2020
ANNUAL REPORT
REDROW ANNUAL REPORT 2020
Performance Summary
£2,112m
£1,920m
£1,660m
£1,382m
£1,339m
£250m
£406m
£380m
£315m
92.3p
85.3p
70.2p
55.4p
£140m
32.9p
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20
16
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19
20
16
17
18
19
1818
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£1,339m
Revenue
-37%
£140m
Profit before tax
-66%
32.9p
Earnings per share
-64%
6,443
£1,422m
£1,047m
5,718
5,319
4,716
£1,144m
£1,030m
£1,015m
£848m
£857m
£780m
4,032
£899m
£654m
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SUNNINGDALE GREEN, HERNE BAY, KENT
Contents
STRATEGIC REPORT
GOVERNANCE REPORT
FINANCIAL STATEMENTS
Performance Summary
01
02 Our Investment Case
04 Our Strategy
06 Our Business Model
08 Chairman’s Statement
10
Group Chief
Executive's Statement
14 Operating Review
Financial Review
29
32 Section 172(1) Statement
Risk Management
38
49 Corporate Governance
117
Report
Independent Auditors’
Report
50 Board of Directors
64 Audit Committee Report
71 Nomination Committee
75
78
Report
Placemaking and
Sustainability
Committee Report
Directors’ Remuneration
Report
101 Directors’ Report
116 Statement of Directors’
Responsibilities
126 Consolidated Income
Statement
126 Statement of
Comprehensive Income
127 Balance Sheets
128 Statement of Changes
in Equity
129 Statement of Cash Flows
130 Accounting Policies
136 Notes to the Financial
Statements
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4,032
Legal completions
-37%
Award highlights
£1,422m
Order book
+40%
See note 23
£1,047m
Work in progress*
+22%
* including showhomes
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SHAREHOLDER
INFORMATION
162 Corporate and
Shareholder
Information
163 Five Year Summary
Find more information at:
redrowplc.co.uk
COVER IMAGE: THE OAKS AT TAYLOR'S CHASE, WARRINGTON, CHESHIRE
02
Redrow plc Annual Report 2020
STRATEGIC REPORT
Our Investment Case
Successful leadership team
Redrow has a strong, experienced and successful leadership
team and remains committed to succession planning and
developing the next generation of homebuilders.
14%
of workforce on structured training programmes *
257
internal promotions in year
Placemaking
We focus on delivering high quality homes and creating
attractive, sustainable and vibrant places to live.
£188m
committed to fund improvements to local
communities *
944
affordable homes delivered to our communities
Excellent product range
Redrow has an excellent product range which continues to
evolve.
c£1.6bn
revenue value of private reservations secured
in the year *
Creating communities
a key focus
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Expertise in land buying
Redrow has the expertise and resources to ensure that the
right land opportunities are secured in geographic locations
aligned to our strategy.
c3,600 plots
added to current land holdings including from
forward land
c1,700 plots transferred
from forward land to owned land holdings
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.
91.9%
customer recommendation - 5 star status *
92%
of employees would recommend Redrow to a friend
A strong, efficient and resilient balance sheet
Redrow has net assets of c£1.6bn. The Group focuses medium
term on delivering superior levels of return on equity and return
on capital employed from an efficient use of its capital base.
8.7%
return on equity *
Nil cash
return to shareholders in 2020 due to cash
conservation in response to COVID-19 pandemic
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* See note 23
04
Redrow plc Annual Report 2020
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
2021
TARGETS
KEY PERFORMANCE
INDICATORS
2020
2019
EPS
DPS
• Guidance withdrawn*
32.9p
92.3p
• Guidance withdrawn*
–
30.5p
Revenue
• Guidance withdrawn*
£1,339m £2,112m
Average Sales Outlets
• 118
110
126
Monies
committed
to fund
improvements
to local
communities
• Continued
investment in local
communities
£188m
£314m
• Affordable
homes delivered
944
1,712
ROCE
• Guidance withdrawn*
9.2%
28.5%
Land holding
years
Waste diverted
from landfill
90% or more
customer
recommend
rating
Private
reservation rate
• Maintain land
holdings at c4 years
6.2 years 4.0 years
• >95%
97.4%
97.7%
• HBF 90% customer
recommend rating
91.9%
90.9%
• Maintain an
appropriate balance
in availability of
product in the right
locations
0.74
0.66
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
workforce
14%
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
• Maintain at 0.3
or below
0.38
0.36
* Financial guidance withdrawn due to economic uncertainty surrounding COVID-19.
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06
Redrow plc Annual Report 2020
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 stakeholders.
Buildin g
Resp o n sibly
stomer & M ark e ti n
u
C
Thriving
C ommunities
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Land, Pla
V
aluin
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INPUTS
Land Holdings
Our People
Our Placemaking Skills
Our Financial Resources
G
o
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Creating long-term
sustainable value
C
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C o m m
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s
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e rcial & Syste
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 results are 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. Our 8 placemaking principles, ‘Redrow 8’ are based on a customer-focused approach to creating better places
to live. By using these principles we will ensure that we leave a legacy of attractive, sustainable and vibrant places to live for
generations to come.
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.
Our People
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 2020
STRATEGIC REPORT
Chairman’s Statement
“I am immensely proud of the way our team and the wider
workforce responded to the crisis and continue to do so.”
part-time basis. All furloughed employees returned to work by
the end of June and, as a result of the Group’s resilient cash
flow, we decided not to utilise the Government’s Job Retention
Scheme and returned all payments received under the Scheme.
The COVID-19 pandemic had a profound impact upon the
Group’s performance in the 2020 financial year but we have
entered the new financial year in a position of considerable
strength. We have a record order book of £1.42bn (2019:
£1.02bn) (see note 23) and brought forward very high levels of
work in progress. This was due in part, to increased investment
earlier in the year in anticipation of strong demand for Help to
Buy ahead of changes to the scheme next year. Our robust
COVID-19 protocols are operating well across the business
and, as the workforce have adjusted to the new ways of
working, build output is progressively returning to pre-COVID
levels commensurate with reducing work in progress. We
expect, and have planned for, our protocols to remain in place
for many months to come.
FINANCIAL RESULTS
The Group’s results were significantly affected by COVID-19 in a
financial year that was budgeted to be disproportionately
weighted to the final quarter. The temporary closure of sites and
adapting to new ways of working, resulted in only 264
completions in the final quarter of the year compared to 2,345 in
2019. As a consequence, turnover for the year was down by 37%
to £1.34bn (2019: £2.11bn).
The significantly reduced turnover combined with substantial
costs attributable to COVID-19 and impairments associated with
the decision to scale back the London business, resulted in a
loss in the second half and pre-tax profits reducing to £140m
(2019: £406m) for the year.
Despite the reduction in turnover in the second half, the
measures taken to protect cash flow resulted in the Group
ending the financial year with £126m of net debt (2019: £124m
net cash) (see note 20).
STRATEGY
The housing market is entering a period of change. The
COVID-19 pandemic will have an enduring impact upon the
market as the economy recovers and consumer experiences
during lockdown influence future preferences and priorities.
The successful Help to Buy scheme is also scheduled to
change at the end of March 2021 and end in March 2023. The
scheme has supported thousands of buyers since its inception
in 2013 across a wide range of homes and locations.
Redrow’s reputation for placemaking to create great places to
live, and its established award winning Heritage Collection of
homes, position the business to meet changing customer
priorities. The Collection appeals to a broad range of buyers
across new and second hand markets and has proved
remarkably adaptable over the years as it has evolved in
JOHN TUTTE
Executive Chairman
I am immensely proud of the way our team and the wider
workforce responded to the COVID-19 crisis and continue to
do so. I am also grateful to everyone associated with Redrow
for their willingness to embrace our new ways of working that
prioritise the health and wellbeing of our customers,
employees, subcontractors and suppliers.
Our immediate response to the pandemic in March was to
temporarily close all our sales centres and construction sites.
An orderly and phased return to construction only began in
May when it was safe to do so following the development and
implementation of robust COVID-19 protocols. Sales centres in
England also re-opened in May for customers on an
appointment only basis with stringent safeguarding measures
in place, and fully opened in mid-June as non-essential retail
restrictions were relaxed. Sales offices in Wales opened later
in June as restrictions there were lifted.
As a precaution against the risk of an extended lockdown, the
Group acted decisively to put in place measures to protect its
cash flow and arrangements to increase its banking facilities.
The Revolving Credit Facility was increased by £100m to
£350m and the Group gained eligibility as an issuer for the
Government’s COVID Corporate Funding Facility (CCFF) with
an insurer limit of £300m. Given the timely return to work and
the effectiveness of measures to protect its cash flow, the
Group has not drawn on the CCFF.
As part of its measures to protect cash flow, the Group
furloughed around 80% of its employees and the entire
directorate volunteered to take a 20% cut in salary and the
Executive team also waived their 2020 bonus entitlement. The
Group’s advanced and robust IT systems support remote
working and, whilst divisional offices have re-opened, many
colleagues continue to work effectively from home on a full or
response to changing customer and regulatory demands. The
Collection achieves high levels of customer satisfaction with a
five star rating in the HBF Annual Customer Satisfaction Survey.
The Heritage Collection is well established across all our
regional businesses and our teams are accustomed to plotting
the product to consistently achieve superior returns compared
to bespoke designs. There remains considerable scope to
further utilise the Heritage Collection to grow the regional
divisions and expand into new geographical areas. We have
therefore decided, following a detailed review, the Group
should focus on this core strength together with a continuing
emphasis on quality, service, addressing climate change and
improving biodiversity – putting customers and the
environment at the heart of our strategy.
As part of this strategy, the Group announced at the end of
June it is scaling back its London business. Our plan is to
principally limit the Group’s London activities to the successful
Colindale Gardens development. The significant impairments
and related costs totalling £35m associated with scaling back
the London business have been fully provided for in the 2020
accounts.
BOARD CHANGES
Matthew Pratt was appointed Group Chief Executive on 1st July
2020. Matthew has extensive operational experience in the
industry and has worked for Redrow for over 17 years. His
career has progressed through all senior management levels
within the Group and prior to his appointment as Chief
Executive, he was Chief Operating Officer.
My intention was to step back to Non-Executive Chairman at
the end of June to coincide with Matthew’s appointment and to
retire from the business ahead of the 2021 AGM. However, in
response to the ongoing challenges due to COVID-19, and at
the request of the Board, I have agreed to continue in an
executive capacity to support Matthew and the senior
management team until November 2020. I will then continue as
Non-Executive Chairman until a replacement is appointed
ahead of the AGM in 2021 for which a search has already
commenced.
I was delighted to welcome Nicky Dulieu to the board as a
Non-Executive Director during the year. Nicky has extensive
board experience and considerable knowledge of the retail
sector.
Vanda Murray has decided to step down from the Board due to
work commitments. I am grateful for Vanda’s valuable
contribution during her tenure and wish her every success for
the future. Nicky Dulieu will replace Vanda as Chair of the
Remuneration Committee following the close of this year’s AGM.
TRADING AND OUTLOOK
The Group secured 4,222 private reservations in the year with
a value of £1.61bn (2019: £1.67bn) (see note 23). As a result of
the Group’s strong sales performance earlier in the year, and
the significant shortfall in legal completions due to the
COVID-19 lockdown, the Group entered the new financial year
with a record order book of £1.42bn (2019: £1.02bn).
Since sales centres re-opened in May, the Group has seen
strong demand, especially from buyers wanting to use the Help
to Buy scheme ahead of next year’s changes and those
wishing to benefit from the Stamp Duty Land Tax (SDLT)
holiday. However, whilst the Group is well positioned it is also
conscious of a number of factors that could adversely affect
the market in the medium term. In particular, the ongoing
impact of the COVID-19 pandemic, the possibility of a no-deal
exit from the EU and the ending of the SDLT holiday.
Whilst there remains a significant under-supply of new homes,
the demand for open-market housing is very dependent upon
the strength of the economy and in particular, the availability
and affordability of mortgages and buyers being able to fund
deposits. Low interest rates continue to keep mortgages at
historically affordable levels, however, the recent reduction in
the availability of high loan to value products will affect some
buyers, particularly those that will not qualify for the Help to
Buy scheme next year.
We broadly welcome the Government’s ‘Planning for the Future
Consultation’ which, in time, proposes to streamline and
modernise the planning process and improve the supply and
delivery of new homes. The immediate priority however, must
be to support the demand-side through this period of
economic uncertainty. The impact of the SDLT holiday expiring
in March to coincide with the changes to the Help to Buy
scheme could disrupt a sustainable recovery. We would
therefore urge government to consider taking steps to avoid a
hiatus in the market, including a long-term reform of SDLT to
free-up more cash for deposits at a time when the high loan to
value mortgage market is constrained. The SDLT holiday is
clearly demonstrating that cutting rates is a highly effective
way to stimulate the entire housing market and help revitalise
the wider economy.
Although there remains uncertainty on the horizon, the Group
is well placed to deliver a robust performance. We have
completed substantially more homes in the first few weeks of
the new financial year than during the comparable period last
year whilst maintaining a record order book as a result of keen
demand for our Heritage Collection homes.
This, combined with reduced investment in London, will deliver
strong operating cash flow over the coming months to support
our regional growth plans and we expect to be cash positive at
the end of the financial year. As a result, and, subject to market
conditions, we expect to resume dividend payments in 2021.
The Group’s resilience in these challenging times is testament
to the dedication and commitment of the whole Redrow team
and, as ever, I am hugely grateful for their ongoing support.
JOHN TUTTE
Executive Chairman
15 September 2020
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10
Redrow plc Annual Report 2020
STRATEGIC REPORT
Group Chief Executive’s Statement
“Our order book represents a strong foundation to underpin the
business in 2021.”
with a strong rate of sale, delivers industry-leading revenues
on an outlet basis for a typical housing development.
Last year our average private house floor area was 1,294 sq ft
and the desirability of Heritage homes which already account
for over 80% of turnover is further increasing as customers
realise how important the space and layout of their home is
when potentially faced with having to spend more time at
home. As we continue to build in prime locations many of our
homes are within reach of families aspiring to a larger home.
Taking these facts and trends into account my aim is to evolve,
rather than revolutionise, our successful strategy. At the same
time we will drive forward our market advantage in areas such
as digital and online services.
Following a strategic review of our London operations we
made the decision to exit from all sites over time, with the
exception of our Colindale Gardens development.
Making acceptable returns in London has become increasingly
more difficult in recent years. There remains downward
pressure on the London market created by weak overseas
demand, shifting social trends, which suggest many buyers are
now looking to live and work outside the Capital, and a
convoluted two-tier planning system that has not responded to
any of these changes.
We will however continue with our Colindale Gardens
development, on the site of the old Hendon Police Training
College and on the outskirts of the Capital. During the year we
received a planning resolution for a further 1,200 plots, which
will result in the development delivering c4,000 homes and
continuing to account for the majority of our London-associated
revenue. The size of the scheme has allowed us to integrate
many of our Redrow placemaking principles, which will ensure
this will be a desirable location long after we have finished
construction.
Our well established divisional network across England and
Wales has the capacity to offset the reduction in London and
maintain overall growth whilst still continuing to satisfy strong
consumer demand for our core Heritage product.
Following lockdown our sales rate has remained strong
highlighting the demand for our quality homes and places.
In anticipation of the strong demand for Help to Buy ahead of
the planned changes to the scheme next year, we have
entered the year with a very strong WIP position. We have
increased the number of plots under construction by 13%. This,
together with advanced build stages results in the equivalent
units work in progress being 48% ahead of the previous year.
MATTHEW PRATT
Group Chief Executive
INTRODUCTION
The onset of COVID-19 had a significant impact on the
business in the financial year under review. Total legal
completions (including JV) reduced to 4,032 compared to
6,443 in the previous year with revenues falling to £1.34bn
(2019: £2.11bn).
We ended the financial year with a record forward order book
of £1.42bn (2019: £1.02bn) of which 70% was already
exchanged. This represents a strong foundation to underpin
the business in 2021, particularly in terms of cash generation
through what might be an uncertain trading period.
This is an extraordinary time for the business, and indeed the
nation. I‘m exceptionally proud of our teams and how they have
and continue to respond to the challenge. Our colleagues,
suppliers, and subcontractors are tirelessly working together to
deliver the best possible outcomes for our customers. This
close collaboration is also helping to prepare the business for
the long-term changes being driven by COVID-19.
As everyone adapts to the impact of the pandemic, customers
are naturally reassessing what is important to them. Our
strategy of delivering high quality, predominantly detached
homes – combined with our strong placemaking principles –
are now more desirable than ever before to homebuyers
searching for more space and ‘a better way to live’.
This strategy gives us a high level of differentiation, and
together with disciplined cost control, means Redrow is well
positioned to navigate all market conditions. Our average
private selling price of £386,700 (2019: £389,500) combined
Ensuring the safety of all personnel remains our priority and, as
trades have become more familiar with revised working
practices, productivity has continued to improve. Meanwhile,
our strong opening WIP position is compensating for reduced
productivity until we fully return to pre-COVID-19 levels.
PEOPLE
At the beginning of COVID-19 we took some immediate steps
to protect the business, whilst supporting customers,
colleagues and front-line workers.
INVESTING IN PLACES
Prior to the COVID-19 pandemic the Group added 3,614 plots
to the current land bank and, after taking into account legal
completions, land sales, re-plans and our London review, our
owned and contracted land holdings with planning totalled
27,000 plots (2019: 28,566 plots). Pull through from Forward
Land accounted for 1,721 of the plots added.
We temporarily postponed the purchase of new land as part of
measures to protect cash flow at the onset of COVID-19 and
also renegotiated favourable deferment terms on our existing
obligations.
Post lockdown we have returned to the market, taking a
sensible and balanced view with regard to land acquisition.
Land agreements will be made on a case by case basis, with
preference given to those deals which are either at strong
margins or alternatively are subject to planning with walk away
provisions should we see any material changes in the market.
Our cautious and selective approach to the land market will
inevitably have an impact upon outlet growth in the next
financial year. We do however, continue to target moderate
growth and we will accelerate our land buying activities when
the time is right.
As part of our strategy to create better places to live, we are
progressing our work to address climate change and improve
biodiversity. We have been awarded a gold level status in this
years NextGeneration Benchmark, retaining third place for the
fourth year in a row. The NextGeneration Benchmark assesses
and ranks the sustainability performance of the UK’s 25 largest
housebuilders.
This success follows us receiving the 2019 NextGeneration
Innovation Award in June, which is awarded to a homebuilder
that has demonstrated initiatives that go far beyond the criteria
used for the benchmark.
We were recognised for our commitment to supporting healthy
communities by developing a unique social value calculator.
We were proud to support the NHS during the crisis with a
number of initiatives, including offering our Show Homes on a
site near Basildon for doctors and nurses to sleep between
shifts; donating personal protection equipment to NHS
Hospitals across the country and supporting colleagues who
selflessly decided to volunteer whilst on furlough.
The Health & Wellbeing of our people remains a priority. We
have now trained over 200 Mental Health First aiders and
earlier this year we supported the ‘Time to Talk’ day aimed at
raising awareness of mental health issues. Notwithstanding
this, colleagues, subcontractors and their families will still have
access to a 24-hour confidential phone line externally manned
by professionals to help in times of need.
HEALTH, SAFETY & ENVIRONMENTAL
Early on in the COVID-19 outbreak, our teams began to plan for
return to work protocols and liaised closely with industry
bodies to develop best practice.
Our construction, sales centre and customer service videos
received thousands of views both from within, and outside, the
housebuilding industry. We were proud not just to support our
own colleagues, but to help others, in particular, SME’s without
the resources to develop and promote protocols.
All our workplaces are COVID-19 secure and we helped to
shape the co-produced Government and Home Builders
Federation charter on safe working practice with regard to
COVID-19 safety protocols.
Reflecting our commitment to Health, Safety & Environmental,
three of our site managers have received ‘Highly Commended’
awards at the NHBC’s annual Health and Safety Awards. Now
in their tenth year, the awards are given to site managers who
demonstrate an outstanding level of health and safety
management from planning through to execution.
CUSTOMERS & QUALITY
Once again, we were proud to secure a number of top
customer service accolades.
From guaranteeing that 99.9% of our timber was responsibly
secured to ensuring 97.7% of our waste was diverted from
landfill in 2019, we have continued to fulfil our company ethos
of building responsibly and protecting the environment.
We have also teamed up with The Wildlife Trusts to develop a
robust group-wide wildlife strategy for all of our sites, and we
are also partners with the Bumblebee Conservation Trust,
which has seen us introduce a variety of pollinator-friendly
measures, resulting in the implementation of hedgehog
highway networks, bat bricks and bird boxes to encourage
local wildlife.
We were again a HBF Five Star Customer Excellence Award
winner, with our score trending above the majority of the major
homebuilders with a recommendation score of 91.9%.
Throughout the year, we were continually rated as ‘Excellent’
on Trustpilot and it was particularly pleasing to see the many
positive customer comments about colleagues across the
business, working in sales, construction and customer service.
Twenty one of our site managers were awarded NHBC Pride in
the Job awards recognising their dedication to quality and will
now go forward to the next stage of the awards.
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Redrow plc Annual Report 2020
STRATEGIC REPORT
Group Chief Executive’s Statement continued
This customer service performance is underpinned by our iPad
quality inspection tool which enables site managers to take
before and after pictures of every build stage. This industry
leading technology is the foundation of our customer service
performance and we are already beginning to see the benefits
in further improved quality and efficiencies.
We remain the only major homebuilder to be a member of the
Institute of Customer Service (ICS), sponsoring a number of
colleagues on its industry accreditation scheme and sharing
best practice.
In response to the COVID-19 pandemic we expanded our
customer experience, including introducing zoom calls for
potential homebuyers and virtual Hard Hat tours by site teams
to guide customers around their homes at pre-plaster stage.
Our inspection apps were also adapted to enable customers to
complete their own Home Preview tours whilst maintaining
social distancing.
MARKET OUTLOOK AND CURRENT TRADING
The government has recognised that the home building
industry has a big role to play in the country’s economic
recovery. It is committed to tackling the chronic housing
shortage and meeting its 300,000 new homes per year target
by the mid 2020’s.
We welcome both the introduction of the stamp duty holiday
and the extension of Help to Buy to ensure prospective
homeowners aren’t disadvantaged by changes to build
schedules caused by COVID-19.
Once again, I would like to thank the Redrow team, customers,
shareholders and all partners for their support, dedication and
understanding during the last few months.
It is likely there will be a level of market uncertainty for the
foreseeable future. However, Redrow is very well placed to
navigate all market conditions. Our level of differentiation,
combined with social trends towards customers desiring
quality family homes in great places, has resulted in an
encouraging sales rate following the business’ re-start. For the
first 11 weeks of the current financial year our sales rate has
been very strong at 0.84 (2019: 0.68). We currently have a
record forward order book of £1.53bn (2019: £1.33bn), which
provides further certainty going forward. Overall, we have an
excellent platform to continue delivering and evolving
Redrow’s successful strategy in the future.
MATTHEW PRATT
Group Chief Executive
15 September 2020
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THE COPSE, DEVON
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Redrow plc Annual Report 2020
STRATEGIC REPORT
Operating Review
LAND, PLANNING & DESIGN
At Redrow we use our planning and
design skills to develop our quality land
holdings into well-designed, sustainable
and vibrant places to live.
OWNED AND CONTRACTED
LAND BY GEOGRAPHY (PLOTS)
2020
2019
North
Central
South
Greater London
2020
5,459
8,024
10,785
2,732
2019
5,580
8,398
11,251
3,337
27,000
28,566
FORWARD LAND BY CATEGORY (PLOTS)
2020
2019
Land owned without planning
Land contracted without
planning
Options with housing allocation
2020
2,504
2,577
8,618
Options with realistic prospect
17,001
2019
3,185
1,281
9,935
17,099
30,700
31,500
THE IMPORTANCE OF PLACEMAKING
The renewed focus of Central Government on placemaking
and the delivery of beautiful places to live has in the last 12
months seen the publication of the National Design Guide
(NDG) in October 2019 as well as the final report of the
Building Better, Building Beautiful Commission at the end of
January 2020.
At Redrow we are very well-placed to embrace this new
agenda and on publication of the NDG we refined our
assessment criteria for our internal placemaking scoring
system (the Redrow 8) to reflect the key characteristics of
well-designed places set out in the Government guidance.
Our placemaking principles are embedded into how we
approach all of our new developments and this year our
Group Master Planning Team held two design seminars for all
of our design managers to share and discuss best practice
and how we can deliver places of the highest quality. This
sharing of ideas and best practice was supplemented by the
launch of our placemaking e-learning course for all staff,
designed to further develop their knowledge of key
placemaking and urban design principles and how they are to
be applied to our new communities.
We have compiled two new comprehensive design manuals,
one for use by our divisional teams and one for use by
external design consultants engaged to assist in the design of
our new developments. The manuals cover all aspects of site
layout and landscaping and are rooted in the delivery of our
placemaking principles, ensuring that every design decision
we make contributes to the creation of a successful and
beautiful place to live. The new manuals also reflect and
address the latest requirements for biodiversity net gain and
the focus on creating sustainable places to live.
We are changing our approach to landscaping to create more
natural, wildlife friendly planting designs which complement
our beautiful homes. For example, at our Woodford
development, we have seeded and planted the swales with
wildflower mixes, grasses and more mature trees giving a less
ornamental and more natural feel to these areas.
Our Group Master Planning team is responsible for working
with all of our divisions to promote our placemaking approach
and to advise on how emerging schemes might be revised or
refined to ensure that we deliver the best quality place we
can on each site. This includes regular project design review
process and assessment of emerging layouts against our 8
placemaking principles. Our Redrow 8 scoring system means
that we can assess a project at a number of stages from the
drawing board to delivery on site to test and review our
progress against our urban 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.
Communicating our placemaking vision to our customers is
important to us. To assist with this we have developed a
series of placemaking videos for customers, explaining how
we ensure that all of our developments respond to the unique
characteristics of the site and the surroundings, provide
places that are easy to get around and accessible, embrace
the natural environment and provide places to go and things
to do.
LAND
Our land buying expertise, resources and placemaking abilities
help Redrow secure quality land holdings. During the financial
year, the Group acquired c3,600 plots with planning
permission to add to our current (owned and contracted) land
holdings, being extremely selective with our land purchases in
the second half of the financial year in the light of the COVID-19
pandemic. As a result, after 4,032 legal completions, allowing
certain contracts to lapse and the impact of the London scale
back, we closed the year with 27,000 plots in the current land
holdings (2019: 28,566). This represents a c6 year land supply
based on legal completions in the financial year (2019: c4
years). Approximately 40% of our current land holdings are in
the South, 30% in the Central Region, 20% in the North and
10% in Greater London.
Forward land continues to make a significant contribution to
land additions, delivering 48% (2019: 40%) of the c3,600
current land additions in the year across 8 sites. We closed the
year after transfer to the current land holdings, the impact of
the London scale back and strategic reviews with forward land
holdings of 30,700 plots (2019: 31,500 plots).
DEVELOPMENT THAT ENHANCES NATURE
The launch of our industry-leading biodiversity strategy in
summer 2020 coincided with a new-found public appreciation of
the importance of ‘doorstep nature’, following COVID-19
stay-at-home restrictions. During the lock-down, people
increasingly turned to nature and green spaces for solace and to
support their mental and physical wellbeing. Natural England
reports that in May 2020, 74% of adults were taking more time to
notice and engage with everyday nature, such as listening to
birdsong or noticing butterflies. Our strategy – created in
partnership with The Wildlife Trusts - aims to help our
communities do just that. Our vision is to create the best new
developments for wildlife, where people benefit from access to
nature-rich spaces; and to use our activities to increase
biodiversity, inspiring other businesses to do the same.
THE SWALES AT WOODFORD GARDEN VILLAGE, CHESHIRE
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Redrow plc Annual Report 2020
STRATEGIC REPORT
Operating Review continued
SOCIAL HOUSING
LEGAL COMPLETIONS (%)
27
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The strategy contains a series of commitments to help us
achieve our vision, by creating developments:
• That contribute to wider ecological networks;
• That provide more biodiversity after development than was
there before;
• That are planted in a way that reflects the local landscape
character with native species;
• Where wildlife can move through the development using
green corridors;
• Where local communities are involved in the design and care
of the green spaces;
• That are enticing and accessible to the community with
engagement to help them enjoy and understand the wildlife
around them;
• That improve with time through community engagement and
effective long-term management;
• Where the benefits for nature and people will be measured.
This partnership is the first time a representative from The
Wildlife Trusts has been seconded to a housebuilder. Reflecting
on her experience, secondee Rosie Whicheloe, a Landscape
Ecologist from London Wildlife Trust remarks:
“The Government’s intention to make biodiversity net gain
compulsory through the planning system was a driver for this
strategy, but Redrow have long recognised that people are an
important part of the equation too, and so do the Wildlife Trusts.
This means we need to restore nature on a massive scale – not
only where we work and play but also where we live. Yet,
environmental organisations can’t achieve this without
collaborating with others such as house builders. We need to
apply the Lawton concept of being better and more joined up to
our habits as well as our habitats. Redrow’s strategy with The
Wildlife Trusts brings together expertise from two historically
conflicting sectors to find a way to put nature at the heart of
designing new places in which to live.”
Our partnership with The Wildlife Trusts continues as we begin
to implement the strategy across the business. Much has already
changed as we have developed the strategy but there is still
more to do; creating new processes and checks; working with
ecological and landscape consultants; training teams and
working with management companies. Together we are
developing a robust assurance process to ensure our
commitments are fulfilled and developing links between Redrow
regional teams and their local Wildlife Trusts to establish closer
working relationships at the local level. By working together at
an early stage we can ensure that development has positive
outcomes for both nature and people.
During the year we also took the decision to halt the use of
hedge netting on our developments due to the potential
negative impacts on wildlife. We were also delighted to win an
award in CIRIA’s BIG Biodiversity Challenge, for work at our
Heritage Park development, North Wales. The project won the
Project of the Year Award for small-scale projects. Here, Redrow
gifted land to the Amphibian and Reptile Conservation (ARC)
Trust for the development of a new local community nature
reserve, which has since shown a 6-fold increase in the
population of endangered Great Crested Newts. A great
example of how good development can restore nature and
benefit local communities.
We are also thrilled to report a further success story for
endangered species at our Mill Meadows development in South
Wales. This formerly derelict paper mill site had a small
population of the rare Lesser Horseshoe bat roosting in the mill
buildings. Prior to demolition of the unsafe buildings, we created
a new ‘bat hotel’, which the bats quickly started to use. The bats
had never been known to breed at the old mill buildings, but our
ecological surveys have recently shown that there is now a
breeding population in the new bat house. This significant
achievement, demonstrates how redevelopment, done well, can
help improve biodiversity.
Earlier this year we celebrated five years working in successful
partnership with the Bumblebee Conservation Trust to create
bumblebee-friendly housing developments. We have also
provided a range of information to our customers on how they
can help the plight of the bumblebee in their new gardens, as
well as gifting c2000 free memberships of the Trust to
customers on selected developments. We celebrated the
anniversary during the COVID-19 pandemic and consequently
released a series of online animations with top tips for gardening
for bumblebees.
DEVELOPING HEALTHY PLACES TO LIVE
The importance of having access to local green spaces has
never been more keenly felt than during the lockdown of spring
and summer 2020. We have long understood the benefits that
such spaces can bring to communities and consequently we are
creating more than 1,600 acres of green space and communal
areas on our current developments. These include a range of
spaces suitable for all ages and activities, including football
pitches such as those being created at our Roman Green
development in Chester; community woodlands like the new
one being planted at our Amington Garden Village; nature trails
such as the bumblebee trail we have woven through the natural
areas at Saxon Brook, Exeter; as well as numerous parkland
areas on our developments suitable for events, play, sport,
picnics or just a quiet stroll and sit near one of our attractive
ponds.
This desire for even more green and open spaces is often
voiced during our extensive community consultation processes.
As a result of community consultation for our Mill-at-Springfield
development, in Kent, we increased the amount of landscaping
throughout the scheme; and at Kings Meadow in Ely we
responded to feedback from the community to create additional
green corridors through the development.
We have also created 22km (2019:19km) of new cycling routes in
and beyond our developments in the year; enabling our
customers and local communities to reduce their car use and
also to avoid using public transport during the COVD-19
pandemic. For example, at our development at Cheswick
Village, near Bristol we provided new cycle paths which provide
strategic connections to local employment, education, shops
and community facilities as well as providing for leisure and
exercise. Being able to safely and easily cycle to these places
can also help to reduce our customer’s carbon emissions. We
also incorporate ‘trim trails’ through the green spaces on some
of our developments, such as the one at our Ebbsfleet Green
development; and at our Colindale Gardens development, North
London, we have installed an outdoor gym for residents to enjoy.
The vast majority of our developments have green travel plans,
and a range of initiatives are in place to help reduce car
dependency, including cycle-ways, car clubs and other
initiatives.
BRINGING BENEFITS TO THE WIDER LOCAL
COMMUNITIES
For more than 40 years we have sought to create truly thriving
communities which enhance existing communities, designing
our developments in a way that helps people live sociable,
active lives in attractive environments. This year we continued
that approach, committing £188m to the local communities
where we build for the development of new schools, local
shops, community & health centres as well as green spaces as
part of the planning process.
As part of our placemaking principles, we are committed to
providing ‘Homes for All’. We recognise that sustainable and
socially cohesive communities are formed where there is a
diverse mix of homes and tenures provided. We are proud to
have designed, built and delivered 944 new affordable homes
across our developments in the financial year (2019: 1,712)
partnering with Registered Providers (RPs). Redrow is
committed to providing high quality affordable homes for local
people and one measure of our success in achieving this is the
repeat business we continue to enjoy with both small and large
RPs time and time again.
This year we completed a new community centre at our
Caddington Woods development, Luton, and handed it over to
the Caddington & Slip End Community Trust (CaSE) who will
now manage it. The community centre, which is a zero carbon
building, provides a focal point for everyone to come together
to enjoy a range of activities including fitness classes, parties,
local club meets and it also has an adjoining children’s play
area. To help celebrate the opening of the new centre,
members of Redrow’s sustainability team worked with local
school children to create individual ceramic tiles to decorate
the entrance area. Each tile depicted aspects of the natural
world, celebrating the surrounding woodland, which is being
enhanced to provide improved habitat for wildlife and a lovely
natural space for the community to enjoy.
We know that since the COVID-19 pandemic, having access to
a local shop has become more important than ever. At our
Horsforth Vale development, a new independent local shop is
situated at the heart of the neighbourhood, providing fresh
provisions within walking distance for everyone in the new
500-home community.
We are also focused on creating ‘edible landscapes’ on our
developments, providing food for both the local community
and wildlife. Our community orchard at Saxon Brook, Exeter
also provides beautiful blossoms – great for pollinators too –
and a focal point for the community to come together to enjoy
the harvest. At Cherhill View, Calne a strong allotment
community has developed, coming together to grow their own
fresh fruit and vegetables.
We are keen to help build a sense of community at our new
developments, so we invite all new customers to welcome
parties before they move into their new home. These informal
events are an opportunity for everyone to meet their new
neighbours and find out more about the new community and
surrounding area. We also hold community days at many of our
developments to help bring people together; for example at
The Copse in Dawlish we arranged a Pancake Day event
where the whole community – old and new – were invited to
drop in to enjoy making and sampling pancakes together in the
company of special guest bakers Louise and Val from The
Great British Bake-Off.
Year-on-year we continue to support community initiatives in
the areas local to where we build. Our Local Community Funds
are open for community groups to apply to. We have supported
a diverse range of causes including, providing tools for a
primary school eco-club in Formby, providing a much-needed
mobility scooter for the 19th Swindon Scout group, enabling the
purchase of new sound equipment at a performing arts school
in Chester, supporting a project that aims to alleviate period
poverty among local girls in Lancashire, sponsoring a carol
service in aid of the Stroke Association in Marlborough, and
providing kit for a new netball team in Cheshire. Across
Yorkshire we have been rehoming lifesaving defibrillators from
our completed construction sites to local communities.
Harewood Nursery School in Pontefract, West Yorkshire, is the
latest recipient, with the defibrillator being installed outside the
school building, so the whole community has access to the
device.
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Redrow plc Annual Report 2020
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
1,339
16
17
18
19
20
LEGAL COMPLETIONS (NO.)
6,443
5,718
5,319
4,716
4,032
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CORPORATE RESPONSIBILITY
As outlined in our Chairman’s statement, our strategy includes
a continuing emphasis on quality, service, addressing climate
change and improving biodiversity – putting customers and
the environment at the heart of our strategy.
We have been named as winner of the
prestigious ‘Global Good Company of the
Year’ in the Global Good Awards 2020 for
our approach to social and environmental
sustainability. We received the Silver
Award.
Our shortlisting is based on our
sustainable approach to development across three key areas:
• Building responsibly: e.g using 99.9% responsibly sourced
and certified timber, minimising waste, reducing carbon
emissions and partnering with organisations such as The
Wildlife Trusts and The Bumblebee Conservation Trust;
• Valuing people: e.g through investment in apprenticeships,
training and personal development together with
comprehensive health and wellbeing programmes for staff
and subcontractors; and
• Creating thriving communities: e.g through a combination of
strong placemaking principles and investment in local
neighbourhoods.
At the start of the financial year we were also awarded the
NextGeneration Innovation Award for our
research into social value and our new social
value calculator. In the NextGeneration annual
benchmark we retained third place and received
a Gold Award for the fourth consecutive year,
which recognises our sustainability strategy,
management and progress.
In order to continue to evolve and improve our approach, this
year we commissioned an external organisation to undertake a
review of our approach to sustainability and in particular how
we can better communicate this transparently and effectively
to our stakeholders. As a result we are currently undertaking a
refresh of our approach which will include: re-engaging with
stakeholders to undertake a new materiality exercise; which,
along with a review of risks and opportunities, may result in a
re-alignment of our vision for sustainability and our aspirations
and goals in this area.
on leadership responsibilities around mental health has been
designed and commenced roll out across our divisions pre
COVID-19 together with training for managers.
REVENUE, LEGAL COMPLETIONS AND OUTLETS
The Group’s results were significantly impacted by COVID-19 in
a financial year that was budgeted to be disproportionately
weighted towards the final quarter. As a consequence, we
achieved 93% of our legal completions in the 39 weeks to the
end of March 2020 (2019: 64%). This resulted in revenue for
this financial year being 37% below last year at £1,339m (2019:
£2,112m) and legal completions falling to 4,032 (2019: 6,443).
Our established award winning Heritage Collection contributed
84% of the Group’s private sales revenue (2019: 79%) with our
bespoke product representing 16% of private sales revenue
(2019: 21%).
Affordable housing accounted for 23% of legal completion
volumes this year compared to the unusually high 27% in the
previous year and 10% of homes revenue (2019: 12%).
Homes revenue by geographical area was broadly in line with
the previous year with 38% in the South, 26% in Central, 23% in
the North and 13% in Greater London.
The temporary closure of all our sales centres impacted our
active outlets this year where our average fell from 126 last
year to 110 this year. At the end of June 2020 we were
operating from 113 active outlets (2019: 129).
VALUING AND DEVELOPING OUR PEOPLE AND
PARTNERS
Health and wellbeing
This is one of our strategic aims. Health and wellbeing is an
important part of this and never more so than these
challenging times both in terms of physical and mental health.
We have a dedicated wellbeing advisor supported by
wellbeing champions in all our divisions together with a
dedicated health and wellbeing page on our intranet. This year
we also launched a health and wellbeing newsletter to focus
on a range of topics and share different ways employees can
improve their physical and mental wellbeing.
Mindful of the importance of work life balance, during the year
we reviewed our working hours and reduced these whilst still
offering flexibility within working hours. In our 2020 Insight
employee survey, conducted for us by an external consultancy,
we achieved a 91% response rate and 76% of respondents
were happy with their home/work life balance, up from 67% in
the previous year.
Having launched our “Mind Your Head” initiative last year, we
have built on this in the current year and now have over 200
mental health first aiders across the Group. A mandatory online
mental health e-learning module has been launched for all
Redrow colleagues to gain a better understanding of mental
health and support to take care of their own wellbeing as well
as that of others. A bespoke Redrow Directors course focused
A suite of mental health toolbox talk sessions have been
created for our site teams. Each session provides education
round key mental health topics and focuses on the support
available. We supported “Time to Talk” day on February 6th
when our sites hosted these talks and encouraged all
colleagues and subcontractors across our business to step
away from work and talk, over lunch, cakes and biscuits.
A variety of other initiatives have also been delivered including
flu jabs offered to all Redrow colleagues and support for
financial wellbeing.
Learning and development
A key focus has been developing, communicating and training
on new safe working practices in the light of the COVID-19 risk.
During lockdown and subsequently we have placed additional
emphasis on our e-learning platform, ensuring all colleagues
completed vital working training and allowing core skills to be
refreshed.
In total, we completed 5,925 training days this year, including
those which support our induction process from a combination
of e-learning and face to face training delivered at our training
centres at Tamworth and Daresbury and training suite at our
Head Office. 14% of our employees are trainees (2019: 15%).
We continue to support work to inspire the next generation into
careers in construction. For example, we have supported three
Skill Build events this year in South Wales the South West and
the National finals and continue to work with Wolverhampton
UTC by providing assistance with employer projects, CV
workshops and careers events. We have also revalidated our
association with John Moores University this year and currently
have three Redrow colleagues studying the Construction
Management in Housing Building degree we helped to
develop.
Redrow also has Redrow’s Women’s Network which is a group
developed to support women in the business and young
females entering the industry providing mentoring.
PARTNERING FOR SUPPLY CHAIN SUSTAINABILITY
While the work we do in reducing the direct impacts from our
operations is important; the greater part of our impact comes
from the products, materials and activities of our supply chain.
