored allowing management to
identify and respond to any sudden
changes or movements.
With underlying build costs continuing to
rise and house price inflation moderating
over the year we maintain tight controls on
costs and continue to build our
relationships with key suppliers and
broaden our supplier base.
Weekly review of sales at Group,
divisional and site level.
Ensuring strong relationships with lenders
and valuers to ensure they recognise our
premium product.
Ongoing and regular monitoring of
Government policy and lobbying as
appropriate.
Customer Service
Failure of our customer
service could lead to
relative under
performance of our
business.
BUILDING
RESPONSIBLY
Availability of
Mortgage Finance
Availability of mortgage
finance and increased
lending criteria
requirements are key
factors in the current
environment.
DEVELOPING
THRIVING
COMMUNITIES
Group
Finance
Director
Proactively engage with the Government,
Lenders and Insurers to support the
housing market.
Expert New Build Mortgage Specialists
provide updates on and monitoring of
regulatory change.
Land Procurement
The ability to purchase
land suitable for our
products and the timing
of future land purchases
are fundamental to the
Group’s future
performance.
BUILDING
RESPONSIBLY
Group
Communications
Director
My Redrow website to support our
customers purchasing their new home.
Introduction of Hard Hat Tours for
customers of their new home at an
appropriate stage of production.
Regular review of our marketing and
communications policy at both Group and
divisional level.
Risk has increased following the
introduction of GDPR. We mitigate this by
ensuring that we are fully compliant with
the new GDPR regulations in our marketing
activities by taking a proactive approach to
GDPR with detailed project team defining
and implementing new Policies &
Procedures and training for staff.
Group
Development
Director
Proactive monitoring of the market conditions
to implement a clear defined strategy at both
Group and divisional level.
Liquidity and Funding
The Group requires
appropriate facilities for
its short-term liquidity
and long-term funding.
Group
Finance
Director
BUILDING
RESPONSIBLY
Suitable committed banking facilities with
covenants and headroom.
Regular communication with our investors
and relationship banks, including visits to
developments.
Regular review of our banking covenants
and capital structure.
Ensuring our future cash flow is sustainable
through detailed budgeting process and
reviews.
Strong forecasting and budgeting process.
BUILDING
RESPONSIBLY
Planning and Regulatory
Environment
The inability to adapt to
changes within the
planning and regulatory
environment could
adversely impact on our
ability to comply with
regulatory requirements.
Group
Development
Director
Group Human
Resources
Director
Group
Company
Secretary
Experienced and knowledgeable personnel
in our land, planning and technical teams.
Effective use of our Land Bank Management
system to support the land acquisition
process and monitor opportunities has led to
the risk decreasing overall.
Peer review by Legal Directors and use of
third party legal resources for larger site
acquisitions to reduce risk.
Close management and monitoring of
planning expiry dates and CIL.
Well prepared planning submissions
addressing local concern and deploying
good design.
Careful monitoring of the regulatory
environment and regular communication of
proposed changes across the Group
through the Executive Management Team.
Proactive approach to the introduction of
GDPR with a broad based project team
defining and implementing new policies and
procedures.
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Risk Management continued
Risk
Risk Owners
Key Controls and Mitigating Strategies
Risk Movement
Risk
Risk Owners
Key Controls and Mitigating Strategies
Risk Movement
Appropriateness
of Product
The failure to design and
build a desirable product
for our customers at the
appropriate price may
undermine our ability to
fulfil our business
objectives.
DEVELOPING
THRIVING
COMMUNITIES
Group Design
and Technical
Director
Regular review and product updates in
response to the demand in the market and
assessment of our customer needs.
Design focused on high quality build and
flexibility to planning changes.
Regular site visits and implementation of
product changes to respond to demands.
Group
Human
Resources
Director
Attracting and
Retaining Staff
The loss of key staff and/
or our failure to attract
high quality employees
will inhibit our ability to
achieve our business
objectives.
VALUING
PEOPLE
Group Health
and Safety and
Environmental
Director
BUILDING
RESPONSIBLY
Health and Safety/
Environment
Instances of non-
compliance with Health
& Safety standards and
Environmental
regulations could put our
people and the
environment at risk,
ultimately damaging
our reputation.
Increased levels of
scrutiny of the
housebuilding industry
heightens the risk
environment.
Personal Development Programmes
supported by National training centres at
three locations.
Graduate training, Undergraduate
placements and Apprentice training
programmes to aid succession planning.
Development of a bespoke housebuilding
degree course in conjunction with Liverpool
John Moores University and Coleg Cambria.
Remuneration strategy in order to attract
and retain talent within the business is
reviewed regularly and benchmarked.
Introduction of a new Engagement Team
and development of a new internal
communications platform in addition to
annual employee survey to create
framework for strong, two-way
communication.
Dedicated restructured team operating across
the Group to ensure compliance of
appropriate Health and Safety standards.
Separate focus on Assurance visits to site and
proactive management support to develop
planning and processes.
Internal and external training provided to all
employees.
Divisional Construction (Design and
Management) Regulation (CDM) inspections
carried out to assess our compliance with our
client duties under CDM.
Health and Safety discussion at both Group
and divisional level board meetings.
CDM competency accreditation requirement
as a minimum for contractor selection process.
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BUILDING
RESPONSIBLY
Group
Commercial
Director
Key Supplier or
Subcontractor Failure
The failure of a key
component of our supply
chain to perform due to
financial failure or
production issues could
disrupt our ability to
deliver our homes to
programme and
budgeted cost.
BUILDING
RESPONSIBLY
Chief
Information
Officer
Cyber Security
Failure of the Group’s IT
systems and the security
of our internal systems,
data and our websites
can have significant
impact to our business.
The introduction of
GDPR has increased the
requirements for the
control of personal data.
Use of reputable supply chain partners with
relevant experience and proven track record.
Monitoring of subcontract supply chain to
maintain appropriate number for each trade
to identify potential shortage in skilled
trades in the near future.
Subcontractor utilisation on sites monitored
to align workload and capacity.
Materials forecast issued to suppliers and
reviewed regularly.
Group Monthly Product Development
meetings to identify and monitor changes in
the regulatory environment.
Communication of IT policy and procedures
to all employees.
Regular systems back up and storage of
data offsite.
Internal IT security specialists.
Use of third party entity to test the Group’s
cyber security systems and other proactive
approach for cyber security including Cyber
Essentials Plus accreditation.
Compulsory GDPR and IT security online
training to all employees within our
business.
Fraud/Uninsured Loss
A significant fraud or
uninsured loss could
damage the financial
performance of our
business.
BUILDING
RESPONSIBLY
Group
Finance
Director
Systems, policies and procedures in place
which are designed to segregate duties and
minimise any opportunity for fraud.
Regular Business Process Reviews
undertaken to ensure compliance with
procedure and policies followed by formal
action plans.
Timely management reporting.
Insurance strategy driven by business risks.
Fraud awareness training.
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Redrow plc Annual Report 2018
STRATEGIC REPORT
Risk Management continued
VIABILITY STATEMENT
In accordance with provision C2.2 of the UK
Corporate Governance Code 2016, 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 December 2022.
The Directors have selected a three year timeframe
over which to assess the viability of the Group, from
1 July 2018 to 30 June 2021. 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 2021.
STRATEGIC REPORT APPROVAL
The Strategic Report outlined on pages 1 to 59
has been approved by the Board.
By order of the Board
GRAHAM COPE
Company Secretary
3 September 2018
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THE LOFTINGS, MAIDENHEAD
60
ERSKINE PARK, WILTON, WILTSHIRE
GOVERNANCE REPORT
Corporate Governance Report
“The Board is committed to maintaining high standards of
corporate governance and ensuring that the requisite
mechanisms are in place to meet such standards.”
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 corporate
governance. 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.
We are reporting against the UK Corporate
Governance Code (2016 version) (the “Code”) for this
report. We welcomed the publication of the new UK
Corporate Governance Code, released in July by the
Financial Reporting Council (www.frc.org.uk).
The renewed focus on long-term success and
sustainability in the revised UK Corporate
Governance Code is in direct alignment with the
Company and the Group’s culture and we are
pleased that it will help further raise the standards of
corporate governance in the UK.
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 2018, the
Company applied the principles of, and was
compliant with the provisions of the Code. This
report also explains what the Board 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.
Since the last report, Debbie Hewitt has indicated
her intention to retire from the Board following the
conclusion of the 2018 Annual General Meeting and
she will step down as Chairman of the Remuneration
and Nomination Committees and as a member of
the Audit Committee at the same time. Following the
close of the 2018 Annual General Meeting, Nick
Hewson will be appointed as the Senior
Independent Director and Chairman of the
Nomination Committee and Vanda Murray will
become Chairman of the Remuneration Committee.
In 2017, Steve Morgan indicated his decision to ease
back from a full time Executive role towards a
Non-Executive role. The role transition successfully
took place in the financial year ended 30 June 2018,
with Steve Morgan maintaining focus with the Board
on strategic development of the business, the
product and key important projects.
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 land acquisition, sales
outlets, sales and our product. Our 2018 Annual
General Meeting will be held on Wednesday, 7
November 2018 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 2018 Annual General Meeting, the Board
looks forward to meeting with you.
GRAHAM COPE
Company Secretary
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Redrow plc Annual Report 2018
62
GOVERNANCE REPORT
Board of Directors
Composition of
the Board
Length of tenure of
Non-Executive Directors
Main Board
by Gender
Executive
Non-Executive
Over three years
One to three years
Female
Male
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M A N R
STEVE MORGAN (65)
CHAIRMAN
JOHN TUTTE (62)
GROUP CHIEF EXECUTIVE
BARBARA RICHMOND (58)
GROUP FINANCE DIRECTOR
GRAHAM COPE (54)
COMPANY SECRETARY
SIR MICHAEL LYONS (68)
NON-EXECUTIVE DIRECTOR
DEBBIE HEWITT (55)
SENIOR INDEPENDENT DIRECTOR
NICK HEWSON (60)
NON-EXECUTIVE DIRECTOR
VANDA MURRAY (57)
NON-EXECUTIVE DIRECTOR
Steve Morgan founded Redrow
in 1974 and grew the business to
become one of the UK’s leading
home builders. He floated the
Company in 1994 and stepped
down as Chairman in November
2000 to pursue other interests.
Steve returned to Redrow in
Spring 2009, once again taking
over as Chairman.
Steve is also Chairman of The
Bridgemere Group of Companies,
which includes leisure, aviation
and overseas property interests.
In 2001, he set up The Steve
Morgan Foundation, which is now
one of the largest charitable trusts
in the UK.
Steve has been awarded five
Honorary Doctorates/Degrees.
He was awarded the OBE in 1992
for services to the construction
industry and the CBE in 2016 for
philanthropy.
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 40
years’ experience within the
industry, having previously held
the position as Chief Executive of
Wilson Connolly plc.
John was appointed to the board
of the Home Builders Federation
in February 2015. He is also a
Chairman of the Home Building
Skills Partnership – an initiative
between the HBF and CITB
to attract and develop a more
diverse skilled workforce for the
industry and its supply chain.
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.
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.
Graham Cope joined Redrow as
Head of Legal in November 2002
and was appointed Company
Secretary two months later. He
is Company Secretary to the
Main Board and Secretary to all
Committees.
Graham has over 25 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.
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.
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
Group plc, The Restaurant Group
plc, BGL Group, Visa Europe
Limited and White Stuff.
She also holds a Non-Executive
Director role in 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.
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 a Non-Executive Chairman
of Supermarket Income REIT plc
and 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.
BOARD EXPERIENCE:
COMMITTEE MEMBERSHIP:
Finance
Property
Operational
Sustainability
M
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Main Board
Audit Committee
Nomination Committee
Remuneration Committee
Placemaking and Sustainability Committee
The Board appointed Vanda
Murray with effect from
1 August 2017. Vanda has
substantial Non-Executive
Director and Remuneration
Committee experience.
She was appointed Non-
Executive Chair of Marshalls plc
in May 2018 and holds Non-
Executive roles with Bunzl plc,
where she is Senior Independent
Director, Manchester Airports
Holdings Limited and Just
Childcare Holdings Limited.
Vanda is also Pro-Chancellor and
Chair of Governors at Manchester
Metropolitan University.
Vanda has a BA (Hons) in
European Business Administration
and a French Business Diploma
completed at Neoma Business
School in Reims. She is a Fellow
of the Chartered Institute of
Marketing.
Vanda was awarded an OBE in
2001 for services to business and
to exports.
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Redrow plc Annual Report 2018
64
GOVERNANCE REPORT
Corporate Governance Report continued
REDROW GOVERNANCE STRUCTURE
Main Board
NON -EXECUTIVE CHAIRMAN
EXECUTIVE DIRECTORS
NON -EXECUTIVE DIRECTORS
Responsible for leading the Board and
Responsible for day-to-day operation
Responsible for providing constructive
ensuring its effectiveness with a key
of the business and performance of
challenge and helping to develop
focus of the strategic development of
the Company.
proposals on strategy.
the business.
SENIOR INDEPENDENT DIRECTOR
Board Committees
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AUDIT
NOMINATION
Provides independent scrutiny of the Company’s financial
Identifies and makes recommendations concerning the
and non-financial performance, risks and audit functions.
composition of the Board and that of its Committees.
PLACEMAKING AND SUSTAINABILITY
REMUNERATION
Promotes high environmental and placemaking standards in
Aims to attract and retain good management and to
line with our three key principles: Thriving Communities,
incentivise them to create shareholder value.
Building Responsibly and Valuing People.
Executive Management Team
GROUP CHIEF EXECUTIVE
GROUP FINANCE DIRECTOR
Responsible for the operational management of the Group,
Responsible for the financial management of the Group in its
the implementing of strategic plans and reporting to the
broadest sense and maintaining effective communications
Board on these matters.
with shareholders.
GROUP COMPANY SECRETARY
REGIONAL CHIEF EXECUTIVES
Responsible for governance structures and mechanisms,
Responsible for the operational management of divisions
corporate conduct and is the primary source of advice on the
within their assigned locations and reporting to the Group
conduct of the business.
Chief Executive on this.
GROUP DEVELOPMENT DIRECTOR
GROUP HR DIRECTOR
Chairman of Harrow Estates plc and responsible for the
strategic management of the Group’s land holdings.
Responsible for implementing the strategy on people,
ensuring that the management of talent and culture is
aligned with the Group’s longer-term goals.
GROUP SALES & MARKETING DIRECTOR
GROUP COMMUNICATIONS DIRECTOR
Responsible for the marketing and sales strategy and
Responsible for developing the Group’s reputation via
implementation across the Group and all Redrow brands.
strategic communications and customer services.
DIVISIONS
GROUP
Build | Commercial | Customer Services
Finance | Land | Sales | Technical
Commercial | Finance | H&S | HR | IT
Legal | Marketing | Technical | Sustainability
Our 14 Homes divisions are comprised of the above
The above departments support the divisions to contribute to
departments which work together to deliver the
the successful operation of the business.
Group’s strategy.
INTRODUCTION
This report sets out the Company’s compliance with
the Code issued by the Financial Reporting Council
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 2018 the
Company has been compliant with the provisions of
the Code.
The governance structure is set out in the diagram
opposite.
THE BOARD
The Board comprises a Non-Executive Chairman,
two Executive Directors and four Independent
Non-Executive Directors, one of which acts as the
Senior Independent Director.
The Chairman and Group Chief Executive
The Company has separate roles for the Chairman
and Group Chief Executive, ensuring 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.
The division of responsibility and accountability
between the roles is well defined and using such a
balanced approach ensures that no one individual
has unfettered powers of decision.
Steve Morgan, as Chairman, is primarily responsible
for:
• leading the Board to ensure optimum
effectiveness;
• encouraging a culture of openness and debate;
• taking a leading role in determining the Board’s
composition and structure;
• ensuring that effective communications are
maintained with shareholders; and
• meeting with the Non-Executive Directors without
the presence of the Executive Management Team.
John Tutte, as Group Chief Executive, is responsible
for:
• operational management of the Group;
• implementing strategic plans with the assistance
of the Executive Management Team;
• ensuring that the visions and values of the
Company are properly communicated across
the Group; and
• reporting on these to the Board.
The Senior Independent Director
Debbie Hewitt was appointed as the Senior
Independent Director on 1 September 2014. Debbie
will retire from the Board at the close of the Annual
General Meeting on 7 November 2018 and will be
succeeded in her position as Senior Independent
Director by Nick Hewson.
Nick has a wealth of experience as a Non-Executive
Director and, having been on the Board since 2012,
has a good understanding of the business thereby
making him best placed to succeed Debbie in her
position as Senior Independent Director.
The following additional responsibilities fall within
the remit of the Senior Independent Director:
• acting as a sounding board for the Chairman and
supporting him in ensuring the Board is effective
and that constructive relations are maintained;
• being available to shareholders in order to
understand their issues and concerns in order to
relay to the Board; and
• leading the evaluation of the performance of the
Chairman and obtaining views from other
Directors.
Non-Executive Directors
The role of the Non-Executive Directors within the
Company is essential in order to view the Group
objectively and provide constructive challenge to
the Executive Directors and scrutinise performance.
They have a good understanding of the business
and bring a range of skills and experience to the
discussions of the boardroom. The diversity and
skills brought into the Company by the Non-
Executive Directors is crucial to developing the
strategy of the Group.
The Non-Executive Directors play a vital role in
occupying seats on the Board’s Committees and
they are positioned in such way that the Committees
benefit from their expertise and background.
