Building shareholder value...
Annual Report and Accounts 2010
Taylor Wimpey plc is a focused community
developer with operations in the UK, the US,
Canada and Spain. We aim to be the
developer of choice for customers, employees,
shareholders and communities.
Our 2010 financial performance
Revenue – continuing
(£m)
Operating profit*
(£m)
Profit/(loss) before tax and
exceptional items (£m)
Exceptional items –
before tax (£m)
Profit/(loss) for the year –
total Group (£m)
£2,603.3m
£194.1m
£75.1m
£(146.4)m
£259.3m
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2008
2009
2010
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2010
2008
2009
2010
Adjusted earnings/(loss)
per share (p)
Earnings/(loss) per share
(p)
Tangible net assets
per share (p)
Year end net debt
(£m)
0.6p
8.1p
56.9p
£(654.5)m
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* Profit on ordinary activities before finance costs, exceptional items, brand amortisation and tax, after share of results of joint ventures.
Taylor Wimpey manages a portfolio of over 170,000 land plots across the UK, the US, Canada and Spain.
Operational Highlights:
UK Housing
• Significant improvement in operating margin to 7.1%
North America Housing
• 44% of our land portfolio is finished lots, which do not
(2009: 0.8%).
• Successful promotion of a 1,500 home community in
Cambuslang, near Glasgow.
• Asset turn increased to 1.1 times (2009: 0.8 times).
need further development.
• Sites acquired in 2008-2010 performing strongly
• Increased asset turn to 1.5 times (2009: 1.3 times).
Contents
Directors’ Report:
Business Review
Operational and financial
performance in 2010 and
prospects for 2011.
Directors’ Report:
Governance
Information regarding
the Board and how they
run the business for the
benefit of shareholders.
Financial
Statements
Detailed analysis of our
financial performance.
02 Business overview
04 Our value cycle
06 Chairman’s statement
08 Group Chief Executive’s review
09 Strategy
10 Group key performance indicators
12 Principal risks and uncertainties
14 UK Housing
20 North America Housing
25 Spain and Gibraltar Housing
26 Our Corporate Responsibility approach
28 Group financial review
32 Board of Directors
34 Corporate Governance Report
41 Remuneration Report
51 Statutory, regulatory and other formal information
55 Independent Auditors’ Report
56 Consolidated Income Statement
57 Consolidated Statement of Comprehensive Income
58 Consolidated Balance Sheet
59 Consolidated Statement of Changes in Equity
60 Consolidated Cash Flow Statement
61 Notes to the Consolidated Financial Statements
94 Independent Auditors’ Report
95 Company Balance Sheet
96 Notes to the Company Financial Statements
102 Particulars of Principal Subsidiary Undertakings
103 Five Year Review
104 Notice of Meeting
111 Shareholder Facilities
112 Principal Operating Addresses
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For more information
Corporate responsibility
Visit our corporate Web site:
www.taylorwimpeyplc.com
Cross-reference within this document
for related information.
A full Corporate Responsibility
Report is published separately
on-line and is available from
www.taylorwimpeyplc.com.
Key information about our
approach to sustainable
development is available in the
following areas of this report.
Governance
Pages 7, 32-54
Approach & policies
Pages 7, 11, 26-27
Environment
Pages 13, 18, 23, 27
Community
Pages 4-5, 9, 17, 26-27
Employees
Pages 7, 11, 13, 27, 53
KPIs
Pages 10-11, 15, 21
Health & safety
Pages 13, 15, 18, 21, 23, 27
1
Taylor Wimpey plc Annual Report & Accounts 2010
Directors’ Report: Business Review
Business overview
We are one
of the largest
homebuilders in
the UK and a top
10 homebuilder
in the US.
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UK Housing
Taylor Wimpey is one of the largest
homebuilders in the UK with national
coverage from 24 regional offices.
Overview
– We build homes in the UK under the Taylor Wimpey brand.
– We build a wide range of homes in the UK, from one bedroom apartments
to five bedroom houses, with prices ranging from below £100,000 to above
£500,000.
– In addition, we build affordable housing across the UK, which represented
18% of our 2010 completions.
2010 highlights
Completions
9,962
Average
selling price
£171k
Average outlets
289
Short term
landbank
63,556
plots
Proportion of Group revenue
66.7%
Market conditions
– After an encouraging start to the first half of 2010, we saw some softening
around the time of the general election in May. Trading improved once the
outcome was known, leading to a robust summer period. Sales softened in
the autumn ahead of the government’s Comprehensive Spending Review in
October, with incremental improvements following the announcement.
– National house price indices show a mixed picture over the year.
– Mortgage availability remains restricted, although there has been some
improvement in the number of products available to first time buyers.
Short term priorities
– Add new plots to the land portfolio that create value.
– Optimise planning consents on each outlet prior to commencing development
and sales.
– Reduce build costs through continuous improvement in operational efficiency.
– Deliver competitive offers in each local market.
For more information
see pages 14-19
2
Taylor Wimpey plc Annual Report & Accounts 2010
Directors’ Report: Business Review
Spain and Gibraltar Housing
North America Housing
Taylor Morrison is a top 10
homebuilder in the United
States and also operates in
Ontario, Canada.
Overview
– In the United States we sell homes under the Taylor Morrison brand and our
business in Canada trades under the Monarch brand.
– Our homes in North America range from high-rise apartments in Toronto to full
service country club homes in Florida and from entry level to luxury homes.
– Our prices range from below £75,000 to above £500,000. Average selling
prices vary by geography from £123,000 in Arizona to £264,000 in California.
2010 highlights
Completions
4,140
Average
selling price
£200k
Average outlets
149
Landbank
30,262
plots
Proportion of Group revenue
32.1%
Market conditions
– As expected, market conditions in the US were distorted by the cessation of
the Homebuyer Tax Credit on 30 April 2010. After an encouraging first quarter,
sales rates softened in the second quarter and into the thrird quarter. We saw
stability at lower levels as the autumn progressed and this continued through
the fourth quarter.
– Affordability levels remain exceptionally good in many of our markets and
foreclosures are gradually reducing.
– Market conditions in Canada remain strong, with house price increases in both
Toronto and Ottawa over the course of 2010.
Short term priorities
– Drive sensible sales rates for each site.
– Retain build cost and overhead savings.
– Maintain reduced level of investment in land and work in progress spend where
appropriate.
– Grow market share in our key markets.
For more information
see pages 20-24
3
Taylor Wimpey plc Annual Report & Accounts 2010
Overview
– Our homes in Spain are sold under the
Taylor Wimpey brand.
– Our business in Spain is primarily focused
on developing sites in popular locations.
– Following our announcement in 2008 that
we planned to exit our Gibraltar business,
we recorded our final home completions in
this market during 2010.
2010 highlights
Completions
136
Average
selling price
£214k
Average outlets
15
Landbank
1,783
plots
Proportion of Group revenue
1.2%
For more information
see page 25
For more information
www.taylorwimpeyplc.com
Our Web site contains a wide
variety of additional information
about the Group.
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Directors’ Report: Business Review
Our value cycle
Taylor Wimpey manages a portfolio of
over 170,000 land plots across the UK,
US, Canada and Spain. We create value
through active management of this
portfolio and deliver this value through
building high quality communities that
meet the needs of local residents and our
potential customers.
Building sustainable communities
How we create and deliver value
Selecting
land
Key principles
Land is the critical ‘raw material’
for our business and the ability
to purchase the right sites
in the right locations at the
right price is a key driver of
shareholder value.
Selecting
land
Optimising
development
value
Caring
about our
customers
Optimising
development
value
Getting the
homebuilding
basics right
Getting the
homebuilding
basics right
We generate value for our shareholders through managing
our investment portfolio of land to deliver optimal returns.
These returns are created through identifying the best
opportunities, adding value through the planning process
and designing places to live that meet the local demand.
We deliver this value through safe, efficient and considerate
development of these communities and helping our
customers to buy and move into their new homes.
Caring
about our
customers
Key principles
Designing a sustainable
community that meets the
needs of local residents,
is attractive to potential
customers and provides
attractive returns for
shareholders requires a
consultative and iterative
process of community
engagement.
Key principles
We work with selected sub-
contractors and build using
carefully sourced materials to
ensure that the homes that we
sell are of a high quality and
are built safely, efficiently, cost
effectively and with minimal
impact on the environment.
Key principles
We recognise that buying a
house is a significant financial
and emotional investment. We
aim to make buying, moving
into and living in a Taylor
Wimpey home as easy as
possible for our customers.
4
Taylor Wimpey plc Annual Report & Accounts 2010
How we create and deliver value
Directors’ Report: Business Review
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Our strategic approach
We employ land teams in each of our regional businesses in the UK
and North America, who use their experience, local knowledge and
industry contacts to identify potential acquisitions.
In addition, we have a team of strategic land experts in the UK who
are tasked with identifying areas where population growth, or other
local demand, could create opportunities to promote land with no
current planning consent through the planning system.
Our strategic approach
We have a strong track record of consultation with local residents prior
to developing large scale communities, such as Great Western Park,
Didcot. We are benefiting from this knowledge and experience across
our UK business in preparation for the implementation of the Localism
Bill during 2011. See page 17 for further details.
As part of this iterative process, we are able to identify the best use of
land to meet the needs of local residents, ensure that we have a mix
of homes that meet market demand and that the site is optimised for
safe, efficient and considerate development.
Our strategic approach
We are committed to providing a safe place in which our employees
and sub-contractors can work. We are also committed to high
standards of environmental management.
The building process is carefully managed by our site-based and
regional production teams to ensure quality and to minimise disruption
to residents in the surrounding areas.
Our strategic approach
We focus on continually improving our standards of customer care
and our customer experience through:
• regular market research to identify customer requirements;
• tailoring our range of incentives to help customers make their purchase;
• helping customers navigate the process of selling their existing
home and moving into their new home; and
• benchmarking our performance in industry customer care surveys
to identify opportunities for further improvements.
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Taylor Wimpey plc Annual Report & Accounts 2010
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Directors’ Report: Business Review
Chairman’s statement
After the challenges
of recent years,
Taylor Wimpey
has made strong
progress during
2010.
Shareholder information
Full details of the facilities available to
shareholders can be found on page 111
of this Annual Report and Accounts and at
www.taylorwimpeyplc.com/InvestorRelations/
ShareholderInformation
Electronic communications
We make our Annual Report available
electronically to those shareholders who have
not requested a paper version. This has three
key benefits:
• a significant reduction in printing and postage
costs, without reducing the level of information
available;
• faster access to information; and
• reducing the amount of resources consumed,
such as paper, and lessening the impact
of printing and mailing activities on the
environment.
We also encourage shareholders to elect
to receive notification of the availability of
Company documentation by means of an e-mail.
Shareholders can sign up for this facility by
logging onto our Web site.
For more information
www.taylorwimpeyplc.com
/InvestorRelations/Shareholder Information
/ElectronicCommunications.htm
After the challenges of recent years, Taylor
Wimpey has made strong progress during
2010. We have:
• Delivered significant operational
improvement, which is reflected in the
Group’s enhanced profitability;
• Increased the tangible net asset value
per share;
• Completed the refinancing of the debt
facilities entered into in April 2009; and
• Continued to support and develop our
people, including making a number
of changes to the membership of the
Board.