This is why we continued to develop our partnership with the
Supply Chain Sustainability School during the year, to help
build awareness and the skill-base of our supply chain across a
range of sustainability issues. It’s also a more efficient process
for the supply chain, since accessing the School’s resources
prevents the need to repeat the process for other customers
as it’s visible to all.
We are members of the School’s Carbon Special Interest
group, working with our industry peers to drive a reduction in
carbon emissions from the supply chain through products,
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Redrow plc Annual Report 2020
STRATEGIC REPORT
Operating Review continued
works and services procured. Phase one of the project is
already underway and involves the collection of Scope 1 and
Scope 2 energy and carbon data from key suppliers into a
bespoke online tool; with a view to collecting Scope 3 data at a
later date and for the most carbon-intensive materials only.
The collection of this data will help us in calculating the
greenhouse gas emissions from our supply chain that are
attributable to us, as our Scope 3 emissions. The second phase
of the project with be engaging further with the suppliers to
provide resources to help them reduce these emissions.
We have continued our work liaising with our supply chain to
find ways to eliminate, reduce, reuse or recover packaging.
This includes the Dulux paint can recycling scheme, which sees
used, empty paint-cans recycled into new materials and
products, such as plastic piping or steel tools. More than
17,000 paint-cans were recovered from our sites this year
which contributes to our excellent track-record in diverting
waste from landfill. In addition, our pallet repatriation scheme
recovered in excess of 34,000 pallets in the year by our supply
partner. A new approach that will enable the recovery, repair
and re-introduction of dedicated pallets for construction
products is to be trialled later in 2020.
Understanding the origins and potential impacts of the
products and materials we use has long been an important
issue for us. We use a large amount of timber in the
construction of our new homes and we are aware that illegal
logging is one of the most serious threats to the world’s forests,
which are home to many threatened wildlife species as well as
vulnerable communities. They are also important in their
capacity to store carbon. Consequently we have been working
to ensure the timber we buy is from known and responsible
sources. We were active members of WWF’s Global Forest
Trade Network from 2003, until the group was recently closed
by WWF. Despite the closure of the programme, we continue to
progress and implement the policies and practices developed
over this time, and remain dedicated to sourcing forest
products from well-managed sources. In the 2019 calendar
year, 99.9% of the forest products in our homes were from
verified and credibly certified sources, as follows:
• 81.32% credibly certified (e.g. FSC purchased with Chain of
Custody)
• 18.58% source verified (including e.g. PEFC purchased with
Chain of Custody)
We have recently disclosed to the CDP Forests Programme for
the first time in order to maintain transparency in our reporting
this area and to continue to develop as industry leader in this
field.
For other materials and products used in the construction of
our homes, we use a supply chain mapping system to enable
us to better understand their origins, enabling us to work with
supply partners to identify and avoid those products deemed
to be high risk in respect of environmental and social ethics.
During the year we have reviewed the percentage of recycled
content of our materials and will now start exploring
alternatives to help increase the recycled content in our homes
and reduce our embodied carbon emissions. Our internal
product review panel seeks out and appraises potential new
products and materials that will help us continue to improve the
efficiency and sustainability of our homes. During the year we
introduced new feature gable panels and feature cills which are
manufactured off-site helping us reduce waste, limiting the
need for people to work at height, increasing build efficiency,
as well as offering a consistent and quality finish.
Datum RPO were introduced in 2019 to manage the supply of
agency labour and to ensure we have a legally compliant
workforce from a preventing modern slavery perspective.
Regular audits have been undertaken of the labour supply
chain to prevent non-compliance have been undertaken by
them throughout the year.
IMPROVING OUR SYSTEMS AND PROCESSES
It remains fundamental as our business continues to evolve
and face new challenges and opportunities that 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, system analysts, software developers, IT
security officers, help desk experts and systems accountants
led by our Chief Information Officer. The team work closely with
Group and the operational businesses with major system
improvement projects sponsored by members of the Executive
Management team.
Our systems have proved resilient during lockdown and the
in-house IT team adapted quickly to allow the majority of Head
Office and divisional office staff to work from home. We and
our customers also benefited from the online reservation
system we introduced last year and have now introduced video
call functionality to MyRedrow as a further option for our
customers to interact remotely with our sales colleagues.
Our “REDSMI” Site Managers Inspection iPad application is
now fully embedded within our construction teams. They now
have the ability to carry out 9 quality inspections of each
property throughout the entire construction process – noting
good practice and items that need rectifying, with pictures and
text. The reports and photographs from these inspections are
sent directly to our subcontractors, resulting in quicker
resolution of defects and a higher quality finished product.
Along with many other businesses we have embraced personal
conferencing facilities. These have quickly become embedded
as an efficient and socially distanced way to hold meetings
which will continue to be used going forward.
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Redrow plc Annual Report 2020
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.
BUILDING RESPONSIBLY
Considerate Constructors
A key element of building responsibly is ensuring that our
construction sites are managed in a way that seeks to improve
the image of construction by striving to promote and achieve
best practice in the following areas; caring about appearance;
respecting the community; protecting the environment;
securing everyone’s safety; valuing the workforce.
As a contractor partner of the Considerate Constructors
Scheme (CCS), we have committed to signing-up all our
developments to the scheme. This means that regular visits are
undertaken by a monitor from the CCS to determine if our sites
are meeting the Scheme’s Code of Considerate Practice.
In 2020 two of our sites won national CCS site awards;
Springfields in our Yorkshire division and Padcroft Works in our
London division. These two sites will be represented at the
national awards ceremony, amongst their selected outstanding
performing peers, where the level of their award will be
determined.
• Every site having a dedicated COVID-19 supervisor to
manage all matters relating to COVID-19;
• Introducing hand cleaning stations in the welfare facilities
and out on site;
• Ensuring that the 2m social distancing guidance can be
adhered to in the welfare facilities by introducing floor
markings, rules and additional outside seating;
• Ensuring that the 2m social distancing guidance can be
adhered to out on site by way of floor markings and
restricting the number of operatives in each plot; and
• Introducing a whistle blowing text number so that anyone
with concerns can contact us.
NHBC Construction Quality Review (CQR)
During the financial year, the NHBC undertook 110 CQRs (2019:
136) across our developments. Each build stage is scored from
0-6 with over three quarters of our build stages rated above
good to outstanding.
During the year we had a total of 94 monitoring visits across all
of our divisions with an average score of 35.09 (out of a
possible 50), which is consistent with the previous year’s
results.
The NHBC also carry out inspections at key build stages in
their warranty provider capacity, reporting any defects that fall
below their standards of quality. Average reportable items per
inspection are monitored.
May 2020 saw the publication of an internal document called
“Considerate Constructors Scheme (CCS) Guidance”. The aim
of this document is to provide all of our construction
colleagues with a fully comprehensive guide of the CCS
scheme along with a Redrow specific checklist so that the
message is consistent throughout the business and leads to
continual improvement.
The last four months of the financial year have seen a fall in the
number of visits carried out by the CCS due to the COVID-19
pandemic but the visits are now resuming, albeit these are
largely on a virtual basis via personal conferencing facilities.
We are committed to working with the CCS to find ways to
carry out visits in line with current restrictions and are keen to
show the monitors what measures we have implemented to
keep our workforce, customers and stakeholders safe. These
measures include, but are not exclusive to:
The table below shows average reportable items and CQR
percentage and average scores.
Build Quality
Average reportable items per
inspection
FY 2020
FY 2019
0.20
0.20
Construction Quality Review – %
80.3%
75.1%
Construction Quality Review –
average score out of 6
4.13
3.97
Average reportable items at 0.2 per inspection in 2020
remained consistent with the prior year and places us in the
top quartile of our peer group. We are targeting a reduction to
0.15 by focusing even more on quality throughout the build
process, aided by the integration of our quality based
inspection application RedSMI.
The CQR score for the year was 80.3% an increase from last
years 75.1%.
NHBC Pride in the Job Awards
2020 sees the 40th anniversary of the NHBC Pride in the Job
Awards, recognising excellence in on-site management.
From 11,000 eligible site managers nationwide, only 240 have
been awarded a first round quality award with 21 of those
being Redrow site managers.
These 21 award winners will be presented with their awards at
virtual ceremonies later this year and will continue on to the
next stages of the competition, trying to secure a seal of
excellence, regional or national award.
Last autumn, 8 of Redrow’s 2019 first round winners went on to
achieve the coveted seal of excellence awards.
PRODUCT DESIGN
As well as offering spacious, adaptable living spaces for both
work and relaxation, our homes also offer excellent levels of
energy efficiency. This provides comfort and financial benefits
for our customers whilst simultaneously helping to tackle
climate change by reducing emissions. Our approach focuses
on delivering an efficient building which retains heat due to
high specification materials, superior insulation throughout,
state-of-the-art air-tight windows and doors and energy
efficient boilers and appliances throughout. We supplement
this approach with the addition of renewable technologies,
where appropriate and take great care in helping our
customers understand how these features work so they can
reduce their bills and play their part in reducing their carbon
emissions.
Furthermore, we are committed to extending our existing
approach in order to deliver zero-carbon homes in the coming
decade, playing our part in the UK’s transition to a zero-carbon
economy by 2050. Our first steps on this journey have taken
place this year, as we began scrutinising several low-carbon
technologies for room and water heating in our homes,
including air source heat pumps and infrared panel heaters.
We are currently trialling a smart home and energy
management system which has the following features and
potential benefits:
• Intelligent light switches that can reduce the total energy
consumption of a home by up to 20% through observing and
learning the occupant’s life styles and adapting the heating
and lighting to avoid wasting energy on empty homes or
unused parts of the house.
• Energy management system comprising solar PV panels,
battery storage and an intelligent hybrid inverter that looks
to achieve net-zero electricity use in the home.
• Using battery storage, the system automatically and invisibly
‘time shifts’ consumption to use the generated renewable
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GREENHOUSE GAS EMISSIONS PER 100M2 BUILD
3.01
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10.64
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energy when it is most needed. In winter, it automatically
tops up the battery with low-cost off-peak energy; in
summer, the excess of renewable energy is sold back to the
grid for the best price.
Our homes also have one of the lowest water use standards in
the industry at 105 litres-per-person-per-day (lpppd), compared
with a building regulation standard of 125 lpppd. This is an
issue of increasing importance; a recent report from the Public
Accounts Committee shows that England is likely to face
significant water shortages within the next two decades as the
population grows, urbanisation continues and the climate
warms. We continue to be active Gold Leaf members of the UK
Green Building Council, working with them to deliver our
shared vision of homes and developments that enable people
and the planet to thrive.
MANAGING OUR RESOURCES EFFICIENTLY AND
REDUCING OUR CARBON IMPACT
Carbon Reductions
During the year we partnered with a new specialist energy
management company to improve our commercial efficiency
and assist with the timely collection of energy data from our
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Redrow plc Annual Report 2020
STRATEGIC REPORT
Operating Review continued
% OF WASTE DIVERTED FROM LANDFILL
94.8
95.4
96.8
97.65 97.40
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% OF RESPONSIBLY SOURCED TIMBER
99.83 99.94 99.90 99.92 99.90
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site operations. Our independently verified greenhouse gas
emissions increased to 3.01 tonnes of CO2e per 100m2 of build
(2019: 2.42 tCO2e/100m2); more information on this data can be
found on page 104. The increase is attributable to improved
site gas and electricity data collection combined with a
reduction in homes built in 2020 due to COVID-19. Emissions
from site diesel reduced by 11%, from site LPG by 50%, from
office gas use by 12%, from business travel by 20% and from
office electricity by 5%. Emissions from air conditioning units
have increased slightly due to more offices being heated and
cooled by such systems.
Almost 50% of our direct greenhouse gas emissions come
from use of diesel on our sites and consequently we have
been working to reduce this during the year. We are currently
trialling a hybrid generator system with solar PV and a smart
energy management system and will be looking to roll this out
across all our construction sites following further testing.
Indications to-date show that a fuel saving of between 33%
and 50% can be achieved using this technology, with the
accompanying emission reductions, and they have an added
bonus of noise reduction due to the reduced time the
generator needs to operate. We are also currently
investigating the efficacy of Hydrotreated Vegetable Oil (HVO)
with our supply partners, as an alternative fuel for site plant
and equipment which we anticipate would reduce net CO2
emissions by up to 90%.
We have also been working to reduce site and office gas and
electricity consumption. Eco-cabins are now being rolled-out
to all new sites, providing: improved thermal insulation, double
glazed windows with low u values, energy efficient LED lights
with PIR activation, energy efficient heaters with thermal cut
out and timers and energy efficient point of use hot taps.
Electric vehicles and hybrids are included on the company car
list for all car grades and all of our regional offices have
charging points installed. We are now installing charging points
in all new sales centres for use by site-based staff and
customers. Investing in this infrastructure will encourage and
accommodate changing behaviours and further reduce our
direct and indirect carbon emissions.
We continue to publicly disclose to the Carbon Disclosure
Project our energy and carbon data, along with details of our
policies, strategy, management and progress against targets.
In 2019 we were scored ‘B’ for our main disclosure, which is the
same as the construction sector average and higher than the
European regional average score. Our Supplier Engagement
Rating was also scored ‘B’ which is higher than both the
construction sector average and the European regional
average scores. We are also one of only 28 companies listed
on the UKGBCs new Climate Commitment Platform, outlining
our climate commitments and helping promote further action
and ambition across the built-environment sector. More
information on our listing at the UKGBC Climate Change
Platform is provided at https://ukgbcclimate.net/company/
redrow-plc. During the year we also began a screening
assessment of the emissions from our ‘indirect’ activities
(Scope 3), including the manufacture and transport of materials
and the use of our homes by our customers, with a view to
greater disclosure of these issues in the future.
Reducing waste
We are now starting to see the results of our work over the last
few years in eliminating and reducing waste from our
construction activities. In 2020 waste generated has reduced
to 8.97 tonnes per 100m2 of build (2019: 10.15 t/100m2).
During the year we launched our ‘Reduce the Rubble’ project
which is systematically auditing all of the waste generated
during construction of a ‘typical’ Redrow home, and working
with site teams, designers, subcontractors and suppliers to
identify the root causes of the waste to find ways to eliminate
or reduce it in the future. In March, the teams involved in the
project also attended Waste and Resource Efficiency
workshops to help them understand the principles of resource
efficiency and the circular economy, the legal framework,
practical measures to reducing waste and the benefits that can
be achieved. The workshops were delivered by an expert at
our partners, the Supply Chain Sustainability School and we
are looking to roll these sessions out for all divisions. An
example of where we have identified waste reduction
the house building sector during the lockdown period. The
reduction in the average number of sites in the year reflects
the impact of the closure of sites during the majority of the
lockdown period.
The last four months of our financial year has seen us work
collaboratively to develop and publish our COVID-19 Secure
Risk Assessments for all four key areas of the business, namely
Offices, Sites, Sales and Customer Services. These documents
have also been supplemented with additional internal
operating guidance, ‘return-to-work’ e-learning packages, and
instructional COVID-19 videos. All of these have contributed to
ensuring that the health and wellbeing all of our employees,
contractors and customers were and are sufficiently protected
as our developments and offices returned.
Since returning to work we have instigated COVID-19
Compliance Inspections and continue to do so in order to
ensure that we are effectively planning, managing, monitoring
and co-ordinating our work activities.
Redrow remains committed to improving its overall Health,
Safety & Environmental (HS&E) performance and has been
continually reviewing its HS&E Management Systems by
introducing over 25 system updates during the reporting
period. In addition, Redrow’s environmental arrangements and
systems are regularly assessed against the requirements of
the international environmental management standard; ISO
14001. These assessments are conducted by the British
Standards Institute at both Group and Divisional levels, and the
Company has successfully maintained its certification, which
confirms that the requirements of the standard are being met.
All of which has been aimed at maintaining a continuous
improvement in our HS&E performance across the whole
business and focus on our four key areas of Governance,
Leadership, Ownership and Workplaces.
opportunities is in relation to plasterboard offcuts; and we are
currently reviewing the lengths of plasterboard we procure
with a view to reducing offcuts and waste. We continue to
share best practice and findings from our work in this area with
industry peers through our ongoing membership of the HBF
Waste Forum and involvement in the Supply Chain School
Waste Special Interest Group.
Although our main focus is on the eradication and reduction of
waste in the first instance, we also continue to ensure that any
waste that is created is reused or recycled as appropriate.
During the year 97.4% of our waste was diverted from landfill, a
very slight decrease from 97.7% in 2019 which may be
attributable to restricted access to some recycling facilities
during the COVID-19 pandemic; however we continue to
exceed our own target of 95%. We reuse the vast majority of
inert waste on our sites, with the appropriate licences and
specifications. For example, at our Wendlescliffe development
in Bishop Cleeve we crushed existing demolition waste to an
approved specification and reused this crushed material under
the private driveways. We also continue to support the
Community Wood Recycling scheme – a social enterprise who
provide a waste wood collection service from our sites.
Throughout the year more than 600 tonnes of timber was
collected from our sites by the scheme, which has all been
recovered, providing jobs, training and opportunities for
people who are otherwise marginalized from the labour
market.
In addition to the industry-leading water standards designed
into our homes, we are also focusing on reducing the amount
of water used in our operations. We are currently working with
a utility specialist company to help us better monitor and
manage water use on sites and are installing waterless urinals
in all new site welfare facilities.
We also incorporate Sustainable Urban Drainage schemes on
the majority of our developments to improve rainwater
management and reduce flood risk. At our Heathlands
development in North Wales, we have been commended for
effective water management, including rainwater harvesting
which safely and cleanly diverts rainwater from the rooftops of
the new homes and feeds it into the adjacent nature reserve,
and having extensive long-term management plans in place.
HEALTH & SAFETY
The all accident figure for the 2020 financial year decreased
by 27.5% to 310 compared with 428 in the prior year. There was
also a 7% decrease in the number of reportable injuries in
2020, down to 42 compared with 45 in 2019.
Unfortunately, due to the decrease in the average number of
sites in the 2020 financial year compared to the prior year,
from 126 to 110, this has resulted in a slight increase in our
‘accident per site rate’ to 0.38 compared with 0.36 in the
previous year.
The above figures have to be read in context of the impact
COVID-19 had on the country, the construction industry and
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Redrow plc Annual Report 2020
STRATEGIC REPORT
Operating Review continued
CUSTOMER & MARKETING
We were pleased to once again secure
the HBF Five Star Excellence Award.
CUSTOMER & MARKETING STRATEGY
The Customer & Marketing team was formed in July 2019.
Although a common structure across retailing, we believe it’s the
first time a housebuilder has brought together Sales & Interiors,
Marketing, Customer Service and Communications within a
single team.
This approach has already paid dividends in a number of ways.
It has allowed the combined team to better manage the
end-to-end customer experience, becoming even more agile
around the needs of Redrow homebuyers.
More efficient sharing of customer & market intelligence has also
enabled the team to create better solutions for the business and
customers. Two examples of this were the team’s preparations
for changes to the government’s Help to Buy scheme and
innovations to support customers during COVID-19.
reported going over budget, with almost 40% stating that they
had spent more than originally planned.
This research highlighted a significant opportunity for Redrow to
target the second hand market, with our market-leading
Heritage range and Redrow 8 placemaking principles. This is a
key strategy to mitigate changes to the current Help to Buy
scheme.
This insight has led to the ‘why do up, if you can buy new’
campaign. An integrated marketing campaign, it highlights the
inconvenience and stress of renovating a second hand property
versus buying a Redrow home, with modern open plan living,
timeless exteriors and green public spaces.
We have also taken into account the social trend of increased
home working with our Interiors team with more rooms dressed
to highlight flexible home working spaces.
We investigated the views of 2,000 UK adults on their home
buying preferences and found that the pandemic has in fact
encouraged many people across the country to reassess how
they want to use the space in their home, and what community
features and facilities they want to be surrounded by.
In terms of home renovation we found that the more significant
the home renovation project, the less satisfied homeowners
tend to be with the results.
For example, just 38% of those who spent more than six months
on a renovation project were likely to do so again on a future
project. As well as unsatisfactory results, consumers frequently
RESERVATIONS AND ORDER BOOK
The Group secured £1.6bn of private reservations in the year
(2019: £1.7bn). As a result of a strong sales performance earlier in
the financial year and the significant shortfall in legal
completions in the final quarter, the Group ended the financial
year with a record total order book of £1.4bn, a 40% increase on
the prior year (2019: £1.0bn).
AGILITY AROUND OUR CUSTOMERS
The onset of COVID-19 has highlighted our market advantage in
digital and online services and the ability of the Redrow team to
re-engineer customer processes at speed. Whilst lockdown was
WHY DO UP...
IF YOU CAN BUY NEW?
underway, the Customer & Marketing team liaised closely with
Health & Safety, IT and Learning & Development colleagues to
ensure the customer experience fully incorporated best practice
when it came to social distancing and reducing the spread of
COVID-19.
Hard copy collateral was removed from sales centres with sales
consultants using their dedicated iPads to display interactive
content to customers on big screens. Videos were put together
highlighting the new sales centre visit experience and the
process for a Redrow Technician visiting a customer occupied
home to carry out a repair.
These films have been viewed thousands of times and have
been shared as best practice both within and outside the
housebuilding industry. We quickly introduced virtual zoom calls
for customers at different points during the journey. Delivered by
Sales Consultants, they can also provide 3D virtual tours to
customers, talking them through optional extras and fittings.
Our Site Management teams also moved quickly to offer the
popular Hard Hat customer visits as a virtual option. If customers
don’t want to physically visit site, they can still view their homes
at pre-plaster stage giving them the opportunity to see the
quality of the build from the inside out.
Our inhouse IT teams also amended our inspection apps for
customers to carry out their own Home Preview pre-completion
visit around their home, whilst maintaining social distancing from
Redrow colleagues. Customers can take pictures of any issues
in their home and upload them to the Redrow iPad, before
handing the device to the waiting Redrow Customer Service
Manager who will then ensure any issues are resolved.
ENGAGING WITH CUSTOMERS AND
COMMUNITIES ONLINE
We were pleased to once again secure the HBF Five Star
Excellence Award, with our performance trending above the
majority of the major housebuilders. Throughout the course of
the year we have consistently been rated as ‘excellent’ on
Trustpilot, with individual colleagues across the business
highlighted by customers for going the ‘extra mile.’
We have invested in new technology to bring all our customer
review content into one place to better manage, review and
analyse all customer feedback. This will also create a more
seamless way of ensuring that customer feedback is consistently
fed back into product and service design.
Social media is another key way of engaging with customers and
communities and receiving feedback. For nearly four years, we
have been utilising Crowd Control HQ technology, which
IMAGERY FROM THE NEW NATIONAL MARKETING CAMPAIGN
SOCIAL DISTANCING MEASURES IMPLEMENTED IN ALL SALES CENTRES
27
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28
Redrow plc Annual Report 2020
STRATEGIC REPORT
Operating Review continued
STRATEGIC REPORT
Financial Review
“In April 2020 we increased our committed unsecured
syndicated loan facility by £100m to £350m.”
enables over 100 colleagues across the business to respond to
customers on social media after a validation from the central
communications team.
This approach enables local divisional teams to manage the
whole relationship with the customer and to provide meaningful
responses via social media. This approach has delivered
customer average response time of just over one hour on social
media.
Having taken the decision to temporarily close our sales offices
during lockdown, we found ourselves in the privileged position
of being able to help the army of doctors, nurses, health workers
and care staff who are engaged in the real battle against this
deadly disease.
Our Redrow colleagues quickly identified ways that they could
get involved in supporting the mammoth effort being made by
NHS trusts around the country, in particular contributing to
keeping them safe while working and ‘looked after’ when
off-duty.
Redrow teams across England and Wales have donated
much-needed protective clothing and masks to a variety of
hospitals, including the new 4,000-bed emergency Nightingale
Hospital that’s been created at ExCel, in East London. Masks
and antibacterial hand wash also went to St James’ University
Hospital in Leeds, affectionately known as Jimmy’s.
Colleagues across the country are volunteering and giving their
time to support our NHS where possible. Nalab from our Eastern
team has volunteered to deliver vital medication to vulnerable
people and also provide transportation to and from the hospital.
Decommissioned show homes at one of our developments in
Basildon, Essex, were opened up to be used by staff from the
neighbouring hospital, giving them a place to rest between shifts
without the need to travel.
Redrow colleagues also delivered furniture and accessories to
Basingstoke and North Hampshire Hospital, where they were
used to create a much-needed new rest area for staff.
Meanwhile our South Wales team helped to make up hampers of
essentials and other goodies for patients at the University
Hospital of Wales in Cardiff following a request from nurses. Our
Yorkshire team were quick to follow suit and donate PPE, a
hamper full of essentials, goodies and even some colouring
books for children to Pindersfield Hospital in Wakefield. They
also gave defibrillators to Yorkshire Ambulance Services.
In the North West, Wrexham Maelor Hospital put out an urgent
appeal for protective shoe covers on social media. Our team
were quick to gather up and deliver as many boxes as they
could find and then also managed to put together some luxury
hampers which they gave to Wrexham Maelor, The Countess of
Chester, Arrowe Park and Aintree hospitals.
We also backed the NHS contractorsappeal.com and joined the
hundreds of thousands of people who gathered on their
doorsteps every Thursday evening at 8pm to ‘Clap for our
Carers’, showing our appreciation for health workers
everywhere.
BARBARA RICHMOND
Group Finance Director
PROFITABILITY
This year the Group’s results have been significantly adversely
impacted by the COVID-19 pandemic which resulted in a very
limited number of legal completions in the final quarter of the
financial year.
Total Group revenue was £1.3bn (2019: £2.1bn), a reduction of
37%. Homes revenue was £1.3bn (2019: £2.1bn) from the
completion of 4,032 new homes (2019: 6,443) and other
revenue from land sales was £7m (2019: £21m).
As we reported in February, the first half of the financial year
had seen strong trading with revenue of £870m and pre-tax
profit of £157m. In the second half, the dramatic reduction in
revenue in quarter four, combined with the provision for scaling
down our London business resulted in a pre-tax loss in the half
of £17m.
PHASING OF 2020 PROFIT BEFORE TAX (£M)
157
140
Proudly supporting
our NHS
-17
H2
H1
Year
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Average selling price increased by 2% to £330,400 (2019:
£324,500) due to a reduction in the level of affordable housing
output in the year to a more normal 23% of legal completion
volumes compared to 27% in the previous year. Private
average selling price at £386,700 was 1% lower than last year
(2019: £389,500), however our Heritage Collection private
average selling price increased slightly to £388,700 (2019:
£387,500).
As a result of the 37% reduction in legal completions and
therefore revenue, ongoing site related and sales and
marketing costs from the temporary closure of our
developments and £35m of impairment costs arising from the
strategic decision to scale back our London operations, gross
profit for the year reduced to £242m (2019: £504m).
Administrative expenses increased slightly to £94m in the year
(2019: £93m). Whilst the Group furloughed c 80% of employees
during the height of the lockdown, we decided not use the
Government Job Retention Scheme due to the resilience of
our liquidity position. Administrative expenses naturally
increased as a percentage of revenue to 7.0% (2019:4.4%).
The Group therefore delivered an operating profit of £148m
(2019: £411m) in the year at an operating profit margin of 11.1%
(2019: 19.5%).
Net financing costs at £8m were £3m higher than the prior year
due to the levels of net debt during the latter part of the year
and the cost of increasing our facilities and obtaining access to
the CCFF. We had an average monthly net cash balance of
£2m for the whole year compared to £80m during the previous
year.
As a result, the Group delivered a profit before tax of £140m
(2019: £406m) for the year with basic earnings per share down
64% at 32.9p (2019: 92.3p).
TAX
The corporation tax charge for the year was £27m (2019:
£77m). The Group's tax rate for 2020 was 19% in line with
2019. This had previously been expected to be 18.5% based
on the rates substantively enacted at 4 September 2019.
However, in the Chancellor’s Budget on 11 March 2020, it was
confirmed that the rate of corporation tax will remain at 19%
from April 2020 and for the following year. The normalised
rate of tax for the year ending 30 June 2021 is therefore
projected to be 19% based on rates which are substantively
enacted currently.
The Group paid £64m of corporation tax in the year (2019:
£77m). For the financial year ending 28 June 2020 the new
legislation for corporation tax payments by very large
30
Redrow plc Annual Report 2020
STRATEGIC REPORT
Financial Review continued
companies took 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
paying six instalments.
return on capital employed was 9.2% (2019: 28.5%) (See note
15f). Return on equity also reduced to 8.7% from 26.5%. (See
note 23). We will be working to increase our ROCE to our 25%
target again over the medium term.
DIVIDENDS
As announced on 24 March 2020, the Board took the
decision to cancel the 10.5p interim dividend which was due
to be paid on 9 April 2020 due to the uncertainty around
the impact of the COVID-19 pandemic on the business. Due
to the ongoing uncertainty the Board is not recommending
the payment of a final dividend for the year at the 2020
Annual General Meeting. However, based on trading to date
and the forward order book, we expect to resume dividend
payments in 2021.
In the previous financial year, the Group distributed to
shareholders £218m including the B shares during the year
being a total cash return to shareholders of 60.5p per share.
RETURNS
Net assets at 28 June 2020 were £1,626m (2019: £1,585m), a
3% increase. Capital employed at the same date was £1,751m
(2019: £1,461m) up 20% due to the increased level of work in
progress and reduced land creditors at June 2020. Our
INVENTORIES
Our gross investment in land decreased slightly by £9m to
£1,538m (2019: £1,547m) reflecting our cautious approach to
land purchases in the second half of the financial year, partly
offset by lower land eliminations as a result of the reduced
levels of legal completions in the year. Approximately 48% of
our current land bank additions in 2020 came from our
forward land holdings, slightly higher than the five year
average contribution.
As expected, land creditors decreased by £136m to £302m at
June 2020 (2019: £438m) representing 20% of gross land
value (2019: 28%) due to timing of deferred land payments.
Our owned plot cost has increased by £4,000 per plot to
£78,000 at June 2020 (2019: £74,000), increasing slightly to
20% of the average selling price of private legal completions
in the year (2019: 19%).
Our gross investment in work in progress (WIP) has increased
significantly by £190m to £1,047m (2019: £857m). This is a
FRENCHAY GARDENS, BRISTOL
(i) Liquidity
The Group regularly prepares and reviews its cash flow
forecasts and stress tests them. These are used to
manage liquidity risks in conjunction with the
maintenance of appropriate committed banking facilities
to ensure we maintain medium term committed banking
facilities sufficient for a major market breakdown.
Facilities are kept under regular review and the Group
maintains regular contact with its banks and other
financial institutions; this ensures Redrow remains
attuned to new developments and opportunities and
that our facilities remain aligned to our strategic and
operational objectives and market conditions.
Our current banking syndicate comprises six banks and
in addition to our committed facilities, Redrow also has
further uncommitted bank facilities which are used to
assist day to day cash management.
18
(ii) Interest rate risk
The Group is exposed to interest rate risk as it borrows
money at floating rates. Redrow occasionally 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 or
the previous financial year and no interest rate swaps are
held currently (2019: nil).
PENSIONS
As at June 2020, the Group’s financial statements showed a
£22m surplus (2019: £18m 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 increase is mainly due to the return on scheme assets
outpacing the impact on defined benefit obligations of
reduced discount rates.
BARBARA RICHMOND
Group Finance Director
15 September 2020
consequence of both a planned build up of WIP in
preparation for higher demand in the run up to the changes
in the Help to Buy Scheme and the impact of legally
completing only 264 homes in the final quarter of the
financial year due to the constraints of the COVID-19
pandemic. Net of payments on account, as a percentage of
the significantly reduced Homes turnover it increased to 69%
from 37% last year.
RECEIVABLES
Trade receivables decreased by £12m at June 2020 to £25m
(2019: £37m) due primarily to the timing of Help to Buy and
Housing Association receipts. Other receivables decreased
from £19m to £8m partly due to the timing of the recovery of
VAT on land payments.
PAYABLES
Trade payables, customer deposits, social customer
payments on account and accruals were £55m higher than
2019 levels at £604m (2019: £549m) with trade payables
reducing and customer deposits, social customer payments
on account and accruals increasing mainly due to levels of
activity in the final quarter of the financial year.
CASH FLOW AND NET DEBT
There was a cash outflow generated from operations of
£80m in the year (2019: cash inflow of £371m). This reflected
the impact of the 37% reduction in legal completions and
hence revenue and cash receipts in the fourth quarter.
Although we closed the year with net debt of £126m
compared to a net cash balance at June 2019 of £124m, we
still achieved an average monthly positive cash balance
during the year of £2m (2019: £80m).
Given the ongoing strength of the sales market since we
re-opened, we expect to be cash positive in December 2020
and June 2021.
FINANCING AND TREASURY MANAGEMENT
In April 2020 we increased our committed unsecured
syndicated loan facility by £100m to £350m. This matures in
December 2022. We also added £13m of committed,
unsecured bilateral facilities in May 2020.
The Group also gained eligibility as an issuer for the
Government’s CCFF with an insurer limit of £300m. Given the
timely return to work and the effectiveness of measures to
protect its cash flow, the Group has not drawn on the CCFF
and is unlikely to do so.
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.
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Redrow plc Annual Report 2020
STRATEGIC REPORT
Section 172(1) Statement
SECTION 172(1) STATEMENT
In line with Section 172(1) of the Companies Act 2006, the
Directors of the Company must act in a way which they
consider, in good faith, would most likely promote the success
of the Company for the benefit of its members as a whole, and
in doing so must have regard to a number of other key matters.
There must therefore be a careful balance of sometimes
competing interests of different stakeholder groups and it is the
duty of the Directors to act in such a way should promote the
long-term success of the Company as a whole.
Likely long-term consequences of decisions (s.172(1)(a))
Given the nature of the business, the Board takes a long-term
approach to its decision-making to ensure that the Company is
able to deliver its strategy of creating long-term sustainable
value for all of our stakeholders by developing thriving
communities with high quality homes that provide a better way
to live.
There has been considerable emphasis on resource efficiency,
use of sustainable materials, placemaking and biodiversity as
these are aspects that are key to creating a long-term
sustainable business and value to our stakeholders. See pages
14 to 25 of the Strategic Report for an overview of the
sustainability practices of the Group.
Effective risk management systems are also imperative to
understanding the likely long-term consequences of actions.
The Board plays a key role in reviewing the Company’s
approach to risk, including an assessment of its emerging and
principal risks. See pages 38 to 45 of the Strategic Report for a
description of the identified risks, procedures for identifying
risks and an explanation of how these are being controlled or
mitigated.
At least annually, the Board conducts an assessment of the
prospects of the Company, taking into consideration the
Company’s current position and principal risks. This year the
Directors selected a three year timeframe over which to assess
the viability of the Company. The Viability Statement can be
found on page 47 and 48 of the Strategic Report.
Maintaining a reputation for high standards of business
conduct (s.172(1)(e))
The Directors have regard to the desirability of the Company
maintaining a reputation for high standards of business
conduct. The Company has in place a Code of Conduct which
acts as a guide for employees to doing the right thing in
business, focusing on the values and behaviours deemed most
important for the Group and seeking to guide employees in
their good judgement to act in the Redrow way. The Company
also has well-embedded policies in place which assist with
ensuring high standards of conduct, including in respect of the
following key areas: Health, Safety and Environment;
Whistleblowing; Anti-Bribery and Corruption; Human Rights;
and Modern Slavery. The Environmental, Social and
Governance Disclosures section of the Directors’ Report, from
pages 103 to 110, provides further insight into measures put in
place by the Board to assist with maintaining a reputation for
high business conduct standards.
Acting fairly between members of the Company (s.172(1)(f))
The Directors also have regard to the need to act fairly
between members of the Company, aiming to understand their
views and act in their best interests. The ownership of the
Company follows a ‘one share, one vote’ structure, which
assists with promoting parity in shareholder rights. The Board
ensures that there is fair and equal dissemination of information
to all shareholders and has a dedicated investors section of the
Company’s website which is available to all shareholders. This
provides easy access to RNS announcements, key financial
dates, dividend details, reports and publications. In the
ordinary course, and outside of the prohibition on meeting
attendance currently in force by the Government due to the
COVID-19 pandemic, all members are invited to attend the
Annual General Meetings of the Company, offering an
opportunity for members of any size shareholding to have a
conversation with, and ask questions to, each of the Directors.
For any Annual General Meetings where in-person attendance
is prohibited due to the Government regulation, all
shareholders will be offered the opportunity to submit
questions to the Board ahead of the meeting with answers
being made available to them.
Having regard to specific stakeholder groups (s.172(1)(b) to
s.172(1)(d))
The table which follows seeks to provide insight into how the
Board carries out their duty under this section, in particular with
those stakeholder groups referenced in s.172(1)(b) to (d) of the
Act, and how this links to strategy.
Stakeholder Group
Why important to us?
Key Priorities of the Stakeholder Group
Engagement with Stakeholder Group
Impact on Board decisions
INVESTORS
Our shareholders provide funds which aid the
growth of our business and are vital to our future
success
• Strong financial performance
• Good governance practices
• Transparency and openness
• Adoption of sustainable business practices
DEVELOPING
THRIVING
COMMUNITIES
Examples of the impact of shareholders on the Board’s
decision making include:
• a change to composition of the Board following
consultation with major shareholders; and
• treatment of LTIP award vesting in line with views of major
shareholders (i.e. pro-rating LTIP awards to reflect period
that a Director served in post as an executive, rather than
as an office holder).
Examples of engagement with our shareholders include:
• formal results presentations immediately following
publication of the interim and final results;
• dedicated investor related section of the Company
website (providing easy access to RNS announcements,
key financial dates, dividend details, reports and
publications);
• meetings held between the Directors and significant
shareholders;
• comprehensive consultation exercise carried out with
major shareholders and proxy advisory firms regarding
remuneration practices, Board composition and the
impact of COVID-19 on remuneration and the
remuneration policy renewal;
• meetings held between the Executive Directors and
current and potential significant shareholders; and
• Annual General Meeting, at which each of the Directors
were in attendance in 2019, offering an opportunity for
shareholders to directly engage with the Board.
For further details of engagement with shareholders, see
page 57 of the Corporate Governance Report, under
heading: Shareholder Engagement
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Redrow plc Annual Report 2020
STRATEGIC REPORT
Section 172(1) Statement continued
Stakeholder Group
Why important to us?
Key Priorities of the Stakeholder Group
Engagement with Stakeholder Group
Impact on Board decisions
EMPLOYEES
Our employees are essential to preserving
long-term value and Valuing People is a
fundamental part of our strategy
• Development of our people
• Safety and wellbeing of our people
• Good quality employment opportunities
• Transparency and openness
VALUING
PEOPLE
SUPPLIERS
Having strong relationships with our suppliers is
important to our long-term success and the Board
is briefed on supplier feedback and issues on a
regular basis
BUILDING
RESPONSIBLY
• Assistance with training and development
opportunities
• Assistance with addressing the industry skills
shortage
• Timely payment practices
• Creation of jobs for our subcontractors
• Safety and wellbeing of our people
• Compliance with laws and regulations
Examples of engagement with our employees include:
• designated workforce Non-Executive Director;
• employee communication via the intranet, Engage;
• employee engagement meetings;
• annual INsight survey;
• direct email communication channel to the Board;
• promotion of share ownership through employee share
plans;
• division specific communications; and
• Company performance communications.
For further details of engagement with employees, see
page 106 of the Directors' Report, under heading:
Workforce Engagement
Examples of engagement with our suppliers include:
• participation in workshops, delivered through our
partnership with the Supply Chain Sustainability School,
to engage with our suppliers on a number of matters;
• collaboration with subcontractors on health and safety
matters and ensuring that our values on customer service,
quality, safety and sustainability are in alignment;
• working with our supply chain to attract new entrants into
the industry and actively supporting our subcontractors to
train their recruits to agreed standards, including inviting
them to workshops and briefings;
• engagement by way of a supply chain mapping system
enabling us to work with supply partners to identify and
avoid high risk products;
• working with supply chain to find ways to eliminate,
reduce or reuse packing; and
• collaboration with key suppliers to collate their Scope 1
and Scope 2 energy and carbon data allowing the
creation of a bespoke online tool to assist with the
calculation of greenhouse gas emissions from our supply
chain that are applicable to us.
Examples of the impact of employees on the Board’s
decision making include:
• a commitment to ensuring that 15% of the total workforce
are enrolled on formal training programmes at any one
time; and
• the introduction of mental health first aiders programme,
with currently over 200 employees having received
training and been equipped to act in such capacity across
the business.
Examples of the impact of suppliers on the Board’s decision
making include:
• the Company partnering with the Supply Chain School
which has granted access to thousands of online
presentations, training modules, guidance documents and
checklists with regular invites to attend workshops and
briefings;
• the identification of waste reduction opportunities
following workshops with suppliers to identify the root
causes of waste; and
• engagement of Datum RPO to manage all temporary
labour requirement and processes, including carrying out
periodic audits to ensure temporary agency workers are
legally compliant and there are no instances of modern
slavery; and
• placing apprentices, who are employed and trained by the
Company, with subcontractors for their apprenticeship,
with around 85% of apprentices going on to take a position
with the subcontractor at the end of their apprenticeship.
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Putting our customers first is a key principle
underpinning our strategic theme of Building
Responsibly. The Board believes that the most
meaningful praise it can get is from the people
who buy our homes.
CUSTOMERS
BUILDING
RESPONSIBLY
• Build a quality product and provide a great
Examples of engagement with our customers include:
place to live
• Provide excellent customer service
• Be a considerate constructor and good
neighbour
• Develop places that enhance health and
wellbeing
• face-to-face interactions and interactions via the My
Redrow app;
• customer feedback via the NHBC survey;
• close monitoring of customer complaints and feedback;
• reports to the Board from the Customer and Quality
Director, appointed in 2020 to spearhead and develop
the customer services strategy, and the Group Customer
& Marketing Director; and
• launch of a series of placemaking videos for customers
seeking to engage with them regarding how our
developments respond to the unique characteristics of
the site and surroundings.