The Company Secretary
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 and the
Company Secretary will assist in arranging such
advice.
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Redrow plc Annual Report 2018
66
GOVERNANCE REPORT
Corporate Governance Report continued
DIRECTORS’ AND OFFICERS’ INSURANCE
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 appointments of the Non-Executive Directors
are generally made for three-year terms. Following
the assessment on the effectiveness of the
Directors, the Nomination Committee will make
recommendations to the Board on re-appointments.
The Nomination Committee has recommended the
re-appointment of each of the Executive Directors
and Non-Executive Directors, save for Debbie
Hewitt, who has indicated her intention to retire
from the Board. The Nomination Committee report
can be found on pages 76 and 77.
Under the Company’s Articles of Association, all
Directors are subject to re-election at their first
General meeting after appointment. Debbie Hewitt
completed nine years as a Non-Executive Director
of the Company on 19 August 2018 and will
therefore not be submitting herself for re-election.
Debbie will retire from the Board following the close
of the 2018 Annual General Meeting.
The Board is not seeking to appoint an additional
Non-Executive Director to replace Debbie Hewitt as
they believe that the resultant balance of Non-
Executive and Executive Directors remains effective
and contains the appropriate mix of skills and
experience for the Board to remain successful. The
composition of the Board will remain compliant with
principle B.1.2 of the Code following the change as
the ratio of Independent Non-Executive Directors to
Executive Directors, excluding the Chairman, will be
3:2 (60%).
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, with the exception of
Debbie Hewitt for the reasons outlined above, will
be submitting themselves for re-election at the
Annual General Meeting.
APPOINTMENTS TO EXTERNAL BOARDS
Prior to Executive Directors and Non-Executive
Directors taking on any additional responsibility
outside of the Group, an assessment is undertaken to
determine whether this will compromise their ability to
commit sufficient time to the Company to properly
discharge their responsibilities or create any potential
conflicts. In making the assessment, the Board
considers the mandates attributable to such positions,
in line with the scoring mechanism used by Institutional
Shareholder Services, to determine whether a person
is overboarded. The Board does not consider that any
of its Directors are overboarded and is satisfied that
sufficient time and energy is devoted to the Company
by each Director.
ROLE OF THE BOARD
The Board is responsible for putting in place the
strategic plans for the Group and providing the
leadership required in order to achieve its vision
and goals.
There are matters which the Board delegate to
Committees, the Executive Management Team and
other relevant management bodies in order to
ensure that the Group is operating efficiently and
effectively.
In order to ensure that the Board fulfil their statutory
duties as Directors, there is a formal schedule of
matters reserved specifically for the Board’s
decisions. The matters reserved include:
• approval of the Group’s long-term objectives and
strategy;
• approval of the Annual Report, preliminary and
half-yearly financial statements, trading updates
and the recommendation of dividends;
• approval of any significant changes in accounting
policies or practices; any changes relating to
capital structure and approval of treasury policies;
• ensuring the maintenance of a sound system of
internal control and risk management;
• assessing the prospects and viability of the Group;
• approval of corporate acquisitions or disposals,
significant land purchases or contracts;
• changes to the size, structure and composition of
the Board;
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.
• approval of significant policies, including the
Group’s Health and Safety policy;
• review of overall corporate governance
arrangements; and
• appointment and removal of the Company
Secretary.
Long-term performance and shareholder value relies
on high quality corporate governance and the Board
is responsible for maintaining strong governance
practices and regularly reviewing the Group’s
governance structure as illustrated on page 64.
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 sufficiently in advance of the meetings to
allow adequate time for review to enable informed
debate and challenge at meetings and include key
strategic, operational and financial information.
Where a Director is unable to attend a meeting, they
are encouraged to discuss any issues arising with
the Chairman or Group Chief Executive as
appropriate. If a Director has a concern about the
running of the business, the minutes should
accurately reflect this. Should any Director resign
from their position as a result of unresolved
concerns in the Company, they are requested to
submit a written statement to the Chairman outlining
their concerns for circulation to the Board. There
were no statements received of this nature for the
year ended 30 June 2018.
Attendance by individual Directors at Board
meetings is set out below.
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
Management Team provides the Board with an
appropriate view of the detail of the business and
the benefit of their significant collective experience
of the UK house building industry and that enables it
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 2018, other than Steve Morgan, are
considered to be independent.
Details of the Directors’ respective experience is set
out in their biographical profiles on pages 62 to 63.
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 one
Non-Executive Chairman, two Executive Directors
and four Independent Non-Executive Directors in
compliance with the Code.
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 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.
TABLE OF ATTENDANCE
Name
Steve Morgan
John Tutte
Role
Chairman
Group Chief Executive
Barbara Richmond
Group Finance Director
Debbie Hewitt
Nick Hewson
Senior Independent Director
Non-Executive Director
Sir Michael Lyons
Non-Executive Director
Vanda Murray
Non-Executive Director
Attendance at Meetings
6/6
6/6
6/6
6/6
6/6
6/6
6/6
All details for the Directors are provided on pages 62 to 63.
Details of internal control and risk management processes are included in the Audit Committee report on pages 72 to 73.
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Redrow plc Annual Report 2018
68
GOVERNANCE REPORT
Corporate Governance Report continued
BOARD PERFORMANCE EVALUATION
The Board undertook an internal formal evaluation
of its own performance, and the performance of
each of its Committees, during the year ended
30 June 2018. This started with a questionnaire
designed to assess performance and ongoing
effectiveness across key areas in the year ended
30 June 2018 and to maintain visibility and progress
during the financial year. Following the completion
of the questionnaires, a report was presented to the
Board and discussed. The main observations from
the evaluation were:
• the appropriateness of the timings and number of
meetings and active contribution from Board
members were rated very highly;
PROFESSIONAL DEVELOPMENT
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.
All Directors undertake a comprehensive induction
programme following their first appointment.
The programme for the Non-Executive Directors is
specifically designed to encompass the full breadth
of the business and includes visits to operating
businesses.
• the Committees of the Board were deemed to be
operating effectively and within their Terms of
Reference;
During the year the formal appraisals of the Group
Chief Executive and the Group Finance Director
were undertaken by the Chairman.
• there was unanimous agreement that the Board
was appropriately made up of individuals from a
diversity of gender, background and
psychological type as well as having an
appropriate mix of skills and knowledge; and
• the Board members were highly satisfied that
there was a clear linkage between remuneration
offered to the Directors and strategy, risks and
performance of the Company.
The evaluation also identified the following areas for
improvement which will continue to be addressed
over the coming year:
• continued focus on the longer-term strategic
objectives of the Group to allow constructive
challenge by the Non-Executive Directors;
• further consideration to be made to the longer-
term succession planning of the Executive
Management Team, although it was
acknowledged that good progress had been
made; and
• scope for a more rigorous evaluation of
performance.
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 Management Team and the
Non-Executive Directors.
All Non-Executive Directors had an annual appraisal
conducted by the Senior Independent Director.
COMMITTEES
The Board is supported by Audit, Nomination,
Remuneration and Placemaking 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 75;
the Nomination Committee report on pages 76 to
77; the Remuneration Committee report on pages
80 to 95 and the Placemaking and Sustainability
Committee report can be found on pages 78 to 79.
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 Placemaking
and Sustainability Committee is chaired by Sir
Michael Lyons. Following Debbie’s retirement at the
2018 Annual General Meeting, she will be
succeeded by Vanda Murray as Chairman of the
Remuneration Committee and Nick Hewson as
Chairman of the Nomination Committee.
The Board completed a performance evaluation of
each of its Committees during the financial year
ended 30 June 2018. The evaluation reports were
discussed at a meeting of the Committees and it
was concluded that they were contributing and
functioning effectively and were complying with
their Terms of Reference.
CAPITAL STRUCTURE
The information of the capital structure of the
Company is included in the Directors’ Report on
page 98.
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 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
Executive
Management Team
Female
Male
3 (43%)
4 (57%)
2 (22%)
7 (78%)
Direct reports to Executive
Management Team
10 (29%)
25 (71%)
Redrow employees
at June 2018
764 (33%)
1,518 (67%)
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.
During the year ended 30 June 2018, 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 2017 and February
2018, the Group Chief Executive and the Group
Finance Director met current and potential significant
shareholders. This included visits to London and the
United States of America and feedback from these
meetings was independently collated and
disseminated to the Board.
Last year the Annual General Meeting took place at a
venue close to the Company’s Head Office. All
Directors attended the Annual General Meeting on 9
November 2017. Shareholders are encouraged to
attend the 2018 Annual General Meeting, which
presents an opportunity for all shareholders
attending to ask questions formally during the
meeting and informally afterwards to the Directors.
Formal notification of the 2018 Annual General
Meeting is sent to Shareholders at least 21 working
days in advance.
The Company’s website, www.redrowplc.co.uk, gives
access to current financial and corporate information.
GRAHAM COPE
Company Secretary
3 September 2018
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Redrow plc Annual Report 2018
70
GOVERNANCE REPORT
Audit Committee Report
“The Committee is responsible for providing independent scrutiny of the
Group’s financial and non-financial performance, internal control process
and external Auditors.”
NICK HEWSON
Chairman of the
Audit Committee
COMMITTEE MEMBERSHIP AND MEETINGS
The four Members of the Committee are Independent
Non-Executive Directors. Nick Hewson is Chairman of
the Committee and is a Fellow of the Institute of
Chartered Accountants in England and Wales.
Biographies of the Members of the Committee can be
found on pages 62 to 63.
The Board believes that Nick Hewson has the
requisite financial qualifications and experience to
chair the Committee and the balance of the
Committee has the appropriate level of experience to
fulfil its Terms of Reference and the requirements of
the Code.
separately with the external Auditors and Internal
Audit following the final audit and the review of the
year ended 30 June 2018 financial statements.
No matters of concern were raised within these
discussions. The Committee Chairman also met with
the Engagement Partner of the external Auditors
and the Chief Information Officer to discuss Internal
Audit matters. The Group Company Secretary acts
as Secretary to the Committee.
RESPONSIBILITIES AND TERMS
OF REFERENCE
The key responsibilities of the Committee are:
• monitoring the timeliness and integrity of the
Vanda Murray joined as a Member of the Committee
following her appointment to the Board on 1 August
2017. Liz Peace retired as a Member of the Board and
the Committee with effect from 31 August 2017.
financial statements of the accompanying reports
to the shareholders and Corporate Governance
Statements including reviewing the findings of
external Auditors;
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 2018. The external Auditors,
PricewaterhouseCoopers LLP (“PwC”), and the Chief
Information Officer who had the responsibility for
Internal Audit of the Company, were also in attendance
at all meetings.
Table of Attendance
Name
Role
Nick Hewson
Chairman
Debbie Hewitt
Member
Sir Michael Lyons
Member
Vanda Murray
Liz Peace*
Member
Member
Attendance
at Meetings
3/3
3/3
3/3
3/3
0/0
*
There were no meetings held between 1 July 2017 and
31 August 2017, being the date which Liz Peace retired as
a Member of the Committee.
The Committee met three times in the year ended
30 June 2018 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 has also had the opportunity to meet
• reviewing and monitoring the effectiveness of
systems for internal control, financial reporting
and risk management having regard to the
long-term prospects and viability of the Company;
• reviewing and overseeing the effectiveness of
Internal Audit;
• making recommendations to the Board in relation
to the appointment and removal of external
Auditors and approving the remuneration and
terms of engagement;
• determining the criteria used in order to assess
the quality of the external audit and reporting on
any significant issues considered in relation to the
financial statements;
• 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;
• reviewing the Company’s procedures for
detecting fraud and the adequacy of its systems
and controls for the prevention of bribery;
• reviewing the Company’s procedures for data
management and cyber resilience;
• reviewing the Company’s procedures and
controls for the prevention of tax evasion and the
facilitation of tax evasion; and
• reviewing the Company’s procedures for raising
concerns.
The Committee’s Terms of Reference are available
on the Company’s website (www.redrowplc.co.uk).
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AUDIT COMMITTEE REPORTING ON SIGNIFICANT ISSUES
The primary areas of judgement and estimation uncertainty which were considered by the Committee and how these were
addressed is set out below.
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.
VALUATION OF INVENTORY
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
and any forward land against which provisions have been made.
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 PwC’s report benchmarking pension actuarial assumptions. The Scheme was in surplus as at 30 June 2018.
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 were as follows:
September 2017 A review of the full year 2017 results including the Annual Report and a report from the external Auditors;
Consideration of the Group risk assessment process, viability statement and a going concern review;
An update on cyber security and attaining Cyber Essentials Plus; and
A review of the Company’s policies and procedures to ensure compliance with the General Data Protection
Regulation 2018.
February 2018
June 2018
A review of the 2018 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 2018 and associated fees;
A review of the effectiveness of the external Audit process;
A review of the independence and objectivity of the external Auditors;
A review of the Committee’s effectiveness;
A further update on cyber security; and
A report on the changes made to ensure that the Company would be compliant under the General Data
Protection Regulation 2018.
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;
The adoption of the Group’s Anti-Facilitation of Tax Evasion 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 2019;
A review on the independence and objectivity of the external Auditors;
Further discussions regarding the future tendering of the external Audit in compliance with the Order of the
Competition and Markets Authority;
Undertook a Performance Evaluation of the Committee; and
An update on cyber security and compliance with the General Data Protection Regulation 2018.
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September 2018 A review of the full year 2018 results, including the Annual Report and a report from the external Auditors;
Consideration of the Group risk assessment process, viability statement and a going concern review; and
Tender process for the appointment of new Auditors, strategy and timetable discussed and agreed.
Redrow plc Annual Report 2018
72
GOVERNANCE REPORT
Audit Committee Report continued
AUDIT INDEPENDENCE
PwC were appointed Auditors in 1999 following their
merger with 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.
Whilst the Company is satisfied that the auditors remain
independent, it recognises the Order of the
Competition and Markets Authority in relation to FTSE
350 companies which will require the Company to
change its statutory auditor for the June 2020 audit at
the latest.
Due to the length of time that PwC have been the
Company’s Auditors, the Committee considers that it is
in the best interests of the Company to undertake a
tender of the external Audit. As a result, the Committee
has had further discussions regarding its future policy,
strategy and timing for tendering of the external Audit.
The Company has commenced a tender process for the
appointment of new Auditors. The tender process will
be supervised by the Committee, who will then make a
recommendation to the Board on the appointment of
the replacement Auditor. Following the appointment, an
announcement will be made.
In the meantime, the Company will be proposing the
re-appointment of its current Auditor at the 2018 Annual
General meeting.
The Committee confirms that there were no contractual
obligations that acted to restrict the Committee’s choice
of external Auditors.
The Committee has a formal policy in respect of the
work of the external Auditors. The purpose of this policy
is to ensure that the Auditor’s objectivity and
independence is maintained by ensuring both that the
nature of any non-audit work undertaken and the level
of fees paid does not compromise the Auditor’s
position.
Appointments in respect of non-audit work require the
prior approval of the Committee within an established
budget. In addition, no work can be undertaken by the
external Auditors in any area where there is any
identifiable risk that the work of an individual within the
external Audit firm or the external Audit firm generally
could conflict or compromise the quality, objectivity or
independence of any audit or compliance work
undertaken for the Group.
The external Auditors are not indemnified by the
Company nor has the Company purchased liability
insurance for them.
Details of fees paid to PwC for audit and non-audit
purposes are disclosed on page 119.
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 the Group. The Executive
Directors, the Group Company Secretary, Regional
Chief Executives, Group Human Resources Director,
Group Sales and Marketing Director, Group
Communications Director and Group Development
Director (“the Executive Management Team”) 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;
• the Group 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;
• in addition, key functional Directors complete a
Principal Controls Self-Assessment Questionnaire
which is reviewed by the Board to assist in
improvements in the control framework;
• 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
accounts. The basis for the preparation of
consolidated accounts has been undertaken in
accordance with the Company’s Accounting policies
as set out on pages 114 to 118.
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 Management
Team, 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 Group personnel at Head Office and
within the divisions and report directly to the Group
Finance Director.
RISK MANAGEMENT AND INTERNAL AUDIT
The Group’s Risk Register defines controls as prevent
or detect and identifies owners 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 Review, a
risk-based programme that was designed, based on
the Risk Register, to be carried out regularly at each
division of the Group. 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 and these reports are then discussed
at the next Committee meeting. In addition the
Committee at its meetings reviews the progress
made by the relevant division, following the
completion of a Business Process Review, against the
Internal Audit process.
The Company has introduced a new business
planning process whereby each land transaction,
following completion of the development, is tested
against its original appraisal to ascertain its
performance and to improve cash flow forecasting.
These Post Completion Reports are provided to the
Committee and are discussed at each meeting.
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. During the
year, this policy was updated to reflect changes in
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Redrow plc Annual Report 2018
74
GOVERNANCE REPORT
Audit Committee Report continued
PERFORMANCE EVALUATION
The Committee completed a performance
evaluation during the financial year by the members
of the Committee and those who regularly attend by
invitation, including the external Auditor, completing
a self-assessment questionnaire and a report
compiled by the Group Company Secretary from the
results 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
3 September 2018
best practice and to incorporate reference to the new
corporate criminal act of facilitating tax evasion, as
referred to below.
BRIBERY ACT
Following the introduction of the Bribery Act 2010
the Company put in place a policy on bribery and
corruption for all employees strictly to adhere to.
The Group 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. This policy
was updated this year to reflect changes to internal
procedures since the previous publication.
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 internal e-learning
facility, each employee will be required to complete
a mandatory compliance test which reminds each
employee of their obligations.