2010 performance
In my first Chairman’s statement, I am
delighted to be able to report a strong
improvement in the Company’s financial
performance during 2010 as the benefits
of the strategy for recovery set out in last
year’s Annual Report take effect. I look
forward to building on this success during
the course of my tenure.
We have recorded a profit before exceptional
items and tax of £75.1 million (2009 loss:
£96.1 million). Pre-tax exceptional items
for the year are £146.4 million (2009:
£603.8 million), with the major constituents
being the costs of refinancing and further
reviews of the carrying value of our land and
work in progress in the United States and
Spain. This gives a loss before tax of
£71.3 million (2009 loss: £699.9 million).
This recovery in underlying profitability owes
much to the improvements made in all
areas of our business processes, which I
have been very impressed by and which will
add significant value as we move forward.
Refinancing
In addition to this improvement in the
Company’s financial performance, we
have also made further progress in
strengthening the Company’s balance
sheet. As we announced on 15 December
2010, we have completed the refinancing
of our existing debt facilities, ahead of their
maturity date in July 2012.
The new arrangements provide a number
of benefits, including:
• a simplified debt structure with
extended maturity profile;
• better blended interest rate of around
7.5%; and
• greater operational flexibility.
6
Taylor Wimpey plc Annual Report & Accounts 2010
Directors’ Report: Business Review
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uncertainty of ongoing speculation
regarding a potential change of ownership.
Board changes
After seven years as Chairman of the
Company, Norman Askew stood down at
the end of June 2010. Norman guided the
Company safely through unprecedented
market conditions and leaves it well
positioned for the future.
I was appointed to the Board as Chairman
on 1 July 2010 and I am delighted to have
joined an excellent Board, experienced,
unified and fully committed to the
Company and its stakeholders.
Ryan Mangold joined the Board as Group
Finance Director in November 2010.
Ryan joined Taylor Wimpey in April 2009
as Group Financial Controller and has
played an important role in delivering the
recent refinancing. I would like to take this
opportunity to welcome him to the Board
and thank his predecessor, Chris Rickard,
who stood down in November 2010, for
his significant contribution to the Group.
As stated in last year’s Annual Report,
David Williams stood down as a Non
Executive Director on 31 March 2010.
Rob Rowley, who joined the Board on 1
January 2010, succeeded David as Senior
Independent Director in addition to his role
as Chairman of the Audit Committee.
We have recently announced that Katherine
Innes Ker and Andrew Dougal will be
stepping down as Non Executive Directors
immediately prior to the Annual General
Meeting, after long and distinguished
service to the Board. Katherine has served
on the Board for more than nine years and
Andrew for more than eight.
As announced in February 2011, I am
very pleased that Kate Barker will be
joining the Board as a Non Executive
Director with effect from 21 April 2011.
Kate brings a wealth of economic and
political experience as well as a detailed
knowledge of the housing industry.
I would like to record the Board’s
enormous gratitude to Norman, Chris,
David, Katherine and Andrew for their
contributions in what have been some
very challenging times.
I would like to thank our shareholders and
debt providers for their ongoing support to
the Group.
Further information regarding the
refinancing is contained within Ryan
Mangold’s Group Financial Review on
page 30.
North American operations
As recently announced, we are evaluating
proposals for our North American
business and will update the market in
due course.
Dividends
The Board did not consider it appropriate
to propose an interim dividend for 2010.
The uncertainty in the wider economy has
eased somewhat during the second half
of 2010, however, we are not proposing
a final dividend for 2010 (2009 full year
dividend: nil).
We will continue to review our dividend
policy in the light of Taylor Wimpey’s
financial position and prevailing economic
and market conditions in the future.
Corporate responsibility
As a major community developer, we
have social, ethical, environmental and
economic responsibilities that we take
extremely seriously. We believe that
corporate responsibility is an essential part
of good governance and makes sound
business sense, as well as being crucial
for risk and opportunity management.
Following my appointment in July 2010,
I was also very pleased to meet with a
number of our major shareholders to
discuss both business and governance
matters, which I found very helpful
indeed. I look forward to further such
meetings during the course of 2011 and
to meeting with shareholders at the Annual
General Meeting on 21 April 2011.
During 2010, we have embedded our
approach to corporate responsibility more
fully into the day to day management of
the business. As such, although ultimate
responsibility continues to rest with the
Group Chief Executive, Pete Redfern,
the Corporate Responsibility Committee
of the Board has been disbanded.
However, the Board will continue to
review our corporate responsibility
strategy and reporting on a regular
basis. Our Sustainability Steering Group,
comprising seven senior personnel
from relevant disciplines across our UK
business, coordinates our sustainability
activities at the operational level and we
continue to benefit from our excellent
and fully integrated health, safety and
environmental management system.
Our people
I have been very impressed by what I have
seen of our business and our people so
far. They have demonstrated a very strong
work ethic, together with huge pride,
creativity and responsibility in support of
the Company as well as the homes and
communities that we build.
We would like to record our thanks to
all of the people within our business and
particularly those in our North American
business who have had the additional
Corporate governance
Strong corporate governance is, if anything, even more essential in challenging
market conditions.
The Board undertook a comprehensive review of the new UK Corporate Governance
Code (UKCGC) in September 2010 in order to ensure that we are ready to comply with
it during 2011. We also undertook a Board Evaluation during 2010 and, going forward,
will conduct this process via an external facilitator once every three years, as set out in
the UKCGC.
All Directors will be submitting themselves for election or re-election at this year’s
Annual General Meeting.
A full report on our corporate governance activities can be found in the Corporate
Governance Report on pages 34 to 40 which confirms that the Company was again
compliant with the Combined Code.
Visit our Web site
www.taylorwimpeyplc.com /InvestorRelations/CorporateGovernance/
Kevin Beeston
Chairman
7
Taylor Wimpey plc Annual Report & Accounts 2010
Directors’ Report: Business Review
Group Chief Executive’s review
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Applying our focused strategy
to our value cycle gives us the
opportunity to deliver further
growth in shareholder value.
How we create value and measure
performance for our shareholders:
Strategy
A clear strategy for the future p9
Key performance indicators
A measured approach p10
Risks and uncertainties
Effectively managing risk in the
delivery of our strategy p12
Having strengthened our financial
position during 2009, we have delivered
a significant improvement in our financial
performance in 2010. This reflects a
combination of the continuing benefits
of the operational decisions that we took
in 2008 and the delivery of our strategy
for recovery that I set out in last year’s
Annual Report.
Developing our strategy
After a year of greater stability in our
markets in the UK and North America
during 2009, 2010 has brought a broadly
stable year in the UK market and, as
expected, some volatility in the US. It is,
therefore, very pleasing to have been able
to deliver such a strong improvement
in the performance of the Group
without the assistance that a market
recovery provides.
We enter 2011 with a continuing focus
on maximising the value that we achieve
from each home completion across all
of the Group’s operations and we have
made good progress in the key areas of
pricing, build cost reduction, replanning
and additions to our landbank, as you
will see in the regional sections of this
Annual Report.
Pete Redfern Group Chief Executive
Highlights for the year
We have delivered a significant
improvement in the Group’s
performance during 2010:
• Growth in profitability in both the
UK and North America.
• Refinancing completed.
• Reduced pension deficit.
• Strong cash generation.
Having
strengthened our
financial position
during 2009, we
have delivered
a significant
improvement
in our financial
performance
in 2010.
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Directors’ Report: Business Review
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Strategy
Vision and goal
Taylor Wimpey is a focused community developer. We aim to be the developer of choice for customers,
employees, shareholders and communities.
Our Group strategy
We create value through active management of our land portfolio and deliver this value through building high quality communities
that meet the needs of local residents and our customers.
Long term objectives
• Provide growth in earnings per share, in light of
market conditions.
Short term priorities
• Enhance the Group’s profitability in both of our main
markets through:
• Deliver a return on capital employed above the level
– Focusing on sales price increases rather than
of our cost of funding.
• Return the Group to an investment-grade credit rating.
• Attract and retain the highest calibre of employees and strive
to be a company that people want to work for.
volume growth.
– Continued focus on operating efficiency.
– Maintaining a tight control on overhead costs.
• Active management of our land portfolio.
• Evaluate proposals for our North American business.
• Maximise the potential of our employees through training
and development programmes.
The next stage is to build on this platform
and on the experience that we have
gained as a management team from
the difficult trading conditions of the last
few years.
required scale of our building operations
with reasonable certainty. By contrast, in
the US, it is usually the case that the land
vendor is responsible for achieving the
required consents.
As set out in the description of our value
cycle on page 4 our primary channel
for the creation of value is the active
management of our land portfolio. Rather
than seeing homebuilding as the driver
of value, we see it as the way to deliver
the value that we have created through
selecting land and optimising its value.
We manage over 170,000 plots of land
in our portfolio across the UK, the US,
Canada and Spain. This requires a
significant amount of capital to fund and it
is essential that we allocate our capital to
the most attractive opportunities in order
to generate the best returns.
The majority of this portfolio is land in
the UK. This reflects the nature of the
UK land-buying market, with developers
typically taking responsibility for delivering
an implementable planning consent. Given
the unpredictable nature of the current
planning system, it is essential to ensure
that we have sufficient land at different
stages of planning to be able to plan the
However, the lengthy planning process
provides us with opportunities as well as
challenges. We can use that time to refine
our designs for the community, engaging
with the planning authority and local
residents to ensure that what we deliver
will meet their needs. This is a process
that we have spent more time on since the
downturn, with encouraging results, and
one which we will continue to focus on,
going forward.
Once an optimised planning consent is
achieved, we begin work on site to deliver
the design that we have created. By
getting the basics right, we deliver high
quality homes for our customers that are
built safely, efficiently, cost effectively and
with minimal impact on the environment.
We have made good progress in
enhancing our operational efficiency over
the last few years through a combination
of merger synergies, reduced labour and
materials costs and value engineering
sites to reduce the level of infrastructure
costs. This is an ongoing process and we
have initiated a programme of continuous
improvement in this area with each of our
sites being reviewed on a quarterly basis
to ensure that the anticipated value is
delivered or exceeded.
We continue to monitor our overhead
costs carefully and, following a
consultation process, we will be
consolidating our Corporate office and
UK Head Office into a single team based
in our existing High Wycombe office. This
will enable us to work more efficiently
to support the operational business
and enhance communication across
departmental functions. In addition,
we will commence the roll-out of a new
IT system in our UK business which is
expected to increase efficiency and reduce
support costs.
In order to deliver value for shareholders,
it is essential that the homes and
communities that we build are attractive
places to live for our customers. This is a
key stage of optimising value as we design
each development and it is supported by
the work of our sales and marketing and
customer care teams.
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Directors’ Report: Business Review
Group Chief Executive’s review continued
Group key performance indicators
Our Group KPIs provide a measure of our performance against our strategy
Adjusted earnings/(loss) per share
Return on average capital employed
Objective
We seek to provide growth in earnings
per share in light of market conditions.