Examples of the impact of customers on the Board’s decision
making include:
• the introduction of our Red Site Managers Inspection iPad
app in 2019 for use by site and customer service managers
to ensure that identifying and rectifying potential issues
during the build is a smooth process leading to a high
quality end product;
• the introduction of our online reservation system which
offers the ability for customers to legally complete the
reservation process remotely 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; and
• during the COVID-19 lockdown, the decision to conduct
Hard Hat tours virtually and adapting home preview tours
and welcome parties to fit with social distancing guidelines.
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Redrow plc Annual Report 2020
STRATEGIC REPORT
Section 172(1) Statement continued
Stakeholder Group
Why important to us?
Key Priorities of the Stakeholder Group
Engagement with Stakeholder Group
Impact on Board decisions
COMMUNITY AND
ENVIRONMENT
Working safely and considerately to protect the
environment is a key principle underpinning our
strategic theme of Building Responsibly and we
listen to learn to connect with local communities
in line with the Redrow 8 placemaking principles.
BUILDING
RESPONSIBLY
• Support with local causes and community
projects
• Provide affordable homes
• Reduce waste from our construction activities
• Be a considerate constructor and good
neighbour
• Prevent pollution from our construction
activities
• Mitigate for effects of climate change and
flood risk on our developments
• Protect and enhance biodiversity
• Develop places that enhance health and
wellbeing
• Share value through the communities we
build
Examples of engagement with the communities in which we
operate include:
Examples of the impact of the community and environment
on the Board’s decision making include:
• discussions and consultations with local communities at
an early stage to discuss matters that may inform the
development process, to enable us to design
developments that are sensitive and responsive and
foster a sense of belonging;
• direct communications with local wildlife organisations
who can be provide a wealth of knowledge about the
local context and help influence our designs;
• engaging directly with local schools to ensure that green
spaces and play areas are well used;
• working with the emerging community as the
development progresses to help foster a sense of
community and belonging though active involvement of
residents; and
• discussions with a variety of organisations local to our
developments, allowing us to understand what is
happening locally and enabling us to provide donations
and sponsorship for local community projects to ensure
that communities continue to thrive.
• the introduction of the Company reporting against the Task
Force on Climate-related Financial Disclosures (“TCFD”)
framework to enhance our climate-related reporting, which
can be found on pages 111 to 115 of the Directors’ Report;
• the introduction of our industry-leading biodiversity
strategy in summer 2020, our vision being to create the
best new developments for wildlife, where people benefit
from access to nature-rich spaces and to use our activities
to increase biodiversity, inspiring other businesses to do
the same;
• the commitment of £188m to the local communities where
we build for the development of new schools, local shops,
community and health centres, as well as green spaces;
• the creation of more than 1,600 acres of green space and
communal areas on our current developments, including a
wide range of spaces suitable for all ages and activities;
• the decision to halt use of hedge netting on our
developments due to the potential negative impacts on
wildlife;
• the signing up as a contractor partner of the Considerate
Constructors Scheme (CCS) and signing-up all our
developments to the scheme;
• the maintenance of our environmental management
system, which is externally certified to ISO14001; and
• the alignment of our approach to the United Nations
Sustainable Development Goals (SDGs), which aim to
achieve a better global future for all by addressing key
social and environmental challenges such as health &
wellbeing and biodiversity.
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GOVERNMENT
AND REGULATORS
Active engagement with governmental bodies
and regulators is important to allow us the
opportunity to have input on matters relating to
our industry where possible and to ensure we are
able to put in place appropriate measures to
comply with laws and regulations
BUILDING
RESPONSIBLY
• Compliance with laws and regulations
• Ethical operations and practices
• Address the UK housing shortage
• Provide affordable homes
• Prevent pollution from our construction
activities
• Provide good quality employment
opportunities
Examples of engagement mechanisms with Government
and regulators include:
Examples of the impact of Government and regulators on the
Board’s decision making include:
• participation in a range of consultations affecting our
industry and practices;
• attendance at meetings and forums to engage with policy
makers relevant to our operations;
• discussions with Government bodies regarding their new
emphasis on the design quality of housing developments;
• closely working with Government bodies to contribute to
the agenda on the mandatory biodiversity net gain
requirements for new developments;
• Government lobbying in relation to matters impacting the
housing market; and
• reports from the Executive Management Team providing
updates on statutory and regulatory developments to be
considered by the Board in their decision-making.
• on publication of the Government’s National Design Guide
in October 2019, our assessment criteria for our internal
placemaking scoring system (the Redrow 8) was refined to
reflect the key characteristics of well-designed places set
in the Government guidance; and
• ahead of the Environmental Bill coming into force (requiring
the updated Defra metric to quantify the ecological
impacts by developers), we developed a new Company-
wide strategy to ensure that our developments enhance
biodiversity and contribute to nature’s recovery.
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Redrow plc Annual Report 2020
STRATEGIC REPORT
Risk Management
HOW WE MANAGE RISK
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 Stakeholders
Commitment to Training
BUSINESS RISKS
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OUR RISK MANAGEMENT PROCESS
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 ensure that a robust assessment is made of emerging and principal risks;
• To effectively communicate our risks and define responsibilities in order to manage risk;
• To continually evaluate and review the impacts of any potential new risks occurring within our business; and
• To develop and implement action plans to mitigate risks as appropriate.
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 and emerging risks and principal concerns are identified and robustly assessed 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;
• Management responsibility to implement the Board’s polices on risk management and internal controls; and
• Internal controls operated 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 robustly 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 2020
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
DEVELOPING
THRIVING
COMMUNITIES
Group
Chief
Executive
Housing Market
The UK housing market
conditions have a direct
impact on our business
performance.
This year has seen the
added risk of distortions
in the housing market
due to reaction to a
global pandemic
together with related
economic uncertainty.
The UK's exit from the
EU may also lead to
increased economic
uncertainty.
Close monitoring of Government guidance.
Delegated Crisis Committee established with
Executive Board meetings a minimum of twice
weekly in times of crisis.
Market conditions and trends are being
closely monitored allowing management to
identify and respond to any sudden changes
or movements.
Weekly review of sales at Group,
divisional and site level with monitoring of
pricing trends and Help To Buy (HTB) levels.
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 economic
conditions, the COVID-19 pandemic and
unknowns surrounding the UK leaving the EU,
potentially without an agreed deal in place.
Availability of
Mortgage Finance
Availability of mortgage
finance is a key factor 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.
Risk has increased this year due to the risk of
the restriction of mortgage availability in
particular for high LTV mortgages.
Customer Service
Failure of our customer
service could lead to
relative under
performance of our
business.
Group
Customer
and
Marketing
Director
BUILDING
RESPONSIBLY
This year has seen the
added risk of customer
technicians entering
occupied homes at a time
of global pandemic.
Customer and Quality Director appointed.
My Redrow website to support our customers
purchasing their new home.
Increased use of digital and virtual
communication tools.
Attention to customer feedback supported by
a process at nine months post occupation to
address root cause of customer fatigue and
dissatisfaction.
Regular review of our marketing and
communications policy at both Group and
divisional level.
Risk has increased due to net risk of customer
service technicians entering occupied homes
in a pandemic and impact of potential delays
as a result of COVID-19 safety protocols.
BUILDING
RESPONSIBLY
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.
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.
Appropriate investment in strategic land
programme supported by specialist Group
team.
Effective use of our Land Bank Management
system to support the land acquisition
process.
Close monitoring of progress of relevant Local
Plans.
Peer review by Legal Directors and use of
third party legal resources for larger site
acquisitions to reduce risk.
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Redrow plc Annual Report 2020
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
Liquidity and Funding
The Group requires
appropriate facilities for
its short-term liquidity
and long-term funding.
Group
Finance
Director
Medium term committed banking facilities
sufficient for a major market breakdown.
Regular communication with our investors and
relationship banks, including visits to
developments as appropriate.
BUILDING
RESPONSIBLY
Regular review of our banking covenants
appropriateness and design and capital
structure.
Ensuring our future cash flow is sustainable
through detailed budgeting process and
reviews and scenario modelling.
Strong forecasting and budgeting process.
Risk has increased this year due to impact of
development closures during COVID-19
lockdown on net debt and lack of bonding
capacity in the surety market.
DEVELOPING
THRIVING
COMMUNITIES
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.
Group Design
and Technical
Director
Regular review and product updates in
response to the demand in the market and
assessment of our customer needs.
Design focused on high quality build and
flexibility to planning changes.
Regular site visits and implementation of
product changes to respond to demands.
Focus on award winning Heritage Collection.
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 managing data
protection with multi-functional team meeting
regularly.
Risk increased in year reflecting increase in
the likelihood of not being able to maximise
income from Housing Associations due to
economic uncertainty.
BUILDING
RESPONSIBLY
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.
The deadline for the
UK's future trading
relationship with the EU
being finalised is
December 2020. If an
agreed deal is not in
place, potential tariffs
may increase material
costs and customs
arrangements may lead
to delays in the delivery
of imported
components within the
supply chain.
Group
Commercial
Director
Use of reputable supply chain partners with
relevant experience and proven track record
and maintain regular contact.
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.
Collaborate with Supply Chain Partners in
development of updated Brexit supply
continuity strategies.
Collaborate with Supply Chain Partners in
development of return to work recovery plans.
Group Monthly Product Development
meetings to identify and monitor changes in
the regulatory environment.
The risk has increased this year due to the
potential impact of the COVID-19 pandemic on
the supply chain together with the risk of the
UK leaving the EU without an agreed deal.
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Redrow plc Annual Report 2020
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
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.
Personal Development Programmes
supported by National training centres at four
locations.
Graduate training, Undergraduate placements
and Apprentice training programmes to aid
succession planning.
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.
Flexible working policy.
This risk has reduced in the year due to market
conditions and a flexible working policy.
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.
The systems have proved resilient to
increased home working.
The risk has increased due to increased
assessment of impact of third party potential
data compromise.
BUILDING
RESPONSIBLY
Health and Safety/
Environment
Non-compliance with
regulations could put
our people and the
environment at risk.
Increased levels of
scrutiny of the industry
heightens the risk
environment as does
ensuring safe COVID-19
working practices are
adhered to.
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.
Fraud/Uninsured
Loss
A significant fraud or
uninsured loss could
damage the financial
performance of our
business.
BUILDING
RESPONSIBLY
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.
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.
The risk has increased this year as a result of
reduced availability of insurance due to
prevailing market conditions.
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Redrow plc Annual Report 2020
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:
Location in this Annual Report
Operating Review – Development that Enhances Nature
Operating Review – Developing Healthy Places to Live
Operating Review – Corporate Responsibility
Operating Review – Managing our Resources Efficiently
and Reducing our Carbon Impact
Operating Review – Health and Safety
Directors’ Report – Environmental
Page
Ref.
15-16
16-17
18-19
23-25
25
104-105
Related Principal Risks*
Health and Safety/
Environment
Key Supplier or
Subcontractor Failure
Appropriateness of
Product
Related policies available
on our website
Environment
Purchasing of sustainable
timber products policy
Environmental policy
statement
Health and safety policy
statement
Partnering with our supply
chain
A responsible and
sustainable developer
Employees
Diversity and inclusion
policy statement
Operating Review – Valuing and Developing and People
and Partners
19
Attracting and
Retaining Staff
Directors’ Report – Workforce Engagement
106-107
Directors’ Report – Employee Wellness
Directors’ Report – Diversity and Inclusion Policy
Directors’ Report – Learning and Developing
107
107
108
Social
A responsible and
sustainable developer
Human rights policy
statement
Health and safety policy
statement
Partnering with our supply
chain
Human Rights
Human rights policy
statement
Slavery and human
trafficking statement
Operating Review – Bringing Benefits to the Wider Local
Communities
Operating Review – Partnering for Supply Chain
Responsibility
Operating Review – Customers and Marketing
17
Housing Market
19-20
26-28
Health and Safety/
Environment
Attracting and
Retaining Staff
Directors’ Report – Social
105-109
Customer Service
Directors’ Report – Human Rights
Directors’ Report – Modern Slavery
Key Supplier or
Subcontractor Failure
108
109-110
Attracting and
Retaining Staff
Key Supplier or
Subcontractor Failure
Anti-Corruption and Anti-Bribery
Anti-bribery policy
statement
Whistleblowing policy
statement
Audit Committee Report – Bribery Act
Corporate Governance Report – Whistleblowing
Corporate Governance Report – Conflicts of Interest
69
56
56
Fraud/Uninsured Loss
Attracting and
Retaining Staff
Cyber Security
Business Model
A responsible and
sustainable developer
Our Strategy
Our Business Model
Chairman’s Statement – Strategy
Corporate Governance Report – Strategy, Purpose,
Values and Culture
All
4-5
6-7
8-9
55-56
Non-Financial KPIs
A responsible and
sustainable developer
Environmental policy
statement
Health and safety policy
statement
Our Strategy
4-5
Land Procurement
Customer Service
Attracting and
Retaining Staff
Health and Safety/
Environment
Planning and
Regulatory
Environment
Appropriateness of
Product
*
For full description of related principal risks, see pages 40 to 45.
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.
GOING CONCERN AND VIABILITY STATEMENT
The COVID-19 pandemic has had a profound impact on the Group’s financial performance in the 52 weeks ended 28 June 2020. It
has created economic uncertainty for the foreseeable future, disrupting many lives and industries, including housebuilding.
An assessment of going concern is included in the Basis of Preparation section of Accounting Policies on page 130.
Viability
In accordance with Provision 31 of the UK Corporate Governance Code 2018, the Directors have assessed the prospects and
viability of the Group.
The Directors’ assessment has made reference to our current position, the potential impact of the principal risks facing the
Group, including the economic uncertainty arising from the COVID-19 global pandemic and the Group’s risk and risk management
attitudes and processes.
The Directors have selected a three year timeframe over which to assess the viability of the Group from 29th June 2020 to 2 July
2023. This timeframe was selected as it corresponds with the Board’s three year planning horizon.
On an annual basis, the Directors formally review the financial forecasts for the Group. These incorporate assumptions about the
timing of legal completions of new homes and land purchases, selling prices, profitability, working capital requirements and
cashflows.
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STRATEGIC REPORT
Risk Management continued
GOVERNANCE REPORT
Corporate Governance Report
The three year plan has been stress tested including the robust downside scenario outlined in the going concern assessment above.
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 2 July 2023.
STRATEGIC REPORT APPROVAL
The Strategic Report outlined on pages 1 to 48 has been approved by the Board.
By order of the Board
GRAHAM COPE
Company Secretary
15 September 2020
“The Board appreciates the value of good governance to long-term
sustainable success and this report seeks to provide the opportunity for
a meaningful assessment of the quality of the Company’s governance
arrangements.”
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
(2018 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. This will be the first year of reporting
against the revised version of the Code and we look forward to
sharing how we have applied the spirit of the principles and
provisions.
This report has been prepared and approved by the Board
and, on behalf of the Board I confirm that during the 2020
financial year, the Company applied the principles of, and was
compliant with the provisions of the Code other than where
stated on pages 53 to 54 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.
Stakeholder Engagement
With the introduction of the requirement for larger companies
to include a Section 172(1) Companies Act 2006 statement (the
“s.172(1) Statement”) within their Annual Reports, and the
increased focus on such engagement within the revised Code,
this was, and continues to be, a key focus area for the Board.
The s.172(1) Statement of the Group can be found on pages 32
to 37. This explains who has been identified as key
stakeholders, the main priorities of those stakeholders and
how we engage with them.
Board Composition
Since the last report, Matthew Pratt, having joined the Board
on 1 April 2019 as Chief Operating Officer, became Group Chief
Executive on 1 July 2020 and Nicky Dulieu joined the Board on
6 November 2019 as a Non-Executive Director and became a
Member of the Audit, Remuneration and Nomination
Committees from the same date. It is also intended that John
Tutte, currently Executive Chairman, will step back to a
Non-Executive Chairman role at the 2020 AGM on 6 November
2020, and will retire from the Board ahead of the 2021 AGM,
being succeeded by an Independent Non-Executive Chairman.
Additionally, Vanda Murray has informed the Board of her
intention to retire from the Board following the 2020 AGM due
to other work commitments. Further details of these changes
can be found in the Nomination Committee Report on pages 71
to 74.
Board Effectiveness
We also discuss in this report how the Board monitors its
effectiveness in order to ensure that it has the strength and
capability to lead the Company to continued success. Last
year, an externally facilitated evaluation of the Board and each
of its Committees was carried out by Independent Audit. In
2020, a formal internal evaluation of the Board and Committees
was undertaken to build upon the progress made in the
previous year. Having considered the output of this year’s
evaluation, the Board considers that it continues to function
effectively and its relationship with its Committees continue to
be sound. Details of the evaluation can be found on page 61.
Strategy, Culture and Values
The revised version of the Code has an increased focus on the
role of the Board in setting and monitoring the Group’s
purpose, strategy and values and ensuring that these are
aligned with culture. This is an area which is consistently
required to be at the top of the Board’s agenda and details of
the work undertaken by the Board in this regard can be found
on pages 55 to 56.
Our 2020 Annual General Meeting will be held on Friday, 6
November 2020 and the Notice of Annual General Meeting
together with Explanatory Notes will be sent to you separately.
GRAHAM COPE
Company Secretary
15 September 2020
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Redrow plc Annual Report 2020
50
GOVERNANCE REPORT
Board of Directors
JOHN TUTTE (64)
EXECUTIVE CHAIRMAN
MATTHEW PRATT (45)
GROUP CHIEF EXECUTIVE
BARBARA RICHMOND (60)
GROUP FINANCE DIRECTOR
GRAHAM COPE (56)
COMPANY SECRETARY
NICK HEWSON (62)
SENIOR INDEPENDENT DIRECTOR
SIR MICHAEL LYONS (70)
NON-EXECUTIVE DIRECTOR
VANDA MURRAY (59)
NON-EXECUTIVE DIRECTOR
NICKY DULIEU (56)
NON-EXECUTIVE DIRECTOR
M
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M A N R P
M A N R
M A N R
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 Tutte 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 Tutte was appointed to
the board of the Home Builders
Federation in February 2015. He
stepped down as Chairman of the
Home Building Skills Partnership in
March 2020 to coincide with the
Partnership being incorporated
into the wider HBF organisation.
Matthew Pratt joined the Board
of Redrow in April 2019 as Chief
Operating Officer and was
promoted to Group Chief Executive
with effect from 1 July 2020.
He joined Redrow in 2003 as a
Chief Quantity Surveyor and later
became Managing Director of the
Midlands Division. In 2013, Matthew
Pratt was appointed as a Regional
Chief Executive and became
a member of the Executive
Management Team.
Matthew Pratt trained as a quantity
surveyor and graduated with
a degree in Construction from
Nottingham Trent University. He
has 23 years’ experience within
the industry.
Barbara Richmond joined the
Board of Redrow in January
2010, bringing with her a proven
track record, with over 25 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 Richmond was appointed
a Non-Executive Director of Lonza
Group Ltd with effect from 16 April
2014.
She 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 Cope has over 25 years’
experience in the housebuilding
sector, either working in-house or
for clients in private practice. He
qualified as a solicitor in 1989 and
is a member of the Law Society.
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. He became the Senior
Independent Director of the
Company on 7 November 2018.
Nick Hewson is a Non-Executive
Chairman of Supermarket Income
REIT plc and a Non-Executive
Director of Croma Security
Solutions Group Plc.
He 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.
The Board appointed Nicky
Dulieu in November 2019. She has
strong Non-Executive Director
experience and has extensive
knowledge of retailing and
customer service.
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.
Sir Michael Lyons served 17
years as Chief Executive of three
major English Local Authorities,
including 7 years at Birmingham
City Council, and was knighted
in 2000 for services to Local
Government. Following his long
and distinguished career in Local
Government, Sir Michael Lyons
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.
She 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 Murray was awarded
an OBE in 2001 for services to
business and to exports.
Nicky Dulieu is currently a
Non-Executive Director and
the Chair of the Remuneration
Committees of Adnams plc and
Marshall Motor Holdings plc.
She is also a Non-Executive
Director of WH Smith plc and a
Commercial Board member of the
Royal Horticultural Society.
She trained as an accountant
with Marks & Spencer Group plc
and held various strategic and
financial roles within the company
over a 23 year period. Following
this, Nicky Dulieu was appointed
to the Board of Hobbs Limited
and became Chief Executive from
2008 until 2014.
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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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BOARD EXPERIENCE
COMMITTEE MEMBERSHIP
Finance
Property
Operational
Sustainability
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Nomination Committee
Remuneration Committee
Placemaking and
Sustainability
Committee
Redrow plc Annual Report 2020
52
GOVERNANCE REPORT
Corporate Governance Report continued
REDROW GOVERNANCE STRUCTURE
Main Board
EXECUTIVE CHAIRMAN
GROUP CHIEF EXECUTIVE 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
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: Developing Thriving
incentivise them to create shareholder value.
Communities, Building Responsibly and Valuing People.
Executive Management Team
EXECUTIVE CHAIRMAN
GROUP CHIEF EXECUTIVE
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.
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.
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 Code of Conduct, 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.
NEW GOVERNANCE REPORTING FOR 2020
There were a number of key developments introduced in 2018, to be reported upon for the Company’s 52 weeks ended 28 June
2020. The following were flagged in last year’s Annual Report as items identified by the Board as key developments and this
report demonstrates how these have been implemented:
1.
2.
3.
4.
Section 172 reporting – this Annual Report explains how the Directors have carried out their statutory duty within s.172(1) of
the Companies Act 2006 (the “Act”). This explanation can be found on pages 32 to 37.
CEO pay ratio – the disclosure of the CEO pay ratio (CEO pay calculated against the 25th, median and 75th percentile of UK
employees’ pay) can be found on page 97.
Culture – a description of the work undertaken by the Board to ensure the alignment of culture with values and strategy can
be found on pages 55 to 56.
Board level workforce representation – as disclosed in last year’s Annual Report, Vanda Murray was appointed as the
designated Non-Executive Director responsible for facilitating workforce engagement. Following her retirement from the
Board on 6 November 2020 after the AGM, Vanda Murray will be succeeded by Nicky Dulieu as the designated Non-
Executive Director for workforce engagement. A further explanation of this can be found on page 106.
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
The Directors have considered the contents and requirements of the Code and confirm that throughout the 52 weeks ended
28 June 2020 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.
GROUP FINANCE DIRECTOR
COMPANY SECRETARY
Provision
Reason for non-compliance
Explanation
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
with the Group’s longer-term goals.
reputation via strategic communications and customer service.
DIVISIONS
GROUP
Build | Commercial | Customer Services
Finance | Land | Sales | Technical
Commercial | Finance | HS&E | 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.
9 – The Chair should be
independent on
appointment. A Chief
Executive should not
become chair of the same
company.
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 Provision
10 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 believed, and continues to believe, that
circumstances necessitated continuity and that this appointment
was therefore in the best interests of the Company. Moreover,
following Steve Morgan’s retirement, the appointment of John
Tutte allowed for an eventual transition to a more conventional
board structure.
The Board consulted with major shareholders in respect of this
composition and set out its reasons to all shareholders via RNS
announcement and also by way of publication on the Company
website at http://investors.redrowplc.co.uk/corporate-
governance.
It is intended that John Tutte will step back to Non-Executive
Chairman at the AGM in November 2020 and retire from the
Board ahead of the AGM in 2021. An independent Non-Executive
Chairman is to be appointed following the retirement of John
Tutte ahead of the AGM in 2021, in line with Provision 9 of the
Code.
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Redrow plc Annual Report 2020
54
GOVERNANCE REPORT
Corporate Governance Report continued
Provision
Reason for non-compliance
Explanation
Matthew Pratt, previously a Regional Chief Executive of the
Company, was appointed as Chief Operating Officer with effect
from 1 April 2019 and became Group Chief Executive on 1 July
2020. This 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 58.
A written statement of the division of these responsibilities is
reviewed and approved by the Board each year.
See pages 72 to 73 for a more detailed explanation of the
appointment.
19 – The Chair should not
remain in post beyond nine
years from the date of their
first appointment to the
Board. This period may be
extended for a limited time
however a clear
explanation must be given.
John Tutte was first
appointed to the Board on
10 July 2002 and become
Chairman on 1 April 2019.
As described above, the appointment of John Tutte was
intended to be on an interim basis to allow for a smooth transition
following the departure of Steve Morgan in March 2019 and to
allow for an eventual transition to a more conventional board
structure.
It is intended that John Tutte will step back to Non-Executive
Chairman at the AGM in November 2020 and retire from the
Board ahead of the AGM in 2021. An independent Non-Executive
Chairman is to be appointed following the retirement of John
Tutte ahead of the AGM in 2021, in line with Provision 9 of the
Code. The Nomination Committee have commenced the search
for the Chairman position, more details of which can be found on
page 72.
REPORTING ON THE UK CORPORATE GOVERNANCE
CODE 2018
The format of this report now reflects the new layout of the
Code, with a view to make it easier for shareholders to be able
to evaluate how the Code has been applied throughout the
year, in line with the requirements of the Listing Rules:
1
Board Leadership and Company Purpose – pages 54 to
58;
2. Division of Responsibilities – pages 58 to 60;
specifically for the Board’s decisions. The matters reserved
include:
• 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;
• authorising conflicts of interest where permitted by the
3.
Composition, Succession and Evaluation – pages 60 to 62;
Company’s Articles of Association;
4. Audit, Risk and Internal Control – page 62; and
• assessing the prospects and viability of the Group, including
measurement of key performance indicators;
• assessing and monitoring culture in alignment with purpose,
values and strategy;
• approval of corporate acquisitions or disposals, significant
land purchases or contracts;
• changes to the size, structure and composition of the Board;
5. Remuneration – page 63.
1. BOARD LEADERSHIP AND COMPANY PURPOSE
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
maintaining strong governance practices and regularly
reviewing the Group’s governance structure as illustrated on
page 52.
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 Group Chief Executive as appropriate. If a Director
has a concern about the running of the business, the minutes
should accurately reflect this. Should any Director resign from
their position as a result of unresolved concerns in the
Company, they are requested to submit a written statement to
the Executive Chairman outlining their concerns for circulation
to the Board. There were no statements received of this nature
during the year.
Attendance by individual Directors at Board meetings is set out
on page 59.
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;
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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 Group Chief Executive
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.
KPI ASSESSMENT AND RISK MANAGEMENT
The Board have the overall responsibility for setting the key
performance indicators and selecting the appropriate form of
measurement to allow an objective assessment of the Group’s
performance. The Board also sets appropriate targets against
each indicator and ensures timely and accurate measurements
against each identified performance indicators. See page 5 for
further details of the key performance indicators of the Group.
The ultimate responsibility for the effective management of the
risks faced by the Group in order to achieve its strategic and
financial objectives lies with the Board. It is vital to the
long-term sustainability of the Group that strong risk
management mechanisms are in place. Details of the Group’s
risk management processes, including the Board’s robust
assessment of the Group’s emerging and principal risks, key
controls and mitigating strategies can be found on pages
38 to 45.
STRATEGY, PURPOSE, VALUES AND CULTURE
Setting and monitoring the Group’s purpose, values and
strategy and ensuring that these are aligned with culture is a
key role of the Board.
Engagement with stakeholders, and understanding the key
matters which are of priority to them, has formed the basis of
the Group’s business strategy and purpose and can be seen in
the three themes of Developing Thriving Communities, Building
Responsibly and Valuing People.
Our purpose, to operate to create a better way for people to
live, is supported by our strategy of creating long-term
sustainable value for all of our stakeholders by developing
thriving communities with high quality homes that provide a
better way to live. The messaging regarding the Group’s
purpose and strategy is consistent, clear and at the forefront of
everything we do.
The Redrow culture is the unconscious landscape through
which our people think, behave and act, regardless of whether
they are working in the boardroom, Division, Group or on site.
Our culture is embedded through our values of: hard work;
attention to detail; innovation; passion; and pursuit of
excellence. We expect our people to apply these values in
their daily working life.
There are a number of measures adopted by the Board to
assist with monitoring, assessing and embedding culture:
• approval of significant policies, including the Group’s Health,
• introduce key Group personnel and external advisors;
Safety and Environmental policy;
• review of overall corporate governance arrangements;
• ensuring a satisfactory dialogue with key stakeholders; 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
• 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.
Redrow plc Annual Report 2020
56
GOVERNANCE REPORT
Corporate Governance Report continued
1.
2.
3.
4.
5.
STRATEGY, PURPOSE, VALUES AND CULTURE
(CONTINUED)
The Board monitors the opinions of employees via the
annual INsight survey to assist with measuring how far
Redrow values are incorporated into the culture and
evaluates the level of consistency in employee’s views of
culture.
Consistent language is used in communications with our
people via our intranet, Engage, which seeks to embed
cultural norms by reinforcing the strategy and values and
reiterating the behaviours and actions which are to be
encouraged.
CONFLICTS OF INTEREST
Transparency in our business dealings is paramount and the
Board is ultimately responsible for ensuring that there are
procedures in place to ensure that conflicts of interests, or
potential conflicts of interests, are managed effectively.
In line with the Group’s Code of Conduct, employees must
immediately inform their line manager if there is any possibility
of there being an actual or potential conflict of interest. If
conflicts can be mitigated, authorisation by way of a Divisional
board meeting must be obtained and the Company Secretary
must be informed.
Policies are regularly reviewed and updated to ensure that
they are in alignment with the Company’s purpose, values
and strategy.
Directors must disclose any actual or potential conflicts of
interests immediately to the Company Secretary and seek
formal approval from the Board.
Brand guidelines are communicated internally and
employees are expected to adhere to these guidelines in
their daily working lives. The guidelines reinforce what
Redrow stands for, why we do what we do and how we are
expected to behave.
Site and Divisional visits are carried out by the Board,
which allows them to engage directly with the workforce
and obtain their views on culture within the business.
Vanda Murray, as designated Non-Executive Director for
workforce engagement, also has an important role in
obtaining views of employees in this regard, particularly at
these visits.
The Board is proud to have a business that is customer focused
with employees taking pride in creating a better way to live
through their contribution to providing a high quality product
and service to our customers.
WHISTLEBLOWING
The Group has a widely publicised Whistleblowing Policy
which enables employees and other stakeholders to raise
concerns in confidence. The Board receives 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 additionally
includes an independent reporting hotline where independent
and confidential advice can be provided on whistleblowing
matters.
During the year, there were no alleged or suspected
wrongdoings reported through the whistleblowing procedure.
The Whistleblowing Policy is formally reviewed and approved
each year by the Board. During the year, there were no
changes made to the policy.
Additionally, each Head of Department must make an annual
Related Party Transaction Disclosure confirming any instances
where employees had an actual or potential conflict of interest.
The Board is satisfied that the procedures in place to deal with
conflicts of interest are sufficient and were operated effectively
during the year.
BOARD ACTION FOLLOWING SIGNIFICANT VOTES
RECEIVED AGAINST SHAREHOLDER RESOLUTION
At the Company’s AGM held on 6 November 2019, all
resolutions put to the meeting were passed. However, a
number of shareholders voted against resolution 3 (the
appointment of John Tutte as Executive Chairman), for which
68.62% of votes cast were in favour, and resolution 11 (approval
of the directors’ remuneration report), for which 69.61% of votes
cast were in favour.
In line with Provision 4 of the Code, the Board consulted with
major shareholders to understand their concerns and
implemented changes following the feedback received.
An update statement in respect of the action taken following
consultation with major shareholders can be found on
Company’s website at http://investors.redrowplc.co.uk/
corporate-governance.
Below is a final summary in respect of both resolutions 3 and 11
setting out the impact of shareholder feedback on the Board’s
decisions and any resultant proposed actions.
Resolution 3
Having consulted with major shareholders and proxy advisory
bodies, and understanding their concerns regarding
independence, the Nomination Committee proposed a number
of changes to the Board structure. In January 2020, the Board
held a further consultation with major shareholders regarding
the proposed Board changes in order to obtain their feedback.
The following changes were proposed and well received by
the shareholders engaged and were subsequently approved
and announced by the Board via RNS announcement:
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• John Tutte (currently Executive Chairman) to step-down to
Non-Executive Chairman at the 2020 AGM and retire ahead
of the AGM in 2021;
• an independent Non-Executive Chairman to be appointed
following the retirement of John Tutte ahead of the AGM in
2021, in line with the Code; and
• Matthew Pratt (then Chief Operating Officer) appointed as
Group Chief Executive with effect from 1 July 2020.
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. There is a dedicated
investor related section of the Company website, providing
easy access to RNS announcements, key financial dates,
dividend details, reports and publications.
It was initially intended that John Tutte would step-down to
Non-Executive Chairman from 30 June 2020. However, due to
the unprecedented impact of COVID-19 on the business and
the housebuilding industry, the Board asked John Tutte to
remain as Executive Chairman until the Company’s AGM in
2020 to support the senior management team get the business
back to full operation and John Tutte agreed to this request. It
remains John Tutte’s intention to retire from the Board ahead of
the AGM in 2021 and Matthew Pratt took up the position of
Group Chief Executive with effect from 1 July 2020.
Resolution 11
Having consulted with major shareholders and proxy advisory
bodies, the Board understood that the 2020 LTIP award (with
targets below those set for the 2019 award) and the LTIP
payment made to Steve Morgan were the key contributing
factors to the votes against this resolution.
For the reasons outlined in the Result of AGM RNS
announcement, released on 6 November 2019, the Board was,
and remains, satisfied that the targets set for the 2020 LTIP
were appropriate taking into account the challenges the
business faced and struck the right balance between ambition
and deliverability.
As outlined in the update statement, available on the
Company’s website, Steve Morgan’s LTIP which vested in 2019
was pro-rated to reflect his length of service until his departure
at the end of March 2019, rather than the shorter period of time
he was in service as an executive (having transitioned to
non-executive in October 2017). Under the rules of the scheme,
Steve Morgan’s transition in October 2017 was not a leaving
event and, as such, when he retired in March 2019 he was
treated as a ‘good leaver’ under the scheme. This approach
was consistent with the LTIP rules, voting guidelines effective
for 2019 and the treatment for the award made to Steve
Morgan that vested in September 2018, when 99.35% of votes
cast were in favour of the resolution approving the Directors’
remuneration report.
We do however note the feedback from investors, and as a
result, once John Tutte has retired from the Board ahead of the
AGM in 2021, his outstanding LTIP awards will be pro-rated to
reflect the period he is in post as an executive, rather than his
time as an office holder.
The Board appreciates and thanks shareholders for the
constructive feedback received and looks forward to
continuing its dialogue with them.
During the 52 weeks ended 28 June 2020, the Executive
Chairman, the Group Chief Executive and the Group Finance
Director, together with the Senior Independent Director and
the Chair of Remuneration Committee, also held a number of
meetings with significant shareholders and subsequently
briefed the Board on issues discussed at these meetings.
There were a number of items discussed at these meetings,
and there was a particular focus on the composition of the
Board and remuneration matters, following feedback received
from the 2019 AGM. The impact of these discussions on
decisions taken by the Board can be seen above.
During the year, a comprehensive consultation exercise was
carried out with significant shareholders of the Company and
proxy advisory firms. The consultation involved matters relating
to remuneration practices, Board composition and the impact
of COVID-19 on remuneration and remuneration policy renewal.
Following the full year and half-yearly results’ announcement in
September 2019 and February 2020, the Executive Directors
met current and potential significant shareholders. 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 AGM
on 6 November 2019, which allowed them to engage directly
with shareholders and their representatives and answer any
questions. The Board answered questions from shareholders
and engaged with them following the meeting.
Formal notification of the 2020 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.
WORKFORCE ENGAGEMENT
The Board believes that quality engagement with the
workforce is essential to preserving long-term value and a
description of the engagement mechanisms of the Company
with employees can be found in the Directors Report on pages
106 to 107.
SECTION 172(1) STATEMENT – STAKEHOLDER
ENGAGEMENT
The Section 172(1) Statement of the Group, explaining how the
Directors have carried out their statutory duty within s.172(1) of
the Act, can be found on pages 32 to 37 of the Strategic
Report.
Redrow plc Annual Report 2020
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GOVERNANCE REPORT
Corporate Governance Report continued
DIRECTORS’ AND OFFICERS’ INSURANCE
The Company has directors’ and officers’ insurance in place
which insures Directors against certain liabilities, including
legal costs.
2. DIVISION OF RESPONSIBILITIES
THE BOARD
The Board comprises an Executive Chairman, two Executive
Directors and four Independent Non-Executive Directors, one
of which acts as the Senior Independent Director.
From the date of his first appointment, John Tutte has remained
in post beyond nine years, which is not compliant with
Provision 19 of the Code. This appointment was intended to be
for a limited time, and it is intended that an independent
Non-Executive Chairman will succeed John Tutte as Chairman
following his retirement ahead of the AGM in 2021.
In 2019 and 2020, the Board engaged with major shareholders
in respect of Board composition, particularly regarding the
Chairmanship role, and the proposed succession plans were
well-received by the shareholders consulted.
Executive Chairman and Group Chief Executive - Division of
Responsibilities
The Company has separate roles for the Executive Chairman
and Group Chief Executive, ensuring that there is a clear
division of responsibilities at the head of the Company
between the running of the Board and the operational
responsibility for the running of the Company’s business, as
required by the Code.
Group Chief Executive
Matthew Pratt, as Group Chief Executive, is responsible for:
• operational management of the Group;
• implementing strategic plans with the assistance of the
Executive Management Team;
• ensuring that the visions and values of the Company are
properly communicated across the Group; and
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;
• reporting on these to the Board.
Senior Independent Director
In line with Provision 12 of the Code, Nick Hewson was
appointed as the Senior Independent Director on 7 November
2018, having succeeded Debbie Hewitt in this position.
Nick Hewson 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.
• facilitating constructive board relations and effective
contributions from all Non-Executive Directors;
The following additional responsibilities fall within the remit of
the Senior Independent Director:
• ensuring that all Directors receive accurate, timely and clear
information;
• taking a leading role in determining the Board’s composition
and structure;
• 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
• ensuring that effective communications are maintained with
issues and concerns in order to relay to the Board; and
shareholders; and
• leading the evaluation of the performance of the Executive
• meeting with the Non-Executive Directors without the
Chairman and obtaining views from other Directors.
presence of the Executive Management Team.
John Tutte was not independent upon appointment when
assessed against Provision 10 of the Code, as he was
previously the Group Chief Executive of the Company. The
Board recognises that this is outside the provisions of the
Code, however as detailed on page 72, it was considered in
the best interests of the Company for John Tutte to replace
Steve Morgan as Chairman. This appointment was intended to
be on an interim basis, with John Tutte easing back to a
Non-Executive Chairman role at the 2020 AGM before retiring
from the Board ahead of the 2021 AGM. It is intended that John
Tutte will be succeeded by a Non-Executive Chairman who
shall be independent when assessed against the
circumstances outlined in the Code.
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, including offering of specialist
advice and strategic guidance. 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.
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The Non-Executive Directors play a vital role in appointing and
removing Executive Directors, and ensuring that there are
succession plans in place for key roles. The work of the
Nomination Committee, comprising all Non-Executive
Directors, can be seen on pages 71 to 74.
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. He is responsible for advising the Board
on all governance matters. The Company Secretary is a
Member of the Executive Management Team and all Directors
have access to his advice and services. He is responsible for
governance structures and mechanisms, corporate conduct
and is the primary source of advice on the conduct of the
business.
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.
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,
which, together with the benefit of their significant collective
experience of the UK house building industry, enables the
Board to discharge its duties and responsibilities effectively.
The Non-Executive Directors bring a wealth of experience and
understanding from outside the Company which enables them
to challenge and help develop proposals on the Company’s
strategy.
The details of the Directors’ respective experience are set out
in their biographical profiles on pages 50 to 51.
In considering the independence of each Non-Executive
Director, the Board has taken into consideration the guidance
provided by the Code. The Board considers that all Non-
Executive Directors holding office during the year to be
independent in accordance with Provision 10 of the Code, as
they each:
i.
have not been employed by the Company or Group;
ii. have no material business relationship with the Company;
iii.
iv.
v.
vi.
do not participate in the Company’s employee share plans
or pension scheme;
have not received additional remuneration beyond the
director’s fee displayed on page 91 of this Annual Report;
have no close family ties with any of the Company’s
Directors, Executive Management Team or advisers;
have no significant links with other Directors through
involvement in other companies;
vii. do not represent a significant shareholder; and
viii. have not served on the Board for more than nine years
from the date of their first appointment.
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
Provision 11 of the Code as the ratio of Independent Non-
Executive Directors to Executive Directors, excluding the
Chairman, is 4:2 (66.67%). Following the retirement of Vanda
Murray after the 2020 AGM, the Board composition will remain
compliant with this provision, with the ratio of Independent
Non-Executive Directors to Executive Directors, excluding the
Chairman, being 3:2 (60%).
APPOINTMENTS TO EXTERNAL BOARDS
Prior to Executive Directors and Non-Executive Directors
taking on any additional responsibility outside of the Group,
and before making new appointments to the Board, an
assessment is undertaken to determine whether this will
TABLE OF ATTENDANCE
Name
John Tutte
Matthew Pratt
Barbara Richmond
Nick Hewson
Sir Michael Lyons
Vanda Murray
Nicky Dulieu
Role
Attendance at Meetings
Executive Chairman
Group Chief Executive
Group Finance Director
Senior Independent Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
8/8
8/8
8/8
8/8
8/8
8/8
5/51
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Nicky Dulieu was appointed as Non-Executive Director on 6 November 2019 and attended all meetings which were held from 6 November 2019
to the end of the 2020 financial year.
Redrow plc Annual Report 2020
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Redrow plc Annual Report 2020
GOVERNANCE REPORT
Corporate Governance Report continued
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.