THE CRIMINAL FINANCES ACT
Following the introduction of the Criminal Finances
Act 2017 on 30 September 2017, the Company put in
place a policy relating to the facilitation of tax
evasion. The policy is applicable to every employee
and the Employee Handbook, which is provided to
each new employee, includes reference to the
policy and the Group’s zero-tolerance stance on tax
evasion and its facilitation. As with the Bribery Act
policy, the Group Company Secretary ensures that
the policy is complied with and reports to the
Committee on matters falling within the policy.
The Anti-Facilitation of Tax Evasion policy shall be
formally reviewed and approved each year by the
Committee.
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THE REGENT COLLECTION AT ERSKINE PARK, WILTON, WILTSHIRE
Redrow plc Annual Report 2018
76
GOVERNANCE REPORT
Nomination 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.”
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 period ending 30 June 2018 were Nick
Hewson, Liz Peace, Sir Michael Lyons and Vanda
Murray.
DEBBIE HEWITT
Chairman of the
Nomination
Committee
Vanda Murray joined as a Member of the Committee
following her appointment to the Board on 1 August
2017. Liz Peace retired as a Member of the Board
and the Committee with effect from 31 August 2017.
The biographies of the Members of the Committee
can be found at pages 62 to 63.
Table of Attendance
Name
Role
Debbie Hewitt
Chairman
Nick Hewson
Liz Peace*
Member
Member
Sir Michael Lyons
Member
Vanda Murray**
Member
Attendance
at Meetings
3/3
3/3
0/1
3/3
2/2
• 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 Directors 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 Placemaking and Sustainability
Committees;
• ensuring that a formal, structured and tailored
induction programme is undertaken by any newly
appointed member of the Board;
• reviewing annually the time required from the
Non-Executive Directors;
• satisfying itself with regard to succession planning
for the Board and senior management, taking into
account the challenges and opportunities facing
the Company and future skills and expertise
needed on the Board including development and
training; and
• ensuring suitable candidates for the Board are
identified through an appropriate recruitment
process, giving due regard to the benefits of
diversity, including gender and ethnicity, and
recommended for appointment.
*
**
Liz Peace was unable to attend the meeting which was held
whilst she was a Member of the Committee.
The Committee’s Terms of Reference are published
on the Group’s website (www.redrowplc.co.uk).
Vanda Murray attended both meetings which were held
following her appointment as a Member of the Committee.
The Committee met three times during the year ended
30 June 2018. 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.
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;
MAIN ACTIVITIES DURING THE YEAR
During the year to 30 June 2018 the Committee
undertook the following activities:
• a review of the structure, size and composition of
the Board;
• a review of executive succession. The Committee
concluded that the present Board balance and
composition remains appropriate but that it will be
kept under review;
• an assessment of the Board composition and
effectiveness with specific regard given to the
retirement of Debbie Hewitt at the conclusion of
the 2018 Annual General Meeting;
• recommended that the Directors, save for Debbie
Hewitt following completion of 9 years’ service,
stand for re-election at the conclusion of the 2018
Annual General Meeting in accordance with UK
Corporate Governance Code; and
• reviewed the Committee’s Terms of Reference.
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The Directors were not present and did not vote
when their individual proposals were discussed.
SUCCESSION
The Board considers that succession planning of the
Board and its Committees is extremely important
and believes that it currently has a good balance
and diversity among its Non-Executive Directors,
with each of them having relevant skills derived
from serving in a range of executive and non-
executive positions over many years.
On 19 August 2018, Debbie Hewitt completed 9
years’ service on the Board and, in line with best
practice, she will not be standing for re-election at
the 2018 Annual General Meeting.
In preparation for the retirement of Debbie Hewitt,
the Committee put in place a succession plan
recognising best practice which advises the
Chairman of the Remuneration Committee shall sit
on the Committee for a year prior to taking up the
Chairman role and that the Senior Independent
Director have a good understanding of the
Company to enable them to carry out the duties of
the role effectively.
With effect from the close of the 2018 Annual
General Meeting, Debbie Hewitt will be succeeded
by Nick Hewson as the Senior Independent Director
and Chairman of the Nomination Committee and by
Vanda Murray as Chairman of the Remuneration
Committee.
Nick Hewson has substantial experience as a
Non-Executive Director and, having been on the
Board since December 2012, has a good
understanding of the business of the Group. He has
also been a member of the Nomination Committee
since joining the Board in 2012.
Vanda Murray has extensive Remuneration
Committee experience, having held Chairman
positions of the Remuneration Committees in Bunzl
plc and Fenner plc. She joined the Remuneration
Committee of the Company on 1 August 2017 and
has spent a significant amount of time shadowing
Debbie Hewitt in preparation for her taking on the
role of Chairman of the Remuneration Committee.
Following an assessment by the Committee, the
Board is not currently seeking to appoint an
additional Non-Executive Director to replace
Debbie Hewitt, as the recruitment of Vanda Murray
in 2017 has provided for the Non-Executive
succession needs. As a result of careful succession
planning, the Committee believes that the resultant
balance of the Non-Executive Directors and
Executive Directors remains effective, along with
each of the Board’s Committees.
DIVERSITY
The principle of boardroom diversity is strongly
supported and recognised 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. Current female representation on
the Board is 43%.
Once Debbie Hewitt steps down from the Board at the
close of the 2018 Annual General Meeting, female
representation on the Board will be 33%, remaining in
line with the Hampton-Alexander Review, which
recommends that FTSE 350 companies should aim to
build the representation of women on their boards to
33% by 2020.
The Board believes in the benefits of cognitive
diversity, from a wide range of complementary skills.
The Committee will continue to aspire to maintain a
diverse Board with recruitment and selection of
talented individuals and with a broad range of
appropriate skills, irrespective of gender.
The Committee continues to monitor and review
reports and recommendations relating to the
composition of boards and diversity, including the
Parker Review on ethnic diversity.
The Group Human Resources Director attends the
monthly Executive Management Team meetings and
provides a monthly people report which provides key
statistics on Group employees as well as providing
updates on employee engagement and recruitment.
She reports to the Nomination Committee at least
twice a year to update on progress.
PERFORMANCE EVALUATION
The Committee members completed a
performance evaluation during the financial year
and a report was presented by the Secretary 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. Actions were
agreed to maintain this progress.
Throughout the year, good progress had been
made on the longer-term succession planning of
the Executive Management Team and this will
remain a priority for the coming year.
DEBBIE HEWITT
Chairman of the Nomination Committee
3 September 2018
Redrow plc Annual Report 2018
78
GOVERNANCE REPORT
Placemaking and Sustainability Committee Report
“The Committee ensures that the Group lives up to high environmental and
placemaking standards and delivers on its commitment to promote the
creation of socially and economically sustainable communities.”
SIR MICHAEL
LYONS
Chairman of the
Placemaking and
Sustainability
Committee
COMMITTEE MEMBERSHIP AND MEETINGS
The Members of the Committee during the
Financial Year comprised Sir Michael Lyons, who
was Chairman of the Committee and Nick Hewson,
Independent Non-Executive Director, Matthew
Pratt, Southern Regional Chief Executive, Robert
MacDiarmid, Group Sustainability Director, and
Karen Jones, Group Human Resources Director.
Liz Peace retired from the Board on 31 August 2017
and was replaced by Sir Michael Lyons on
1 September 2017 as Chairman of the Committee.
On 1 September 2017 the Committee was renamed
the Placemaking and Sustainability Committee.
Table of Attendance
Name
Role
Sir Michael Lyons
Chairman
Liz Peace*
Chairman
Nick Hewson
Member
Matthew Pratt**
Member
Robert MacDiarmid Member
Karen Jones
Member
Attendance
at Meetings
3/3
0/0
3/3
2/3
3/3
3/3
*
**
There were no meetings held between 1 July 2017 and
31 August 2017, being the date which Liz Peace retired as
a Member of the Committee.
Due to unforeseen circumstances, Matthew Pratt was
unable to attend one of the meetings but was fully
appraised of the matters discussed therein.
The Committee met three times during the year
ended 30 June 2018. 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.
RESPONSIBILITIES AND TERMS
OF REFERENCE
The key responsibilities of the Committee are:
• to develop and monitor the Company’s approach
to sustainability and to review and approve the
sustainability targets proposed by management;
• to assess the impact of the Company’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;
• to have regard to environmental corporate social
responsibility and community issues, including
environmental management systems, waste
management systems, recycling and energy
management;
• 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 Company 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 Company employees so that
they can realise their capability to contribute to
the social, environment and economic health of
our communities and having regard to the
promoting and maintaining the highest degree of
physical, mental and social wellbeing in the
workplace;
• to ensure that the Company 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 Company’s policies and reporting
with regard to personnel recruitment,
development and succession planning to ensure
a sustainable and engaged workforce;
• supported a series of workshops that were run to
help refine the Group’s placemaking principles.
These principles, which have been titled “Redrow
8”, are being developed by drawing on the
Group’s many years of experience delivering high
quality distinctive places to live;
• encouraged the Company to become a member
of the NHS Healthy Towns Network. The purpose
of the network is to explore how new housing
developments can achieve better health
outcomes;
• evaluated the outcomes of a pilot project
examining how our current design approach is
impacting biodiversity at several of our existing
developments. Whilst the sample of sites in this
exercise was not large enough to make wider
predictions, the findings gave insight into the key
considerations for achieving biodiversity ‘net gain’
and will inform the development of our new
biodiversity strategy;
• supported the formulation of a health and
wellbeing strategy which is being developed to
improve the wellbeing of the Group’s people and
create a more inclusive workplace; and
• continued to review and evaluate the Group’s
collaboration with education partners, which is
aiming to positively impact people and
communities.
PERFORMANCE EVALUATION
The Committee members completed a performance
evaluation during the financial year and a report was
presented by the Secretary 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.
SIR MICHAEL LYONS
Chairman of the Placemaking
and Sustainability Committee
3 September 2018
• to have regard to the Company’s involvement in
the community, and the Company’s policy on
charitable donations and activities;
• to have regard to the Company’s developments in
customer engagement and service to ensure its
values are upheld;
• to adhere to the Company’s three key principles
of sustainability: Thriving Communities, Building
Responsibly and Valuing People; and
• to ensure that we are continuing to create great
places to live and making social, economical and
environmental contributions to local areas by
setting well-designed homes and amenities within
attractive shared spaces.
The Committee regularly reviews its Terms of
Reference; these were last reviewed in May 2018
and are published on the Group’s website
(www.redrowplc.co.uk).
MAIN ACTIVITIES DURING THE YEAR
During the year ended 30 June 2018 the principal
activities of the Committee were as follows:
• assessed the changes required to achieve the
target of implementing an accredited H&S
Management system (ISO45001);
• implemented three new sustainability themes
(Thriving Communities, Building Responsibly and
Valuing People) and set the objectives and
targets in order to fully integrate these principles
within the Group;
• supported the implementation of the new
Intranet, which promotes increased
communication across the Group;
• monitored and reviewed the Company’s response
to environmental legislation and regulation,
ensuring the appropriate risk mitigation controls
were being implemented, monitored and
evaluated;
• monitored the suitability of internal and external
communication of sustainability related activities.
Methods of communication included internal
magazines, Companywide briefings and updates
to the Company’s website;
• approved the Company becoming Gold Leaf
members of the UK Green Building Council
(UKGBC) and becoming corporate members of
Considerate Constructors Scheme (CCS), a
non-profit-making, independent organisation
founded by the construction industry to improve
its image;
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Redrow plc Annual Report 2018
80
GOVERNANCE REPORT
Directors’ Remuneration Report
“I am pleased to present the Directors’ Remuneration Report for the year
ended 30 June 2018.”
DEBBIE HEWITT
Chairman of the
Remuneration
Committee
At the Annual General Meeting on 9 November
2017, our Directors’ Remuneration Policy was put to
a binding shareholder vote, which was approved by
99.97% of the votes cast. The Remuneration
Committee believes that this approved Policy
continues to reflect our overall remuneration
philosophy and that it is working effectively to align
the executives with the optimum outcome for all
stakeholders. 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 82 to 84. We will be submitting a Policy for
shareholder approval at the 2020 AGM in line with
the three year cycle set out in the regulations.
The Annual Remuneration Report (pages 86 to 95)
provides details on the remuneration we paid in
respect of 2018 and how we intend to operate our
policies in 2019. It will be submitted to an advisory
shareholder vote at the 2018 Annual General Meeting.
OUR PHILOSOPHY – ALIGNING REWARD
WITH PERFORMANCE
Our Remuneration strategy remains unchanged – it
is designed to reflect the needs of a UK based,
capital intensive house builder, 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.
2018 OUTCOMES – AN OUTSTANDING YEAR
As described in detail on pages 1 to 59 of this
Annual Report, 2018 was another outstanding year
for Redrow, which saw:
• Record profit before tax of £380m, up 21%
• Revenue exceeding £1.9bn, up 16%
• Earnings per share up 22% to 85.3p
• ROCE improving further to 28.5%
• Dividend up 65% to 28p
Based on these principles, our remuneration framework includes the following components:
Fixed Components
Variable Components
Salary
Benefits Pension
Annual Bonus
LTIP
Market competitive
Maximum 100% of salary
Maximum 150% of salary
–
Reflect nature of
role, and skills
and experience
–
–
–
Balanced scorecard of key
performance measures – for
example, PBT, ROCE, land
holdings, outlet openings
50% deferred into shares – half
vest after one year and half after
two years
Cash and shares subject to
clawback for five years following
payment / vesting
–
–
–
Based on stretching long-term
EPS and ROCE targets
Subject to clawback for five
years following vesting
Subject to an additional holding
period of two years following
vesting (including post-
employment)
Shareholding Guidelines
200% of salary to be built up over five years from appointment
The alignment between performance and reward
which underpins our executive remuneration
framework, is reflected in the outcomes for the
annual bonus and LTIP:
• 2017-18 Annual bonus: Based on exceptional
performance, with the targets for maximum
payment exceeded for three of the annual bonus
measures (PBT, ROCE, land holdings) and
performance on outlet openings significantly
above target but short of the stretch target, the
Committee determined that the annual bonus
should pay out at 96.7% of salary for both 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
• 2015 -18 LTIP: EPS of 85.0p and ROCE of 28% in
2018 were both significantly above the targets
for maximum vesting of 76.3p and 22%,
respectively. The Committee therefore
determined that the 2015 LTIP award should vest
in full on 14 September 2018.
The 2018-19 annual bonus targets are disclosed on
page 86.
We have and will continue to set stretching target
ranges for our incentive awards. Shareholders will
note from our disclosure that historical targets set
were stretching and payments have reflected
absolute and relative outperformance in market terms
for financial returns and for the strategic objectives of
quality land holdings and strong order book.
REMUNERATION DECISIONS FOR 2019
The Committee has decided to award salary
increases to the Group Chief Executive and Group
Finance Director of 2.5%, effective from 1 July 2018.
This is below the average increase for all other
employees across the business which was 3.5%.
The annual bonus and LTIP will operate in line with
our Remuneration Policy.
The annual bonus will continue to be based on a
balanced scorecard of performance measures – PBT,
ROCE, a measure based on the number of outlets
opened and land acquired.
The EPS and ROCE target ranges for the 2018-21 LTIP
award are set out on page 86 of this report.
As reported last year, all variable pay elements were
removed from the Chairman’s package and therefore
Steve Morgan was not invited to participate in the
2017/18 annual bonus scheme nor granted an LTIP in
2017. Further, following his move to Non-Executive
Chairman on 1 October 2017, his salary of £499k was
reduced to an annual fee of £300k. He takes a
nominal payment of £10k, which he donates via
payroll giving to the Steve Morgan Foundation and
the remainder is donated directly by the Company to
the Steve Morgan Foundation.
CORPORATE GOVERNANCE
The Remuneration Committee continues to monitor
developments in respect of the Government’s
corporate governance reforms including the recently
announced changes to the UK Corporate
Governance Code (the “Code”). During the coming
year the Committee will review Redrow’s compliance
with the remuneration aspects of the Code and will
make amendments where necessary.
PERFORMANCE EVALUATION
The Committee completed a performance evaluation
during the financial year by the members of the
Committee and those who regularly attend by
invitation, including the Chairman, Group Finance
Director and Group HR Director, completing a
self-assessment questionnaire. A report was
compiled by the Group Company Secretary from the
results and it was presented to the Committee and
discussed. It was concluded that the Committee had
fulfilled its remit and had in place appropriate Terms
of Reference. The report also concluded how the
Committee would ensure that the succession
planning of the Chair of the Committee would work,
including a detailed handover plan.
SHAREHOLDER ENGAGEMENT
We remain committed to an ongoing and transparent
dialogue with our shareholders on executive
remuneration. In putting in place our current Policy,
we engaged with a number of our major
shareholders and their feedback was taken into
account by the Committee in finalising the Policy. We
will continue to engage with our shareholders on any
significant changes to the Policy.
Last year, 99.96% of votes cast were in favour of the
Remuneration Report and 99.97% of votes cast were
in favour of the Remuneration Policy. We look forward
to receiving your continued support on our approach
to remuneration at this year’s Annual General Meeting.
CLOSING REMARKS
Finally, as you will be aware, I will be retiring from the
Board following the AGM after 9 years of service as a
Non-Executive Director. It has been a privilege to be
a member of the Redrow Board during a period of
considerable growth. Assuming her election by
shareholders, Vanda Murray will take up the position
of Chairman of the Remuneration Committee with
effect from 7 November 2018.
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.