Definition
The basic earnings per share from
continuing operations based upon the
profit attributable to ordinary shareholders
before exceptional items divided by the
average number of shares in issue during
the year.
Why is it key to our strategy?
The generation of earnings is essential to
deliver share price growth and dividends
to shareholders and to fund future growth
in the business. This measure is also
commonly used by stock market analysts in
assessing the value of companies.
0.6p
for 2010
6
.
0
)
2
.
7
(
)
3
.
4
(
Objective
We aim to deliver a return on capital
employed above the level of our cost
of funding.
Definition
Profit on ordinary activities before finance
costs, exceptional items and amortisation
of brands but including share of results of
joint ventures, divided by the average of
opening and closing tangible net worth.
Why is it key to our strategy?
Developing communities is a capital-
intensive business due to the need to fund
our landbank, so it is essential to ensure
that this capital is used as effectively
as possible.
8.2%
for 2010
2
.
8
6
.
2
5
.
1
2008
2009
2010
2008
2009
2010
Risk
The following key risks have the
greatest potential impact on the Group’s
strategy:
• Economic and market environment.
• Government regulations and planning
policy.
• Land purchasing.
• Compliance with financial and operational
covenants.
For more information
see pages 12-13
Corporate responsibility
Our corporate responsibility approach
underpins the way we do business.
We have a duty to take social, environmental,
ethical and economic factors into account when
conducting our business and tackling global
imperatives such as sustainable development and
climate change.
For more information
see pages 26-27
We recognise that buying a house is
a significant financial and emotional
investment. Surveys often highlight moving
home as one of the most stressful events
in a person’s life and we aim to make
the process of buying, moving into and
living in a Taylor Wimpey home as easy
as possible for our customers. We will
continue to work with mortgage lenders
to identify ways in which we can help our
customers to purchase their home in an
environment where mortgage lending
remains constrained, particularly for first
time buyers.
Our homes are designed for the way
that our customers live. For example, we
have undertaken considerable customer
research to ensure that our new house
type range in the UK meets the needs of
modern living.
We participate in industry customer
care surveys across our business and
benchmark our scores both internally and
against our industry peers.
Combining these initiatives with the strong
team of people that we have across our
business gives us the ability to continue
to grow our margins, subject to stable
market conditions.
10
Taylor Wimpey plc Annual Report & Accounts 2010
Refinancing
A key achievement during 2010 was
the completion of our refinancing in
December. We now have a simplified debt
structure and extended maturity profile,
as well as greater operational flexibility to
pursue the strategy outlined above. Ryan
Mangold provides more detail on the new
facilities in his Group Financial Review on
page 30.
North American operations
As we have previously outlined, our
intention is to refocus the business of the
Group on the UK market in the medium
term. This is a decision that the Board
has considered for some time, particularly
given the potential for recovery in the
US housing market. However, there are
a number of factors that mean that the
Group is better positioned to deliver value
to shareholders if it is focused on its
UK operations.
The decision reflects the relative
attractiveness of the UK housing market,
which is driven by structural undersupply
of new housing, the constrained supply
of land within the UK and the low stock
levels within the UK housebuilding
industry. The Board believes that,
historically, the combined UK business
Directors’ Report: Business Review
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Tangible net assets per share
Employee turnover
Objective
To deliver growth in tangible net assets
per share as market conditions allow.
Definition
The net asset value of the Group, as
reported on the consolidated Balance
Sheet, less goodwill and other intangible
assets, divided by the number of shares in
issue at the period end.
Why is it key to our strategy?
The Group must meet its financial
covenants in order to retain access to its
debt funding.
Please note this key performance indicator has been
amended following the Group’s refinancing in December
2010, which removed the requirement to meet the
cash flow covenant test as set out in the previous
financing arrangement.
56.9p
for 2010
Objective
We endeavour to attract and retain the
highest calibre of employees and strive to
be a company that people want to work for.
9%
for 2010
8
.
9
1
1
Definition
The number of employees leaving the
Group (excluding redundancies) expressed
as a percentage of the average number
of employees across the Group during
the year.
6
1
9
.
6
5
9
.
6
4
Why is it key to our strategy?
Having high quality teams in place is
essential to developing communities and
delivering high quality homes that our
customers want to live in, on time and
to budget.
9
6
2008
2009
2010
2008
2009
2010
and North American business have
not had a material overlap nor shared
significant synergies. The Board also
believes that, historically, the UK equity
markets have not fully reflected the
value and contribution of the North
American business.
As previously announced, we received
interest in our North American operations
towards the end of 2010 and have made
progress in evaluating these approaches.
However, there is no guarantee that any
transaction will take place and we will
not recommend a sale of the business
to shareholders unless we consider that
it represents a satisfactory value for our
high quality operations. We will update
the stock market as appropriate in
due course.
People
Our value cycle requires significant
input from skilled people to deliver
quality homes and communities for our
customers. I continue to believe that the
quality of our teams is a key differentiator
for our business and is reflected in the
strength of the performance that we have
delivered together in 2010. I would like
to record my thanks for their ongoing
commitment and hard work, once again.
Corporate responsibility
We remain committed to being a
responsible company and to playing our
part in building increasingly sustainable
homes and communities.
As Group Chief Executive, I take
ownership of the corporate responsibility
agenda at the Board level and oversee the
work of our Sustainability Steering Group.
I also sit on the Confederation of British
Industry’s Climate Change Board, enabling
us to benefit from best practice across a
wide range of industries.
Outlook
In the UK, we have seen a positive start to
2011 with some price increases achieved.
We expect the underlying market to
remain relatively flat over the course of
2011, although we are likely to continue
to see volatility in the national house price
indices from month to month as economic
uncertainty continues and mortgage
lending remains restricted.
The significant long term undersupply of
new housing in the UK persists and we
are committed to working with the UK
government to deliver a planning system
that is capable of supporting an increased
level of supply, whilst recognising the
11
Taylor Wimpey plc Annual Report & Accounts 2010
likelihood of reduced supply during the
transition stage. We will also continue to
work with the mortgage industry to identify
ways of increasing mortgage supply, such
as our recently launched ‘Take5’ product
that uses an insurance-backed guarantee
to provide an affordable 95% mortgage.
In North America, markets appear to have
stabilised and there are signs of increasing
consumer confidence. Affordability levels
remain at record highs and this, combined
with gradually reducing foreclosure levels,
provides the potential for a strong recovery
as confidence returns.
We are evaluating proposals for our North
American business and will update the
market as appropriate in due course.
With a simplified debt structure in place,
we now have significantly greater
operational flexibility and an enhanced
ability to deliver our strategic priorities,
including further margin improvement.
Pete Redfern
Group Chief Executive
Directors’ Report: Business Review
Group Chief Executive’s review continued
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Principal risks and uncertainties
As with any business, Taylor Wimpey faces a number of risks and uncertainties in the course of its
day to day operations. By effectively identifying and managing these risks, we are able to improve
our returns, thereby adding value for shareholders.
Description of risk
Economic and
market environment
Government
regulations and
planning policy
Compliance
with financial
and operational
covenants
Land purchasing
Demand for our homes can be
adversely affected by weakness
in the wider economy. This
includes factors such as
unemployment levels, interest
rates and the availability of
credit, which are outside of the
Group’s control.
Governments issue a wide
variety of requirements for
new housing, particularly in
the UK, covering areas such as
design, quality, sustainability
and product mix.
The UK general election in
2010 resulted in a change
of government and new
planning regulations are
being progressed through
Parliament.
We completed a total
refinancing in December 2010,
which resulted in a standard
set of financial and operational
covenants for our sector.
However, breach of our new
covenants could, in certain
circumstances, lead to a
requirement to repay debt
funding in its entirety.
Purchasing of land that is
poor quality or mis-priced
or purchasing land in
insufficient quantity.
Relevance to strategy
The majority of the homes
that we build are sold to
individual purchasers who
take on significant mortgages
to finance their purchases.
In addition to our short
term land portfolio we have
a strategic land portfolio of
77,060 potential plots in
the UK.
Potential impact on KPIs
Mitigation
As such, customer demand
is extremely sensitive to
economic conditions.
The global economy has
exhibited some volatility
during 2010 arising from
concerns regarding the
sovereign debt of some
countries.
Credit availability and
consumer confidence remain
below normal levels. As a
result, the level of effective
demand for new homes
continues to be significantly
reduced, impacting both
profitability and cash
generation.
Our local teams select the
locations and home designs
that best meet the needs of
the local community and
customer demand.
We continue to evaluate new
outlet openings on the basis
of local market conditions
and regularly review the
pricing and incentives that we
offer. We also minimise the
level of speculative build that
we undertake.
Our ability to obtain the
planning permission required
to develop communities on
this land is dependent on our
ability to meet the relevant
regulatory and planning
requirements.
Inability to obtain suitable
consents could impact on
the number or type of homes
that we are able to build. We
could also be required to
fund higher than anticipated
levels of planning obligations,
or incur additional costs to
meet increased regulatory
requirements. All of these
would have a detrimental
impact on the contribution
per plot.
We consult with the UK
government on upcoming
legislation, both directly and
as a member of industry
groups, to highlight potential
issues. At a local level, our
land specialists work closely
with the relevant planning
authorities, consult with local
communities and structure
purchase agreements to
mitigate such risk.
Our new financial
arrangements no longer
have specific limits on the
level of land spend, but do
set limits on our maximum
level of gearing and specify a
minimum amount of interest
cover by reference to either
operating cash or EBITDA.
These requirements, while
not expected to constrain the
business under reasonably
foreseeable market conditions,
could be compromised under
extreme market conditions.
As our land portfolio is a
relatively illiquid asset in
adverse market conditions,
any requirement to pay back
debt at short notice under
such conditions could lead
to a requirement to sell land
on unfavourable terms, or
potentially cause the business
to fail if sufficient funds cannot
be raised.
Land is the major ‘raw
material’ for the Group, but
the availability of good quality
land at an attractive price is
currently scarce.
Purchasing land of the
appropriate quality on
attractive terms will enhance
the Group’s ability to deliver
strong profit growth as
housing markets recover.
Purchasing poor quality or
mis-priced land would have
a detrimental impact on our
profitability. Purchasing
insufficient land would reduce
the Group’s ability to manage
its portfolio actively and lead
to a shortfall in anticipated
performance.
We monitor our future and
detailed cash requirements
on a monthly basis, which
takes into account land spend
and projected site openings,
together with headroom
to cover contingencies and
unforeseen requirements.
We operate an investment
appraisal process for land
purchases, which ensures
that such projects are subject
to appropriate review and
authorisation, dependent
on the proposed scale
of expenditure.
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Availability of
sub-contractors
Site safety
Construction and
cost management
Ability to attract and
retain high calibre
employees
The difficult operating
environment over the last
three years has resulted in
the failure of some sub-
contractors’ businesses. In
addition, reduced levels
of homebuilding have led
to some skilled tradesmen
leaving the industry to take
jobs in other sectors.
Building sites are inherently
dangerous places and our
management of health and
safety issues is of paramount
importance to us.