In line with Provision 15 of the Code, the Executive Directors do
not hold more than one significant Non-Executive Directorship
position.
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 reports can be found on the following pages:
i.
Audit Committee report - pages 64 to 70;
ii. Nomination Committee report - pages 71 to 74;
iii.
Placemaking and Sustainability Committee report - pages
75 to 77; and
iv. Remuneration Committee report - pages 78 to 100.
Each Committee has Terms of Reference, governing their
responsibilities and powers, approved by the Board. The
minutes of the Committee meetings are circulated to the Board
and the Committee Chairmen provide reports to the Board on
the work undertaken by the Committees.
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. Nicky
Dulieu shall succeed Vanda Murray as Chair of the
Remuneration Committee following the retirement of Vanda
Murray on 6 November 2020.
The Board completed a performance evaluation of each of its
Committees during the 2020 financial year. 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.
3. COMPOSITION, SUCCESSION AND EVALUATION
NOMINATION PRACTICES
To assist with the assessment of the Company’s application of
the Code, the following table sets out where key information
relating to the Company’s nomination related practices can be
found within the Annual Report:
Subject
Page reference
Explanation of the
main roles and
responsibilities of the
Nomination Committee
See page 71 of the Nomination
Committee Report, under heading:
Responsibilities and Terms of
Reference
Explanation of the
work undertaken by
the Nomination
Committee
Annual reappointment
of Directors and
reasons why
reappointment is
recommended
Tenure of Chairman
See page 72 of the Nomination
Committee Report, under heading:
Main Activities During the Year
See pages 60 to 61 of the
Corporate Governance Report,
under heading: Appointments and
Re-Elections to the Board
See pages 73 to 74 of the
Nomination Committee Report,
under heading: Annual Re-Election
of the Directors
See page 58 of the Corporate
Governance Report, under
sub-heading: Executive Chairman
See page 72 of the Nomination
Committee Report, under heading:
Succession
External search
consultancy and
connection disclosure
See page 72 and 73 of the
Nomination Committee Report,
under heading: Succession
Annual evaluation of
Board, Committees
and Directors and
action taken following
results of evaluation
See page 61 of the Corporate
Governance Report, under
heading: Board Performance
Evaluation
THE NOMINATION COMMITTEE
The Nomination Committee is responsible for leading the
process for appointments to the Board and ensuring that
succession plans allow for the development of a diverse
pipeline for the Board and Executive Management Team
positions.
All members of the Nomination Committee are independent
Non-Executive Directors and the Committee is chaired by Nick
Hewson, the Senior Independent Director.
Further details of the role of the Nomination Committee and
work undertaken throughout the year can be found on pages
71 to 74.
APPOINTMENTS AND RE-ELECTIONS TO THE BOARD
The appointments of the Non-Executive Directors are
generally made for three-year terms and all Directors are
subject to annual re-election. Following the assessment on the
effectiveness of the Directors, the Nomination Committee will
make recommendations to the Board on reappointments.
The Nomination Committee has recommended the
reappointment of each of the Executive Directors and
Non-Executive Directors.
• there was clarity on the Board’s objectives with a good
balance between short-term performance and long-term
consequences;
The Board is mindful 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 annual
re-election is subject to continued satisfactory performance.
The Board has decided that all Directors will be submitting
themselves for re-election at the 2020 Annual General
Meeting, save for Vanda Murray who has informed the Board of
her intention to retire from the Board following the 2020 AGM
due to other work commitments. Vanda Murray’s appointment
term was extended on 1 August 2020 to 6 November 2020,
being the date of the 2020 Annual General Meeting, following
which she shall retire from the Board.
The Board has satisfied itself that all Directors who will be
submitting themselves for re-election continue to perform
satisfactorily. Details of appropriate Annual General Meeting
Resolutions will be found in the Notice of Annual General
Meeting which will be sent to shareholders separately.
BOARD PERFORMANCE EVALUATION
In line with the Code, each year a formal performance
evaluation of the Board and its Committees is undertaken.
Last year, an externally facilitated evaluation of the Board and
Committees was carried out by Independent Audit. In 2020, a
formal internal evaluation of the Board and Committees was
undertaken to build upon the progress made in the previous
year. After reviewing the evaluation report prepared by
Independent Audit last year, a questionnaire was created and
tailored, taking into consideration comments made in the
previous years’ assessment as well as the current market.
The questionnaires were completed by all members of the
Board and each member of the 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.
Following completion of the questionnaires, an anonymised
effectiveness report was compiled and presented at the
relevant Board and Committee meetings held in June and July
2020. Having considered the output of this year’s evaluation,
the Board considers that it continues to function effectively and
its relationship with its Committees continue to be sound. The
main observations from the evaluation were:
• the Board works on a basis of trust and openness;
• the right people were brought together around the table to
allow for meaningful discussions and meeting arrangements
were rated highly;
• 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;
• the quality of chairmanship was highly regarded in promoting
inclusive discussions; and
• the response to the COVID-19 pandemic was highly rated,
recognising the strength of the Board, Executive
Management Team and wider leadership team in dealing
with the situation with safety, transparency and efficiency.
The evaluation also identified the following areas for
improvement, which will continue to be addressed over the
coming year:
• considering the importance of the Board in setting and
reviewing the strategy, it was identified that there was
potential scope for a further session dedicated specifically to
strategy to allow for blue sky thinking;
• there could be further challenge on how far and how quickly
we are progressing towards our strategic objectives and
milestones; and
• there may be scope for increasing focus on developing the
next generation of leaders to ensure the leadership team
remain effective.
As a result, the Board considers that it continues to operate
effectively with meetings to facilitate and debate decision
making.
2019 Evaluation
Recommendations of
improvement from the
2019 evaluation
Action taken during the year
Renewed focus on
preparing for crises
which could impact the
Group and ensuring
that contingencies and
mitigations are in place
A detailed business continuity plan
was put in place during the year,
which allowed the Group to be
more prepared when the COVID-19
crisis hit, with the business
continuity plan being activated.
Ensuring that the
Board allocates
sufficient time to
overseeing
organisational culture
to ensure that it aligns
with the Board’s
expectations
Possible scope for
further consideration
of how emerging
technology in the
market could bring
strategic opportunities
and risks
Work has been undertaken in the
year to monitor, assess and embed
culture, further details of which can
be seen on pages 55 to 56, and
this will remain on the Board’s
agenda for the coming year.
Reference to technology is now
included within the Board papers
for each meeting with discussion
around how technology is used
across the Group and where the
opportunities and risks lie.
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Corporate Governance Report continued
Subject
Page reference
See page 116 of Governance
Report, under heading: Statement
of Directors’ Responsibilities
Explanation of the
Directors responsibility
for preparing the
Annual Report and
assessment forming
the basis for their
conclusion that the
Annual Report is fair,
balanced and
understandable.
AUDIT COMMITTEE
The Board has established an Audit Committee comprising all
four independent Non-Executive Directors. The Executive
Chairman is not a member of the Audit Committee.
The Board is satisfied that, with the financial backgrounds of
Nick Hewson (being a Fellow of the Institute of Chartered
Accountants in England and Wales) and Nicky Dulieu (having
held various strategic and financial roles within a FTSE 250
company over a 23 year period), there is sufficient recent and
relevant financial experience to ensure that the Committee is
able to function effectively with the appropriate degree of
challenge.
Further details of the role of the Audit Committee and work
undertaken throughout the year can be found on pages 64 to
70.
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. A more
detailed explanation of the approach to diversity can be found
on page 107.
In line with Provision 23 of the Code, the gender split of the
Company can be found on page 74 within the Nomination
Committee Report.
4. AUDIT, RISK AND INTERNAL CONTROL
AUDIT, RISK AND CONTROL PRACTICES
To assist with the assessment of the Company’s application of
the Code, the following table sets out where key information
relating to the Company’s audit, risk and control practices can
be found within the Annual Report:
Subject
Page reference
Explanation of the
main roles and
responsibilities of the
Audit Committee
See pages 64 to 65 of the Audit
Committee Report, under heading:
Responsibilities and Terms of
Reference
Explanation of the
work undertaken by
the Audit Committee
See page 66 of the Audit
Committee Report, under heading:
Main Activities During the Year
Risk management and
internal control
systems
See pages 38 to 39 of Strategic
Report, under heading: Risk
Management
See pages 38 to 45 of Strategic
Report, under heading: Risk
Management
See pages 47 to 48 of Strategic
Report, under heading: Going
Concern and Viability Statement
Robust assessment of
the Company’s
emerging and principal
risks (including a
description of the
identified risks,
procedures for
identifying risks and an
explanation of how
these are being
controlled and
mitigated)
Adoption of going
concern basis of
accounting and
assessment of
prospects of the
Company, taking into
consideration the
Company’s current
position and principal
risks
5. REMUNERATION
REMUNERATION PRACTICES
To assist with the assessment of the Company’s application of
the Code, the following table sets out where key information
relating to the Company’s remuneration practices can be found
within the Annual Report:
REMUNERATION COMMITTEE
The Board has established a Remuneration Committee
comprising all four independent Non-Executive Directors. In line
with Provision 32 of the Code, the Executive Chairman is not a
member of the Remuneration Committee as he was not
independent upon appointment.
Subject
Page reference
Non-Executive
Director remuneration
Remuneration
consultancy
appointment
Executive Director
remuneration
supporting alignment
with long-term
shareholder interests
Discretion to override
formulaic outcomes,
malus and clawback
provisions
Notice and contract
periods
Remuneration policy
setting
Pay ratios
Engagement regarding
remuneration
See page 91 of Directors’
Remuneration Report, under
heading: Single Total Figure
Remuneration Table
See pages 99 to 100 of Directors’
Remuneration Report, under
heading: Consideration of
Directors’ Remuneration –
Remuneration Committee and
Advisors
In the Remuneration Policy table,
see Operation column of LTIP
component for details of vesting
and holding periods, on page 84.
See also page 94 of Directors’
Remuneration Report, under
heading: Shareholding Guidelines
and Share Interests
See page 81 of Directors’
Remuneration Report under
sub-heading: Risk
See page 87 of Directors’
Remuneration Report, under
heading: Service Contracts
See page 81 of Directors’
Remuneration Report, under
heading: Remuneration Strategy
See page 97 of Directors’
Remuneration Report, under
sub-heading: CEO Pay Ratio
See page 57 of the Corporate
Governance Report, under
sub-heading: Resolution 11
See page 85 of Directors’
Remuneration Report, under
heading: Consideration of
Shareholder Views
Vanda Murray is currently the Chair of the Remuneration
Committee, having served on the Committee for over 12 months
before taking over this role from her successor, Debbie Hewitt.
Vanda Murray shall retire from the Board following the Annual
General Meeting of the Company on 6 November 2020 and
shall be succeeded as Chair of the Remuneration Committee by
Nicky Dulieu. Nicky Dulieu has served as a member of the
Remuneration Committee since her appointment to the Board
on 6 November 2019 and has significant remuneration
experience. She is currently appointed as the Chair of the
Remuneration Committees of Adnams plc and Marshall Motor
Holdings plc, therefore the Board is satisfied that Nicky Dulieu
has sufficient remuneration experience to successfully lead the
Remuneration Committee.
The Board has delegated the responsibility to the Remuneration
Committee for determining the remuneration policy and setting
the remuneration for the Chairman, Executive Directors and
members of the Executive Management Team, taking into
consideration the remuneration of the workforce.
Further details of the role of the Remuneration Committee and
work undertaken throughout the year can be found on pages 78
to 100.
DIRECTORS’ EMOLUMENTS WAIVER
On 27 March 2020, the Directors and senior directors in the
business announced internally they had volunteered to take a
20% cut in salary for the duration of the crisis. Following this, the
wider directorate in the business also volunteered to take a
salary cut of 20%. Save for the Executive Chairman, salaries for
the Directors, senior directors and wider directorate returned to
their usual levels with effect from 18 May 2020, to coincide with
the phased return to construction.
Following the volunteered offering from the Executive Chairman,
the Remuneration Committee agreed that the salary of the
Executive Chairman would remain at the reduced rate of 80%
until the 2020 AGM, to be held on 6 November 2020, at which
date his revised salary for his Non-Executive Chairmanship role
would take effect. See page 89 of the Directors’ Remuneration
Report for further details.
GRAHAM COPE
Company Secretary
15 September 2020
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GOVERNANCE REPORT
Audit Committee Report
“The Committee monitors the effectiveness of the Group’s financial
reporting, systems of risk management and internal control and the
integrity of the Company’s internal and external audit processes.”
I am pleased to present the Audit
Committee Report for the 52 weeks
ended 28 June 2020, which has been
prepared in accordance with the
requirements of the UK Corporate
Governance Code 2018 (the “Code”)
and the Financial Conduct Authority’s
Listing Rules and Disclosure, Guidance
and Transparency Rules (the “DTRs”).
During 2020, the Committee maintained
its focus on monitoring the
effectiveness of the Group’s financial
reporting and the integrity of the risk
NICK HEWSON
Chairman of the
Audit Committee
management systems and internal control procedures by
providing valuable independent challenge and oversight. This
year was also the first financial year which KPMG LLP (“KPMG”)
provided the external audit function of the Company, having
succeeded PricewaterhouseCoopers LLP following a successful
tender process undertaken by the Committee in 2018.
I would also like to welcome Nicky Dulieu, Independent
Non-Executive Director, who joined as a Member of the Board
and the Committee on 6 November 2019. She brought with her
solid financial and commercial experience which has added to
the skill set of the Committee and enabled it to further enhance
the quality of its work and challenge.
COMMITTEE MEMBERSHIP AND MEETINGS
There are four Members of the Committee, each of which are
Independent Non-Executive Directors, with myself, the Senior
Independent Director, being Chair of the Committee. The other
Members of the Committee during the 2020 financial year were
Sir Michael Lyons, Vanda Murray and Nicky Dulieu. The
Company Secretary acts as Secretary to the Committee.
The Board is satisfied that there is the requisite recent and
relevant financial experience on the Committee (in line with
Provision 24 of the Code) and that there is sufficient
competence in accounting and auditing (in line with DTRs
7.1.1A) due to the following:
• I, as Chairman of the Committee, am a Fellow of the Institute
of Chartered Accountants in England and Wales; and
• Nicky Dulieu, as a Member of the Committee, has held
various strategic and financial roles within a FTSE 250
company over a 23-year period.
The qualifications, skills and experience of each Committee
Member can be found on pages 50 to 51.
As noted above, Nicky Dulieu joined as a Member of the Board
and the Committee on 6 November 2019.
To enable the Committee to provide robust challenge of the
reports submitted to the Committee, regular attendees at the
meetings during the year included the Group Finance Director,
Finance Director - Group Services (who has the responsibility
for the Company’s internal audit), Chief Information Officer
(who has the responsibility for IT, including cyber security and
systems accounts) and KPMG LLP as the external auditor.
The Committee met three times during the year and details
of the meeting attendance can be seen in the table below.
A summary of the principal activities of the Committee is
provided below.
Table of Attendance
Name
Nick Hewson
Sir Michael Lyons
Vanda Murray
Nicky Dulieu 1
Role
Chairman
Member
Member
Member
Attendance
at Meetings
3/3
3/3
3/3
2/2
1
Nicky Dulieu was appointed as a Member of the Committee on
6 November 2019 and attended all meetings that were held from
6 November 2019 to the end of the 2020 financial year.
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 function following the final audit and the review
of the 52 weeks ended 28 June 2020 financial statements.
The Committee Chairman met with the Engagement Partner of
the external auditors, as well as the Finance Director – Group
Services to discuss internal audit matters.
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
any significant financial reporting judgements containing
therein and the findings of the external auditors;
• monitoring and reviewing any formal announcements
relating to the Company’s financial performance;
• reviewing and monitoring the effectiveness of systems for
internal control, financial reporting and risk management,
covering all material controls (including financial, operational
and compliance controls), having regard to the long-term
prospects and viability of the Company;
• providing advice to the Board upon request on whether the annual report and accounts, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for shareholders to assess the Company’s position, performance,
business model and strategy;
• 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 and monitoring the external auditor’s independence and objectivity;
• monitoring and reviewing the policy on the engagement of the external auditors to supply non-audit services, taking into
consideration the impact this may have on independence;
• ensuring that the internal and external audit functions remain independent and effective through formal and transparent
review;
• 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;
• reviewing the Company’s procedures for raising concerns; and
• reporting to the Board on how the Committee has discharged its responsibilities.
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:
(i) Valuation of inventory
The Committee receives a report prepared by management at each reporting date outlining the approach taken by
management to assess the net realisable value of inventories together and cost of sales, 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 28 June 2020.
(iii) Going Concern
Annually, management conducts a detailed going concern review, considering liquidity and banking covenant compliance.
The Committee has challenged forecast cash flows and the assumptions applied to derive the cash flows and availability of
finance from existing facilities. The Committee has challenged the various risks associated with the COVID-19 pandemic and
the UK’s departure from the European Union that have been assumed as part of this review. The cash flow forecasts
evidence that the Group has adequate levels of liquidity from its committed facilities and complies with all banking
covenants for at least 12 months from 15 September 2020. The Committee therefore considers that it is appropriate to
continue to adopt a going concern basis in the preparation of the financial statements.
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.
The Committee concluded that appropriate judgements had been applied in determining the estimates and that adequate
disclosures had been made.
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Redrow plc Annual Report 2020
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GOVERNANCE REPORT
Audit Committee Report continued
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 2019 A review of the full year 2019 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;
A review of the related third party transactions;
Discussion regarding the latest Business Performance Review;
A review of the compliance with the Anti-Bribery Policy; and
An update on cyber security.
February 2020
A review of the 2020 half-yearly accounts including a report from the external auditors;
Consideration of the key accounting judgement areas and going concern;
A review of the proposed external audit strategy for 2020 and associated fees;
A review of the Risk Register;
Discussion regarding the latest Business Performance Review;
A review of the compliance with the Anti-Bribery Policy;
An update on compliance with the General Data Protection Regulation 2018;
A further update on cyber security;
A review of the new Gifts and Hospitality Policy;
A review of the Terms of Reference of the Committee;
An update on the integration of KPMG LLP as the succeeding external auditors;
A review of the effectiveness of the external audit process; and
A review of the independence and objectivity of the external auditors.
June 2020
A review of the appropriateness of the Group’s accounting policies;
An update on action taken in response to the COVID-19 pandemic;
A review of the Risk Register;
Discussion regarding the latest Business Performance Review;
A review of internal controls across the whole business;
A review of the Cross Divisional Testing;
An update on insurance cover for the Group;
An update and discussion on internal audit and its strategy;
An update and discussion on the external audit;
A further update on the integration of KPMG LLP as the external auditors;
A review of the external audit fees;
A further update on compliance with the General Data Protection Regulation 2018;
A further update on cyber security;
A review of the Group’s Anti-Bribery Policy, Anti-Facilitation of Tax Evasion Policy and Whistleblowing
Policy; and
Report presentation of the Committee Performance Evaluation and a discussion on its effectiveness.
September 2020 A review of the full year 2020 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;
A review of the related third party transactions;
Discussion regarding the latest Business Performance Review;
A review of the compliance with the Anti-Bribery Policy; and
An update on cyber security.
EXTERNAL AUDITORS
Following the conclusion of the tender process led by the
Committee, the Company announced on 9 November 2018
that the Board had approved the proposed appointment of
KPMG LLP as the Company’s external auditors for the financial
year commencing 1 July 2019. There were a number of factors
contributing to this proposal, including KPMG LLP’s audit
experience, particularly with other entities of a similar size to
the Company, as well as their knowledge, reliability and
approach to quality assurance and independence. The
appointment was subsequently approved by shareholders at
the 2019 Annual General Meeting, whereby 99.76% of votes
were cast in favour of the resolution, with the appointment
taking effect from 6 November 2019.
The tenure of the current Audit Partner from KPMG LLP, Nick
Plumb, commenced from the financial year commencing 1 July
2019.
Provision of Non-Audit Services by 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
has the Company purchased liability insurance for them.
Non-audit services provided by the external auditors during
the 2020 financial year comprised audit related assurance
services, in the form of an independent review of the half-
yearly statements. The Committee concluded that the provision
of such services was appropriate given that they were closely
related to the work performed in the external audit process
and, for reason of effectiveness and efficiency, it was
considered advantageous to engage the external auditors due
to their knowledge and expertise.
The Committee, in line with the above formal policy, approved
all non-audit service fees for the work undertaken in the
financial year. The provision of such services was in line with
the FRC’s Revised Ethical Standard 2019. As a result of this
policy and additional discussions with the external auditors, the
Committee is satisfied that the independence of KPMG LLP
was not compromised because of this additional work. Details
of fees paid to KPMG LLP for audit and non-audit purposes are
disclosed on page 137.
Independence Assessment of External Auditors
In line with Provision 25 of the Code, the Committee monitors
and reviews the independence and objectivity of the external
auditors. The Committee is satisfied that KPMG LLP remain
independent and objective following its assessment, taking
into consideration the following:
i.
ii.
iii.
iv.
Tenure of the audit firm – the 2020 financial year was the
first period of KPMG LLP’s appointment as the external
auditors. The Committee is aware of the requirement for it
to retender the Company’s statutory audit services
engagement at least every ten years, with rotation at least
every twenty years. The Committee is also mindful of the
Competition & Markets Authority view that companies may
benefit from going out to tender every five years and,
when considering the specific timing for the retender of
the external auditors, the Committee shall consider which
year would be in the best interests of its members. Having
completed only one year of external audit services, the
Committee is satisfied that the independence of KPMG
LLP has not been impaired;
Tenure of the audit partner – the 2020 financial year was
the first period of Nick Plumb’s engagement as Audit
Partner of the external auditors. The Committee is aware
of the requirement for the Audit Partner of the external
auditor to be rotated at least every five years. Having
completed only one year as Audit Partner, the Committee
is satisfied that the independence of the external auditors,
and Nick Plumb as Audit Partner, has not been impaired;
Connection of the audit firm to the Members of the
Committee – 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; and
Level of non-audit services provided to the Company
– the Committee is satisfied that the level of non-audit
services provided by KPMG LLP was in line with the
Company’s policy and was appropriate in respect of the
audit services provided and that an effective audit could
be conducted, with such level in no way compromising
independence.
Effectiveness Assessment of External Auditors
The performance of the external auditors is subject to regular
review by the Committee, in line with Provision 25 of the Code.
In its assessment of the effectiveness of the external auditors,
the Committee considered the quality of the external audit
processes; the knowledge and experience of the external audit
team; the external audit scope and plan; the external audit
communications; and the external audit governance and
independence. Following its assessment, the Committee is
satisfied that KPMG LLP remain effective and provide rigorous
challenge.
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Redrow plc Annual Report 2020
68
GOVERNANCE REPORT
Audit Committee Report continued
Re-Appointment of External Auditors
Following its assessment of the independence and
effectiveness of the external auditors, having received the
recommendation from the Committee, the Company shall be
proposing the re-appointment of KPMG LLP as its external
auditors at the 2020 Annual General meeting.
• the Board requires each director in its operating divisions to
complete an annual statement on Corporate Governance
and related party transactions. The statement is designed to
provide assurance that Group policies and procedures are
being implemented and complied with in all material
respects;
The Committee confirms that there were no contractual
obligations that acted to restrict the Committee’s choice of
external auditors.
INTERNAL CONTROLS
The Board 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 has
been 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, principal and emerging 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 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, Safety and Environmental
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;
• key functional directors must complete a Principal Controls
Self-Assessment Questionnaire which is reviewed by the
Board to assist in improvements in the control framework;
• a weekly business report (WBR) comprising sales funnel
information, gross margins and order book is produced for
the Group, each division and each site and circulated across
the Group;
• a monthly reporting pack is circulated in advance and
reviewed at 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 28 June 2020. 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 130 to 135.
In assessing the effectiveness of the internal audit function, the
Committee is satisfied that it has the appropriate status,
processes, knowledge and resources to deliver an effective
internal audit and that the function has had a positive impact on
the controls and governance of the Group.
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
they liaise closely with appropriate Group personnel at head
office and within the divisions and report directly to the Group
Finance Director.
RISK MANAGEMENT AND INTERNAL AUDIT
The Group’s Risk Register defines controls as prevent or detect
and identifies owners for each high level risk. Feedback on the
risks and controls is actively encouraged and is facilitated by
links on the Group’s intranet to ensure the risks listed remain
relevant and accurate. The Register itself is regularly
maintained and is reviewed by the Committee annually.
The internal audit strategy is discussed with 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 principal and emerging 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.
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 specifically to bribery and the implication on
individuals and the Company of an act of bribery either given
or received. Within the Code of Conduct, there is a specific
decision-making tool which is designed to provide employees
with key questions to ask themselves should they ever be
faced with difficult situations which could ultimately lead to
bribery or corruption. This seeks to guide them to act in a way
that is in line with Company policy and prevent any form
bribery taking place.
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. Within the Code of Conduct,
there is a gift specific decision-making tool which employees
are encouraged to use when considering whether they should
accept or offer a gift or hospitality which seeks to guide them
to the expected behaviours in line with our policy.
INTERACTION WITH FRC
During the year the Financial Reporting Council (FRC)
Corporate Review team opened and concluded its review of
our 2019 Annual Report. All correspondence received and
responses were discussed with the Chair of the Audit
Committee on behalf of the Committee. As a result of the FRC
review, we have improved the clarity of our Group disclosures
in relation to Critical Accounting Judgements and Key Sources
of Estimation Uncertainty, Dividend distribution accounting
policy and Trade and Other Receivables notes. The nature of
the FRC review is that it provides no assurance that the annual
report and accounts are correct in all material respects. The
FRC's role is not to verify the information but is to consider
compliance with reporting requirements.
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.
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 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.
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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Redrow plc Annual Report 2020
70
Redrow plc Annual Report 2020
GOVERNANCE REPORT
Audit Committee Report continued
GOVERNANCE REPORT
Nomination Committee Report
PERFORMANCE EVALUATION
During the year, a formal internal evaluation of the Committee
was carried out to build upon the progress made by the 2019
evaluation which was externally facilitated by Independent
Audit.
After reviewing the evaluation report prepared by Independent
Audit last year, a questionnaire was created and tailored, taking
into consideration comments made in the previous years’
assessment as well as the current market. 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.
Following completion of the questionnaire, an anonymised
effectiveness report was compiled and presented to the
Members of the Committee. 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 understanding and challenging the control and risk
management framework and ensuring that the external
auditors have the right focus. It was also agreed that the
Committee maintains a clear focus and benefits from good and
open discussions and is led by a knowledgeable Chairman
who promotes challenge and debate from all Members.
COMPLIANCE STATEMENT
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 52
weeks ended 28 June 2020.
NICK HEWSON
Chairman of the Audit Committee
15 September 2020
“Careful succession planning for the Board and the Executive Management
Team, and rigorous assessment of the Board and its Committees, is crucial
to the long-term success of the Company.”
I am pleased to present the Nomination
Committee Report for the 52 weeks
ended 28 June 2020. This report has
been prepared in accordance with the
requirements of the UK Corporate
Governance Code 2018 (the “Code”)
which is the first year in which we shall
be reporting against this new version of
the Code.
During 2020, the Committee
maintained its focus on the skillset,
experience and knowledge required on
the Board to ensure that it remains
effective and focused on driving
NICK HEWSON
Chairman of the
Nomination
Committee
forward the strategy of the Company.
This year, we welcomed Nicky Dulieu as an Independent
Non-Executive Director of the Board on 6 November 2019. She
also joined as a Member of this Committee, as well as the Audit
and Remuneration Committees at the same date. We are
delighted that Nicky Dulieu has joined us as she brings with
her a wealth of experience that has further enhanced the
knowledge and skills of the Board as a whole.
Additionally, on 1 July 2020, Matthew Pratt was promoted to
Group Chief Executive of the Company, having been
appointed as Chief Operating Officer on 1 April 2019. This
promotion is a great reflection of Company’s commitment to
internal progression and is explained further in this report.
COMMITTEE MEMBERSHIP AND MEETINGS
There are four Members of the Committee, each of which are
Independent Non-Executive Directors, with myself, the Senior
Independent Director, as Chair of the Committee. The other
Members of the Committee during the 2020 financial year
were Sir Michael Lyons, Vanda Murray and Nicky Dulieu. The
Company Secretary acts as Secretary to the Committee.
As stated in my introduction above, Nicky Dulieu joined as a
Member of the Board and the Committee on 6 November
2019.
The biographies of the Members of the Committee can be
found at pages 50 to 51.
The Committee met three times during the 52 weeks ended
28 June 2020. For all meetings, and where necessary, papers
were circulated sufficiently in advance to allow proper
consideration of all matters for discussion. Details of the
meeting attendance can be seen in the table below.
Table of Attendance
Name
Nick Hewson
Sir Michael Lyons
Vanda Murray
Nicky Dulieu 1
Role
Chairman
Member
Member
Member
Attendance
at Meetings
3/3
3/3
3/3
2/2
1
Nicky Dulieu was appointed as a Member of the Committee on
6 November 2019 and attended all meetings that were held from
6 November 2019 to the end of the 2020 financial year.
RESPONSIBILITIES AND TERMS OF REFERENCE
The key responsibilities of the Committee are:
• reviewing the structure, size and composition of the Board
(including skills, knowledge and experience) and making
recommendations for further recruitment to the Board or
proposing changes to the existing Board;
• reviewing the leadership needs of the Company, both
executive and non-executive, ensuring appropriate
succession planning for Directors and other senior
executives within the business;
• leading the process for Board appointments, ensuring they
are conducted on merit and against objective criteria;
• making recommendations to the Board, including on
appointment of Executive 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;
• 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; and
• reviewing the policy on diversity and inclusion and ensuring
there is sufficient linkage to the Company’s strategy.
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Redrow plc Annual Report 2020
GOVERNANCE REPORT
Nomination Committee Report continued
The Committee’s Terms of Reference are published on the
Group’s website (redrowplc.co.uk).
MAIN ACTIVITIES DURING THE YEAR
During the 2020 financial year, the Committee undertook the
following activities:
• a review of the structure, size and composition of the Board;
• a review of executive and non-executive succession;
• a review of the succession plans of the Executive
Management Team;
• an assessment of the Board composition and diversity;
• a recruitment process for an additional Independent
Non-Executive Director, resulting in the appointment of
Nicky Dulieu;
• consultation with major shareholders in respect of the
intended Board changes following discussions with those
shareholders at the end of 2019, including Matthew Pratt
being promoted to Group Chief Executive and John Tutte
stepping back to Non-Executive Chairman at the end of the
2020 AGM and being replaced by an Independent Non-
Executive Chairman ahead of the 2021 AGM;
• a discussion following Vanda Murray informing the Board of
her intention to retire from the Board on 6 November 2020
after the AGM as a result of other work commitments and the
appointment of Nicky Dulieu to the role of Chair of the
Remuneration Committee;
• an evaluation of the Board, its Committees and the Executive
and Non-Executive Directors;
• a review and recommendation that the Directors stand for
re-election at the conclusion of the 2020 Annual General
Meeting in accordance with UK Corporate Governance
Code;
• a review of the Committee’s Terms of Reference; and
• engagement of an external recruitment agency, following a
tender process for the provision of such services, to
commence the search for an Independent Non-Executive
Chairman to succeed John Tutte as the current Chairman
ahead of the 2021 AGM.
Where appropriate, the Directors were not present and did not
vote when any individual proposals were discussed.
SUCCESSION
Executive Directors
Chairman
John Tutte was appointed as Executive Chairman, replacing
Steve Morgan, on 1 April 2019.
The Committee determined that the appointment of John Tutte,
having a wealth of experience and knowledge of the Group,
was in the best interests of the Company, as the circumstances
necessitated continuity following the departure of Steve
Morgan. Moreover, following Steve Morgan’s retirement, the
appointment of John Tutte allowed for an eventual transition to
a more conventional board structure, which would be in line
with the Code.
The Board consulted with major shareholders in respect of the
rationale behind this appointment and set out its reasons to all
shareholders via RNS announcement and additionally by way
of publication on the Company website at http://investors.
redrowplc.co.uk/corporate-governance.
The Committee recognised that ordinarily the Group Chief
Executive should not go on to become Chairman and that
should this happen, major shareholders should be consulted
(per Provision 9 of the Code). For the reasons outlined, John
Tutte was deemed the most suitable person for the role and
the Board held consultations with major shareholders in this
regard. Following these consultations, it is intended that John
Tutte will step back to Non-Executive Chairman at the AGM in
November 2020 and retire from the Board ahead of the AGM in
2021. An Independent Non-Executive Chairman is to be
appointed following John’s retirement ahead of the AGM in
2021, in line with Provision 9 of the Code.
The Committee also recognised that the Chairman should not
remain in post beyond nine years from their first appointment
to the Board and that, if this is to be extended, a clear
explanation is to be provided (per Provision 19 of the Code).
John Tutte joined the Board in July 2002 however, as
explained above, the re-appointment of John Tutte to be
proposed at the 2020 AGM is intended to allow for a thorough
search process for a succeeding Independent Non-Executive
Chairman.
In July 2020, the Committee commenced a tender process for
external recruitment services to be provided to the Company
to commence the search for the succeeding Non-Executive
Chairman. Following the tender process, the Inzito Partnership
was engaged to assist with the recruitment process for this
position. Other than its engagement for this appointment, the
Inzito Partnership has no connection to the Company or the
individual directors of the Company. The process is still in the
early stages, however further details of this process shall be
outlined in next year’s Annual Report. As soon as the
appointment has been approved, the Company shall release
an RNS announcement containing details of the appointment.
Group Chief Executive
Matthew Pratt, previously Chief Operating Officer, was
promoted to Group Chief Executive on 1 July 2020.
Having joined the Board on 1 April 2019 as Chief Operating
Officer, the Committee recommended the promotion of
Matthew Pratt to Group Chief Executive, having been satisfied
that his capabilities, experience and strategic focus would
allow him to effectively lead the operational management of
the Group and implement strategic plans with the assistance of
the Executive Management Team.
During his tenure, the Committee was satisfied that Matthew
Pratt had demonstrated the following, which were deemed
essential for the appointment of Group Chief Executive:
• 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. The
appointment of Matthew Pratt as Group Chief Executive, having
joined the company in 2003 as a Chief Quantity Surveyor and
becoming a Regional Chief Executive in 2013, is a great example
of how the Company develops and nurtures talent resulting in the
ability for employees to make their way up to the Board.
Division of Responsibilities
The Committee is satisfied that the separation of roles at the
head of the Company has been maintained, with the Executive
Chairman being responsible for leading the Board and the
Group Chief Executive being responsible for the executive
leadership of the business. Further information on the division
of responsibilities between the Executive Chairman and the
Group Chief Executive can be found on page 58.
In addition to this, the Committee has determined that there
remains an appropriate combination of Executive Directors and
Independent Non-Executive Directors such that no one
individual, or small group of individuals, dominates the Board’s
decision-making.
Non-Executive Directors
The Board considers that succession planning of the Board and
its Committees is extremely important and believes that it now
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.
In late 2019, the Committee identified that the Board may
benefit from the appointment of an additional Non-Executive
Director and, following a tender process, Russell Reynolds
Associates were engaged as the external search agency to
assist with this appointment. Other than its engagement for this
appointment, Russell Reynolds Associates has no connection
to the Company or the individual directors of the Company.
A list of possible candidates was drawn up and interviews for
the position were held. Following the interviews, a shortlist of
potential candidates was presented to the Committee for
consideration. The merits, strengths and weaknesses of the
shortlisted candidates were discussed and considered
extensively by the Committee. Following deliberations, the
Committee unanimously agreed that Nicky Dulieu should be
nominated to the Board for approval.
Nicky Dulieu has extensive Non-Executive Director experience
and is currently a Non-Executive Director of Adnams plc,
Marshall Motor Holdings plc and WH Smith plc. She trained as
an accountant with Marks & Spencer Group plc and held
various strategic and financial roles within the company over a
23-year period. Following this, Nicky Dulieu was appointed to
the Board of Hobbs Limited and became Chief Executive from
2008 until 2014.
The Board accepted the Committee’s recommendation, and
the Company appointed Nicky Dulieu as an Independent
Non-Executive Director with effect from the close of the AGM
on 6 November 2019. Following her appointment, she
undertook a tailored induction programme, which introduced
her to the Company and senior management and allowed her
understand the business in order for her to be able to properly
discharge her duties.
Nicky Dulieu has brought to the Board strong financial and
commercial experience as well as extensive knowledge of
retailing and customer service, which shall be of great benefit
to the Board.
Vanda Murray has informed the Board of her intention to retire
from the Board as a result of other work commitments. Vanda
Murray’s appointment term was extended on 1 August 2020 to
6 November 2020, being the date of the 2020 Annual General
Meeting. Vanda Murray will not be seeking re-election at the
2020 Annual General Meeting and will retire from the Board
following that meeting.
ANNUAL RE-ELECTION OF THE DIRECTORS
The Committee 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 current composition is
compliant with Provision 11 of the Code as the ratio of
Independent Non-Executive Directors to Executive Directors,
excluding the Chairman, is 4:2 (66.67%). Following the
retirement of Vanda Murray after the 2020 AGM, the Board
composition will remain compliant with this provision, with the
ratio of Independent Non-Executive Directors to Executive
Directors, excluding the Chairman, being 3:2 (60%).
The Committee has also assessed the time commitment of all
Directors to ensure that any other commitments do not
compromise their ability to commit sufficient time to the
Company to properly discharge their responsibilities. The
Committee does not consider that any of its Directors are over
boarded and is satisfied that sufficient time and energy is
devoted to the Company by each Director.
Following an assessment comprising the following factors, the
Committee has satisfied itself that all Directors continue to
perform satisfactorily and are important to the Company’s
long-term sustainable success:
• the effectiveness of the Directors as part of the annual
evaluation;
• the skills, knowledge and experience of the Directors, taking
into consideration the requirements of the Company;
• the time dedicated by the Directors to the Company in order
to properly discharge their responsibilities; and
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Nomination Committee Report continued
GOVERNANCE REPORT
Placemaking and Sustainability Committee Report
• the fulfilment of the independence criteria, as outlined in
Ethnic Diversity
Provision 10 of the Code, for the Independent Non-Executive
Directors.
As such, the Committee has recommended that the Board
propose the re-election of all Directors at the 2020 AGM, save
for Vanda Murray who has informed the Board of her intention
to retire from the Board as a result of other work commitments.
Vanda Murray’s appointment term was extended on 1 August
2020 to 6 November 2020, being the date of the 2020 Annual
General Meeting, following which she shall retire from the
Board.
DIVERSITY
The principle of boardroom diversity is strongly supported and
recognised by the Board and has clear linkages to the Company’s
strategy, with Valuing People being one of the Company’s three
strategic themes. 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 to achieve a balance on the Board. 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 appointment of Nicky Dulieu
to the Board on 6 November 2019, the current female
representation on the Board is 42.86%. Once Vanda Murray
retires from the Board following the 2020 AGM, the female
representation on the Board will be 33.33%, thereby remaining
in line within the aforementioned 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.
In line with Provision 23 of the Code, the table below sets out
the current position of the Company on a gender basis:
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 107.
PERFORMANCE EVALUATION
During the year, a formal internal evaluation of the Committee
was carried out to build upon the progress made by the 2019
evaluation which was externally facilitated by Independent
Audit.
After reviewing the evaluation report prepared by
Independent Audit last year, a questionnaire was created and
tailored, taking into consideration comments made in the
previous years’ assessment as well as the current market.
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.
Following completion of the questionnaire, an anonymised
effectiveness report was compiled and presented to the
Members of the Committee. 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 establishing the right size and mix of
members of the Board with a good balance of personalities
for generating lively discussion and that the Committee had
found the right people for the Board ensuring good coverage
of the core skills required for the business to remain effective.
Succession planning for the Executive Management Team
and management of potential successors for senior executive
roles will remain a priority for the coming year.
Main Board
Executive Management Team
Direct reports to Executive
Management Team
Female
3 (43%)
2 (22%)
Male
4 (57%)
7 (78%)
11 (33%)
22 (67%)
NICK HEWSON
Chairman of the Nomination Committee
Redrow employees at June 2020
795 (34%)
1,548 (66%)
15 September 2020
“The key priorities of the Committee are: strengthening the connection
between people and places by Developing Thriving Communities;
monitoring the Company’s impact on the environment and the communities
it creates by Building Responsibly; and ensuring that the Company supports
and develops its people by Valuing People”.
I am pleased to present the
Placemaking and Sustainability
Committee Report for the 52 weeks
ended 28 June 2020.
During 2020, the Committee
maintained its focus on developing
and monitoring the Company’s
approach to placemaking and
sustainability and monitoring the
impact of the Company’s operations
on the environment and its
communities. A description of the main
activities undertaken by the
Committee during the year is outlined
below.
SIR MICHAEL
LYONS
Chairman of the
Placemaking and
Sustainability
Committee
This year, we welcomed Will Heath as a Member of the
Committee. Will Heath is the Group Development Director of
the Company and is responsible for the strategic
management of the Group’s land holdings. The Sustainability
and Master Planning teams report into Will Heath and he is
responsible for driving the placemaking and sustainability
strategy of the Group. We are delighted that he has joined
the Committee as a full Member.
COMMITTEE MEMBERSHIP AND MEETINGS
The Members of the Committee during the financial year
comprised myself as Chairman of the Committee, Nick
Hewson, Senior Independent Director, Matthew Pratt, Group
Chief Executive, Karen Jones, Group Human Resources
Director and Will Heath, Group Development Director. The
Company Secretary acts as Secretary to the Committee.
Will Heath joined as a Member of the Committee on 9
October 2019.
The Committee met three times during the 2020 financial
year. For all meetings, papers were circulated sufficiently in
advance to allow proper consideration of all matters for
discussion. Details of the meeting attendance can be seen in
the table below.
