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Redrow plc
Redrow House, St. David’s Park, Flintshire CH5 3RX
Telephone: 01244 520044
redrow.co.uk
2019
ANNUAL REPORT
REDROW ANNUAL REPORT 2019
Highlights
£2,112m
£1,920m
£1,660m
£1,382m
£1,150m
£406m
£380m
92.3p
85.3p
£315m
70.2p
£250m
£204m
55.4p
44.5p
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15
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£2,112m
Revenue
+10%
£406m
Profit before tax
+7%
92.3p
Earnings per share
+8%
60.5p*
6,443
5,718
5,319
22.8%
23.7%
4,716
4,022
28.5%
28.5%*
26.0%
28p
17p
10p
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SHAREHOLDER
INFORMATION
128 Corporate and
Shareholder
Information
129 Five Year Summary
6p
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60.5p
Cash return per share
+116%
* inc B share payment
Award highlights
6,443
Legal completions
+13%
28.5%
ROCE
+0%
* see note 14f
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Find more information at:
redrowplc.co.uk
INNOVATION
AWARD
AMINGTON GARDEN VILLAGE, TAMWORTH, MIDLANDS
Contents
STRATEGIC REPORT
GOVERNANCE REPORT
FINANCIAL STATEMENTS
01 Highlights
02 Our Investment Case
04 Our Strategy
06 Our Business Model
08 Chairman’s Statement
Chief Operating
10
Officer’s Review
14 Operating Review
28
30
Financial Review
Risk Management
38 Corporate Governance
87
Report
40 Board of Directors
50 Audit Committee Report
55 Nomination Committee
58
Report
Placemaking and
Sustainability
Committee Report
60 Directors’ Remuneration
Report
80 Directors’ Report
86 Statement of Directors’
Responsibilities
94
95
96
Independent Auditors’
Report
Consolidated Income
Statement
94 Statement of
Comprehensive Income
Balance Sheets
Statement of Changes
in Equity
Statement of Cash Flows
97
98 Accounting Policies
103 Notes to the Financial
Statements
127 Glossary
COVER IMAGE: REGENT’S GRANGE, CHESTER, CHESHIRE
02
Redrow plc Annual Report 2019
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 attractive, sustainable and vibrant places
to live.
15%
£314m
of workforce on structured
training programmes
committed to fund improvements
to local 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.
90.9%
customer recommendation -
5 star status
91%
226
internal promotions in year
1,712
affordable homes delivered to our
communities
of employees would recommend
Redrow to a friend
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 c£1.6bn. 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.
c£1.7bn
revenue value of private
reservations secured in the year
Creating
communities
a key focus
c7,400 plots
acquired to add to current land holdings
26.5%
return on equity
c2,900 plots added
60.5p per share
from forward land to owned land holdings
cash return to shareholders
03
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Our benchmark for
success in 2020
c£2.2bn
£2.1bn
£1.9bn
£1.7bn
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REVENUE
c£430m
£406m
£380m
£315m
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20
PROFIT BEFORE TAX
99.7p
92.3p
85.3p
70.2p
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EPS
28.5%
28.5%
26.0%
25+%
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ROCE
04
Redrow plc Annual Report 2019
STRATEGIC REPORT
Our Strategy
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.
MEASURE
2020
TARGETS
KEY PERFORMANCE
INDICATORS
2019
2018
EPS
DPS
Revenue
• EPS increasing
to 99.7p
92.3p
85.3p
• DPS of 32p
30.5p
28p
• Revenue increasing
to c£2.2bn
£2,112m £1,920m
Sales Outlets
• 135 outlets
129
132
Monies
committed
to fund
improvements
to local
communities
• Continued
investment in local
communities
£314m
£184m
• Affordable
homes delivered
1,712
1,102
ROCE
• ROCE of 25+%
28.5%
28.5%
Land holding
years
• Maintain land
holdings at c4 years
4.0 years 4.5 years
Waste diverted
from landfill
• >95%
97.7%
96.8%
90% or more
customer
recommend
rating
Private
reservation rate
• HBF 90% customer
recommend rating
90.9%
89.1%
• Maintain an
appropriate balance
in availability of
product in the right
locations
0.66
0.70
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;
• 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.
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
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
15%
15%
• 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
0.36
0.35
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06
Redrow plc Annual Report 2019
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
aluin
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P
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Land, Plan
nin
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Thrivin g
Co m
m u nitie
Custo m
er S
e r v i c e
Creating long-term
sustainable value
&
D
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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
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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 and aspirations change.
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
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.
Employees
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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08
Redrow plc Annual Report 2019
STRATEGIC REPORT
Chairman’s Statement
“I am delighted to be able to report that Redrow for the sixth
consecutive year has delivered record results.”
The Group’s excellent trading performance led to strong cash
generation and resulted in a cash positive position of £124m
(2018: £63m) at the year-end after making a special pay-out of
30p per share under a ‘B share’ scheme in April. Return on
Capital Employed was maintained at 28.5% due to tight control
of working capital and negotiating favourable payment terms
for land.
Due to the Group’s ongoing strong cash position, the Board is
proposing a final dividend of 20.5p per share (2018: 19p) making
30.5p for the year (excluding the ‘B share’ payment): a 9%
increase on the prior year. Subject to shareholder approval at
the Annual General Meeting, this will be paid on 13th November
2019 to all shareholders on the register as at close of business
on 20th September 2019.
MARKET BACKDROP
The wider housing market continues to be affected by the
uncertainty surrounding Brexit and the high cost of moving,
particularly the burden of Stamp Duty Land Tax. During the
year residential property transactions across the UK reduced
and are currently running well below historical levels. House
price inflation remains subdued with most indices only
reporting small rises.
Against this more challenging backdrop, the new homes market
has been less affected and remained comparatively resilient.
The Group entered the new financial year with a strong order
book of £1.02bn: a decrease of £129m largely as a result of
previously reported weaker trading towards the end of the first
half and lower volumes and average selling prices in London.
Market fundamentals remain encouraging. There is an
undersupply of new housing, the mortgage market remains
competitive and Help to Buy continues to support buyers of
new homes. In the last financial year Help to Buy accounted for
1,881 private reservations (2018: 1,794). The scheme is now
being more widely used in London where it has generally
replaced investor sales.
The Government made an announcement during the year
about the future of Help to Buy. With effect from April 2021 the
scheme will only be available to first time buyers and regional
price caps are to be introduced. The scheme will end in March
2023. The regional price caps if unaltered, will adversely affect
the ability of first time buyers to acquire homes through the
scheme in the more affluent areas of the north and midlands –
this goes against the initial intention of the scheme when it was
launched in 2013, to make homes more affordable across the
country. London will be least affected by the changes in 2021
but, unless the scheme is extended or transitional
arrangements are put in place, will be impacted most in 2023
as a consequence of the growing take-up and the higher
equity loan available in the capital.
JOHN TUTTE
Executive Chairman
This is my first Chairman’s Statement since taking up the role
at the beginning of April and I am delighted to be able to
report that Redrow for the sixth consecutive year has delivered
record results.
The Group completed 6,443 new homes passing the 6,000
milestone for the first time. The Group also celebrated
handing-over its 100,000th home last November.
FINANCIAL RESULTS
Group revenue grew by 10% to £2.1bn (2018: £1.9bn) as a result of
a 13% rise in legal completions driven by a 55% increase in social
housing output which accounted for the average selling price
falling by 2% to £324,500 (2018: £332,300). The private average
selling price increased by 2% to £389,500 (2018: £380,200) due
to geographic mix and a small element of house price inflation.
Gross profit at £504m was £35m above last year: the gross
margin reduced slightly to 23.9% mainly due to the increase in
the proportion of social housing. With overall house price
inflation barely covering underlying cost increases we have
instigated a number of cost saving measures to maintain margins.
Operating expenses increased to £93m (2018: £87m) reflecting
the investment in the new Thames Valley division which became
fully operational at the beginning of July 2019. As a percentage
of turnover operating expenses were fractionally lower at 4.4%
(2018: 4.5%).
Operating profit was £411m, an 8% increase (2018: £382m) with
an operating margin of 19.5% (2018: 19.9%).
Pre-tax profits were a record £406m, up 7% (2018: £380m) and
earnings per share increased by 8% to 92.3p.
The Group’s strategy to mitigate the impact of the changes to
the Help to Buy scheme in 2021 and its demise in 2023, is to
build on the continued success of the Heritage Collection to
attract more buyers from the secondary market who would not
ordinarily consider new. The Heritage Collection offers the
character and space considered by many to be absent from
new homes and, when combined with great placemaking, has
a broad appeal to a wide range of customers.
BOARD CHANGES
During the year Steve Morgan stepped down from the Board
almost ten years to the day since he returned in March 2009.
Steve founded the business in 1974. His insightfulness,
determination and leadership have been fundamental to the
Group’s growth and success. We are all indebted to him for his
huge contribution to Redrow and the wider housing industry
and we wish him all the best for the future.
LAND AND PLANNING
During the year the Group added 7,371 plots to the owned and
contracted land holdings. Of these 2,909 were converted from
Forward Land holdings. After taking into account completions,
the Group’s owned and contracted land holdings with planning
increased by 936 plots to 28,566 (2018: 27,630). The Group’s
Forward Land holdings increased by a net 800 plots to 31,500
(2018: 30,700). The Group is maintaining a cautious approach
to land buying and will continue to do so until there is more
certainty around Brexit and the outlook for the economy.
This more cautious approach combined with ongoing delays in
the planning system, is inevitably having an impact on the rate
at which new outlets are coming on-stream. However, our shift
to acquiring and developing larger sites offering a wider range
of product is helping to mitigate this by delivering better rates
of sale.
During the year we launched our placemaking guide “Designing
a Better Way to Live”. The guide sets out eight design principles
that steer our teams to creating truly great places to live – the
guide is very much a pragmatic and customer facing response
to the Government’s growing interest in design quality.
QUALITY AND CUSTOMER SERVICE
The significant investment we have committed to both
improving the build quality of our homes and the service our
customers receive in recent years is paying-off. Last year we
regained our five star status in the annual HBF Customer
Satisfaction Survey with a recommendation score of over 90%
and a Net Promotor Score of 50.3 – one of the highest in the
industry. It is also very pleasing to report that a record 28 of our
site managers won NHBC Pride in the Job Awards.
PEOPLE
As our growth moderates in line with our strategy, so does the
need to expand the workforce. We created an additional 40
jobs in 2019 and we now directly employ 2,325 people. Of
these 15% are trainees. During the year we recruited over 160
trainees including 107 apprentices.
It is encouraging to see a broader range of diversity across our
workforce including more female apprentices. It is also a
testament to our learning and development programmes that
during the year 226 colleagues were promoted to positions of
greater responsibility.
Debbie Hewitt also stepped down from the Board after nine
years’ distinguished service. The Board would like to thank
Debbie for her significant contribution throughout her tenure
and wish her every success for the future.
As part of the reorganisation of the Board following Steve’s
announcement to step down and my appointment as Executive
Chairman, Matthew Pratt was promoted to Chief Operating
Officer and appointed to the Board in April 2019. Matthew has
worked for the Group for 16 years at all senior management
levels and has a wealth of operational knowledge and
experience.
For the first time, the Board recently undertook an external
evaluation of its performance. Whilst the evaluation concluded
the Board and its committees operate well, a number of
recommendations to improve performance were suggested
and all are being implemented.
OUTLOOK AND SUMMARY
Since the start of the new financial year, trading has been
encouraging and the demand for our homes is strong with
reservations running ahead of last year. Additionally, we have
exchanged contracts for a further PRS scheme at Colindale
Gardens adding 347 plots to an already substantial order book.
Over the course of the past year, the Group has worked
alongside its supply chain to identify any disruption the
business could experience in the event the UK leaves the EU
without a deal. Our suppliers have both increased stocks of
imported goods and put in place plans to source materials from
alternative suppliers.
We are understandably cautious about the post-Brexit future
and also the eventual impact of the impending changes to the
Help to Buy scheme. We do however, have a clear strategy to
continue to grow, albeit more modestly, centred on our award
winning Heritage Collection that is so popular across a broad
range of buyers.
We entered the new financial year with a strong order book, an
excellent balance sheet and a pipeline of new outlets.
Notwithstanding the political and economic uncertainty we
face, based upon trading over recent weeks, we have every
reason to be confident that 2020 will be another successful
year for the Group.
Our excellent results are very much down to the hard work and
dedication of the Redrow team together with our
subcontractors and suppliers, and I am immensely grateful to
them all for their ongoing commitment to the business.
JOHN TUTTE
Executive Chairman
4 September 2019
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10
Redrow plc Annual Report 2019
STRATEGIC REPORT
Chief Operating Officer’s Review
“The Group continued its successful strategy of growth.”
INVESTING IN PLACES
The land market remains attractive with plenty of opportunities
to acquire quality sites in good selling areas. However we
continue to exercise some caution in the market and will
continue to do so until the wider political uncertainty is
clarified.
In 2019 we acquired 7,371 plots of which 2,909 were
transferred from our forward land holdings. In the year, our
average site size was around 200 plots. As we have mentioned
before, these larger sites have the strategic advantage of
relieving pressure on replacement by ultimately slowing down
the rate of outlet closure. Larger sites also allow much more
scope for us as a design driven developer to provide our
customers with a more desirable environment to live within.
Design of the overall site is just as important to our purchasers
in their decision on where to live as the aesthetics of the home
they buy.
Our current land holdings have increased by 936 plots despite
our more cautious approach to land acquisition. It is pleasing to
note our pull through from forward land of 2,909 plots
representing just under 40% of all purchases. The current land
holdings provide around 4.4 years’ supply at our 2019
completions rate.
Overall, our forward land holdings remain strong and will
continue to play an essential part in delivering the homes the
business needs to maintain our growth projections.
By geography the current land holdings remain weighted to the
south of the country and broadly at the same percentages as
last year.
Our forward land holdings remain strong in the north due to the
history of the business; however, we are continuing to search
for more opportunities in the south. The expansion of Harrow,
to focus on identified growth areas such as Thames Valley, will
ensure forward land makes a valuable contribution across all
areas of our operations going forward.
Our current land holdings in Greater London continue to fall
reflecting our concerns over the market. London is the most
affected by the political uncertainty around Brexit and the end
of Help to Buy in 2023 will most profoundly affect the capital.
We are particularly cautious about future investment and will
continue to de-risk any investment through either PRS or
partnership agreements.
The combined estimated GDV of our current and forward land
holdings is approximately £20bn.
MATTHEW PRATT
Chief Operating Officer
INTRODUCTION
Having worked for Redrow for the last 16 years, it gives me
great pleasure to present this report as Chief Operating Officer
following what has been another year of record results.
Over the past year, the Group continued its successful strategy
of growth and delivered 6,443 homes in the year, an increase
of 13% from the previous year. Accordingly, revenues have risen
by 10% to £2.1bn and profit before tax has risen by 7% to £406m
(2018: £380m).
As part of our ongoing strategy to grow organically, we have
opened a new office in Oxford. The new Thames Valley
division will cover the growth areas around the county of
Oxfordshire.
To reduce costs and operate more efficiently, we are
consolidating our East and West London divisions into one
office to be based at our Colindale development, where in
time, we will be building a new purpose built office to house all
our London operations. By making these changes, we will be
able to share a number of functions across the two businesses,
such as finance, planning and sales.
We are expanding the team at Harrow Estates who will now
also have a satellite operation in the Thames Valley office to
focus on the larger sites in the south helping to support our
further growth in this area. The expansion of Harrow will also
assist the divisions on larger more complicated schemes and
forward land.
FOCUSING ON CUSTOMERS
Build Quality
Redrow’s aim is to build houses and apartments that our
customers are proud to call their homes. We were therefore
delighted to achieve an HBF five star award for customer
service in their annual survey. In the most recent published 12
month rolling score we continue to trend above the five star
builder status with a 92% recommendation score.
Our product is hand built by skilled craftsmen in all weather
and consists of many components that require a large number
of different trades to install. Notwithstanding this, we recognise
that we can still improve our quality to deliver the best possible
home every time.
In the year we launched our quality control iPad-based system
for our site teams to ensure our hand built product is
thoroughly checked and logged for quality. The system allows
our site managers to identify faults in the home, record these
with marked up photographs showing what corrective works
are required. Every subcontractor has access to our portal that
provides a detailed list, with photographs of any works
requiring rectification. Once remedial works have been
completed the subcontractor can close down the instruction
by returning a photo of the remediated works. The data from
this system will allow us to review common faults and improve
our training and specification to prevent repeating faults.
Ultimately the introduction of this system will allow us to
identify faults and ensure they are correctly and quickly
remediated. The new system will enable us to engage better
with our subcontractors leading to improved quality and
reductions in cost through shared best practice. The recording
of the home at various stages of build also allows us to
demonstrate to our customers the inspections we have
undertaken and the inner-workings of their new home.
Customer experience
We continually review and ensure our customers are having a
great Redrow experience.
In the year, we have enhanced our utilisation of social media as
a means of communicating with our customers.
We have recently engaged with Trustpilot where customers
can post reviews in addition to the HBF customer survey.
Although in its infancy, we have been encouraging customers
to leave feedback, and from an initial small number of
responses we have now received over 570 reviews and have a
Trustpilot rating of 4 out of 5 stars - ‘great’.
HEALTH AND SAFETY
We continue to commit to continuous improvement in health
and safety. In 2018 we significantly increased our health and
safety team and split this into the two distinct areas of
responsibility and assurance. The distinction between the roles
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PENLANDS GRANGE, HAYWARDS HEATH, WEST SUSSEX
12
Redrow plc Annual Report 2019
STRATEGIC REPORT
Chief Operating Officer’s Review continued
has allowed us to both support our teams to produce the
safest sites and also independently audit the teams for
compliance.
In the year, three of our site managers were awarded highly
commended at the NHBC annual Health and Safety awards.
They were among only 27 site managers nationally who were
awarded this achievement showing our commitment to
constantly improve our safety with the ultimate aim to have
safer sites. We continue to engage with our subcontractor
base to ensure they work to the same high standards.
COST INITIATIVES AND MODERN METHODS OF
CONSTRUCTION
The business continues to focus on tight build control and
reducing costs. Whilst maintaining quality is key to this
success, focusing on a number of small initiatives rather than
wholesale changes can cumulatively have a significant effect.
The business is currently highlighting reducing build times to
save costs in overall prelims as well as improving build quality
to reduce defects and waste.
Reducing build times is not about expecting trades to build
faster; it is about reducing the gaps or standing time when
plots are not being work on. By focusing on eliminating the
standing time the overall build time reduces.
Whilst we do use modern methods of construction (MMC)
across the Group, such as timber frame and steel frame, this is
more specific to the site and the product we are building. As
referred to above, we are looking at various smaller areas of
efficiency rather than wholesale changes and a move to MMC.
Although we pride ourselves on our traditional homes being
built by skilled craftsmen, wherever possible we look to use off
site manufactured components: for example, large off site
manufactured arches for houses or the service pods for our
multi-storey developments.
Our efforts to improve quality and efficiency do not stop with
build. This year we launched our online reservation system. In
the past a customer would need to set aside a significant
amount of time with a sales consultant to run through all
aspects of the property before making a reservation partly to
ensure compliance with regulations. This was a time
consuming process for all and could be a daunting process for
our customers.
Our new system allows the customer to review all the
information they require in the comfort of their own home at a
pace they are comfortable with, being able to dip in and out of
the process until it is complete. Once they have reviewed all
the information and agreed and signed the relevant
documents online they can progress to paying the reservation
fee and securing their property.
Although this process makes the administration easier, it does
not undermine the relationship with the sales teams that
remains an essential part of the sales process and our service.
It is another way where we are enhancing the customer
journey whilst both improving the efficiency of onsite staff and
strengthening our compliance to regulations.
VALUING PEOPLE
In response to our continued growth we now employ over
2,300 people directly and many more times this through our
supply-chain.
In our most recent employee survey 95% of our employees
said they were proud to work for Redrow, testimony to our
commitment to ensure our employees are engaged with the
business.
In the year we have also increased our engagement directly
with our subcontractors as well as our own employees.
Looking forward, we expect to continue our work with them to
improve the wellbeing of all people working on our sites. We
have introduced dedicated help lines to support our
subcontractors and also arranged Health Kiosks on sites
where our subcontractors’ personnel can measure their basic
health statistics and receive advice.
In response to growing mental health issues across the
building industry, we have trained a number of mental health
first aiders and have plans and volunteers to train a total of 120.
We have a number of strategic partnerships with colleges
across the country. The first group of students have completed
their first year of our dedicated housebuilding degree which
has been developed in conjunction with Liverpool John
Moores University and Coleg Cambria. Our second cohort
have commenced and in total we now have 23 people working
towards their BSc in Construction Management -
Housebuilding.
THE MARKET AND OUTLOOK
The market for new homes remains resilient despite political
and economic uncertainty brought about by ongoing
conjecture over Brexit.
The business is in excellent shape to react to any changes and
challenges we may face with an outstanding product which will
not lose its desirability even in a shifting economy.
There remains strong demand for a quality product which
continues to be supported by low interest rates.
We are well placed for the future with a strong order book, an
excellent product and a dedicated team to deliver for the
future.
MATTHEW PRATT
Chief Operating Officer
4 September 2019
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COLINDALE GARDENS, NORTH LONDON
14
Redrow plc Annual Report 2019
STRATEGIC REPORT
Operating Review
LAND, PLANNING & DESIGN
At Redrow we use our planning and
design skills to develop our quality land
holdings into sustainable and vibrant
places to live.
OWNED AND CONTRACTED
LAND BY GEOGRAPHY (PLOTS)
2019
2018
North
Central
South
Greater London
2019
5,580
8,398
11,251
3,337
2018
5,331
7,848
10,356
4,095
28,566
27,630
FORWARD LAND BY CATEGORY (PLOTS)
2019
2018
Land owned without planning
Land contracted without
planning
Options with housing allocation
2019
3,185
1,281
9,935
Options with realistic prospect
17,099
2018
2,973
2,722
12,257
12,748
31,500
30,700
PLACEMAKING
Central Government has placed a new emphasis on the
design quality of housing developments and plans to issue
new planning guidance on design as well as a ‘design manual’
later this year. At Redrow we fully embrace the placemaking
agenda. We have completed hundreds of new communities
over the last 40 years, all of which are instantly recognisable
as “Redrow places”. Creating a better way to live by
producing high quality homes is an integral part of our culture.
Our 8 placemaking principles, “Redrow 8”, are based on a
customer-focused approach to creating better places to live
and are well-established across our divisions. By using these
principles we will ensure that we leave a legacy of attractive,
sustainable and vibrant places to live for generations to come.
This year we launched our placemaking manual “Designing a
Better Way to Live”. This comprehensive document sets out a
series of measurable principles for each of our “Redrow 8”
placemaking principles together with case studies giving
examples of how we have successfully delivered each of
these on a Redrow development. The manual is now being
used across the Group to guide and shape all of our new
developments to ensure that they consistently meet our high
standards for creating great places to live.
Our Group Master Planning team is responsible for working
with our divisions and promoting our placemaking approach,
thus ensuring through a comprehensive programme of design
reviews that all of our developments consistently deliver
better places to live. Each layout and completed development
is now measured against our principles to generate a ‘Redrow
8 score’ so that we can monitor the delivery of each of our
design objectives. The scoring system also provides a ‘health
and wellbeing’ score based on how the place encourages
social interaction, provides for walking and cycling,
incorporates nature as well as providing attractive green
spaces.
Our Garden Village developments are an important example
of how we deliver better places to live. Here our approach to
creating great places is inspired by the timeless principles of
the original garden city movement such as the integration of
generous, accessible and good quality open spaces and the
creation of attractive tree-lined streets.
LAND
During the financial year the Group acquired 7,371 plots with
planning permission to add to our current (owned and
contracted) land holdings. This more than compensated for the
6,443 legal completions in the year and, after the impact of
replans too, resulted in us closing the year with 28,566 plots in
the current land holdings, a 3% increase on the previous year
closing position (2018: 27,630).
Forward land continues to make a significant contribution to
land additions and delivered 40% (2018: 37%) of the 7,371
current land additions in the year across 14 sites. In the light of
this, we have continued our strategy of strengthening our
forward land holdings ending the year with 31,500 plots, a 3%
increase on the previous year (2018: 30,700 plots).
DEVELOPING HEALTHY PLACES TO LIVE
Ensuring positive health and wellbeing outcomes for our
customers and communities is a key part of our social purpose.
We have embedded objectives for delivering healthy places to
live within our “Redrow 8” placemaking principles referred to
above. These include making our developments easy to get
around, to encourage walking and cycling, providing places to
go and things to do to help create a sense of community, as well
as bringing nature into our developments to benefit physical and
mental health. During the year we created c70 hectares of public
open space, ranging from parkland, wildlife areas and outdoor
sports and fitness facilities. At our Frenchay Gardens
development near Bristol, for example, we are creating an
outdoor gym, giving the community the opportunity to exercise
for free on their doorstep.
Redrow are active members of NHS Healthy New Towns
Network and our “Redrow 8” principles have been informed by
this and embed the objectives of the NHS ten principles for
healthy places. Our “Redrow 8” scoring system enables us to
record the degree to which each new development meets our
health and wellbeing objectives and we will be able to use this
information to ensure we take every opportunity to make our
new places as healthy as possible. A great example of this is at
our Cherhill View development, Calne where we have built new
allotments for the community to grow their own fresh fruit and
vegetables.