Construction work can be
subject to delays and additional
cost for a variety of reasons.
These include adverse ground
conditions, environmental
considerations and adverse
weather conditions.
Recruiting employees with
inadequate skills or in
insufficient numbers, or not
being able to retain key staff.
In order to optimise our build
cost efficiency, whilst retaining
the flexibility to commence
work on new sites as market
conditions allow, the vast
majority of work carried
out on site is performed by
sub-contractors.
Our operations require a large
number of people, ranging
from employees and sub-
contractors to customers and
their families, to visit our sites
each day. We want all of these
people to go home at the end
of the day safe and uninjured.
We build communities in the
UK, the US, Canada and Spain
on a wide variety of different
sites. Potential issues range
from hurricanes in Florida to
extreme cold in Ontario and
from ground contamination
to the presence of protected
wildlife species.
Our value cycle requires
significant input from skilled
people to deliver quality
homes and communities for
our customers.
The challenging market
conditions in recent years
have meant that we have
had to reduce the number of
employees across the Group.
If our sub-contractors are
not able to recruit sufficient
numbers of skilled employees,
the development of our
communities may suffer
from delays or quality issues,
leading to reduced levels of
customer satisfaction. Lack of
skilled sub-contractors could
also result in higher levels of
waste being produced from
our sites.
In addition to the potentially
tragic personal impact of
an accident on site, there is
potential for legal proceedings,
financial penalties,
reputational damage and
delay to the site’s progress.
Construction delays can result
in additional costs to get the
build programme back on
schedule, lead to quality issues
and have an adverse impact on
customer satisfaction.
Additional costs arising from
the construction process
may have an adverse impact
on profit.
Not having the right teams
in place could lead to delays,
quality issues, reduced sales
levels, poor customer care and
reduced profitability.
We vet all suppliers prior
to working with them to
ensure that they meet
our requirements for
environmental impact,
health and safety, quality
and financial stability. We
also work to address the
skills shortage in the industry
through apprenticeship
schemes and the Construction
Industry Training Board.
We have a comprehensive
health, safety and
environmental management
system, which is integral
to our business. This is
supported by our policies and
procedures to ensure that
we live up to our intention of
providing a safe and healthy
working environment.
We monitor both cost and
risk closely throughout the
life of a project, from initial
viability assessment to post-
completion review. This is
achieved through the use of
detailed risk registers and
regular site valuations, which
are reviewed and approved at
the appropriate level.
We monitor employee
turnover levels on a monthly
basis and conduct exit
interviews, as appropriate,
to identify any areas for
improvement. We benchmark
our remuneration against
the industry, have succession
plans in place for key roles
within the Group and
hold regular development
reviews to identify training
requirements.
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Directors’ Report: Business Review
UK Housing
In the current market conditions, we remain focused
on maximising the value from each home completion
rather than looking to grow volumes ahead of
underlying improvements in the market.
UK housing market
We entered 2010 with concerns
regarding ongoing political and economic
uncertainty. The relatively robust market
conditions that we have experienced over
the year proved to be slightly better than
our initial assumptions.
We saw solid demand in the first quarter
of the year, with some underlying price
increases before a slight softening around
the general election in May. Once the
outcome of the election was known, we
saw an improvement and the summer
trading period was slightly ahead of our
expectations. As we moved into autumn,
we saw another softening of demand
as customers awaited the outcome of
the Comprehensive Spending Review
in October. As with the general election,
once the uncertainty had been resolved
we saw an incremental pick-up in sales.
Following a gradual improvement over
the course of 2009, mortgage availability
has remained restricted through 2010.
According to the Bank of England, the
total value of loans approved for house
purchases during 2010 was £80,106
million, a slight increase on the £77,780
million in 2009.
Interest rates remained at an historic low
of 0.5% throughout 2010 and there has
been a gradual increase in the availability
of higher loan-to-value mortgages,
albeit at a significant premium to those
mortgages available to customers with a
bigger deposit.
National house price indices do not
show a clear trend for 2010 following the
annual increases reported for 2009. The
Nationwide House Price Index shows
a rise of 0.4% over 2010 to an average
house price of £162,763. By contrast, the
Halifax House Price Index reports a fall of
1.6% during 2010 to an average house
price of £162,435. Our own sales data
shows a small increase in selling prices
over the course of the first half of 2010,
followed by a marginal reduction in the
second half.
Compared to our own experiences of mix-
adjusted house prices, the national indices
tend to exaggerate the movements
and we would expect this to continue
into 2011.
Industry volumes improved during 2010,
with the housebuilding industry, including
housing associations, starting just over
115,000 homes compared to less than
90,000 in 2009, according to the National
House-Building Council. However, the
quarterly trend has been downwards since
the end of the second quarter of 2010.
Industry volumes remain significantly
below the level of household formations,
with the most recent forecasts of an
average of 232,000 per annum from 2008
to 2033 for England alone.
The level of housebuilding in the UK is a
key focus for the new government and its
Localism Bill was published in December
2010. The bill, which is currently
progressing through the parliamentary
process, is intended to devolve power
for planning decisions to the local
communities that such decisions impact
upon. The government has also published
details of a New Home Bonus scheme,
which is intended to link financial benefits
for local authorities, and by extension
their electorates, to decisions to allow
development of new homes. We support
the government’s intention to reform the
planning system and comment on the
potential impact of the bill in more detail
on page 17.
There has been a variety of reactions
from local authorities to the proposed
changes and we continue to work with the
government to deliver an implementable
system that is capable of supporting an
increase in the supply of new homes.
14
Taylor Wimpey plc Annual Report & Accounts 2010
Pete Redfern
Group Chief Executive
Key market drivers
• Continuing undersupply of new homes
against government projections of
household formation.
• Strong cultural preference towards home
ownership rather than rental.
Market risk factors
• Continuing restrictions on credit
availability.
• Changing economic environment
leading to increasing interest rates or
unemployment.
• First time buyers becoming priced out of
the market.
• Changes in investor sentiment leading to
increased supply in the secondary market.
Taylor Wimpey
operational highlights
• Significant improvement in operating
margin to 7.1% (2009: 0.8%).
• Successful promotion of a 1,500 home
community in Cambuslang, near Glasgow.
• Asset turn increased to 1.1 times (2009:
0.8 times).
Directors’ Report: Business Review
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Strategy
Maximising the value from each home sold through active management of our land portfolio and engaging with planning
authorities and local communities to deliver attractive places to live.
Long term objectives
• Remain focused on margin ahead of volume.
• Grow profitability through active management of
our landbank.
Short term priorities
• Add new plots to the land portfolio that create value.
• Optimise planning consents on each outlet prior to commencing
development and sales.
• Increase the number of plots with optimal planning consents to
• Reduce build costs through continuous improvement in operational
enable us to open more outlets.
efficiency.
• Deliver competitive offers in each local market.
Our UK Housing Key Performance Indicators
Objective
Definition
Contribution per
legal completion
We strive to maximise the level of
contribution per home sold.
Revenue, net of incentives, less
build costs, land costs and direct
selling costs divided by the
number of homes completed.
Why is it key to
our strategy?
In an environment where land
is a scarce resource and volumes
are likely to remain constrained
in the short term, growing the
contribution per legal completion
offers a route to profit growth.
2010
22.9
£22.9k
2009
12.6
2008
16.5
Forward
order book as
a percentage
of completions
In a flat or falling pricing
environment we look to maximise
the level of our order book.
The number of homes in our
year-end order book, expressed
as a percentage of the number
of homes completed during the
year (excluding joint venture
completions).
A strong order book provides
greater stability in business
planning and enhances our ability
to increase the contribution per
legal completion.
Owned and
controlled plots
with planning
We aim to maintain sufficient
land in our portfolio to enable
us to remain selective in future
purchases.
The total number of plots that we
either own or control, with some
form of planning consent.
Having a portfolio of land in place
is key to planning the required
scale of our building operations
for future home completions.
Customer
satisfaction
We strive to maintain and
improve our customer
satisfaction scores.
Health and safety
We want our employees and sub-
contractors to go home safe and
uninjured, day after day.
Percentage of customers
satisfied or very satisfied with
their new home as measured by
the National New Homes survey
undertaken by the NHBC on
behalf of the HBF eight weeks
after legal completions.
Reportable injury frequency rate
per 100,000 hours worked.
Waste generated
per home
We aim to reduce the level of
waste generated per home
each year.
Total tonnage of construction
waste per home built.
Delivering high levels of customer
satisfaction increases the
reputation of our business and
reduces the costs associated with
rectifying poor quality work.
As well as having a moral duty
to maintain safety on site, lapses
can have a detrimental impact on
the business through additional
costs, delays and/or reputational
damage.
As well as having a beneficial
impact on the environment,
reducing waste is a key part of
driving down build cost and
may also assist in winning future
planning consents.
2010
2009
2008
2010
2009
2008
2010
2009
2008
2010
2009
2008
2010
2009
2008
47.2%
47.2
53.6
31.7
63,556
87.1%
0.235
4.35
63,556
66,089
74,917
87.1
87.1
79.4
0.235
0.226
0.296
4.35
4.69
5.11
Risk
The Group’s principal risks and uncertainties are detailed on pages 12 and 13 of this report. The risks that have seen the greatest
change in the UK business during 2010 are:
• Economic and market environment, with uncertainty around the general election in May and the Comprehensive Spending Review in October.
• Government regulations and planning policy, with the new government’s Localism Bill being issued towards the end of 2010.
• Compliance with financial and operational covenants following the completion of the Group’s refinancing in December 2010.
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Directors’ Report: Business Review
UK Housing continued
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Market statistics
Housing starts
115,500
for 2010
(88,100 for 2009)
Mortgage lending (£m)
£80,106m
for 2010
(£77,780m for 2009)
Annual house price increase
0.4%
for 2010
(5.9% increase for 2009)
* Profit on ordinary activities before finance costs,
exceptional items, brand amortisation and tax,
after share of results of joint ventures.
Managing our land portfolio
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Our land strategy is based on managing an investment
portfolio rather than being volume-driven in our
approach to land acquisition.
Our focus is on maintaining a slightly longer portfolio
of land with more strategically sourced plots.
Identifying and purchasing sites that are in the right
location, at the right price, combined with achieving the
best planning consent is central to our land strategy.
Financial review
Revenue from UK Housing was £1,736.6
million (2009: £1,700.4 million), with a
higher average selling price outweighing
the impact of a slight reduction in the
number of home completions. Operating
profit* was £123.0 million, a significant
increase on the £14.3 million achieved
in 2009 and the operating margin has
risen sharply, from 0.8% in 2009 to 7.1%
in 2010.
There are no exceptional items relating to
the UK Housing business during the year
(2009: £452.8 million).
Net operating assets in the UK were
£1,628.6 million (2009: £1,693.1 million).
Sales, completions and pricing
Market conditions in the UK were broadly
flat in comparison to those experienced
in 2009, albeit we saw some softness in
the market around the time of the general
election in May and again at the time of
the Comprehensive Spending Review
in October.