Table of Attendance
Name
Sir Michael Lyons
Nick Hewson
Matthew Pratt
Karen Jones 1
Will Heath 2
Role
Chairman
Member
Member
Member
Member
Attendance
at Meetings
3/3
3/3
3/3
2/3
2/2
1
2
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.
Will Heath was appointed as a Member of the Committee on 9 October
2019 and attended all meetings that were held from 9 October 2019 to
the end of the 2020 financial year.
RESPONSIBILITIES AND TERMS OF REFERENCE
The key responsibilities of the Committee are:
• to develop and monitor the Company’s approach to
sustainability and to review and approve the sustainability
targets proposed by management;
• to assess the impact of the Company’s operations on the
environment and communities affected by its activities,
including the consideration of policies to enhance the
benefits of those activities and mitigate any negative impact
of those activities;
• to monitor the Company’s approach to environmental
corporate social responsibility and community issues,
including environmental management systems, waste and
recycling management systems and energy and carbon
management;
• to develop and monitor the Company’s approach to
placemaking, including monitoring of the Group’s adherence
to the Redrow 8, being the placemaking principles for
designing sustainable communities;
• 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;
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Placemaking and Sustainability Committee Report continued
• 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;
• reviewed and discussed the progress on resource efficiency
projects, including the Company’s approach to action on
climate change and supporting a waste minimisation
campaign, including the Oxford Waste Project (a project to
identify the root causes and audit of the wasted materials
from a typical home of the Company);
• 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 review the Company’s involvement in the community, and
the Company’s policy on charitable donations and activities;
• to monitor the Company’s developments in customer
engagement and service to ensure its values are upheld;
and
• to adhere to the Company’s three key principles of
sustainability: Developing Thriving Communities, Building
Responsibly and Valuing People.
The Committee regularly reviews its Terms of Reference; these
were last reviewed in October 2019 and are published on the
Group’s website (redrowplc.co.uk).
MAIN ACTIVITIES DURING THE YEAR
During the 52 weeks ended 28 June 2020, the principal
activities of the Committee were as follows:
• considered and approved action plans for the three
sustainability themes (Developing Thriving Communities,
Building Responsibly and Valuing People) and measured
progress against each;
• regularly reviewed the placemaking and sustainability
scorecard which measures progress against the
sustainability targets of the Company;
• considered and approved action plans for ensuring
consistent implementation of the Redrow 8 placemaking
principles across sites;
• discussed and agreed the adoption of the Landscaping
Design Code of the Company to ensure consistent high
quality landscaping schemes across the Company’s
developments, having particular regard to the biodiversity
gains of landscaping;
• discussed the Company’s membership of the NHS Healthy
New Town Network, with the Redrow 8 principles
incorporating and reflecting those of the 10 NHS principles
relating to spatial design;
• monitored the work of the Biodiversity Working Group and
its progress on biodiversity strategy for the Company,
including educating all Divisions of the Company, reviewed
the biodiversity objectives and discussed the Group’s
partnership with The Wildlife Trusts;
• monitored and regularly reviewed the Group’s health, safety
and environmental performance;
• 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;
• reviewed the 2020 Social Impact Review of the Company;
• reviewed the work undertaken by the Learning and
Development team with particular reference to skill
development;
• discussed the progress made by the Company with the
‘Mind your Head’ campaign following its signing up to the
Building Mental Health pledge;
• reviewed the work undertaken by the Women’s Network,
including mentoring to females across the business and
providing a network and support for women within the
Group;
• discussed the results of the 2019 INsight Employee
Engagement survey and reviewed the employee benefits
and initiatives to ensure they remain fit for purpose;
• monitored and reviewed workforce engagement
mechanisms, with particular focus on the communications
with employees whilst on furlough;
• reviewed and evaluated the Group’s collaboration with
education partners, which is aiming to positively impact
people and communities.
• supported the business in registering with the Living Wage
Foundation to become an accredited living wage employer;
• engaged a specialist consultant to perform an independent
review of the Company’s ESG disclosures and scoring and
agreed an improvement plan to enhance ESG reporting over
the coming years;
• reviewed the NextGeneration Benchmark status and
discussed key areas of focus to improve upon in the coming
year;
• discussed and supported the renewal of the ISO 14001
Environmental Management System certification;
• reviewed the work undertaken as a result of COVID-19 from
shutting down sites safely to putting in place COVID-19
measures including protocols and safe distancing measures
on site, in the sales offices and in the Regional and Divisional
offices; and
• undertook a performance evaluation of the Committee.
KEY DISCLOSURES
Within this Annual Report, there are a number of key
disclosures and policies which relate to the work and scope of
the Committee. The table below sets out where key information
relating to items falling within the remit of this Committee is
located within this report:
Subject
Page reference
Environmental
Greenhouse Gas
Emissions
Research and
Development
Resource Efficiency
(including low carbon
homes)
Sustainable Materials
Biodiversity
Task Force on
Climate-related
Disclosures
Social
Considerate
Constructors
See pages 104 to 105 of
Directors’ Report
See pages 111 to 115 of
Directors’ Report
See page 22 of Strategic Report
Social Value Calculator See pages 105 to 109 of
Directors’ Report
Placemaking
Workforce
Engagement
Employee Wellness
Diversity and Inclusion
Policy
Learning and
Development
Health, Safety and
Environment
Charitable and Political
Donations
Human Rights
Supply Chain
Local Communities
Customers
Governance
Code of Conduct
Modern Slavery
Stakeholder
Engagement
Employee Wellness
Policy References
Group Non-Financial
Information Statement
See pages 109 to 110 of
Directors’ Report
See page 46 of Strategic Report
PERFORMANCE EVALUATION
During the year, a formal internal evaluation of the Committee
was carried out to build upon the progress made by the 2019
evaluation which was externally facilitated by Independent
Audit.
After reviewing the evaluation report prepared by Independent
Audit last year, a questionnaire was created and tailored, taking
into consideration comments made in the previous years’
assessment as well as the current market. The Members of the
Committee were invited to participate in the evaluation.
Following completion of the questionnaire, an anonymised
effectiveness report was compiled and presented to the
Members of the Committee. 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
overseeing the Company’s health and safety and social and
moral responsibilities and maintaining focus on the concerns of
the Committee. 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. Further enhancement of
the Company’s ESG disclosures, obtaining independent
assurance over environmental performance and controls and
reviewing the remit of the Committee will remain priorities for
the coming year.
SIR MICHAEL LYONS
Chairman of the Placemaking
and Sustainability Committee
15 September 2020
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Redrow plc Annual Report 2020
GOVERNANCE REPORT
Directors’ Remuneration Report
“I am pleased to present the Directors’ Remuneration Report for the 52
weeks ended 28 June 2020.”
In line with the reporting requirements, this remuneration report is split into three sections:
ANNUAL STATEMENT
The annual statement sets out an overview of how our policy operates, the context in which remuneration
decisions for the 52 weeks ended 28 June 2020 were made and our approach to paying Executive Directors
in 2021 following changes to executive directors’ roles.
REMUNERATION POLICY
Our previous remuneration policy comes to the end of its three-year life and therefore a new policy will be put
to a shareholder vote at the 2020 AGM. As described in more detail below, the Committee, following
consultation with major shareholders is rolling forward the 2017 policy for one further year. The rolled over
policy is set out in this remuneration report and will be subject to a binding shareholder vote at the 2020 AGM
ANNUAL REPORT ON REMUNERATION
This describes in further detail the pay outcomes for the 52 weeks ended 28 June 2020 and the proposed
implementation for the 2021 financial year. It also includes CEO pay ratio reporting for the first time and other
details including executives’ shareholding and historic outcomes.
VANDA
MURRAY OBE
Chair of the
Remuneration
Committee
IMPACT OF COVID-19 ON EXECUTIVE DIRECTORS’ REMUNERATION
As set out in detail in the Operating and Financial Review sections, the COVID-19 pandemic which emerged in the last quarter of our
financial year was more disruptive to our business than any we can recall in recent times. In these unprecedented times, the Board’s
main priority has been to safeguard the well-being of our workforce and customers.
Throughout this challenging period for the industry, the management team has demonstrated great resilience and have collectively
taken responsible actions in response to the COVID-19 pandemic.
• On 27 March 2020 we announced the orderly and safe closure of all the Group’s developments and, on that date, the entire
directorate volunteered to take a 20% cut in salary and pensions. This was not reinstated until sites reopened and a significant
proportion of furloughed staff had returned to work.
• In the case of John Tutte, he volunteered to continue with a 20% reduction in his salary and pension until he steps back to a
non-executive role after the November 2020 AGM.
• The Group worked proactively to manage its cash flow and a significant proportion of employees were furloughed. As the
Group’s cash flow position improved from a phased return to construction, the Group decided not to utilise the Government’s
Job Retention Scheme and has returned all payments received under the scheme. The Executives have agreed to forgo any
bonus entitlements in respect of the 2019/20 year. It should be noted that a number of non-profit related targets had been met
when they were assessed at the end of the year.
The Remuneration Committee is pleased that the management team has acted responsibly and that its swift actions during this
period have considered fully the wider stakeholder experience and left the business in good shape in what remains a very
uncertain environment.
Inevitably, the impact of the pandemic has had an impact on the annual bonus and LTIP vesting outcomes for the year ending 28
June 2020. As disclosed in last year’s report, the 2020 annual bonus was based on a scorecard of measures. Half the bonus was
based on PBT which was not achieved. The other half of the bonus was based on order book, land, customer service, health and
safety and personal objectives and performance against these objectives resulted in 37.9% out of a potential 50%. However,
reflecting the impact on Redrow’s wider stakeholders, the executive directors agreed, prior to the bonus achievement being
assessed or awarded, to voluntarily forgo any bonus for the year and the Remuneration Committee is supportive of this action.
The LTIP awards granted in 2017 were subject to stretching EPS and ROCE conditions measured over the three financial years
ending 28 June 2020. EPS for the year was 32.9p and ROCE was 9.2%, reflecting the impact of COVID-19 in the final year of
assessment, which meant neither measure reached their respective threshold targets and thus the award will lapse in full in
November 2020.
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REMUNERATION POLICY RENEWAL
The Redrow Directors’ Remuneration Policy was last approved by shareholders at the November 2017 Annual General Meeting and
is due for renewal at the 2020 meeting. The Remuneration Committee was part way through a comprehensive review of directors’
remuneration and was looking to consult with shareholders and proxy advisory agencies on changes to its Remuneration Policy in
the final quarter of the 2020 financial year.
However, as a consequence of the unprecedented impact of COVID-19 on the business in Q4 and as the Board’s focus turned to
more immediate priorities, the Remuneration Committee did not feel it was appropriate to bring forward a new Remuneration Policy
with potentially significant changes at the 2020 AGM. Instead, we intend to rollover the current 2017 Policy and put forward a
revised policy for approval in 2021 when there should be greater clarity on the market environment. The concept of a rolled over
policy was included in guidance issued by The Investment Association and our major shareholders made it clear during a
comprehensive consultation exercise that they were supportive of our rollover proposal.
The ‘rolled over’ policy will require shareholder approval at the November 2020 Annual General Meeting. This policy will be on
largely the same terms as the current one, albeit with some commitments on compliance with good practice and with the provisions
of the UK Corporate Governance Code built in.
The Remuneration Committee is cognisant of the focus on executive pensions and this is reflected in the reduction that has been
applied to Matthew Pratt’s contribution rate since taking on the Chief Executive role on 1 July 2020 (see below). The Remuneration
Committee has committed to reduce all executive directors’ contribution rates to the workforce rate of 7% of salary by 1 July 2023.
This commitment is included in the rollover policy and the new policy that we intend to put to a shareholder vote in 2021.
Under the current policy, on cessation of employment, good leavers’ outstanding share awards vest on their normal vesting date
and, in the case of LTIP awards, these are reduced pro-rata for time and a 2-year holding period would continue to apply. This
potentially creates alignment with shareholders for up to 5 years after leaving employment. As part of the forthcoming directors’
remuneration policy review, the Remuneration Committee will seek to include a post-cessation shareholding guideline in line with
evolving market and good practice from next year.
BOARD CHANGES
As previously announced, it was intended that John Tutte would move to Non-Executive Chairman from 30 June 2020. However,
due to the impact of the pandemic on the business, the Board asked John Tutte to remain as Executive Chairman until the
Company’s AGM in 2020 to support the senior management team get the business back to full operation and the Board was
grateful that John agreed to this request. However, it remains John’s intention to retire from the Board ahead of the AGM in 2021
and, as announced on 20 April 2020, Matthew Pratt took up the position of Group Chief Executive on 1 July 2020.
Matthew Pratt’s salary in his new role as Chief Executive from 1 July 2020 has been set significantly below market levels at
£540,000 to allow him time to gain experience and develop into the role. The Remuneration Committee intends to increase his
salary to £625,000 from 1 July 2021 subject to performance in his new role over the next 12 months. The Committee believes the
phasing of base salary is appropriate and, having conducted a comprehensive internal and external CEO search, the Committee is
comfortable that a £625,000 salary suitably reflects the scope and responsibility of the role for a business of Redrow’s scale and is
appropriately positioned against peers in the industry and other FTSE 250 comparable businesses. A £625,000 salary (applicable
from 1 July 2021 subject to performance) is 2.5% higher than John Tutte's salary as Executive Chairman which was agreed in July
2019.
Upon taking up the role, Matthew’s pension contribution was reduced to 7% of salary which is in line with the pension contribution
rate across the Redrow workforce. His bonus opportunity and LTIP grant levels will remain in line with the existing policy
opportunities, at 100% of salary and 150% of salary respectively. The Remuneration Committee intends to review these incentive
opportunities and the choice of performance measures over the next 12 months to ensure they remain competitive for a company of
Redrow’s size and scale and reflect the short and medium-term priorities of the Group as it emerges from the pandemic.
The Remuneration Committee determined that John Tutte’s salary should remain at £610,000 for the period he is in post as an
executive and that he will not participate in the 2020/21 annual bonus scheme or receive an LTIP award in 2020.
John volunteered to reduce his salary by 20% (in line with the voluntary reduction communicated by the Board on 9 April 2020) and
has since volunteered to extend this reduction until he steps back to being Non-Executive Chairman at the November 2020 AGM.
Therefore, his salary will be £488,000 (reduced from £610,000). John will continue to receive a contribution towards pension (by
reference to his lower salary) and his standard benefits while he continues as Executive Chairman.
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Redrow plc Annual Report 2020
GOVERNANCE REPORT
Directors’ Remuneration Report continued
John’s fee in his role as Non-Executive Chairman following the 2020 AGM shall be set at £300,000p.a. This fee rate reflects the
value and experience he provides to the business and the likely level of time commitment required during these challenging times.
A lower fee is likely to apply to the next Non-Executive Chairman.
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. As the
business comes to terms with the pandemic, The Committee believes there should be greater focus on sales and growing profit.
Therefore, 50% of the bonus will continue to be based on stretching PBT targets based on the current outlook and 24% will be
based on delivering sales volume and revenue as consumer confidence grows.
Customer service remains of paramount importance, as does the health and safety of our employees. Therefore, 14% of the bonus is
based on customer service targets and 12% on H&S underpinned by COVID-19 compliance on our sites.
The Committee believes a mix of profit, revenue, customer service and H&S aligns the executive team with the key priorities of the
business over the next 12 months.
Setting meaningful LTIP targets at the current time is challenging given the uncertainty surrounding COVID-19 and the economic
outlook. Therefore, the Remuneration Committee intends to grant LTIP awards at the normal time, in September, and it will set the
measures and targets within six months of grant. The targets will be communicated to shareholders at the time they have been
agreed and set. The level of challenge associated with these targets will take into account the business outlook at the time.
The Remuneration Committee has discretion to adjust the number of shares vesting from the award if it considers that the vesting
outcome is not sufficiently reflective of the underlying performance of the Company and to the extent the Committee believes there
have been windfall gains.
LOOKING FORWARD
Redrow’s senior management team has shown great leadership, resilience and energy in recent months and the Remuneration
Committee will continue to ensure its approach to setting senior executive pay is commensurate with that of shareholders,
employees, customers, suppliers and other stakeholders.
As announced in July, after three years as a non-executive at Redrow I will be stepping off the Board at the November 2020 AGM. I
will be handing over the responsibility of chairing the Remuneration Committee to Nicky Dulieu with whom I have worked closely
over the last year. Under Nicky’s chairmanship, the Remuneration Committee will resume its review of the Remuneration Policy from
the start of the next calendar year and will seek the views of shareholders in helping to shape the new policy.
Please feel free to contact me or Nicky, via the Company Secretary, if you would like to provide feedback on the design of the new
policy.
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.
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2020 DIRECTORS' REMUNERATION POLICY
As described in the Annual Statement, the Remuneration Committee has decided to roll forward the 2017 shareholder approved
Remuneration Policy for a further year (effective following shareholder approval at the 2020 Annual General Meeting) with the
intention of putting forward a revised policy to a binding shareholder vote in 2021 when there should be greater clarity on the
market environment following the impact of the COVID-19 pandemic.
Therefore, there are no material changes between this Policy and the 2017 one. The two exceptions are:
• Pension contribution rates for newly appointed executive directors will be aligned with the workforce rate and a commitment
has been provided for all executive directors to be workforce aligned by 1 July 2023. The pension section of the policy table
has been updated to reflect this.
• The clawback policy has been updated to reflect additional triggers introduced.
This 2017 Policy was originally formed as part of discussions between the Committee, the Executive Directors, Human Resources
Director and external advisors and with the feedback from stakeholders. The decision to roll forward the 2017 Policy for a further
year was made by the Committee, following discussions with the wider Board and a comprehensive consultation exercise with the
Group’s major shareholders and proxy voting agencies in 2020.
Remuneration strategy
This Policy has considered the provisions of the 2018 UK Corporate Governance Code and in particular the following six factors:
Clarity
• The Policy has a clear aim; to incentivise and reward for the delivery of our strategy
• This Policy is an update of the previous Policy, with minimal changes so is well understood both internally and externally
• Each component of remuneration is clearly explained in the Policy table, including its purpose, how it is operated, the
maximum potential and any relevant performance measures
• Full disclosure of performance measures and assessments is provided for shareholders’ consideration
Simplicity
• The Policy reflects standard UK market practice, with the operation of an annual incentive and a single long-term share plan,
full details of which are set out in the Policy table
• All payments are in the form of cash or Redrow plc shares, there are no artificial structures used to deliver remuneration
Risk
• The Committee has the ability to use its discretion to override the formulaic outturns of the incentive plans if it is felt
appropriate
• Comprehensive malus and clawback provisions operate in both incentive plans, providing the ability to recover or withhold
payments if appropriate
Predictability
• Appropriate individual (and where necessary aggregate) limits are set out in the Policy and within the respective plan rules so
outcomes can be predicted
• The possible reward outcomes under different performance scenarios are shown in the “Illustration of Remuneration Policy”
section on page 86
• In operating the Policy, the Committee continually monitors the performance of in-flight incentive awards so that it is well aware
of potential outcomes
Proportionality
• The outcomes of our incentive plans are directly aligned to the delivery of our strategy
• Outcomes are assessed against multiple metrics to ensure performance is considered on a broad basis
• The Committee has the ability to use its discretion to override the formulaic outturns of the incentive plans if it is felt
appropriate
Alignment of culture
• A key focus of our Policy is to promote long-term sustainable performance which is reflective of the business culture
• Incentive outcomes rely on strong performance across a broad selection of measures which are important to our stakeholders
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GOVERNANCE REPORT
Directors’ Remuneration Report continued
THE REMUNERATION POLICY CONTINUED
Policy Table for Executive Directors
Component
Purpose/link
to strategy
Operation
Maximum
Performance framework
N/A
N/A
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.
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.
Base
Salary
To provide a
market
competitive
element of
fixed
remuneration to
attract and
retain leaders
of the required
calibre to
deliver the
strategy.
Benefits
To provide a
market
competitive
benefits
package to
support the
Director in
fulfilling their
role.
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.
Benefits may include: a
company car (or equivalent
cash allowance), private
medical insurance,
permanent health
insurance, fixed term group
income protection and a
death in service benefit,
and where appropriate any
tax payable thereon.
Executive Directors may
also participate in
all-employee share plans on
the same basis as other
employees.
The Committee has
discretion to include, where
it considers it appropriate to
do so, other benefits to
reflect specific individual
circumstances, such as
housing, relocation, travel,
or other expatriate
allowances.
Component
Pension
Purpose/link
to strategy
To provide a
market
competitive
element of
fixed
remuneration
for retirement
planning.
Annual
Bonus
A variable pay
opportunity
which motivates
and rewards
annual
performance
and delivery of
the strategy on
an annual basis.
Deferral aligns
reward with
long term value
of Redrow
shares.
Operation
Maximum
Performance framework
The maximum DC
contribution/cash
supplement (in respect of a
financial year) is 20% of base
salary.
Any new executive directors
appointed to the Board will
have a maximum pension
contribution of 7% of salary
in line with the current wider
workforce contribution rate.
All executive directors will
have a pension contribution
rate of no more than 7% of
salary from 1 July 2023.
100% of salary
N/A
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 2020/21 performance measures are set out
on page 90.
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 for 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 (for
example, in limited
circumstances where it may
not be possible to grant a
share award due to technical
reasons), 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
to strategy
Operation
Purpose/link
Purpose/link
Component
to strategy
Operation
Maximum
Maximum
Performance framework
Performance framework
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84
GOVERNANCE REPORT
Directors’ Remuneration Report continued
THE REMUNERATION POLICY CONTINUED
Component
Long Term
Incentive
Plan (LTIP)
Purpose/link
to strategy
Designed to
motivate and
reward
long-term
performance
and delivery of
the strategy
and provide
alignment with
Redrow
shareholders.
Operation
Maximum
Performance framework
The maximum award which
may be granted in respect of
a financial year will normally
not exceed 150% of salary.
However, in exceptional
circumstances only, the
Committee may make
awards of up to 200% of
salary.
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. An explanation of the
approach to the current performance measures
is set out on page 90.
For threshold performance, 20% of the awards
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
(for example, in limited
circumstances where it may
not be possible to grant a
share award due to technical
reasons) 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 incorporate the right
to receive (in cash or shares)
the aggregate value of
dividends paid on vested
shares between the vesting
date and the date on which
the awards are released
following the holding period,
on such basis as the
Committee may determine,
which may assume the
reinvestment of these
dividends in shares on a
cumulative basis.
The Committee reserves the right to make any remuneration payments and payments for loss of office (including exercising any
discretions available to it in connection with such payments) notwithstanding that they are not in line with the Remuneration
Policy set out above where the terms of the payment were agreed (i) before 10 November 2014 (the date the Company’s first
shareholder approved Remuneration Policy came into effect); (ii) before the Remuneration Policy set out above came into effect,
provided that the terms of the payment were consistent with the shareholder-approved Remuneration Policy in force at the time
they were agreed; or (iii) at a time when the relevant individual was not a director of the Company and, in the opinion of the
Committee, the payment was not in consideration for the individual becoming a director of the Company. For these purposes
“payments” includes the Committee agreeing awards of variable remuneration and, in relation to an award over shares, the terms
of the payment are “agreed” at the time the award is granted. The Committee may make minor amendments to the Remuneration
Policy (for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation) without
obtaining shareholder approval.
Choice of performance measures and target setting
For the annual bonus and LTIP, performance measures are chosen which help to drive and reward the achievement of the Group’s
strategy and also provide alignment between employees and shareholders. The Committee reviews measures each year to ensure
they remain appropriate and reflect the future strategic direction of the Group. Targets for each performance measure are set by the
Committee with reference to internal plans and external expectations. Performance is typically measured on a ‘sliding scale’ so that
incentive payouts increase pro-rata for levels of performance in between the threshold and maximum performance targets.
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Differences in pay policy for employees and executive directors
The principles applied to the remuneration of Executive Directors are essentially the same as those for the Company. The difference
between pay for Executive Directors and employees is that for Executive Directors the variable pay element forms a greater
proportion of the overall package and the total remuneration opportunity is higher to reflect the increased responsibility of the role.
While remuneration practices vary across the full employee population, they are based on the same broad principles which
underpin the policy for Executive Directors set out above. For example:
• Remuneration packages should be sufficient to attract and retain the calibre of talent necessary to deliver the strategy for
shareholders;
• A significant number of Group employees are eligible to participate in bonus or incentive arrangements designed to drive a
shared responsibility for delivering performance for shareholders;
• Redrow operates a number of share incentive plans to encourage employee share ownership and align employees with the
interests of shareholders. The deferred bonus plan is cascaded to senior management. All employees are entitled to
participate in the Save As You Earn (SAYE) share option plan under which employees are granted options and encouraged to
save in order to invest in Company shares; and
• All employees are eligible to participate in the defined contribution pension scheme.
Consideration of conditions elsewhere in the company
When setting the Remuneration Policy for Executive Directors, the Committee has regard to the pay and employment conditions of
employees within the Company. The Committee did not consult directly with employees when formulating the Remuneration Policy
for Executive Directors. The Committee considers salary increases within the business but does not formally consider any other
comparison metric.
Consideration of shareholder views
The Committee engages with all major independent shareholders and shareholder advisory groups, when developing this
Remuneration Policy. Views expressed during this engagement are taken into account by the Committee in finalising the proposals.
The Committee will subsequently inform all of those consulted of planned changes as a result of the consultation and the final
proposed Policy. We will be conducting a comprehensive consultation exercise as part of the development of the 2021 Policy.
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 82 to 84, the Committee may
determine that a charitable donation, which is, in its opinion, equivalent to the value of that payment or benefit, may be made by the
Company.
Executive shareholding guidelines
Executive Directors are expected to build and retain a shareholding in the Group at least equivalent to 200% of base salary. Until
the shareholding guideline has been met Executives will be required to retain all vested 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. Awards made from 2019/20, included additional triggers relating to an error in the calculation of a
performance condition and circumstances which the Committee considers sufficient to have, or had potential to have, caused
reputational damage will also apply.
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.
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GOVERNANCE REPORT
Directors’ Remuneration Report continued
THE REMUNERATION POLICY CONTINUED
For deferred bonus plan awards, in the event of a material misstatement of the Company’s audited financial results or employee
misconduct, any unexercised awards will lapse immediately and the participant will forfeit any shares previously acquired under
awards made under that plan.
Corporate events
Unvested awards under the deferred bonus plan and LTIP will normally vest early in the event of a takeover or winding-up of the
Company and, in the case of the deferred bonus plan, if the Company goes into administration or a voluntary arrangement is
proposed with its creditors. In these circumstances, deferred bonus awards vest in full and LTIP awards vest taking into account the
relevant performance conditions and, unless the Committee determines otherwise, time pro rating to reflect the proportion of the
performance period that has elapsed. Awards may also be rolled over for equivalent awards in a different company. If the Company
is or is likely to be affected by a demerger, special dividend, delisting or other event which in the Committee’s opinion, may affect
the current or future value of the Company’s shares, the Committee may allow some or all of the awards to vest. The extent to which
LTIP awards vest in these circumstances will be calculated on the same basis as set out above for a takeover. The terms of awards
may be (a) in the event of any variation of the Company’s share capital, delisting, special dividend or distribution, demerger or other
event which may in the Committee’s opinion, affect the current or future value of the Company’s shares, adjusted or (b) amended in
accordance with the plan rules.
Illustration of remuneration policy
The charts below illustrate the potential value of the remuneration packages for the Executive Directors under the following
scenarios (no share price growth is assumed):
• Minimum – reflects fixed pay only (base salary and pension contributions as at 1 July 2020 and benefits included using the
disclosed values for the year ended 28 June 2020, except for the Chairman, where it reflects his proposed ongoing position of
no variable incentives and only his time as Executive Chairman up to the November 2020 Annual General Meeting);
• Target – reflects fixed pay, target bonus (50% of salary) and LTIP awards vesting at threshold (i.e. 20% of salary); and
• Maximum – reflects fixed pay, maximum bonus (100% of salary) and maximum LTIP awards, assuming the proposed Policy is
approved (i.e. 150% of salary for the CEO and FD).
• Maximum plus share price growth – as for Maximum above, but with the value of 50% share price growth included within the
LTIP element
ILLUSTRATIONS OF APPLICATION OF REMUNERATION POLICY
£2,500
£2,000
£1,500
0
0
0
£
'
£1,000
500
£0
£2,355
17%
£1,950
42%
34%
£978
11%
28%
28%
23%
£602
£602
£602
£602
£600
100%
100%
100%
100%
100%
61%
31%
26%
£1,682
£1,404
17%
40%
33%
£738
10%
25%
£479
26%
22%
100%
65%
34%
28%
Min
Target
Max
Max
with
growth
Min
Target
Max
Max
with
growth
Min
Target
Max
Max
with
growth
John Tutte
Matthew Pratt
Barbara Richmond
Approach to remuneration for recruitment of a new executive director
On the appointment of any new Executive Director, the Committee would seek to offer a remuneration package which can secure
an individual with the necessary skills and experience to lead the business and deliver the strategy.
Executive Directors would be appointed within the remuneration framework set out in the Policy Table for Executive Directors.
Salaries would typically be set at an appropriately market competitive level to reflect skills and experience, although, if appropriate,
the Committee may set salaries towards the lower end of the market range to allow future salary progression to reflect performance
in the role. In accordance with the Policy Table, the Committee also has discretion to include other benefits such as housing or
relocation benefits, if relevant to reflect specific individual circumstances. The maximum level of variable remuneration which may
be awarded (excluding any compensatory awards referred to below) would be as set out in the Policy Table.
Where an individual forfeits outstanding incentive awards with a previous employer, the Committee may offer compensatory awards
to facilitate recruitment. These awards would be in such form as the Committee considers appropriate, taking into account all
relevant factors including the form, expected value, anticipated vesting and timing of the forfeited awards. The value of any
compensatory awards would be no higher, in the opinion of the Committee, than the value forfeited. While cash may be included in
the recruitment package to reflect the forfeiture of cash-based incentive awards, the Committee does not envisage that substantial
“golden hello” cash payments would be offered.
Any share awards referred to in this section will be granted as far as possible under the Company’s existing share plans. Share
awards may be granted under the Company’s LTIP in excess of the limits set out in the Policy Table above to provide compensatory
buyout awards only (which may be subject to any performance conditions the Committee considers appropriate), in accordance
with the terms above. If necessary, awards may be granted outside of these plans as currently permitted under the Listing Rules, but
within the limits set out in this section.
The remuneration package for a newly appointed Non-Executive Director would normally be in line with the structure set out in the
Policy Table for Non-Executive Directors.
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
01/07/20
12 months
6 months
6 months
12 months
12 months
6 months
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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 appointments after 1 July 2017, 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.
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 1
Non-Executive
Nicky Dulieu
Non-Executive
01/12/12
06/01/15
01/08/17
06/11/19
01/12/18
06/01/18
01/08/20
06/11/19
1
Vanda Murray's appointment was extended on 1 August 2020 to cover the period from this date until the 2020 AGM, at which point she will be retiring
from the Board.
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Total Fixed Remuneration
Annual Bonus
LTIP
Share Price Growth
Copies of the Directors' service contracts and letters of appointment are available for inspection at the Company's registered office.
Redrow plc Annual Report 2020
88
GOVERNANCE REPORT
Directors’ Remuneration Report continued
THE REMUNERATION POLICY CONTINUED
Policy on payments following Directors’ termination of service
On termination of a Director’s contract, the Committee’s objective is to agree an outcome which is in the best interests of the
Company and its shareholders, taking into account the specific circumstances and performance of the individual, as well as any
relevant contractual obligations and incentive plan rules.
As described in the section above, contractual payments in lieu of notice would be limited to salary and contractual benefits and
may be made in instalments subject to mitigation.
The Committee has discretion to make a payment under the annual bonus in respect of the year of leaving where an individual is
designated a “good leaver” (as described below). In such circumstances, the maximum bonus opportunity would normally be
reduced pro-rata to reflect the portion of the year served. Any payment would remain subject to performance against the original
targets and, if practicable, would be assessed and paid (in cash) as part of the normal year end assessment process. Outstanding
awards under the deferred bonus plan and the LTIP would be treated in accordance with the relevant plan rules. Under these rules,
if the participant leaves as a “good leaver”, then the treatment of outstanding awards will be as follows:
• Deferred bonus: Nil-cost options will be exercisable for a period of six months following the date of cessation. Options will be
exercisable in full unless (for awards made in respect of 2015 and subsequent financial years other than in the case of death)
the Committee exercises discretion to reduce the awards pro-rata to reflect the extent to which the vesting period had elapsed
at the date of cessation; and
• LTIP: Awards will normally continue to the original vesting date although the Committee may determine that awards vest
following cessation. Where a holding period applies, awards will normally continue to be subject to that holding period
following cessation. Unless the Committee determines otherwise, awards will be reduced pro-rata to reflect the extent to
which the performance period has elapsed at the date of cessation and time served as an executive. The Committee will
decide the extent to which the award vests in these circumstances, taking account of the extent to which the performance
condition is satisfied and time served as an executive. If an individual dies, their LTIP awards will normally vest shortly following
their death and their LTIP awards will only be time pro-rated if the Committee considers it appropriate.
Circumstances in which a participant will be considered a “good leaver” are: death, ill-health, injury, disability, redundancy,
retirement or the sale of the individual’s employing company or business outside of the Group.
Where an individual leaves the Company for any other reason, deferred bonus and unvested LTIP awards will lapse.
The Committee retains discretion to make additional exit payments where such payments are made in good faith in discharge of an
existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement or compromise of any claim
arising in connection with the termination of a director’s office or employment or for any fees for outplacement assistance and/or the
director’s legal and/or professional advice fees in connection with their cessation of office or employment. The details and rationale
for any such payments would be disclosed in the Annual Remuneration Report.
Non-Executive Director Fees
Component Approach of the Company
Non-
Executive
fees
Fees are determined by the Board excluding the Non-Executive Directors. The fee encompasses a basic fee and supplementary
fees for serving on a Board Committee or acting as Senior Independent Director. It may also include supplementary fees for
undertaking duties or making a time commitment to Company business beyond the Non-Executive Director’s normal role.
Expenses incurred in respect of the performance of duties for the Company may be reimbursed or paid for by the Company,
including any tax due on such payments.
The fees payable to the Non-Executive Directors will not exceed the limit set out in the Company’s Articles of Association and
will be set at a level which reflects skills, experience, time commitment and appropriate market data.
The Non-Executive Directors do not participate in any bonus or incentive plan, nor do they receive any benefits nor participate in any pension
arrangements.
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ANNUAL REMUNERATION REPORT
STATEMENT OF IMPLEMENTATION FOR 2021
This section summarises how the Committee intends to operate the Remuneration Policy for the year ending 30 June 2021.
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.
Given the circumstances the Company has not awarded a company-wide pay increase this year and therefore, Barbara
Richmond’s salary remains unchanged from 1 July 2020.
It had been intended that John Tutte would move to Non-Executive Chairman from 1 July 2020. However, due to the impact of
the COVID-19 pandemic on the business, the Board asked John to remain as Executive Chairman until the November 2020 AGM
to support the senior management team which he has agreed to do. In line with the company-wide pay freeze, John did not
receive an increase to his salary from 1 July 2020.
At the start of the pandemic, the entire directorate volunteered to take a 20% cut in salary and pensions, John Tutte has
volunteered to continue his voluntary reduction of 20% of salary until he steps back to Non-Executive Chairman at the November
2020 AGM and therefore his annual rate of salary will be equivalent to £488,000.
Having joined the Main Board as Chief Operating Officer in April 2019, Matthew Pratt took up the position of Group Chief
Executive on 1 July 2020. The Remuneration Committee considered carefully how to position Matthew's base salary and felt a
phased approach was more appropriate to allow Matthew to gain experience and develop into the role and to reflect John Tutte
continuing in an executive capacity until the November 2020 AGM. Therefore, Matthew's salary has initially been set significantly
below market levels for the first year at £540,000 and the Remuneration Committee intends to increase this to £625,000 from 1
July 2021 subject to performance. The Committee believes this is an appropriate salary for the following reasons:
• It reflects the level of responsibility and scope of the full role in a challenging market;
• The Redrow Nominations Committee undertook a comprehensive internal and external search and it became clear that top
leadership talent with home construction knowledge is relatively scarce. This has been reflected in the level of starting salaries
for CEOs with sector experience at other comparable listed housebuilders (where joining salaries have been higher than
£625,000);
• The £625,000 salary is subject to performance and, if appropriate, would apply from July 2021 (noting it is a 2.5% increase on
John Tutte's which was agreed in July 2019);
• As a sense check, the Remuneration Committee benchmarked the role and took comfort that a £625,000 salary is not
excessive against comparable home construction peers and FTSE 250 companies;
• The Remuneration Committee consulted with leading shareholders who appeared supportive of the phased approach to
Matthew's salary and the salary positioning; and
• The value of Matthew's total pay package value remains modest against market levels.
The salaries for 2021 are effective from 1 July 2020 and are as follows:
£’000
John Tutte 1
Barbara Richmond
Matthew Pratt 2
1 July
2020
488
370
540
1 July
2019
610
370
–
1
John Tutte’s salary reflects the continuation of his voluntary 20% reduction
2 Matthew Pratt’s role as COO prior to 1 July 2020 is not directly comparable with his position as Chief Executive
Change
(20%)
0%
–
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Redrow plc Annual Report 2020
90
GOVERNANCE REPORT
Directors’ Remuneration Report continued
Pension
John Tutte and Barbara Richmond will continue to receive a contribution towards pension of 20% of salary.
On appointment to the main Board on 1st April 2019, 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%. On his appointment to Group Chief
Executive on 1 July 2020 his pension contribution was further reduced to 7% of salary which is line with the majority of the
workforce.
emerges from a difficult year. The Remuneration Committee believes this fee positioning is appropriate given John’s likely degree of
involvement in the business and it is expected that a market-aligned fee rate will apply to John’s successor as Non-Executive
Chairman.
OUTCOMES IN RESPECT OF 2020
The tables below set out the remuneration for the Directors in respect of 2020. Further discussion of each of the components is set
out on the pages which follow. Where indicated, these disclosures have been audited.
As part of the rolling over of the 2017 policy, a firm commitment has been provided for all executive directors to be aligned with the
workforce rate of 7% of salary from 1 July 2023 which aligns with the Company's year end.
SINGLE TOTAL FIGURE OF REMUNERATION TABLE (AUDITED)
The remuneration of the Executive Directors in respect of 2020 is shown in the table below (with the prior year comparative):
Annual bonus
The annual bonus opportunity will remain at 100% of salary in line with our Policy. John Tutte will not participate in the annual bonus
scheme in 2020/21.
The Committee has decided to make changes to the measures that will apply for 2020/21 to reflect the challenging environment.
Consistent with last year, 50% of the bonus will be based on PBT targets. To support our aim of delivering sales volumes in a difficult
market, 24% of the bonus will be based on revenue.
Customer service remains of paramount importance as does the health and safety of our employees and subcontractors.
Accordingly, 14% of the bonus will be based on customer service targets and 12% on health and safety underpinned by COVID-19
compliance on our sites.
Measures
Profit Before Tax
Turnover
Customer Service
Health & Safety
2020
50%
24%
14%
12%
These revised measures are felt to be more appropriately aligned with our current priorities as we seek to return to growth following
the shock to our core business in 2020.
It is the current intention that the targets will be disclosed in the FY 2021 Remuneration Report provided the Committee is
comfortable they are no longer commercially sensitive at the time.
LTIP awards to be granted during 2021
It is expected that LTIP awards in the 2021 financial year will be made at the level of 150% of salary to Matthew Pratt and Barbara
Richmond. John Tutte will not participate in the 2021 LTIP.
Setting meaningful LTIP targets at the current time is challenging given the uncertainty surrounding COVID-19 and the economic
outlook. Therefore, the Remuneration Committee intends to grant LTIP awards at the normal time, in September 2020, and set the
measures and targets within six months of grant when there should hopefully be more visibility on the medium term outlook. The
measures and targets will be communicated to shareholders at the time they have been agreed and communicated with
participants and there will be full disclosure in next year’s Remuneration Report. The level of challenge associated with these
targets will take into account the business outlook at the time.
Salary (iI)
Benefits (iv)
Pensions (v)
Total Fixed
Remuneration
Bonus (vi)
LTIP (vii)
Total Variable
Remuneration
Total
£’000
John Tutte (i)
Barbara Richmond
Matthew Pratt (iIi)
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
580
360
399
598
338
103
16
35
22
16
19
5
116
120
72
40
68
10
712
467
461
734
425
118
–
–
–
508
287
87
–
–
–
851
481
184
– 1,359
712 2,093
–
–
768
467
1,193
271
461
389
(i)
John Tutte served as Chief Executive Officer until 1 April 2019 when he became Executive Chairman.
(ii)
Executive Directors took a voluntary 20% salary and pension deduction from 1 April 2020 to 18 May 2020 with John Tutte maintaining the deduction
throughout his remaining period as Executive Chairman.
(iii)
Matthew Pratt was appointed to the Board as Chief Operating Officer on 1 April 2019. His FY 2019 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.
(iv) Benefits include a fully expensed company car (or equivalent cash allowance) and private health insurance.
(v) Pension includes the value of the cash allowance paid to John Tutte, Barbara Richmond and Matthew Pratt in respect of the relevant year.
(vi)
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 2019 bonus was 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.
(vii) LTIP represents the value of the LTIP award which vests in respect of the 3-year performance period ending in the relevant financial year. No shares
will vest on 15 November 2020 due to the vesting threshold not being reached. The 2019 column includes an updated vested value for the 2016 LTIP
award (which vested at 100% of maximum), based on the share price on the actual date of vesting (12 September 2019). The figure provided last year
was based on the average share price over the last three months of the FY2019 financial year.