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Redrow plc Annual Report 2018
82
GOVERNANCE REPORT
Directors’ Remuneration Report continued
THE REMUNERATION POLICY
The Remuneration Policy became effective following shareholder approval at the 2017 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 79 to 86 of the 2017 Annual Report, 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 house-
building sector.
Salaries are normally
reviewed annually, with any
changes effective at the
start of the financial year.
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.
N/A
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.
Participation in all employee
share plans is subject to
statutory limits.
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,
and where appropriate any
tax payable thereon.
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.
Component
Pension
Purpose/link
to strategy
To provide a
market
competitive
element of
fixed
remuneration
for retirement
planning.
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.
Operation
Maximum
Performance framework
N/A
The maximum DC
contribution/cash
supplement (in respect of a
financial year) is 20% of base
salary.
100% of salary.
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:
–
–
–
25% based on profit before tax;
25% based on return on capital
employed (ROCE);
25% based on land
holdings; and
–
25% based on outlet openings
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.
No bonus will be payable for
performance below threshold
levels set by the Committee.
The Committee has discretion to
adjust the level of payout if the
outcome from a formulaic
assessment does not appropriately
reflect underlying business
performance.
Individuals are eligible to
participate in the Company’s
Defined Contribution (DC)
pension scheme or receive a
pension allowance cash
supplement.
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.
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.
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Redrow plc Annual Report 2018
84
GOVERNANCE REPORT
Directors’ Remuneration Report continued
THE REMUNERATION POLICY CONTINUED
Component
Long Term
Incentive
Plan (LTIP)
Purpose/link
to strategy
Designed to
motivate and
reward
long-term
performance
and delivery of
the strategy
and provide
alignment with
Redrow
shareholders.
Operation
Maximum
Performance framework
The maximum award which
may be granted in respect of
a financial year will normally
not exceed 150% of salary.
However, in exceptional
circumstances only, the
Committee may make
awards of up to 200% of
salary.
Awards may be made under
the Redrow plc 2014 Long
Term Incentive Plan (LTIP).
Awards are normally in the
form of nil-cost options. 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).
Awards normally vest
subject to the satisfaction of
performance conditions
measured over a period of at
least three years. Vested
awards will normally be
subject to an additional
holding period of two years.
Clawback provisions apply.
Awards 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 released
following the holding period,
on such basis as the
Committee may determine,
which may assume the
reinvestment of these
dividends in shares on a
cumulative basis.
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
salary would normally
vest.
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 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 they would otherwise be eligible to receive under any of the components set out in the Policy
Table on pages 82 to 84, 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.
Executive shareholding guidelines
Executive Directors are expected to build and retain a shareholding in the Group at least equivalent to
200% of base salary. Until the shareholding guideline has been met Executives will be required to retain all
deferred bonus shares and LTIP shares on a net of tax basis.
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Clawback
For awards under the annual bonus plan (including deferred share awards) and awards made since the
introduction of the 2014 LTIP, the Committee has discretion to clawback 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, if a participant’s gross misconduct has resulted in the material misstatement
of the Group accounts (or the accounts of one of its subsidiaries), 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:
Contract date
Notice period from the Director
Notice period from the Company
Name
John Tutte
01/07/14
Barbara Richmond
18/01/10
12 months
6 months
12 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 and
letters of appointment 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.
For future appointments, it is the Committee’s policy that notice periods will normally be 6 months from both
the Director and the Company initially and thereafter, 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
Steve Morgan*
Non-Executive Chairman
23/03/09
Debbie Hewitt**
Senior Independent Director
21/08/09
Nick Hewson
Non-Executive
Liz Peace***
Non-Executive
Sir Michael Lyons
Non-Executive
Vanda Murray****
Non-Executive
01/12/12
01/09/14
06/01/15
01/08/17
01/10/17
19/08/18
01/12/15
01/09/14
06/01/18
01/08/17
*
**
Steve Morgan moved from Executive to Non-Executive Chairman on 1 October 2017.
Debbie Hewitt’s appointment was extended on 19 August 2018 to cover the period from this date until the 2018 AGM at which
point she will be retiring from the Board.
***
Liz Peace retired from the Board on 31 August 2017.
**** Vanda Murray joined the Board on 1 August 2017.
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Redrow plc Annual Report 2018
86
GOVERNANCE REPORT
Directors’ Remuneration Report continued
ANNUAL REMUNERATION REPORT
STATEMENT OF IMPLEMENTATION FOR 2019
This section summarises how the Committee intends to operate the Remuneration Policy for the year
ending June 2019.
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 2018 was 3.5%. The Committee decided to award
base salary increases for the Executive Directors of 2.5%, effective 1 July 2018, as follows:
£’000
John Tutte
Barbara Richmond
2019
598
338
2018
Change
583
330
2.5%
2.5%
Annual bonus
For FY 2019, the annual bonus will operate on the same basis as for FY 2018, assessed using the same
balanced scorecard of measures as shown on page 88.
It is the current intention that the targets will be disclosed in the FY 2019 Annual Remuneration Report
provided the Committee is comfortable they are no longer commercially sensitive.
LTIP awards to be granted during 2019
Subject to shareholder approval of the new Remuneration Policy, LTIP awards in the FY 2019 financial year
will be made at the level of 150% of salary and will be subject to the following stretching EPS and ROCE
performance targets, measured over the three year period ending in 2021:
Award vesting level as % of salary (for each component)
EPS for 2021
ROCE for 2021
Nil
10%
30%
75%
Below 105.0p
Below 25.8%
105.0p
110.0p
25.8%
26.8%
115.0p or above
27.8% or above
Vesting between the points above is on a sliding scale basis
In line with our Policy, these awards will be subject to an additional two year post-vesting holding period.
The Committee notes that the ROCE performance target for the scheme which commences in FY19 is below the
2018 actual ROCE performance of 28%, although above the maximum target for the LTIP schemes which have
or which are due to vest in FY18, FY19 and FY20. The Committee has discussed this in detail and considers,
given the general economic context, that the ROCE target for the 2019 awards is sufficiently stretching.
NON-EXECUTIVE DIRECTOR FEES
The base fee for a Non-Executive Director is £55k p.a. from 1 August 2017. In line with current practice the
Company pays an additional fee of £10k p.a. to Committee Chairs and an additional fee of £10k p.a. to the
Senior Independent Director. The fee for the Non-Executive Chairman is £300k p.a.
OUTCOMES IN RESPECT OF 2018
The tables below set out the remuneration for the Directors in respect of 2018. Further discussion of each of
the components is set out on the pages which follow. Where indicated, these disclosures have been audited.
As Steve Morgan moved from an Executive to Non-Executive role during the course of the financial year,
the remuneration that was attributable to each role is shown in the Executive remuneration table and
Non-Executive remuneration table respectively.
SINGLE TOTAL FIGURE OF REMUNERATION TABLE (AUDITED)
The remuneration of the Executive Directors in respect of 2018 is shown in the table below (with the prior
year comparative):
Salary
Benefits (ii)
Annual
bonus (iii)
LTIP (iv)
Pensions (v)
Total
£’000
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Steve Morgan (i)
4
15
John Tutte
583
569
Barbara
Richmond
330
322
–
16
17
31
16
16
–
–
–
–
564
569
681
1,195
–
117
–
4
46
114
1,961
2,463
319
322
384
675
66
64
1,116
1,399
(i)
Steve Morgan served as Executive Chairman from 1 July to 30 September 2017. The disclosure in this table and footnote are
in reference to that period. Steve Morgan drew a nominal annual salary of £15k (2017: £15k) per annum which he donated via
Payroll Giving to The Steve Morgan Foundation, a UK registered charity of which Steve Morgan is a trustee.
The Company also made a donation to The Steve Morgan Foundation of £121k in respect of 2018 (2017: £716k). This donation
represents Steve Morgan’s notional salary of £499k per annum less the £15k per annum nominal salary for the three months
to 30 September 2017. In 2017 the donation was made up of a notional salary of £472k (being the balance of Steve Morgan’s
notional annual salary of £487k less the £15k nominal salary) and £244k (being an amount in respect of the cash annual
bonus which Steve Morgan waived his entitlement to). The notional cash bonus represented half of the total bonus for 2017,
calculated using the notional salary of £487k and a bonus percentage of 100% of maximum, equivalent to that earned by
John Tutte and Barbara Richmond.
Steve Morgan’s 2015 LTIP award, also structured as a cash award over notional Redrow shares, will vest in full on 14
September 2018 based on performance to the 2018 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 2018 in accordance with footnote (iv) below) is
£582k (2017: £1,022k).
Further details on the donation to The Steve Morgan Foundation are given in the Directors’ Report on page 99 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)
(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. Details of performance targets are set out below.
LTIP represents the value of the LTIP award which vests in respect of a performance period ending in the relevant financial
year. The 2018 column includes the value of the 2015 LTIP award which will vest in full on 14 September 2018, using the
average share price over the last three months of 2018. The 2017 column includes the vested value of the 2014 LTIP award
(which vested at 100% of maximum), based on the share price on the date of vesting (18 September 2017).
(v) Pension includes the value of the cash allowance paid to John Tutte and Barbara Richmond in respect of the relevant year.
The fees of the Non-Executive Directors in respect of 2018 are shown in the table below (with the prior
year comparative).
£’000
Steve Morgan (i)
Debbie Hewitt
Nick Hewson
Sir Michael Lyons
Liz Peace (ii)
Vanda Murray
Fees
2018
2017
8
75
63
63
8
50
–
70
45
45
45
–
(i)
Steve Morgan served as Non-Executive Chairman from 1 October to 30 June 2018. The disclosure in this table and footnote
are in reference to that period. Steve Morgan draws a nominal fee of £10k per annum which he donates via Payroll Giving to
The Steve Morgan Foundation, a UK registered charity of which Steve Morgan is a trustee. The Company also made a
donation to The Steve Morgan Foundation of £218k (being the balance for this period of Steve Morgan’s notional annual fee
of £300k per annum less the £10k nominal fee.)
(ii)
Liz Peace retired as a Non-Executive Director on 31 August 2017.
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88
GOVERNANCE REPORT
Directors’ Remuneration Report continued
SINGLE TOTAL FIGURE OF REMUNERATION TABLE (AUDITED) CONTINUED
Annual bonus
The maximum bonus opportunity for the Executive Directors during 2018 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 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 holdings and outlet openings) which support
shareholder value creation over the medium to long-term.
% of bonus opportunity
Rationale
PBT
ROCE
Land holdings
Outlets opened
30%
30%
20%
20%
A fundamental measure of annual profitability
A measure of how effectively we use our capital base
Measures the foundation for our future growth
A fundamental indicator of future growth
As described in detail on pages 1 to 59 of this Annual Report, 2018 was another outstanding year for Redrow.
As a result of the targets for maximum payment for three of the PBT, ROCE and Land holdings being
exceeded and performance on outlet offerings significantly above target but short of the stretch target, the
Committee determined that the bonus should pay out at 96.7%, resulting in bonus awards to the Executive
Directors as shown in the Single Total Figure of Remuneration on page 87.
Our policy is to disclose annual bonus targets in the year to which the payment relates, subject to the
Committee being comfortable that the targets are no longer commercially sensitive. Accordingly the 2018
targets are disclosed in the following table:
% of bonus
opportunity
Threshold payout
(10% of maximum)
Target payout
(50% maximum)
Maximum
payout
Actual 2018
performance
2018 Target Range
PBT
ROCE
GDV of land
acquired
Outlets opened
in year
30
30
20
20
Total
100%
£340m
21.9%
1.8bn
48
£360m
23.1%
£380m
24.3%
£380m
28.0%
1.9bn
£2.0bn
£2.2bn
51
54
53
Payout (% of
total bonus
opportunity)
30
30
20
16.7
96.7%
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. Clawback
provisions for both the cash and deferred share elements will apply.
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. In 2018, annual awards were made at the level of 150% of
salary, in line with the prevailing policy.
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 historic 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 2018 (2015 awards)
and which were granted during the 2018 financial year.
LTIP awards vesting in respect of 2018
The LTIP awards granted in September 2015 were based on performance over the three year performance
period ending in 2018. 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 2015 LTIP awards will vest in
full on 8 September 2018. The value of these vested awards is included in the 2015 LTIP column of the
Single Total Figure of Remuneration on page 87.
Award vesting level as a % of share options granted (for each component)
EPS for 2018
ROCE for 2018
Nil
10%
30%
50%
Vesting between the points above is on a sliding scale basis
Actual performance
Vesting (% of total award)
Below 62.5p
Below 18.0%
62.5p
69.4p
18.0%
20.0%
76.3p or above
22% or above
85.3p
50%
28.5%
50%
LTIP awards granted during 2018
The LTIP awards granted in November 2017 will vest in November 2020 based on performance over the
three year performance period ending in 2020 as follows:
Award vesting level as a % of share options granted (for each component)
EPS for 2020
ROCE for 2020
Nil
6.67%
20%
50%
Below 80.4p
Below 24.2%
80.4p
90.4p
24.2%
25.7%
104.4p or above
27.2% or above
Vesting between the points above is on a sliding scale basis
SCHEME INTERESTS AWARDED DURING 2018 (AUDITED)
The following table sets out details of LTIP awards to Executive Directors during the 2018 financial year.
Executive Director
Type of interest
Basis of award
Face value
Threshold
vesting (% of
maximum)
John Tutte
Barbara Richmond
LTIP
LTIP
150% of salary
150% of salary
£875k
£495k
20%
20%
End of
performance period
30 June 2020
30 June 2020
Awards to John Tutte and Barbara Richmond are made in the form of nil-cost options.
The face value has been calculated using the average share price used to determine the number of shares
awarded, being 593.5p (the average, over the three days to the date of grant).
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Redrow plc Annual Report 2018
90
GOVERNANCE REPORT
Directors’ Remuneration Report continued
Shareholding guidelines and share interests
Under our shareholding guidelines, Executive Directors are expected to build and retain a shareholding in
the Group at least equivalent to 200% of base salary. Until the shareholding guideline has been met,
Executives will be required to retain all deferred bonus shares and LTIP shares on a net of tax basis. 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 2018 and current interests in long-term incentives.
Executive Directors
John Tutte
Barbara Richmond
Non-Executive Directors
Steve Morgan (i)
Debbie Hewitt
Nick Hewson
Liz Peace (ii)
Sir Michael Lyons
Vanda Murray
Number of shares
beneficially held
at 30 June 2018
Shareholding
as % of salary
Guideline met?
704,213
510,441
713%
915%
Yes
Yes
120,386,045
30,687
20,500
3,400
3,000
3,500
(i)
Steve Morgan’s interest includes those of his connected persons and is broken down as follows:
• 77,636,045 ordinary shares held by Steve Morgan indirectly through Bridgemere Securities Limited;
•
•
25,950,000 ordinary shares held by The Steve Morgan Foundation, of which Steve Morgan is a trustee, for the
beneficiaries of the Foundation; and
4,200,000 ordinary shares each held by LKT Investments Limited, MSH Investments Limited, GEM Investments Limited and
RSM Investments Limited (controlling 16,800,000 ordinary shares). Each of these entities are run for the benefit of Steve
Morgan’s children.
(ii)
Liz Peace resigned from the Board on 31 August 2017. The shareholding shown is as at the date of her resignation.
Shareholding as a percentage of salary is calculated using the shareholding and base salary as at 1 July 2018
and the average share price for the final quarter of 2018.
The table below provides details of the interests of the Executive Directors in incentive awards during the year.