We achieved a net private sales rate per
outlet of 0.51 for the year as a whole
(2009: 0.55) and cancellations remained in
line with the long term average at 18.2%
(2009: 18.7%). We increased our number
of outlets to 301 at the year end from a
low point of 271 in September 2010 and
expect to deliver further growth in outlet
numbers during 2011.
We completed a total of 9,962 homes in
2010 (2009: 10,186), of which 8,103 were
private completions (2009: 8,432), 1,824
were affordable homes (2009: 1,709)
and 35 were our share of joint venture
completions (2009: 45). The overall
average selling price for these completions
was £171k, an increase of 7% over the
2009 equivalent of £160k of which around
two-thirds was mix-related. The average
selling price for private completions
increased to £184k (2009: £171k) and the
affordable average selling price rose to
£116k (2009: £108k).
Our year end order book was 4,684
homes (2009: 5,431), reflecting a slower
sales rate in the second half and our
ongoing strategy of prioritising margin.
The success of this approach is illustrated
by the margins in our order book,
which are significantly higher than the
2009 comparative.
achieved from each home completion
rather than looking to grow volumes
ahead of underlying improvements in
market conditions.
Selecting land
We have a landbank with planning
consent that is equivalent to more than
six years of completions at current levels
and a further 77,060 potential plots in
our strategic landbank. As outlined in my
Group Chief Executive’s review on pages
8 to 13 we view this as an investment
portfolio that we manage actively to create
value for shareholders.
Looking back over the last housing
market cycle in the UK, it is clear that
the industry shifted towards a strategy of
growing profits through growing volumes
as the market picked up from the mid-
1990s through to 2007. This led to land
strategies based on achieving volume
targets and increased the risks inherent
in a cyclical business. The strength of
our existing land portfolio enables us to
target our activity in the land market to
only the best opportunities. We continue
to be highly selective with regard to the
types of sites that we buy, in terms of
location, product mix, anticipated returns
and level of risk. We undertake a series of
thorough reviews of each opportunity at
all levels during the acquisition process.
Only those opportunities that meet our
requirements, including level of return on
capital, operating profit and risk profile, are
submitted for approval.
Having re-entered the land market during
the second half of 2009, we remained
active in 2010. We have seen an
improvement in the availability of attractive
opportunities during the second half of
2010 and have maintained our consistent,
disciplined approach to land acquisition.
During the year, we have approved a total
of 8,713 new plots on 86 new sites (2009:
3,003 plots on 22 sites) with limited use of
deferred payment terms.
Our UK short term land portfolio,
representing owned or controlled land
with planning, or a resolution to grant
planning, stood at 63,556 plots at 31
December 2010 (2009: 66,089 plots). The
average cost per plot in the land portfolio
was £31k at 31 December 2010 on the
basis of allocating all net realisable value
provisions against land value (2009: £30k).
Strategy
In the current market conditions, we
continue to focus on maximising the value
We plan to retain our national coverage,
selecting the best opportunities in each
region to deliver the best returns. Our
16
Taylor Wimpey plc Annual Report & Accounts 2010
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Optimising development value
Our focus on continuous improvement and adding
value at every stage of the process ensures that our
objective of value optimisation is achieved.
We actively manage our land portfolio by reviewing
planning consents prior to starting on site. This allows
us to ensure that the most appropriate product and
layout are selected in terms of both meeting local needs
and building homes efficiently and safely.
of the need to address the substantial
undersupply of new homes in the UK.
However, we do not intend to return to
a volume-driven strategy when market
conditions improve. Our strategy will
remain focused on margin ahead of
volume and we will deliver volumes in a
particular year on the basis of the land
that we have available with optimised
consents, rather than rushing land through
the planning process in order to ‘feed
the machine’.
Therefore, a key consideration in our
strategy going forward will be the new
government’s Localism Bill, which
was published in December 2010 and
is currently progressing through the
parliamentary process. We welcome
the government’s intention to reform the
planning system which, in its current
form, is a brake on the much-needed
supply of new homes. We also believe
that the underlying principle of ensuring
that planning decisions involve the local
people who will be directly affected is
the right one. However, there remains
a significant likelihood that there will be
an unintended reduction in the supply of
new homes during the transition to the
new regulations as planning authorities
get to grips with the changing guidance.
We are continuing to work with the
government and with local authorities to
deliver an implementable system that is
capable of delivering higher levels of new
homes, whilst recognising the challenges
of transition.
We anticipate that, when the bill becomes
law, there will be a greater requirement
for the kind of consultation skills that we
have a strong track record for at large
sites such as Great Western Park, Didcot.
As such, we have internal training and
development programmes underway to
enhance the required communication
and consultation skills across our
Regional teams.
UK Housing landbank
Plots
Detailed planning
Outline planning
Resolution to grant
Subtotal
Allocated strategic
Non-allocated strategic
Total
Owned
33,065
17,130
2,629
52,824
4,917
21,340
79,081
2010
Controlled
1,738
5,358
3,636
10,732
5,265
45,104
61,101
Pipeline
–
654
60
714
–
434
1,148
Total
34,803
23,142
6,325
64,270
10,182
66,878
141,330
2009
Total
37,895
22,427
6,478
66,800
11,584
73,281
151,665
17
Taylor Wimpey plc Annual Report & Accounts 2010
current land strategy is weighted towards
both the south and houses. However,
we believe that a long term strategy with
a sensible mix of sites for all consumer
groups, including first time buyers, and in
all areas where there is significant housing
need will deliver long term returns.
We continue to promote our strategic
land through the planning process and
are pleased to have received planning in
principle for 1,500 homes at Cambuslang
near Glasgow. 22% of our short term land
portfolio was originally sourced without
a planning consent and we expect to
deliver further planning consents from our
strategic portfolio during 2011. At the end
of 2010, 55% of the land within our short
term landbank was fully consented (2009:
57%), which compares favourably with
long term averages.
Optimising development value
We continue to manage our land portfolio
actively. We have made further progress
on our replanning programme and have
now successfully achieved improved
consents on approximately two-thirds
of plots that we had identified as being
suitable for replanning. Successful
replanning brings a wide range of benefits.
For example, a change in the number or
mix of plots can result in an increase in the
overall sales value of the development with
a minimal increase in build costs. Equally,
it may be possible to reduce build cost
through a more efficient layout of homes
reducing infrastructure costs or increasing
the efficiency of the build programme.
We will continue to review the planning
consents that we have on our land
portfolio. For instance, on longer term
sites where we are building out the
first phase we will look to incorporate
feedback from our customers, other local
residents and our own experience on site
to refine the planning consents for future
phases. Equally, as market conditions
change, it may be appropriate to change
the mix of homes in a community prior to
commencing development.
We have focused a significant amount of
time and attention to ensure that every
new site is optimised before opening a
sales outlet. This means having the right
product, layout, cost base and sales
presentation. This has started to add to
margin improvement in late 2010 and early
2011.
We will increase volumes as market
conditions allow and we are mindful
Directors’ Report: Business Review
UK Housing continued
Getting the homebuilding basics right
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We view the basics of homebuilding as continuously
improving operational efficiency, maintaining
health and safety as our non-negotiable top priority,
consideration of the environment when carrying out
our operations and our commitment to the delivery
of high quality homes and communities.
We continue to undertake land sales
where we feel that the price achieved
delivers value and the land does not fit our
strategy or is excess to our requirements.
For the year as a whole, land sales have
generated revenue of £11.4 million (2009:
£47.9 million) with an operating loss of
£2.3 million (2009 loss: £4.1 million).
Product range
We continue to offer a wide range of
products from apartments to five bedroom
houses, with prices ranging from under
£100,000 up to above £500,000. Once
again during 2010, the majority of our
homes were priced within a range from
£100,000 to £200,000.
The number of apartments fell as a
proportion of our overall completions
from 33% in 2009 to 26% in 2010. This
was reflected in a further increase in the
average square footage of our private
completions from 1,003 square feet in
2009 to 1,015 square feet in 2010.
We completed the construction of the
prototypes for our new house type range
during 2010. These prototypes were
visited by representatives from all of
our Regional Business Units, as well as
customer focus groups and the feedback
has been used to refine the designs. The
majority of our new sites will now use
the new house type range and we have
already completed and sold a number
of these homes. We expect to benefit
from additional build cost savings as the
proportion of completions from our new
house types increases.
Getting the homebuilding basics right
Other areas of our business also remain
important, with each having a key role
to play in delivering the value that we
create through our active management of
the landbank.
Health and safety
Health and safety continues to be a
non-negotiable top priority and we have
retained our strong focus through the
changing market conditions. The injury
frequency rate has risen slightly to 0.235
injuries per 100,000 hours worked (2009:
0.226), although it remains below the rate
of 0.296 recorded in 2008. We continue to
target further reductions in 2011.
18
Taylor Wimpey plc Annual Report & Accounts 2010
UK Housing private development
price mix
30
30
17
0
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Price points (£000’s)
Build costs and efficiency
We have made substantial progress on build
cost savings. As previously reported, we
substantially achieved our target of a 10%
reduction in private build costs per square
foot between the first half of 2009 and the
first half of 2010. We are now focused on
delivering further savings in conjunction
with the ongoing work around optimising
planning. We undertake a quarterly review
of all sites, both those which are currently
active and those which have not yet
commenced construction, in order to
identify opportunities for value engineering.
These range from foundation design and the
use of retaining walls to landscaping.
Cash management remains an important
focus. We have made significant progress
with regard to the level of work in progress
on sites during the downturn and we intend
to retain this discipline going forward.
Environment
Reducing waste is not only a responsible
course of action in terms of protecting the
environment, it also contributes towards
lowering build costs. We monitor our
performance in this area closely and have
reduced the level of waste generated per
home by 7% in 2010.
During 2010 we built 570 homes to level
three of the Code for Sustainable Homes.
We also built 923 homes to EcoHomes
standards in 2010, including 191 to
EcoHomes Good, 524 to Very Good and
208 to Excellent.
All homes within our new house type
range will be capable of achieving Code
for Sustainable Homes levels three
and four, and are designed to integrate
renewable energy technologies where
appropriate. We have also already planned
the changes that will be needed to meet
2013 building regulations.
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Quality
We remain committed to delivering high
quality homes for all of our customers.
During 2010, 87.1% of our customers
were satisfied or very satisfied with the
quality of their home (2009: 87.1%).
This is reflected in our performance in the
2010 NHBC (the National House-Building
Council) Pride in the Job Awards, which
are based on build quality. Our UK Site
Managers won 55 Quality Awards,
17 Seals of Excellence and two Regional
Awards (2009: 70 Quality Awards,
16 Seals of Excellence and two
Regional Awards).
Caring about our customers
Sales and marketing
Sales strategy is also a key element of
delivering value. We set prices locally and
make use of a range of targeted customer
incentives to deliver competitive offers in
each local market.