The fees of the Non-Executive Directors in respect of 2020 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
Nicky Dulieu (iii)
Fees
2020
2019
–
–
73
63
63
35
7
26
72
65
61
–
The Remuneration Committee has discretion to adjust the number of shares vesting from the award if it considers that vesting
outcome is not sufficiently reflective of the underlying performance of the Company and to the extent the Committee believes there
have been windfall gains.
(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 (being the balance for this period of Steve Morgan’s notional annual fee of £300k per annum less the £10 nominal fee).
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. On his appointment as Non-Executive
Chairman, John Tutte will receive a fee equivalent to £300k p.a. which is consistent with that granted to our previous Non-Executive
Chairman and is reflective of John Tutte’s likely higher than typical expected time commitments during FY 2021 as the Company
(ii) Debbie Hewitt retired as a Non-Executive Director on 7 November 2018.
(iii) Nicky Dulieu was appointed as Non-Executive Director on 6 November 2019.
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Redrow plc Annual Report 2020
92
GOVERNANCE REPORT
Directors’ Remuneration Report continued
2020 Annual bonus
The maximum bonus opportunity for the Executive Directors during 2020 was 100% of salary, in line with the Remuneration
Policy. This was based on the achievement of stretching targets under a balanced scorecard of six key performance measures.
The scorecard combined measures which represent an appropriate balance between ‘backward looking’ financial performance
(PBT) ‘forward looking’ strategic and operational measures (order book and land holdings) which support shareholder value
creation over the medium to long-term together with building responsibly measures (customer recommend score and accident
rate) and personal objectives.
% of bonus opportunity
Rationale
PBT
Closing private order book
Land holdings acquired
Customer recommend score
Accident rate
Personal objectives
50%
10%
10%
15%
5%
10%
A fundamental measure of annual profitability
A measure of how effectively we are protecting future performance
Measures the foundation for our future growth
Measure of customer satisfaction
Focus on building safely
Covering strategic, operational and people objectives
The 2020 targets and outcomes are disclosed in the following table:
% of bonus
opportunity
Threshold payout
Maximum payout
Actual 2020
performance
Payout achieved (%
of total bonus
opportunity)
PBT
Order book
GDV of land acquired
Customer recommend score
Accident rate
Personal objectives
Total
50%
10%
10%
15%
5%
10%
100%
£395m
£650m
£2.05bn
90%
£435m
£720m
£2.25bn
92.5%
Homes built/accidents >15
£140m
£1,135m
£1.5bn
91.8%
16.62
Achieved - see
below
–
10%
–
12.9%
5%
10%
37.9%
Personal objectives for each Executive Director were divided into three equally weighted measures, categorised under the
headings Strategic, Operational and People. For FY 2020, the Strategic measure was common to all three Executive Directors
and was focused on a forward-looking strategic plan to mitigate potential changes to the Help to Buy scheme. The Operational
measure was targeted on delivering a more even spread of completions throughout the year. The People measure was based on
talent management and succession planning activities in each Executives' respective area of the business. Commercial
sensitivities remain around the specific targets but in all cases the Committee assessed performance using a combination of
quantitative and qualitative information and was satisfied that the targets had been met in full.
Whilst some of the non-profit related measures were achieved (which would have resulted in a 37.9% payout under the scheme),
the Executive Directors, having reflected on the impact on Redrow’s wider stakeholders, advised the Committee during the
financial year that they wished to forego voluntarily any bonus for the year. The Remuneration Committee is supportive of this
wish and therefore no bonuses will be awarded this year.
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 2020 (2017 awards) and which were
granted during the 2020 financial year.
LTIP awards vesting in respect of 2020
The LTIP awards granted in November 2017 were based on performance over the three year performance period ending
28 June 2020. Based on performance against the EPS and ROCE targets set when the award was granted, summarised in the
table following, neither of the thresholds were met and therefore these awards will lapse on 15 November 2020.
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Award vesting level as a % of share options granted (for each component)
EPS for 2020*
ROCE for 2020
Nil
6.67%
20%
50%
Vesting between the points above is on a sliding scale basis
Actual performance
Vesting (% of total award)
Below 84.42p
Below 24.2%
84.42p
94.92p
24.2%
25.7%
109.62p or above
27.2% or above
32.9p
nil%
9.2%
nil%
*
As outlined in the Cash Return Circular published in 2019 an upwards adjustment of the EPS performance target was necessary to neutralise the effect
of the return of cash and share consolidation which took place in 2019.
As no shares vested the value of these awards is nil and has been included in the 2020 LTIP column of the Single Total Figure of
Remuneration Table on page 91.
SCHEME INTERESTS AWARDED DURING 2020 (AUDITED)
The following table sets out details of LTIP awards to Executive Directors during the 2020 financial year.
Executive Director
John Tutte
Barbara Richmond
Matthew Pratt
Number of
awards granted
Basis of award
153,911
150% of salary
93,356
150% of salary
103,448
150% of salary
Face
value 1
£915k
£555k
£615k
Threshold
vesting (% of
maximum)
13.3%
13.3%
13.3%
Vesting date
September 2022
September 2022
September 2022
1
The face value has been calculated using the average share price used to determine the number of shares awarded, being 594.5p (the average, over
the three days to the date of grant).
Awards to John Tutte, Matthew Pratt and Barbara Richmond are made in the form of nil-cost options.
The LTIP awards granted on 11 September 2019 will vest in September 2022 based on performance over the three-year
performance period ending 30 June 2022 as follows:
Award vesting level as a % of share options granted (for each component)
Nil
6.67%
20%
50%
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 target range was set in light of the business outlook at the time
including internal forecasts, external analyst consensus and a broader view of the macroeconomic environment.
Deferred Bonus Plan awards, being 50% of the bonus earned relating to FY2019 performance, were granted during the year as
set out below:
Executive Director
John Tutte
Barbara Richmond
Matthew Pratt
Number of
awards granted
Face
value 1
Portion of
bonus deferred
Vesting date
42,750
£254k
24,163
25,471
£144k
£151k
50%
50%
50%
50% in September 2020 and 50% in September 2021
50% in September 2020 and 50% in September 2021
50% in September 2020 and 50% in September 2021
1
The face value has been calculated using the average share price used to determine the number of shares awarded, being 594.5p (the average over
the three days to the date of grant).
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GOVERNANCE REPORT
Directors’ Remuneration Report continued
Shareholding guidelines and share interests
Under our shareholding guidelines, Executive Directors are expected to build and retain a shareholding in the Group at least
equivalent to 200% of base salary. Until the shareholding guideline has been met Executives will be required to retain all
deferred bonus shares and LTIP shares on a net of tax basis. As shown in the table below, John Tutte and Barbara Richmond
meet this guideline.
*
Matthew Pratt is building his shareholding in line with the Remuneration Policy and held at 61% of salary as at 28 June 2020.
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 28 June 2020
and current interests in long-term incentives.
Number of shares
beneficially held
at 28 June 2020
Shareholding
as % of salary
Guideline met?
Executive Directors
John Tutte
Matthew Pratt
Barbara Richmond
Non-Executive Directors
Nick Hewson
Sir Michael Lyons
Vanda Murray
Nicky Dulieu
699%
61%
662%
Yes
No*
Yes
755,686
73,020
542,332
19,523
2,857
3,333
–
Shareholding as a percentage of salary is calculated using the shareholding and base salary as at 1 July 2020 and the average
share price for the final quarter of the 52 weeks ended 28 June 2020.
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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
2019
Share Price
on Grant
£
Grant
Date
Award
Vested
Awards
granted in
year
Awards
Exercised
in year
Awards
held at
28 June
2020
Exercise
Price
£
From
To
John Tutte
SAYE 2017
LTIP 2016
LTIP 2017
LTIP 2018
LTIP 2019
3,673
30/10/17
138,882
12/09/16
147,346
15/11/17
152,370
10/09/18
–
11/09/19
DEF BONUS 2017
22,579
11/09/17
DEF BONUS 2018
47,923
10/09/18
DEF BONUS 2019
–
11/09/19
512,773
Barbara Richmond
SAYE 2016
SAYE 2017
SAYE 2019
LTIP 2016
LTIP 2017
LTIP 2018
LTIP 2019
2,812
1,836
28/10/16
30/10/17
1,821
28/10/19
78,472
12/09/16
83,404
15/11/17
86,122
10/09/18
–
11/09/19
DEF BONUS 2017
12,758
11/09/17
DEF BONUS 2018
27,062
10/09/18
DEF BONUS 2019
–
11/09/19
294,287
Matthew Pratt
SAYE 2017
LTIP 2016
LTIP 2017
LTIP 2018
LTIP 2019
3,673
30/10/17
30,022
12/09/16
23,168
15/11/17
23,951
10/09/18
–
11/09/19
DEF BONUS 2017
11,846
11/09/17
DEF BONUS 2018
27,858
10/09/18
DEF BONUS 2019
–
11/09/19
6.12
4.097
5.935
5.887
5.945
6.30
5.887
5.945
4.00
6.12
6.18
4.097
5.935
5.887
5.945
6.30
5.887
5.945
6.12
4.097
5.935
5.887
5.945
6.30
5.887
5.945
–
138,882
–
–
–
22,579
23,961
–
–
–
–
153,911
–
3,673
4.90
01/01/21
01/07/21
(138,882)
–
12/09/19
12/09/26
–
–
–
147,346
152,370
153,911
15/11/20
15/11/27
10/09/21
10/09/28
11/09/22
11/09/29
–
(22,579)
–
11/09/18
11/09/27
(23,961)
23,962
10/09/19
10/09/28
–
42,750
–
42,750
11/09/20
11/09/29
185,422
196,661
(185,422)
524,012
–
–
–
–
–
–
93,356
–
–
24,163
117,519
–
–
–
–
103,448
2,812
–
–
78,472
–
–
–
12,758
13,531
–
107,573
–
30,022
–
–
–
11,846
13,929
(2,812)
–
–
–
1,836
1,821
3.20
4.90
4.94
01/01/20
01/07/20
01/01/21
01/07/21
01/01/23
01/07/23
(36,975)
41,497
12/09/19
12/09/26
–
–
–
(12,758)
(13,531)
–
83,404
86,122
93,356
–
13,531
24,163
(66,076)
345,730
15/11/20
15/11/27
10/09/21
10/09/28
11/09/22
11/09/29
11/09/18
11/09/27
10/09/19
10/09/28
11/09/20
11/09/29
–
(14,146)
–
–
–
3,673
15,876
23,168
23,951
103,448
–
13,929
25,471
4.90
01/01/21
01/07/21
12/09/19
12/09/26
15/11/20
15/11/27
10/09/21
10/09/28
11/09/22
11/09/29
11/09/18
11/09/27
10/09/19
10/09/28
11/09/20
11/09/29
–
–
(11,846)
(13,929)
–
25,471
–
120,518
55,797
128,919
(39,921)
209,516
i.
ii.
iii.
iv.
The performance conditions attached to the 2018 LTIP awards were disclosed in the 2019 Directors’ Remuneration Report.
The performance conditions attached to the 2019 LTIP awards are shown on page 93.
There are no further performance conditions attached to the exercise of the deferred bonus awards.
Between 29 June 2020 and 15 September 2020 (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.
As noted on page 74 of the 2019 Annual Report, 108,961 LTIP share options granted in September 2016 to Steve Morgan vested
on 12 September 2019 and were paid in cash as per the scheme rules.
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Redrow plc Annual Report 2020
96
GOVERNANCE REPORT
Directors’ Remuneration Report continued
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.
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 2019 and 2020.
Executive Director
John Tutte
Scheme
LTIP 2016
No. shares
exercised
Date of
exercise
138,882
12/09/19
DEF BONUS 2017
22,579
11/09/19
DEF BONUS 2018
23,961
11/10/19
185,422
Barbara Richmond
LTIP 2016
36,975
12/09/19
Matthew Pratt
DEF BONUS 2017
12,758
11/09/19
DEF BONUS 2018
13,531
10/09/19
LTIP 2016
DEF BONUS 2017
63,264
14,146
11,846
12/09/19
11/09/19
DEF BONUS 2018
13,929
10/09/19
39,921
Mid price
on date of
exercise
(pence)
612.00
604.50
595.83
612.00
604.50
595.83
612.00
604.50
595.83
Notional gain on
exercise (£’000)
849.96
136.49
142.77
1,129.22
226.29
77.12
80.62
384.03
86.57
71.61
82.99
241.17
Pension
John Tutte and Matthew Pratt are deferred members of the Redrow Staff Pension Scheme (now closed to future accrual) and
details of entitlements under this plan are set out below. He also received a pension allowance supplement of 20% of salary.
Barbara Richmond received a pension allowance supplement equivalent to 20% of salary and Matthew Pratt received 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 91. 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 28 June 2020
£
Benefits paid to
Director during period
up to 28 June 2020
£
Defined Benefit accrued
during period up to
28 June 2020
£
57,919
15,373
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.
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Salary
Benefits
Annual bonus
Additional Statutory Information
Executive
Chairman
All Redrow
employees
2.0%
Nil%
(100%)
2.92%
11.0%
(64.3%)
Name
Salary
Benefits
Annual bonus
Matthew Pratt (Chief
Operating Officer
during FY 2020)
Barbara
Richmond (Chief
Financial Officer)
Nick Hewson
(Senior
Independent
Director)
Vanda Murray
(Non-Executive
Director)
Sir Michael Lyons
(Non-Executive
Director)
Nicky Delieu
(Non-Executive
Director)
Matthew Pratt was
appointed to the
Board as Chief
Operating Officer
on 1 April 2019*
6.50%
84.2%**
-100%
1.40%
3.30%
-3.00%
n/a
n/a
n/a
n/a
n/a
n/a
Nicky Delieu was
appointed as
Non-Executive
Director on 6
November 2019*
*
**
A year-on-year comparison is not possible in these circumstances
This increase from £19k to £35k was in relation to a change in company car and the provision of fuel
CEO Pay Ratio
CEO Pay Ratio
25th Percentile pay ratio
50th Percentile pay ratio
75th Percentile pay ratio
Method A
27:1
18:1
12:1
The remuneration figures for the employee at each quartile were determined with reference to 28 June 2020.
Our CEO pay ratios have been calculated using Option A under the Companies (Miscellaneous Reports) Regulations 2018 as this
is the most statistically accurate way. The total remuneration of all UK employees for the 2020 financial year has been calculated
and ranked to identify the employees where remuneration places them at the 25th, 50th and 75th percentile points.
The total pay and benefits and salary of the employees paid at the 25th percentile, 50th percentile and 75th percentile is shown
below.
Salary
Total pay and benefits
25th Percentile
50th Percentile
75th Percentile**
£23,950
£26,069
£32,008
£40,581
£27,760
£60,756
*
**
The pay ratio comparison has been calculated on using John Tutte’s single total figure remuneration as Executive Chairman as this is considered the
most appropriate position
The employee identified at the 75th percentile is in a sales consultant role, which has the opportunity to earn higher remuneration through
commission arrangements, hence the base salary is lower than the 50th percentile employee but total pay and benefits is higher
The Remuneration Committee notes that the Executive Chairman’s remuneration package is appropriately more heavily
weighted toward variable pay elements, i.e. annual bonus and LTIP, than the general employee population and is therefore likely
to result in the ratio fluctuating as a function of the outcomes of incentive plans year on year. However, the Committee will
continue to monitor pay ratios, including any longer term trends, as part of its annual agenda.
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GOVERNANCE REPORT
Directors’ Remuneration Report continued
Relative importance of spend on pay
The table below shows total employee remuneration and distributions to shareholders, in respect of 2020 and 2019 (and the
difference between the two).
£m
Total employee remuneration
Distributions to shareholders
2020
134
–
2019
Change (%)
141
220
(5.0%)
(100%)
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 nil pence per share in respect of 2020 compared to 60.5
pence per share in respect of 2019 including the B share cash return.
Performance graph and table
The chart below shows the TSR of Redrow in the ten-year period to 28 June 2020 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.
600
500
400
300
200
100
0
2010
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
2020
Steve
Morgan
Steve
Morgan
Steve
Morgan
Steve
Morgan
John
Tutte
John
Tutte
John
Tutte
John
Tutte
John
Tutte
John
Tutte
£582k
£855k
£1,050k £1,922k £2,355k £1,916k
£2,463k £1,950k £2,093k £712k
50%
50%
80%
100%
100%
100%
100%
96.7%
85%
Nil%**
0%
0%
19%
100%
100%
100%
100%
100%
100%
Nil%
*
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. 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).
**
John Tutte voluntarily waived any bonus for 2020 given the wider stakeholder experience
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 £205k during 2020 (£169k during
2019). 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,
Sir Michael Lyons and Nicky Dulieu.
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;
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2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
• determining performance targets and the extent of their achievement for both annual and long-term incentive awards operated
Redrow
FTSE 250
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 28 June 2020 and details of Committee attendance are set out in the following table:
TABLE OF ATTENDANCE
Name
Vanda Murray
Nick Hewson
Sir Michael Lyons
Nicky Dulieu
Role
Chair*
Member
Member
Member
Attendance at Meetings
4/4
4/4
4/4
4/4
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As announced in July 2020 Vanda Murray will be stepping off the Board at the November 2020 AGM. Nicky Dulieu will take over as Chair having been
a member of the Remuneration Committee since November 2019.
Redrow plc Annual Report 2020
100
GOVERNANCE REPORT
Directors’ Remuneration Report continued
GOVERNANCE REPORT
Directors’ Report
The Committee received advice from FIT Remuneration Consultants LLP during the year. FIT is a member of the Remuneration
Consultants Group and as such voluntarily operates under the Code of Conduct in relation to executive remuneration consulting
in the UK. The Committee is comfortable that FIT does not have connections with Redrow plc that may impair their objectivity
and independence. The fees charged by FIT for the provision of independent advice to the Committee during 2020 was £44,858
FIT provided no other services to the Company.
Statement of voting at Annual General Meeting
At the Annual General Meeting held on 6 November 2019, votes cast by proxy and at the meeting in respect of directors’
remuneration report are shown in the table.
Resolution
No.
%
No.
%
Votes For
Votes Against
Total
votes cast
exc withheld
Votes
withheld
Approval of Directors’ Remuneration Report
for the year ended 30 June 2019
193,706,106
69.61
84,585,769
30.39
278,291,875
1,443,300
In line with provision 4 of the UK Corporate Governance Code, the Board has consulted with major shareholders to understand
their concerns following the number of votes against this resolution and has taken action following the feedback received. An
update statement in respect the action taken after consultation with major shareholders can be found on the Company’s website
at http://investors.redrowplc.co.uk/corporate-governance and a final summary setting out the impact of shareholder feedback on
the Board’s decisions can be found on page 57.
By order of the Board
VANDA MURRAY OBE
Chair of the Remuneration Committee
15 September 2020
OTHER STATUTORY DISCLOSURES
The Companies Act 2006 (the “Act”) requires the Directors to
present a fair review of the business during the 52 weeks to 28
June 2020 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 48 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 49 to 116.
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 138.
Capital
Structure
(details of the
issued share
capital)
Directors
See note 18 of the financial statements on
page 158.
• See page 59 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 2020 AGM are set out on
pages 50 to 51.
• Details of Directors’ interests, including
interests in the Company’s shares, are
disclosed in the Directors’ Remuneration
Report on page 94.
Employment
Policies of the
Company
Details of the Company’s employment policies
may be found in the Directors’ Report on
pages 107 to 108.
The Redrow
Benefit Trust
Report (the
“Employee
Benefit
Trust”)
Environmental,
social and
governance
(ESG)
disclosures
Greenhouse
gas emissions
Details of the shares held by the Employee
Benefit Trust may be found in the Directors’
Report on page 103.
Details of the Company’s approach to ESG
matters can be found in the Directors’ Report
on pages 103 to 110.
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 104.
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 140 to 143 and the Directors’
Remuneration Report on pages 78 to 100.
Section 172(1)
Statement
The Section 172(1) Statement can be found in the
Strategic Report on pages 32 to 37.
The Directors have pleasure in presenting to the shareholders
their report and audited consolidated financial statements for
the 52 weeks ended 28 June 2020.
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Redrow plc Annual Report 2020
102
GOVERNANCE REPORT
Directors’ Report continued
RESULTS, DIVIDENDS AND RETURN OF CASH
The Group made a profit after tax of £113m (2019: £329m). As
announced on 24 March 2020, due to the uncertainty around
the impact of the COVID-19 pandemic on the business, it was
decided that the Company would cancel the 10.5p interim
dividend which was due to be paid on 9 April 2020 to holders
of ordinary shares on the register at the close of business on 6
March 2020. The Board is not recommending the payment of a
final dividend for the year at the 2020 Annual General Meeting.
ANNUAL GENERAL MEETING
Notice of the 2020 Annual General Meeting to be held on
Friday, 6 November 2020 will be sent to shareholders
separately. Members wishing to vote, should return forms of
proxy to the Company’s Registrar not less than 48 hours before
the time for holding the meeting.
The formal notice convening the Annual General Meeting,
together with explanatory notes, will be found in a separate
circular which will be sent to shareholders separately and will
be available on the Company’s website. Shareholders will also
find with the Notice of Annual General Meeting a form of proxy
for use in connection with the meeting.
DIRECTORS
The Directors of the Company during the year to the date of
this report, along with their meeting attendance, are listed on
page 59. The current Directors are listed on pages 50 to 51
together with their biographical details.
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 a 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.
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 78 to 100.
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
Matthew Pratt and Barbara Richmond, who stand for
reappointment as Executive Directors; Nick Hewson and Sir
Michael Lyons who stand for reappointment as Non-Executive
Directors; and John Tutte and Nicky Dulieu who stand for
appointment as Non-Executive Directors, continue to be
effective and demonstrate the appropriate commitment to their
roles.
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 £12,326,664.70 (which is equivalent to
approximately 33% of the Company’s issued share capital) and
up to a further aggregate nominal amount of £12,326,664.70 in
connection with an offer by way of a rights issue. The authority
was not exercised during the period ended 28 June 2020 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.
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.
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.
In accordance with the UK Corporate Governance Code (the
“Code”), all of the Directors will retire at the Annual General
Meeting to be held on Friday, 6 November 2020 and, being
eligible, offer themselves for reappointment, save for Vanda
Murray who will be stepping down from the Board following the
2020 AGM.
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
approved the proposed appointment of KPMG LLP as the
Company’s external auditors for the financial year commencing
1 July 2019. The appointment was subsequently approved by
shareholders at the 2019 AGM, receiving 99.76% of votes in
favour, with the appointment taking effect from 6 November
2019.
QUALIFYING THIRD PARTY INDEMNITY PROVISIONS
During the course of the 52 weeks ended 28 June 2020,
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 Company’s
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.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
DISCLOSURES
Limiting the environmental impact of developments by building
responsibly and creating thriving and desirable places to live are
key parts of the Group’s strategy, and through the use of its
design principles, the Company has ensured that social,
environmental and economic aspects are incorporated into the
communities delivered. Valuing people is also a key component
of the Group’s strategy and this is executed by valuing and
developing people and partners and inspiring the next
generation to build.
In recognition of the Company’s sustainability performance, it
was awarded a gold level status in the most recent
NextGeneration Benchmark, which is an assessment and
ranking of the sustainability performance of the UK’s 25 largest
housebuilder, thereby retaining third place for the fourth year in
a row.
The Board considers ESG matters as part of its regular risk
assessment and the following sections seek to provide a deeper
understanding of the work undertaken by the Company in
relation to ESG matters.
percentage or number of votes, deadlines for exercising voting
rights and arrangements by which, with the Company’s
co-operation, financial rights carried by securities are held by
a person other than the holder of the securities.
Zedra Trust Company (Guernsey) Limited, as trustee of the
Employee Benefit Trust, held 8,841,362 shares (2.51%) in the
Company as at 28 June 2020 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.
SUBSTANTIAL HOLDINGS IN THE COMPANY
As at 28 June 2020, the Company had 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”).
Notifiable Person
Bridgemere
Securities Limited
Number of
Ordinary
Shares Held
% of voting
rights
56,352,350
16.00%
Vidacos Nominees/HSBC 1
17,876,321
5.08%
1
The Company was notified of this interest prior to the 20 for 21 share
consolidation on 8 April 2019. The figure displayed as the number of
shares held 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, at which time was
18,770,138.
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%.
The Company has not been notified of any changes to the
above interests, or any other notifiable interests, since 28 June
2020.
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.
INDEPENDENT AUDITORS
Following the conclusion of the formal tender process, the
Company announced on 9 November 2018 that the Board had
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Redrow plc Annual Report 2020
104
GOVERNANCE REPORT
Directors’ Report continued
ENVIRONMENTAL
Greenhouse Gas Emissions
Greenhouse gas (“GHG”) emissions data for the period 1 July 2019 to 28 June 2020 are set out in the table below:
Emissions from:
Scope 1 activities:
• Direct emissions from combustion of fuels
and business travel
Scope 2 activities:
Current
Reporting Year
(1 July 2019 to
28 June 2020)
Comparison
Year
(1 July 2018 to
30 June 2019)
Units
12,250
12,478
tonnes of CO2e
• Indirect emissions from purchased electricity and heat
3,254
1,985
tonnes of CO2e
Total Greenhouse Gas Emissions:
• (Scope 1 + Scope 2)
Intensity ratio:
15,504
14,463
tonnes of CO2e
Total emissions per 100m2 of build
3.01
2.42
tonnes of CO2e per 100m2 of build
Notes to the Greenhouse Gas Emissions Data
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.
During the reporting period, the annual quantity of energy
consumed by the Company was 37,032,239 kWh. This figure is
the aggregate of:
• the annual quantity of energy consumed from activities for
which the company is responsible involving the combustion
of gas;
• the annual quantity of energy consumed resulting from the
purchase of electricity and heat by the company for its own
use; and
• the annual quantity of energy consumed from activities for
which the company is responsible, involving the
consumption of fuel for the purposes of transport.
100% of the figures reported above relate to emissions and
energy consumed solely in the United Kingdom.
The Company has taken several measures for the purpose of
reducing greenhouse gas emissions and increasing the
Company's energy efficiency:
• Almost 50% of our greenhouse gas emissions come from
use of diesel on our sites and consequently we have been
working to reduce this during the year. We are currently
trialling a hybrid generator system with solar PV and a smart
energy management system and will be looking to roll this
out across all 130 construction sites following further testing.
We are also currently investigating the efficacy of
Hydrotreated Vegetable Oil (HVO) with our supply partners,
as an alternative fuel for site plant and equipment which we
anticipate would reduce net CO2 emissions by up to 90%.
• Following energy audits carried out at the beginning of the
reporting year, we have identified a number of opportunities
to improve the energy efficiency of our sales offices, show
homes, sites and our divisional offices. These opportunities
relate to lighting, heating and hot water and are now being
actioned by the relevant departments. We are currently
reviewing our policy for our show homes lighting and our
strategy for our divisional offices energy management.
• We have also been working to reduce site and office gas
and electricity consumption with new eco-cabins being now
rolled-out to all new sites, providing: improved thermal
insulation, double glazed windows with low u values, energy
efficient LED lights with PIR activation, energy efficient
heaters with thermal cut out and timers and energy efficient
point of use hot taps.
We have used the GHG Reporting Protocol – Corporate
Standard and the emissions have been calculated using the
2020 UK Government’s Greenhouse Gas Conversion Factors for
Company Reporting. Reported Scope 2 emissions are
calculated using the location-based method. The slight increase
in normalised emissions is attributable to improved data
collection, combined with a reduction in homes completed due
to COVID-19 in 2020. We intend to set this as a new baseline
year and set a new ambitious target going forward.
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/about-redrow/our-values/building-
responsibly/managing-our-resources-efficiently/
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 for the 52 weeks ended 28 June 2020 was £0.4m
(2019: £0.6m).
Resource Efficiency
Managing resources efficiently is a key principle underpinning
one of the Company’s strategic themes of building responsibly.
The following are key examples of the Company’s approach to
managing its resources efficiently:
1.
2.
3.
Carbon – the Company continues to be an active Gold
Leaf member of the UK Green Building Council and is
working to reduce the carbon emissions from both its
homes and operations. The Company is committed to
extending its existing approach in order to deliver
zero-carbon homes in the coming decade and has taken
its first steps in this journey during the year, as further
explained in the Strategic Report.
Water – the homes produced by the Group have one of
the lowest water use standards in the industry at 105
litres-per-person-per-day (lpppd), compared with a
building regulation standard of 125 lpppd. The Company is
committed to reducing the amount of water used in its
operations and during the year, the water usage was 18.50
m3 per 100m2 of build.
Waste – the Company is also committed to reducing waste
from its operations and in 2020, waste generated was
8.97 tonnes per 100m2 of build. Where possible, we also
ensure that any waste created is reused or recycled as
appropriate and during the year, 97.4% of our waste was
diverted from landfill.
For further details on the Company’s approach to managing its
resources efficiently, please see pages 23 to 25 of the
Strategic Report.
Sustainable materials
The Company is committed to sourcing sustainable materials in
for use in its operations to contribute to its long-term
sustainability. The following are key examples of the Company’s
approach to sourcing such materials:
1.
Timber – the Company uses a large amount of timber in
the construction of its homes and is committed to sourcing
forest products from well-managed sources. In the 2019
calendar year, 99.9% of the forest products used by the
Company were from verified and credibly certified
sources.
2.
Other materials – the Company also uses supply chain
mapping for other materials and products used in
constructing its homes to allow it to work with supply
partners to identify and avoid products deemed to be high
risk in respect of environmental and social ethics.
For further details on the Company’s approach to sourcing
sustainable materials, please see pages 19 to 21 of the
Strategic Report.
Biodiversity
During the year, the Company launched its industry-leading
biodiversity strategy in partnership with The Wildlife Trusts to
ensure that our developments enhance biodiversity and
contribute to nature’s recovery and internal workshops have
been running to equip our teams with the knowledge and skills
to make a difference to nature.
For further details on the Company’s new biodiversity strategy,
and action taken during the year for nature, please see pages 15
to 16 of the Strategic Report.
Climate-related Disclosures
Following the recommendation of the Task Force on Climate-
related Financial Disclosure (TCFD), it was decided that specific
climate-related disclosures would be included within this Annual
Report. Please see pages 111 to 115 for the TCFD disclosure table.
SOCIAL
Social Impact Review
The Company seeks to make a meaningful social impact when
building homes for our customers. A review was undertaken in
2020 to assess the social impact of our operations and the full
report can be found on the Company’s website at
redrowplc.co.uk.
Social Value Calculator
In 2019, the Company received the NextGeneration Innovation
Award, which is awarded to a homebuilder that has
demonstrated initiatives that go far beyond the criteria used for
the benchmark. The Group was recognised for its commitment
to supporting healthy communities by developing a unique
Social Value Calculator. The calculator presents a monetary
value against individual outcomes over a 25-year period, being
the typical length of a mortgage, and its assessment methods
are consistent with the guidance advocated in HM Treasury’s
Green Book on quantifying the social impact of its policies.
The Group’s ground-breaking work on researching the social
value associated with multiple aspects of home building and
community creation ensures it has a clearer, more holistic
perspective on the impact of the placemaking decisions. It also
allows the Company to take a more strategic approach to design
and community planning and further the knowledge and
perspective of the business on the features and characteristics
of a new development which are most likely to make people
happier and healthier.
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Redrow plc Annual Report 2020
106
GOVERNANCE REPORT
Directors’ Report continued
Placemaking
The Company has developed a benchmarking scorecard of
placemaking principles for designing sustainable communities,
called the Redrow 8. The assessment criteria underpinning the
Redrow 8 has been refined to reflect the key characteristics of
well-designed places set out in the government guidance.
During the year, a placemaking e-learning module was launched
for all staff in order to develop their knowledge of how key
placemaking and urban design principles are to be applied to
the communities served by the Company.
For further details on the Company’s approach to placemaking,
please see pages 14 to 15 of the Strategic Report.
materials and action plans following meetings are made
available to all employees via Engage.
4.
INsight survey – this survey is distributed annually to all
employees and in the latest survey there was a 91%
participation rate. The feedback from employees was
anonymised.
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.
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. The Company engages with
employees through the following means:
5.
1.
2.
3.
Designated workforce Non-Executive Director – in line
with Provision 5 of the Code, Vanda Murray was appointed
as the designated Non-Executive Director for workforce
engagement in 2019. Board and Committee meetings are
arranged throughout the year in different divisions across
the country, with visits to different development sites
arranged around the Board meetings. This has allowed
Vanda Murray the opportunity to engage directly with the
workforce, at both divisional offices and on sites, to obtain
their views on a wide range of matters relating to life at
Redrow. This is then fed back to the Board providing for an
important mechanism for the Board to understand the
views of the workforce. Following her retirement from the
Board on 6 November 2020 after the AGM, Vanda Murray
will be succeeded by Nicky Dulieu as the designated
Non-Executive Director for workforce engagement.
Employee communication via the intranet, Engage –
Engage is available for all employees of the Company and
is 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. This proved to be a vital communications
tool during the COVID-19 pandemic as it allowed
information to be shared instantly with all employees
(whether still working or on furlough) so that we were able
to keep each person in the loop and up to date with
actions being taken by the business.
Employee engagement meetings – each divisional
business and Group has a team of elected representatives
who attends regular engagement meetings. These
meetings keep employees up to date with Company news
and employee health and wellbeing initiatives and enable
the representatives 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
6.
7.
8.
Enhanced maternity and paternity leave, flexible working
and enhanced flexible holidays are just a few examples of
the changes made as a result of employee engagement
through the INsight survey.
Direct communication channel to the Board – employees
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 this 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.
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.
Division specific communications – 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. Each Division has a
dedicated section on the intranet which is regularly
updated to reflect matters directly affecting that part of the
business.
Company performance communications – the Company’s
intranet, Engage, is also used as a tool for communicating
factors affecting the performance of the Company to
employees to ensure that they understand how the
business is performing in the current market. Additionally,
the Executive Chairman circulates the results
announcements and trading updates to all employees.
Following the release of the interim and final results
announcements, the Group Finance Director attends the
Head Office and each Divisional office to make a
presentation directly to employees to explain the results
and strategy for the year.
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The Board shall keep these engagement mechanisms under
review so that they can be ensure they remain effective.
• Human Rights Policy
• Disciplinary and Grievance Policy and Procedures
Employee Wellness
The Company recognises that the wellness of its employees is
vital to the success of the business and has put in place a
number of initiatives to focus on health and wellbeing, including:
1.
Mental health first aiders – following the Company’s
commitment to the Building Mental Health Charter,
employees have received training on the area of mental
health, including mandatory training for all Heads of
Department, so that they can understand the importance
of such health and be open to discussing this within their
teams. There is also a mental health e-learning module
which all employees were invited to participate in.
Further additional training was provided to a number of
employees who volunteered to become mental health first
aiders. There are currently over 200 employees who have
been trained and equipped to act as mental health first
aiders.
2.
MyLife – this employee assistance programme is now
made available to all employees, subcontractors and their
families. The programme includes a free confidential
advice helpline available 24/7 and provides advice and
support through telephone counselling sessions for both
personal and work-related problems.
The HR department has a dedicated team focusing on health
and wellbeing to ensure that health remains a key priority and
that the wellness initiatives in place are fit for purpose.
4.
Diversity and Inclusion Policy
The Company recognises that its continued success depends
upon its 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 it 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. This
commitment continues throughout employment, ensuring that
equal training, career development and promotion opportunities
are available to all employees.
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
• Recruitment and Selection Policy
The Company has in place 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 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. The Group has 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.
Training – a number of 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.
Membership – 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.
The Company has taken 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.
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Redrow plc Annual Report 2020
certified by the British Standards Institute to the international
standard ISO 14001:2015.
to attract new entrants into the industry and supporting their
training needs.
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Directors’ Report continued
Learning and Development
The Company places considerable importance on training and
developing its people. Historically, training has primarily been
delivered face-to-face at the Company’s in-house training
facilities and supported through blended e-learning. During the
COVID-19 lockdown, and in the time since, the Group has
placed additional emphasis on its e-learning platform, ensuring
all colleagues completed vital return-to-work training, in
addition to refreshing core skills. Moving forward the Company
will make more use of technology to deliver training through
e-learning, webinars and interactive online sessions.
During the year, 5,925 training days were completed in total.
The Company, in partnership with Liverpool John Moores
University and Coleg Cambria, established the UK’s first
dedicated Housebuilding Degree. The three-year degree
provides students with a full overview of housebuilding skills
including quality, project management, health and safety,
business skills and law. Learning is achieved through a blend of
classroom activities, virtual learning, practical site visits and
tutorials, meaning that learners are be able to combine their
studies with working and earning. To date this has been used
to upskill the Group’s existing workforce and the Board are
pleased to welcome the first intake of sponsored degree
students who will join the Group this Autumn post A Levels.
During the year, the Company recruited over 120 trainees,
including 90 apprentices and 15% of our direct employees are
trainees. Company apprentices receive first class training, both
on site and at local colleges, and the Company partners with
key suppliers to ensure that apprentices receive a
comprehensive understanding of the wider aspects of their
chosen field.
The Company is committed to assisting with tackling the
problem of attracting young people to construction, and more
specifically housebuilding, by analysing the barriers to
entry-level recruitment into the sector and making
recommendations to overcome these. For further details of the
work undertaken in analysing the state of apprenticeships and
construction careers in the UK, the 2020 Apprentice Report
can be found on the Company’s website at redrowplc.co.uk.
Health, Safety and Environment
The Company is committed to quality and excellence
therefore it follows that minimising risk to people, plant,
products and the environment is inseparable from all of its
other objectives. Health and safety has naturally become
embedded into the culture of the Group, as it forms part of the
overall duty of being an employee or supplier of the Group.
The Group seeks to achieve the highest health, safety and
environmental standards as it significantly contributes to the
overall performance of the business and protects both people
and environment from harm. The Company operates an
environmental management system that ensures that it
manages environmental impacts in a systematic way and is
For further details on our approach to health and safety, see
page 25 of the Strategic Report.
Charitable and Political Donations
The Company recognises the difference it can create through
its presence as a national housebuilder by developing thriving
communities through supporting the local community and
charitable projects. The Company and its employees are
actively involved in fundraising activities for our selected
charitable partners.
Divisions annually select a local charity to support whereby its
purpose is in alignment with one of the Group’s key priorities.
This allows each part of the business to choose a charity
meaningful to them in the communities in which they operate.
In accordance with Company policy, the charity must be
verified before any donations are made to it and a record is
maintained of all charitable contributions made.
The Group paid £0.2m in charitable donations during the year,
being £0.1m in respect of national charities and £0.1m in
support of local charities.
The Company does not engage or support any form of political
donations. No Group company or employee is permitted to
make a political donation in the name of the Company and
employees are cautioned to be extra vigilant to ensure that
political contributions are not made in circumstances where
gifts, hospitality or the actions of third parties are engaged in
transactions on behalf of the Company. The Group made no
political donations during the year.
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
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As a partner of the Supply Chain School, the Group’s supply
chain have access to thousands of online presentations,
training modules, guidance documents and checklists and are
regularly invited to attend workshops and briefings.
Due diligence is conducted on the Group’s 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.
For further details on our how the Company partners with its
supply chain for sustainability, see pages 19 to 20 of the
Strategic Report.
Local Communities
During the year, the Company continued to create thriving
communities and committed £188m to the local communities
served for the development of new schools, local shops,
community and health centres as well as green spaces as part
of the planning process. The Company is creating more than
1,600 acres of green space and communal areas on its current
developments and during the year it created 22km of new
cycling routes in and beyond its developments.
‘Hard Hat tours’ are also conducted with customers during the
pre-plaster stage of construction to show the care and
attention to details that goes into building their home, and
allows them to feel connected to their home even before it is
built.
Business Relationships
A summary of how the Board have had regard to the need to
foster the Company’s business relationships with suppliers,
customers and others, and the effect of this on the decisions
taken by the Company, can be found within the Section 172(1)
Statement on pages 32 to 37.
GOVERNANCE
Corporate Governance
The Board remains committed to high standards of corporate
governance. Details relating to the Company’s governance
arrangements and compliance with the UK Corporate
Governance Code are provided in the Corporate Governance
Report on pages 49 to 100.
Code of Conduct
The Company has in place a Code of Conduct, which acts as a
guide for employees to doing the right thing in business. It
focuses on the values and behaviours deemed most important
for the Group and seeks to guide employees in their good
judgement to act in the Redrow way.
The Group is committed to providing high quality affordable
homes for local people and has designed, built and delivered
over 940 new affordable homes across its developments in
England and Wales in partnership with Registered Providers.
The Code of Conduct provides a number of decision-making
tools to assist employees if faced with difficult decisions and
sets out the Company’s policy on a number of key matters
deemed integral to doing the right thing in business, including:
For further details on our how the Company creates strong,
connected communities, see pages 16 to 17 of the Strategic
Report.
• Whistleblowing;
• Health, safety and environment;
Customers
The Company’s purpose is to operate to create a better way for
people to live and there is very much a customer focused
culture across the Group.
During the year, based on a survey run by the Home Builders
Federation, over 90% of customers polled said they would
recommend a Redrow home to a friend, earning the Company
a top five-star rating. The Company was also the first top ten
housebuilder to join the Institute of Customers Services and
was nominated for the Best Customer Satisfaction Strategy at
the UK Customer Service Awards during the year.
Technology also plays a key part in the Company’s innovative
customer service offering. Having launched the Red Site
Managers Inspection iPad app in 2019, site and customer
service managers use this system to ensure that identifying
and rectifying potential issues during the build is a smooth
process leading to a high quality end product. Customers also
have access to the My Redrow app, which is an online
members-only area for customers to personalise their home
with finishes and upgrades.
• Diversity and inclusion;
• Human rights;
• Supply chain and modern slavery;
• Integrity (comprising bribery, gifts and hospitality, tax evasion
facilitation, conflicts of interest, share dealing and data and
asset protection); and
• Charitable and political donations.