Awards
held at
30 June
2017
Share Price
on Grant
£
Grant
Date
Award
Vested
Awards
granted in
year
Awards
Exercised
in year
Awards
held at
30 June
2018
Exercise
Price
£
From
To
John Tutte
SAYE 2015
SAYE 2017
LTIP 2014
LTIP 2015
LTIP 2016
LTIP 2017
8,163
30/10/14
–
30/10/17
189,474
08/09/14
112,348
14/09/15
138,882
12/09/16
–
15/11/17
DEF BONUS 2015
27,328
14/09/15
DEF BONUS 2016
67,732
12/09/16
DEF BONUS 2017
–
11/09/17
2.76
6.12
2.85
4.94
4.097
5.935
4.94
4.097
6.30
8,163
–
(8,163)
–
–
3,674
–
3,674
2.21
4.90
01/01/18
01/07/18
01/01/21
01/07/21
189,474
–
–
–
27,328
33,866
–
–
–
147,346
–
–
(189,474)
–
08/09/17 08/09/24
–
–
–
112,348
138,882
147,346
14/09/18
14/09/25
12/09/19
12/09/26
15/11/20
15/11/27
(27,328)
–
14/09/16
14/09/25
(33,866)
33,866
12/09/17
12/09/26
–
45,159
–
45,159
11/09/18
11/09/27
543,927
258,831
196,179
(258,831)
481,275
Barbara Richmond
SAYE 2015
SAYE 2016
SAYE 2017
LTIP 2014
LTIP 2015
LTIP 2016
LTIP 2017
4,081
11/11/13
2,812
28/10/16
–
30/10/17
107,018
08/09/14
63,462
14/09/15
78,472
12/09/16
–
15/11/17
DEF BONUS 2015
15,435
14/09/15
DEF BONUS 2016
38,260
12/09/16
DEF BONUS 2017
–
11/09/17
2.76
4.00
6.12
2.85
4.94
4.097
5.935
4.94
4.097
6.30
4,081
–
–
107,018
–
–
–
15,435
19,130
–
–
1,836
–
–
–
83,404
(4,081)
–
–
(107,018)
–
–
–
–
–
(15,435)
(19,130)
–
22,516
–
–
2,812
1,836
–
63,462
78,472
83,404
–
19,130
22,516
2.21
3.20
4.90
01/01/18
01/07/18
01/01/20
01/07/20
01/01/21
01/07/21
08/09/17 08/09/24
14/09/18
14/09/25
12/09/19
12/09/26
15/11/20
15/11/27
14/09/16
14/09/25
12/09/17
12/09/26
11/09/18
11/09/27
309,540
145,664
107,756
(145,664)
271,632
Steve Morgan*
LTIP 2010
LTIP 2011
LTIP 2012
LTIP 2013
LTIP 2014
LTIP 2015
LTIP 2016
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
96,154
14/09/15
1.30
1.10
1.54
2.37
2.85
4.94
118,867
12/09/16
4.097
DEF BONUS 2012
137,897
23/10/12
DEF BONUS 2013
73,263
24/09/13
DEF BONUS 2014
78,246
08/09/14
DEF BONUS 2015
46,761
14/09/15
DEF BONUS 2016
57,969
12/09/16
DEF BONUS 2017
–
11/09/17
1,671,796
1.54
2.37
2.85
4.94
4.097
6.30
78,625
367,012
271,739
183,158
162,105
–
–
137,897
73,263
78,246
46,761
28,985
–
1,427,791
–
–
–
–
–
–
–
–
–
–
–
–
38,651
38,651
–
–
–
–
–
–
–
–
–
–
–
–
–
–
78,625
367,012
271,739
183,158
162,105
96,154
118,867
137,897
73,263
78,246
46,761
57,969
38,651
1,710,447
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
12/09/19
12/09/26
23/10/13
22/10/22
24/09/14
24/09/23
08/09/15 08/09/24
14/09/16
14/09/25
12/09/17
12/09/26
11/09/18
11/09/27
i. The performance conditions attached to the 2016 LTIP awards were disclosed in the 2017 Directors’ Remuneration Report.
ii. The performance conditions attached to the 2017 LTIP awards are shown on page 89.
iii. There are no further performance conditions attached to the exercise of the deferred bonus awards.
iv. Between 1 July 2018 and 3 September 2018 (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.
• All scheme interests held by Steve Morgan are receivable in cash on terms which in all other respects mirror those for other Executive Directors.
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92
GOVERNANCE REPORT
Directors’ Remuneration Report continued
STATEMENT OF SHAREHOLDING AND SCHEME INTERESTS (AUDITED) CONTINUED
Shareholding as a percentage of salary is calculated using the shareholding and base salary as at 1 July 2018
and the average share price for the final quarter of the financial year ended 30 June 2018.
GAINS MADE BY DIRECTORS ON SHARE OPTIONS
The table below outlines the notional gains made by Directors on share options exercised during the year,
calculated as at the exercise date.
Executive Director
John Tutte
Barbara Richmond
Scheme
SAYE 2015
LTIP 2014
No. shares
exercised
Date of
exercise
8,163
02/01/18
189,474
08/09/17
DEF BONUS 2015
27,328
19/09/17
DEF BONUS 2016
33,866
13/09/17
SAYE 2015
LTIP 2014
4,081
02/01/18
107,018
08/09/17
DEF BONUS 2015
15,435
19/09/17
DEF BONUS 2016
19,130
13/09/17
Mid price
on date of
exercise
(pence)
Notional gain on
exercise (£’000)
652.8
626.7
555.0
583.1
652.8
626.7
555.0
583.1
35
1,187
152
197
18
671
86
112
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 87. John Tutte and Barbara Richmond are also covered by fixed term group
income protection and death in service benefit.
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
Normal retirement date
Accrued benefit
at 30 June 2018
£
Benefits paid to
Director during period
up to 30 June 2018
£
John Tutte
24 June 2021
55,602
Nil
Defined Benefit accrued
during period up to
30 June 2018
£
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.
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 2017 and 2018.
Salary
Benefits
Annual bonus
Group Chief
Executive
All Redrow
employees
2.5%
Nil%
2.5%
3.5%
-4.6%
-8.3%
Relative importance of spend on pay
The table below shows total employee remuneration and distributions to shareholders, in respect of 2018
and 2017 (and the difference between the two).
£m
Total employee remuneration
Distributions to shareholders
2018
139
103
2017
Change (%)
120
63
+16%
+63%
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
28 pence per share in respect of 2018 compared to 17 pence per share in respect of 2017.
Performance graph and table
The chart below shows the TSR of Redrow in the nine year period to 30 June 2018 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.
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400
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2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Redrow
FTSE 250
FTSE Small Cap
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94
GOVERNANCE REPORT
Directors’ Remuneration Report continued
SUPPORTING DISCLOSURES AND ADDITIONAL CONTEXT CONTINUED
The table below provides remuneration data for the Chairman/Group Chief Executive (as applicable) for
each of the nine financial years over the equivalent period.
2010
2011
2012
2013
2014
2015
2016
2017
2018
Name
Steve
Morgan
Steve
Morgan
Steve
Morgan
Steve
Morgan
Steve
Morgan
John
Tutte
John
Tutte
John
Tutte
John
Tutte
Remuneration/
donations*
Bonus
(% of Maximum)
LTIP vesting
(% of Maximum)
£592k
£582k
£855k
£1,050k £1,922k £2,355k £1,916k
£2,463k £1,961k
52%
50%
50%
80%
100%
100%
100%
100%
96.7%
*
**
Liz Peace retired from the Board on 31 August 2017.
Vanda Murray joined the Board on 1 August 2017.
TABLE OF ATTENDANCE
Name
Debbie Hewitt
Nick Hewson
Liz Peace*
Sir Michael Lyons
Vanda Murray**
Role
Chairman
Member
Member
Member
Member
Attendance at Meetings
3/3
3/3
1/1
3/3
2/2
As announced on 15 June 2018, Debbie Hewitt will retire from the Board following the close of the AGM on
7 November 2018 at which point, assuming election by shareholders, Vanda Murray will become Chair of
the Remuneration Committee.
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 2018 were £13,900. Deloitte LLP also provides the Company with tax advisory services but does not
have any other connection with the Company.
Statement of voting at Annual General Meeting
At the Annual General Meeting held on 9 November 2017, votes cast by proxy and at the meeting in
respect of directors’ remuneration report are shown in the table.
Resolution
No.
%
No.
%
Votes For
Votes Against
Total
votes cast
exc withheld
Votes
withheld
Approval of
Remuneration Report
for year ended
30 June 2017
Approval of
Remuneration Policy
By order of the Board
294,952,301
99.96
115,267
0.04 295,067,568
2,174,169
295,928,671
99.97
88,112
0.03
296,016,783
1,224,954
DEBBIE HEWITT
Chairman of the Remuneration Committee
3 September 2018
0%
0%
0%
19%
100%
100%
100%
100%
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 Steve 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 99 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).
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 £169k during 2018 (£170k during 2017).
This represented 220,000 Euros in both years.
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, Vanda Murray and Sir Michael Lyons. Liz Peace stepped down from the
Committee on 31 August 2017 and Vanda Murray joined the Committee on 1 August 2017.
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 2018 and details of Committee attendance are set
out in the following table.
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Redrow plc Annual Report 2018
96
GOVERNANCE REPORT
Directors’ Report
OTHER STATUTORY DISCLOSURES
The Companies Act 2006 (“the Act”) requires the
Directors to present a fair review of the business
during the year to 30 June 2018 and of the position
of the Company at the end of the financial year
together with the financial statements, Auditor’s
Report and a description of the principal risks and
uncertainties which the Company faces. The
Strategic Report can be found on pages 1 to 59 of
the Annual Report. The FCA’s Disclosure Guidance
and Transparency Rules require certain information
to be included which can be found in the Corporate
Governance Report on pages 60 to 103.
There were no significant events since the balance
sheet date. An indication of likely future
developments in the business of the Company and
details of the Company’s use of financial
instruments for risk management purposes are
included in the Strategic Report.
The Corporate Governance Report and the
Strategic Report, together with the Notice of Annual
General Meeting including the explanatory notes
and sections of the Annual Report incorporated by
reference, form part of the Directors’ Report which is
presented in accordance with, and with reliance
upon, applicable English company law. The liabilities
of the Directors in connection with this report shall
be limited as provided by English Law.
The table opposite sets out where key information
can be found in the Annual Report.
Employment
Policies
The Redrow
Employee
Benefit Trust
(“the
Employee
Benefit
Trust”)
Subject
Page Reference
Dividends
Capital
Structure
(details of the
issued share
capital)
Directors
See note 5 of the financial
statements on page 120.
See note 17 of the financial
statements on page 139.
• See page 62 to 63 detailing the
Directors who served during the
year.
• Biographical details of the
Directors of the Company who are
seeking election and re-election
at the 2018 AGM are set out on
pages 62 to 63.
• Details of Director’ interests,
including interests in the
Company’s shares, are disclosed
in the Directors’ Remuneration
Report on page 90.
Details of the Company’s
employment policies may be found
in the Directors’ Report on page
99.
Details of the shares held by the
Employee Benefit Trust may be
found in the Directors’ Report on
page 98.
Environmental,
social and
governance
(ESG)
disclosures
Details of the Company’s approach
to diversity and ESG disclosures
governance can be found in the
Directors’ Report on pages 96 to
101.
Redrow plc
Long Term
Incentive Plan
(LTIP)
Details of the Company’s LTIP are set
out in note 7d of the consolidated
financial statements on pages 122 to
125 and the Directors’ Remuneration
Report on pages 80 to 95.
Greenhouse
gas emissions
All disclosures on the Company’s
greenhouse gas emissions, as
required to be disclosed under
Schedule 7 of The Large and
Medium-sized Companies and
Groups (Accounts and Reports)
Regulations 2008 and the
Companies Act 2006 (Strategic
Report and Directors’ Report)
Regulations 2013 are contained in
the Directors’ Report on page 100.
77,636,045 shares, representing 20.99% of the
issued share capital of Redrow.
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 60 to 103.
DIRECTORS
The Directors of the Company during the year to the
date of this report and the current Directors are
listed on pages 62 to 63 together with their
biographical details.
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 80 to 95.
Formal appraisals of the Executive Directors were
undertaken during the financial year. All the
Non-Executive Directors underwent an annual
appraisal conducted by the Senior Independent
Non-Executive Director. The Board confirms that
John Tutte and Barbara Richmond, who stand for
re-appointment as Executive Directors and Steve
Morgan, Nick Hewson, Sir Michael Lyons and Vanda
Murray 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.
In accordance with the UK Corporate Governance
Code, all the Directors, will retire at the Annual
General Meeting to be held on Wednesday, 7
November 2018, and, being eligible, offer
themselves for re-appointment, with the exception
of Debbie Hewitt. Debbie Hewitt will retire from the
Board at the close of the 2018 Annual General
Meeting.
The Directors have pleasure in presenting to the
shareholders their report and audited consolidated
financial statements for the 12 months ended 30
June 2018.
RESULTS AND DIVIDENDS
The Group made a profit after tax of £308m (2017:
£253m). An interim dividend of 9.0p (2017: 6.0p) net
per share was paid on 4 May 2017. The Board
proposes to pay on 13 November 2018, subject to
shareholder approval at the 2018 Annual General
Meeting, a final dividend of 19.0p (2017: Final
Dividend: 11.0p) net per share in respect of the year
ended 30 June 2018 to shareholders on the
Register as at the close of business on 21
September 2018. The Company’s dividend
re-investment plan gives shareholders the
opportunity to re-invest their dividends.
ANNUAL GENERAL MEETING
Notice of the 2018 Annual General Meeting to be
held on Wednesday, 7 November 2018 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. The formal notice convening
the Annual General Meeting, together with
explanatory notes, will be found in a separate
circular which will be sent to shareholders
separately and will be available on the Company’s
website. Shareholders will also find with the Notice
of Annual General Meeting a form of proxy for use in
connection with the meeting.
The Board noted that Resolution 16 relating to the
approval of the terms of the waiver received a vote
of 58.68% against at the 2017 Annual General
Meeting. The waiver would have permitted the
Concert Party’s percentage interest in the
Company’s shares to increase from 32.70% to a
maximum of 36.34% (in each case representing
120,942,378 ordinary shares) as a result of share buy
backs authorised by Resolution 19 without requiring
the Concert Party to make a mandatory offer for
other shareholders’ shares.
The Board consulted with a number of shareholders
and proxy advisor bodies prior to the 2017 Annual
General Meeting to discuss their concerns relating
to the waiver and has assessed the feedback
received after the Annual General Meeting. The
Board continues to take its responsibility to engage
with shareholders seriously. Since the 2018 Annual
General Meeting, Steve Morgan has diluted his
shareholding further by transferring 16,800,000
shares for the benefit of his children as part of
long-term inheritance planning. As a result of the
transfer, Steve Morgan’s shareholding reduced to
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Redrow plc Annual Report 2018
98
GOVERNANCE REPORT
Directors’ Report continued
DIRECTORS INTERESTS
Related party transactions are disclosed in
note 22 to the Financial Statements. A summary
of remuneration provided to key management
personnel is provided in note 7c.
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 applicable
English 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 ended 30 June
2018 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 Annual General Meeting.
aggregate nominal value of £3,697,999.30. This
authority will expire at the Annual General Meeting,
and no such purchases were made during the
financial year ended 30 June 2018.
VOTING AND TRANSFER OF SHARES
The Company’s Articles of Association do not contain
any specific restrictions on the size of a shareholder’s
holding or on the transfer of shares.
The Company is not aware of any agreements
between shareholders that may result in restrictions
on the transfer of securities and/or voting rights.
The Company’s Articles of Association do not contain,
and the Company is not aware of, any restrictions on
voting rights, including any limitations on voting rights
of holders of a given percentage or number of votes,
deadlines for exercising voting rights and
arrangements by which the Company’s co-operation,
financial rights carried by securities are held by a
person other than the holder of the securities.
Zedra Trust Company (Guernsey) Limited, as trustee
of the Employee Benefit Trust, held 8,776,804 shares
(2.37%) in the Company as at 30 June 2018 on trust
for the benefit of employees of the Company. The
voting rights attaching to the shares held by the
Employee Benefit Trust are exercisable by the
Trustee and there are no restrictions on the exercise
of the voting of, or acceptance of any offer relating to
those shares. The Employee Benefit Trust agreed to
waive its right to the final dividend over 1.3m shares
being part of its total shareholding.
SUBSTANTIAL HOLDINGS IN THE COMPANY
As at 30 June 2018, the Company has been advised
of the following notifiable interests of 3% or more in
its ordinary shares:
Bridgemere Securities Limited
77,636,045 20.99%
The Steve Morgan Foundation
25,950,000
7.02%
Vidacos Nominees/HSBC
18,770,138
5.08%
Schroders plc
18,359,023
4.97%
Standard Life Aberdeen plc
18,328,079
4.95%
FIL Limited
BlackRock Inc
17,343,977
4.69%
15,277,577
4.13%
On 25 July 2018, the following notification was
received:
Authority was given to the Directors at last year’s
Annual General Meeting to make market purchases
of the Company’s ordinary shares up to an
Woodford Investment
Management Ltd
18,774,573
5.07%
The persons set out in the table above have notified
the Company pursuant to Rule 5 of the Disclosure
Guidance and Transparency Rules of their interests
in the ordinary share capital of the Company.
Otherwise, no changes in the above holdings had
been notified.
CHANGE OF CONTROL
The Company’s banking facilities require repayment
in the event of a change of control. In addition the
Company’s employee share incentive schemes
contain provisions, whereby, upon a change of
control, outstanding options and awards would vest
and become exercisable by the relevant employees,
subject to the rules of the schemes.
There are no agreements between the Company
and its Directors or employees providing for
compensation for loss of office or employment in
event of a takeover bid.
EMPLOYEES
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 and training
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.
The Company places considerable importance on
the provision of training and development of its
employees through training@redrow. Training is
administered at a purpose built in-house training
facility at Tamworth. Training@redrow completed
6,541 training days during the year ended 30 June
2018, 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 ‘Engage’, 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.
DIVERSITY AND INCLUSION POLICY
The Company recognises that our continued success
depends upon our ability to recruit the right people,
retain them and help them to reach their full potential.
The Company believes that attracting a diverse
range of skills and abilities will enable us to meet the
challenge of the growing skills gap in the sector.
The Company is firmly committed to giving every
potential recruit and employee the same
opportunities irrespective of their gender, race,
ethnic or national origin, disability, age, sexuality,
religious belief, marital status or social class.
As such the Company opposes all forms of unlawful
or unjust discrimination and requires all colleagues to
comply with legislation in this area and strive for best
practice.
The Company embeds this through awareness and
training in the following policies:
• Diversity and Inclusion Policy
• Employee Policy
• Recruitment and Selection Policy
• Disciplinary and Grievance Policy and Procedures
CHARITABLE AND POLITICAL DONATIONS
The Group made no political donations but paid
£0.5m in charitable donations during the year, being
£0.4m 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 £0.3m donation during the year to The Steve
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.
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Redrow plc Annual Report 2018
100
GOVERNANCE REPORT
Directors’ Report continued
GREENHOUSE GAS EMISSIONS
Greenhouse gas (“GHG”) emissions data for the period 1 July 2017 to 30 June 2018 are set out in the table below.