In an environment where mortgage
availability remains constrained, financing
a new home is a key consideration for
many of our customers and, in particular,
first time buyers. Although shared equity
products (where we retain a stake in the
customer’s home which is repaid in the
future) are popular with customers, we
continue to use them sparingly. We prefer
to use other products that assist first
time buyers, such as our ‘Friends and
Family Advantage’ product, which allows
others to contribute towards a first time
buyer’s deposit and earn interest on their
money. We have recently launched our
‘Take5’ 95% mortgage product, which
uses an insurance-backed guarantee to
provide an affordable source of funding
for first time buyers. The success of our
approach is highlighted by the fact that
29% of our sales in 2010 were to first
time buyers (2009: 30%).
We continue to develop our on-line
capabilities and have introduced a
number of new features to our Web site
(www.taylorwimpey.co.uk) including the
ability to book appointments at any of our
outlets. We also have a mobile version of
the site available at m.taylorwimpey.co.uk.
Customer satisfaction
We continue to measure customer
satisfaction using two surveys. The
first is the National New Homes survey
undertaken by NHBC on behalf of HBF
(the Home Builders Federation). Each of
our customers is sent a survey eight weeks
after their legal completion date. The
second survey is the NHBC’s own survey
measuring the same elements but sent to
customers nine months after completion.
These surveys have become a key part
of our Customer Service Management
(CSM) system and are used to identify
opportunities for further improvement.
Current trading
Constrained mortgage lending and
the continuing uncertainty in the wider
UK economic environment remain the
greatest restrictions on the market and we
continue to run the business cautiously.
We expect to make further progress in
2011 with regard to build cost reduction
and enhancing the value within our land
portfolio. We have been encouraged by
the enhanced sales rates, sales prices and
margins that we are achieving on recent
outlet openings, whether new acquisitions
or from the existing land portfolio. Our
focus remains on maximising margins
rather than volume growth and we remain
on track to achieve our target of double-
digit operating margins in 2012, subject to
continuing stable market conditions.
Caring about our customers
Understanding our customers’ needs and guiding them
through the process of buying their Taylor Wimpey
home is fundamental to our customer care approach.
We have recently launched our ‘Take5’ 95% mortgage
product to provide an affordable source of funding for
first time buyers.
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Directors’ Report: Business Review
North America Housing
Our combination of successful land investment,
efficient build processes, tightly controlled overhead
costs and strong customer focus positions us well for
recovery in the US.
North America housing market
As I highlighted in the market risk factors
of my report last year, the US Federal
Government’s Homebuyer Tax Credit was
withdrawn at the end of April 2010. As
expected this led to volatility in the US
housing market, with homebuyers who
might otherwise have purchased later in
the year accelerating their decisions in
order to qualify.
As a result, after an encouraging first
quarter, the US housing market softened
in the second quarter and into the third
quarter. We saw stability at lower levels as
the autumn progressed and this stability
continued through the fourth quarter
of 2010.
Looking beyond the distorting impact of
the Homebuyer Tax Credit, the underlying
position remains encouraging. California,
Texas and Florida remain three of the
top four States by population in the US
and Texas, Colorado and Arizona remain
amongst the fastest growing States
by population.
Affordability levels remain exceptionally
good, and have increased in many of our
markets. The affordability ratio (which
represents the percentage of households
that can afford to buy the median price
home) is now above 60% in California,
which is traditionally the least affordable of
our markets. Affordability levels are above
70% in both Texas and Colorado, and
above 80% in both Florida and Arizona.
Delinquency levels, which reflect the
number of mortgages in arrears by
more than 60 days are also showing an
encouraging trend in many of our markets.
The data shows sharp falls in Texas,
California and Colorado, with the level
remaining broadly flat in Arizona and rising
in Florida. However, legal challenges in a
number of States relating to foreclosure
procedures employed by banks led to
a number of moratoria on foreclosures
and potential distortions in the trend. Due
to the more conservative approach to
mortgage lending in Canada, the market
there does not suffer from the risk of rising
foreclosure levels.
Construction starts have stabilised at
low levels, with the number of new single
family homes started in 2010 estimated
at 470,900, slightly up on the 2009 level
of 445,100, but significantly below the
622,000 starts in 2008. Despite the low
level of starts, inventory levels have risen in
all of our markets.
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Sheryl Palmer
President and CEO, North America Housing
Key market drivers
• Cessation of Homebuyer Tax Credit
programme distorted sales patterns
during 2010.
• Record levels of affordability in
some markets.
• Widespread geographical variation
in house price trends.
Market risk factors
• Continuing restrictions on credit
availability.
• Changing economic environment
leading to increasing interest rates or
unemployment.
• Increased levels of foreclosures.
• Increasing levels of inventory in some
markets.
• Impact of government actions on
mortgage interest deduction, mortgage
regulation and government sponsored
enterprises such as Freddie Mac.
• Interest rate rises in Canada impacting
on affordability.
Taylor Morrison
operational highlights
• 44% of our land portfolio is finished lots,
which do not need further development.
• Sites acquired in 2008-2010
performing strongly.
• Increased asset turn to 1.5 times
(2009: 1.3 times).
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Taylor Wimpey plc Annual Report & Accounts 2010
Directors’ Report: Business Review
Our North America Housing strategy
Our North America strategy is focused on maximising value from each home sold through pricing, build cost reduction and selective
land purchasing.
Long term objectives
• Grow volumes through taking advantage of targeted land
acquisition opportunities.
Short term priorities
• Drive sensible sales rates for each site.
• Retain build cost and overhead savings.
• Maintain reduced level of investment in land and work in progress
spend where appropriate.
• Grow market share in our key markets.
Our North America Housing Key Performance Indicators
Objective
Definition
Contribution per
legal completion
We strive to maximise the level of
contribution per home sold.
Revenue, net of incentives, less build
costs, land costs and direct selling
costs divided by the number of homes
completed.
Why is it key to
our strategy?
In an environment where
volumes are likely to remain
constrained in the short term,
growing the contribution per
legal completion offers a route to
profit growth.
Forward
order book as
a percentage
of completions
In a flat or falling pricing
environment we look to maximise
the level of our order book.
The number of homes in our year end
order book, expressed as a percentage
of the number of homes completed
during the year (excluding joint
venture completions).
A strong order book provides
greater stability in business
planning and enhances our ability
to increase the contribution per
legal completion.
Owned and
controlled plots
with planning
We aim to maintain sufficient
land in our portfolio to enable
us to remain selective in future
purchases.
The total number of plots that we
either own or control, with some form
of planning consent.
Having a portfolio of land in place
is key to planning the required
scale of our building operations
for future home completions.
Customer
satisfaction
We strive to maintain and
improve our customer
satisfaction scores.
Total homebuyer satisfaction
score out of a possible 100 points
as measured by customer surveys
undertaken by AVID Advisors, a
customer loyalty management firm
that works with homebuilders across
the United States and Canada.
Delivering high levels of customer
satisfaction enhances our
reputation, reduces selling costs
by increasing customer referrals
and reduces the costs associated
with rectifying poor quality work.
2010
2009
2008
2010
2009
2008
2010
2009
2008
2010
2009
2008
31.8
£31.8k
22.0
23.9
66.6
67.6
51.4
30,262
29,062
29,178
88.0
86.6
85.4
66.6%
30,262
88.0
Health and safety
We want our employees and
sub-contractors to go home safe
and uninjured day after day.
Reportable injury frequency rate per
100,000 hours worked, excluding
sub-contractors.
As well as having a moral duty
to maintain safety on site,
lapses can have a detrimental
impact on the business through
additional costs, delays and/or
reputational damage.
2010
0.057
0.057
2009
0.210
2008
0.041
Environmental
performance
Environmental legislation varies across the different regions in which we operate in North America.
Environmental management is tackled at a Divisional level and there is no consistent metric which reflects our
approach across the business.
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Risk
The Group’s principal risks and uncertainties are detailed on pages 12 and 13 of this report. The risks that have seen the greatest
change in the North America business during 2010 are:
• Economic and market environment, with volatility resulting from the cessation of the Homebuyer Tax Credit programme.
• Land purchasing, as the demand for developed lots has continued to increase as homebuilders look to replenish their inventory.
• Ability to attract and retain high calibre employees, as the competition for talented employees will intensify as the market recovers and given
widespread speculation about the potential sale of the business.
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Taylor Wimpey plc Annual Report & Accounts 2010
Directors’ Report: Business Review
North America Housing continued
Selecting land
We utilise the skills and local market knowledge of our
Divisional teams in selecting the most appropriate land
investments for our portfolio.
We are selective, rather than being volume driven, in
our approach and focus on high quality sites in our core
locations. We have a track record of investing in larger
development communities.
We benefit from a strong reputation as a good partner
and relationship based land buyer.
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* Profit on ordinary activities before finance costs,
exceptional items, brand amortisation and tax, after
share of results of joint ventures.
The Case-Shiller Home Price Indices
show price falls for the year across many
metropolitan areas, although there continues
to be widespread geographical variation.
Markets in California show price increases
over the year, but declines are recorded for
Colorado, Florida, Texas and Arizona.
Market conditions in Canada remain
strong, assisted by the more robust
economic environment. House prices in
both Toronto and Ottawa show continued
growth over the course of 2010 and
housing starts have also increased.
Financial review
Our North American Housing operations
generated revenue of £835.6 million
(2009: £824.3 million), with the reduction
in home completions being offset by
increased average selling prices driven by
mix changes in the US and price growth
in Canada.
Operating profit* was £93.8 million (2009:
£48.1 million), with strong growth being
delivered in both the US and Canada.
The operating margin also rose sharply to
11.2% from 5.8% in 2009.
Exceptional items were £7.5 million (2009:
£79.8 million). We conducted regular
reviews of the carrying value of our land
portfolio during 2010 and have recorded
further write-downs of £7.5 million at the
year end, primarily relating to a specific
long term site in California.
Net operating assets in North America
were £612.7 million (2009: £558.1 million).
Sales, completions and pricing
We had an average of 149 active outlets
during 2010 (2009: 172), with outlet
numbers broadly stable since the start of
the year after the reduction in 2009.
Net reservation rates for North America
as a whole were 0.47 per outlet per
week (2009: 0.60). Sales rates in Canada
remain very strong, while in the US we
saw improvements in the latter part of the
year as the impact of the cessation of the
Homebuyer Tax Credit diminished. The
cancellation rate for North America as a
whole was 15%, in line with the long term
average (2009: 15%).
We completed a total of 4,140 homes
in North America (2009: 4,755). Of this
total, 2,570 completions were in the US
(2009: 3,347) and 1,570 completions
were delivered in Canada (2009: 1,408).
We achieved an average selling price of
US$274k (2009: US$255k) in the US and
C$374k in Canada (2009: C$347k).
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Taylor Wimpey plc Annual Report & Accounts 2010
Our North America order book was 2,756
homes at the year end (2009: 3,216).
Strategy
Our operational strategy in North America
remains unchanged. We remain focused
on cost reductions and cash management,
whilst enhancing the inherent value in
existing land positions and continuing our
targeted programme of land acquisitions.
Selecting land
Locating and vetting suitable land
positions is the most critical challenge for
our business. We have adopted a portfolio
management approach to our land
investment decisions, allocating capital to
each division on the basis of anticipated
market and economic dynamics in each
Divisional area and taking into account
supply and demand in the targeted
customer segments.