COMMUNITY ENGAGEMENT
New developments, when done well, can unlock sites and
create thriving and prosperous communities. We work
alongside the local community to design developments that
integrate well into the surrounding area, with a strong local
identity. We entered into a 50/50 partnership with LB
Wandsworth to deliver the residential-led regeneration of a
1960s built estate in Roehampton, London. We actively
engaged with stakeholders, through a series of workshops,
providing numerous opportunities for local people to
participate in the masterplan development process. In addition
we ran a number of community events including the
Roehampton ‘Feel Good’ Festival and Safer Neighbourhood
events.
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We organise welcome meetings and community events on our
developments to help forge new friendships and strengthen
existing community networks. At Amington Garden Village,
Tamworth we ran a community day to bring customers, staff,
stakeholders and council members together to celebrate the
new site and discuss future community activities. At our
Bloxham Vale development near Banbury we held a ‘Brass on
the Grass’ community day with live entertainment a seven-
piece New Orleans-style brass band and refreshments.
BRINGING BENEFITS TO LOCAL COMMUNITIES
Creating lasting value for society and improving the quality of
life for local communities is an important part of what we do.
During the year we delivered a wide range of facilities across
the country, including new schools, health centres, cycle and
public transport routes, community centres and outdoor social
spaces. In total we committed £314m to local communities
through formal contributions and affordable homes up c70% on
last year. For example, at Amington Garden Village we are
building a new school and community centre, expanding an
existing nature reserve, creating a new community woodland
and a series of cycle networks in the area.
Additionally, we also contributed many more hours and
donations supporting a wide and diverse variety of local
groups in the communities close to our developments. For
example our local Community Funds across the country
support countless local initiatives including gifting bird boxes
and hedgehog hotels to primary schools; new books to a
children’s hospital; donations to a club which gives visually
impaired people access to tennis lessons and to another club
helping give deaf and hard of hearing residents the confidence
to face social interaction and reduce isolation.
ACHIEVING GAINS FOR NATURE
For many years we have carefully protected wildlife and
habitats on our developments, but more recently there has
been a growing recognition that across the UK our wildlife is in
decline. Everyone must do more - not just to protect what’s
already there - but to design and create additional, quality
habitat for wildlife as a part of our activities. We recognise the
opportunities that exist for us to make a difference in this area,
SOCIAL HOUSING
LEGAL COMPLETIONS (NO.)
1,712
1,102
1,014
834
571
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Redrow plc Annual Report 2019
STRATEGIC REPORT
Operating Review continued
which is why we are supportive of the Government’s plans to
mandate biodiversity net gain for new development. We have
been working closely with Government bodies to contribute to
this emerging agenda; we are members of Greater Manchester
Biodiversity Net Gain Task Group and John Tutte, our
Executive Chairman sits on the Council for Sustainable
Business which has also been considering the issue.
We have been undertaking biodiversity net gain calculations
on our developments to enable us to review our current design
approach. At our Caddington Woods development, Luton our
designs are forecast to achieve a 64% net gain for biodiversity.
We are converting this former car park into a new community of
325 homes complete with open spaces designed in
partnership with RSPB. The designs consist of native shrubs
and species-rich grassland as well as the creation of new
wildlife ponds. The development is surrounded by broad-
leaved woodland which is being enhanced to provide
improved habitat for wildlife and a great natural space for the
community to enjoy.
PARTNERING FOR NATURE
We have partnered with The Wildlife Trusts to develop a new
Nature for People strategy for Redrow. Throughout the year we
have been reviewing our current design approach and working
with teams across the business to help co-develop the new
strategy document. The strategy will focus on delivering
biodiversity net gains and helping connect communities with
nature on our developments, as well as ensuring effective
ongoing management of green spaces into the future to ensure
lasting gains are achieved.
A great example of how we are already leaving a lasting legacy
is our Heritage Park development, Penymynydd, North Wales.
Here, Redrow gifted an area of land to the Amphibian and
Reptile Conservation (ARC) Trust to be developed into a local
nature reserve. Previously the land had been a quarry, a pub
and agricultural land which provided little wildlife value. Two
years later, the site is now rich in wildlife, with surveys showing
a 6-fold increase in the Great Crested Newt population, as well
as new species such as the rare mud snail. The site will provide
opportunities for the local community to enjoy nature for years
to come.
We will shortly celebrate five years of fruitful partnership
working with the Bumblebee Conservation Trust. In that time
we have created several bumblebee flagship projects, advised
many other developments, incorporated bee-friendly planting
in our show home gardens, trained landscapers and
management companies on the right approach for
bumblebees, given over 1,500 free memberships of the Trust
to our customers - with another c.1,000 due to be given this
coming year - and developed a range of bee information for
customers and education packs for school children. This year
we were delighted to be shortlisted for in the Business Charity
Awards for charity partnership in the property & construction
category.
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SAXON BROOK, EXETER, DEVON
18
Redrow plc Annual Report 2019
STRATEGIC REPORT
Operating Review continued
COMMERCIAL & SYSTEMS
We continue to improve our systems and
efficiencies, working closely with our
suppliers and subcontractors to deliver
increasing numbers of our quality homes.
REVENUE (£M)
2,112
1,920
1,660
1,382
1,150
15
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LEGAL COMPLETIONS (NO.)
6,443
5,718
5,319
4,716
4,022
15
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GROWING OUR BUSINESS RESPONSIBLY
As we continue to grow and deliver much needed new homes,
it is important that we do so in a responsible and sustainable
manner.
We are pleased to have achieved a Gold Award from
NextGeneration for the fourth consecutive year, remaining in
third position in the UK’s top 25 housebuilders with an
improved score of 82% (2018: 80%). NextGeneration is an
independent organisation which benchmarks housebuilders on
their sustainability performance with scores based on
assessing the environmental and societal impact of our homes
and developments.
This year we have also received the NextGeneration
Innovation Award in recognition of our commitment to
supporting healthy communities by developing a unique social
value calculator. As the first developer to carry out research, in
conjunction with a research consultancy, on the social value
associated with multiple aspects of home building and
community creation, our ground-breaking work ensures we
have a clearer, more holistic perspective on the impact of
placemaking decisions. It also helps us to take a more strategic
approach to design and community planning and further our
knowledge and perspective on the features and characteristics
of a new development which are most likely to make people
happier and healthier. The introduction of the calculator has
enabled us to have more informed conversations with local
authorities and planning teams about our homes and
investment in community focused infrastructure.
REVENUE, LEGAL COMPLETIONS AND OUTLETS
Revenue this year exceeded £2bn for the first time at £2.1bn
(2018: £1.92bn), a 10% increase. The sale of homes accounted
for all but £21m of revenue, which as last year was attributable
to land sales (2018: £20m). Growth came from across all our
geographical regions other than Greater London which was
broadly stable.
We delivered a record 6,443 legal completions in 2019, a 13%
increase on 2018 levels (2018: 5,718).
Affordable housing accounted for 27% of legal completion
volumes compared to 19% in the previous year and 12% of
homes revenue (2018: 7.5%). This increase was expected.
Apartments represented 20% of private legal completion
volumes and 19% of private sales revenue, a slight reduction on
2018 levels of 21% volume and 22% revenue respectively.
The Group had 126 active outlets on average in 2019, slightly
higher than the 124 in the previous year.
RESPONSIBLE SOURCING
AND PROCUREMENT
As partners and active
participants of the Supply Chain Sustainability School we are
engaging extensively with our supply chain on a range of
sustainability issues. We have held a number of briefings and
workshops with the School, across our divisions in the past
year, to raise the skills and knowledge of our supply chain
across a number of important issues.
We have partnered with an external company, Datum RPO, for
the supply of agency labour to ensure we have a legally
compliant workforce. Regular audits are undertaken of the
labour supply chain to prevent non-compliance and potential
illegal working practices.
We have achieved the highest possible score in the WWF’s
2019 Timber Scorecard, achieving ‘3 Trees’ in the assessment
by WWF for the third time in succession. This is in recognition
of our work in ensuring that 99.9% of our timber products are
responsibly sourced and credibly certified; playing our part in
protecting the world’s forests.
In addition, we have undertaken a comprehensive supply chain
mapping exercise to identify the source/country of origin for
the other products used in the construction of our homes, to
better understand and investigate potentially high risk
products with respect to social and environmental ethics.
Throughout the year we have been continuing to work with our
supply chain to assess product packaging and identify
opportunities to eliminate or reduce the amount of packaging
used - particularly single-use plastics. Where packaging is
necessary to protect products and materials we are working
with suppliers to find ways to reuse or recover the packaging
effectively, as well as examining material compositions. We have
long had in place a pallet repatriation scheme and are currently
trialling a new approach that will enable the recovery, repair and
re-introduction of dedicated pallets for construction products.
VALUING AND DEVELOPING PEOPLE AND PARTNERS
One of our strategic aims is to inspire future industry talent and
to support our colleagues at every stage of their career.
Training and development is an important aspect of this and
consistently 15% of our employees are on structured training
programmes with 226 internal promotions in the year.
We continue to evolve our learning and development offerings,
many delivered at our dedicated in-house training centre at
Tamworth and three satellite centres around the Group.
Redrow has now become an approved training organisation
with CITB and continues to be an accredited training provider
of NHBC courses. As part of our commitment to diversity and
narrowing the gender pay gap, we set up the Redrow Women’s
Network to inspire and support future female leaders.
Wellbeing is an increasing focus. During the year we launched
a major new wellbeing initiative “Mind Your Head”, having
signed the building mental health charter. Our aim is to ensure
we have workplaces which support our employees and
subcontractors and to educate everyone to raise awareness of
mental health, tackle the stigma and get the conversation
started. Our target is to train 120 mental health first aiders by
December 2019 and we are on track to achieve this. In addition
we will be providing training courses for all Directors and
Managers, an e-learning module for all employees and toolbox
talks for subcontractors.
We introduced a number of new employee benefits in the year
in response to feedback and suggestions provided by the 2018
employee engagement survey. The 2019 employee
engagement survey was delivered on our behalf again by an
external agency and achieved a 91% response rate (2018:90%).
This was followed up with workshops across the Group to
share feedback and ideas.
We also introduced a Subcontract Assistance Programme
during the year to support subcontractors and their families
with advice via an independent helpline. In addition, Redrow
became a patron of Youth Build which is a charity that
promotes and engages with young people to combat social
exclusion through the development of construction based
support services.
IMPROVING OUR SYSTEMS AND PROCESSES
It is important that as our business continues to grow and
evolve, we continue to invest in improving our systems and
processes to support this.
We have a dedicated team of in-house IT specialists including
a digital team, systems analysts, software developers, IT
security officers, help desk experts and systems accountants
based at our Head Office led by our Chief Information Officer.
The team work closely with Group and the operational
business and major systems improvement projects are
sponsored by members of the Executive Management Team.
During the year we became the first housebuilder to offer
customers the ability to legally complete the reservation of a
new home online with the launch of online reservation to
significantly enhance our customer journey.
We have further enhanced our iPad based system for site
managers introduced last year to support the drive to improve
build quality and to get it right first time.
Another example of improvements for stakeholders was the
introduction of our fully interactive online Annual Report 2018
which was the first of its kind for a major housebuilder. It was
created by our in-house teams and has been well received,
winning the “Best Annual Report Award” at the PRCA City and
Financial Awards in February 2019. We would encourage our
shareholders to view online if they are able.
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Redrow plc Annual Report 2019
STRATEGIC REPORT
Operating Review continued
CONSTRUCTION
To meet the demand for new homes, the
housebuilding 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 believe in collaborating with partners to
positively impact people and communities through education
and engagement activities.
John Tutte, our Executive Chairman, is also chairman of the
Home Building Skills Partnership. Part of the Home Builders
Federation, this aims to develop, grow and sustain a
programme to provide the workforce the industry requires to
deliver the further increases in housing supply the country
needs. Its focus is on attracting new entrants into the industry
and on providing training to develop the qualified workforce
needed to construct high quality new homes.
As mentioned last year, Redrow has developed a
housebuilding degree course in conjunction with John Moores
University and Coleg Cambria. In March 2019 our second
cohort of students commenced their studies with a total of 23
Redrow employees now working via this towards obtaining
their BSc in Construction Management – Housebuilding.
This year we delivered over 7,100 training days, an increase of
9% on the previous year. As part of our commitment to
evolving our learning and development programmes to better
support the business as it grows, we introduced two new
development programmes for talented site managers and
sales consultants in the year. Potential attendees are identified
through our divisional succession planning processes and the
programme aims to support and develop these talented
individuals to progress to managerial roles within the business.
Our Graduate trainees completed two community projects this
year, creating wonderful outside spaces for children to play at
a primary school in South Wales and an early years centre in
North Wales.
BUILDING RESPONSIBLY
This year saw Redrow host its first Building Responsibly
Conferences – three regional day-long events held across the
country and attended by all of our construction and customer
service teams.
With a full complement of our site and customer service
managers (CSMs), their assistants and other site-based
operatives in attendance, as well as construction managers
and health and safety representatives, this required us to
cease all building work for a full day and demonstrated our
commitment to involving everyone from the ground up in our
ongoing efforts to raise standards and get it right first time.
Key themes of the events included health, safety and the
environment, build quality, the customer experience and
employee engagement, with a special emphasis on mental
health first aid training. We also welcomed guest speaker
Kyran Bracken, former England World Cup rugby star, who
spoke eloquently about teamwork and leading by example,
before presenting our inaugural Building Responsibly awards
for best overall construction sites in each region and best sites
for health, safety and environmental performance.
The conferences also marked the official roll out of two
important changes to working practices:
• New iPad technology, specially developed apps and
subcontractor portal: Site managers and their assistants
inspect the houses at every stage and can now easily and
electronically assign work orders to the relevant contractor,
attaching photographs and video footage from their iPad if
relevant. Subcontractors can accept the work order and
share updates, photographs, etc, back via the platform so
that site teams and customer services can see the work has
been completed, along with any relevant further information.
This system allows our site managers to highlight any areas
of quality or safety concern instantly, providing photographic
evidence, with no need to remember to phone or email the
relevant individual later. Site teams can deal with faults more
proactively and we have a system that enables us to compile
and review data for common faults and to target training for
our teams.
• New joint inspection process: Site managers and customer
service managers now work together to inspect all
properties prior to handover, each of them logging their own
issues on their iPads. Whilst they naturally have different
areas of concern and focus (CSMs are more likely to focus
on finishing, for example), by jointly inspecting they can
better communicate with each other and ensure nothing
gets missed. This much closer working relationship is
helping us to deliver a higher quality product and also
means we have a much more comprehensive digital record
of the outcome of each inspection.
With quality at the forefront of all our advances in construction
processes, it was particularly pleasing in June 2019 to learn
that a record number of our site managers had been
recognised in the annual NHBC Pride in the Job Awards.
The 12-month selection and judging process identifies site
managers who encapsulate skills such as leadership, technical
expertise and attention to detail. An impressive 28 of our site
managers received Quality Awards and will now compete for
the highly coveted Seal of Excellence and Regional Awards
this autumn.
In addition our NHBC Construction Quality Assurance Review
score increased to 75% from 70% in 2018.
PRODUCT DESIGN
We are active Gold Leaf members of the UK Green Building
Council, supporting and contributing to their aim of improving
the sustainability of the built environment. During the year we
have been involved in events ranging from biodiversity, to zero
carbon homes to social value.
Our Internal Product Review Panel meets regularly to evaluate
potential new materials, products and suppliers that will help
with efficiencies, quality and our sustainability objectives. We
use timber frame systems to build a number of properties,
which is less labour intensive, has reduced H&S risk, is faster
to build and is responsibly sourced. We also install a pre-
insulated panelised roofing system on our 2½ storey
properties which also has the advantage of reduced reliance
on subcontractors and increased build efficiency. The majority
of our homes are built using a pre-cast ground floor system
incorporating insulated infill blocks. This system has an A+
Green Guide rating and is easier and quicker to build with.
Modular construction has been used for the construction of
our new Ebbsfleet office.
Tackling climate change and reducing our customer’s energy
bills are key considerations in the way we design our homes.
Our design process focuses on the right layout, materials and
products to retain heat within the home. This is done through
greater insulation levels throughout the building, high-
specification doors and windows, efficient boilers and great
care in achieving increased air-tightness. As a result, our
homes are ‘B’ rated, on average, for energy efficiency,
comparing to the UK average home which is ‘D’ rated.
Importantly, we help our customers appreciate how best to live
in their new home with a view to reducing their energy bills. We
do this face-to-face with them, by showing them the home and
its energy efficient features during construction, and by
showing them how to operate the features, such as ventilation
and zone heating, at handover.
During the year Redrow contributed to the ‘Bricks and Water’
Inquiry. The inquiry focused on how to build the number of
homes we need in England while at the same time ensuring we
improve flood resilience and water availability, and avoid costs
for future generations. Our homes are industry-leading in terms
of water efficiency with a rating of just 105 litres per person per
day, which is well below building regulations.
As well as designing our homes to help mitigate climate
change, we are also reviewing how they may need to change
in the future in order to adapt to the impacts of a changing
climate. We have been undertaking advanced modelling of the
performance of our homes in different climatic scenarios to
understand the potential impacts. The results will inform our
designs to help prevent overheating and ensure the continued
comfort and wellbeing of our customers.
MANAGING RESOURCES EFFICIENTLY
The construction industry is one of the biggest contributors of
waste in the UK and Redrow continues to focus on eliminating
and reducing the amount of waste created. A Group-wide
project is tackling the root causes of waste and focusing on the
efficient use of materials in our homes. As a result, waste has
decreased from 10.63 tonnes per 100m2 of build in 2018 to
10.15 tonnes/100m2 in 2019. Our ongoing membership of the
HBF Waste Forum is enabling us to share best practice and
knowledge with our industry peers to tackle waste across the
sector.
Throughout the year we have been continuing to work with our
supply chain to assess product packaging and identify
opportunities to eliminate or reduce the amount of packaging
used - particularly single-use plastics. Where packaging is
necessary to protect products and materials we are working
with suppliers to find ways to reuse or recover the packaging
effectively, as well as examining material compositions. We
have long had in place a pallet repatriation scheme and are
currently trialling a new approach that will enable the recovery,
repair and re-introduction of dedicated pallets for construction
products.
We recognise the importance of using materials efficiently and
reducing waste and have initiatives in place to ensure that our
remaining waste is reused, recycled or recovered. During the
year 97.7% of our waste was diverted from landfill, an increase
from 96.8% in 2018 and exceeding our own target of 95%.
We have continued to work with the Community Wood
Recycling scheme; a waste wood collection service which also
operates as a social enterprise network. 100% of our waste
wood collected by the scheme is recycled, recovered or
reused by local communities. Our waste wood has been used
on small scale community building projects and also utilised to
make a range of useful products including bird boxes and
dining tables. Our sites in the South East have benefitted
significantly from the scheme which has further encouraged a
strong culture of reuse within this division. Effective waste
management has also been achieved through quarterly waste
audits and regular training with site operatives.
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Redrow plc Annual Report 2019
STRATEGIC REPORT
Operating Review continued
Waste management has also been a focus at our Head Office,
as we upgraded our recycling facilities, invested in
biodegradable packaging, and started a ‘food to fuel’ initiative
– whereby all our catering waste is transformed into Biogas, a
renewable source of energy.
We are on course to meet our 2022 target for reduction carbon
intensity with a 3% reduction since our baseline year of 2017.
Our 2019 Greenhouse Gas emissions have decreased to 2.42
tonnes of CO2e per 100m2 of build (2018: 2.48 tCO2e/100m2)
- these figures are independently verified to a limited level of
assurance.
Our carbon reduction strategy is currently focusing on three
key areas. We are working to substantially reduce the amount
of diesel used on our construction sites, with a key aim of
reducing the time that generators are required and that they
are sized appropriately. We have been upgrading our site
accommodation and welfare units to provide ‘Eco-cabins’
across our sites which have improved insulation; double glazed
windows; door closers; LED lighting with PIR activation; room
and water heaters with thermal cut-out and timers, as well as
waterless urinals. We are also currently carrying out audits of
energy use in our offices and show homes and will be
implementing a programme of improvements in the coming
months. We have recently appointed a new supply partner to
work with us on managing service utilities and investigate
purchasing energy from a renewable energy tariff.
We have been awarded a ‘B’ grade from our most recent
submission to the Carbon Disclosure Project which reflects our
positive carbon strategy and programmes for reducing carbon
emissions across the business.
HEALTH & SAFETY
Ensuring that our sites are safe places to work, live and visit is
central to our build operations. We remain committed to
improving our overall Health, Safety & Environmental (HS&E)
performance. We restructured in 2018 when we increased
resources and reorganised into two distinct areas of
responsibility: Assurance & Compliance and Development.
This year we have launched a full review of our HS&E
Management Systems including a new Assurance Inspection
Report, a long term project to digitise data gathering and
performance monitoring as well as launching a new HS&E
Training Standard and Competency Matrix for all employees.
There has been a slight increase in our accident incident rate per
site rate to 0.36 (2018: 0.35). We are committed to continuous
improvement in its HS&E performance and processes and have
identified four key areas of focus to support this. They are
Governance, Leadership, Ownership and Workplaces and we are
already seeing the benefits of focusing on these areas.
Three of our sites managers were Highly Commended at the
NHBC’s annual Health & Safety Awards for demonstrating an
outstanding level of health and safety management from
planning through to execution. They were among only 27 site
managers in the UK to be given this status.
A key element of building responsibly is ensuring that our
construction sites are managed in a way that is considerate of
the potential impacts on the local area and community, as well as
the needs and welfare of the workforce. As a corporate partner
of the Considerate Constructors Scheme (CCS), we have
committed to signing-up all our developments to the scheme.
This means that regular, independent assessments are
undertaken by CCS to determine if our sites are meeting the
Scheme’s Code of Practice.
Our Lyon Square development in Harrow received two silver
awards in the Considerate Constructors National Site Awards
2019, in recognition for the great efforts that the site has put into
raising the bar for considerate construction. Only the highest
performing companies and suppliers participating in the national
scheme received awards, making this an exceptional
achievement.
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THE HEDGEROWS, CHORLEY, LANCASHIRE
After an initial period of one month across these on demand
platforms, the advert was viewed over 2.6 million times. Those
that saw it were targeted by geography and demographics as
being potential buyers in key areas in which we build. We have
committed to investing in this advert into 2020, and will also be
continuing to promote it via our social media channels and
national email campaigns.
The video was produced by the creative communications
company DRPG, who has previously worked on national
campaigns for companies including BT, Jaguar Land Rover,
Sainsbury’s and Worcester Bosch. The advert was shot in a
Redrow home, displaying the interiors available across our
Collections.
REDROW SHOW HOMES
At Redrow, our show homes are an important aspect of our sales
and marketing strategy. We have a dedicated in-house interior
design team who design and create show homes to inspire
existing and potential customers alike.
THRIVING COMMUNITIES
We aim to make our developments part of the local community
and help our customers appreciate the place as well as the
home.
For example at Taylor’s Chase, Warrington, Cheshire our
development site plan signposts key local amenities.
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Redrow plc Annual Report 2019
STRATEGIC REPORT
Operating Review continued
SALES & MARKETING
At Redrow we have a reputation for
building award winning homes.
MARKETING STRATEGY
During the year Redrow has continued to evolve its marketing
strategy with the launch of a national TV advertising campaign.
The advert is currently being shown across video on demand
platforms; All 4 and ITV player, as well as YouTube TrueView. It is
also available to view on our website at redrow.co.uk/theysay.
Titled ‘They Say…’, the campaign was designed to promote our
homes as a premium alternative to the second-hand property
market and to challenge outdated perceptions people have
about new builds compared to older homes. The content
specifically looks to debunk existing myths that were uncovered
in a Zoopla Smarter Property Solutions Survey of 600 adults, by
applying them to Redrow’s homes.
This found that potential buyers consider new build homes to be
easy to maintain, more eco-friendly than a resale home and
often to include the latest technology, as well as to have a good
layout. However, the results did show that the British public
perception is that new builds generally have small rooms, are
too uniform, and that their look and style is not appealing.
The advert, launched in early June, demonstrates that this is not
the case for Redrow by outlining three stand-out benefits of our
homes, underpinned by strong proof points, to show that we
build “new homes like no other”.
Redrow homes are large - Our four-bedroom Henley house-
type is over 164 square metres, while the Leamington three-
bedroom home is approximately 132 square metres. This is
significantly more than the new build national average of 88.9
square metres and greater than the Government’s minimum
guidelines of 96 square metres.
Redrow homes have character - Each Redrow street scene is
carefully designed to be unique, with a mix of different house
styles and characteristics. This individual design approach,
derived from the Arts & Crafts movement, means that Redrow
stands out from other housebuilders and fosters a feeling of
characterful personality, often found in second-hand properties,
rather than the uniformity seen in many other modern
developments.
Redrow homes have soul - Our traditional exteriors are
enhanced with the best modern interior designs. Light and airy
open plan kitchen, dining and family areas are carefully
considered to truly maximise family living spaces and are perfect
for entertaining. By including fully finished elements into the
build process, we foster early characterisation in a new home to
ensure nobody moves into a blank canvas.