Emissions from:
Scope 1 activities:
• Direct emissions from combustion of fuels
and business travel
Scope 2 activities:
Current
Reporting Year
(1 July 17 to
30 June 18)
Comparison
Year
(1 July 16 to
30 June 17)
Units
12,006
11,128
tonnes of CO2e
• Indirect emissions from purchased electricity
2,275
2,956
tonnes of CO2e
Total emissions:
• (Scope 1 + Scope 2)
Intensity ratio:
14,281
14,084
tonnes of CO2e
Total emissions per 100m2 of build
2.48
2.50
tonnes of CO2e per 100m2 of build
RESEARCH AND DEVELOPMENT
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 Sustainability Team, as these issues play
a prominent role in the Company’s activities. 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 2018 was £0.6m (2017: £0.6m).
METHODOLOGY
This disclosure 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.
A Corporate Accounting and Reporting Standard.
Further details and the independent assurance
report can be found at www.redrowplc.co.uk/
building-responsibly/managing-our-resources-
efficiently.
INDEPENDENT AUDITORS
The Company has commenced a tender process
for the appointment of new Auditors. The tender
process will be supervised by the Audit
Committee, who will then make a recommendation
to the Board on the appointment of the
replacement Auditor. Following the appointment,
an announcement will be made.
In the meantime, a resolution to re-appoint
PricewaterhouseCoopers LLP as external Auditors
will be proposed at the Annual General Meeting on
Wednesday, 7 November 2018.
PROVISION OF INFORMATION
TO AUDITORS:
In the case of each Director in office at the date the
Directors’ report is approved, confirm that:
Emissions have been calculated using the UK
Government’s Greenhouse Gas Conversion Factors
for Company Reporting. Reported Scope 2 emissions
are calculated using location-based method.
(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
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 –
(b) they have taken all of the steps that they ought
to have taken as a Director in order to make
themselves aware of any such relevant audit
information and to establish that the Company’s
Auditors are aware of that information.
GOING CONCERN
The Directors have acknowledged 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 48 to
51, the Group maintains adequate committed
banking facilities. As stated in note 14 to the financial
statements, at 30 June 2018, the Group had £245m
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 2019. 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.
By order of the Board
GRAHAM COPE
Company Secretary
Redrow plc
Registered no: 2877315
3 September 2018
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Redrow plc Annual Report 2018
102
GOVERNANCE REPORT
Statement of Directors’ Responsibilities
RESPONSIBILITY STATEMENT
Each of the Directors, whose names and functions
are listed below confirms that, to the best of their
knowledge:
• that the Annual Report, taken as a whole, is fair,
balanced and understandable and provides the
information necessary for shareholders to assess
the Group and the Company’s position and
performance, business model and strategy.
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
Sir Michael Lyons
Non-Executive Director
Vanda Murray
Non-Executive Director
By order of the Board
GRAHAM COPE
Company Secretary
3 September 2018
Redrow plc
Redrow House
St. David’s Park
Flintshire
CH5 3RX
The Directors are responsible for preparing the
Annual Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare
financial statements for each financial 12 month
period. Under that law, the Directors have prepared
the Group financial statements in accordance with
International Financial Reporting Standards (IFRSs)
as adopted by the European Union and Company
financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by
the European Union. Under company law, the
Directors must not approve the financial statements
unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and
Company and of the profit or loss of the Group and
Company for that period. In preparing these
financial statements, the Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• state whether applicable IFRSs as adopted by the
European Union have been followed for the
Group financial statements and IFRSs as adopted
by the European Union have been followed for
the Company financial statements, subject to any
material departures disclosed and explained in
the financial statements;
• make judgements and accounting estimates that
are reasonable and prudent; and
• prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the Group and the Company will
continue in business.
The Directors are also responsible for safeguarding
the assets of the Group and the Company and
hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group and the Company’s transactions
and disclose with reasonable accuracy at any time
the financial position of the Group and the Company
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.
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.
103
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LYON SQUARE, HARROW, LONDON
Redrow plc Annual Report 2018
104
FINANCIAL STATEMENTS
Independent Auditors’ Report
To the Members of Redrow plc
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
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 2018 and of the group’s
profit and the group’s and the company’s cash flows for the
12 month period (the “period”) then ended;
• have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs) as
adopted by the European Union and, as regards the
company’s financial statements, as applied in accordance
with the provisions of the Companies Act 2006; and
• 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.
• We have audited the financial statements, included within the
Annual Report 2018 (the “Annual Report”), which comprise: the
Group and Company balance sheets as at 30 June 2018; the
consolidated income statement and statement of
comprehensive income, the Group and Company statement of
cash flows, and the Group and Company statement of
changes in equity for the 12 month period then ended; the
accounting policies; and the notes to the financial statements.
Our opinion is consistent with our reporting to the Audit
Committee.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We remained independent of the group in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard,
as applicable to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the group or the company.
Other than those disclosed in note 2 to the financial statements,
we have provided no non-audit services to the group or the
company in the period from 1 July 2017 to 30 June 2018.
Our audit approach
Overview
• Overall group materiality: £19.00 million (2017: £15.75 million),
based on 5% of profit before tax.
Materiality
• Overall company materiality: £7.79 million (2017: £4.90 million),
based on 1% of total assets.
Audit scope
• Two financially significant companies in the Group, being Redrow
Homes Limited, and Redrow plc.
• The components where we performed our audit work, accounted
for 98.4% of revenue and 94.4% of profit before tax.
Key audit
matters
• Valuation of inventory (Group).
• Valuation of pension scheme surplus (Group and Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed 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.
We gained an understanding of the legal and regulatory framework applicable to the group and the industry in which it operates,
and considered the risk of acts by the group which were contrary to applicable laws and regulations, including fraud. We
designed audit procedures at group and significant component level to respond to the risk, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. We focused on
laws and regulations that could give rise to a material misstatement in the group and company financial statements, including, but
not limited to, the listing rules, pensions legislation and UK tax legislation. Our tests included, but were not limited to, reviewing
the financial statements disclosures and agreeing to underlying supporting documentation where necessary. We made enquiries
with management to obtain further understanding of current and potential risks of non-compliance. There are inherent limitations
in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely we would become aware of it.
We did not identify any key audit matters relating to irregularities, including fraud. As in all of our audits we also addressed the
risk of management override of internal controls, including testing journals and evaluating whether there was evidence of bias by
the directors that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or
not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we
make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all
risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Valuation of inventory (Group)
See the Accounting Policies for the directors’
disclosures of related accounting policies and key
accounting estimates. See note 13 for the detailed
disclosures on the inventory balance at year end.
The Group holds inventory in the form of land for
development, work in progress and showhomes with a
carrying value of £2,291m, net of provisions.
The carrying value of inventory is determined by
reference to a number of assumptions and
judgements, which are subject to levels of estimation.
These include regular updates to site appraisals for
latest sales prices and costs to complete, the
availability of mortgage financing for customers, the
availability of Government schemes aiding first-time
buyers, and assessments of the likelihood of obtaining
planning permission on land held for development.
Changes in any of these key judgements could lead to
a material change in the carrying value of inventory.
We tested management’s controls over the process for estimating
the expected remaining build costs, including the budgeting and
review processes.
We have also attended a divisional commercial meeting to
understand and observe the process for discussing build progress
at individual sites, updating cost to complete accruals, investigating
build variances, and any potential issues with planning permission
on sites held.
We inspected evidence of the Board’s review of divisional
management’s forecast sales prices.
We have observed a sample of site assessments performed at
month ends to determine the progress of the site build.
We did not identify any significant deficiencies of control during
these procedures.
We reviewed management’s forecasts to identify any non-profitable
sites, assessing management’s assumptions relating to these sites
and ensuring adequate provisions were included for them. 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. All sites
identified through this procedure were either already included in
management’s provision, or related to build variances which form
part of a separate provision.
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.
No material differences were identified from our testing performed.
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Redrow plc Annual Report 2018
106
FINANCIAL STATEMENTS
Independent Auditors’ Report continued
To the Members of Redrow plc
Key audit matter
How our audit addressed the key audit matter
Valuation of pension scheme surplus (Group
and Company)
See the Accounting Policies for the directors’
disclosures of related accounting policies and key
accounting estimates. See note 7e for the detailed
disclosures on the pension scheme surplus.
The Group operates a defined benefit pension
scheme with a net surplus of £22 million at the year
end. This surplus is derived from assets with a gross
value of £133 million less the present value of
obligations of £111 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 the
expected returns on investments.
Changes in any of the key actuarial assumptions
could lead to a material movement in the calculated
net surplus.
We obtained and read the IAS19 valuation report that was prepared
by the Group’s independent firm of actuaries and used by the
directors in calculating the value of the Group’s surplus in respect of
the defined benefit pension scheme.
We have reviewed the pension scheme membership data provided
to management’s actuary in relation to deferred members on which
the pension surplus is calculated.
We used our own actuarial experts to assess the judgemental
assumptions within the valuation report, specifically the discount
rate, future RPI inflation, mortality rates and expected returns on
investments. The results of our audit work indicated that the
financial and demographic assumptions were within a reasonable
range.
We reviewed management’s assessment of the right to recognise
the net pension surplus under the requirements of IFRIC 14 and in
light of the Scheme Rules are satisfied that it is appropriate to
recognise the surplus.
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 structure of the group and the company, the accounting processes and controls,
and the industry in which they operate.
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 two financially significant companies in the Group, being Redrow plc and Redrow
Homes Limited. This gave us the evidence we needed for our opinion on the Group financial statements. All work was performed
by the Group engagement team.
As part of designing our audit, we determined materiality and assessed 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.
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 in aggregate 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 materiality
How we determined it
Rationale for benchmark applied
Group financial statements
Company financial statements
£19.0 million (2017: £15.75 million).
£7.79 million (2017: £4.9 million).
5% of profit before tax.
1% of total assets.
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 believe that total assets is the
primary measure used by the
shareholders in assessing the position of
the Holding Company, and is a generally
accepted auditing benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality.
The range of materiality allocated across components was between £7.79 million and £18.80 million. Certain components were
audited to a local statutory audit materiality that was also less than our overall group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.9
million (Group audit) (2017: £0.8 million) and £0.4 million (Company audit) (2017: £0.2 million) as well as misstatements below
those amounts that, in our view, warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add or draw attention to
in respect of the directors’ statement in the financial statements about whether
the directors considered it appropriate to adopt the going concern basis of
accounting in preparing the financial statements and the directors’ identification
of any material uncertainties to the group’s and the company’s ability to continue
as a going concern over a period of at least twelve months from the date of
approval of the financial statements.
We have nothing material to add or
to draw attention to. However,
because not all future events or
conditions can be predicted, this
statement is not a guarantee as to
the group’s and company’s ability to
continue as a going concern.
We are required to report if the directors’ statement relating to Going Concern in
accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our
knowledge obtained in the audit.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in
this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement,
we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report based on these
responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006
(CA06), ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and
matters as described below (required by ISAs (UK) unless otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and
Directors’ Report for the period ended 30 June 2018 is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
107
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108
FINANCIAL STATEMENTS
Independent Auditors’ Report continued
To the Members of Redrow plc
The directors’ assessment of the prospects of the group and of the principal risks that would threaten the
solvency or liquidity of the group
We have nothing material to add or draw attention to regarding:
• The directors’ confirmation on page 102 of the Annual Report 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.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The directors’ explanation on page 102 of the Annual Report 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 to report having performed a review of the directors’ statement that they have carried out a robust
assessment of the principal risks facing the group and 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 UK
Corporate Governance Code (the “Code”); and considering whether the statements are consistent with the knowledge and
understanding of the group and company and their environment obtained in the course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the directors, on page 102, that they consider the Annual Report taken as a whole to be fair,
balanced and understandable, and provides the information necessary for the 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 obtained in the course of performing our audit.
• The section of the Annual Report on page 70 describing the work of the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee.
• The directors’ statement relating to the company’s compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006. (CA06)
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 102, the directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true
and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the company or to cease operations, or have no realistic
alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
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.
OTHER REQUIRED REPORTING
Companies Act 2006 exception reporting
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
• certain disclosures of directors’ remuneration specified by law are not made; 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.
Appointment
Following the recommendation of the audit committee, we were appointed by the members on 5 January 1987 to audit the
financial statements for the year ended 30 June 1987 and subsequent financial periods. The period of total uninterrupted
engagement is 32 years, covering the years ended 30 June 1987 to 30 June 2018.
ARIF AHMAD
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
3 September 2018
109
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Redrow plc Annual Report 2018
110
FINANCIAL STATEMENTS
Consolidated Income Statement
For the 12 months ended 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
2
3
3
10
4
6
6
2018
£m
1,920
(1,451)
469
(87)
382
3
(10)
(7)
5
380
(72)
308
2017
£m
1,660
(1,255)
405
(83)
322
4
(12)
(8)
1
315
(62)
253
85.3p
85.2p
70.2p
70.0p
FINANCIAL STATEMENTS
Statement of Comprehensive Income
For the 12 months ended 30 June
Group
Company
Note
Profit for the year
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss
Remeasurements of post employment benefit obligations
7e
Deferred tax on actuarial (gains)/losses taken directly to equity
Other comprehensive (expense)/income for the year net of tax
2018
£m
308
22
(4)
18
2017
£m
253
(8)
1
(7)
Total comprehensive income for the year
18
326
246
2018
£m
1
22
(4)
18
19
2017
£m
51
(8)
1
(7)
44
FINANCIAL STATEMENTS
Balance Sheets
As at 30 June
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
Cash and cash equivalents
Total current assets
Total assets
Equity
Retained earnings at 1 July 2017
Profit for the year
Other comprehensive income/(expense) for the year
Dividend Paid
Movement in LTIP/SAYE
Retained earnings
Share capital
Share premium account
Other reserves
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
Note
8
9
10
11
7e
12
13
12
14f
18
17
18
18
14
15
11
7e
16
14b
15
Group
2018
£m
Company
2017
£m
2018
£m
2017
£m
2
15
6
4
22
8
57
2
16
27
5
–
11
61
2,218
2,043
42
90
2,350
2,407
1,131
308
18
(74)
(4)
1,379
37
59
8
35
62
2,140
2,201
937
253
(7)
(44)
(8)
1,131
37
59
8
1,483
1,235
5
178
5
–
9
197
22
671
34
727
924
90
197
3
2
8
300
45
585
36
666
966
2,407
2,201
–
–
–
–
22
–
22
–
675
89
764
786
701
1
18
(74)
–
646
37
59
7
749
5
–
–
–
–
5
–
30
2
32
37
786
–
–
–
3
–
–
3
–
945
61
1,006
1,009
701
51
(7)
(44)
–
701
37
59
7
804
90
–
–
2
–
92
83
27
3
113
205
1,009
The financial statements on pages 110 to 142 were approved by the Board of Directors on 3 September 2018 and were signed on
its behalf by:
JOHN TUTTE
Director
BARBARA RICHMOND
Director
Redrow plc Registered Number 2877315
111
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Redrow plc Annual Report 2018
112
FINANCIAL STATEMENTS
Statement of Changes in Equity
For the 12 months ended 30 June
FINANCIAL STATEMENTS
Statement of Cash Flows
For the 12 months ended 30 June
Group
Company
Group
Company
Profit for the year
Other comprehensive income/(expense) for the year
Total comprehensive income relating to the year (net)
Dividend paid
Movement in LTIP/SAYE
Net increase/(decrease) in equity
Opening equity
Closing equity
Note
18
18
2018
£m
308
18
326
(74)
(4)
248
1,235
1,483
2017
£m
253
(7)
246
(44)
(8)
194
1,041
1,235
2018
£m
1
18
19
(74)
–
(55)
804
749
2017
£m
51
(7)
44
(44)
–
–
804
804
The above items are presented net of tax where appropriate. See note 4 and note 11 for information on income tax and deferred
tax expense.
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
2018
£m
1
307
308
2017
£m
5
248
253
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
(Increase)/decrease 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
Acquisition of software, property, plant and equipment
Interest received
Net receipts from/(net payments) to joint ventures
– continuing operations
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Issue of bank borrowings
Repayment of bank borrowings
Purchase of own shares
Dividend paid
Net cash (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
19
2018
£m
382
3
(6)
379
(5)
(175)
76
1
276
(4)
(74)
198
(2)
–
26
24
5
(90)
(12)
(74)
(171)
51
17
68
2017
£m
322
2
(5)
319
6
(140)
3
1
189
(5)
(56)
128
(1)
–
(1)
(2)
90
(230)
(16)
(44)
(200)
(74)
91
17
2018
£m
2017
£m
(2)
–
(2)
(4)
270
–
3
–
269
(3)
–
266
–
4
–
4
5
(90)
–
(74)
(159)
111
(22)
89
(3)
–
–
(3)
19
–
2
–
18
(3)
–
15
–
13
–
13
90
(230)
–
(44)
(184)
(156)
134
(22)
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Redrow plc Annual Report 2018
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FINANCIAL STATEMENTS
Accounting Policies
Both the consolidated and Company financial statements have
been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union
(EU) and effective at 30 June 2018, 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.
The principal accounting policies 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 1 July 2018 (2017: 2
July 2017). 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.
In respect of social housing, the Group enters into contracts for
the sale of social housing either at an agreed price or at a
discount to open market value. Payment for these properties is
made by the purchaser, either on legal completion of the unit
or, in certain circumstances on a staged basis. Revenues in all
cases are recognised on the legal completion of the built home.
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.
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.
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116
FINANCIAL STATEMENTS
Accounting Policies continued
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, excluding private 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. These
include infrastructure and development costs such
as roads and sewers, including contributions to other
community benefits such as schools, medical centres
and community centres.