We utilise the skills and local market
knowledge of our Divisional teams in
selecting the most appropriate land
investments for our portfolio. Where
opportunities are identified, we undertake
a rigorous appraisal process, prioritising
an appropriate margin to reflect the relative
risk and timing of return of the project.
All land investment decisions are taken by
Taylor Morrison’s Investment Committee,
with large-scale deals referred to the
Group’s Board for approval. We approved
new land purchase commitments
for 4,706 plots during 2010 (2009:
4,217 plots) focusing on longer term
opportunities in attractive sub-markets.
We now own or control a total of 30,262
plots in North America (2009: 29,062)
with an average cost per plot, excluding
development costs, of US$15.3k
(2009: US$15.1k).
Optimising development value
Our expertise in planning and developing
large-scale communities in both the
US and Canada, distinguishes us from
our peer group. Our land development
operations enable us to identify the plots
in a community that best suit our homes
and then sell the other plots as finished
lots to other homebuilders. Managing the
development also enables us to contain
costs and deliver lots at the right time for the
needs of our homebuilding operations and
gives us greater control of our land pipeline.
The recent market downturn has resulted
in a significant improvement in the
entitlement, planning and development
process as a result of the lower volume
Directors’ Report: Business Review
Optimising development value
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Our land development operations enable us to identify
the plots in a community that best suit our homes.
Managing the development also enables us to contain
costs and deliver lots at the right time for the needs
of our homebuilding operations and gives us greater
control of our land portfolio.
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Getting the homebuilding basics right
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We continue to focus on operational efficiencies
including maintaining tight control on build costs and
work in progress.
Importantly our efficiency initiatives are not at the
expense of quality. We continue to strengthen the
reputation of our business in North America, receiving
further recognition during 2010.
of applications. For entitlements, most
regulatory and municipal agencies
have shown a marked decrease in their
review and processing times. In addition,
agencies in the US have shown both
flexibility and creativity in reviewing
entitlement applications.
Equally, the lower level of activity in the
land development industry has created
similar benefits. The timelines associated
with the main land development
processes have reduced as a result of
greater availability of sub-contractors and
the costs have reduced significantly.
Of the 25,790 owned plots in our land
portfolio, approximately 41% are now raw
lots that we will develop prior to building
homes (2009: 32%). A further 44% of our
owned plots are now at the finished lot
stage, with no further development work
required (2009: 46%).
Product range
We continue to offer a wide range of
homes to our customers in North America,
ranging from entry level to luxury homes.
Our product range includes high-rise
condominiums, single family homes,
townhomes and full service country club
communities. At present our only active
and upcoming high-rise projects are in the
Canadian market.
We strive to maintain a wide range of
products and price levels within our
homebuilding activities, in order to
expand our reach across a wide range of
potential customers.
Our US homebuilding operations trade
under the Taylor Morrison brand and our
Canadian business trades under the long-
standing Monarch brand.
Getting the homebuilding basics right
Health and safety
Health and safety continues to be a
non-negotiable top priority. In 2010
Taylor Morrison was named runner up
in the prestigious National Association
of Homebuilders 2009 Safety Award for
Excellence. During 2010, we reduced
the total number of accidents by 37%,
achieving an incident rate reduction
from 0.210 to 0.057 per 100,000 hours
worked. In addition, trade partner
accidents reduced from 21 to 15 in 2010.
Build costs and efficiency
We are continually looking for ways to
reduce build costs and increase efficiency.
During 2010 we began providing our
construction superintendents (the
equivalent of a UK site manager) with
handheld mobile devices for scheduling,
which has improved efficiency. We
have extended the roll-out of our ‘lean
manufacturing’ approach to our Denver
Division in 2010 and will complete the
roll-out in 2011 when it is introduced in
our West Florida Division. This approach
focuses on identifying and eliminating
construction waste in conjunction with our
trade and supplier partners.
Quality
Importantly these initiatives are not at
the expense of quality and we continue
to strengthen the reputation of our
business in North America, receiving
further recognition during 2010. For
example, Taylor Morrison was named
Volume Builder of the Year in the Greater
Houston Builders Association’s Houston
Best Awards Show and our Evergreen
Community in Toronto won awards for
building innovation and excellence at the
EnerQuality Awards for Excellence.
Environment
Many of our communities are designed
to co-exist with the natural habitat. This
is particularly the case in areas such
as Florida, where there are threatened
species or fragile ecosystems that
need protection.
Caring about our customers
Sales and marketing
Our approach to sales and marketing
utilises a balanced approach of
central support and local expertise to
attract potential homebuyers to our
communities. The central team provides
a consistent marketing framework as
well as comprehensive sales training to
local teams. Our local teams utilise local
media and marketing streams to deliver
the unique message most relevant to the
targeted customer group.
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North America Housing continued
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Our Web sites, www.taylormorrison.com
and www.monarchgroup.net are key
elements of our sales and marketing
activities. The ultimate purpose of these
Web sites is to direct those potential
customers with a high probability of
purchasing a home to the sales team at
one of our communities. Customers are
also able to make inquiries and receive a
prompt response from one of our ‘Internet
Home Consultants’.
Customer satisfaction
During 2010 we developed ‘Homeward
Bound’, a comprehensive guide to
purchasing one of our homes, which is
personalised for each customer.
Our customer surveys in 2010 were
undertaken by AVID Advisors, a
customer loyalty firm that works with
homebuilders across the US and Canada.
We are delighted to have improved
our performance in 2010, both against
our 2009 score and against the wider
industry benchmark. We achieved a score
of 88 with respect to total homebuyer
satisfaction (2009: 86.6) against an
industry average of 85 (2009: 83.8).
Monarch was ranked best housebuilder
for customer satisfaction in Ottawa for the
second year running by market research
specialists JD Power.
Current trading
In the US, markets appear to have
stabilised and there are signs of increasing
consumer confidence. Affordability
remains at excellent levels in the US
and, combined with gradually reducing
foreclosure levels, provides the potential
for a strong recovery as confidence grows.
Our combination of successful land
investment, efficient build processes,
tightly controlled overhead costs and
strong customer focus positions us well
for recovery in the US.
We strive to maintain a
wide range of products
and price levels within our
homebuilding activities, in
order to expand our reach
across a wide range of
potential customers.
Caring about our customers
We are delighted to have improved our customer
survey performance scores in 2010, both against our
2009 score and against the wider industry benchmark.
We expect market conditions in Canada to
remain robust for the foreseeable future.
Monarch was ranked best housebuilder for customer
satisfaction in Ottawa for the second year running by
market research specialists JD Power.
24
Taylor Wimpey plc Annual Report & Accounts 2010
Directors’ Report: Business Review
Spain and Gibraltar Housing
Market conditions are likely to remain challenging
in Spain during 2011. We are reviewing our strategy
for the business and expect to take a more aggressive
approach to driving sales rates.
Our Spain and Gibraltar Housing business at a glance
Our Spain Housing strategy
• Deliver high quality homes in popular locations that appeal to both foreign and Spanish buyers
• Focus on cash generation and cost reduction
• Remain cautious on land purchasing at the current point in the market cycle.
Javier Ballester
Managing Director, Spain
Order book volume as a percentage of completions
Owned and controlled plots with planning
Customer satisfaction
Health and safety (Spain)*
* Please note that the injury frequency rate for Spain equates to just three incidents in 2009 and a further three incidents in 2010
2010
36.8%
1,783
92%
0.786
2009
20.0%
1,901
98%
0.481
Performance
We have completed 136 homes in
Spain and Gibraltar in 2010 (2009: 225),
including the final home completions from
our Gibraltar business.
The average selling price of our 2010
home completions was £214k (2009:
£260k), reflecting the change in the mix of
our Gibraltar completions.
Revenue was £31.1 million in 2010 (2009:
£61.0 million), as a result of the reduction
in both completions and average selling
price. Operating loss* was £3.6 million
(2009 loss: £1.4 million) as a result of the
ongoing market weakness.
We have reduced the number of plots
in our land portfolio over the course of
the year as we remain cautious in our
approach to new land purchases. We
owned or controlled 1,783 plots at 31
December 2010 (2009: 1,901).
Our year end order book was 50 homes
(2009: 45).
We have undertaken further reviews of the
carrying value of our land portfolio in Spain
and have recorded a further write down of
£17.3 million (2009: £3.3 million).
We have now completed our exit from the
Gibraltar market.
Current trading
We have seen an improved level of interest
from overseas buyers during the early
part of 2011, with increased levels of
Web site traffic, telephone enquiries and
reservations. However, the local market
remains weak, with reduced sales to
Spanish buyers.
Market conditions are likely to remain
challenging in Spain during 2011. We are
reviewing our strategy for the business
and expect to take a more aggressive
approach to driving sales rates.
Spain Housing
market at a glance
Key drivers
• Continuing oversupply of properties
on mainland Spain.
• Continued restrictions on mortgage
availability.
• Ongoing weakness of Sterling against
the Euro.
• Economic uncertainty resulting in
reduced consumer confidence.
* Loss on ordinary activities before finance costs,
exceptional items, brand amortisation and tax, after share
of results of joint ventures.
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Directors’ Report: Business Review
Our Corporate Responsibility approach
As a major homebuilder we have social, ethical,
environmental and economic responsibilities
that we take extremely seriously.
Highlights from the 2010 Corporate Responsibility Report
Achievements in 2010
Our Raploch development in Scotland won a series of awards for community
engagement and skills and training at the Homes for Scotland Quality Awards
and the Scottish Home Awards.
Monarch Corporation was ranked best housebuilder for customer satisfaction
in Ottawa by JD Power and named 2010 Home Builder of the Year by the
Building Industry and Land Development Association.
Taylor Morrison was named Volume Builder of the Year and received a total
of 19 awards in the Greater Houston Builders Association’s Houston Best
Awards Show.
Site manager Mike Crawford came second in the large category of the Supreme
Winners Awards at the NHBC Pride in the Job Awards. We received a total of
two Regional Awards, 17 Seals of Excellence and 55 Quality Awards.
Our groundbreaking Evergreen community in Toronto, Canada won awards
for building innovation and excellence as well as green marketing at the
EnerQuality Awards for Excellence.
With our consortium partners, we received outline planning permission for
Cranbrook, a major new low carbon urban settlement near Exeter in Devon.
Building will start in 2012.
We developed a UK Waste and Resources Strategy and Action Plan in
2010 after an in-depth analysis of all waste streams identified significant
opportunities for cost savings and environmental benefits from improved
resource use.
We completed the first prototypes of our new UK house type range
during 2010 and undertook research to explore consumer perceptions
of the new range.
For more information see our online CR report
www.taylorwimpeyplc.com/CorporateResponsibility/CRreports
26
Taylor Wimpey plc Annual Report & Accounts 2010
We believe that addressing corporate
responsibility makes sound financial sense
for our Company and is an essential part
of good governance. Our 2010 Corporate
Responsibility (CR) Report sets out our
approach to and performance on the wide
range of CR issues that are relevant to
our business. An overview of the report is
provided below.