People say new homes
are all the same...
They don’t know Redrow
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SHOT FROM REDROW’S TV CAMPAIGN
26
Redrow plc Annual Report 2019
STRATEGIC REPORT
Operating Review continued
CUSTOMER SERVICE
We continue to be committed to providing
customer service comparable with the very
best from the retail and service sectors.
FOCUS ON CUSTOMER SERVICE
In March 2019 we were awarded the top Five Star rating by the
Home Builders Federation (HBF), based on a survey of
customers in which more than 90% said they would recommend
Redrow to a friend.
Indeed, we have increased our customer satisfaction scores
year-on-year since the launch of our ‘Customer First’ strategy in
2015. As well as significantly investing in people and systems,
we created a customer journey, which was influenced by the
best retailers outside of housebuilding.
As well as the recommend score of more than 90%, we have
also achieved a very strong net promoter score (NPS) of 50.3 in
the HBF’s survey. The NPS is a measurement used globally
across many industries to provide an indication of customer
satisfaction and our score ranks amongst the best.
We also became the first top ten housebuilder to join the
Institute of Customer Service (ICS) and, this year, were
nominated for Best Customer Satisfaction Strategy at the UK
Customer Satisfaction awards.
We have achieved these accolades following the introduction of
a range of customer service focused initiatives, including:
• Customers being engaged throughout their journey to
Redrow home ownership, including hard-hat tours, which
show future homeowners the care and attention that is going
ORDER BOOK (£M)
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into the process of building their home. These tours are
arranged at pre-plaster stage and help customers gain a
detailed insight into their new home.
• Site and Customer Service Managers now use an iPad app
when inspecting homes during the build process and
beyond. Stages in the inspection process are photographed
and automatically communicated to subcontractors. The app
is designed in-house and unique to Redrow.
• Customers also benefit from My Redrow, an online members
only area, providing a secure dashboard to support their
journey and choose their finishes and upgrades to
personalise their homes.
Recognising that everyone has a responsibility for customer
service, and that it is a Group culture not just a function of the
customer service team, our strategy has been driven through
all levels of the business. Sales and construction teams have
been equally involved in many of the initiatives introduced:
from the tone of all ongoing communications with customers
whether by phone, text, email or letter, to the hosting of
Welcome Parties so customers can meet their new neighbours
and to the hard-hat tours.
We’ve brought in customer-focused experts from other sectors
to help us to deliver a positive experience to customers; we’ve
introduced new handover policies and re-engineered the
customer journey, while updating the website, developing
bespoke customer service management software and
introducing brand new web and app platforms to support our
customers.
Redrow won the “Large Developer of the Year” at Property
Week’s RESI Awards and whilst it is good to be recognised so
highly within our industry, recognition from our customers of
our quality and service is more pleasing.
PRODUCT
Outside of Greater London, our divisions continue to focus on
our award winning Heritage Collection which this year
contributed 79% of the Group’s private sales revenue (2018:
72%). Our Lifestyle Collection within our Heritage range is
increasingly popular, being just as spacious as our family homes
but with fewer but larger bedrooms, all with en-suite bathrooms.
The Heritage Collection is complemented by our bespoke
product which represented 21% of private revenue in the year
(2018: 28%). Bespoke product is predominantly apartments and
features more strongly in the South and Greater London.
engaging with customers on social media since 2012, we
recognised we could improve our responses to enquiries made
via our key social media accounts including Facebook, Twitter
and LinkedIn.
RESERVATIONS AND ORDERBOOK
The Group secured just under £1.7bn of private reservations in
the year (2018: £1.7bn) and ended the year with a healthy total
closing order book of £1.0bn (2018: £1.1bn). This reduction
compared to last year was largely a result of weaker trading
towards the end of the first half and lower volumes and average
selling prices in London. Private reservations per outlet per
week were 0.66 compared to 0.70 in the previous year.
We have utilised an all-in-one social media management
platform, Crowd Control HQ, to decentralise and streamline our
activities in this area. Customers contacting us via social media
now receive direct communications from their local customer
service representative, just as they would if they chose to make
contact via an email or by phone. We have increased our
response rate significantly and, importantly, the speed at which
we respond.
ONLINE REPUTATION
The last decade has seen a huge rise in social media use and,
increasingly, customers using it as a primary way to contact us
to resolve service issues. While Redrow has been actively
In the year ahead we will continue to focus more closely on
online reputation and, particularly, how we feature and
participate in online customer review websites such as
Trustpilot.
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SALES CENTRE, WOODFORD GARDEN VILLAGE, CHESHIRE
28
Redrow plc Annual Report 2019
STRATEGIC REPORT
Financial Review
“Group delivered a record profit before tax of £406m.”
As a result, the Group delivered a record profit before tax of
£406m (2018: £380m) for the year with basic earnings per
share up 8% at 92.3p (2018: 85.3p).
TAX
The corporation tax charge for the year was £77m (2018:
£72m). The Group’s tax rate for 2019 was 19% in line with
2018. The normalised rate of tax for the year ending 30 June
2020 is projected to be 18.5% based on rates which are
substantively enacted currently.
The Group paid £77m of corporation tax in the year (2018:
£74m) following the traditional quarterly pattern. For the
financial year ending 30 June 2020 the new legislation for
corporation tax payments by very large companies takes
effect. This brings instalments for financial year 2020
onwards forward by four months and, for the financial year
ending June 2020 only, results in Redrow effectively paying
six instalments.
DIVIDENDS
The Board has proposed a 2019 final dividend of 20.5p per
share which will be paid on 13 November 2019 to
Shareholders on the register on 20 September 2019, subject
to Shareholder approval at the 2019 Annual General Meeting.
This is an 8% increase on last years’ final. The full year
dividend is therefore 30.5p (2018:28p) up 9% on last year and
maintains a payout ratio of 33% of earnings (2018: 33%). In
addition, we delivered a B share cash return of 30p per share
to shareholders during the year.
The Group distributed to shareholders £218m including the B
shares (2018: £74m) during the year. Our total cash return to
shareholders for the 2019 financial year is 60.5p per share.
RETURNS
Net assets at 30 June 2019 were £1,585m (2018: £1,483m), a 7%
increase. Capital employed at the same date was £1,461m
(2018: £1,420m) up 3%. Our return on capital employed was
maintained in the year at 28.5% (2018: 28.5%). Return on equity
reduced slightly from 28.0% to 26.5%.
INVENTORIES
Our gross investment in land increased by £76m, or 5% in the
year to £1,515m (2018: £1,439m) reflecting our continued
success in securing sites to best utilise our product and place
making skills on acceptable terms. Approximately 40% of our
current land bank additions in 2019 came from our forward
land holdings which is in line with the five year average
contribution.
BARBARA RICHMOND
Group Finance Director
PROFITABILITY
This has been another year of record financial results for the
Group with revenue exceeding £2bn for the first time at £2.1bn
(2018: £1.9bn) and profit before tax of £406m (2018: £380m).
This was achieved by completing a record 6,443 new homes
(2018: 5,718).
Total Group revenue rose 10% to £2.1bn, with homes revenue
increasing by 10% to £2.1bn (2018: £1.9bn) and other revenue
from land sales in line with the previous year at £21m (2018:
£20m).
As a result gross profit increased by £35m in the year to
£504m (2018: £469m) giving a gross margin of 23.9% (2018:
24.4%). This 50 basis point reduction compared to last year is
primarily due to the change in tenure mix of our residential
housing turnover with 12% of Homes revenue coming from
Affordable Homes compared to 7.5% last year.
The continued growth of the business has generated an
operating profit for the year of £411m (2018: £382m), an 8%
increase on that achieved in 2018. This represents an
operating margin of 19.5% (2018: 19.9%). Administrative
expenses reduced slightly as a percentage of turnover to 4.4%
(2018:4.5%) although they increased in absolute terms due to
our ongoing investment in the business.
Net financing costs at £5m were £2m lower than the prior year
due to the improved cash position in 2019. We had an average
monthly positive cash balance during the year of £80m, with
the equivalent level in 2018 being £22m.
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
and no interest rate swaps are held currently.
18
PENSIONS
As at June 2019, the Group’s financial statements showed a
£18m surplus (2018: £22m surplus) 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
£4m reduction is mainly due to the decrease in the discount
rate together with an allowance for GMP equalisation.
BARBARA RICHMOND
Group Finance Director
4 September 2019
Land creditors increased by £51m to £438m at June 2019
(2018: £387m) representing 28% of gross land value
(excluding cash on account), a slight increase on last year
(2018: 27%).
Our owned plot cost has increased by £3,000 per plot to
£74,000 at June 2019 (2018: £71,000), but has been
maintained at 19% of the average selling price of private legal
completions in the year (2018: 19%).
Our investment in work in progress was broadly in line with
2018 at £782m (2018: £779m). As a percentage of Homes
turnover it reduced from 41% to 37%. This reflects the
reduced WIP on apartment schemes and the timing of
planning leading to a slightly lower than originally expected
number of outlets in June 2019.
RECEIVABLES
Trade receivables increased by £21m at June 2019 to £37m
(2018: £16m) due primarily to the timing of Help to Buy and
Housing Association receipts. Other receivables decreased
from £29m to £19m partly due to the timing of the recovery of
VAT on land payments.
PAYABLES
Trade payables, customer deposits and accruals decreased
by £10m to £442m (2018: £452m) due to reduced levels of
Greater London private apartment deposits.
CASH FLOW AND NET CASH/(DEBT)
The cash inflow generated from operations was £371m
(2018:£276m). This equates to a cash conversion from
EBITDA of 90% in 2019, up from 72% in 2018. This significant
cash generation more than funded both the growth in the
business and the £111m B share cash return in the year. As a
result our net cash balance increased from £63m at the end
of June 2018 to £124m at the end of June 2019.
FINANCING AND TREASURY MANAGEMENT
During the year we have maintained our committed
unsecured syndicated loan facility of £250m which matures
in December 2022.
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
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Redrow plc Annual Report 2019
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
Business Policies and Procedures
Authorisation Processes
System Based Controls
Business Process Reviews
Site Completion Reviews
PEOPLE AND CULTURE
Professionalism
Clear Communication
Qualified Personnel
Pride and Achievement
Interests Aligned with Shareholders
Commitment to Training
BUSINESS RISKS
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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.
Operational Divisions
• All identified high level risks are then further broken down into components and sub level risks to be considered at
the divisional level and Group department level; and
• Internal controls are implemented to mitigate, control and continuously monitor these risks.
Risk Owners & Executive Management Team
• Any new risks identified at divisional level and Group department 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 and all previously identified risks;
• The probability and potential impact for each sub level risk is assessed by the Risk Owners;
• 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 2019
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
Housing Market
The UK housing market
conditions have a direct
impact on our business
performance.
DEVELOPING
THRIVING
COMMUNITIES
Chief
Operating
Officer
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 remaining subdued
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.
Risk has increased due to the continued
uncertainty surrounding Brexit and the
introduction of the regional price caps for Help
to Buy in April 2021.
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.
The threat of early withdrawal of Help to Buy
dissipated in the year.
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.
Customer Service
Failure of our customer
service could lead to
relative under
performance of our
business.
Group
Customer
and
Marketing
Director
BUILDING
RESPONSIBLY
My Redrow website to support our customers
purchasing their new home.
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 reduced due to improvements in build
quality but this was more than offset by the
increase in focus on quality and customer
service by Government and the media.
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
Development
Director
Proactive monitoring of the market conditions to
implement a clear defined strategy at both
Group and divisional level.
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.
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
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 2019
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 Design
and Technical
Director
Regular review and product updates in
response to the demand in the market and
assessment of our customer needs.
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
Design focused on high quality build and
flexibility to planning changes.
Regular site visits and implementation of
product changes to respond to demands.
Introduction of Internal Product Review Panel.
Risk has reduced in the year due to
improvements in build quality and the
introduction of the Internal Product Review
Panel.
Personal Development Programmes supported
by National training centres at four 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.
Engagement Team and continued refinement of
internal communications platform in addition to
annual employee survey to create framework
for strong, two-way communication.
Group
Human
Resources
Director
VALUING
PEOPLE
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.
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.
Group Health
and Safety and
Environmental
Director
Dedicated in-house team operating across the
Group to ensure compliance of appropriate
Health and Safety standards supported by
external professional expertise.
Separate focus on Assurance visits to site and
proactive management support to develop
planning and processes.
Monthly Divisional H, S & E Leadership meetings.
Tri-annual Group H, S & E Leadership meetings.
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.
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.
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.
BUILDING
RESPONSIBLY
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.
Chief
Information
Officer
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 2019
STRATEGIC REPORT
Risk Management continued
GROUP NON-FINANCIAL INFORMATION STATEMENT
The table below sets out where key non-financial information can be found within this report:
Reporting
requirement
Environment
Employees
Social
Human rights
Related policies available on
our website
Purchasing of sustainable
timber products policy
Environmental policy
statement
Health and safety policy
statement
Partnering with our supply
chain
A responsible and
sustainable developer
Diversity and inclusion
policy statement
Location in this Annual Report
Directors’ Report - Greenhouse Gas Emissions
Placemaking and Sustainability Committee Report – Main
Activities During the Year
Chief Operating Officer’s Review – Health and Safety
Operating Review – Commercial and Systems
Operating Review – Construction
Page Ref.
84
59
11 & 12
18 & 19
20 to 23
Operating Review – Commercial and Systems
18 & 19
Corporate Governance Report – Workforce Engagement
Corporate Governance Report – Diversity
Directors’ Report – Employees
Directors’ Report – Diversity and Inclusion Policy
A responsible and
sustainable developer
Operating Review – Land, Planning and Design
Operating Review – Customer Service
Directors’ Report – Human Rights
Directors’ Report – Supply Chain
Human rights policy
statement
Slavery and human
trafficking statement
Partnering with our supply
chain
Anti-corruption and
anti-bribery
Anti-bribery policy
statement
Audit Committee Report – Bribery Act
Audit Committee Report – Whistleblowing
Business model
Non-financial KPIs
Whistleblowing policy
statement
A responsible and
sustainable developer
A responsible and
sustainable developer
Health and safety policy
statement
Environmental policy
statement
Our Strategy
Our Business Model
Our Strategy
48
48
82 & 83
83
14 to 17
26 & 27
85
85
54
53 & 54
4 & 5
6 & 7
4 & 5
The above policies are applicable to all employees within the Group and are easily accessible both internally and externally.
The principles which underpin each of the policies are embedded within the culture of the Group and any behaviour
inconsistent with these policies will be investigated and disciplinary action will be taken where warranted.
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 2019 to 30 June
2022. 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 2022.
STRATEGIC REPORT APPROVAL
The Strategic Report outlined on pages 1 to 37 has been approved by the Board.
By order of the Board
GRAHAM COPE
Company Secretary
4 September 2019
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WILTON HILL, WILTSHIRE
GOVERNANCE REPORT
Corporate Governance Report
“High corporate governance standards are essential to the success
of a company and the Board is committed to putting in place the
requisite mechanisms to take the Company beyond compliance.”
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 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
GRAHAM COPE
Company
Secretary
and, of course, meets 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, which was published
by the Financial Reporting Council (‘FRC’) and is available to
view at www.frc.org.uk. We welcomed the publication of the
new UK Corporate Governance Code released in 2018 by the
FRC, particularly its broader view of corporate governance and
renewed focus on long-term sustainable success. The changes
in the revised UK Corporate Governance Code are also aligned
with the Board’s increased focus on engagement with the
workforce and more generally the culture needed to sustain
long-term success. Throughout the year, the Board have been
mindful of the letter and spirit of the revised UK Corporate
Governance Code and we look forward to reporting to you on
our application of this version next year.
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 2019, the Company applied the principles
of, and was compliant with the provisions of the Code other
than where stated on page 43 of this report. In this report, we
provide not only the regulatory and statutory assurances
required from us, but we also try to provide a deeper
understanding of the workings of our Board.
This report explains what the Board actually does and
describes how it is responsible for setting the codes and
values of the Company as well as how it interacts with its
shareholders and other key stakeholders. The report also
explains the Company’s strategic goals and its performance
against them.
We also discuss in this report how the Board monitors its
effectiveness in order to ensure that is has the strength and
capability to lead the Company to continued success. In 2019,
Independent Audit were engaged as an external facilitator to
carry out an evaluation of the effectiveness of the Board and
each of its committees. The evaluation found that the Board
continues to be working well and functioning in an effective
way. Details of the external evaluation can be seen on pages
46 to 47.
Since the last report, the composition of the Board has
changed significantly. Details of the changes can be found in
the Nomination Committee Report on pages 55 to 57, however
these are summarised as follows:
• Debbie Hewitt, previously Senior Independent Director,
retired from the Board on 7 November 2018, following the
conclusion of the 2018 Annual General Meeting;
• Nick Hewson was appointed as Senior Independent Director
on 7 November 2018 and became the Chairman of the
Nomination Committee at the same time;
• Vanda Murray was appointed as Chair of the Remuneration
Committee on 7 November 2018;
• Steve Morgan, the founder of Redrow, retired from his
position as Chairman on 31 March 2019;
• John Tutte, previously Group Chief Executive, was appointed
as Executive Chairman of the Company on 1 April 2019; and
• Matthew Pratt, previously Regional Chief Executive, was
appointed as Chief Operating Officer on 1 April 2019.
Our 2019 Annual General Meeting will be held on Wednesday,
6 November 2019 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
2019 Annual General Meeting, the Board looks forward to
meeting with you.
GRAHAM COPE
Company Secretary
4 September 2019
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Redrow plc Annual Report 2019
40
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
JOHN TUTTE (63)
EXECUTIVE CHAIRMAN
MATTHEW PRATT (44)
CHIEF OPERATING OFFICER
BARBARA RICHMOND (59)
GROUP FINANCE DIRECTOR
GRAHAM COPE (55)
COMPANY SECRETARY
Matthew Pratt joined the Board
of Redrow in April 2019. He
joined Redrow in 2003 as a
Chief Quantity Surveyor and later
became Managing Director of the
Midlands Division. In 2013, Matthew
was appointed as a Regional Chief
Executive and became a member
of the Executive Management
Team.
Matthew is a qualified quantity
surveyor and graduated with
a degree in Construction from
Nottingham Trent University. He
has 22 years’ experience within
the industry.
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. In
April 2019, John was appointed as
Executive Chairman following the
retirement of Steve Morgan.
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.
NICK HEWSON (61)
SENIOR INDEPENDENT DIRECTOR
SIR MICHAEL LYONS (69)
NON-EXECUTIVE DIRECTOR
VANDA MURRAY (58)
NON-EXECUTIVE DIRECTOR
BOARD EXPERIENCE
Nick Hewson 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 became the
Senior Independent Director of
the Company on 7 November
2018, following the conclusion of
the 2018 Annual General Meeting.
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.
Sir Michael Lyons joined the
Redrow Board in January 2015.
In 2014, he chaired the Lyons
Housing Commission to produce
a road map for increasing house
building in this country.
The Board appointed Vanda
Murray with effect from 1 August
2017. Vanda has substantial
Non-Executive Director and
Remuneration Committee
experience.
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.
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.
Finance
Property
Operational
Sustainability
COMMITTEE MEMBERSHIP
M
Main Board
A
N
R
P
Audit Committee
Nomination Committee
Remuneration Committee
Placemaking and
Sustainability
Committee
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42
GOVERNANCE REPORT
Corporate Governance Report continued
REDROW GOVERNANCE STRUCTURE
Main Board
EXECUTIVE CHAIRMAN
CHIEF OPERATING OFFICER AND
GROUP FINANCE DIRECTOR
NON -EXECUTIVE DIRECTORS
(INCLUDING SENIOR INDEPENDENT DIRECTOR)
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.
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
EXECUTIVE CHAIRMAN
CHIEF OPERATING OFFICER
Responsible for leading the Board to deliver the Group’s
Responsible for the operational management of the Group,
strategic objectives and ensuring that effective
the implementing of strategic plans and reporting to the
communications are maintained with shareholders.
Board on these matters.
GROUP FINANCE DIRECTOR
COMPANY SECRETARY
Responsible for the financial management of the Group in its
Responsible for governance structures and mechanisms,
broadest sense and maintaining effective communications
corporate conduct and is the primary source of advice on the
with shareholders.
conduct of the business.
REGIONAL CHIEF EXECUTIVES
GROUP DEVELOPMENT DIRECTOR
Responsible for and reporting on the
operational management of Divisions.
Chairman of Harrow Estates plc and responsible for the
strategic management of the Group’s land holdings.
GROUP HR DIRECTOR
GROUP CUSTOMER AND MARKETING DIRECTOR
Responsible for implementing the strategy on people,
Responsible for the overall customer experience, including
ensuring that the management of talent and culture is aligned
marketing and sales strategy, and developing the Group’s
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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.
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
The Directors have considered the contents and requirements of the Code and confirm that throughout the year ended
30 June 2019 the Company has been compliant with the provisions of the Code, as explained further in this report, other than as
set out in the table below.
Provision
Reason for non-compliance
Explanation
A.3.1 – the Chairman
should be independent
upon appointment
John Tutte, previously the
Chief Executive,
succeeded Steve Morgan
as Chairman
on 1 April 2019 and
therefore did not meet the
independence criteria set
out in B.1.1 of the Code on
appointment
The succession plan for Steve Morgan, being the founder and
previous Chairman of the Company, was considered extensively
by the Nomination Committee.
John Tutte has a wealth of experience and knowledge of the
Company and the Board considered it to be in the best interests
of the Company for him to succeed Steve as Chairman. The
appointment has delivered on the Nomination Committee’s
objective to provide for a smooth transition following Steve
stepping down.
Matthew Pratt, previously a Regional Chief Executive of the
Company, was appointed as Chief Operating Officer with effect
from 1 April 2019, which allowed the Company to maintain a clear
division of responsibilities between himself and John Tutte as the
Executive Chairman. The division of these responsibilities can be
seen on page 44. A written statement of the division of these
responsibilities is reviewed and approved by the Board each year.
See page 56 for a more detailed explanation of the appointment.
GOVERNANCE STRUCTURE
Governance is a key priority of the Board and the governance
structure is set out in the diagram opposite. Each component
within the structure is governed by a particular set of rules,
whether it is the Redrow handbook, the policies and
procedures manual and/or the terms of reference. Each of
these are regularly reviewed and are updated in line with best
practice and legislative or regulatory changes.
FUTURE GOVERNANCE CONSIDERATIONS
The Board keeps fully apprised of developments in corporate
governance given the importance governance plays in the
long-term success of a company. There were a number of key
developments introduced in 2018, which will apply to the
Company’s financial year ending 30 June 2020. The
developments of particular note were:
of a specific report relating to the section 172 duty is a new
requirement, the duty itself was introduced with the
Companies Act 2006 and has therefore been carried out
by the Directors since its imposition.
CEO pay ratio – the new requirement to include the pay of
the most senior Executive Director calculated against the
25th, median and 75th percentile of UK employees’ pay
and presented in the Directors’ Remuneration Report,
along with a supporting narrative. Such disclosure shall
also assist the Remuneration Committee in fulfilling their
widened remit of taking into account workforce
remuneration and related policies when setting Director
remuneration.
Culture – a renewed focus on culture has been introduced
with the 2018 Code, whereby the Board should ensure that
there is a culture which aligns values of the Company with
strategy and should also assess long-term value
preservation. Steps have been implemented during the
year to ensure that culture, values and strategy remain high
on the Board’s agenda.
Board level workforce representation – the new
requirement to ensure that the workforce is represented at
Board level to enable the Board to more easily understand
the views of the wider workforce. The Board has discussed
2
3
4
with the Group’s longer-term goals.
reputation via strategic communications and customer service.
1
DIVISIONS
GROUP
Build | Commercial | Customer Services
Finance | Land | Sales | Technical
Commercial | Finance | H&S | HR | IT
Legal | Marketing | Technical | Sustainability
Our Homes Divisions are comprised of the above departments
The above departments support the Divisions to contribute
which work together to deliver the Group’s strategy.
to the successful operation of the business.
Section 172 reporting – the new requirement to include an
explanation in the Annual Report of how the Directors have
carried out their statutory duty to act in a way which they
consider, in good faith, would be most likely to promote the
success of the Company for the benefit of its members as a
whole, and in doing so have regard to key stakeholders
(including employees, suppliers, customers and
communities); maintaining a reputation for high standards
of business conduct; environmental impact; and likely
long-term consequences of decisions. Whilst the inclusion
Redrow plc Annual Report 2019
44
GOVERNANCE REPORT
Corporate Governance Report continued
the various methods available for such representation
and has appointed Vanda Murray as the designated
Non-Executive Director responsible for facilitating such
engagement.
Senior Independent Director
Nick Hewson was appointed as the Senior Independent
Director on 7 November 2018, having succeeded Debbie
Hewitt in this position.
Throughout the year the Company has been mindful of these
developments, along with others, and has accordingly
introduced new practices, or adapted existing practices where
appropriate. We look forward to reporting fully on these
matters in our 2020 Annual Report.
THE BOARD
The Board comprises an Executive Chairman, two Executive
Directors and three Independent Non-Executive Directors, one
of which acts as the Senior Independent Director.