The Code of Conduct has been made available to all
employees and is publicised on the Company’s intranet,
Engage.
Modern Slavery
There is a Group commitment to ensuring that there is no
modern slavery or human trafficking in any part of our business
or supply chains. The Group has a policy in place reflecting its
commitment to acting ethically and with integrity in all business
relationships and to implementing and enforcing effective
systems and controls to ensure slavery and human trafficking is
not taking place anywhere in its supply chains.
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GOVERNANCE REPORT
Directors’ Report continued
There are a number of key initiatives in place to assist with the
approach to ethical and responsible sourcing, including the
following:
1.
2.
3.
All suppliers and manufacturers must submit a detailed
Supplier Appraisal Assessment for approval as part of the
pre-tender qualification process. The appraisal forms also
track the country of manufacture allowing the Company to
identify materials supplied by manufacturers with a
high-risk profile.
All supply partners must warrant that they shall comply,
and will use their best endeavours to ensure that any
subcontractor or party within their own supply chain shall
at all times comply, with the Modern Slavery Act 2015.
The Company’s Standard Purchase Order and
Subcontractor Terms of Contract require trading partners
to comply fully with the Modern Slavery Act 2015, with any
breach resulting in the termination of all live contracts.
With temporary labour acknowledged as an area of high risk
for modern slavery, Datum RPO were introduced at the start of
July 2019 to manage all temporary labour requirement and
processes. Alongside a number of system based checks for
example right to work, health and safety conducted by Datum
RPO, they also carry out physical checks and audits
periodically to ensure temporary agency workers are legally
complaint and there are no instances of modern slavery.
As a partner of the Supply Chain School, the Group’s workforce
and supply chain have access to thousands of online
presentations, training modules, guidance documents and
checklists and are regularly invited to attend workshops and
briefings. One of the key areas covered by the school is
modern slavery, with online presentations, checklists, guidance
documents and training modules accessed from their website.
In its partnership with the Supply Chain School, the Company
has recently worked in collaboration with the school and other
partners on further developing guidance materials to identify
what a good due diligence systems look like.
For further details on the steps taken by the Group to ensure
that modern slavery is not taking place in our business or
supply chains, please see our Slavery and Human Trafficking
Statement for the 2020 financial year, which is available to view
at redrowplc.co.uk.
Stakeholder Engagement
groups have been identified as the current key stakeholders of
the Group:
1. Customers;
2. Our people;
3. Government regulators;
4.
Investors;
5. Landowners;
6. Local communities;
7. Non-Governmental Organisations and society;
8. Planning authorities; and
9. Supply chain.
The Section 172(1) Statement of the Group, explaining how the
Directors have engaged with the stakeholders outlined in that
section of the Companies Act 2006, can be found on pages 32
to 37 of the Strategic Report.
Anti-Bribery and Corruption
The Company has a zero tolerance approach to bribery or
corruption of any form and there is a widely publicised formal
policy in place dealing with this, which is available to all
employees.
The Company has a principle-based system for bribery
prevention, which comprises the following six principles:
1. maintenance of bribery risk assessments within our sector;
2.
3.
4.
5.
top level commitment of the unacceptability of bribery
which is engrained in our culture;
proper due diligence with people we do business with and
seeking reciprocal anti-bribery agreements;
clear policies and procedures applicable to all employees
and business partners;
effective implementation by embedding anti-bribery within
internal controls, recruitment, remuneration policies,
operations, communications and training; and
6.
monitoring and reviewing through auditing and financial
controls which are sensitive to bribery.
Further details of the company’s Anti-Bribery and Corruption
policy, and work undertaken to prevent bribery taking place
within the business, can be found in the Audit Committee Report
on page 69.
The Board regularly reviews the identity and key priorities of its
stakeholders and the business strategy of the Group is shaped
by the issues that matter to key stakeholders.
PROVISION OF INFORMATION TO AUDITORS
Each Director in office at the date the Directors’ report is
approved, confirms that:
There is a section of the Company’s website, at redrowplc.co.uk,
which is dedicated to stakeholder engagement, and includes
identification of who the key stakeholders are, what the
Company understands to be their priorities and how the
Company has responded to those priorities. The following
(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 external 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 external auditors are aware of that information.
GOING CONCERN
In considering whether it is appropriate to prepare these
financial statements on a going concern basis, the Directors
have conducted a detailed going concern review, considering
the Group’s liquidity and banking covenant compliance.
Following the review, details of which can be found within the
Basis of Preparation section of Accounting Policies on page
130, the Directors consider that the Group has adequate
resources in place for the forecast period and have therefore
adopted the going concern basis of accounting in preparing
these financial statements.
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD)
In addition to reporting and disclosing our environmental and sustainability performance throughout this report, this year we
have also included specific climate-related disclosures following the TCFD’s recommendations and structured this around its key
four thematic areas.
Governance
Disclose the organisation’s governance around climate-related risks and opportunities.
Describe the Board’s
oversight of climate-
related risks and
opportunities.
Describe management’s
role in assessing and
managing climate-related
risks and opportunities.
The Placemaking and Sustainability Committee develops and monitors the Company’s approach
to environmental, social and economic issues. The Committee also reviews and approves the
setting of performance objectives and targets and monitors progress against these. The
Committee reports to the Main Board which has ultimate responsibility for sustainability and
climate-related matters. The Health, Safety and Environment Management Committee also
develops and monitors the Company’s approach to environmental sustainability matters and
regularly reviews the objectives and effective operation of the ISO 14001 Environmental
Management System (EMS).
The composition of the Main Board can be seen on pages 50 to 51 and the members of the
Placemaking and Sustainability Committee can be seen on page 75, with representatives from
other disciplines within the business invited to attend the meetings as necessary.
The Group Development Director briefs the Placemaking and Sustainability Committee on
sustainability and climate change matters, supported by the in-house sustainability team who
provide expertise in developing the sustainability strategy, environmental and sustainability
policies and identifying areas of improvement. The Group Development Director also chairs a
monthly Sustainability meeting with Directors of departments across the business, including the
Group Design and Technical Director, Group Commercial Director, Group Customer and
Marketing Director, Group HR Director, Group Masterplanning Director, Group HS&E Director
and Construction Director. These meetings ensure that climate and sustainability-related issues
are understood across the functions of the business and responsibility for assessing and
managing risks and opportunities is shared with the appropriate teams.
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GOVERNANCE REPORT
Directors’ Report continued
Strategy
Describe the
climate-related risks
and opportunities the
organisation has
identified over the short,
medium, and long term.
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s
businesses, strategy and financial planning where such information is material.
The business has identified the following climate-related risks and opportunities:
Risks
• Disruption to build programme and delivery chain from flooding and storm damage
• Increased requirements for surface water management impacting on margins and insurance
• Extreme weather events affecting productivity in offices and sites
• Risk of overheating of homes and apartments due to increase in outside temperatures
• Droughts exacerbating water scarcity
• Failure to be proactive in identifying opportunities for energy efficient products and materials
• Failure to ensure sustainable procurement routes
• Risk that the supply chain fails to supply materials/technologies required to tackle climate
change
• Failure to reduce operational environmental impacts (e.g. Greenhouse Gas emissions)
• Increased energy and fuel prices for Redrow’s operations
• Failure to implement current and emerging regulations adequately
• Not meeting customer expectations in the use of environmentally friendly materials and
products
• Potential litigation from customers for failing to meet regulations and adequately plan for
physical risks
Opportunities
• Increased awareness and demand from our customers for homes adaptable to climate
change issues
• Innovation and research opportunities for lower carbon design and the use of innovative
products
• Focus on identifying and implementing initiatives for climate change adaptation
• Focus on our supply chain resilience, the use of materials with lower embodied carbon and
materials that come from recycled and ethical sources
• Use of renewable energy on our operations
Strategy
Describe the impact of
climate-related risks and
opportunities on the
organisation’s business,
strategy, and financial
planning.
Describe the resilience of
the organisation’s
strategy, taking into
consideration different
climate-related scenarios,
including a 2°C or lower
scenario.
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s
businesses, strategy and financial planning where such information is material.
The business has identified the following climate-related risks and opportunities that can impact
our strategy and financial planning:
Risks
• Direct regulations arising from UK Government and regional government setting out policies
to minimise carbon dioxide emissions and achieve zero carbon homes
• Climate change impacts such as increased temperatures, water shortages and flood risk may
result in the need to redesign aspects of our product which may result in increased costs,
sourcing and adoption of new technologies
• An increase in extreme weather events may impact on supply chain continuity and
construction activities, limiting production
• Changing climate may reduce the availability of land on which the business can build and
may cause disruption to construction programme
• Building materials becoming unavailable or limited and hence more expensive which will
impact our operations, build programme and financial planning
• Insufficient development of innovative products and technologies can limit our plans to
delivering homes with climate resilient measures taken into account during their design
Opportunities
• Increasing regulatory standards bring customer benefits and subsequent marketing benefits
- energy efficiency of new homes is becoming more important to our customers as the cost
of energy continues to rise
• Focusing on the development of lower-emission homes and the provision of low-carbon
lifestyles in the communities we build
• Focusing on increasing green travel options in the developments we create, providing us
with marketing benefits and higher customer satisfaction
• Ability to respond to and pre-empt consumer demand in the area of low-carbon products and
sustainable communities, placing us in a better competitive position and therefore increasing
revenues
• An increased focus on meeting business targets relating to carbon, energy, waste and water
as part of our strategy to Building Responsibly means we are realising opportunities to
contribute to environmental improvements as well as reducing our operating costs
Our business strategy and objectives have been developed by several key means:
1.
Stakeholder engagement and materiality assessment - whereby key stakeholders were
consulted on issues such as energy efficiency and low carbon (homes), flood risks,
biodiversity, water efficiency. These issues were then prioritised according to their impact/
potential impact.
2.
Risk and opportunities processes - as outlined in section below
The resulting strategy has three business principles, each of which encompasses issues
relating to climate change:
–
–
–
Developing Thriving Communities (including objectives such as placemaking and
biodiversity)
Building Responsibly (including objectives such as responsible sourcing of materials and
carbon reduction)
Valuing People (including objectives and targets relating to climate-related and
sustainability training)
We currently evaluate the climate-related risks to Redrow through our existing risk evaluation
and management systems. This includes an examination of impacts and likelihood of
occurrence to give us opportunity to examine different scenarios, but is not formal scenario
analysis. We are reviewing our approach to climate risk management, in particular in our
examination of science based targets and expect to be using more formal scenario analysis for
climate related risks in the next two years.
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Redrow plc Annual Report 2020
GOVERNANCE REPORT
Directors’ Report continued
Risk Management
Disclose how the organisation identifies, assesses, and manages climate-related risks.
Describe the
organisation’s processes
for identifying and
assessing climate-related
risks.
A comprehensive risk register is maintained at Group level covering all aspects and disciplines
within the business. Climate change risks are covered in a specific section which is read in
context with other sections. For each risk there are Prevent Controls and Detect controls in
place and each section is owned by a member of the Executive Management Team responsible
for review and monitoring.
Newly identified risks are added when encountered and a six monthly review is held. At a
divisional level, issues with potential to impact the divisional operational performance, are
reported monthly on a site-by site basis at the divisional board meeting.
Sustainability and climate change risks are also identified and assessed within the Group's
specific sustainability risk matrix, which is aligned with the main group risk register. This forms
part of our Environmental Management System, which is externally certified to ISO14001:2015.
Redrow’s in-house Technical, Commercial and Sustainability teams continuously monitor
developments in regulation and legislation and engage at high level within the industry to
maintain currency and to provide input to policy direction. This information is fed back to the
Main Board in monthly reports. Appropriate solutions to meet sustainability requirements are
identified, evaluated and where appropriate, employed in future-proofing product specifications.
Describe the
organisation’s processes
for managing climate-
related risks.
The development and implementation of a robust sustainability strategy in the business ensures
we recognise and address key climate-related risks and opportunities. Managing impacts from
changing weather patterns is done in various ways, including:
–
Monitoring frequency, location and severity of extreme weather events, insurance market
response and regulatory change in response to extreme weather events
– We have appropriate insurance cover in place, especially for flood risk
–
We regularly review policies and procedures for considering flood risk when procuring
land or planning a development
– We obtain professional advice on risk reduction measures for our product design
–
We continually review materials suppliers to secure supply from alternative sources if
necessary
Appropriate action plans are fed into the business process, shaping and informing a number of
Company policies which are published on our website and are available to staff and customers.
Policy decisions are communicated back to divisional Managing Directors for immediate
implementation. The impacts can be relevant in the short term, for instance in dealing with
unique site specific requirements imposed through planning conditions and equally important
for long term strategy development for future business.
Describe how processes
for identifying, assessing,
and managing climate-
related risks are
integrated into the
organisation’s overall risk
management.
All risks and opportunities which are identified as being pertinent to the business, including
climate change and sustainability issues are reported through the monthly cycle of management
reporting to the Executive Management Team, quarterly to the Main Board and quarterly to the
Placemaking and Sustainability Committee. Reports captured include those from divisional
Board meetings and from specialist disciplines within the business located at the Head Office
such as Sustainability, Commercial, Financial, Health and Safety, Human Resources, Sales &
Marketing and Technical.
Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities
where such information is material.
Disclose the metrics used
by the organisation to
assess climate-related
risks and opportunities in
line with its strategy and
risk management process.
Throughout this report we disclose a range of metrics that relate key themes of our Sustainability
Strategy: energy, carbon, waste, water and biodiversity. These include:
• Scope 1 and 2 emissions
• Total emissions per 100m2 build
• Total energy consumed by source
• Waste generated per 100m2 build
• % of waste diverted from landfill
• % of forest products used in our homes from verified and credibly certified sources
• % of materials and subcontractor sourced locally
• % of homes with domestic recycling facilities
• Water usage per 100m2 build
Disclose Scope 1, Scope
2, and if appropriate,
Scope 3 GHG emissions,
and the related risks.
Greenhouse Gas Emissions data for Scope 1 and 2 are detailed in page 104 of this report.
This disclosure includes all of the emission sources required under the Companies Act 2006
(Strategic Report and Directors’ Report) Regulations 2013 and is reported in line with the
Greenhouse Gas (GHG) Protocol: A Corporate Accounting and Reporting Standard.
Describe the targets used
by the organisation to
manage climate-related
risks and opportunities
and performance against
targets.
We are committed to reducing our environmental impact and we aim to continually reduce the
energy and water consumption, carbon emissions and waste generated from our operations and
to become environmentally and net-positive.
Our targets are shown below (set with 2017 as the baseline year):
• Reduction of the carbon intensity of our construction operations and offices by 10% by 2022
• Reduction of the water intensity of our construction operations and offices by 5% by 2022
• 95% + of construction waste diverted from landfill
• Reduction of our construction waste intensity by 10% by 2022
In addition, we are currently considering our methodology to calculate our Scope 3 emissions
and our approach to Science Based Targets.
By order of the Board
GRAHAM COPE
Company Secretary
Redrow plc
Registered no: 2877315
15 September 2020
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FINANCIAL STATEMENTS
Independent Auditors’ Report
To the Members of Redrow plc
1. Our opinion is unmodified
We have audited the financial statements of Redrow plc (“the
Company”) for the period ended 28 June 2020 which comprise
the Consolidated Income Statement, the Group and Company
Statement of Comprehensive Income, the Group and Company
Balance Sheets, the Group and Company Statement of Changes
in Equity, the Group and Company Statement of Cash Flows and
the related notes, including the accounting policies on pages
130-135.
In our opinion:
–
–
–
–
the financial statements give a true and fair view of the
state of the Group’s and of the parent Company’s affairs as
at 28 June 2020 and of the Group’s profit for the period then
ended;
the Group financial statements have been properly prepared
in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs as
adopted by the EU);
the parent Company financial statements have been
properly prepared in accordance with IFRSs as adopted by
the EU and as applied in accordance with the provisions of
the Companies Act 2006; and
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS
Regulation.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis
for our opinion. Our audit opinion is consistent with our report to
the audit committee.
We were first appointed as auditor by the audit committee on 13
November 2019. The period of total uninterrupted engagement
is for the one financial period ended 28 June 2020. We have
fulfilled our ethical responsibilities under, and we remain
independent of the Group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to
listed public interest entities. No non-audit services prohibited
by that standard were provided.
Overview
Materiality:
group financial
statements as a
whole
£15.4m
5% of normalised Group profit
before tax
Coverage
100% of Group profit before tax
Key audit matters
Audit risks
Cost of sales recognition and
carrying amount of both land
held for development and work
in progress
Valuation of defined benefit
obligation
Brexit
Event driven
Going concern
GOVERNANCE REPORT
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report
and the Group and parent Company financial statements in
accordance with applicable law and regulations.
RESPONSIBILITY STATEMENT OF THE DIRECTORS
IN RESPECT OF THE ANNUAL FINANCIAL REPORT
We, the Directors, confirm that to the best of our knowledge:
Company law requires the Directors to prepare Group and
parent Company financial statements for each financial year.
Under that law, they are required to prepare the Group
financial statements in accordance with International Financial
Reporting Standards as adopted by the European Union
(IFRSs as adopted by the EU) and applicable law and have
elected to prepare the parent Company financial statements
on the same basis.
Under company law, the Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and
parent Company and of their profit or loss for that period. In
preparing each of the Group and parent Company financial
statements, the directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable,
relevant and reliable;
• state whether they have been prepared in accordance with
IFRSs as adopted by the EU;
• the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit
or loss of the Company and the undertakings included in
the consolidation taken as a whole; and
• the Strategic Report includes a fair review of the
development and performance of the business and the
position of the issuer and the undertakings included in the
consolidation taken as a whole, together with a
description of the principal risks and uncertainties that
they face.
We consider the Annual Report, taken as a whole, is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position
and performance, business model and strategy.
The Directors of the Company who were in office during the
year and up to the date of signing the financial statements
were:
• assess the Group and parent Company’s ability to continue
John Tutte
Executive Chairman
as a going concern, disclosing, as applicable, matters
related to going concern; and
• use the going concern basis of accounting unless they
either intend to liquidate the Group or the parent Company
or to cease operations, or have no realistic alternative but
to do so.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain the
parent Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the parent
Company and enable them to ensure that its financial
statements comply with the Companies Act 2006. They are
responsible for such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud
or error, and have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the UK governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Matthew Pratt
Group Chief Executive
Barbara Richmond
Group Finance Director
Nick Hewson
Senior Independent Director and
Non-Executive Director
Sir Michael Lyons
Non-Executive Director
Vanda Murray
Non-Executive Director
Nicky Dulieu
Non-Executive Director
By order of the Board
GRAHAM COPE
Company Secretary
15 September 2020
Redrow plc
Redrow House
St. David’s Park
Flintshire
CH5 3RX
Redrow plc Annual Report 2020
118
119
The risk
Our response
Historical comparisons: For a sample of
completed sites, we performed a retrospective
review to compare the overall build cost budget
(including central infrastructure and development
costs) and sales forecasts to actual costs and
selling prices achieved to determine the accuracy
of site budgets and forecasts.
Test of details: We recalculated the write down
recorded on the London sites which the company
now plans to exit by comparing forecast sales
proceeds to carrying amount and used our
valuation specialist to assess the determination of
expected sales proceeds.
Assessing transparency: Assessing the
adequacy of the Group's disclosures about the
degree of estimation involved in calculating cost
of sales and carrying value of land and work in
progress.
FINANCIAL STATEMENTS
Independent Auditors’ Report continued
To the Members of Redrow plc
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below the key audit matters, in decreasing order of audit
significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as
required for public interest entities, our results from those procedures. These matters were addressed, and our results are based
on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and
in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on
these matters.
Cost of sales
recognition and
carrying amount
of both land
held for
development
and work in
progress.
Cost of sales
recognition and
carrying amount
of both land
held for
development
and work in
progress
Cost of sales
(£1,097 million;
2019: £1,608
million), carrying
amount of land
held for
development
(£1,538 million;
2019: £1,547
million) and work
in progress (£972
million; 2019:
£790 million)
Refer to page 65
(Audit Committee
Report), page
133 (accounting
policy) and
pages 153
(financial
disclosures).
The risk
Our response
Subjective estimates
Our procedures included:
The carrying value of land and work in progress is
determined by reference to a number of
estimates, which are subject to levels of
estimation uncertainty including the likelihood of
favourable planning applications, and forecasts of
future build costs and sales prices. Changes in
any of the key estimates could lead to a material
change in the carrying value of land and work in
progress.
Test of details: For a sample of undeveloped land
sites and capitalised pre development costs, we
corroborated explanations received from
management as to their planning status by
assessing underlying planning and legal
documents and compared the latest estimates of
site profitability to budget; to determine if any
provisions are required against the undeveloped
land bank.
For certain sites, typically large, multi-phased
sites or other sites where significant infrastructure
costs are incurred towards the latter stages of site
completion, cost of sales for completed sales
includes estimates of these future costs. The level
of estimation uncertainty can be material where
the future infrastructure requirements are large
and complex.
The effect of these matters is that as part of our
risk assessment we determined that the cost of
sales of £1,097 million and the carrying amount of
land held for development (£1,538 million) and
work in progress (£972 million) have a high
degree of estimation uncertainty, with a potential
range of reasonable outcomes greater than our
materiality for the financial statements as a whole.
Test of details: For a sample of sites which due to
either their size and/or complexity we considered
at higher risk of misstatement we:
–
–
compared the period end carrying value
recorded to that determined by the Quantity
Surveyor and performed a comparison to the
actual costs incurred to verify that any
abnormal costs or build variances incurred,
including those related to COVID 19
disruption, have been appropriately identified
and accounted for in the period.
For a sample of costs. we assessed the
accuracy of the site build cost budgets, which
are used by the company to both estimate the
net realisable value of WIP and calculate and
allocate cost of sale on sale of a unit, by
comparing the inputs to the budgets to
supporting documents such as invoices and
quotations.
Sector expertise: We used our own Quantity
surveyor specialist to challenge areas of risk
within the build cost forecasts, particularly in
respect of incomplete site-wide infrastructure and
development works, to assess whether the risk
was appropriately reflected in both forecast costs
and cost of sales for sold units.
Test of details: We identified low and negative
margin sites and assessed the completeness and
accuracy of related net realisable value provisions
recorded.
120
121
FINANCIAL STATEMENTS
Independent Auditors’ Report continued
To the Members of Redrow plc
The risk
Our response
The risk
Our response
Valuation of the
defined benefit
obligation
Group and
Company: (£151
million; 2019:
£130 million)
Refer to page 65
(Audit Committee
Report), page
134 (accounting
policy) and page
144 (financial
disclosures).
Subjective estimate
Our procedures included:
Small changes in the assumptions used to
determine the liabilities of The Redrow Staff
Pension scheme, in particular those relating to
price inflation rate, the discount rate and post
retirement mortality rates, can have a significant
impact on the valuation of the liabilities.
The effect of these matters is that, as part of our
risk assessment for audit planning purposes, we
determined that that valuation of defined benefit
obligation of £151 million had a high degree of
estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality
for the financial statements as a whole. The
financial statements (note 7e) disclose the
sensitivity estimated by the Group and Company.
–
–
–
Benchmarking Assumptions: We used our
actuarial specialists to challenge the key
assumptions applied in the calculation of the
liability, includingthose relating to price
inflation rate, the discount rate and post
retirement mortality rates against externally
derived market data;.
Assessing actuaries’ credentials: We
assessed the competence, independence,
and integrity of Group’s actuarial expert and
third party expert fund managers.
Assessing transparency: We considered the
adequacy of the Group’s disclosures relating
to thesensitivity of the obligation to the
assumptions.
Our results:
Overall, the results of our testing were
satisfactory and we consider the carrying amount
of defined benefit obligation to be acceptable.
Going concern
including the
impact of
Covid-19
Refer to page 47
(Going Concern
and Viability
statement), page
65 (Audit
Committee),
page 111
(Directors’
Report) page
130 (accounting
policy) and page
153 (financial
disclosures).
Disclosure quality
Our procedures included:
The financial statements explain how the Board
has formed a judgement that it is appropriate to
adopt the going concern basis of preparation for
the Group and parent Company.
That judgement is based on an evaluation of the
inherent risks to the Group’s and parent
Company’s business model and how those risks
might affect the Group’s and parent Company’s
financial resources or ability to continue
operations over a period of at least a year from
the date of approval of the financial statements.
The risk most likely to adversely affect the
Group’s and Company’s available financial
resources over this period was the impact of
Coronavirus on the economy as a whole leading
to a significant decrease in revenue and cash
inflows.
There are also less predictable but realistic
second order impacts, such as the impact of
Brexit on the supply of building materials, demand
for housing and cost price inflation, which could
result in a reduction of available financial
resources.
The risk for our audit was whether or not those
risks were such that they amounted to a material
uncertainty that may have cast significant doubt
about the ability to continue as a going concern.
Had they been such, then that fact would have
been required to have been disclosed.
–
–
–
–
–
Funding assessment: We assessed whether
the directors’ view of the availability of
borrowings and covenant terms is consistent
with our understanding of the facility
agreement and remains appropriate for the
Group’s requirements.
Test of detail: We evaluated the models the
directors used in their assessment and
whether the assumptions used are realistic,
achievable and consistent with external
information such as industry and economic
forecasts. We also assessed assumptions
against post period end actual performance,
our understanding of the sector as well as any
other matters identified in the audit.
Historical comparisons: We evaluated the
reliability of the Group’s cash flow forecasts
and average selling prices by assessing
previous forecasts made by the Group against
actual performance.
Sensitivity analysis: We considered
sensitivities over the level of available
financial resources and headroom over debt
covenants indicated by the Group’s financial
forecasts taking account of reasonably
possible (but not unrealistic) adverse effects
that could arise from the rapidly changing and
uncertain Coronavirus situation.
Assessing transparency: We assessed the
completeness and accuracy of the matters
covered in the going concern disclosure with
reference to the outcome of the procedures
detailed above.
Our results:
–
We found the going concern disclosure
without any material uncertainty to be
acceptable.
122
123
FINANCIAL STATEMENTS
Independent Auditors’ Report continued
To the Members of Redrow plc
3. Our application of materiality and an overview of
the scope of our audit
Materiality for the Group financial statements as a whole was set
at £15.4 million determined with reference to a benchmark of
profit before tax, normalised by averaging over the last three
years due to impact of COVID-19 on the financial performance in
the period to 28 June 2020, of which it represents 5%. The
averaging of the benchmark as a result of the impact of
COVID-19 reflected a revision to our initial materiality set for
planning purposes, which was based on current year forecast
profit before tax.
Materiality for the parent company financial statements as a
whole was set at £15.3 million, determined with reference to a
benchmark of net assets, of which it represents 1.6%.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £0.77 million, in
addition to other identified misstatements that warranted
reporting on qualitative grounds.
Of the group’s 55 reporting components, we subjected 3 to full
scope audits for group purposes.
The components within the scope of our work accounted for the
percentages illustrated below.
Normalised Profit before tax
£308.7m
Group Materiality
£15.4m
£ 15.4m
Whole financial
statements materiality
£ 15.0m
Range of materiality at 3
components (£0.7m-£15.0m)
n Normalised Profit before tax
n Group materiality
£0.77m
Misstatements reported to
the audit committee
Group revenue
Group profit before tax
Group total assets
0
0
5%
2020: 100%
2020: 100%
2020: 95%
100%
100%
95%
n Full scope for group audit purposes 2020 n Residual component
4. We have nothing to report on going concern
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the
Company or the Group or to cease their operations, and as they
have concluded that the Company’s and the Group’s financial
position means that this is realistic. They have also concluded
that there are no material uncertainties that could have cast
significant doubt over their ability to continue as a going concern
for at least a year from the date of approval of the financial
statements (“the going concern period”).
Our responsibility is to conclude on the appropriateness of the
Directors’ conclusions and, had there been a material
uncertainty related to going concern, to make reference to that
in this audit report. However, as we cannot predict all future
events or conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that were
reasonable at the time they were made, the absence of
reference to a material uncertainty in this auditor's report is not a
guarantee that the Group and the Company will continue in
operation.
We identified going concern as a key audit matter (see section 2
of this report). Based on the work described in our response to
that key audit matter, we are required to report to you if:
–
we have anything material to add or draw attention to in
relation to the directors’ statement on page 130 of the
financial statements on the use of the going concern basis of
accounting with no material uncertainties that may cast
significant doubt over the Group and parent Company’s use
of that basis for a period of at least twelve months from the
date of approval of the financial statements; or
–
if the same statement is materially inconsistent with our audit
knowledge.
We have nothing to report in these respects.
5. We have nothing to report on the other information
in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not
cover the other information and, accordingly, we do not express
an audit opinion or, except as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in doing
so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified
material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
–
–
we have not identified material misstatements in the
strategic report and the directors’ report;
in our opinion the information given in those reports for the
financial period is consistent with the financial statements;
and
–
in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw
attention to in relation to:
–
–
–
the directors’ confirmation within the viability statement page
47 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
and liquidity;
the risk management report describing these risks and
explaining how they are being managed and mitigated; and
the directors’ explanation in the viability statement of how
they have assessed the prospects of the Group, over what
period they have done so and why they considered that
period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities as they
fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
Under the Listing Rules we are required to review the viability
statement. We have nothing to report in this respect.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent
with judgments that were reasonable at the time they were
made, the absence of anything to report on these statements is
not a guarantee as to the Group’s and parent Company’s
longer-term viability.
124
125
FINANCIAL STATEMENTS
Independent Auditors’ Report continued
To the Members of Redrow plc
Corporate governance disclosures
We are required to report to you if:
7. Respective responsibilities
Directors’ responsibilities
–
we have identified material inconsistencies between the
knowledge we acquired during our financial statements
audit and the directors’ statement that they consider that the
annual report and financial statements taken as a whole is
fair, balanced and understandable and provides the
information necessary for shareholders to assess the
Group’s position and performance, business model and
strategy; or
–
the section of the annual report describing the work of the
Audit Committee does not appropriately address matters
communicated by us to the Audit Committee;
We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the
eleven provisions of the UK Corporate Governance Code
specified by the Listing Rules for our review.
We have nothing to report in these respects.
6. We have nothing to report on the other matters on
which we are required to report by exception
Under the Companies Act 2006, we are required to report to
you if, in our opinion:
–
–
–
–
adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
the parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by
law are not made; or
we have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects.
As explained more fully in their statement set out on page 116,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing
the Group and parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting
unless they either intend to liquidate the Group or the parent
Company or to cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or other
irregularities (see below), or error, and to issue our opinion in an
auditor’s report. Reasonable assurance is a high level of
assurance, but does not guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud,
other irregularities or error and are considered material if,
individually or in aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis
of the financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience,
and through discussion with the directors and other
management (as required by auditing standards), and from
inspection of the group’s regulatory and legal correspondence
and discussed with the directors and other management the
policies and procedures regarding compliance with laws and
regulations. We communicated identified laws and regulations
throughout our team and remained alert to any indications of
non-compliance throughout the audit. The potential effect of
these laws and regulations on the financial statements varies
considerably.
Firstly, the group is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation (including related companies legislation), distributable
profits legislation, and taxation legislation. We assessed the
extent of compliance with these laws and regulations as part of
our procedures on the related financial statement items.
8. The purpose of our audit work and to whom we owe
our responsibilities
This report is made solely to the Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and
the Company’s members, as a body, for our audit work, for this
report, or for the opinions we have formed.
Nick Plumb (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
8 Princes Parade
Liverpool
L3 1QH
16 September 2020
Secondly, the group is subject to many other laws and
regulations where the consequences of non-compliance could
have a material effect on amounts or disclosures in the financial
statements, for instance through the imposition of fines or
litigation. We identified the following areas as those most likely
to have such an effect: health and safety and other relevant
construction legislation as well as consumer rights legislation.
Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of
the directors and other management and inspection of
regulatory and legal correspondence, if any. Through these
procedures, we became aware of actual or suspected non-
compliance and considered the effect as part of our procedures
on the related financial statement items.The identified actual or
suspected non-compliance was not sufficiently significant to our
audit to result in our response being identified as a key audit
matter.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-
compliance with laws and regulations (irregularities) is from the
events and transactions reflected in the financial statements, the
less likely the inherently limited procedures required by auditing
standards would identify it. In addition, as with any audit, there
remained a higher risk of non-detection of irregularities, as these
may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. We are
not responsible for preventing non-compliance and cannot be
expected to detect non-compliance with all laws and
regulations.
126
FINANCIAL STATEMENTS
Consolidated Income Statement
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
52 weeks
ended
28 June
2020
£m
1,339
(1,097)
242
(94)
148
2
(10)
(8)
–
140
(27)
113
32.9p
32.8p
52 weeks
ended
30 June
2019
£m
2,112
(1,608)
504
(93)
411
3
(8)
(5)
–
406
(77)
329
92.3p
92.0p
Note
2
2
3
3
11
4
6
6
FINANCIAL STATEMENTS
Statement of Comprehensive Income
Profit for the year
Other comprehensive income/(expense)
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 income/(expense) for the year net of tax
Total comprehensive income for the year
Group
Company
52 weeks
ended
28 June
2020
£m
52 weeks
ended
30 June
2019
£m
52 weeks
ended
28 June
2020
£m
113
329
1
–
1
(7)
1
(6)
114
323
2
1
–
1
3
52 weeks
ended
30 June
2019
£m
486
(7)
1
(6)
480
Note
7e
19
FINANCIAL STATEMENTS
Balance Sheets
Assets
Intangible assets
Property, plant and equipment
Lease right of use assets
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 2019/2 July 2018
Profit for the year
Other comprehensive income/(expense) for the year
Dividend paid
Movement in LTIP/SAYE
Retained earnings at 28 June 2020/30 June 2019
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
Group
Company
As at
28 June
2020
£m
As at
30 June
2019
£m
As at
28 June
2020
£m
As at
30 June
2019
£m
Note
8
9
10
11
12
7e
13
14
13
15f
5
19
18
19
19
15
16
12
17
16
2
19
7
9
1
22
–
60
2
16
–
6
4
18
9
55
2,585
2,404
38
7
44
2,674
2,734
1,481
113
1
(72)
(1)
1,522
37
59
8
48
–
204
2,656
2,711
1,379
329
(6)
(218)
(3)
1,481
37
59
8
1,626
1,585
170
120
5
8
303
805
–
805
1,108
2,734
80
167
4
8
259
833
34
867
1,126
2,711
–
–
–
–
–
22
774
796
–
300
1
41
342
1,138
908
2
1
(72)
–
839
37
59
7
942
170
–
–
–
170
26
–
26
196
–
–
–
–
–
18
–
18
–
890
1
212
1,103
1,121
646
486
(6)
(218)
–
908
37
59
7
1,011
80
–
–
–
80
30
–
30
110
1,138
1,121
The accompanying notes form an integral part of the financial statements.
The financial statements on pages 126 to 161 were approved by the Board of Directors on 15 September 2020 and were signed
on its behalf by:
JOHN TUTTE
Director
BARBARA RICHMOND
Director
Redrow plc Registered Number 2877315
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128
FINANCIAL STATEMENTS
Statement of Changes in Equity
FINANCIAL STATEMENTS
Statement of Cash Flows
Profit for the year
Other comprehensive income/(expense) for the year
Total comprehensive income relating to the year (net)
Dividend paid
Movement in LTIP/SAYE
Net increase/(decrease) in equity
Opening equity
Closing equity
Note
5, 19
19
Group
Company
52 weeks
ended
28 June
2020
£m
52 weeks
ended
30 June
2019
£m
52 weeks
ended
28 June
2020
£m
52 weeks
ended
30 June
2019
£m
113
1
114
(72)
(1)
41
1,585
1,626
329
(6)
323
(218)
(3)
102
1,483
1,585
2
1
3
(72)
–
(69)
1,011
942
486
(6)
480
(218)
–
262
749
1,011
The above items are presented net of tax where appropriate. See note 4 and note 12 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
The accompanying notes form an integral part of the financial statements.
2020
£m
2
111
113
2019
£m
(14)
343
329
Cash flows from operating activities
Profit for the year
Depreciation and amortisation
Financial income
Financial costs
Income tax expense
Dividends from subsidiaries
Adjustment for non-cash items
Decrease/(increase) in trade and other receivables
Increase in inventories
(Decrease)/increase in trade and other payables
(Decrease) in provisions
Cash (outflow)/inflow generated from operations
Interest paid
Tax paid
Net cash (outflow)/inflow from operating activities
Cash flows from investing activities
Acquisition of software, property, plant and equipment
Interest received
Payments to joint ventures
Net cash (outflow)/inflow from investing activities
Cash flows from financing activities
Issue of bank borrowings
Repayment of bank borrowings
Payment of lease liabilities
Purchase of own shares
Dividend paid
Net cash (outflow)/inflow from financing activities
(Decrease)/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
Group
Company
52 weeks
ended
28 June
2020
£m
52 weeks
ended
30 June
2019
£m
52 weeks
ended
28 June
2020
£m
52 weeks
ended
30 June
2019
£m
Note
113
7
(2)
10
27
–
1
20
(181)
(75)
–
(80)
(5)
(64)
(149)
(7)
–
(3)
(10)
170
(80)
(3)
(16)
(72)
(1)
(160)
204
44
329
3
(3)
8
77
–
(7)
(6)
(113)
84
(1)
371
(2)
(77)
292
(4)
1
–
(3)
80
(5)
–
(10)
(218)
(153)
136
68
204
2
–
(4)
3
–
–
(3)
(184)
–
(4)
–
(190)
(3)
–
(193)
–
4
–
4
170
(80)
–
–
(72)
18
(171)
212
41
486
–
(1)
13
(4)
(500)
(2)
285
–
–
–
277
(12)
–
265
–
1
–
1
80
(5)
–
–
(218)
(143)
123
89
212
5
20
The accompanying notes form an integral part of the financial statements.
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130
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).
Going concern
The financial statements have been prepared on a going
concern basis which the Directors consider to be appropriate
for the reasons outlined below.
As a precaution against an extended lockdown, the Group
increased its available banking facilities by £100m in April
2020. As a result, the Group has a £350m Revolving Credit
Facility (RCF) (2019: £250m) provided by an established
syndicate of six banks being Barclays Bank PLC, Lloyds Bank
Plc, The Royal Bank of Scotland Plc, Santander UK PLC, HSBC
UK Bank PLC and Svenska Handelsbanken AB (PUBL). This
expires in December 2022 and is a committed unsecured
facility. No change to the RCF covenants was made as a result
of the increase to £350m. As at 15 September 2020, £260m of
this facility was undrawn. It is likely that the RCF will be
renewed prior to its expiry in December 2022.
In addition the Group has a further £13m of committed,
unsecured facilities also expiring in December 2022 and £3m
of unsecured, uncommitted facilities.
The Group also gained eligibility as an issuer for the
Government’s COVID Corporate Funding Facility (CCFF) with
an issuer limit of £300m. Given the timely return to work and
the effectiveness of measures to protect its cash flow, the
Group has not used the CCFF and our forecasts do not assume
the utilisation of this facility.
In the interests of cash conservation the Board took the
decision not to pay the interim dividend due to be paid in April
2020 and no final dividend for financial year 2020 will be paid.
The Directors have prepared forecasts including cashflow
forecasts for a period of 26 months from the date of approval
of these financial statements to 30 December 2022. These
forecasts indicate that the Group will have sufficient funds to
meet its liabilities as they fall due, taking into account the
following severe but plausible downside assumptions:
• A 20% price reduction on all unexchanged private legal
completions for FY21 and a 10% price reduction on all
unexchanged social legal completions for FY21;
• A 10% price reduction on all unexchanged private legal
completions for FY22 and a 5% price reduction on all
unexchanged social legal completions for FY22;
• FY23 legal completions at May 2020 budgeted prices; and
• A reduction in sales rate to 0.4 per budgeted active outlet
per week from July 2020 to Sept 2021, representing a 43%
reduction from average rates over the last three years.
These downside assumptions reflect the further potential
impact of COVID 19 being increased economic uncertainty,
further Government lockdown restrictions and increasing rates
of unemployment and consumer confidence levels.
Allowing for the above downside scenario, the model shows
the Group has adequate levels of liquidity from its committed
facilities and complies with all its banking covenants
throughout the forecast period. The Directors therefore
consider that the Group has adequate resources in place for
the forecast period and have therefore adopted the going
concern basis of accounting in preparing these financial
statements.
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
and apart from a change in accounting policy in respect of
Inventories. Inventories were previously stated net of cash on
account (payments on account from social and private rented
sector customers). These payments are now disclosed in Trade
and Other payables and the 2019 comparatives have been
restated.
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 2019:
IFRS 16 ‘LEASES’
• IFRS 16 ‘ Leases’ became effective for accounting periods
beginning on or after 1 January 2019. IFRS 16 requires
lessees to recognise a lease liability reflecting future lease
payments and a ‘right of use asset’ for virtually all lease
contracts. 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 applied IFRS 16 using the
modified retrospective approach and therefore the
comparative information has not been restated and
continues to be reported under IAS 17. The right of use asset
at the date of transition was equal to the lease liability of
£8m.
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.
b) The following standards have been issued but have
not been applied by the Group in these financial
statements. These amendments to standards and
interpretations had no significant impact on the
financial statements:
• IFRIC 23 ‘Uncertainty over Income Tax Treatments’
• Amendments to IFRS 4 ‘Insurance Contracts’
• Amendments to IFRS 9 ‘Financial Instruments’
• Amendments to IAS 28 ‘Investments in Associates and Joint
Ventures’
• Amendments to IAS 19 ‘Plan Amendment, Curtailment or
Settlement’
c) The following new standards and amendments to
standards have been issued but are not effective for
the financial year beginning 1 July 2019 and have not
been early adopted:
• Amendments to IFRS 3 ‘Definition of a Business’
• Amendments to IAS 1 and IAS 8 ‘Definition of Material’
• IFRS 17 ‘Insurance Contracts‘
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.