Total land costs are allocated to the private housing on a
development as, in the case of amenity land and social housing
land, neither has sufficient contribution from sales of the
precise area of the land to cover the land costs and are a
planning requirement of the development.
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.
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.
FORWARD LAND
Expenditure relating to forward land options, conditional
contracts and land owned without planning is initially
recognised in inventory at cost. It is reviewed regularly for
impairment.
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.
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
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.
between the proceeds, net of transaction costs and the
redemption value is recognised in the income statement
over the period of the borrowings.
f. Deposits
New property deposits from private customers are held within
Trade and Other payables until the legal completion of the
related property or the rescission of the sale contract.
ONEROUS CONTRACTS
Onerous contracts are contracts in which the unavoidable
costs in meeting the obligations under the contract exceed the
economic benefits expected to be received under it. Provision
is made to reflect management’s best current estimate of the
least net cost of either fulfilling or exiting the contract.
SHARE CAPITAL
Ordinary shares are classed as equity.
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 2017:
• Amendments to IAS7, ‘Statement of cash flows on disclosure
initiative’.
• The implementation of these standards has not had a
material impact on the Group financial statements.
FINANCIAL INSTRUMENTS
a. Land creditors
Deferred payments arising from land creditors are held at
discounted present value using the effective interest method,
in accordance with IAS 39. The difference between the fair
value and the nominal value is amortised over the deferment
period via financing costs.
The interest rate applied is an equivalent loan rate available
on the date of the land purchase.
b. Derivative financial instruments and hedge
accounting
Derivative financial instruments are initially recorded at fair
value and the fair value is remeasured to fair value at each
reporting date.
The 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
117
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Redrow plc Annual Report 2018
from Contracts with Customers’, is also applied. The Group
has a number of operating leases, mainly in relation to cars
and some office properties, which the Group currently
anticipates will be required to be brought onto the balance
sheet together with corresponding assets. The Group does
not expect the net impact on profit to be significant.
118
FINANCIAL STATEMENTS
Accounting Policies continued
IMPACT OF NEW STANDARDS AND
INTERPRETATIONS CONTINUED
b) The following new standards and amendments
to standards have been issued but are not effective
for the financial year beginning 1 July 2017 and have
not been early adopted:
• 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. It is more prescriptive in terms of what
should be included within revenue than IAS 18 ‘Revenue’.
Published May 2014, effective date: annual periods
beginning on or after 1 January 2018. Currently the Group
recognises revenue at the fair value of the consideration
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 on legal completion.
Profit is recognised on legal completion. The Group
continues to assess the impact of this standard on the Group.
This standard will not effect the statement of cashflows nor
does the Group expect the implementation of this standard
to have a material impact on profit.
• Amendment to IFRS 15, ‘Revenue from contracts with
customers’. Published April 2017, effective date: Annual
periods beginning on or after 1 January 2018.
• IFRS 9 ‘Financial instruments’. This standard replaces the
guidance in IAS 39. Published July 2014, effective date:
annual periods beginning on or after 1 January 2018.
It affects the classification, measurement, impairment and
de-recognition of financial instruments. The Group does not
currently expect its implementation to have a material impact
on reported results.
• 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
FINANCIAL STATEMENTS
Notes to the Financial Statements
1. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Judgements and estimates 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 have not made any
individual critical accounting judgements that are material to the Group. Management considers the key sources of estimation
uncertainty 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 2018. 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.
The primary risks the Group is exposed to by the defined benefit pension scheme are the movement in corporate bond yields,
the market’s long-term expectations for inflation and movement in mortality rates. The scheme closed to future accrual with
effect from 1 March 2012.
2. OPERATING PROFIT
Operating profit is stated after charging:
Inventories expensed in the year
Depreciation
Amortisation
Operating leases – plant and machinery
– other
Research and development expenditure
Auditors’ remuneration – fees payable to the Company’s Auditors for audit services (i)
– fees payable to the Company’s Auditors for other services (ii)
Fees payable to the Company’s Auditors comprise:
Note
13
9
2018
£m
2017
£m
1,375
1,193
2
1
3
1
1
–
–
2
–
3
1
1
–
–
(i)
fees payable for the audit of parent company and consolidated financial statements £30,000 (2017: £30,000) and fees
payable for the audit of the Company’s subsidiaries pursuant to legislation £157,000 (2017: £146,000).
(ii)
Auditors’ remuneration for other services comprised £20,000 (2017: £20,000) in respect of an independent review of the half-
yearly financial statements (Audit related assurance services), £nil (2017: £10,000) in respect of Radleigh audit file review
(Non-audit services), £nil (2017: £408,000) in respect of Reporting Accountant services (Non-audit services) and £9,100
(2017: £8,000) in respect of iXBRL tagging (Taxation compliance services).
119
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Redrow plc Annual Report 2018
120
3. NET FINANCING COSTS
Interest payable on bank loans
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
Deferred tax
Origination and reversal of temporary differences
Total income tax charge income statement
Reconciliation of tax charge for the year
Profit before tax
Tax calculated at UK Corporation Tax rate
Tax charge for the year
Deferred tax recognised directly in equity
Relating to pension scheme
Current income tax payable in the Company is £nil (2017: payable £3m).
Information on the impact of future tax rate changes is included in note 11.
5. DIVIDENDS
The following dividends were paid by the Group:
Prior year final dividend per share of 11.0p (2017: 6.0p); Current year interim dividend
per share of 9.0p (2017: 6.0p)
2018
£m
2017
£m
(4)
(6)
(10)
3
3
(7)
(6)
(6)
(12)
4
4
(8)
2018
£m
2017
£m
73
(1)
72
380
72
72
4
4
2018
£m
74
74
62
–
62
315
62
62
(1)
(1)
2017
£m
44
44
The Board decided to propose a final dividend of 19.0p per share in respect of 2018 (£70m (2017: 11.0p, £41m)). The dividend has
not been provided for and there are no income tax consequences.
6. EARNINGS PER ORDINARY SHARE
The basic earnings per share calculation for the year ended 30 June 2018 is based on the weighted average number of shares
in issue during the period of 361m (2017: 361m) excluding those held in trust under the Redrow Long Term Incentive Plan
(9m shares (2017: 9m 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.
For the 12 months ended 30 June 2018
Basic earnings per share
Effect of share options and SAYE
Diluted earnings per share
For the 12 months ended 30 June 2017
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
Earnings
£m
Number
of shares
millions
308
–
308
361
1
362
Per share
pence
85.3
(0.1)
85.2
Earnings
£m
Number
of shares
millions
Per share
pence
253
–
253
361
2
363
70.2
(0.2)
70.0
Group
Company
2018
£m
106
15
9
9
139
2017
£m
92
13
8
7
120
2018
£m
2017
£m
3
2
–
2
7
3
2
–
2
7
Group
Company
2018
Number
960
1,348
2,308
2017
Number
2018
Number
2017
Number
860
1,270
2,130
9
–
9
9
–
9
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2018
122
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 and the Non-Executive Directors.
Summary key management remuneration is as follows:
Salaries and short-term employee benefits
Share-based payments
2018
£m
5
3
8
2017
£m
5
2
7
In addition, the Redrow Staff Pension scheme paid £15,246 (2017: £14,730) to The Steve Morgan Foundation on behalf of 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 80 to 95, 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
2018
824,208
2017
1,073,997
1 January 2018
1 January 2017
£2.31
£6.13
£4.90
£1.51
£4.00
£3.20
3/5 years
3/5 years
4.03%
1.5%
4.43%
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.
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 15 November 2017 were granted to a limited number of Senior Executives. The scheme is
discussed in greater detail within the Directors’ Remuneration Report.
7. EMPLOYEES CONTINUED
d. Share-based payments continued
The LTIP has 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
2018
321,012
2017
334,953
15 November 2017 12 September 2016
£5.20
£5.85
£0.00
N/A†
3 years
4.03%
N/A†
£3.56
£4.08
£0.00
N/A†
3 years
4.43%
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 15 November 2017 comprises £5.20 in respect of non-market
based performance conditions.
The fair value at the measurement date of the LTIP granted on 12 September 2016 comprises £3.56 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
2018
Tranche 1
450,047
2018
Tranche 2
449,915
2017
Tranche 1
705,703
2017
Tranche 2
705,845
Date of grant
11 September 2017 11 September 2017 12 September 2016 12 September 2016
Fair value at the measurement date
Share price
Exercise price
Expected volatility
Option life
Expected dividend yield
Risk free interest rate
£6.11
£6.33
£0.00
N/A†
1 year
3.38%
N/A†
£5.87
£6.33
£0.00
N/A†
2 years
3.74%
N/A†
£3.94
£4.08
£0.00
N/A†
1 year
3.50%
N/A†
£3.77
£4.08
£0.00
N/A†
2 years
3.93%
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.
123
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2018
124
7. EMPLOYEES CONTINUED
d. Share-based payments continued
Share options outstanding
The following share options were outstanding at 30 June 2018:
Type of scheme
Long Term Share Incentive 2012
Long Term Share Incentive 2013
Long Term Share Incentive 2014
Long Term Share Incentive 2015
Long Term Share Incentive 2016
Long Term Share Incentive 2017
Deferred Bonus Incentive 2012 – Tranche 1
Deferred Bonus Incentive 2012 – Tranche 2
Deferred Bonus Incentive 2013 – Tranche 1
Deferred Bonus Incentive 2013 – Tranche 2
Number
of options
2018
Number
of options
2017
Exercise
price
Date of grant
23 October 2012
24 September 2013
8 September 2014
–
–
–
134,271
90,947
377,194
14 September 2015
175,810
175,810
12 September 2016
308,714
334,953
15 November 2017
321,012
23 October 2012
23 October 2012
24 September 2013
24 September 2013
4,656
4,656
6,562
8,374
–
13,212
13,212
23,205
43,206
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£1.25
£0.98
£0.95
£1.98
£2.21
£3.70
£3.20
£4.90
Deferred Bonus Incentive 2014 – Tranche 1
8 September 2014
15,619
103,850
Deferred Bonus Incentive 2014 – Tranche 2
8 September 2014
34,851
154,024
Deferred Bonus Incentive 2015 – Tranche 1
14 September 2015
56,179
157,181
Deferred Bonus Incentive 2015 – Tranche 2
14 September 2015
76,860
393,355
Deferred Bonus Incentive 2016 – Tranche 1
12 September 2016
183,390
652,818
Deferred Bonus Incentive 2016 – Tranche 2
12 September 2016
622,100
652,939
Deferred Bonus Incentive 2017 – Tranche 1
Deferred Bonus Incentive 2017 – Tranche 2
Company Share Option Plan
Save As You Earn
Save As You Earn
Save As You Earn
Save As You Earn
Save As You Earn
Save As You Earn
Save As You Earn
11 September 2017
417,174
11 September 2017
417,053
–
–
21 November 2008
35,970
77,935
1 January 2011
–
1 January 2012
32,999
21,514
49,175
1 January 2014
136,228
154,711
1 January 2015
154,273
890,421
1 January 2016
391,882
445,196
1 January 2017
886,247
1,006,056
1 January 2018
752,871
–
The total share options outstanding at 30 June 2018 under the LTIP, Deferred Bonus Incentive Plan, Company Share Option Plan
and the Save As You Earn schemes represent 1.4% of the issued share capital (2017: 1.6%).
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:
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
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
2018
Weighted
average
exercise price
2018
Number
of options
2017
Weighted
average
exercise price
2017
1,113,175
(26,239)
(602,412)
321,012
805,536
–
2,207,002
(205,409)
(1,054,081)
899,962
1,847,474
391,147
77,935
(41,965)
35,970
35,970
2,567,073
(297,925)
(758,856)
824,208
2,334,500
6,228
–
–
–
–
–
–
–
–
–
–
–
–
£1.25
£1.25
£1.25
£1.25
£2.81
£3.54
£2.15
£4.90
£3.66
£2.34
1,626,492
–
(848,270)
334,953
1,113,175
225,218
2,040,389
(155,045)
(1,089,890)
1,411,548
2,207,002
507,890
95,920
(17,985)
77,935
77,935
2,619,112
(357,184)
(768,852)
1,073,997
2,567,073
6,448
–
–
–
–
–
–
–
–
–
–
–
–
£1.25
£1.25
£1.25
£1.25
£2.39
£3.20
£1.78
£3.20
£2.81
£2.51
The weighted average share price at the date of exercise of share options exercised during the year was £6.21 (2017: £4.27).
The options outstanding at 30 June 2018 had a range of exercise prices of £nil to £4.90 (2017: £nil to £3.70) and a weighted
average remaining contractual life of 5.5 years (2017: 5.6 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 £9m (2017: charge £7m).
125
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2018
126
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 £13m (2017: charge of £16m). A credit of £22m related to the defined benefit section of
the Scheme (2017: charge of £8m), with £nil being charged to the income statement (2017: charge of £nil) and a credit of £22m to
the statement of comprehensive income (2017: charge of £8m). The charge arising from the defined contribution section was £9m
(2017: £8m).
Triennial valuation
A full independent triennial actuarial valuation of the defined benefit section of the Scheme was undertaken at 1 July 2017 using
the Projected Unit Method. As at 1 July 2017, in the opinion of the Actuary, there was a deficit of £15m in the defined benefit
section of the Scheme, based on the Trustees’ technical provisions assumptions with the Scheme’s assets representing 90% of
the Scheme’s technical provisions. As at 1 July 2017 the value of the defined benefit section of the Scheme’s assets was £126m.
The previous triennial valuation was undertaken as at 1 July 2014 and reported a deficit of £20m.
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 2017. This valuation has been updated
to 30 June 2018 by a qualified actuary for the purposes of these financial statements.
The Group agreed a recovery plan for the 1 July 2014 actuarial valuation: it agreed to contribute £1.1m per annum to the Scheme
from 1 July 2014 to 30 June 2020 and £1.5m per annum from 1 July 2020 to 30 June 2026. During the 2017 financial year, the
Group agreed to increase its contributions to £3.0m per annum from 1 January 2018. As a result, the Group expects to contribute
£3.0m to the Scheme in the year ending 30 June 2019.
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
2018
n/a
2.9%
2.0%
2.9%
3.1%
2.1%
2017
n/a
3.1%
2.2%
2.6%
3.2%
2.2%
1
2
In respect of pensions in excess of the guaranteed minimum pension earned prior to 30 June 2006.
In respect of pensions in excess of the guaranteed minimum pension earned after 30 June 2006. Other pension increases are valued in a
consistent manner.
The mortality tables used in the actuarial valuation were as follows (which make allowance for projected further improvements
in mortality):
For male and female members:
SAPS CMI_2017 1.25% Long Term Trend (2017: SAPS CMI_2016 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 22.1 years (2017: Male 22.1 years)
Male 23.1 years (2017: Male 23.1 years)
Female 24.0 years (2017: Female 24.0 years)
Female 25.1 years (2017: Female 25.1 years)
It has been assumed that the majority of members will commute part of their pension in return for a tax free cash sum on retirement.
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
2018
£m
2018
£m
Quoted
market price in
active market
No quoted
market price in
active market
2017
£m
2017
£m
2018
£m
Total
Quoted
market price in
active market
No quoted
market price in
active market
Equities
Debt instruments
Other
Cash
Insurance policies
Total market value of assets
Present value of obligations
Surplus/(deficit) in the Scheme
49
50
16
16
–
131
–
–
–
–
2
2
49
50
16
16
2
133
(111)
22
44
59
14
6
–
123
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 2018 (unchanged from 30 June 2017).
The total amounts credited/(charged) against income in the year were as follows:
–
–
3
–
2
5
2018
%
68
32
100
2017
£m
Total
44
59
17
6
2
128
(130)
(2)
2017
%
75
25
100
127
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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 arising from changes in demographic assumptions
Actuarial movements arising from changes in financial assumptions
Actuarial gains arising from experience adjustments
Group and Company
2018
£m
2017
£m
–
–
–
5
1
11
5
22
22
–
–
–
8
3
(19)
–
(8)
(8)
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2018
128
7. EMPLOYEES CONTINUED
e. Retirement benefit schemes continued
The amount included in the balance sheet arising from the (deficit)/surplus in respect of the Group’s defined benefit section is
as follows:
Balance sheet surplus/(deficit)
At start of year
Amounts credited/(charged) 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) arising from changes in demographic assumptions
Actuarial movements 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
2018
£m
2017
£m
(2)
22
2
22
130
3
(5)
(1)
(11)
(5)
111
128
3
5
–
2
(5)
133
6
(8)
–
(2)
116
4
(6)
(3)
19
–
130
122
4
8
–
–
(6)
128
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 126). All figures are before allowing for deferred tax.