Executive Chairman and Chief Operating Officer - Division
of Responsibilities
The Company has separate roles for the Executive Chairman
and Chief Operating Officer, 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.
Executive Chairman
John Tutte, as Executive 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.
Chief Operating Officer
Matthew Pratt, as Chief Operating Officer, 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.
These responsibilities held by Matthew Pratt are the
responsibilities previously held by John Tutte when he
occupied the position of Group Chief Executive of the
Company.
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.
The following additional responsibilities fall within the remit of
the Senior Independent Director:
• acting as a sounding board for the Executive 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 Executive
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.
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.
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. The Nomination Committee report can be
found on pages 55 to 57.
The Board believes that presently the balance of Non-
Executive and Executive Directors is effective and contains the
appropriate mix of skills and experience for the Board to
continue successfully. The composition is compliant with
principle B.1.2 of the Code as the ratio of Independent
Non-Executive Directors to Executive Directors, excluding the
Chairman, is 3:2 (60%).
The Board, having been informed of the principles and
provisions of the Code on election and re-election, including
that there should be a formal, rigorous and transparent
procedure for the appointment of new directors to the Board,
and that re-election is subject to continued satisfactory
performance, has decided that all Directors will be submitting
themselves for re-election at the Annual General Meeting.
The Board has satisfied itself that all Directors who will be
submitting themselves for re-election continue to perform
satisfactorily. Details of appropriate Annual General Meeting
Resolutions will be found in the Notice of Annual General
Meeting which will be sent to shareholders separately.
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;
• 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 42.
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
the Company’s 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 Executive
Chairman or Chief Operating Officer 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 Executive Chairman outlining their concerns for
circulation to the Board. There were no statements received of
this nature for the year ended 30 June 2019.
Attendance by individual Directors at Board meetings is set out
on page 46.
BOARD BALANCE AND INDEPENDENCE
The Board considers that it is of a size and has a balance of
skills, knowledge and experience that is appropriate for its
business. The Executive 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
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Redrow plc Annual Report 2019
46
GOVERNANCE REPORT
Corporate Governance Report continued
TABLE OF ATTENDANCE
Name
Steve Morgan 1
John Tutte
Matthew Pratt 2
Barbara Richmond
Debbie Hewitt 3
Nick Hewson
Sir Michael Lyons
Vanda Murray
Role
Chairman
Executive Chairman
Chief Operating Officer
Group Finance Director
Senior Independent Director
Senior Independent Director
Non-Executive Director
Non-Executive Director
Attendance at Meetings
4/4
6/6
2/2
6/6
2/2
6/6
6/6
6/6
1
2
3
Steve Morgan stepped down as Chairman on 31 March 2019 and attended all 4 meetings which were held from 1 July 2018 to 31 March 2019.
Matthew Pratt was appointed as Chief Operating Officer on 1 April 2019 and attended both meetings which were held from 1 April 2019 to
30 June 2019.
Debbie Hewitt stepped down as Senior Independent Director on 7 November 2018 and attended both meetings which were held from
1 July 2018 to 7 November 2018.
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 2019 are considered to be independent.
The details of the Directors’ respective experience are set out
in their biographical profiles on pages 40 to 41.
Under the Code, at least half the Board, excluding the
Chairman, should comprise Non-Executive Directors
determined by the Board to be independent. The Board
currently comprises one Executive Chairman, two Executive
Directors and three 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.
BOARD PERFORMANCE EVALUATION
In line with the Code, each year a formal performance
evaluation of the Board and its Committees is undertaken.
Last year, the evaluation highlighted that there was possible
scope for a more rigorous evaluation of the performance of the
Board. With this in mind, and in accordance with the Code,
Independent Audit were engaged to undertake an external
formal evaluation of the performance of the Board and each of
its committees during the year ended 30 June 2019. Other
than the board evaluation, Independent Audit has not
undertaken any work of any kind for the Company.
Given the significant period of change which the Board was
going through, with a number of key Board members changing
in the year, the Executive Chairman and the Company
Secretary met with Independent Audit to discuss the objectives
of the review, following which a tailored questionnaire was
produced by Independent Audit.
The questionnaire was completed by all members of the Board
and each member of its Committees. Members of the
Executive Management Team and key external advisors were
also invited to participate in the relevant questionnaires. The
purpose of widening the participant pool was to gain a deeper
understanding of the perception of the Board from non-Board
members, which was a useful feedback tool.
Independent Audit compiled a report on the effectiveness of
the Board following receipt of all responses and they were
invited to display their findings at the meeting of the Board in
June 2019. In summary, the results were very positive with
interaction between members of the Board and Committees
and the Executive Management Team continuing to be strong.
The main observations from the evaluation were:
• the Board works on a basis of trust and openness and is
making the right impact;
• the quality of chairmanship was highly regarded in promoting
inclusive discussions;
• meeting arrangements were rated highly, with sensible
agendas and useful board papers;
• there was unanimous agreement that the organisation has a
good focus on compliance and the Board have good
oversight of the Group’s financial heath, organisational
controls and cyber risks; and
• Board members were clear on what the Board wants to
achieve and there is a good balance between short-term
performance and long-term consequences.
The evaluation also identified the following areas for
improvement which will continue to be addressed over the
coming year:
• renewed focus on preparing for crises which could impact
the Group and ensuring that contingencies and mitigations
are in place;
• ensuring that the Board allocates sufficient time to
overseeing organisational culture to ensure that it aligns with
the Board’s expectations; and
• possible scope for further consideration of how emerging
technology in the market could bring strategic opportunities
and risks.
As a result, the Board considers that it continues to operate
effectively with meetings to facilitate and debate decision
making.
2018 Evaluation
Recommendations
Action taken
Continued focus on
longer term strategic
objectives of the
Group
More time dedicated to dealing
specifically with the Group’s
long-term strategic objectives in
the Board meeting.
Further consideration
for the longer term
succession planning of
the Executive
Management Team
Remained as a priority on the
Board’s agenda, recognising that
careful succession planning of key
personnel is an important factor to
the long-term success of the
Company.
Scope for a more
rigorous evaluation of
performance
During the year, Independent Audit
were engaged to conduct a formal
external review of the Board and
each of its Committees and they
were invited to display the findings
of the evaluation directly to the
Board.
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 the Executive
Management Team and the divisional Management Teams.
The Company Secretary assists the Executive Chairman in the
co-ordination of the comprehensive induction programme of all
Directors 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 programme is
tailored accordingly to:
• provide an understanding of their role within the Company;
• build an understanding of how the Board operates within the
structure of the Group;
• introduce key Group personnel and external advisors;
• enhance their knowledge of the Group’s culture and
business; and
• if applicable, prepare the Director for Committee
memberships by additionally providing induction material
relevant to the specific committee.
Ongoing training continues after appointment and the
Executive Chairman endeavours to review the training and
development needs of the Directors at least annually. The aim
is to ensure the further enrichment of their skills and
experience so that they continue to fulfil their role effectively
on the Board and its Committees.
During the year, formal appraisals of the Chief Operating
Officer and the Group Finance Director were undertaken by
the Executive Chairman.
The Executive Chairman and 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 50
to 54; the Nomination Committee report on pages 55 to 57; the
Directors’ Remuneration Committee report on pages 60 to 79
and the Placemaking and Sustainability Committee report can
be found on pages 58 to 59.
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 and the Nomination Committee are
chaired by Nick Hewson, the Remuneration Committee is
chaired by Vanda Murray and the Placemaking and
Sustainability Committee is chaired by Sir Michael Lyons.
The Board completed a performance evaluation of each of its
Committees during the financial year ended 30 June 2019. 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.
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Redrow plc Annual Report 2019
48
GOVERNANCE REPORT
Corporate Governance Report continued
CAPITAL STRUCTURE
The information of the capital structure of the Company is
included in the Directors’ Report on pages 81 to 82.
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 selection 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.
Following the results, workshops were carried out with
each team to discuss the findings and feedback was
collated by the Engagement team. Resulting from the
feedback, commitments and themes for the year were
posted on Engage with regular progress reports posted
on these.
The following are just a few examples of changes made as
a result of employee engagement through the INsight
survey:
•
•
•
Enhanced maternity and paternity leave;
Introduction of flexible working; and
Introduction of enhanced flexible holidays.
Main Board
Executive
Management Team
Direct reports to Executive
Management Team
Redrow employees
at June 2019
Female
Male
2 (33%)
4 (67%)
2 (22%)
7 (78%)
12 (34%)
23 (66%)
810 (35%)
1,515 (65%)
WORKFORCE ENGAGEMENT
The Board believes that greater engagement with the workforce
is essential to preserving long-term value. Valuing People is a
fundamental part of the Group’s strategy and understanding the
views of employees and actively encouraging their participation
sits highly on the Board’s agenda. During the year, the Company
has:
1.
Enhanced employee communication via the new
intranet, Engage
Engage is available for all employees of the Company and
is now the hub for sharing news and communications
across the business. It encourages employees to actively
participate and have a voice in decisions being made by
the Company.
2.
Introduced employee engagement meetings
Each department across the business has an elected
representative who attends regular engagement meetings
to put forward the views and ideas of the department.
Each employee has access to their engagement
representative and has the opportunity to discuss matters
arising from these meetings. All meeting materials and
action plans following meetings are made available to all
employees via Engage.
3.
Implemented changes following feedback from
employees through the INsight survey
The INsight survey is distributed annually to all employees
and in 2019 there was a 91% participant rate. The feedback
from employees was anonymised.
4.
Introduced a direct communication channel to the Board
Employees now have the opportunity to email the Board
and Executive Management Team to ask them any
question relating to the business. Employees have the
option to anonymise their name, division and job title. All
questions asked are discussed at the next Board meeting
and responses are posted on Engage for all employees to
view.
The objective of such an initiative was to ensure that the
Board is reachable at all levels across the business and to
reinforce the culture of openness and transparency
throughout the Group.
5.
Increased focus on the promotion of share ownership
through employee share plans
The Company supports employee share ownership at all
levels as it directly aligns employee interests with those of
shareholders.
Share ownership encourages employees to take a wider
view of the Group. Thinking like a shareholder, as well as
an employee, provides for a deeper perspective and
encourages the workforce to be more inquisitive as to
whether they can individually and collectively improve to
create even more shareholder value.
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 2019, the Chairman, the Chief
Executive Officer/Chief Operating Officer 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 2018 and February 2019, the Executive Chairman
and the Group Finance Director met current and potential
significant shareholders. This included visits to London and
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feedback from these meetings was independently collated and
disseminated to the Board.
Last year the Annual General Meeting took place at the offices
of Instinctif Partners in London. All Directors attended the
Annual General Meeting on 7 November 2018, save for Barbara
Richmond who was unable to attend the meeting due to an
unexpected medical condition and therefore sent her apologies.
Barbara was fully apprised of the matters of the meeting upon
her return.
Shareholders are encouraged to attend the 2019 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 2019 Annual General Meeting will be
sent to Shareholders at least 21 working days in advance.
The Company’s website, redrowplc.co.uk, gives access to
current financial and corporate information.
GRAHAM COPE
Company Secretary
4 September 2019
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Redrow plc Annual Report 2019
50
GOVERNANCE REPORT
Audit Committee Report
“The Committee is responsible for overseeing the Group’s reporting
processes, and the audit thereof, both internal and external, by providing
independent scrutiny, monitoring and reviewing of the effectiveness of
the Company’s internal controls and risk management systems.”
COMMITTEE MEMBERSHIP AND
MEETINGS
The three Members of the Committee
are Independent Non-Executive
Directors. Nick Hewson, the Senior
Independent Director, 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
40 to 41.
The Board believes that Nick Hewson
has the requisite financial qualifications
NICK HEWSON
Chairman of the
Audit Committee
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.
Debbie Hewitt retired as a Member of the Board and the
Committee with effect from 7 November 2018.
The Group Finance Director and the Chief Information Officer
attend meetings by invitation and both were present at all the
meetings in the year ended 30 June 2019. The external Auditors,
PricewaterhouseCoopers LLP (“PwC”), and the Finance Director
– Group Services, who had the responsibility for Internal Audit of
the Company, were also in attendance at all meetings.
Table of Attendance
Name
Nick Hewson
Debbie Hewitt 1
Sir Michael Lyons
Vanda Murray
Role
Chairman
Member
Member
Member
Attendance
at Meetings
4/4
1/1
4/4
4/4
1
Debbie Hewitt attended the meeting which was held prior to her
retirement as a Member of the Committee.
The Committee met four times in the year ended 30 June 2019
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 separately with the external Auditors and
Internal Audit following the final audit and the review of the
year ended 30 June 2019 financial statements. No matters of
concern were raised within these discussions. The Committee
Chairman met with the Engagement Partner of the external
Auditors. He also met with the Finance Director – Group
Services to discuss Internal Audit matters. The 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 financial
statements and accompanying reports to the shareholders
and Corporate Governance Statements including reviewing
the findings of the external Auditors;
• 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;
• monitoring the timeliness of the tender process for the
external Auditors, considering what is in the best interests of
the members of the Company, and facilitating the tendering
process at least every ten years;
• making recommendations to the Board in relation to the
appointment and removal of the 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 external 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 (redrowplc.co.uk).
AUDIT COMMITTEE REPORTING ON SIGNIFICANT
ISSUES
The primary areas of judgement and estimation uncertainty
which were considered and challenged by the Committee and
how these were addressed are set out below in the
paragraphs titled (i) Valuation of inventory and (ii) Defined
benefit pension scheme valuation.
The Group Finance Director and Finance Director – Group
Services are available to attend meetings 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 the external Auditors’ testing of controls and
processes for estimating as well as the adequacy of disclosures that management propose to be made in financial statements.
(i) 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.
(ii) Defined benefit pension scheme valuation
The Committee receives details of the IAS 19R – Employee Benefits valuations carried out at each reporting date for
management by the actuary who advises the Company and the underlying assumptions. A sensitivity analysis is also provided
for its consideration. The Committee also receives details of the triennial independent scheme valuation report prepared by the
Scheme Actuary and reviews key judgement areas made including relevant actuarial advice that has been received. In addition,
the Committee also reviews the external Auditors’ report benchmarking pension actuarial assumptions. The Scheme was in
surplus as at 30 June 2019.
The Committee concluded that appropriate judgements had been applied in determining the estimates and that adequate
disclosures had been made.
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 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;
Tender process for the appointment of the new external Auditors, strategy and timetable discussed and
agreed;
Discussion regarding the latest Business Performance Review;
A review of the compliance with the Anti-Bribery Policy; and
An update on cyber security.
November 2018
An evaluation of the presentations received following the tender for the new external Auditors; and
The recommendation to the Board of the appointment of the new external Auditors.
February 2019
June 2019
A review of the 2019 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 2019 and associated fees;
A review of the Risk Register;
Discussion regarding the latest Business Performance Review;
A review of the effectiveness of the external Audit process;
A review of the independence and objectivity of the external Auditors;
A further update on cyber security; and
An update on compliance with the General Data Protection Regulation 2018.
A review of the appropriateness of the Group’s accounting policies;
Discussions regarding business continuity of the Group;
A review of the Risk Register;
A review of the Group’s Whistleblowing Policy;
A review of the Group’s Anti-Bribery Policy;
A review of the Group’s Anti-Facilitation of Tax Evasion Policy;
A review of internal controls across the whole business;
An update on Internal Audit and its strategy;
Discussion regarding the latest Business Performance Review;
An update on insurance cover for the Group;
A review of the Terms of Reference of the Committee;
Undertook a Performance Evaluation of the Committee; and
A further update on cyber security and compliance with the General Data Protection Regulation 2018.
September 2019 A review of the full year 2019 results, including the Annual Report and a report from the external Auditors; and
Consideration of the Group risk assessment process, viability statement and a going concern review.
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GOVERNANCE REPORT
Audit Committee Report continued
AUDIT INDEPENDENCE
PwC were appointed as the Company’s external Auditors in 1999
following their merger with Coopers & Lybrand who were
appointed in 1987. The current Audit Partner from PwC, Arif Ahmad,
commenced his tenure following the conclusion of the audit of the
year ended 30 June 2015.
Due to the length of time that PwC have been the Company’s
external Auditor, and in recognition of the Order of the Competition
and Markets Authority in relation to FTSE 350 companies which
would require the Company to change its statutory auditor for the
June 2020 audit, the Committee considered that it was prudent to
undertake a tender of the external Audit in 2018 so as to be able to
implement the proposed changes well before 2020.
In mid-2018, the Company commenced a formal tender process for
the appointment of the new external Auditors. The tender process
was supervised by the Audit Committee, which made a
recommendation to the Board on the appointment of the
replacement external Auditors.
Following the conclusion of the tender process, the Company
announced on 9 November 2018 that the Board had approved the
proposed appointment of KPMG LLP as the Company’s external
Auditor for the financial year commencing 1 July 2019. The
appointment remains subject to approval by shareholders at the
Annual General Meeting to be held on 6 November 2019 and
should the resolution be passed, the appointment will take effect
from the conclusion of that meeting. Other than providing internal
audit services to Marshalls plc, of which Vanda Murray is appointed
as Chair, KPMG LLP has no connection to the Members of the
Committee.
PwC were reappointed as the external Auditors by shareholders at
the 2018 Annual General Meeting and will resign as Auditor at the
conclusion of the 2019 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
Auditors’ 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 Auditors’ 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
have the Company purchased liability insurance for them.
Non-audit services provided by the external Auditors during the
year ended 30 June 2019 comprised audit related assurance
services, in the form of an independent review of the half-yearly
statements and taxation compliance services in the form of iXBRL
tagging.
All non-audit service fees for the work undertaken in the financial
year were approved by the Committee in line with the above formal
policy. As a result of this policy and additional discussions with the
external Auditors, the Committee is satisfied that the independence
of PwC was not compromised because of this additional work.
Details of fees paid to PwC for audit and non-audit purposes are
disclosed on page 103.
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
Company Secretary, Regional Chief Executives, Group Human
Resources Director, Group Customer and Marketing 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;
they liaise closely with appropriate Group personnel at head
office and within the divisions and report directly to the Group
Finance Director.
• 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;
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.
• 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 the meetings of the Board, Executive
Management Team and divisional boards. 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 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 30 June 2019. The
internal controls extended to the financial reporting process
and the preparation of consolidated financial statements. The
basis for the preparation of consolidated financial statements
has been undertaken in accordance with the Company’s
Accounting policies as set out on pages 98 to 102.
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 and more often as necessary. 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
The Internal Audit strategy is discussed with the external
Auditors 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 in place a 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 allows concerns to be raised
anonymously and includes a non-retaliation policy whereby all
concerns raised in good faith will be protected, as will those
against whom claims are made which turn out to be unfounded.
The policy contains the contact details of the Company
Secretary and Senior Independent Director and also includes an
independent reporting hotline where independent and
confidential advice can be provided on whistleblowing matters.
During the year, the Company Secretary reported to the
Committee on any alleged or suspected wrongdoings reported
through the whistleblowing procedures or otherwise. All such
incidents in the year were investigated and disciplinary action
was taken against the relevant employees where warranted.
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54
GOVERNANCE REPORT
Audit Committee Report continued
GOVERNANCE REPORT
Nomination Committee Report
The Whistleblowing Policy is formally reviewed and approved
each year by the Committee. During the year, there were no
changes made to the policy.
PERFORMANCE EVALUATION
During the year, Independent Audit carried out an evaluation of
the Audit Committee.
Having discussed the objectives of the evaluation with the
Executive Chairman and Company Secretary, Independent
Audit produced a questionnaire bespoke to the Audit
Committee. The Members of the Committee, as well as those
people who regularly attend the Committee meetings by
invitation, were invited to participate in the evaluation.
A report was presented to the Members of the Audit
Committee by Independent Audit. The findings of the
evaluation were discussed and the Committee was found to be
effective, concluding that it had fulfilled its remit and had in
place appropriate Terms of Reference.
The evaluation highlighted that the Committee was particularly
strong in actively supporting the external Auditor through
guidance and making sure they have the right understanding. It
was also agreed that the Committee maintains a clear focus
and benefits from good and open discussions with a clear
picture of the operation of the risk management framework.
The review found that the existing and rigorous assessment of
the performance of the external Auditor might be codified and
systematised so as to ensure that all aspects of the
performance of the external Auditor were covered and a
codified and therefore consistent record of progress could be
tracked and reported. The Committee agreed to implement
these recommendations to coincide with the appointment of
the new Auditor.
The Company has complied with the provisions of The
Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes
and Audit Committee Responsibilities) Order 2014 for the year
ended 30 June 2019.
NICK HEWSON
Chairman of the Audit Committee
4 September 2019
BRIBERY ACT
Following the introduction of the Bribery Act 2010 the
Company put in place a formal policy on bribery and corruption
for all employees to strictly adhere to. The Company Secretary
ensures that the policy is complied with, updates the policy,
procedures and company code of practice as and when
required and provides regular reports to the Committee.
The Bribery Act policy is formally reviewed and approved each
year by the Committee. There were no changes made to the
policy during the year.
The policy contains the definition of bribery and corruption,
providing examples of how this could work in the context of the
Company’s industry and also offering guidance as to what
would be considered acceptable behaviour. The policy deals
with all matters of bribery and corruption and clarifies the
Company’s strict approach to any form of facilitation payment
or conflict of interest.
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 the Company’s internal e-learning facility, each
employee will be required to complete a mandatory
compliance test which reminds each employee of their
obligations.
Each division across the Group maintains its own Gift Register
whereby all gifts received over the relevant threshold must be
recorded. Gift authorisation forms must be formally approved
and retained by each division. Regular reviews of the Gift
Register are undertaken in order to detect any potential issues
arising under The Bribery Act. A combined Group-wide register
is provided to the Committee to allow risk assessments to be
carried out by the Committee.
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 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 is formally reviewed
and approved each year by the Committee. There were no
changes made to the policy during the year.
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“Identifying the requirements of the business and nominating suitable
candidates compatible with those requirements is a key priority of the
Committee. Careful succession planning for the Board and Senior Executives
is crucial to the long-term success of the Company.”
COMMITTEE MEMBERSHIP
AND MEETINGS
All Members of the Committee are
Independent Non-Executive Directors
with Nick Hewson, the Senior
Independent Director, being Chair of
the Committee. The other Members of
the Committee during the period
ended 30 June 2019 were Debbie
Hewitt, Sir Michael Lyons and Vanda
Murray.
Debbie Hewitt retired as a Member of
the Board and the Committee with
NICK HEWSON
Chairman of the
Nomination
Committee
effect from 7 November 2018.
The biographies of the Members of the Committee can be
found at pages 40 to 41.
• 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
Table of Attendance
Name
Debbie Hewitt 1
Nick Hewson
Sir Michael Lyons
Vanda Murray
Role
Chairman
Chairman
Member
Member
Attendance
at Meetings
2/2
3/3
3/3
3/3
• 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.
The Committee’s Terms of Reference are published on the
Group’s website (redrowplc.co.uk).
1
Debbie Hewitt attended both meetings which were held prior to her
retirement as a Member of the Committee.
The Committee met three times during the year ended 30 June
2019. For all meetings and where necessary, papers were
circulated sufficiently in advance to allow proper consideration of
all matters for discussion. The 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 2019 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 Steve Morgan
on 31 March 2019;
• an assessment of the needs of the Board, followed by the
recommendation of the appointment of John Tutte as
Executive Chairman and Matthew Pratt as the Chief
Operating Officer;
• a review and recommendation that the Directors stand for
re-election at the conclusion of the 2019 Annual General
Meeting in accordance with UK Corporate Governance
Code; and
• a review of the Committee’s Terms of Reference.
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GOVERNANCE REPORT
Nomination Committee Report
Where appropriate, the Directors were not present and did not
vote when any individual proposals were discussed.
therefore no open advertisement, nor was an external search
consultancy engaged, in respect of the chairmanship role.
SUCCESSION
Executive Chairman and Chief Operating Officer
The appointment of the Executive Chairman and Chief
Operating Officer is paramount to the effectiveness of the
Board and the Company and the Board has spent a significant
amount of time putting in place a long-term succession plan for
the previous Chairman and Group Chief Executive.
Steve Morgan and John Tutte have been instrumental to the
success of Redrow and careful planning of the Nomination
Committee and the Board was necessary in order to ensure
that the Company was positioned in the best way possible for
continued growth and success.
The decision making process for both positions is detailed
below.
Chairman
The succession plan for the Chairman has been a priority of the
Nomination Committee for some time, particularly given that
the founder of the Company had occupied this position for the
past 10 years, in both an executive and a non-executive
capacity.
When returning to the Company as Executive Chairman in
2009, Steve Morgan led the Group to growth and success
through a difficult period for the industry. Given this track
record, the Board values how instrumental the Chairman can
be in leading the Company to create value for stakeholders
and society alike.
The Nomination Committee developed a list of characteristics
which were deemed essential for the succession of the
Chairman role. This list was used to aid the succession plan
and included the following:
• The capability to lead the Board and engage successfully
with key stakeholders;
• An understanding of the key stakeholders of the Group;
• A developed understanding of the long-term strategy of the
Group and a commitment to deliver that strategy; and
• Proven experience within, and a developed understanding
of, the housebuilding and construction industry.
Given the history of the Company, and the position to be filled
following Steve Morgan’s departure, the Nomination Committee
felt that such an adjustment to the Board necessitated continuity.