• Amendments to IAS 1 ‘Classification of Liabilities as Current
b. Interests in joint ventures
or Non-current’
• Amendments to IFRS 9, IAS 39 and IFRS 17 ‘Interest Rate
Benchmark Reform’
• Various standards Amendments to References to the
Conceptual Framework in IFRS Standards
The amendments to standards and interpretations noted above
are expected to have no significant impact on the financial
statements.
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 28 June 2020
(2019: 30 June 2019).
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.
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132
FINANCIAL STATEMENTS
Accounting Policies continued
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 cash and non-cash incentives. 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.
Certain sales of social housing units comprise two separate
contracts, one for the sale of land (once foundations are in
place, otherwise known as ‘Golden brick’) and the other on
completion of the buildings. There is a judgement as to
whether a) the sale of land is a separate performance
obligation for the purposes of revenue recognition and b)
whether revenue should be recognised over time or on a point
in time basis. The Group has determined that the land and
building contracts comprise one performance obligation which
is recognised at a point in time, being completion of the social
housing units. In making this judgement the Directors note that
this is a prudent basis of revenue recognition but mindful of
evolving practice in the sector will keep this policy under
review. If the land was identified as a separate performance
obligation, the construction of the building on that land would
meet the criteria for revenue recognition over time,
accelerating revenue and related margin.
The impact of treating the land and buildings as separate
performance obligations and/or recognising revenue on an
over time basis would not be material in either the current or
prior year.
Profit is recognised on legal completion.
PART EXCHANGE PROPERTIES
Part exchange is consistently a de minimis proportion of our
business. It is incidental to our main operation and hence this is
shown on a net expense basis within cost of sales.
SEGMENTAL REPORTING
The main operation of the Group is focused on housebuilding.
The Executive Management Team (who are the Chief
Operating Decision Maker as defined in IFRS 8 'Operating
Segments') regularly reviews the Group's performance and
balance sheet position at both a consolidated and divisional
level. Each division is an operating segment as defined by IFRS
8 in that the Executive Management Team evaluates
performance and allocates resources at this level.
All the divisions have been aggregated into one reporting
segment on the basis that they all operate entirely within the
United Kingdom and share similar economic characteristics
including:
• sales demand subject to the same macro economic factors
eg. mortgage availability and Government policy;
• debt is raised centrally and the cost of capital is the same at
each division; and
• national supply agreements for key inputs such as materials
are negotiated centrally and in place across the Group
Within the Operating Review, the Group has provided
information on land holdings (page 14) and homes revenue
proportions (page 19) by geographical area being North,
Central, South and Greater London. The Executive
Management Team do not consider these to be separate
reportable segments because, as stated above, they review
the whole operations at a consolidated and divisional level
when assessing performance and allocating resources.
EXCEPTIONAL ITEMS
Exceptional items are those which in the opinion of the
Board, are material by size or nature, non-recurring and
of such significance that they require separate disclosure.
NET FINANCING COSTS
Interest income is recognised on a time apportioned basis by
reference to the principal outstanding and the effective interest
rate. Interest costs are recognised in the income statement on
an accruals basis in the period in which they are incurred.
INCOME AND DEFERRED TAX
Income tax comprises current tax and deferred tax.
Current tax is based on taxable profits for the year and any
appropriate adjustment to tax payable in respect of prior years.
Taxable profit differs from profit before tax as shown in the
income statement as it excludes income or expenditure items
which are never chargeable or allowable for tax or which are
chargeable or deductible in other accounting periods.
Deferred tax is provided in full, using the balance sheet liability
method, on temporary differences arising between the
carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in
the calculation of taxable profit.
Deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Deferred tax
liabilities are recognised for all temporary differences. Deferred
tax is calculated at the rates enacted at the balance sheet date.
Deferred tax is credited or charged in the income statement,
consolidated statement of comprehensive income, or retained
earnings as appropriate.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the end
of the lease term.
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 lease liability is initially measured at the present value of
the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or,
if that rate cannot be readily determined, the Group’s weighted
average incremental borrowing rate. The lease term comprises
the non-cancellable period of the contract, together with
periods covered by an option to extend the lease where the
Group is reasonably certain to exercise that option. The lease
liability is measured by increasing the carrying amount to
reflect interest on the lease liability, and reducing it by the
lease payments made. The lease liability is remeasured when
the Group changes its assessment of whether it will exercise
an extension or termination option.
The Group has elected not to recognise right-of-use assets
and lease liabilities for short-term leases that have a lease term
of 12 months or less and leases of low value assets. The Group
recognises the lease payments associated with these leases
as an expense on a straight-line basis over the lease term.
The Company presents right-of-use assets separately as
‘Lease right of use assets’ and lease liabilities as ‘Trade and
other payables’ in the statement of financial position.
INVENTORIES
Inventories are stated at the lower of cost and net realisable
value.
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
At the inception of a contract, the Group assesses whether a
contract is, or contains, a lease.
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial amount of
the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs
incurred less any lease incentives received.
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. Inventories (excluding land) are at
standard cost. Abnormal costs are expensed to cost of sales as
incurred.
Land includes refundable land contract exchange deposits.
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.
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Redrow plc Annual Report 2020
obligation is determined using the projected unit credit method
on an annual basis by an independent scheme actuary.
of hedging is maintained to manage interest rate risk in
respect of borrowings.
Deposits received in advance are typically held for a period of
up to 18 months before the associated performance obligations
are satisfied and the revenue is recognised.
134
FINANCIAL STATEMENTS
Accounting Policies continued
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.
FORWARD LAND
The Group enters into a number of arrangements for the
purchase of land. Where such arrangements are conditional
on a future event the Group recognises option fees and other
initial costs as they fall due, which are included initially in
inventory and subject to regular impairment analysis, but
does not recognise the full cost of the land until the option to
purchase the land has been executed. Where the Group
enters into an unconditional contract on deferred payment
terms the land purchased is recognised at contract inception
together with a related liability, discounted at an appropriate
rate. The related land creditors are shown as due within or
after one year in line with the contractual payment terms, as
the Directors believe this information is important in assessing
the Group’s liquidity and timing of future cash flows and debt
profile. In line with industry practice in the cash flow
statement the settlement of land creditors is shown as an
operating cash flow as the Directors believe the financing of
land purchases is integral to the Group’s management of
working capital.
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
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, having reassessed any
appropriate service and non-marked performance conditions.
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.
Deferred payments arising from land creditors are considered
as financing rather than operational in nature. However, in line
with industry practice, the Group treats cash paid in respect of
land, including land creditors, as operating rather than
financing cashflows.
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
The policy prohibits any trading in derivative financial
instruments or their use for speculative purposes.
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
at the point at which there is a legal obligation to make a
distribution to shareholders.
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, where
considered to be receivable within the Group's normal
operating cycle of c4 years after the balance sheet date;
otherwise they are classified as non-current assets. Loans and
receivables include ‘trade receivables’ and ‘other receivables’ in
the balance sheet.
Trade receivables are held at discounted present value less
any impairment. The amount is then increased to settlement
value over the settlement period via financing income.
d. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits. Bank overdrafts that are repayable on demand,
forming an integral part of the Group’s cash management
are included as a component of cash and cash equivalents
for the purpose of the statement of cash flows.
e. Borrowings and trade payables
Interest bearing borrowings and trade payables are recorded
when the proceeds are received, net of transaction costs
incurred and subsequently at amortised cost. Any difference
between the proceeds, net of transaction costs and the
redemption value is recognised in the income statement
over the period of the borrowings.
f. Deposits and payments on account
New property deposits from private customers are held within
Trade and Other payables until the legal completion of the
related property when revenue is recognised or the rescission
of the sale contract.
Payments on account from social and private rented sector
(PRS) customers are held within Trade and Other payables until
legal completion of the related properties when revenue is
recognised.
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Redrow plc Annual Report 2020
136
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 other than the disclosure judgement outlined below.
As noted in the accounting policy, in line with industry practice, the Group treats cash paid in respect of land, including the
settlement of land creditors, as operating rather than financing cashflows. This is a judgement as, whilst the repayment profile of
land creditors is important in assessing the Group’s liquidity and timing of future cash outflows, the Directors believe that
settlement of the land creditors is an operating cashflow on the basis that land purchases are integral to the Group’s working
capital management.
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
Management considers the key sources of estimation uncertainty relate to:
b. Operating profit
Carrying value of inventories and cost of sales recognition
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 thereby
impacting current year cost of sales and in future periods. A full review of the net realisable value of inventories was undertaken
by the Group as at 28 June 2020 and this requires Management to use its judgement and experience in assessing any
impairment provisions that may be required.
If there are significant movements in UK house prices or development costs compared to Managements' expectations then
further impairments or reversal of impairments already made may be needed.
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. A sensitivity analysis in included on page 147.
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.
Operating profit is stated after charging:
Inventories expensed in the year
Amortisation
Depreciation – Property, plant and equipment
Depreciation – Lease right of use assets
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:
(i)
(ii)
fees payable for the audit of parent company and consolidated financial statements £50,000 (2019: £30,000) and fees
payable for the audit of the Company’s subsidiaries pursuant to legislation £150,000 (2019: £147,750).
Auditors’ remuneration for other services comprised £36,895 (2019: £20,000) in respect of an independent review of the half-
yearly financial statements (Audit related assurance services), £nil (2019: £9,100) in respect of iXBRL tagging (Taxation compliance
services) and £nil (2019: £1,130) in respect of ‘PwC Inform’, an on-line technical accounting guide (other services).
Amounts receivable by the Group's auditor in respect of pension services performed for the pension trustees is £40k
(2019: £24k).
The 2020 ratio of non-audit fees to audit fees is 1:5.42 (2019: 1:5.88).
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2020
£m
1,332
7
1,339
2019
£m
2,091
21
2,112
Note
2020
£m
2019
£m
14
8
9
1,027
1,526
–
4
3
–
–
–
–
3
–
1
–
–
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Redrow plc Annual Report 2020
138
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 in respect of current year
Adjustment in respect of prior years
Current tax charge
Deferred tax
Origination and reversal of temporary differences
Adjustment in respect of prior years
Deferred tax charge
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% (2019: 19.0%)
Tax charge for the year
Deferred tax recognised directly in equity
Relating to pension scheme
Current income tax charge in the Company is £1m (2019: credit of £3m).
Information on the impact of future tax rate changes is included in note 12.
5. DIVIDENDS
The following dividends were paid by the Group:
Prior year final dividend per share of 20.5p (2019: 19.0p); Current year interim dividend
per share of nil pence (2019: 10.0p)
B share dividend nil pence (2019: 30.15p)
2020
£m
2019
£m
(5)
(5)
(10)
2
2
(8)
(2)
(6)
(8)
3
3
(5)
2020
£m
2019
£m
27
(4)
23
1
3
4
27
140
27
27
–
–
2020
£m
72
–
72
77
–
77
–
–
–
77
406
77
77
(1)
(1)
2019
£m
107
111
218
6. EARNINGS PER ORDINARY SHARE
The basic earnings per share calculation for the 52 weeks ended 28 June 2020 is based on the weighted average number of
shares in issue during the period of 343m (2019: 356m) excluding those held in trust under the Redrow Long Term Incentive Plan
(9m shares (2019: 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 52 weeks ended 28 June 2020
Basic earnings per share
Effect of share options and SAYE
Diluted earnings per share
For the 52 weeks ended 30 June 2019
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
113
–
113
343
2
345
Per share
pence
32.9
(0.1)
32.8
Earnings
£m
Number
of shares
millions
Per share
pence
329
–
329
356
2
358
92.3
(0.3)
92.0
Group
Company
2020
£m
104
15
10
5
134
2019
£m
109
15
10
7
141
2020
£m
2019
£m
3
1
–
–
4
3
1
–
1
5
Group
Company
2020
Number
946
1,418
2,364
2019
Number
2020
Number
2019
Number
896
1,408
2,304
8
–
8
8
–
8
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2020
140
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
2020
£m
4
1
5
2019
£m
5
2
7
Detailed disclosure of Directors’ emoluments and interests in shares are included in the Directors’ Remuneration Report on
pages 78 to 100, 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
2020
791,921
2019
712,217
1 January 2020
1 January 2019
£2.17
£6.18
£4.94
£2.03
£5.78
£4.62
3/5 years
3/5 years
3.38%
1.5%
3.38%
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 11 September 2019 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
2020
456,376
2019
335,604
11 September 2019 10 September 2018
£5.945
£5.945
£0.00
N/A*
3 years
N/A
N/A*
£5.97
£5.97
£0.00
N/A†
3 years
3.38%
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 11 September 2019 comprises £5.945 in respect of non-market
based performance conditions.
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.
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
2020
Tranche 1
488,481
2020
Tranche 2
488,611
2019
Tranche 1
575,210
2019
Tranche 2
575,349
Date of grant
11 September 2019 11 September 2019 10 September 2018 10 September 2018
Fair value at the measurement date
Share price
Exercise price
Expected volatility
Option life
Expected dividend yield
Risk free interest rate
£5.945
£5.945
£0.00
N/A*
1 year
N/A
N/A*
£5.945
£5.945
£0.00
N/A*
2 years
N/A
N/A*
£5.97
£5.97
£0.00
N/A†
1 year
N/A
N/A†
£5.97
£5.97
£0.00
N/A†
2 years
N/A
N/A†
†
For nil-cost awards not subject to a market based condition, volatility and risk free rate are not applicable.
141
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2020
142
7. EMPLOYEES CONTINUED
d. Share-based payments continued
Share options outstanding
The following share options were outstanding at 28 June 2020:
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 2016
Long Term Share Incentive 2017
Long Term Share Incentive 2018
Long Term Share Incentive 2019
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
Deferred Bonus Incentive 2016 – Tranche 1
Deferred Bonus Incentive 2016 – Tranche 2
Deferred Bonus Incentive 2017 – Tranche 1
Deferred Bonus Incentive 2017 – Tranche 2
Deferred Bonus Incentive 2018 – Tranche 1
Date of grant
Number
of options
2020
Number
of options
2019
Exercise
price
12 September 2016
–
15 November 2017
278,973
308,714
321,012
10 September 2018
291,354
335,604
11 September 2019
434,929
23 October 2012
23 October 2012
24 September 2013
24 September 2013
8 September 2014
8 September 2014
14 September 2015
14 September 2015
12 September 2016
12 September 2016
11 September 2017
11 September 2017
10 September 2018
4,656
4,656
4,642
4,642
3,615
3,615
3,089
3,090
16,780
19,318
18,553
40,249
61,991
–
4,656
4,656
4,642
4,642
3,615
10,133
18,055
18,059
45,774
59,868
56,651
378,972
554,139
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£2.21
£3.70
£3.20
£4.90
£4.62
£4.94
Deferred Bonus Incentive 2018 – Tranche 2
10 September 2018
418,050
554,270
Deferred Bonus Incentive 2019 – Tranche 1
Deferred Bonus Incentive 2019 – Tranche 2
Save As You Earn
Save As You Earn
Save As You Earn
Save As You Earn
Save As You Earn
Save As You Earn
11 September 2019
11 September 2019
1 January 2015
1 January 2016
1 January 2017
419,794
419,904
–
55,899
93,139
1 January 2018
533,938
1 January 2019
510,860
–
–
137,678
85,540
768,706
635,764
665,318
1 January 2020
688,326
–
The total share options outstanding at 28 June 2020 under the LTIP, Deferred Bonus Incentive Plan and the Save As You Earn
schemes represent 1.2% of the issued share capital (2019: 1.4%).
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
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
2020
Weighted
average
exercise price
2020
Number
of options
2019
Weighted
average
exercise price
2019
965,330
(139,100)
(277,350)
456,376
1,005,256
–
1,718,132
(236,191)
(1,012,389)
977,092
1,446,644
204,572
2,293,006
(442,661)
(760,104)
791,921
1,882,162
16,927
–
–
–
–
–
–
–
–
–
–
–
–
£4.04
£4.51
£3.02
£4.94
£4.72
£3.20
805,536
–
(175,810)
335,604
965,330
–
1,847,474
(285,500)
(994,401)
1,150,559
1,718,132
230,751
2,334,500
(295,938)
(457,773)
712,217
2,293,006
12,604
–
–
–
–
–
–
–
–
–
–
–
–
£3.66
£4.08
£2.98
£4.62
£4.04
£3.70
The weighted average share price at the date of exercise of share options exercised during the year was £6.67 (2019: £6.07).
The options outstanding at 28 June 2020 had a range of exercise prices of £nil to £4.94 (2019: £nil to £4.90) and a weighted
average remaining contractual life of 5.6 years (2019: 5.3 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 £5m (2019: charge £7m).
143
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2020
144
7. EMPLOYEES CONTINUED
e. Retirement benefit schemes
The Redrow Staff Pension Scheme comprises of a defined benefit scheme. The Company also offers a defined contribution
scheme to employees. The defined benefit scheme was closed to new entrants from July 2006, having been closed to all but a
limited number of agreed new entrants from October 2001. The defined benefit scheme was closed to future accrual with effect
from 1 March 2012.
The Scheme operates within the frameworks of the applicable pension’s legislation and is regulated by the Pensions Regulator.
The Scheme is managed by a board of Trustees who act in line with legislation and the provisions set out within the Trust Deed
and Rules which underpin the day-to-day operation of the Scheme. The Trustees' overarching aim is to ensure that there are
sufficient monies available to pay members benefits when they fall due. The Trustees work in collaboration with the Company to
manage the risks that this aim might not be met.
The total pension charge for the year was £9m (2019: charge of £16m). A credit of £1.0m related to the defined benefit section of
the Scheme (2019: charge of £7m), with £nil being charged to the income statement (2019: charge of £nil) and a credit of £1m to
the statement of comprehensive income (2019: charge of £7m). The charge arising from the defined contribution section was
£10m (2019: £9m). There were no significant events during the year to report (i.e. plan amendments, curtailments or settlements).
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 28 June 2020 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 2021.
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
2020
n/a
2.9%
2.0%
1.6%
3.1%
2.3%
2019
n/a
3.1%
2.1%
2.3%
3.3%
2.3%
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.
On 11 March 2020, the Chancellor of the Exchequer and UK Statistics Authority jointly issued a consultation on changing the
Retail Price Index (RPI) formula. They intend to amend the RPI index to reflect the Consumer Price Index including Housing (CPIH).
We have assessed the likely outcome of the Consultation, which we believe to be that the RPI formula will change to be the same
as the CPIH formula, from 2030, and considered the inflation assumptions above in the light of this. As the CPI inflation
assumption is only of relevance to deferred members of the scheme whose average term to retirement is c10 years, we consider
it appropriate to maintain our current approach to deriving CPI.
7. EMPLOYEES CONTINUED
e. Retirement benefit schemes continued
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_2019 1.50% Long Term Trend (2019: SAPS CMI_2018 1.5% Long Term Trend)
The life expectancies from age 65 implied by these tables for typical members are:
Pensioner currently aged 65:
Male 22.0 years (2019: Male 21.9 years)
Future pensioner currently aged 40: Male 24.1 years (2019: Male 24.2 years)
Female 23.9 years (2019: Female 23.9 years)
Female 26.2 years (2019: Female 26.2 years)
It has been assumed that members take 80% of the maximum tax-free cash available to them at the point they retire via
commutation of their pension; this is based on the current commutation factors in use for the defined benefit scheme.
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
2020
£m
2020
£m
Quoted
market price in
active market
No quoted
market price in
active market
2019
£m
2019
£m
2020
£m
Total
Quoted
market price in
active market
No quoted
market price in
active market
2019
£m
Total
62
84
2
4
6
12
–
170
–
–
–
–
–
–
3
3
62
84
2
4
6
12
3
173
(151)
22
53
67
2
–
13
11
–
146
–
–
–
–
–
–
2
2
53
67
2
–
13
11
2
148
(130)
18
Equities
Debt instruments
Real estate
Investment funds
Other
Cash
Insurance policies
Total market value of assets
Present value of obligations
Surplus in the Scheme
The Scheme’s assets are invested in such a way so as to ensure that the assets are sufficient and appropriate to meet the
associated liabilities as they fall due. In selecting the assets, consideration is given to the nature of the liabilities and the
investment strategy of the Scheme includes an allocation to liability driven investments to mitigate the impacts of changes in
interest rates and inflation on both the assets and liabilities.
The defined benefit obligation can be approximately attributed to the scheme members as follows:
Deferred members
Pensioner members
2020
%
72
28
100
2019
%
71
29
100
All benefits are vested at 28 June 2020 (unchanged from 30 June 2019).
Following a High Court ruling on 26th October 2018, at the 2019 year-end the Company made an allowance within the defined
benefit obligation for the estimated liabilities associated with the requirement to provide equalised benefits to male and female
members in respect of Guaranteed Minimum Pensions (GMPs); otherwise known as ‘GMP Equalisation’. GMP Equalisation is an
issue that impacts all defined benefit schemes that were contracted out of the State additional second pension between 17 May
1990 and 5 April 1997. For the DB Scheme, the additional liability in respect of GMP Equalisation is broadly 0.5% of the defined
benefit obligation and continues to be included in this figure.
145
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T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
O
N
I
FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2020
146
7. EMPLOYEES CONTINUED
e. Retirement benefit schemes continued
The total amounts credited/(charged) against income in the year were as follows:
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 movements arising from changes in demographic assumptions
Actuarial movements arising from changes in financial assumptions
Group and Company
2020
£m
2019
£m
–
–
–
24
(1)
(22)
1
1
(1)
1
–
13
–
(20)
(7)
(7)
The amount included in the balance sheet arising from the surplus in respect of the Group’s defined benefit section is as follows:
Balance sheet surplus
At start of year
Amounts credited/(charged) against statement of comprehensive income
Employer contributions paid
At end of year
Changes in the present value of the defined benefit obligation:
At start of year
Past service cost
Interest expense
Benefit payments
Actuarial movements arising from changes in demographic assumptions
Actuarial movements arising from changes in financial assumptions
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
2020
£m
2019
£m
18
1
3
22
130
–
3
(5)
1
22
151
148
3
24
3
(5)
173
22
(7)
3
18
111
1
3
(5)
–
20
130
133
4
13
3
(5)
148
7. EMPLOYEES CONTINUED
e. Retirement benefit schemes continued
The Scheme rules permit the refund of any surplus to the Company with no restrictions. The surplus has therefore been
recognised in full in the Group and Company balance sheets and there is no requirement to restrict the surplus nor to recognise
any additional liability in respect of agreed deficit contributions.
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 144). 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 2 July 2018
Additions
At 30 June 2019
Additions
Disposals
At 28 June 2020
Accumulated amortisation
At 2 July 2018
Charge
At 30 June 2019
Charge
Disposals
At 28 June 2020
Net book value
At 28 June 2020
At 30 June 2019
At 1 July 2018
Approximate impact
2020
Approximate impact
2019
160.2
143.3
144.9
157.4
156.6
22.5
22.2
136.9
123.0
123.2
136.7
133.9
21.3
21.5
Goodwill
£m
Software
£m
Total
£m
1
–
1
–
–
1
–
–
–
–
–
–
1
1
1
3
–
3
–
(1)
2
2
–
2
–
(1)
1
1
1
1
4
–
4
–
(1)
3
2
–
2
–
(1)
1
2
2
2
147
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S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
O
N
I
FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2020
148
9. PROPERTY, PLANT AND EQUIPMENT
The Group
Cost
At 2 July 2018
Additions
At 30 June 2019
Additions
Disposals
At 28 June 2020
Accumulated depreciation
At 2 July 2018
Charge
At 30 June 2019
Charge
Disposals
At 28 June 2020
Net book value
At 28 June 2020
At 30 June 2019
At 1 July 2018
10. LEASE RIGHT OF USE ASSETS
The Group
Cost
Opening lease right of use asset recognised on adoption of IFRS 16
Additions
At 28 June 2020
Accumulated depreciation
At 1 July 2019
Charge
At 28 June 2020
Net book value
At 28 June 2020
At 30 June 2019
Freehold
property
£m
Plant and
machinery
£m
Fixtures
and fittings
£m
Total
£m
17
2
19
5
–
24
4
1
5
1
–
6
18
14
13
3
–
3
–
–
3
3
–
3
–
–
3
–
–
–
9
2
11
2
(2)
11
7
2
9
3
(2)
10
1
2
2
29
4
33
7
(2)
38
14
3
17
4
(2)
19
19
16
15
Property
£m
Photocopiers
£m
Vehicles
£m
Total
£m
4
–
4
–
1
1
3
–
1
–
1
–
–
–
1
–
3
2
5
–
2
2
3
–
8
2
10
–
3
3
7
–
10. LEASE RIGHT OF USE ASSETS CONTINUED
The Group continued
Lease liabilities
Maturity analysis - contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities at 28 June
On implementation of IFRS 16 leases, lease payment commitments are reported within trade and other payables.
Lease liabilities included in the statement of financial position at 28 June
Current
Non-current
Amounts recognised in profit or loss
Interest on lease liabilities
Amounts recognised in the statement of cashflows
Total cash outflow for leases
11. INVESTMENTS
a. Investments
Joint ventures
Group
Company
2020
£m
9
9
2019
£m
6
6
2020
£m
–
–
2020
£m
3
4
1
8
2020
£m
2
4
6
2020
£m
–
2020
£m
3
2019
£m
–
–
149
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S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
O
N
I
FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2020
150
11. 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
2020
£m
2019
£m
2020
£m
2019
£m
8
(3)
(5)
–
9
9
–
–
–
–
–
–
–
–
–
6
(2)
(2)
2
4
6
1
(1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(i)
£9m of the loans to joint ventures are secured (2019: £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.
11. INVESTMENTS CONTINUED
c. Investments in subsidiary undertakings continued
Subsidiaries
Name
HB (HDG) Limited
Redrow Homes Limited
Harrow Estates plc
Redrow Real Estate Limited
Redrow Regeneration plc
Redmira Limited †
HB (NW) Limited †
HB (LCS) Limited (i) †
HB (MID) Limited †
HB (SW) Limited †
HB (SWA) Limited †
HB (Y) Limited †
HB (ESTN) Limited †
HB (WM) Limited †
HB (SM) Limited †
HB (SN) Limited †
HB (WC) Limited †
HB (WX) Limited †
HB (EM) Limited †
HB (CD) Limited †
HB (GRPS) Limited †
HB (CPTS) Limited †
HB (SE) Limited †
HB (CSCT) Limited (i) †
HB (SC) Limited (i) †
Company
Number
1990709
1990710
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
151
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R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
c. Investments in subsidiary undertakings
At 1 July 2019 and 28 June 2020
Company
£m
–
12. 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:
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 28 June 2020
is shown on page 151. 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 dormant and exempt from audit.
All the subsidiaries registered office is Redrow House, St David’s Park, Flintshire, CH5 3RX apart from those marked (i) and (ii)
whose registered offices are as follows:
(i)
c/o TLT LLP, 140 West George Street, Glasgow, G2 2HG
(ii)
13 Castle Street, St. Helier, Jersey, JE4 5UT
Deferred tax assets
At 2 July 2018
Charge to income
Charge to equity
At 30 June 2019
Charge to income
Charge to equity
At 28 June 2020
Imputed
interest
£m
Short-term
temporary
differences
£m
Total
£m
3
–
–
3
(3)
–
–
1
–
–
1
–
–
1
4
–
–
4
(3)
–
1
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
O
N
I
FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2020
152
12. DEFERRED TAX ASSETS AND LIABILITIES CONTINUED
14. INVENTORIES
Deferred tax liabilities
At 2 July 2018
Credit to income
Charge to equity
At 30 June 2019
Charge to income
Credit to equity
At 28 June 2020
Employee
benefits
£m
Short-term
temporary
differences
£m
Total
£m
(4)
–
1
(3)
(1)
–
(4)
(1)
–
–
(1)
–
–
(1)
(5)
–
1
(4)
(1)
–
(5)
The Group has no material unrecognised deferred tax assets.
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.
In the Chancellor’s Budget on 11 March 2020 it was confirmed that the rate of corporation tax will remain at 19% from 1 April 2020.
This measure (cancelling the enacted cut to 17%) will be made under a Budget resolution which has statutory effect under the
Provisional Collection of Taxes Act 1968. As such, it is substantively enacted on the passing of the resolution. The rate will also
stay at 19% for the following year. Deferred tax balances have been valued at 19% (2019: 17%).
13. TRADE AND OTHER RECEIVABLES
Non-current assets
Trade receivables (net)
Amounts due from subsidiary companies
Current assets
Trade receivables (net)
Amounts due from subsidiary companies
Other receivables
Prepayments
Group
Company
2020
£m
2019
£m
2020
£m
2019
£m
–
–
–
25
–
8
5
38
9
–
9
28
–
19
1
48
–
774
774
–
300
–
–
–
–
–
–
890
–
–
300
890
Non-current trade receivables are stated after an allowance of £nil has been made (2019: £5m) in respect of expected credit losses.
This allowance is based on an estimate of default rates. £nil provision was made during the year (2019: £1m). £nil was utilised (2019:
£nil). £3m provision was released during the year (2019: £nil) and £2m provision was transferred to be held against current trade
assets (2019: £3m). Current trade assets are therefore stated after an allowance of £4m (2019: £3m in respect of expected credit
losses with £nil provision utilised (2019: £nil) and £1m provision released (2019: £nil).
Amounts due from subsidiary companies are unsecured, repayable on demand and carry interest at market rate on trading
balances. The balance classified as current is anticipated to be repayable within the normal operating cycle of the subsidiary
businesses.
Land for development
Work in progress
Stock of show homes
Group
Company
2020
£m
1,538
972
75
2019
£m
1,547
790
67
2,585
2,404
2020
£m
2019
£m
–
–
–
–
–
–
–
–
Inventories of £1,027m were expensed in the year (2019: £1,526m). Work in progress includes £1m (2019: £3m) in respect of part
exchange properties. Land held for development in the sum of £160m is subject to a legal charge as security in respect of
deferred consideration (2019: £312m).
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 £33m (2019: £nil). £35m of impairment costs arising for the strategic decision to scale back our London operations
were expensed in the year (2019: £nil).
The Directors consider all inventory to be current in nature as they are expected to be realised within the Group’s normal
operating cycle of c4 years.
15. 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 that follow provide a summary of financial assets and liabilities by category.
The accounting policies for financial instruments have been applied to the following items:
The Group’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.
153
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A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
O
N
I
FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2020
154
15. 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 28 June 2020, the Group had total unsecured bank borrowing facilities of £366m, representing £363m 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 2020 or
2019.
The following table shows the profile of interest bearing debt together with its effective interest rates.
Effective
interest
rate
%
2.1
Total
£m
170
170
2020
Zero
to one
year
£m
One
to two
years
£m
Two
to five
years
£m
Effective
interest
rate
%
–
–
–
–
170
170
2.3
2019
Zero
to one
year
£m
One
to two
years
£m
Two
to five
years
£m
–
–
–
–
80
80
Total
£m
80
80
Bank loans –
floating rate
For the 52 weeks ended 28 June 2020, 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 c £1m (2019: less than £1m).
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
2020
2019
Bank
overdraft
£m
–
–
Bank
loans
£m
177
177
Bank
overdraft
£m
–
–
Bank
loans
£m
85
85
Maturities above include estimated interest payable to the maturity of the facilities.
155
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A
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C
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E
P
O
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T
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
15. FINANCIAL RISK MANAGEMENT CONTINUED
b. Maturity of bank loans and borrowings continued
The Company
Due between two and five years
2020
2019
Bank
overdraft
£m
–
–
Bank
loans
£m
177
177
Bank
overdraft
£m
–
–
Bank
loans
£m
85
85
Maturities above include estimated interest payable to the maturity of the facilities.
The Company was fully compliant with its banking covenants as at 28 June 2020.
At the year end, the Group and Company had £193m (2019: £170m) 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.
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:
28 June 2020
30 June 2019
Total
contracted
cash
payment
£m
306
446
Due
less than
one year
£m
186
271
Due
between
one and
two years
£m
Due
between
two and
five years
£m
51
137
69
38
Balance
at June
£m
302
438
d. Maturity of trade and other payables
The maturity profile of the total contracted payments in respect of financial liabilities (excluding amounts due on land creditors
shown separately in note 15c) at the balance sheet date is as follows:
Trade and other payables (excluding lease liabilities)
Lease liabilities
28 June 2020
Trade and other payables
30 June 2019
Total
contracted
cash
payment
£m
Due
less than
one year
£m
Due
between
one and
two years
£m
Due
between
two and
five years
£m
Balance
at June
£m
527
6
533
494
494
527
8
535
494
494
527
3
530
494
494
–
2
2
–
–
–
3
3
–
–
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2020
156
15. 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:
15. FINANCIAL RISK MANAGEMENT CONTINUED
g. Fair values
The fair value of financial assets and liabilities is as follows:
The Group
Held at Banks with at least an A credit rating per Standard & Poor
Group
Company
2020
£m
44
44
2019
£m
204
204
2020
£m
41
41
2019
£m
212
212
Assets per the balance sheet
Non-current trade and other receivables
Current trade and other receivables *
Cash and cash equivalents
*
includes £6m in respect of shared equity debtors (2019: £7m).
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.
Liabilities per the balance sheet
Bank loans and overdrafts
Trade payables and other payables including customer deposits
Land creditors
Lease liabilities
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.
Other financial liabilities are at amortised cost.
The Company
The total capital levels and gearing ratios as at 28 June 2020 and 30 June 2019 are as follows:
Total borrowings
Less cash and cash equivalents
Net debt/(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
2020
£m
170
(44)
126
1,626
1,752
148
9.2%
7.7%
2019
£m
80
(204)
(124)
1,585
1,461
411
28.5%
N/A
Assets per the balance sheet
Cash and cash equivalents
Amounts due from subsidiary companies (current and non-current)
Liabilities per the balance sheet
Bank loans and overdrafts
Amounts owed to subsidiary companies
2020
Loans and
receivables
Fair value
£m
2020
Loans and
receivables
Carrying
value
£m
2019
Loans and
receivables
Fair value
£m
2019
Loans and
receivables
Carrying
value
£m
–
33
44
77
–
33
44
77
9
47
204
260
9
47
204
260
2020
Other
financial
liabilities
Fair value
£m
2020
Other
financial
liabilities
Carrying
value
£m
2019
Other
financial
liabilities
Fair value
£m
2019
Other
financial
liabilities
Carrying
value
£m
170
527
302
6
170
527
302
6
1,005
1,005
80
494
438
–
1,012
80
494
438
–
1,012
2020
Loans and
receivables
Fair value
£m
2020
Loans and
receivables
Carrying
value
£m
2019
Loans and
receivables
Fair value
£m
2019
Loans and
receivables
Carrying
value
£m
41
1,074
1,115
2020
Other
financial
liabilities
Fair value
£m
170
14
184
41
1,074
1,115
2020
Other
financial
liabilities
Carrying
value
£m
170
14
184
212
890
1,102
2019
Other
financial
liabilities
Fair value
£m
80
14
94
212
890
1,102
2019
Other
financial
liabilities
Carrying
value
£m
80
14
94
Financial assets and liabilities carried at fair value are categorised within the hierarchical classification of IFRS13 as level 3 are
shared equity loans included within Trade and Other receivables at £6m (2019: £7m).
157
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2020
158
16. TRADE AND OTHER PAYABLES
Non-current liabilities
Amounts due in respect of development land
Lease liabilities
Current liabilities
Trade payables
Amounts due in respect of development land
Private customer deposits
Social customer payments on account
Amounts owed to subsidiary companies
Lease liabilities
Other payables
Other taxation and social security
Accruals
Group
Company
2020
£m
2019
£m
2020
£m
2019
£m
116
4
120
311
186
38
165
–
2
10
3
90
805
167
–
167
347
271
27
107
–
–
7
6
68
833
–
–
–
–
–
–
–
14
–
–
–
12
26
–
–
–
–
–
–
–
14
–
–
–
16
30
Amounts due to subsidiary companies are unsecured, repayable on demand and bear interest at market rate on trading
balances.
17. LONG-TERM PROVISIONS
The Group
At 1 July 2019
Provisions created during the year
Provisions released during the year
Provisions utilised during the year
At 28 June 2020
Onerous
contracts
£m
Other
£m
Total
£m
1
–
–
–
1
7
–
–
–
7
8
–
–
–
8
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.
18. SHARE CAPITAL
As at 1 July 2019 and 28 June 2020 (ordinary shares of 10.5p each)
Number of
ordinary shares
352,190,420
19. SHARE CAPITAL, SHARE PREMIUM ACCOUNT AND RESERVES
The Group
At 2 July 2018
Total comprehensive income
Dividends paid
Movement in respect of LTIP/SAYE
At 30 June 2019
Total comprehensive income
Dividends paid
Movement in respect of LTIP/SAYE
At 28 June 2020
Share
capital
£m
Share
premium
account
£m
Other
reserves
£m
Retained
earnings
£m
37
–
–
–
37
–
–
–
37
59
–
–
–
59
–
–
–
59
8
–
–
–
8
–
–
–
8
1,379
323
(218)
(3)
1,481
114
(72)
(1)
1,522
Other reserves
Other reserves consists of a £7m Capital redemption reserve (2019: £7m) and a £1m Consolidation reserve (2019: £1m).
Undistributable reserves
Other reserves are not available for distribution.
The Company
At 2 July 2018
Total comprehensive income†
Dividends paid
At 30 June 2019
Total comprehensive income
Dividends paid
At 28 June 2020
†
Includes dividends received from subsidiary companies.
Other reserves
Other reserves consists of a £7m Capital redemption reserve (2019: £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
646
480
(218)
908
3
(72)
839
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FINANCIAL STATEMENTSNotes to the Financial Statements continuedRedrow plc Annual Report 2020
160
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
20. MOVEMENT IN NET (DEBT)/CASH
The Group
Cash and cash equivalents
Bank loans
Net (debt)/cash
The Company
Cash and cash equivalents
Bank loans
Net (debt)/cash
At
1 July 2019
£m
Non-cash
movement
£m
Cash flow
£m
At
28 June 2020
£m
204
(80)
124
1
–
1
(161)
(90)
(251)
44
(170)
(126)
At
1 July 2019
£m
Non-cash
movement
£m
Cash flow
£m
At
28 June 2020
£m
212
(80)
132
(3)
–
(3)
(168)
(90)
(258)
41
(170)
(129)
21. CONTINGENT LIABILITIES
The Company has guaranteed the bank borrowings of its subsidiaries. Performance bonds 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 £170m (2019: £136m) at the year end and consider the possibility of a cash outflow in settlement to be remote.
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 78 to 100. A summary of
remuneration provided to key management personnel is provided in note 7c.
There have been no 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 28 June 2020 was £1,074m (30 June 2019: £890m). The amount owed
to subsidiary undertakings at 28 June 2020 was £14m (30 June 2019: £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 made £4m loan payments to its joint ventures, Menta Redrow Limited and Menta Redrow (II) Limited.
It also received a £1m dividend from Menta Redrow Limited. The Group’s loans to its joint ventures are disclosed in note 11.
23. ALTERNATIVE PERFORMANCE MEASURES
Redrow uses a variety of Alternative Performance Measures
(APMs) which are not defined or specified by IFRSs but which
the Directors believe are pertinent to reviewing the
performance of the Group, in conjunction with IFRS defined
measures.
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. See note 6.
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. See note 15f.
Return on equity (ROE)
Profit before tax before exceptional items adjusted for joint
ventures as a percentage of opening and closing net assets.
2020
£m
2019
£m
HBF customer satisfaction rating
Net assets at 28 June 2020/30 June 2019
1,626
1,585
Independent HBF customer satisfaction rating score.
Net assets at 30 June 2019/1 July 2018
1,585
1,483
Land holding years
No. of plots in owned land holdings at June divided by no. of
legal completions in financial year.
Average net assets
Profit before taxation
Return on equity %
1,606
1,534
140
406
8.7% 26.5%
2020
2019
Revenue
Owned land holdings at
28 June 2020/30 June 2019
Legal completions
Land holding years
25,130
25,993
4,032
6.2
6,443
4.0
Revenue per consolidated income statement.
Revenue value of private reservations secured in the year
The fair value receivable in the future of private house sales
reserved by customers during the year, net of cancellations.
Sales outlets
Average no. of sales outlets open in the year.
Monies committed to fund improvements in local
communities
These reflect committed Section 106 contributions and
affordable housing provided in the year.
Net asset value per ordinary share
Total net assets at June divided by the number of ordinary
shares in issue at June.
Number of trainees
No. of trainees at June as a percentage of employees at June.
Order book
The value of reserved and exchanged sales which had not
legally completed at the year end.
161
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Redrow plc Annual Report 2020
162
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.
Details of our current developments are available on our
website: redrow.co.uk
GROUP CONTACTS OFFICERS AND ADVISERS
Company Secretary
Graham Cope
Registered Office
Redrow House
St. David’s Park
Flintshire
CH5 3RX
Registered Number 2877315
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Stockbrokers
Barclays
5 The North Colonnade
Canary Wharf
London
E14 4BB
Peel Hunt
Moor House
120 London Wall
London
EC2Y 5ET
Independent Auditor
KPMG LLP
Chartered Accountants
8 Princes Parade
Liverpool
L3 1QH
Solicitor
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 June
Revenue
Operating profit
Operating profit as a percentage of turnover
Profit before tax
Net assets
Net (debt)/cash
2016†
£m
1,382
261
18.9%
250
1,041
(139)
Gearing – net debt as a percentage of capital and reserves
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
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
2020
£m
1,339
148
11.1%
140
1,626
(126)
7.7%
9.2%
8.7%
4,032
32.9p
–
Net asset value per ordinary share
281.5p
334.0p
401.0p
450.0p
461.7p
† Restated to reflect change in accounting policy.
163
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Redrow plc
Redrow House, St. David’s Park, Flintshire CH5 3RX
Telephone: 01244 520044
redrow.co.uk