Item
Present value of defined benefit obligation (£m)
Discount rate -25 basis points
Discount rate +25 basis points
Price inflation rate -25 basis points
Price inflation rate +25 basis points
Post-retirement mortality assumption -1 year age adjustment
Weighted average duration of defined benefit obligation (in years)
Discount rate -25 basis points
Discount rate +25 basis points
8. INTANGIBLE ASSETS
The Group
Cost
At 1 July 2016
Additions
At 30 June 2017
Additions
At 30 June 2018
Accumulated amortisation
At 1 July 2016
Charge
At 30 June 2017
Charge
At 30 June 2018
Net book value
At 30 June 2018
At 30 June 2017
At 30 June 2016
Approximate impact
2018
Approximate impact
2017
116.5
105.2
105.4
116.4
114.0
20.43
20.38
137.7
123.2
123.4
137.5
134.3
22.40
22.11
Goodwill
£m
Software
£m
Total
£m
1
–
1
–
1
–
–
–
–
–
1
1
1
2
–
2
1
3
1
–
1
1
2
1
1
1
3
–
3
1
4
1
–
1
1
2
2
2
2
129
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2018
130
9. PROPERTY, PLANT AND EQUIPMENT
The Group
Cost
At 1 July 2016
Additions
At 30 June 2017
Additions
At 30 June 2018
Accumulated depreciation
At 1 July 2016
Charge
At 30 June 2017
Charge
At 30 June 2018
Net book value
At 30 June 2018
At 30 June 2017
At 30 June 2016
10. INVESTMENTS
a. Investments
Joint ventures
Freehold
property
£m
Plant and
machinery
£m
Fixtures
and fittings
£m
Total
£m
17
–
17
–
17
3
1
4
–
4
13
13
14
3
–
3
–
3
3
–
3
–
3
–
–
–
7
1
8
1
9
4
1
5
2
7
2
3
3
27
1
28
1
29
10
2
12
2
14
15
16
17
Group
Company
2018
£m
6
6
2017
£m
27
27
2018
£m
–
–
2017
£m
–
–
10. INVESTMENTS CONTINUED
b. Investments in joint ventures
Share of joint venture net assets:
Current assets
Current liabilities
Non-current liabilities
Net assets
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
Group
Company
2018
£m
2017
£m
2018
£m
2017
£m
7
(3)
(2)
2
4
6
38
(31)
7
–
7
(1)
6
(1)
5
29
(7)
(22)
–
27
27
17
(15)
2
–
2
(1)
1
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(i)
£4m of the loans to joint ventures are secured (2017: £27m).
The Group’s joint venture investments are:
• 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.
c. Investments in subsidiary undertakings
At 1 July 2017 and 30 June 2018
Company
£m
–
131
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The principal subsidiary company is Redrow Homes Limited. All subsidiary companies are incorporated in Great Britain except
Redrow Homes (Park Heights) Limited which is incorporated in Jersey. A full list of subsidiary undertakings as at 30 June 2018
is shown on page 132. 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.
All the subsidiaries registered office is Redrow House, St David’s Park, Flintshire, CH5 3RX apart from those marked (i) and (ii)
whose registered offices are as follows:
(i)
c/o TLT LLP, 140 West George Street, Glasgow, G2 2HG
(ii)
13 Castle Street, St. Helier, Jersey, JE4 5UT
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2018
132
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 (i)
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 (i)
HB (SC) Limited (i)
Company
Number
1990709
1990710
Name
HB (1995) Limited (i)
Redrow Homes (Wallyford) Limited (i)
6825371
St David’s Park Limited
3996541
PB0311 Limited
5405272
Debut Freeholds Limited
7587765
Tay Homes (Western) Limited
1189328
Tay Homes (Northern) Limited
SC38052
Tay Homes (Midlands) Limited
2469449
3522335
Tay Homes (North West) Limited
Redrow Homes (Park Heights) Limited (ii)
2230870
Redrow Construction Limited
2293006
Poche Interior Design Limited
4017345
Redrow (Shareplan) Limited
3379746
Cadmoore Limited
3522321
Redrow (Sudbury) Limited
537405
The Waterford Park Company Limited
4984069
The Waterford Park Company (Balmoral) Limited
1940936
HB (Herne Bay No 1) Limited
2827161
HB (Herne Bay No 2) Limited
2034733
Redrow Homes East Midlands Limited
2898913
Radleigh Construction Limited
1079513
Radleigh Homes Limited
3988594
Radbourne Edge (Holdings) Limited
SC231364
Redrow Langley Limited
SC74732
Radleigh (Hackwood) Limited
Company
Number
SC155021
SC205159
2479183
7577839
4638403
2806562
2708575
2183136
2189721
66240
1375826
2169473
3520984
3977222
4558070
5429823
6047122
7743649
9163243
4219459
4219460
4210633
8737345
7306461
8131049
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:
Employee
benefits
£m
Imputed
interest
£m
Share-based
payment
£m
Short-term
temporary
differences
£m
Losses
carried
forward
£m
Total
£m
Deferred tax assets
At 1 July 2016
Credit to income
Charge to equity
At 30 June 2017
Charge to income
Charge to equity
At 30 June 2018
–
–
–
–
–
–
–
3
–
–
3
–
–
3
–
–
–
–
–
–
–
2
–
–
2
(1)
–
1
–
–
–
–
–
–
–
5
–
–
5
(1)
–
4
133
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N
A
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E
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11. DEFERRED TAX ASSETS AND LIABILITIES CONTINUED
Deferred tax liabilities
At 1 July 2016
Arising on acquisition
Credit to equity
At 30 June 2017
Credit to income
Charge to equity
At 30 June 2018
Employee
benefits
£m
Imputed
interest
£m
Share- based
payment
£m
Short-term
temporary
differences
£m
Losses
carried
forward
£m
Total
£m
(1)
–
1
–
–
(4)
(4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1)
(2)
–
(3)
2
–
(1)
–
–
–
–
–
–
–
(2)
(2)
1
(3)
2
(4)
(5)
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 £nil (2017: £3m).
A Corporation Tax rate of 20% from 1 April 2016 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. A further change
to reduce the rate to 17% from 1 April 2020 was substantively enacted on 6 September 2016. Deferred tax balances have been
valued at 19%. 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
Company
2018
£m
2017
£m
2018
£m
2017
£m
8
8
8
–
29
5
42
11
11
10
–
21
4
35
–
–
–
–
–
–
675
945
–
–
–
–
675
945
Trade receivables due after more than one year are stated after an allowance of £7m has been made (2017: £8m) in respect of
estimated irrecoverable amounts. This allowance is based on an estimate of default rates. £nil provision was made during the year
(2017: £nil). £1m was utilised (2017: £1m). £nil provision was released during the year (2017: £nil). It is not considered that a material
amount of current asset trade receivables are overdue for payment.
Trade and other receivables due between one and two years are £2m (2017: £1m), between two and five years are £6m (2017:
£8m) and due in more than five years are £nil (2017: £2m). 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.
Amounts due from subsidiary companies are unsecured, repayable on demand and carry interest at a notional rate.
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2018
134
13. INVENTORIES
Land for development
Work in progress
Stock of show homes
Payments on account
Group
Company
2018
£m
1,443
781
67
2,291
(73)
2,218
Restated
2017
£m
1,339
723
57
2,119
(76)
2,043
2018
£m
2017
£m
–
–
–
–
–
–
–
–
–
–
–
–
Inventories of £1,375m were expensed in the year (2017: £1,193m). Work in progress includes £2m (2017: £2m) in respect of part
exchange properties. Land held for development in the sum of £229m is subject to a legal charge as security in respect of
deferred consideration (2017: £168m).
Payments on account comprises £4m (2017: £27m) attributable to land and £69m (2017: £49m) attributable to work in progress.
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 (2017: £nil). Of the net realisable value provision of £nil (2017: £8m), £nil (2017: £nil) is attributed to land
and £nil (2017: £8m) 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.
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 opposite provide a summary of financial assets and liabilities by category.
The accounting policies for financial instruments have been applied to the following items:
14. FINANCIAL RISK MANAGEMENT CONTINUED
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 including customer deposits
Land creditors
Other financial liabilities are at amortised cost.
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
2018
Loans and
receivables
£m
2017
Loans and
receivables
£m
8
37
90
135
11
31
62
104
2018
Other
financial
liabilities
£m
2017
Other
financial
liabilities
£m
27
395
387
809
135
359
351
845
2018
Loans and
receivables
£m
2017
Loans and
receivables
£m
89
675
764
61
945
1,006
2018
Other
financial
liabilities
£m
2017
Other
financial
liabilities
£m
5
14
19
173
14
187
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.
135
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2018
136
14. FINANCIAL RISK MANAGEMENT CONTINUED
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 2018, the Group had total unsecured bank borrowing facilities of £253m, representing £250m 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 2018 or 2017.
The following table shows the profile of interest bearing debt together with its effective interest rates, after taking account of
interest rate swaps as at the balance sheet date and the periods in which they will reprice:
Effective
interest
rate
%
2.0
2.6
2018
Zero
to one
year
£m
22
–
22
Total
£m
22
5
27
One
to two
years
£m
Two
to five
years
£m
Effective
interest
rate
%
–
–
–
2.0
2.3
–
5
5
2017
Zero
to one
year
£m
45
–
45
Total
£m
45
90
135
One
to two
years
£m
Two
to five
years
£m
–
–
–
–
90
90
Bank overdraft
Bank loans –
floating rate
The notional principal amounts in respect of the interest rate swaps together with their maturities are given in the table below:
2018
2017
Balance at
30 June
£m
–
–
Zero
to one
year
£m
–
–
One
to two
years
£m
–
–
For the year ended 30 June 2018, 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 £1m (2017: £1m).
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
2018
2017
Bank
overdraft
£m
Bank
loans
£m
Bank
overdraft
£m
Bank
loans
£m
22
–
–
22
–
–
5
5
45
–
–
45
–
–
95
95
Maturities above include estimated interest payable to the maturity of the facilities.
14. FINANCIAL RISK MANAGEMENT CONTINUED
b. Maturity of bank loans and borrowings continued
The Company
Due within one year
Due between one and two years
Due between two and five years
2018
2017
Bank
overdraft
£m
Bank
loans
£m
Bank
overdraft
£m
Bank
loans
£m
–
–
–
–
–
–
5
5
83
–
–
83
–
–
95
95
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 2018.
At the year end, the Group and Company had £245m (2017: £275m) 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.
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:
Balance
at 30 June
£m
387
351
Total
contracted
cash
payment
£m
394
359
Due
less than
one year
£m
209
154
Due
between
one and
two years
£m
Due
between
two and
five years
£m
144
103
41
102
2018
2017
d. Maturity of trade and other payables
These represent current liabilities due within one year.
137
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2018
138
14. FINANCIAL RISK MANAGEMENT CONTINUED
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
2018
£m
90
90
2017
£m
62
62
2018
£m
89
89
2017
£m
61
61
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.
The total capital levels and gearing ratios as at 30 June 2018 and 30 June 2017 are as follows:
Total borrowings
Less cash and cash equivalents
Net (cash)/debt
Equity
Total capital
Gearing ratio
2018
£m
27
(90)
(63)
1,483
1,420
N/A
2017
£m
135
(62)
73
1,235
1,308
6%
g. Fair values
At 30 June 2018 there is no material difference between the fair value of financial instruments and their carrying values in the
balance sheet.
15. TRADE AND OTHER PAYABLES
Non-current liabilities
Amounts due in respect of development land
Current liabilities
Trade payables
Amounts due in respect of development land
Customer deposits
Amounts owed to subsidiary companies
Other payables
Other taxation and social security
Accruals and deferred income
Group
Company
2018
£m
178
178
336
209
52
–
7
3
64
671
2017
£m
197
197
289
154
64
–
6
3
69
585
2018
£m
2017
£m
–
–
–
–
–
14
–
–
16
30
–
–
–
–
–
14
–
–
13
27
Amounts due to subsidiary companies are unsecured, repayable on demand and bear interest at a notional rate.
16. LONG-TERM PROVISIONS
The Group
At 1 July 2017
Provisions created during the year
Provisions released during the year
Provisions utilised during the year
At 30 June 2018
Onerous
contracts
£m
Other
£m
Total
£m
2
–
(1)
–
1
6
2
–
–
8
8
2
(1)
–
9
139
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S
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.
17. SHARE CAPITAL
Authorised
480,000,000 ordinary shares of 10p each (2017: 480,000,000)
Issued and fully paid
As at 1 July 2017 and 30 June 2018
2018
£m
2017
£m
48
37
48
37
Number of ordinary
shares of 10p each
369,799,938
Options granted to Directors and employees under the LTIP, the CSOP and the SAYE schemes are set out in note 7d.
S
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2018
140
18. SHARE CAPITAL, SHARE PREMIUM ACCOUNT AND RESERVES
The Group
19. MOVEMENT IN NET (DEBT)/CASH
The Group
At 1 July 2016
Total comprehensive income
Dividends paid
Movement in respect of LTIP/SAYE
At 30 June 2017
Total comprehensive income
Dividends paid
Movement in respect of LTIP/SAYE
At 30 June 2018
Share
capital
£m
Share
premium
account
£m
Other
reserves
£m
Retained
earnings
£m
37
–
–
–
37
–
–
–
37
59
–
–
–
59
–
–
–
59
8
–
–
–
8
–
–
–
8
937
246
(44)
(8)
1,131
326
(74)
(4)
1,379
Other reserves
Other reserves consists of a £7m Capital redemption reserve (2017: £7m) and a £1m Consolidation reserve (2017: £1m).
Undistributable reserves
Other reserves are not available for distribution.
The Company
At 1 July 2016
Total comprehensive income†
Dividends paid
At 30 June 2017
Total comprehensive income
Dividends paid
At 30 June 2018
† Includes dividends received from subsidiary companies.
Other reserves
Other reserves consists of a £7m Capital redemption reserve (2017: £7m).
Undistributable reserves
Other reserves are not available for distribution.
Share
capital
£m
Share
premium
account
£m
Other
reserves
£m
Retained
earnings
£m
37
–
–
37
–
–
37
59
–
–
59
–
–
59
7
–
–
7
–
–
7
701
44
(44)
701
12
(74)
639
Cash and cash equivalents
Bank overdrafts
Net cash and cash equivalents
Bank loans
Net cash/(debt)
The Company
Cash and cash equivalents
Bank overdrafts
Net cash and cash equivalents
Bank loans
Net cash/(debt)
20. OPERATING LEASE COMMITMENTS
Within one year
Within two to five years
Later than five years
At
1 July 2017
£m
Cash flow
£m
At
30 June 2018
£m
62
(45)
17
(90)
(73)
28
23
51
85
136
90
(22)
68
(5)
63
At
1 July 2017
£m
Cash flow
£m
At
30 June 2018
£m
61
(83)
(22)
(90)
(112)
28
83
111
85
196
89
–
89
(5)
84
2018
£m
2017
£m
3
4
1
3
5
1
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. Management estimate that the bonds and guarantees amount to £117m (2017: £99m) at the year end and consider the
possibility of a cash outflow in settlement to be remote.
141
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2018
142
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
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 80 to 95. A summary of
remuneration provided to key management personnel is provided in note 7c.
In addition, related party transactions were carried out with parties related to Steve Morgan during the year totalling £0.4m
(Company £0.4m), primarily relating to the donation to The Steve Morgan Foundation as described in the Directors’ Remuneration
Report on pages 80 to 95 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.
As at 30 June 2018, 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 2018 was £675m (2017: £945m). The amount owed to
subsidiary undertakings at 30 June 2018 was £14m (2017: £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.
During the year, the Group received £24m loan repayments from its joint ventures, Menta Redrow Limited and Menta Redrow (II)
Limited. It also received a £3m dividend from Menta Redrow Limited. The Group’s loans to its joint ventures are disclosed in
note 10.
FINANCIAL STATEMENTS
Glossary
DPS
Dividend Per Share
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
GDPR
General Data Protection Regulation
HBF
Home Builders Federation
NHBC
National House Building Council
PRS
Private Rented Sector
Sales Outlet
A development with new homes for sale, comprising a
discreet sales area and with a planned selection of new
homes available
SDLT
Stamp Duty Land Tax
NPPF
National Planning Policy Framework
HOW KEY PERFORMANCE
INDICATOR MEASURES ARE CALCULATED:
Accident incident rate by site
No. of notifiable accidents in financial year divided by
average no. of sites
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
HBF customer satisfaction rating
Independent HBF customer satisfaction rating score
Land holding years
No. of plots in owned land holdings at 30 June divided
by no. of legal completions in financial year
Number of trainees
No. of trainees at 30 June
Private reservation rate
No. of private reservations per week in financial
year divided by average no. of sales outlets
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
Revenue
Revenue per consolidated income statement
Sales outlets
No. of sales outlets open at 30 June
143
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Redrow plc Annual Report 2018
144
SHAREHOLDER INFORMATION
Corporate and Shareholder Information
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.
GROUP CONTACTS
Officers and advisers
Company Secretary
Graham Cope
Details of our current developments are available on our
website: www.redrow.co.uk
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
1 Hardman Court
Manchester
M3 3EB
Solicitors
Slaughter and May
One Bunhill Row
London
EC1Y 8YY
Financial Public Relations Consultants
Instinctif Partners
65 Gresham Street
London
EC2V 7NQ
SHAREHOLDER INFORMATION
Five Year Summary
12 months ended 30 June
Revenue
Operating profit
2014
£m
864
138
2015
£m
1,150
213
Operating profit as a percentage of turnover
15.9%
18.5%
Profit before tax
Net assets
Net cash/(debt)
133
696
(172)
204
873†
(154)
2016†
£m
1,382
261
18.9%
250
1,041
(139)
Gearing – net debt as a percentage of capital and reserves
24.8%
17.6%†
13.3%
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 change in accounting policy.
18.0%
20.5%
3,597
28.3p
2.0p
188.1p
22.8%
26.4%
4,022
44.5p
4.0p
23.7%
26.1%
4,716
55.4p
8.0p
145
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O
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A
N
C
E
R
E
P
O
R
T
2017
£m
1,660
322
19.4%
315
1,235
(73)
5.9%
26.0%
27.7%
5,319
70.2p
12.0p
2018
£m
1,920
382
19.9%
380
1,483
63
N/A
28.5%
28.0%
5,718
85.3p
20.0p
236.1p†
281.5p
334.0p
401.0p
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Redrow plc Annual Report 2018