With this in mind and to remain focused on what has proved to be
a successful long-term strategy of the Group, John Tutte was
deemed to be the ideal successor for the position. Having worked
with Steve Morgan for a number of years, the Board felt that it was
essential to retain his skills and experience to lead the Company
successfully through the period of change. As such, there was
John Tutte joined the Board in July 2002. In September 2009 he
was promoted to Group Managing Director and in July 2014
became Group Chief Executive. He qualified in civil engineering
and has amassed more than 40 years’ experience within the
industry, having previously held the position of Chief Executive of
Wilson Connolly plc.
The Committee recognises that ordinarily the Group Chief
Executive should not go on to become Chairman (per provision
A.3.1 of the Code), however for the reasons outlined, John Tutte
was deemed the most suitable person for the role.
The separation of roles at the head of the Company has been
maintained, with the Executive Chairman being responsible for
running the Board and the Chief Operating Officer being
responsible for the operational management of the Company’s
business. Further information on the division of responsibilities
between the Executive Chairman and the Chief Operating Officer
can be found on page 44.
Chief Operating Officer
As in the case of succession in the chairman role, criteria were
drawn up by the Nomination Committee and the Board to aid
the succession plan for the Group Chief Executive and the
conclusions were that the following qualities would be
necessary in any candidate:
• A deep understanding of the values and culture of the
Group;
• A long-standing knowledge and understanding of the
housebuilding and construction industry;
• The ability to manage successfully the operations of the
Group; and
• The ability to form relationships with key stakeholders of the
Company.
A key component of the Group’s strategy is Valuing People and
the Group possesses a talented employee base in which great
focus is placed on development. As such, the Board greatly
supports promotion from within, provided that the needs of the
role and the qualities required can be clearly met.
Following this process, Matthew Pratt was identified as the
ideal person to occupy the new position of Chief Operating
Officer of the Group. He joined the Company in 2003 as a
Chief Quantity Surveyor and later became Managing Director
of the Midlands Division. In 2013, he was appointed as a
Regional Chief Executive and became a member of the
Executive Management Team.
Matthew Pratt has amassed over 22 years’ experience within
the industry and understands the needs of the Company.
Having spent 16 years within the Group, he understands the
culture and values of the Group and brings stability and
continuity for our key stakeholders.
Senior Independent Director and Chair of the Nomination
and Remuneration Committees
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 7 November 2018, Nick Hewson replaced Debbie Hewitt as
the Senior Independent Director and Chair of the Nomination
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.
Debbie Hewitt was also succeeded by Vanda Murray in her
position as Chair of the Remuneration Committee. Vanda
Murray has extensive Remuneration Committee experience,
having held Chair positions of the Remuneration Committees in
Bunzl plc and Fenner plc. She joined the Remuneration
Committee of the Company on 1 August 2017 and spent a
significant amount of time shadowing Debbie Hewitt, which put
her in good stead to take on the role of Chair of the
Remuneration Committee.
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 the Board recognises that
diversity is an important consideration forming part of the
selection criteria used to assess candidates so as to achieve a
balance on the Board. With this in mind, the Board currently has
not imposed a diversity quota.
The Group Human Resources Director attends the monthly
Executive Management Team meetings and provides a monthly
HR 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 provide an update on progress.
Gender Diversity
The Committee continues to note the target of 33% female
representation on boards outlined in the 2015 Hampton-
Alexander review. Following the retirement of Debbie Hewitt
from the Board in November 2018, the current female
representation on the Board is 33%, remaining in line with this
target.
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 or otherwise.
Ethnic Diversity
The Committee continues to monitor and review reports and
recommendations relating to the composition of boards and
diversity, including the Parker Review and the McGregor-Smith
Review on ethnic diversity.
The Committee believes that all levels of the business should
reflect a diverse workforce and that appointments to the Board
will always be based on merit. The Board strictly prohibits any
bias towards any particular ethnicity, creed, religious belief or
otherwise.
As a national housebuilder, the Company is present in many
different communities and the Board believes that the Group’s
workforce should be reflective of the communities we work in
and the customers we create homes for, including in respect of
ethnicity.
Further details of the steps taken by the Company to increase
diversity and raise awareness of the importance of an inclusive
workforce can be found on page 83.
PERFORMANCE EVALUATION
As part of the external Board evaluation, Independent Audit
also carried out an evaluation of the Nomination Committee.
Having discussed the objectives of the evaluation with the
Executive Chairman and Company Secretary, Independent
Audit produced a questionnaire bespoke to the Nomination
Committee. The Members of the Committee, as well as those
people who regularly attend the Committee meetings by
invitation, were invited to participate in the evaluation.
A report was presented to the Members of the Nomination
Committee at the Board meeting in June 2019. The findings of
the evaluation were discussed and the Committee was found
to be effective, concluding that it had fulfilled its remit and
had in place appropriate Terms of Reference.
The evaluation highlighted that the Committee was
particularly strong in ensuring that the Board is of the right
size, with a good mix of personalities and core skills. It also
found that the Committee could have a deeper involvement in
the oversight of talent management within the Company so as
to grant exposure to the boardroom and Non-Executive
Directors to potential successors. Key actions were agreed by
the Committee to maintain progress on this. Throughout the
year, good progress has been made on the longer-term
succession planning of the Executive Management Team and
this will remain a priority for the coming year.
NICK HEWSON
Chairman of the Nomination Committee
4 September 2019
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Redrow plc Annual Report 2019
58
GOVERNANCE REPORT
Placemaking and Sustainability Committee Report
“The Committee focuses on measuring the alignment of Group practices
with the three themes for long-term sustainable value creation: Developing
Thriving Communities, Building Responsibly and Valuing People.”
COMMITTEE MEMBERSHIP AND
MEETINGS
The Members of the Committee during
the financial year comprised Sir
Michael Lyons, who was Chairman of
the Committee, Nick Hewson, Senior
Independent Director, Matthew Pratt,
Chief Operating Officer, Robert
MacDiarmid, Group Sustainability
Director, and Karen Jones, Group
Human Resources Director.
Robert MacDiarmid retired as a
member of the Committee on 30 June
2019.
Role
Chairman
Member
Member
Member
Member
Attendance
at Meetings
3/3
3/3
3/3
3/3
2/3
SIR MICHAEL
LYONS
Chairman of the
Placemaking and
Sustainability
Committee
Table of Attendance
Name
Sir Michael Lyons
Nick Hewson
Matthew Pratt
Robert MacDiarmid
Karen Jones 1
1
Due to unforeseen circumstances, Karen Jones was unable to attend
one meeting of the Committee, however she was fully appraised of the
matters discussed therein.
The Committee met three times during the year ended 30
June 2019. For all meetings, papers were circulated sufficiently
in advance to allow proper consideration of all matters for
discussion. The Company Secretary acts as Secretary to the
Committee.
RESPONSIBILITIES AND TERMS
OF REFERENCE
The key responsibilities of the Committee are:
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 and recycling
management systems and energy and carbon management;
• to ensure that the Company is continuing to create great
places to live and making social, economic and
environmental contributions to local areas by setting
well-designed homes and amenities within attractive shared
spaces;
• to review, in advance of each meeting, a sustainability
performance scorecard provided by the Sustainability Team,
which assists 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;
• 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
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;
• 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;
and
• to develop and monitor the Company’s approach to
sustainability and to review and approve the sustainability
targets proposed by management;
• to adhere to the Company’s three key principles of
sustainability: Developing Thriving Communities,
Building Responsibly and Valuing People.
• 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
The Committee regularly reviews its Terms of Reference; these
were last reviewed in June 2019 and are published on the
Group’s website (redrowplc.co.uk).
MAIN ACTIVITIES DURING THE YEAR
During the year ended 30 June 2019 the principal activities of
the Committee were as follows:
• monitored the suitability of internal and external
communication of sustainability and placemaking related
activities;
• 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
As part of the external Board evaluation, Independent Audit
also carried out an evaluation of the Committee in the form of a
bespoke questionnaire. The Members of the Committee were
invited to participate in the evaluation.
A report was presented to the Members of the Committee at
the Board meeting in June 2019. The findings of the evaluation
were discussed and the Committee was found to be effective,
concluding that it had fulfilled its remit and had in place
appropriate Terms of Reference.
The evaluation highlighted that the Committee benefits from a
good Chairman and has engaging and focused discussions. It
also found that the Committee was particularly strong in
assessing the quality of external reporting on environmental
goals and performance and supports the Board well in thinking
through how environmental change impacts strategy. The
review offered a number of suggestions for the future shape of
the work of the Committee which will be considered further by
the Committee. Ensuring adherence with the placemaking
framework and assessing the risks and responsibilities around
the communities in which the Company operates will remain
priorities for the coming year.
SIR MICHAEL LYONS
Chairman of the Placemaking
and Sustainability Committee
4 September 2019
• considered and approved action plans for the three
sustainability themes (Developing Thriving Communities,
Building Responsibly and Valuing People) and measured
progress against each;
• discussed and approved the “Redrow 8” placemaking
principles and its associated guide;
• regularly reviewed the placemaking and sustainability
scorecard which measures progress against the
sustainability targets of the Company;
• discussed the utilisation of the Company’s membership of
the NHS Healthy Towns Network in delivering healthier
places to live through careful planning and design;
• analysed the publication showcasing the learning from the
NHS England Healthy New Towns programme and the
application of this learning within the Group;
• reviewed the social impact assessment and discussed
utilising the research results to inform the development of a
forecasting calculator in projecting the social value that a
development by the Company could bring to the area;
• discussion of the work of the Biodiversity Working Group
and its progress on the development of the draft of the new
biodiversity strategy for the Company;
• reviewed and discussed the progress on resource efficiency
projects, including the Company’s approach to action on
climate change and supporting a new waste minimisation
campaign;
• reviewed the initiatives being undertaken in recruitment,
retention and development of the employees of the
Company;
• supported the Company in signing the Building Mental
Health pledge whereby the Company would train mental
health first aiders across the Group and implement an
awareness campaign on the importance of mental health;
• supported the flexible working pilot following valuable
feedback from the employee engagement mechanisms;
• monitored and reviewed the Group’s health, safety and
environmental performance;
• reviewed progress on the increased communication across
the Group following the implementation of the new intranet,
Engage;
• regularly reviewed the prospective developments in the
legislative and regulatory environments;
• monitored and reviewed the Company’s response to
environmental legislation and regulation, ensuring the
appropriate risk mitigation controls were being implemented,
monitored and evaluated;
59
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Redrow plc Annual Report 2019
60
GOVERNANCE REPORT
Directors’ Remuneration Report
“I am pleased to present the Directors’ Remuneration Report for the year
ended 30 June 2019.”
ALIGNING OUR SHORT-TERM PRIORITIES
Each year we review the choice of annual bonus measures to ensure they remain relevant and reflect the business strategy which is
based on delivering strong financial results through ‘Protecting the Future’ and ‘Building Responsibly’. The Committee has made
some changes to the measures that will apply for 2019/20.
This is my first report to you as Chair of the Redrow Remuneration Committee. I joined the Redrow Board
and Remuneration Committee on 1 August 2017 and formally took over the Chair of the Committee
following the AGM on 7 November 2018 and a smooth handover process, for which I would like to thank my
predecessor, Debbie Hewitt.
This remuneration report is split into three sections:
Annual Statement
Remuneration Policy
VANDA
MURRAY OBE
Chair of the
Remuneration
Committee
The annual statement with a
new ‘At a Glance’ section sets
out an overview of how our
policy operates and what we
paid for the year ended 30
June 2019
A summary of the policy that
was approved by shareholders
at the 2017 AGM
Annual Report on
Remuneration
This describes how the policy
was implemented for 2018/19
and the proposed
implementation for the next
financial year
REWARDING PERFORMANCE
As set out in detail in the Operating and Financial Reviews, the year ended 30 June 2019 was another successful year for Redrow.
KEY STRATEGIC
HIGHLIGHTS
A sixth consecutive year
of record results
KPIs WE USE TO MEASURE PERFORMANCE
2019 RESULTS
PBT
ROCE
7% TO £406M
UNCHANGED AT 28.5%
CURRENT LAND HOLDINGS
3% TO C28,600 PLOTS
OUTLETS OPENED
43 OUTLETS OPENED
EPS
67% OVER 3 YEARS TO 92.3P
Annual bonus
This strong performance resulted in maximum payment for three of the 2018/19 bonus measures (ROCE, outlets opened and land
holdings) whilst the PBT delivered of £406m, was on-target for the year. This resulted in a bonus outcome of 85.0% of salary, half of
which will be deferred in shares.
LTIP
LTIP awards were granted in 2016 and were subject to stretching EPS and ROCE conditions measured over the three years
ending 30 June 2019. EPS for the year was 92.3p and ROCE was 28.5% resulting in both measures exceeding their stretch
targets and therefore the LTIP award will vest in full in September 2019.
Despite the uncertainty of Brexit, the housebuilding sector has performed strongly in recent years with high customer demand
underpinned by low interest rates and Government initiatives for first time buyers. This has led to higher than typical incentive
outcomes at Redrow and amongst our peers. The Remuneration Committee considers carefully the alignment of pay and
performance and each year we take into account the prevailing internal and external conditions when setting one and three-year
incentive targets.
Overall, the Committee is satisfied that the 2018/19 annual bonus and 2016 LTIP targets were sufficiently stretching and that the
resulting outcomes are appropriate in the light of company performance. Therefore, the Committee decided not to apply any
discretion to the incentive outcomes.
2020
2019
Financial
Profit Before Tax
ROCE
Protecting the Future
Land
Order Book
Outlets Opening
Building Responsibly
Customer Service
Health & Safety (H&S)
50%
–
10%
10%
–
15%
5%
Personal
Individual objectives
10%
30% ROCE remains an important KPI and will continue to feature in the LTIP but for
the Annual bonus PBT is to be used as it is the primary measure of short-term
financial performance.
30%
20% The GDV of land acquired remains important and prioritising a strong order
book will provide focus on sales volume.
–
20%
–
As set out on pages 26 to 27, we strive to constantly improve our quality and
customer service, an important lead indicator of performance.
– Consistent with our commitment to continuous improvement in H&S, this has
been introduced as a bonus target.
–
These will comprise strategy-related objectives which are tailored to each
Executive Director.
We believe the inclusion of Customer Service and Health & Safety, as well as personal objectives, provides a more rounded
assessment of management’s performance while continuing to have a high weighting towards financial results. In particular, the
Committee is keen to ensure that lead indicators are included to ensure a more balanced approach to performance assessment.
The revised measures are felt to be more appropriately aligned with our overall business strategy and vision.
BOARD CHANGES
Nearly 45 years after founding Redrow, Steve Morgan stepped down as Chairman and John Tutte became Executive Chairman from
1 April 2019. John Tutte’s salary and remuneration terms were unchanged following the change in role. His salary was reviewed as
usual for 2019/20 with the result that it will be increased by 2.0%, which is less than the general workforce increases effective from 1
July 2019.
The Board was pleased to promote internally with Matthew Pratt joining the Board as Chief Operating Officer on the same date.
Matthew’s salary has been set at £410,000p.a. which reflected his experience and his responsibilities for the operational
management of the Group and the implementation of strategic plans. His salary will next be eligible for a review at the usual 2020
review date. Matthew’s pension contribution has been set at a lower rate of 10% of salary. The Committee will consider directors’
pension contributions as part of the policy review for approval in 2020.
With the successful implementation of the Group’s succession plans, Barbara Richmond’s role on the Board has taken on greater
importance and the Committee concluded that a salary adjustment was required to reflect the changing strategic needs and
objectives of the Group, the broad responsibilities she undertakes which have expanded to include sales initiatives, IT, procurement
and M&A; and the need to retain and reward Barbara at a time when there have been several Finance Director board changes in
our sector. The Remuneration Committee is aware of the scrutiny surrounding above workforce increases to directors’ salaries but
concluded that it was appropriate to increase Barbara’s salary by 9.5% to £370,000 p.a., effective from 1 July 2019.
61
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Redrow plc Annual Report 2019
62
GOVERNANCE REPORT
Directors’ Remuneration Report
UK CORPORATE GOVERNANCE CODE
The Committee has considered the various changes to the regulatory environment as they relate to executive remuneration and
welcomes the new UK Corporate Governance Code (the “new Code”). The Committee has adopted a number of changes early and
preparatory steps have already been taken in respect of the following:
• The Committee’s Terms of Reference have been updated to reflect the expanded scope required by the new Code including
responsibility for setting remuneration for the Chairman, Executive Directors, below Board members of the executive team and
the Company Secretary. The terms were updated to require the Committee to take account of Group-wide remuneration and
policies when setting executive pay – workforce pay was reviewed in advance of setting directors’ pay for the current year.
• The operation of the annual bonus plan and the LTIPs have been reviewed to ensure that the Committee has necessary
discretion to override formulaic outcomes (as required by the new Code).
• The malus and clawback provisions in the annual bonus plan and LTIP have also been reviewed to ensure they reflect
emerging good practice; and
• The appointment of myself as the designated Non Executive Director to facilitate workforce engagement.
LOOKING FORWARD
This year we will be reviewing our remuneration policy to take account of the significant changes to the remuneration landscape
and the evolution of good practice features which have been encouraged by the new Code, institutional shareholders and
shareholder bodies. As part of this review, we will be consulting with a range of stakeholders which will include our largest
shareholders. A new policy will be put to a shareholder vote at the November 2020 AGM.
At the 2018 AGM, the Directors’ Remuneration Report received 99.35% votes in favour. I look forward to your support at the
upcoming AGM.
VANDA MURRAY OBE
Chair 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.
AT A GLANCE
Remuneration principles
Our governing principles on executive remuneration are based on the five principles below.
Clear, simple and transparent
arrangements
Alignment with shareholders and
other stakeholders’ interests
Attracting and retaining the right people
Balance of short and long term performance
to deliver sustainable growth
Links reward to achievement of
business strategy and results
Our remuneration policy
Summary of our policy and how remuneration is delivered over time.
Component
Policy
2018/19
2019/20
2020/21
2021/22
2022/23
2023/24
Salary
Salary increases normally
in line with wider
workforce
Fixed Pay
Benefits
Car allowance and
standard insurance
benefits
Salary
paid
Benefits
paid
Pension
DC or cash supplement up
to 20% of salary
Pension
provision
Annual Bonus
Max 100% of salary
50% of any bonus
deferred into shares
Variable
pay –
at risk
LTIP
Max 150% of salary
3 year performance period
+ 2 year holding period
Annual
Bonus
cash paid
Deferred
Bonus
award
LTIP
granted
50% vests
50% vests
LTIP vests
Holding
period
ends
Other
policy
elements
Shareholding
guideline
Recovery and
withholding
200% of salary
All net of tax deferred bonus and LTIP awards held until guideline has been met
Annual bonus and LTIP
Up to fifth anniversary of payment or vesting
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Redrow plc Annual Report 2019
64
GOVERNANCE REPORT
Directors’ Remuneration Report
Performance outcomes
ANNUAL BONUS PERFORMANCE
LTIP PERFORMANCE
0%
20%
40%
60%
80%
100%
0%
20%
40%
60%
80%
100%
PBT (30%)
ROCE(30%)
GDV of land
acquired (20%)
Outlets
opened (20%)
Total
EPS (50%)
ROCE (50%)
Total
85% of maximum earned
100% of award will vest
Remuneration outcomes
JOHN TUTTE
BARBARA RICHMOND
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
Minimum
Target
Maximum
Actual
John
Tutte
Barbara
Richmond
Matthew
Pratt
Minimum
Target
Maximum
Actual
n Fixed
n Annual Bonus Deferred Shares
n LTIP Share price growth
n Annual Bonus Cash
n LTIP Granted
n Fixed
n Annual Bonus Deferred Shares
n LTIP Share price growth
n Annual Bonus Cash
n LTIP Granted
0
200%
400%
600%
800%
1,000%
1,200%
SHAREHOLDING
% OF SALARY
n Total Shareholding n Value of outstanding share awards (net of tax basis) n Shareholding requirement
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, investors.redrowplc.co.uk/reports-and-presentations.
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.
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GOVERNANCE REPORT
Directors’ Remuneration Report continued
THE REMUNERATION POLICY CONTINUED
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 2019/20 performance measures are:
–
–
–
–
50% based on profit before tax;
10% based on Closing private order book;
10% based on land acquired;
15% on Customer Service;
– 5% based on health and safety; and
–
10% on personal objectives.
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.
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.
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.
However, in exceptional
circumstances only, the
Committee may make
awards of up to 200% of
salary.
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 cause the Committee to consider that
an amended performance condition would be
more appropriate and not materially less
difficult to satisfy.
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
award 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.
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Charitable donations
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 65 to 67, 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.
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. For awards to be made in 2019/20, additional triggers relating to an error in the calculation of a
performance condition, reputational damage suffered and any other events the Committee considers specifically relevant to
Redrow will also apply.
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GOVERNANCE REPORT
Directors’ Remuneration Report continued
Clawback continued
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
financial statements (or the financial statements 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
01/04/19
Barbara Richmond
18/01/10
Matthew Pratt
01/04/19
12 months
6 months
6 months
12 months
12 months
6 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. This policy applies to Matthew Pratt who was
appointed to the Board on 1 April 2019, after the approval of this Remuneration Policy and was appointed on 6 months’ 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
Nick Hewson
Non-Executive
Sir Michael Lyons
Non-Executive
Vanda Murray
Non-Executive
01/12/12
06/01/15
01/08/17
01/12/18
06/01/18
01/08/17
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ANNUAL REMUNERATION REPORT
STATEMENT OF IMPLEMENTATION FOR 2019
This section summarises how the Committee intends to operate the Remuneration Policy for the year ending 30 June 2020.
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 Remuneration Committee has decided to increase Barbara Richmond’s salary by 9.5% to £370,000 to reflect her continuing
strong contribution since joining the Company in January 2010 and the importance of her role following changes to the
composition of our Board. The Remuneration Committee is aware of the scrutiny surrounding significant increases to directors’
salaries and has demonstrated a prudent approach to executive pay changes but believes that an adjustment is required in this
case. In taking this decision, the Remuneration Committee considered the following:
• Barbara’s role will take greater importance following Steve Morgan’s departure and John Tutte’s move to Executive Chairman;
• The broad responsibilities Barbara undertakes which have expanded to include sales initiatives, IT, procurement and M&A;
• The importance of retaining Barbara particularly given the recent high turnover of finance directors in the housebuilding
sector; and
• Salary levels for finance directors in the sector and in FTSE 250 companies of a broadly similar size. This was not a driver
behind the proposal but was considered to provide the Committee with assurance that the proposed salary was not ahead of
the market rate for the role.
In April 2019, Matthew Pratt joined the Board as Chief Operating Officer and John Tutte became Executive Chairman. On
appointment, Matthew’s salary had been set at £410,000 p.a., which reflected his experience and his responsibilities for the
operational management of the Group and the implementation of strategic plans. His salary shall remain unchanged for 2020.
On the move to Executive Chairman, John Tutte’s salary was unchanged. His salary was reviewed as usual and will increase by
2.0% which is less than the general workforce increases effective from 1 July 2019.
The salaries for 2020 are effective from 1 July 2019 and are as follows:
£’000
John Tutte
Barbara Richmond
Matthew Pratt
1 July
2019
610
370
410
1 July
2018
598
338
410
Change
2.0%
9.5%
0%
Pension
John Tutte and Barbara Richmond will continue to receive a contribution towards pension of 20% of salary. Matthew Pratt’s pension
contribution was agreed at a lower rate of 10% of salary which was a reduction from his previous package which carried a
contribution of 15%. His 10% contribution level was set prior to The Investment Association’s update in January 2019 which
recommended that pension contributions for new joiners should be in line with the majority of the workforce. The Remuneration
Committee will consider directors’ pension contribution levels as part of the forthcoming 2020 Remuneration Policy review.
Annual bonus
Following a review of bonus measures in light of the Group’s short to medium term objectives, the Committee has decided to make
changes to the measures that will apply for 2019/20.
The measures support the three key strategic objectives – delivering financial results, protecting the future and building
responsibly.
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GOVERNANCE REPORT
Directors’ Remuneration Report continued
Annual bonus continued
2020
2019
Financial
Profit Before Tax
ROCE
Protecting the Future
Land
Order Book
Outlets Opening
Building Responsibly
Customer Service
Health & Safety (H&S)
50%
–
10%
10%
–
15%
5%
Personal
Individual objectives
10%
30% ROCE remains an important KPI and will continue to feature in the LTIP but for
the Annual bonus PBT is to be used as it is the primary measure of short-term
financial performance.
30%
20% The GDV of Land acquired remains important and prioritising a strong order
–
20%
–
–
–
book will provide focus on sales volume.
As set out on pages 26 to 27, we strive to constantly improve our quality and
customer service, an important lead indicator of performance.
Consistent with our commitment to continuous improvement in H&S, this has
been introduced as a bonus target.
These will comprise strategy-related objectives which are tailored to each
Executive Director.
The above measures support our aim for customer service excellence while maintaining focus on quality land investment which will
drive long term profitability. We believe the inclusion of Health & Safety, as well as personal objectives provides a more rounded
assessment of management’s performance while continuing to have a high weighting towards financial results. The revised
measures are felt to be more appropriately aligned with our overall business strategy and vision.
It is the current intention that the targets will be disclosed in the FY 2020 Remuneration Report provided the Committee is
comfortable they are no longer commercially sensitive at the time.
LTIP awards to be granted during 2020
LTIP awards in the FY 2020 financial year will be made at the level of 150% of salary. Consistent with previous years, the 2020 LTIP
awards will be subject to EPS and ROCE metrics, each with a 50% weighting.
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.
Both measures have a three-year performance period ending on 30 June 2022 and the targets are set out in the table below:
Award vesting level as % of salary (for each component)
Nil
10%
30%
75%
EPS for 2022
ROCE for 2022
Below 105.0p
Below 23.4%
105.0p
110.0p
23.4%
24.4%
115.0p or above
25.4% or above
Vesting between the points above is on a sliding scale basis
The Remuneration Committee has considered carefully the targets to apply for each measure by taking into account internal and
external forecasts. Taking these factors into account, the Committee decided it is appropriate to set an EPS target that is lower than
for the awards made last year given the announced changes to the Help to Buy scheme from 2021 and continuing macroeconomic
uncertainty. The Committee is satisfied the EPS targets are suitably stretching given the stretch target of 115p would require a 25%
growth on 2019 EPS, which itself was a record year.
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As a ratio measuring how efficiently the Company is at using its capital to generate profit, it is unrealistic to assume that ROCE can
be maintained at its exceptional current level without affecting the Group’s ability to grow in the longer-term. Whilst the ROCE
targets are lower than those set for last year’s award, the Committee believe they are demanding after taking into account the
outlook for the market, cost pressures and the need to invest for the future.
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.
In line with our Policy, these awards will be subject to an additional two year post-vesting holding period.
Non-Executive Director Fees
The base fee for a Non-Executive Director remains unchanged at £55k p.a. 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.
OUTCOMES IN RESPECT OF 2019
The tables below set out the remuneration for the Directors in respect of 2019. Further discussion of each of the components is set
out on the pages which follow. Where indicated, these disclosures have been audited.
SINGLE TOTAL FIGURE OF REMUNERATION TABLE (AUDITED)
The remuneration of the Executive Directors in respect of 2019 is shown in the table below (with the prior year comparative):
£’000
John Tutte (i)
Barbara Richmond
Matthew Pratt (ii)
Salary
Benefits (iii)
Annual
bonus (iv)
LTIP (v)
Pensions (vi)
Total
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
598
338
103
583
330
–
16
19
5
16
17
–
508
287
87
564
319
–
681
385
175
670
378
–
120
68
10
117
66
–
1,923
1,950
1,097
1,110
380
–
(i)
(ii)
John Tutte served as Chief Executive Officer during FY 2018 and until 1 April 2019 when he became Executive Chairman. His remuneration terms
remained unchanged on his change of role.
Matthew Pratt was appointed to the Board as Chief Operating Officer on 1 April 2019. His remuneration relates to his period on the Board except for
the 2019 LTIP value which is in relation to the award he was granted in September 2016 when he was not on the Board.
(iii) Benefits include a fully expensed company car (or equivalent cash allowance) and private health insurance.
(iv)
(v)
Annual bonus represents the full value of the bonus awarded in respect of the relevant financial year. Details of performance targets are set out below.
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.
LTIP represents the value of the LTIP award which vests in respect of the 3-year performance period ending in the relevant financial year. The 2019
column includes the value of the 2016 LTIP award which will vest in full on 12 September 2019, using the average share price over the last three
months of FY 2019 including any dividend equivalent paid. The 2018 column includes the vested value of the 2015 LTIP award (which vested at 100%
of maximum), based on the share price on the date of vesting (14 September 2018).
(vi)
Pension includes the value of the cash allowance paid to John Tutte and Barbara Richmond in respect of the relevant year and for Matthew Pratt, the
contribution from 1 April 2019 to 30 June 2019.
The fees of the Non-Executive Directors in respect of 2019 are shown in the table below (with the prior year comparative).
£’000
Steve Morgan (i)
Debbie Hewitt (ii)
Nick Hewson
Sir Michael Lyons
Vanda Murray
Liz Peace (iii)
Fees
2019
2018
7
26
72
65
61
–
8
75
63
63
50
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GOVERNANCE REPORT
Directors’ Remuneration Report continued
SINGLE TOTAL FIGURE OF REMUNERATION TABLE (AUDITED) CONTINUED
(i)
Steve Morgan served as Non-Executive Chairman from 1 July 2018 until his retirement from the Board on 31 March 2019. The disclosure in this table
and footnote are in reference to that period. Steve Morgan drew a nominal fee of £10k 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 in 2019 to The Steve Morgan
Foundation of £218k (2018: £218k) (being the balance for this period of Steve Morgan’s notional annual fee of £300k per annum less the £10k nominal
fee)
(ii) Debbie Hewitt retired as a Non-Executive Director on 7 November 2018.
(iii) Liz Peace retired as a Non-Executive Director on 31 August 2017.
Annual bonus
The maximum bonus opportunity for the Executive Directors during 2019 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 combined 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.
Award vesting level as a % of share options granted (for each component)
EPS for 2019*
ROCE for 2019
Nil
10%
30%
50%
Vesting between the points above is on a sliding scale basis
Actual performance
Vesting (% of total award)
Below 74.99p
Below 21.0%
74.99p
83.39p
21.0%
23.0%
91.69p or above
25% or above
92.3p*
50%
28.5%
50%
*
As outlined in the Cash Return Circular published during the year. An upwards adjustment of the EPS performance target was necessary to neutralise
the effect of the return of cash and share consolidation. See pages 81 to 82.
% of bonus opportunity
Rationale
The Remuneration Committee is satisfied that this very strong performance over the last three years warrants full vesting.
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 37 of this Annual Report, 2019 was another outstanding year for Redrow.
As a result of the targets for maximum payment for three of the measures (ROCE, outlets opened and land holdings) being
exceeded and performance on PBT on-target for the year, the Committee determined that the bonus should pay out at 85.0% of
maximum, resulting in bonus awards to the Executive Directors as shown in the Single Total Figure of Remuneration on page 71.
The 2019 targets and outcomes are disclosed in the following table:
2019 Target Range
The estimated value of these vested awards is included in the 2019 LTIP column of the Single Total Figure of Remuneration on
page 71.
SCHEME INTERESTS AWARDED DURING 2019 (AUDITED)
The following table sets out details of LTIP awards to Executive Directors during the 2019 financial year.
Executive Director
John Tutte
Barbara Richmond
Number of
awards granted
Basis of award
152,370
150% of salary
86,122
150% of salary
Face
value 1
£897k
£507k
Threshold
vesting (% of
maximum)
20%
20%
Vesting date
September 2021
September 2021
1
The face value has been calculated using the average share price used to determine the number of shares awarded, being 588.7p (the average, over
the three days to the date of grant).
% of bonus
opportunity
Threshold payout
(10% of maximum)
Target payout
(50% maximum)
Maximum
payout
Actual 2019
performance
Payout (% of total
bonus opportunity)
Awards to John Tutte and Barbara Richmond are made in the form of nil-cost options.
PBT
ROCE
GDV of land acquired
Outlets opened in year
Total
30
30
20
20
100%
* Calculated on a rolling monthly basis.
£386m
23.3%
£2.0bn
38
£406m
24.5%
£2.1bn
40
£426m
25.7%
£2.2bn
42
£406m
27.5%*
£2.3bn
43
15%
30%
20%
20%
85%
The Committee is satisfied that the bonus outcome is reflective of the results delivered by the business during the year.
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 and malus 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.
The sections below summarise details of the LTIP awards which vested in respect of 2019 (2016 awards) and which were
granted during the 2019 financial year.
LTIP awards vesting in respect of 2019
The LTIP awards granted in September 2016 were based on performance over the three year performance period ending
30 June 2019. Based on performance against the EPS and ROCE targets set when the award was granted, summarised in the
table following, the Committee determined that these awards will vest in full on 12 September 2019.
The LTIP awards granted on 11 September 2018 will vest in September 2021 based on performance over the three year
performance period ending 30 June 2021 as follows:
Award vesting level as a % of share options granted (for each component)
EPS for 2021
ROCE for 2021
Nil
6.67%
20%
50%
Below 110.25p
Below 25.8%
110.25p
115.50p
25.8%
26.8%
120.75p or above
27.8% or above
Vesting between the points above is on a sliding scale basis. An upwards adjustment of the EPS performance targets for the
unvested LTIPs was necessary to neutralise the effect of the return of cash and share consolidation on these awards. See pages
81 to 82.
Deferred Bonus Plan awards, being 50% of the bonus earned relating to FY2018 performance, were granted during the year as
set out below:
Executive Director
John Tutte
Number of
awards granted
47,923
Face
value 1
£282k
Barbara Richmond
27,062
£159k
Portion of bonus
deferred
Vesting date
50%
50%
50% in September 2019 and
50% in September 2020
50% in September 2019 and
50% in September 2020
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The face value has been calculated using the average share price used to determine the number of shares awarded, being 588.7p (the average, over
the three days to the date of grant).
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Redrow plc Annual Report 2019
74
GOVERNANCE REPORT
Directors’ Remuneration Report continued
Steve Morgan’s retirement
During the year, Steve Morgan served as Non-Executive Chairman until his retirement from the Board on 31 March 2019. Steve
received a nominal fee of £7k for the 9 month period he was in office and he donated this 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 in 2019 to The Steve
Morgan Foundation of £218k (being the balance for this period of Steve Morgan’s notional annual fee of £300k per annum (£225k
for 9 months) less the £7k nominal fee). Steve did not receive any payment for loss of office.
In September 2016, while Steve occupied the role of Executive Chairman, he was granted a cash LTIP award over 118,867 shares.
Under the shareholder approved LTIP rules, his transition from Executive to Non-Executive Chairman was not a ‘leaver’ event as
he continued to be an office holder. On retiring from the Board on 31 March 2019, Steve was considered by the Remuneration
Committee to be a good leaver. As such, his award will vest on the normal vesting date (12 September 2019) and will be subject
to pro rating based on his service to 31 March 2019 relative to the three year performance period to 30 June 2019. EPS and
ROCE performance resulted in 100% of the award capable of vesting. The pro rata reduction will result in 108,961 awards vesting
on 12 September 2019 and this will be receivable in cash.
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, John Tutte and Barbara Richmond
meet this guideline. *Matthew Pratt exceeded his assigned shareholding guideline prior to his promotion to Chief Operating
Officer. As noted above, Matthew is expected to retain all Deferred Bonus Plan and LTIP shares on a net of tax basis until the
shareholding guideline is met. Non-Executive Directors are not subject to shareholding guidelines.
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 2019
and current interests in long-term incentives.
Executive Directors
John Tutte
Barbara Richmond
Matthew Pratt
Non-Executive Directors
Number of shares
beneficially held
at 30 June 2019
Shareholding
as % of salary
Guideline met?
755,686
534,122
43,515
723%
842%
62%
Yes
Yes
No *
Steve Morgan (resigned from the Board on 31 March 2019)
Held through Bridgemere Securities Limited
Held by other parties connected with Steve Morgan (i)
Total
Debbie Hewitt (resigned from the Board on 7 November 2018) (ii)
Nick Hewson
Sir Michael Lyons
Vanda Murray
69,939,090
36,714,285
106,653,375
30,687
19,523
2,857
3,333
(i)
(ii)
Steve Morgan holds no beneficial interest in these ordinary shares.
The shareholding shown for Debbie Hewitt is as at the date of her resignation from the Board.
Shareholding as a percentage of salary is calculated using the shareholding and base salary as at 1 July 2019 and the average share
price for the final quarter of the financial year ended 30 June 2019.
75
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The table below provides details of the interests of the Executive Directors in incentive awards during the year.
Awards
held at
30 June
2018
Share Price
on Grant
£
Grant
Date
Award
Vested
Awards
granted in
year
Awards
Exercised
in year
Awards
held at
30 June
2019
Exercise
Price
£
From
To
John Tutte
SAYE 2017
LTIP 2015
LTIP 2016
LTIP 2017
LTIP 2018
3,673
30/10/17
112,348
14/09/15
138,882
12/09/16
147,346
15/11/17
–
10/09/18
DEF BONUS 2016
33,866
12/09/16
DEF BONUS 2017
45,159
11/09/17
DEF BONUS 2018
–
10/09/18
481,274
Barbara Richmond
SAYE 2016
SAYE 2017
LTIP 2015
LTIP 2016
LTIP 2017
LTIP 2018
2,812
1,836
28/10/16
30/10/17
63,462
14/09/15
78,472
12/09/16
83,404
15/11/17
–
10/09/18
DEF BONUS 2016
19,130
12/09/16
DEF BONUS 2017
25,516
11/09/17
DEF BONUS 2018
–
10/09/18
274,632
Matthew Pratt
SAYE 2017
LTIP 2016
LTIP 2017
LTIP 2018
3,673
30/10/17
30,022
12/09/16
23,168
15/11/17
–
10/09/18
DEF BONUS 2016
17,574
12/09/16
DEF BONUS 2017
23,693
11/09/17
DEF BONUS 2018
–
10/09/18
98,130
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
6.12
4.94
4.097
5.935
5.42
4.097
6.30
5.42
4.00
6.12
4.94
4.097
5.935
5.42
4.097
6.30
5.42
6.12
4.097
5.935
5.42
4.097
6.30
5.42
1.30
1.10
1.54
2.37
2.85
4.94
–
112,348
–
–
–
33,866
22,580
–
–
–
–
152,370
–
–
–
3,673
4.90
01/01/21
01/07/21
(112,348)
–
14/09/18
14/09/25
–
–
–
138,882
147,346
152,370
12/09/19
12/09/26
15/11/20
15/11/27
10/09/21
10/09/28
(33,866)
–
12/09/17
12/09/26
(22,580)
22,579
11/09/18
11/09/27
–
47,923
–
47,923
10/09/19
10/09/28
168,794
200,293
(168,794)
512,773
–
–
63,462
–
–
–
19,130
12,758
–
–
–
–
–
86,122
–
–
(63,462)
–
–
–
–
–
(19,130)
(12,758)
–
27,062
–
2,812
1,836
–
78,472
83,404
86,122
–
12,758
27,062
95,350
113,184
(95,350)
292,466
3.20
4.90
01/01/20
01/07/20
01/01/21
01/07/21
14/09/18
14/09/25
12/09/19
12/09/26
15/11/20
15/11/27
10/09/21
10/09/28
12/09/17
12/09/26
11/09/18
11/09/27
10/09/19
10/09/28
3,673
4.90
01/01/21
01/07/21
–
–
–
–
(17,574)
(11,847)
–
30,022
23,168
23,951
–
11,846
27,858
(29,421)
120,518
(78,625)
(367,012)
(271,739)
(183,158)
(162,105)
(96,154)
–
–
–
–
–
–
12/09/19
12/09/26
15/11/20
15/11/27
10/09/21
10/09/28
12/09/17
12/09/26
11/09/18
11/09/27
10/09/19
10/09/28
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
–
–
–
–
17,574
11,847
–
29,421
78,625
367,012
271,739
183,158
162,105
96,154
–
–
–
23,951
–
–
27,858
51,809
–
–
–
–
–
–
–
–
–
–
–
–
–
–
118,867
12/09/16
4.097
–
DEF BONUS 2012
137,897
23/10/12
DEF BONUS 2013
73,264
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
38,651
11/09/17
1,710,448
1.54
2.37
2.85
4.94
4.097
6.30
137,897
73,264
78,246
46,761
57,969
38,651
1,591,581
–
118,867
12/09/19
12/09/26
(137,897)
(73,264)
(78,246)
(46,761)
(57,969)
(38,651)
–
–
–
–
–
–
(1,591,581)
118,867
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
Redrow plc Annual Report 2019
76
GOVERNANCE REPORT
Directors’ Remuneration Report continued
STATEMENT OF SHAREHOLDING AND SCHEME INTERESTS (AUDITED) CONTINUED
i. The performance conditions attached to the 2017 LTIP awards were disclosed in the 2018 Directors’ Remuneration Report.
ii. The performance conditions attached to the 2018 LTIP awards are shown on page 73.
iii. There are no further performance conditions attached to the exercise of the deferred bonus awards.
iv. Between 1 July 2019 and 3 September 2019 (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.
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
Scheme
LTIP 2015
No. shares
exercised
Date of
exercise
112,348
17/09/18
DEF BONUS 2016
33,866
06/02/19
DEF BONUS 2017
22,580
06/02/19
168,794
Barbara Richmond
LTIP 2015
63,462
17/09/18
DEF BONUS 2016
19,130
06/02/19
DEF BONUS 2017
12,758
06/02/19
Mid price
on date of
exercise
(pence)
622.65
626.85
626.85
622.65
626.85
626.85
Matthew Pratt
DEF BONUS 2016
DEF BONUS 2017
95,350
17,574
11,847
29,421
04/01/19
04/01/19
521.38
521.38
Notional gain on
exercise (£’000)
699.53
212.29
141.54
1,053.36
395.15
119.92
79.97
595.04
91.63
61.77
153.40
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 and Matthew Pratt receives a contribution of 10% of salary.
The value of these cash supplements is included in the pension column of the Single Total Figure of Remuneration Table on
page 71. John Tutte, Barbara Richmond and Matthew Pratt 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
John Tutte
Matthew Pratt
Normal retirement date
24 June 2021
6 July 2040
Accrued benefit
at 30 June 2019
£
Benefits paid to
Director during period
up to 30 June 2019
£
Defined Benefit accrued
during period up to
30 June 2019
£
56,912
15,106
Nil
Nil
Nil
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 Executive Chairman
The table below shows the percentage change in the salary, benefits and annual bonus of the Executive Chairman and of all
Redrow employees who qualify for participation in the Company’s bonus and benefits plans between 2018 and 2019.
Salary
Benefits
Annual bonus
Executive
Chairman
All Redrow
employees
2.0%
Nil%
(6.7%)
2.31%
13.9%
(15.7%)
Relative importance of spend on pay
The table below shows total employee remuneration and distributions to shareholders, in respect of 2019 and 2018 (and the
difference between the two).
£m
Total employee remuneration
Distributions to shareholders
2019
141
220
2018
Change (%)
139
103
1.4%
113.6%
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 cash returns in respect of each
financial year (see note 5 to the financial statements). This represents 60.5 pence per share in respect of 2019 including the B
share cash return compared to 28 pence per share in respect of 2018.
Performance graph and table
The chart below shows the TSR of Redrow in the ten-year period to 30 June 2019 against the TSR of the FTSE 250. TSR refers to
share price growth with re-invested dividends. The Committee believes the FTSE 250 index is the most appropriate index
against which the TSR of Redrow should be measured, as it is a constituent of the FTSE 250.
450
400
350
300
250
200
150
100
50
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Redrow
FTSE 250
FTSE Small Cap
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Redrow plc Annual Report 2019
The Committee received advice from Deloitte LLP until February 2019. Following a selection process undertaken by the
Committee, the Remuneration Committee appointed FIT Remuneration Consultants LLP (“FIT”) as its independent advisor and
FIT provided advice to the Committee for the remainder of the year. Both FIT and Deloitte LLP are members of the Remuneration
Consultants Group and as such voluntarily operate under the Code of Conduct in relation to executive remuneration consulting
in the UK. The Committee is comfortable that neither the FIT nor Deloitte LLP engagement partners and teams that provided
remuneration advice to the Committee have connections with Redrow plc that may impair their objectivity and independence.
The fees charged by FIT and Deloitte LLP for the provision of independent advice to the Committee during 2019 were £24k and
£2k respectively. During the year, Deloitte LLP provided the Company with tax advisory services but does not have any other
connection with the Company. FIT provided no other services to the Company.
Statement of voting at Annual General Meeting
At the Annual General Meeting held on 6 November 2018, 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
293,829,228
99.35%
1,909,852
0.65% 295,739,080
598,132
Approval of Directors’ Remuneration
Report for year ended 30 June 2018
By order of the Board
VANDA MURRAY OBE
Chair of the Remuneration Committee
4 September 2019
78
GOVERNANCE REPORT
Directors’ Remuneration Report continued
SUPPORTING DISCLOSURES AND ADDITIONAL CONTEXT CONTINUED
The table below provides remuneration data for the Executive Chairman/Group Chief Executive (as applicable) for each of the
nine financial years over the equivalent period.
Name
Remuneration/
donations*
Bonus
(% of Maximum)
LTIP vesting
(% of Maximum)
2011
2012
2013
2014
2015
2016
2017
2018
2019
Steve
Morgan
Steve
Morgan
Steve
Morgan
Steve
Morgan
John
Tutte
John
Tutte
John
Tutte
John
Tutte
John
Tutte
£582k
£855k
£1,050k £1,922k £2,355k £1,916k
£2,463k £1,950k £1,923k
50%
50%
80%
100%
100%
100%
100%
96.7%
85%
0%
0%
19%
100%
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
84 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 2019 (£169k during
2018). This represented 240,000 Swiss Francs in both years.
Consideration of directors’ remuneration – Remuneration Committee and advisors
The Remuneration Committee is comprised solely of Non-Executive Directors and comprises Vanda Murray as Chair, Nick Hewson
and Sir Michael Lyons. Debbie Hewitt stepped down from the Committee at the AGM on 7 November 2018.
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 Executive Committee immediately below the Senior
Executives.
The Committee meets as often as is required but at least twice per year. The Committee met four times during the course of the
financial year ended 30 June 2019 and details of Committee attendance are set out in the following table.
TABLE OF ATTENDANCE
Name
Vanda Murray
Nick Hewson
Sir Michael Lyons
Debbie Hewitt 1
Role
Chair
Member
Member
Chair
Attendance at Meetings
4/4
4/4
4/4
1/1
1
Debbie Hewitt retired from the Board following the close of the AGM on 7 November 2018 at which point, Vanda Murray became Chair of the
Remuneration Committee.
79
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Redrow plc Annual Report 2019
80
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
2019 and of the position of the Company at the end of the
financial year together with the financial statements, Auditors’
Report and a description of the principal risks and uncertainties
which the Company faces. The Strategic Report can be found
on pages 1 to 37 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 38 to 86.
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.
Subject
Page Reference
Dividends
See note 5 of the financial statements on
page 104.
Capital
Structure
(details of the
issued share
capital)
Directors
See note 17 of the financial statements on
page 123.
• See page 46 detailing the Directors who
served during the year, along with their
meeting attendance.
• Biographical details of the Directors of the
Company who are seeking election and
re-election at the 2019 AGM are set out on
pages 40 to 41.
• Details of Directors’ interests, including
interests in the Company’s shares, are
disclosed in the Directors’ Remuneration
report on page 74.
Employment
Policies of the
Company
Details of the Company’s employment policies
may be found in the Directors’ Report on
pages 82 to 83.
The Redrow
Benefit Trust
Report (the
“Employee
Benefit
Trust”)
Environmental,
social and
governance
(ESG)
disclosures
Details of the shares held by the Employee
Benefit Trust may be found in the Directors’
Report on page 82.
Details of the Company’s approach to social
and to diversity and ESG disclosures
governance can be found in the Directors’
Report on pages 80 to 85.
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 106 to 109 and the Directors’
Remuneration Report on pages 60 to 79.
Greenhouse
gas emissions
All disclosures of 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 (pursuant to the
Act, Strategic Report and directors’ report
Regulations 2013), are contained in the
Directors’ Report on page 84.
The Directors have pleasure in presenting to the shareholders
their report and audited consolidated financial statements for
the 12 months ended 30 June 2019.
RESULTS, DIVIDENDS AND RETURN OF CASH
The Group made a profit after tax of £329m (2018: £308m). An
interim dividend of 10.0p (2018: 9.0p) net per share was paid on
9 April 2019. In addition to the interim dividend, the Company
returned 30p net per share on 16 April 2019 via a B Share
Scheme.
The Board proposes to pay on 13 November 2019, subject to
shareholder approval at the 2019 Annual General Meeting, a
final dividend of 20.5p (2018: final dividend: 19.0p) net per
share in respect of the year ended 30 June 2019 to
shareholders on the Register as at the close of business on 20
September 2019. The Company’s dividend re-investment plan
gives shareholders the opportunity to re-invest their dividends.
ANNUAL GENERAL MEETING
Notice of the 2019 Annual General Meeting to be held on
Wednesday, 6 November 2019 will be sent to shareholders
separately. Members wishing to vote, but who cannot attend
the meeting, 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.
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 38 to 86.
DIRECTORS
The Directors of the Company during the year to the date of
this report, along with their meeting attendance, are listed on
page 46. The current Directors are listed on pages 40 to 41
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 60 to 79.
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
reappointment as Executive Directors, Matthew Pratt who
stands for appointment as an Executive Director and Nick
Hewson, Sir Michael Lyons and Vanda Murray who stand for
reappointment 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 for John Tutte and Barbara
Richmond and 6 months’ notice given by the Company for
Matthew Pratt.
In accordance with the UK Corporate Governance Code, all of
the Directors, will retire at the Annual General Meeting to be
held on Wednesday, 6 November 2019 and, being eligible,
offer themselves for re-appointment.
DIRECTORS INTERESTS
Related party transactions are disclosed in note 22 to the
Financial Statements. A summary of remuneration provided to
key management personnel is provided in note 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 issued share capital of 352,190,420
ordinary shares of 10.5 pence each. 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.
In March 2019, a Circular was published providing details of the
return of capital to shareholders by way of a B Share Scheme.
On 27 March 2019, at a General Meeting of the Company
shareholders approved a return of capital of 30 pence per
share, accompanied by a share capital consolidation whereby
shareholders received 20 new ordinary shares of 10.5 pence
each for every 21 existing ordinary shares of 10 pence held at
6pm on 5 April 2019.
In order to ensure that a whole number of new ordinary shares
was created following the implementation of the share
consolidation, 3 existing ordinary shares were issued by the
Company to the Employee Benefit Trust on 29 March 2019. The
total number of shares in issue at 6pm on 5 April 2019 was
369,799,941 ordinary shares of 10 pence each. Following the
consolidation, the total number of shares in issue at the
opening of markets on 8 April 2019 was 352,190,420 ordinary
shares of 10.5 pence each.
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Redrow plc Annual Report 2019
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GOVERNANCE REPORT
Directors’ Report continued
CAPITAL STRUCTURE CONTINUED
369,799,941 newly created B shares of 0.1 pence each were
allotted and issued on 8 April 2019. No application was made
to the UK Listing Authority or to the London Stock Exchange for
any of the B shares to be admitted to the Official List or to
trading on the main market of the London Stock Exchange for
listed securities or any other recognised exchange.
The B shares were purchased by Barclays on 9 April 2019 for
the consideration of 30 pence per share. Following the
purchase, the B shares were reclassified as Deferred shares
and were immediately repurchased and cancelled by the
Company.
No person has any special rights of control over the Company’s
share capital and all issued shares are fully paid.
Authority was given to the Directors at last year’s Annual
General Meeting to allot unissued shares up to an aggregate
nominal amount of £12,326,664.60 equivalent to approximately
33% of the Company’s issued share capital and up to a further
aggregate nominal amount of £12,326,664.60 in connection
with an offer by way of a rights issue. The authority was not
exercised during the period ended 30 June 2019 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.
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 9,113,757 shares (2.59%) in the
Company as at 30 June 2019 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 2.4m shares being part of its total shareholding.
SUBSTANTIAL HOLDINGS IN THE COMPANY
As at 30 June 2019, the Company has been advised of the
following notifiable interests in its ordinary shares, in
accordance with Rule 5 of the Disclosure Guidance and
Transparency Rules (the “DTRs”).
Number of Ordinary Shares
Pre-
consolidation
Post-
consolidation
% of voting
rights
73,436,045 69,939,090
19.86%
25,950,000
24,714,285
7.02%
18,770,138
17,876,321
5.08%
Notifiable Person
Bridgemere
Securities Limited 1
The Steve Morgan
Foundation 1
Vidacos Nominees/
HSBC 1
Standard Life
Aberdeen plc 1
St. James’s Place plc 2
N/A
17,572,528
18,629,926
17,742,786
5.04%
4.99%
1
The Company was notified of these interests prior to the 20 for 21 share
consolidation on 8 April 2019. The figure displayed in the post-
consolidation column for these persons has been calculated by
applying the 20:21 consolidation ratio to number of voting rights
contained within their most recent notification to the Company under
DTR 5.1. The figure displayed in the pre-consolidation column
represents the number of voting rights last notified to the Company by
the respective Shareholder in accordance with DTR 5.1.
2
St. James’s Place plc notified that their interest had fallen below 3% of
the voting rights on 17 July 2019.
In line with the relevant rules the table above does not include
notifications received from investment firms where the interest
has fallen below 5%, or from non-investment firms where the
interest has fallen below 3%.
Other than as noted above, 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
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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 7,155 training days during the year ended 30 June
2019, 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. See page 48 for further details on the Company’s
approach to employee engagement.
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
During the year, the Company implemented a number of
initiatives which the Board believes will further increase the
diversity of our workforce. Some examples of these initiatives
follow:
1. Redrow Women’s Network
As part of the Company’s commitment to diversity and
narrowing the gender pay gap, in 2019 the first Redrow
Woman’s Network was set up to inspire and support
women across the Group. It is also a valuable feedback
tool for the Company which allows the Board to
understand the challenges that women face on their
career path.
2. Redrow Educational Partnership
The Redrow Educational Partnership offers resources,
support and work experience to schools across the
country. The activities undertaken within this initiative aims
to address stereotypes within the industry and highlight
the wide spectrum of roles within the housebuilding
industry.
3. Mentoring Scheme
One of the challenges which the Company is faced with is
the progression of women through the business into
senior roles. During the year, the Group implemented a
mentoring scheme to ensure that all female trainees have
the benefit of a mentor once they have completed their
initial programme. Whilst it is appreciated that gender is
just one of many diversity characteristics, the Board
believes that this is a good starting point and, following a
review of the success of the programme, it is expected
that the scheme will be extended to wider employees.
4. Training
A number of our employees, including mentors within the
mentor scheme, have attended training on unconscious
bias and the importance of a diverse and inclusive
workforce. Mentors are encouraged to discuss the
importance of these issues with their mentees in order to
embed the message early on in the careers of our
workforce. The more openly that these issues are
discussed, the easier it is to create a culture of diversity
across the Group.
5. Enhanced Parental Leave
In September 2018, the Company introduced enhanced
parental leave benefits for all employees which the Board
believes will contribute to employee retention for both
females and males.
6. Sponsorship and Membership
In 2019, the Company sponsored the Inspire Summit, an
annual conference and exhibition exploring how to make
the construction, engineering and housing sectors more
diverse and inclusive. The Board believes that working with
such events keeps the conversation about the importance
of a diverse and inclusive workforce open and current.
During the year, the Company also became a member of
WISE (Women in Science and Engineering), a Community
Interest Company which provides support to employers,
educators and training providers who are seeking to
improve their gender balance, including engagement and
advancement of women.
Redrow plc Annual Report 2019
84
GOVERNANCE REPORT
Directors’ Report continued
GREENHOUSE GAS EMISSIONS
Greenhouse gas (“GHG”) emissions data for the period 1 July 2018 to 30 June 2019 are set out in the table below.
Emissions from:
Scope 1 activities:
• Direct emissions from combustion of fuels
and business travel
Scope 2 activities:
Year ended
30 June 19
Year ended
30 June 18
Units
12,478
12,006
tonnes of CO2e
• Indirect emissions from purchased electricity
1,985
2,275
tonnes of CO2e
Total Greenhouse Gas Emissions:
• (Scope 1 + Scope 2)
Intensity ratio:
14,463
14,281
tonnes of CO2e
Total emissions per 100m2 of build
2.42
2.48
tonnes of CO2e per 100m2 of build
The Company is taking steps to create and sustain a diverse
and inclusive culture across the Group and is committed to
being proactive in working to attract and retain a more diverse
workforce.
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.
Emissions have been calculated using the UK Government’s
Greenhouse Gas Conversion Factors for Company Reporting.
Reported Scope 2 emissions are calculated using the location-
based method.
This inventory of greenhouse gas emissions has been verified
by SGS to a limited level of assurance, in accordance with ISO
14064-3:2006, as meeting the requirements of the Greenhouse
Gas Protocol – A Corporate Accounting and Reporting Standard.
Further details and the independent assurance report can be
found at redrowplc.co.uk/ building-responsibly/managing-our-
resources-efficiently.
CHARITABLE AND POLITICAL DONATIONS
The Group made no political donations but paid £0.4m in
charitable donations during the year, being £0.3m 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.
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 2019 was £0.6m (2018:
£0.6m).
INDEPENDENT AUDITORS
In 2018, the Company commenced a tender process for the
appointment of new Auditors. The tender process was
supervised by the Audit Committee, who made a
recommendation to the Board on the appointment of the
replacement Auditor.
Following the conclusion of the formal tender process, the
Company announced on 9 November 2018 that the Board
had approved the proposed appointment of KPMG LLP as the
Company’s Auditor for the financial year commencing 1 July
2019. The appointment remains subject to approval by
shareholders at the Annual General Meeting to be held on 6
November 2019, and should the resolution be passed, the
appointment will take effect from the conclusion of that
meeting.
PricewaterhouseCoopers LLP were reappointed as the
external Auditors by shareholders at the 2018 Annual General
Meeting and will resign as Auditor following the conclusion of
the 2019 Annual General Meeting.
HUMAN RIGHTS
The Board values and appreciates the contribution made by all
employees at every level and is committed to protecting and
respecting human rights. Each employee is treated fairly and
equally and the Company has measures in place to ensure that
the Group is free from discrimination. Throughout the Group
there is a zero-tolerance approach to any form of harassment
or bullying; forced or involuntary labour; and child labour in any
form. The Board is invested in the development of employees
and has put in place measures to protect both their physical
and mental wellbeing.
The Company embeds its commitments to the protection of
human rights through its Human Rights Policy.
SUPPLY CHAIN
The Company conducts its operations with respect to the
interests and human rights of those employed in our supply
chain. The Group works collaboratively with its supply chain to
develop relationships based on honesty, openness, respect
and fairness. In addition, the Group supports its supply chain
by, among other things, improving their knowledge of
sustainability through training and working with subcontractors
to attract new entrants into the industry and supporting their
training needs.
Due diligence is conducted on our supply chains to ensure that
the values of the partners which we are working with are
aligned with the Group’s commitments to high ethical business
standards. The Company embeds these commitments and
expectations through its policy, Partnering with our Supply
Chain.
QUALIFYING THIRD PARTY INDEMNITY PROVISIONS
During the course of the financial year ended 30 June 2019,
qualifying third party indemnity provisions were in place. The
Company agreed to indemnify the Directors, former Directors
and the Company Secretary of the Company and Associated
Companies (as defined in Section 256 of the Companies Act
2006), to the extent permitted by law and the Articles of
Association, against any liability arising in connection with: any
negligence, default, breach of duty or breach of trust by them;
and their duties, powers or office, including in connection with
the activities of the Company or Associated Company in its
capacity as a trustee of an occupational pension scheme.
The above indemnity provisions remain in force at the date of
this report. In addition, the Company maintains directors’ and
officers’ insurance for each Director of the Company and its
Associated Companies.
PROVISION OF INFORMATION TO AUDITORS
Each Director in office at the date the Directors’ report is
approved, confirms that:
(a) so far as the Director is aware, there is no relevant audit
information (as defined in section 418(3) of the Companies
Act 2006) of which the Company’s Auditors are unaware;
and
(b) 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 28 to 29, the
Group maintains adequate committed banking facilities. As
stated in note 14 to the financial statements, at 30 June 2019,
the Group had £170m 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 2020. 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
4 September 2019
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Redrow plc Annual Report 2019
86
GOVERNANCE REPORT
Statement of Directors’ Responsibilities
FINANCIAL STATEMENTS
Independent Auditors’ Report
To the Members of Redrow plc
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
and Company financial statements, in each case, in accordance
with International Financial Reporting Standards (IFRSs) as
adopted by the European Union. Under company law, the
Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state
of affairs of the Group and the Company and of the profit or
loss of the Group and the 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.
RESPONSIBILITY STATEMENT
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Each of the Directors, whose names and functions are listed
below confirms that, to the best of their knowledge:
• 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 Group financial statements which have been prepared in
accordance with IFRS as adopted by the EU, give a true and
fair view of the assets, liabilities, financial position and profit
of the Group; and
• the Strategic Report, contained on pages 1 to 37 includes a fair
review of the development and performance of the business
and the position of the Group, together with a description of
the principle risk and uncertainties that it faces.
The Directors of the Company who were in office during the
year and up to the date of signing the financial statements
were:
Steve Morgan (i)
Chairman
John Tutte
Executive Chairman
Matthew Pratt
Chief Operating Officer
Barbara Richmond
Group Finance Director
Debbie Hewitt (ii)
Senior Independent Director and
Non-Executive Director
Nick Hewson
Senior Independent Director and
Non-Executive Director
Sir Michael Lyons
Non-Executive Director
Vanda Murray
Non-Executive Director
(i)
(ii)
Steve Morgan stepped down as Chairman on 31 March 2019.
Debbie Hewitt stepped down as Senior Independent Director and
Non-Executive Director on 7 November 2018.
By order of the Board
GRAHAM COPE
Company Secretary
4 September 2019
Redrow plc
Redrow House
St. David’s Park
Flintshire
CH5 3RX
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 2019 and of the Group’s
profit and the Group’s and the Company’s cash flows for the
year 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
2019 Annual Report (the “Annual Report”), which comprise: the
Group and Company balance sheets as at 30 June 2019; the
consolidated income statement, the Group and Company
statements of comprehensive income, the Group and Company
statements of cash flows, and the Group and Company
statements 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 2018 to 30 June 2019.
Our audit approach
Overview
• Overall Group materiality: £20.3 million (2018: £19.0 million), based
on 5% of profit before tax.
Materiality
• Overall Company materiality: £11.2 million (2018: £7.8 million),
based on 1% of total assets.
Audit scope
• Three financially significant companies in the Group.
• The components where we performed our audit work, accounted
for 100% of revenue and 98% 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.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and
regulations related to the London Stock Exchange Listing Rules, UK Health and Safety legislation, UK pensions legislation and
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FINANCIAL STATEMENTS
Independent Auditors’ Report continued
To the Members of Redrow plc
UK tax legislation, and we considered the extent to which non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial
statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were
related to bonus targets and long term incentive plan of key management, where there may be incentive for manipulation of
profits, which could be achieved through the manipulation of estimates such as inventory provisions and accruals. Audit
procedures performed by the Group engagement team included:
• Discussions with management, including consideration of known or suspected instances of non-compliance with laws and
regulation and fraud;
• Challenging assumptions and judgements made by management in their significant accounting estimates (see procedures
outlined in the key audit matters section of our report); and
• Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations including
journal entries which inflated the Group’s results for the period with unusual offset entries and journal entries impacting work in
progress with unusual offset entries to detect any unusual capitalisation of costs.
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.
Also, 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.
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
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.
How our audit addressed the key audit matter
We obtained a detailed understanding of management’s process
for preparing a forecast for each site, this being the basis for profit
recognition in the Consolidated Income Statement.
We tested management’s control over the approval of the initial
forecast and monitoring of changes to forecasts over the course of
development of the site.
The Group holds inventory in the form of land for
development, work in progress and showhomes with a
carrying value of £2,297m, net of provisions.
We tested management’s controls over the process for estimating
the expected remaining build costs, including the budgeting and
review processes.
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 have also attended a divisional commercial meeting as well as
reviewed evidence throughout the year of meetings held 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.
Key audit matter
How our audit addressed the key audit matter
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 or requiring a provision were included in management’s
provision.
We tested a sample of additions and land for development to
purchase documentation and traced payments made to bank.
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.
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 considered 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.
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 £18 million at the year
end. This surplus is derived from assets with a gross
value of £148 million less the present value of
obligations of £130 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.
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.
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Redrow plc Annual Report 2019
90
FINANCIAL STATEMENTS
Independent Auditors’ Report continued
To the Members of Redrow plc
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
£20.3 million (2018: £19.0 million).
£11.2 million (2018: £7.8 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 £1.4 million and £17.1 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 £1.0
million (Group audit) (2018: £0.9 million) and £0.6 million (Company audit) (2018: £0.4 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 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 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. For example, the
terms on which the United Kingdom
may withdraw from the European
Union are not clear, and it is difficult
to evaluate all of the potential
implications on the Group’s trade,
customers, suppliers and the wider
economy.
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 year ended 30 June 2019 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)
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 pages 30 to 37 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 85 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)
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Redrow plc Annual Report 2019
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FINANCIAL STATEMENTS
Independent Auditors’ Report continued
To the Members of Redrow plc
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the Directors, on page 86, 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.
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
• The section of the Annual Report on pages 50 to 54 describing the work of the Audit Committee does not appropriately
• 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 33 years, covering the years ended 30 June 1987 to 30 June 2019.
ARIF AHMAD
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
4 September 2019
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 86, 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.
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Redrow plc Annual Report 2019
94
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
2019
£m
2,112
(1,608)
504
(93)
411
3
(8)
(5)
–
406
(77)
329
92.3p
92.0p
2018
£m
1,920
(1,451)
469
(87)
382
3
(10)
(7)
5
380
(72)
308
85.3p
85.2p
FINANCIAL STATEMENTS
Statement of Comprehensive Income
For the 12 months ended 30 June
Profit for the year
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss
Remeasurements of post employment benefit obligations
Deferred tax on actuarial losses/(gains) taken directly to equity
Other comprehensive (expense)/income for the year net of tax
Total comprehensive income for the year
Note
7e
18
Group
Company
2019
£m
329
(7)
1
(6)
323
2018
£m
308
22
(4)
18
326
2019
£m
486
(7)
1
(6)
480
2018
£m
1
22
(4)
18
19
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
Current corporation tax
Cash and cash equivalents
Total current assets
Total assets
Equity
Retained earnings at 1 July 2018/2017
Profit for the year
Other comprehensive (expense)/income for the year
Dividend paid
Movement in LTIP/SAYE
Retained earnings at 30 June 2019/2018
Share capital
Share premium account
Other reserves
Total equity
Liabilities
Bank loans
Trade and other payables
Deferred tax liabilities
Long-term provisions
Total non-current liabilities
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
5
18
17
18
18
14
15
11
16
15
Group
2019
£m
Company
2018
£m
2019
£m
2018
£m
2
16
6
4
18
9
55
2
15
6
4
22
8
57
2,297
2,218
48
–
204
2,549
2,604
1,379
329
(6)
(218)
(3)
1,481
37
59
8
42
–
68
2,328
2,385
1,131
308
18
(74)
(4)
1,379
37
59
8
–
–
–
–
18
–
18
–
890
1
212
1,103
1,121
646
486
(6)
(218)
–
908
37
59
7
1,585
1,483
1,011
80
167
4
8
259
726
34
760
1,019
2,604
5
178
5
9
197
671
34
705
902
80
–
–
–
80
30
–
30
110
2,385
1,121
–
–
–
–
22
–
22
–
675
–
89
764
786
701
1
18
(74)
–
646
37
59
7
749
5
–
–
–
5
30
2
32
37
786
The financial statements on pages 94 to 126 were approved by the Board of Directors on 4 September 2019 and were signed on
its behalf by:
JOHN TUTTE
Director
BARBARA RICHMOND
Director
Redrow plc Registered Number 2877315
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Redrow plc Annual Report 2019
96
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 (expense)/income 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
5, 18
18
2019
£m
329
(6)
323
(218)
(3)
102
1,483
1,585
2018
£m
308
18
326
(74)
(4)
248
1,235
1,483
2019
£m
486
(6)
480
(218)
–
262
749
1,011
2018
£m
1
18
19
(74)
–
(55)
804
749
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
2019
£m
(14)
343
329
2018
£m
1
307
308
Note
Cash flows from operating activities
Operating profit/(loss)
Depreciation and amortisation
Adjustment for non-cash items
(Increase)/decrease in trade and other receivables
Increase in inventories
Increase in trade and other payables
(Decrease)/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 joint ventures – continuing operations
Net cash (outflow)/inflow from investing activities
Cash flows from financing activities
Issue of bank borrowings
Repayment of bank borrowings
Purchase of own shares
Dividend paid
Net cash (outflow) from financing activities
Increase 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
5
19
2019
£m
411
3
(7)
(6)
(79)
50
(1)
371
(2)
(77)
292
(4)
1
–
(3)
80
(5)
(10)
(218)
(153)
136
68
204
2018
£m
382
3
(6)
(5)
(175)
76
1
276
(4)
(74)
198
(2)
–
26
24
5
(90)
(12)
(74)
(171)
51
17
68
2019
£m
2018
£m
(6)
–
(2)
(2)
–
(2)
285
270
–
–
–
277
(12)
–
265
–
1
–
1
80
(5)
–
(218)
(143)
123
89
212
–
3
–
269
(3)
–
266
–
4
–
4
5
(90)
–
(74)
(159)
111
(22)
89
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FINANCIAL STATEMENTS
Accounting Policies
BASIS OF PREPARATION
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 2019, 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 other than for the effect of applying new
standards.
The principal accounting policies are outlined below:
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 2018:
• IFRS 9 ‘Financial instruments’.
• IFRS 15 ‘Revenue from contracts with customers’.
• IFRS 9 ‘Financial instruments’ came into effect for accounting
periods beginning on or after 1 January 2018 and replaces
IAS 39. It affects the classification, measurement, impairment
and de-recognition of financial instruments. There is no
material effect to the Group from applying IFRS 9.
• IFRS 15 ‘Revenue from contracts with customers’ became
effective for accounting periods beginning on or after 1
January 2018. This standard is a converged standard
replacing IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’
and a number of revenue related interpretations from the
IASB and FASB. It establishes a comprehensive framework
for determining how and when revenue is recognised. Under
IFRS 15 there has been no change to the point of revenue
recognition for the Group as the transfer of control and the
contractual performance obligations are deemed satisfied
on the legal completion of the homes or the built segment of
homes in respect of certain Housing Association and Private
Rented Sector contracts. The Group does not recognise
revenue on the proceeds from the disposal of properties
taken in part exchange against a new home. The net profit or
loss on disposal is shown within gross profit. The gross
proceeds and net profit/loss are immaterial. This treatment
has not changed under IFRS 15 as the Group considers
properties taken in part exchange to be incidental to its main
activity and therefore outside the scope of IFRS 15.
b) The following new standards and amendments
to standards have been issued but are not effective
for the financial year beginning 1 July 2018 and have
not been early adopted:
• 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. 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. The Group has a number of operating leases,
mainly in relation to cars and some office properties, which
will be required to be brought onto the balance sheet
together with corresponding assets. IFRS 16 ‘Leases’ will be
effective for the Group from 1 July 2019. The Group intends
to use the modified retrospective method to implement IFRS
16. Under this approach comparative information is not
restated. Rather, at the date of the initial application of this
standard, the Group will recognise the cumulative effect of
initial application as an adjustment to the opening balance of
equity as at 1 July 2019. This is not material with fixed assets
and liabilities increasing by £8m and £8m respectively.
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 30 June 2019
(2018: 1 July 2018). 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 the transfer of control to
the customer 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 transfer of control to the customer
on legal completion of the built segment of homes.
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.
99
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Redrow plc Annual Report 2019
100
FINANCIAL STATEMENTS
Accounting Policies continued
INCOME AND DEFERRED TAX CONTINUED
INVENTORIES
Deferred tax is credited or charged in the income statement,
consolidated statement of comprehensive income, or retained
earnings as appropriate.
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).
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.
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.
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.
EMPLOYEE BENEFITS
a. Pension obligation
The Group operates two pension schemes for its staff. The
Redrow Staff Pension Scheme (the ‘Scheme’) closed to the
accrual of new benefits with effect from 1 March 2012, with new
benefits now being provided via the Redrow Group Personal
Pension Plan (the ‘GPP’). The Scheme is externally invested and
comprises two sections: a defined benefit section and a defined
contribution section. A defined benefit plan is a pension plan
which defines an amount of pension benefit that an employee
will receive on retirement. It is funded through payments to
trustee administered funds, determined by actuarial valuations
carried out on at least a triennial basis. A defined contribution
plan is a pension plan under which the Group pays agreed
contributions into a separate fund for each employee and any
subsequent pension payable to a specific employee is
determined by the amount accumulated in their individual fund.
The GPP is also a type of defined contribution plan.
The asset/(liability) recognised in the balance sheet in respect
of the defined benefit section of the scheme is the present
value of the defined benefit obligation at the balance sheet
date, less the fair value of plan assets. The defined benefit
obligation is determined using the projected unit credit method
on an annual basis by an independent scheme actuary.
Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are
charged or credited to equity as they arise in full via the
statement of comprehensive income.
Scheme service costs are charged to cost of sales and
administrative expenses as appropriate and scheme finance
costs are included in net financing costs. Past service costs
are recognised immediately in income.
In respect of the defined contribution section of the Scheme
and the GPP, contributions are recognised as an employee
benefit expense when they are due. The Group has no further
payment obligations in respect of the above once the
contributions have been paid.
b. Bonus plans
The Group recognises a liability and an expense for bonuses
where contractually obliged.
c. Share-based payments
Equity settled share-based payments are measured at fair
value on the date of grant and expensed on a straight line
basis over the vesting period, based on the Group’s estimate
of shares that will eventually vest.
d. Termination benefits
Termination benefits are payable when employment is
terminated by the Group before normal retirement date by
redundancy. These benefits are recognised by the Group in
the period in which it becomes demonstrably committed to
terminating the employment of current employees according
to a detailed formal plan without possibility of withdrawal.
FINANCIAL INSTRUMENTS
a. Land creditors
Deferred payments arising from land creditors are held at
discounted present value using the effective interest method,
in accordance with IFRS 9. 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.
101
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Redrow plc Annual Report 2019
102
FINANCIAL STATEMENTS
Accounting Policies continued
FINANCIAL INSTRUMENTS CONTINUED
e. Borrowings and trade payables
Interest bearing borrowings and trade payables are recorded
when the proceeds are received, net of transaction costs
incurred and subsequently at amortised cost. Any difference
between the proceeds, net of transaction costs and the
redemption value is recognised in the income statement
over the period of the borrowings.
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.
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 2019. 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. See Note 7e.
103
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2. REVENUE AND OPERATING PROFIT
a. Revenue
An analysis of the Group’s revenue is as follows:
Revenue from the sale of new housing
Revenue from the sale of land
b. 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:
2019
£m
2,091
21
2,112
2018
£m
1,900
20
1,920
Note
2019
£m
2018
£m
13
9
8
1,526
1,375
3
–
3
1
1
–
–
2
1
3
1
1
–
–
(i)
fees payable for the audit of parent company and consolidated financial statements £30,000 (2018: £30,000) and fees
payable for the audit of the Company’s subsidiaries pursuant to legislation £147,750 (2018: £157,000).
(ii)
Auditors’ remuneration for other services comprised £20,000 (2018: £20,000) in respect of an independent review of the
half-yearly financial statements (Audit related assurance services), £9,100 (2018: £9,100) in respect of iXBRL tagging
(Taxation compliance services) and £1,130 (2018: £1,130) in respect of ‘PwC Inform’, an on-line technical accounting guide
(other services).
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Redrow plc Annual Report 2019
104
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 at 19.0% (2018: 19.0%)
Tax charge for the year
Deferred tax recognised directly in equity
Relating to pension scheme
Current income tax credit in the Company is £3m (2018: £nil).
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 19.0p (2018: 11.0p); Current year interim dividend
per share of 10.0p (2018: 9.0p)
B share dividend 30.15p (2018: nil pence)
2019
£m
2018
£m
(2)
(6)
(8)
3
3
(5)
(4)
(6)
(10)
3
3
(7)
2019
£m
2018
£m
77
–
77
406
77
77
(1)
(1)
2019
£m
107
111
218
73
(1)
72
380
72
72
4
4
2018
£m
74
–
74
6. EARNINGS PER ORDINARY SHARE
The basic earnings per share calculation for the year ended 30 June 2019 is based on the weighted average number of shares
in issue during the period of 356m (2018: 361m) excluding those held in trust under the Redrow Long Term Incentive Plan
(9m shares (2018: 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 2019
Basic earnings per share
Effect of share options and SAYE
Diluted earnings per share
For the 12 months ended 30 June 2018
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
329
–
329
356
2
358
Per share
pence
92.3
(0.3)
92.0
Earnings
£m
Number
of shares
millions
Per share
pence
308
–
308
361
1
362
85.3
(0.1)
85.2
Group
Company
2019
£m
109
15
10
7
141
2018
£m
106
15
9
9
139
2019
£m
2018
£m
3
1
–
1
5
3
2
–
2
7
Group
Company
2019
Number
896
1,408
2,304
2018
Number
2019
Number
2018
Number
960
1,348
2,308
8
–
8
9
–
9
The Board made an additional cash return of 30 pence per share through a B share scheme. Each shareholder at the record date
was issued with one B share for every existing ordinary share held at the time. Barclays Bank PLC (or a subsidiary thereof) (acting
as principal, and not as agent, nominee or trustee for Redrow plc) made an offer to purchase the B shares for an amount of 30
pence per B share (free of all expenses and commissions). The Company accepted the offer on behalf of shareholders and paid
a single dividend to Barclays as holder of all the B shares of 30.15p per share.
The Board decided to propose a final dividend of 20.5p per share in respect of 2019 (£72m (2018: 19.0p, £70m)). The dividend
has not been provided for and there are no income tax consequences.
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2019
106
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
2019
£m
5
2
7
2018
£m
5
3
8
In addition, the Redrow Staff Pension scheme paid £15,756 (2018: £15,246) 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 60 to 79, 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
2019
712,217
2018
824,208
1 January 2019
1 January 2018
£2.03
£5.78
£4.62
£2.31
£6.13
£4.90
3/5 years
3/5 years
3.38%
1.5%
4.03%
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 10 September 2018 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
2019
335,604
2018
321,012
10 September 2018 15 November 2017
£5.97
£5.97
£0.00
N/A†
3 years
3.38%
N/A†
£5.20
£5.85
£0.00
N/A†
3 years
4.03%
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 10 September 2018 comprises £5.97 in respect of non-market
based performance conditions.
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.
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
2019
Tranche 1
575,210
2019
Tranche 2
575,349
2018
Tranche 1
450,047
2018
Tranche 2
449,915
Date of grant
10 September 2018 10 September 2018
11 September 2017
11 September 2017
Fair value at the measurement date
Share price
Exercise price
Expected volatility
Option life
Expected dividend yield
Risk free interest rate
£5.97
£5.97
£0.00
N/A†
1 year
3.38%
N/A†
£5.97
£5.97
£0.00
N/A†
2 years
3.74%
N/A†
£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†
†
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.
107
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2019
108
7. EMPLOYEES CONTINUED
d. Share-based payments continued
Share options outstanding
The following share options were outstanding at 30 June 2019:
7. EMPLOYEES CONTINUED
d. Share-based payments continued
Movements in the year
The number and weighted average exercise prices of share options is as follows:
Type of scheme
Long Term Share Incentive 2015
Long Term Share Incentive 2016
Long Term Share Incentive 2017
Long Term Share Incentive 2018
Deferred Bonus Incentive 2012 – Tranche 1
Deferred Bonus Incentive 2012 – Tranche 2
Deferred Bonus Incentive 2013 – Tranche 1
Deferred Bonus Incentive 2013 – Tranche 2
Deferred Bonus Incentive 2014 – Tranche 1
Deferred Bonus Incentive 2014 – Tranche 2
Deferred Bonus Incentive 2015 – Tranche 1
Deferred Bonus Incentive 2015 – Tranche 2
Date of grant
Number
of options
2019
Number
of options
2018
Exercise
price
14 September 2015
–
175,810
12 September 2016
308,714
308,714
15 November 2017
321,012
321,012
10 September 2018
335,604
23 October 2012
23 October 2012
24 September 2013
24 September 2013
8 September 2014
8 September 2014
14 September 2015
14 September 2015
4,656
4,656
4,642
4,642
3,615
10,133
18,055
18,059
–
4,656
4,656
6,562
8,374
15,619
34,851
56,179
76,860
Deferred Bonus Incentive 2016 – Tranche 1
12 September 2016
45,774
183,390
Deferred Bonus Incentive 2016 – Tranche 2
12 September 2016
59,868
622,100
Deferred Bonus Incentive 2017 – Tranche 1
11 September 2017
56,651
417,174
Deferred Bonus Incentive 2017 – Tranche 2
11 September 2017
378,972
417,053
Deferred Bonus Incentive 2018 – Tranche 1
Deferred Bonus Incentive 2018 – 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
10 September 2018
554,139
10 September 2018
554,270
–
–
21 November 2008
1 January 2012
1 January 2014
–
–
–
35,970
32,999
136,228
1 January 2015
137,678
154,273
1 January 2016
85,540
391,882
1 January 2017
768,706
886,247
1 January 2018
635,764
752,871
1 January 2019
665,318
–
The total share options outstanding at 30 June 2019 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 (2018: 1.4%).
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£1.25
£0.95
£1.98
£2.21
£3.70
£3.20
£4.90
£4.62
Long Term Share Incentive scheme:
Outstanding at the beginning of the year
Lapsed during the year
Exercised during the year
Granted during the year
Outstanding at the end of the year
Exercisable at the end of the year
Deferred Bonus Incentive scheme:
Outstanding at the beginning of the year
Lapsed during the year
Exercised during the year
Granted during the year
Outstanding at the end of the year
Exercisable at the end of the year
Company Share Option Plan:
Outstanding at the beginning of the year
Lapsed during the year
Exercised during the year
Outstanding at the end of the year
Exercisable at the end of the year
Save As You Earn scheme:
Outstanding at the beginning of the year
Lapsed during the year
Exercised during the year
Granted during the year
Outstanding at the end of the year
Exercisable at the end of the year
Number
of options
2019
Weighted
average
exercise price
2019
Number
of options
2018
Weighted
average
exercise price
2018
805,536
–
(175,810)
335,604
965,330
–
1,847,474
(285,500)
(994,401)
1,150,559
1,718,132
230,751
35,970
(35,970)
–
–
–
2,334,500
(295,938)
(457,773)
712,217
2,293,006
12,604
–
–
–
–
–
–
–
–
–
–
–
–
£1.25
£1.25
£1.25
–
–
£3.66
£4.08
£2.98
£4.62
£4.04
£3.70
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
£1.25
£2.81
£3.54
£2.15
£4.90
£3.66
£2.34
The weighted average share price at the date of exercise of share options exercised during the year was £6.07 (2018: £6.21).
The options outstanding at 30 June 2019 had a range of exercise prices of £nil to £4.90 (2018: £nil to £4.90) and a weighted
average remaining contractual life of 5.3 years (2018: 5.5 years).
The expected life used in the models has been adjusted, based on best estimates, to reflect exercise restrictions and
behavioural considerations.
The charge to income in relation to equity settled share-based payments in the year is £7m (2018: charge £9m).
109
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2019
110
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 charge for the year was £16m (2018: credit of £13m). A charge of £7m related to the defined benefit section of
the Scheme (2018: credit of £22m), with £nil being charged to the income statement (2018: charge of £nil) and a charge of £7m to
the statement of comprehensive income (2018: credit of £22m). The charge arising from the defined contribution section was
£9m (2018: £9m).
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 2020.
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
2019
n/a
3.1%
2.1%
2.3%
3.3%
2.3%
2018
n/a
2.9%
2.0%
2.9%
3.1%
2.1%
1
2
In respect of pensions in excess of the guaranteed minimum pension earned prior to 30 June 2006.
In respect of pensions in excess of the guaranteed minimum pension earned after 30 June 2006. Other pension increases are valued in a
consistent manner.
The 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_2018 1.50% Long Term Trend (2018: SAPS CMI_2017 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 21.9 years (2018: Male 22.0 years)
Male 23.2 years (2018: Male 23.0 years)
Female 23.9 years (2018: Female 23.9 years)
Female 25.2 years (2018: Female 25.0 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
2019
£m
2019
£m
Quoted
market price in
active market
No quoted
market price in
active market
2018
£m
2018
£m
2019
£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 in the Scheme
53
67
15
11
–
146
–
–
–
–
2
2
53
67
15
11
2
148
(130)
18
49
50
16
16
–
131
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 2019 (unchanged from 30 June 2018).
The total amounts credited/(charged) against income in the year were as follows:
–
–
–
–
2
2
2019
%
71
29
100
2018
£m
Total
49
50
16
16
2
133
(111)
22
2018
%
68
32
100
111
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Amounts included within the income statement:
Administrative expenses
Past service cost
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
2019
£m
2018
£m
(1.0)
1.0
–
13
–
(20)
–
(7)
(7)
–
–
–
5
1
11
5
22
22
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2019
112
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
At start of year
Amounts (charged)/credited against statement of comprehensive income
Employer contributions paid
At end of year
Changes in the present value of the defined benefit obligation:
At start of year
Past service cost
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
Normal employer contributions
Benefit payments
At end of year
Group and Company
2019
£m
2018
£m
22
(7)
3
18
111
1
3
(5)
–
20
–
130
133
4
13
3
(5)
148
(2)
22
2
22
130
–
3
(5)
(1)
(11)
(5)
111
128
3
5
2
(5)
133
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 110). 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 2017
Additions
At 30 June 2018
Additions
At 30 June 2019
Accumulated amortisation
At 1 July 2017
Charge
At 30 June 2018
Charge
At 30 June 2019
Net book value
At 30 June 2019
At 30 June 2018
At 30 June 2017
Approximate impact
2019
Approximate impact
2018
136.9
123.0
123.2
136.7
133.9
21.30
21.52
116.5
105.2
105.4
116.4
114.0
20.43
20.38
Goodwill
£m
Software
£m
Total
£m
1
–
1
–
1
–
–
–
–
–
1
1
1
2
1
3
–
3
1
1
2
–
2
1
1
1
3
1
4
–
4
1
1
2
–
2
2
2
2
113
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2019
114
9. PROPERTY, PLANT AND EQUIPMENT
The Group
Cost
At 1 July 2017
Additions
At 30 June 2018
Additions
At 30 June 2019
Accumulated depreciation
At 1 July 2017
Charge
At 30 June 2018
Charge
At 30 June 2019
Net book value
At 30 June 2019
At 30 June 2018
At 30 June 2017
10. INVESTMENTS
a. Investments
Joint ventures
Freehold
property
£m
Plant and
machinery
£m
Fixtures
and fittings
£m
Total
£m
17
–
17
2
19
4
–
4
1
5
14
13
13
3
–
3
–
3
3
–
3
–
3
–
–
–
8
1
9
2
11
5
2
7
2
9
2
2
3
28
1
29
4
33
12
2
14
3
17
16
15
16
Group
Company
2019
£m
6
6
2018
£m
6
6
2019
£m
–
–
2018
£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
2019
£m
2018
£m
2019
£m
2018
£m
6
(2)
(2)
2
4
6
1
(1)
–
–
–
–
–
–
–
7
(3)
(2)
2
4
6
38
(31)
7
–
7
(1)
6
(1)
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(i)
£4m of the loans to joint ventures are secured (2018: £4m).
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 2018 and 30 June 2019
Company
£m
–
115
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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 2019
is shown on page 116. 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.
The principal activity of Redrow Homes Limited, Redrow Real Estate Limited, Redrow Regeneration plc, The Waterford Park
Company Limited and The Waterford Park Company (Balmoral) Limited is residential development. The principal activity of
Harrow Estates plc is land acquisition, development and resale. HB (HDG) Limited is an intermediate holding company. St David’s
Park Limited principal activity is business park maintenance services. Those subsidiaries marked with † are non-trading.
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:
S
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(i)
c/o TLT LLP, 140 West George Street, Glasgow, G2 2HG
(ii)
13 Castle Street, St. Helier, Jersey, JE4 5UT
FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2019
116
10. INVESTMENTS CONTINUED
c. Investments in subsidiary undertakings continued
Subsidiaries
11. DEFERRED TAX ASSETS AND LIABILITIES CONTINUED
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
6825371
3996541
5405272
7587765
1189328
SC38052
2469449
3522335
2230870
2293006
4017345
3379746
3522321
Name
HB (1995) Limited (i) †
Redrow Homes (Wallyford) Limited (i) †
St David’s Park Limited
PB0311 Limited †
Debut Freeholds Limited †
Tay Homes (Western) Limited †
Tay Homes (Northern) Limited †
Tay Homes (Midlands) Limited †
Tay Homes (North West) Limited †
Redrow Homes (Park Heights) Limited (ii) †
Redrow Construction Limited †
Poche Interior Design Limited †
Redrow (Shareplan) Limited †
Cadmoore Limited †
Redrow (Sudbury) Limited †
537405
The Waterford Park Company Limited
4984069
1940936
2827161
2034733
2898913
1079513
3988594
SC231364
SC74732
The Waterford Park Company (Balmoral) Limited
HB (Herne Bay No 1) Limited †
HB (Herne Bay No 2) Limited †
Redrow Homes East Midlands Limited †
Radleigh Construction Limited †
Radleigh Homes Limited †
Radbourne Edge (Holdings) Limited †
Redrow Langley Limited †
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:
Deferred tax liabilities
At 1 July 2017
Credit to income
Charge to equity
At 30 June 2018
Credit to income
Credit to equity
At 30 June 2019
Employee
benefits
£m
Short-term
temporary
differences
£m
Total
£m
–
–
(4)
(4)
–
1
(3)
(3)
2
–
(1)
–
–
(1)
(3)
2
(4)
(5)
–
1
(4)
The Group has no material unrecognised deferred tax assets.
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 17%.
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
2019
£m
2018
£m
2019
£m
2018
£m
9
9
28
–
19
1
48
8
8
8
–
29
5
42
–
–
–
890
–
–
890
–
–
–
675
–
–
675
117
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E
N
T
S
Deferred tax assets
At 1 July 2017
Charge to income
Charge to equity
At 30 June 2018
Charge to income
Charge to equity
At 30 June 2019
Imputed
interest
£m
Short-term
temporary
differences
£m
Total
£m
3
–
–
3
–
–
3
2
(1)
–
1
–
–
1
5
(1)
–
4
–
–
4
Trade receivables due after more than one year are stated after an allowance of £5m has been made (2018: £7m) in respect of
expected credit losses. This allowance is based on an estimate of default rates. £1m provision was made during the year (2018: £nil).
£nil was utilised (2018: £1m). £nil provision was released during the year (2018: £nil) but £3m provision was transferred to be held
against current trade assets (2018: £nil). Current trade assets are therefore stated after an allowance of £3m (2018: £nil) in respect of
expected credit losses.
Trade and other receivables due between one and two years are £3m (2018: £2m), between two and five years are £6m (2018: £6m)
and due in more than five years are £nil (2018: £nil). 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 market rate on trading
balances.
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2019
118
13. INVENTORIES
Land for development
Work in progress
Stock of show homes
Cash on account
Group
Company
2019
£m
1,547
790
67
2,404
(107)
2,297
2018
£m
1,443
781
67
2,291
(73)
2,218
2019
£m
2018
£m
–
–
–
–
–
–
–
–
–
–
–
–
Inventories of £1,526m were expensed in the year (2018: £1,375m). Work in progress includes £3m (2018: £2m) in respect of part
exchange properties. Land held for development in the sum of £312m is subject to a legal charge as security in respect of
deferred consideration (2018: £229m).
Cash on account comprises £32m (2018: £4m) attributable to land and £75m (2018: £69m) 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 (2018: £nil).
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
As discussed in note 1, the Group considers the carrying value of inventories to be a critical accounting judgement.
Land creditors
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:
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
2019
Loans and
receivables
£m
2018
Loans and
receivables
£m
9
47
204
260
8
37
68
113
2019
Other
financial
liabilities
£m
2018
Other
financial
liabilities
£m
80
381
438
899
5
395
387
787
2019
Loans and
receivables
£m
2018
Loans and
receivables
£m
212
890
1,102
89
675
764
2019
Other
financial
liabilities
£m
2018
Other
financial
liabilities
£m
80
14
94
5
14
19
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.
119
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2019
120
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 2019, 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 were no interest rate swaps in place in 2019 or 2018.
The following table shows the profile of interest bearing debt together with its effective interest rates.
Effective
interest
rate
%
2.3
Total
£m
80
80
2019
Zero
to one
year
£m
One
to two
years
£m
Two
to five
years
£m
Effective
interest
rate
%
–
–
–
–
80
80
2.6
2018
Zero
to one
year
£m
One
to two
years
£m
Two
to five
years
£m
–
–
–
–
5
5
Total
£m
5
5
Bank loans –
floating rate
14. FINANCIAL RISK MANAGEMENT CONTINUED
b. Maturity of bank loans and borrowings continued
The Company
Due between two and five years
2019
2018
Bank
overdraft
£m
–
–
Bank
loans
£m
85
85
Bank
overdraft
£m
–
–
Bank
loans
£m
5
5
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 2019.
At the year end, the Group and Company had £170m (2018: £245m) 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 IFRS 9, 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.
For the year ended 30 June 2019, 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 less than £1m (2018: £1m).
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:
b. Maturity of bank loans and borrowings
The maturity of bank loans and borrowings is as below:
The Group
Due between two and five years
2019
2018
Bank
overdraft
£m
–
–
Bank
loans
£m
85
85
Bank
overdraft
£m
–
–
Bank
loans
£m
5
5
2019
2018
d. Maturity of trade and other payables
These represent current liabilities due within one year.
Balance
at 30 June
£m
438
387
Total
contracted
cash
payment
£m
446
394
Due
less than
one year
£m
271
209
Due
between
one and
two years
£m
Due
between
two and
five years
£m
137
144
38
41
Maturities above include estimated interest payable to the maturity of the facilities.
121
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2019
122
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
2019
£m
204
204
2018
£m
68
68
2019
£m
212
212
2018
£m
89
89
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 2019 and 30 June 2018 are as follows:
Total borrowings
Less cash and cash equivalents
Net (cash)
Equity
Total capital
Operating profit adjusted for joint ventures
ROCE (Operating profit as above as a percentage of opening and closing total capital)
Gearing ratio
2019
£m
80
(204)
(124)
1,585
1,461
411
28.5%
N/A
2018
£m
5
(68)
(63)
1,483
1,420
388
28.5%
N/A
g. Fair values
At 30 June 2019 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
2019
£m
167
167
347
271
27
–
7
6
68
726
2018
£m
178
178
336
209
52
–
7
3
64
671
2019
£m
2018
£m
–
–
–
–
–
14
–
–
16
30
–
–
–
–
–
14
–
–
16
30
Amounts due to subsidiary companies are unsecured, repayable on demand and bear interest at market rate on trading
balances.
16. LONG-TERM PROVISIONS
The Group
At 1 July 2018
Provisions created during the year
Provisions released during the year
Provisions utilised during the year
At 30 June 2019
Onerous
contracts
£m
Other
£m
Total
£m
1
–
–
–
1
8
–
(1)
–
7
9
–
(1)
–
8
123
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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
As at 1 July 2018 (ordinary shares of 10p each)
As at 30 June 2019 (ordinary shares of 10.5p each)
Number of
ordinary shares
369,799,938
352,190,420
On 8 April 2019, 369,799,941 B shares of 0.1 pence each were allotted and issued to shareholders on the basis of 1 B share for
every existing ordinary share of 10 pence each held at the record date. Following the purchase by Barclays of all of the B shares,
and payment by the Company of a single dividend to Barclays as holder of all of the B shares, the B shares were reclassified as
deferred shares of 0.1 pence and were immediately repurchased and cancelled by the Company.
Alongside the B Share Scheme, on 8 April 2019 the issued share capital of the Company was consolidated. Each shareholder at
the record date received 20 new ordinary shares of 10.5 pence each for every existing 21 ordinary shares of 10 pence each held.
On 29 March 2019, in order to ensure that a whole number of new ordinary shares was created following the implementation of
the share consolidation, 3 existing ordinary shares were issued by the Company to the Employee Benefit Trust. Following the
consolidation, the total number of shares in issue is 352,190,420 ordinary shares of 10.5 pence each.
Options granted to Directors and employees under the LTIP, the CSOP and the SAYE schemes are set out in note 7d.
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2019
124
18. SHARE CAPITAL, SHARE PREMIUM ACCOUNT AND RESERVES
The Group
19. MOVEMENT IN NET CASH
The Group
At 1 July 2017
Total comprehensive income
Dividends paid
Movement in respect of LTIP/SAYE
At 30 June 2018
Total comprehensive income
Dividends paid
Movement in respect of LTIP/SAYE
At 30 June 2019
Share
capital
£m
Share
premium
account
£m
Other
reserves
£m
Retained
earnings
£m
37
–
–
–
37
–
–
–
37
59
–
–
–
59
–
–
–
59
8
–
–
–
8
–
–
–
8
1,131
326
(74)
(4)
1,379
323
(218)
(3)
1,481
Cash and cash equivalents
Bank loans
Net cash
The Company
Cash and cash equivalents
Bank loans
Net cash
Other reserves
Other reserves consists of a £7m Capital redemption reserve (2018: £7m) and a £1m Consolidation reserve (2018: £1m).
20. OPERATING LEASE COMMITMENTS
Undistributable reserves
Other reserves are not available for distribution.
The Company
At 1 July 2017
Total comprehensive income
Dividends paid
At 30 June 2018
Total comprehensive income†
Dividends paid
At 30 June 2019
† Includes dividends received from subsidiary companies.
Other reserves
Other reserves consists of a £7m Capital redemption reserve (2018: £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
19
(74)
646
480
(218)
908
At
1 July 2018
£m
Cash flow
£m
At
30 June 2019
£m
68
(5)
63
136
(75)
61
204
(80)
124
At
1 July 2018
£m
Cash flow
£m
At
30 June 2019
£m
89
(5)
84
123
(75)
48
212
(80)
132
2019
£m
2018
£m
3
5
1
3
4
1
Within one year
Within two to five years
Later than five years
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 £136m (2018: £117m) at the year end and consider the
possibility of a cash outflow in settlement to be remote.
125
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2019
126
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 60 to 79. 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 £0.3m
(Company £0.3m), primarily relating to the donation to The Steve Morgan Foundation as described in the Directors’ Remuneration
Report on pages 60 to 79 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 2019, 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 2019 was £890m (2018: £675m). The amount owed to
subsidiary undertakings at 30 June 2019 was £14m (2018: £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 £nil loan repayments from its joint ventures, Menta Redrow Limited and Menta Redrow (II)
Limited. It also received a £1.7m 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
GDV
Gross Development Value
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
127
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Redrow plc Annual Report 2019
128
Redrow plc Annual Report 2019
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: 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 Square
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
Operating profit as a percentage of turnover
Profit before tax
Net assets
Net cash/(debt)
2015
£m
1,150
213
18.5%
204
873†
(154)
2016†
£m
1,382
261
18.9%
250
1,041
(139)
Gearing – net debt as a percentage of capital and reserves
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 inc cash return
22.8%
26.4%
4,022
44.5p
4.0p
23.7%
26.1%
4,716
55.4p
8.0p
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
2019
£m
1,920
382
19.9%
380
1,483
63
N/A
28.5%
28.0%
5,718
85.3p
20.0p
2,112
411
19.5%
406
1,585
124
N/A
28.5%
26.5%
6,443
92.3p
59.0p
Net assets per ordinary share
236.1p†
281.5p
334.0p
401.0p
450.0p
† Restated to reflect change in accounting policy.
129
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