What we do
The report reviews our approach to
CR in three sections. The first section
looks at our overall response to CR and
sustainability. This includes details on
our CR and sustainability management
structure, identification of risks and
opportunities, stakeholder management
and our response to climate change.
Our homes and communities
The second section focuses on our
commitment to building sustainable
homes and communities and our aim to
achieve high levels of build quality and
customer care. The key areas of focus
in this section are design, engaging with
communities, environmental sustainability,
enhancing economic growth and
customer care.
Design
We strive to build appealing and affordable
homes and to create communities where
our customers will enjoy living. Design is
about architecture and landscape, but it
is also about environmental, social and
economic sustainability. There is a wide
range of issues that we consider when
designing communities.
Engaging with communities
We seek to be a good neighbour and
to engage with local communities and
other stakeholder groups. Community
consultation is an important part of the
planning process for UK housebuilding
and will become even more significant
with the government’s new Localism
Bill. We have a strong track record of
consultation when developing larger
scale communities, such as our Raploch
development in Stirling, Scotland and
we are ensuring that this knowledge
and expertise is transferred across our
Directors’ Report: Business Review
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Stakeholder engagement
We aim to be a responsible homebuilder
and to listen to the opinions and ideas
of our stakeholders. We have identified
our stakeholders as:
• Investors
• Customers
• Employees
• Residents and other groups in the
communities in which we operate
• Suppliers, sub-contractors and other
business partners
• Local, regional and national government
• Landowners and land agents
• Planners and regulators
• Housing associations
• Trade associations and industry bodies
• Charities, NGOs and other groups
interested in sustainable homes and
communities
We regularly and proactively engage with
our stakeholder groups and maintain an
extremely thorough investor relations
programme. Members of our senior
management team represent the Company
on a wide range of government, industry and
other committees and steering groups.
Further information
We value feedback and welcome
comments on our Corporate
Responsibility Report or any
aspect of our approach to
corporate responsibility.
Please e-mail us at:
CRreport@taylorwimpey.com
Or write to:
The Group Company Secretary
Taylor Wimpey plc
80 New Bond Street
London
W1S 1SB
On 28 March 2011 the Company’s
Registered Office will move to
Gate House, Turnpike Road,
High Wycombe, Buckinghamshire,
HP12 3NR.
Visit our Web site
www.taylorwimpeyplc.com
/CorporateResponsibility/CRreports
business. We want to be an organisation
which listens, responds and ultimately
delivers local requirements in the most
appropriate way.
Environmental sustainability
We have a strong track record in
delivering energy efficient homes and
communities with a wide range of
sustainability features. As a Company, we
are committed to building energy efficient
and sustainable homes and communities.
We engage regularly with government,
industry bodies and other organisations
with regard to sustainability issues. We are
in dialogue with these stakeholder groups
about the financial viability, technical
feasibility and other implications of the
Code for Sustainable Homes. Our aim is
to help government to create practical and
achievable policies that increase energy
efficiency and lower carbon emissions.
Having undertaken considerable research
into delivering energy efficient homes, we
believe that a ‘fabric first’ solution is the
most practical and affordable approach.
This means focusing on improving the
energy efficiency of the building fabric –
an area in which we have considerable
expertise – before considering on site
renewable energy.
Enhancing economic growth
We recruit the majority of our office and
site workers from the areas in which
we operate. In the UK, we also provide
affordable housing and contribute
significant sums to infrastructure and
community facilities through planning
obligations. We are involved in a range of
regeneration schemes that are creating
vibrant new communities on formerly
rundown or disused land. In addition,
our larger developments integrate retail
and office space that provide additional
employment opportunities for local people.
Customer care
We focus on continually improving our
standards of customer care and our
customer experience. One key area for
the UK in 2010 was ensuring compliance
with the Consumer Code. All relevant
employees, including Board members,
attended a detailed one day briefing
session. We also set up an induction
programme for new employees and are
monitoring compliance with the Code.
The way we work
The third section looks at the way we
manage our business in the areas
of human resources, health, safety
and environment and supply chain
management.
Employees
We seek to develop our employees’
potential and help them to progress
through our Company. We strive to treat
employees fairly and with respect, and to
provide a safe place for them to work. We
seek to identify and develop their skills
and talents, further improving the already
high calibre of our workforce.
Health, safety and environment
We are committed to providing a safe
place in which our employees and
sub-contractors can work and to high
standards of environmental management.
During 2010, we maintained our focus
on health and safety and it continues
to be a non-negotiable top priority for
our Group. We also take environmental
issues extremely seriously. We have
a comprehensive and fully integrated
health, safety and environmental (HSE)
management system in place in the
UK. In North America, Taylor Morrison
has a company-wide health and
safety programme while environmental
management is tackled at a Divisional level
due to differences in regional legislation.
Supply chain management
Suppliers and sub-contractors play
a vital role in helping us to build high
quality homes and communities for
our customers. We strive to work in
partnership with our suppliers and sub-
contractors, and to treat them fairly and
with respect. We aim to do business with
those who understand and aspire to our
business aims and values
The 2010 report is our fourth annual
CR Report as Taylor Wimpey plc. It
demonstrates our work and achievements
during the period from 1 January to
31 December 2010 and the full report
is available online from 30 March 2011
at http://www.taylorwimpeyplc.com/
CorporateResponsibility/CRreports/
27
Taylor Wimpey plc Annual Report & Accounts 2010
Group summary
The Group made significant progress
during the year, both operationally and
in strengthening of the balance sheet.
We have:
• returned to profit before tax and
exceptional items;
• reduced the level of year end net debt
by £96 million despite exceptional one-
off payments of £187 million; and
• completed a total refinancing which
delivers a simplified debt structure with
extended maturity of 3.5 years, and
provides the Group with the operational
flexibility that it requires.
We have reduced the level of the Group’s
pension deficit and have recognised
£300 million of deferred tax assets in
the UK at the year end due to the
return to profitability of our UK Housing
business and the more stable market
outlook. As a result, the Group’s net
asset value per share has risen from
46.9 pence at the end of 2009 to 56.9
pence at 31 December 2010.
Group results
The Group generated revenue of £2,603.3
million in 2010 (2009: £2,595.6 million)
from total completions of 14,238 homes
(2009: 15,166). We remain focused on
prioritising margin ahead of volume growth
and, although home completions fell in
both the UK and North America, this was
offset by growth in average selling prices.
Gross profit of £363.9 million (2009:
£230.2 million) includes a positive
contribution of £122.4 million (2009:
£59.6 million), relating to realisation of
written down inventory above its originally
estimated net realisable value, where the
combination of selling prices and cost,
or mix improvements have exceeded
our original market assumptions. These
amounts are stated before the allocation
of overhead excluded from the Group’s
net realisable value exercise.
Group operating profit* was £194.1 million
(2009: £43.3 million), representing a
Group operating margin* of 7.5% (2009:
1.7%). Financial performance has been
strong across all of our main markets,
with profit growth achieved in the UK, US
and Canada. £79.3 million of the Group’s
operating profit* was delivered in the first
half of the year and £114.8 million was
recorded in the second half.
Directors’ Report: Business Review
Group financial review
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The Group
made significant
progress during
the year, both
operationally and
in strengthening of
the balance sheet.
Financial summary
Adjusted profit per share
0.6p
for 2010
(4.3p loss for 2009)
Tangible net assets per share
56.9p
at 31 December 2010
(46.9p at 31 December 2009)
Net debt
£654.5m
at 31 December 2010
(£750.9m at 31 December 2009)
* Profit on ordinary activities before finance costs,
exceptional items, brand amortisation and tax, after share
of results of joint ventures.
28
Taylor Wimpey plc Annual Report & Accounts 2010
Ryan Mangold Group Finance Director
The operating profit* for the year includes
£12.0 million relating to a one-off pension
curtailment credit arising from the closure
of the UK George Wimpey Staff Pension
Scheme to future accrual in August 2010.
In addition, there is a £0.6 million pension
curtailment credit arising in respect of the
US pension scheme.
UK Housing
We completed a total of 9,962 homes
in the UK in 2010 (2009: 10,186) at an
average selling price of £171k (2009:
£160k) as we continued to prioritise
margin ahead of volume. We delivered a
significant growth in operating profit* to
£123.0 million (2009: £14.3 million) and in
operating margin* to 7.1% (2009: 0.8%).
The 2010 result includes a one-off pension
curtailment credit of £12.0 million arising
from the closure of the George Wimpey
Staff Pension Scheme to future accrual in
August 2010.
North America Housing
In North America, we completed a total
of 4,140 homes (2009: 4,755), of which
2,570 were in the US (2009: 3,347) and
1,570 were in Canada (2009: 1,408).
Average selling prices rose in both
markets, with an average selling price of
£178k in the US (2009: £161k) and £236k
in Canada (2009: £195k). Revenue totalled
£835.6 million (2009: £824.3 million).
Operating profit for North America as a
whole was £93.8 million (2009: £48.1
million) of which £18.4 million was
delivered in the US (2009 loss: £6.8
million) and £75.4 million was achieved
in Canada (2009: £54.9 million). The
operating margin for North America overall
was 11.2% (2009: 5.8%). The 2010 result
includes a one-off pension curtailment
credit of £0.6 million arising in respect of
the US pension scheme.
Spain and Gibraltar Housing
We completed 136 homes in Spain and
Gibraltar in 2010 (2009: 225), including
the final home completions from our
Gibraltar business. The average selling
price of these completions was £214k
(2009: £260k). Revenue was £31.1 million
(2009: £61.0 million) and we recorded an
operating loss* of £3.6 million (2009 loss:
£1.4 million).
Net finance costs
Pre-exceptional finance costs totalled
£119.0 million (2009: £139.4 million), net
of £3.8 million of interest receivable (2009:
£10.6 million).
Financial highlights
• Refinancing completed.
• Return to profit before tax and exceptional items.
• Growth in operating margins in both the UK and North America.
• Net asset value per share increased to 57p (2009: 47p).
• Pension deficit reduced to £248.5m (2009: £406.4m).
Group results
Completions
Revenue
Operating profit/(loss)* (£m)
Operating margin*
UK
Housing
9,962
1,736.6
123.0
7.1%
North
America
Housing
4,140
835.6
93.8
11.2%
Spain
& Gibraltar
Housing
136
31.1
(3.6)
(11.6)%
Corporate
–
–
(19.1)
–
Consolidated
14,238
2,603.3
194.1
7.5%
Profit before tax and before exceptional items (£m)
Exceptional items (£m)
Loss before tax (£m)
Tax including exceptional credit (£m)
Profit for the year (£m)
Adjusted earnings per share (p)
Dividends per share
75.1
(146.4)
(71.3)
330.6
259.3
0.6
nil
29
Taylor Wimpey plc Annual Report & Accounts 2010
Directors’ Report: Business Review
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The main component of this charge is
interest on borrowings from financial
institutions of £85.8 million (2009: £109.1
million). This reduction reflects the lower
average net debt level of the Group during
2010 of £667.5 million (2009: £1,245.2
million), reflecting the cash generation
of the business and the benefit of a full
year’s impact of the 2009 Placing and
Open Offer.
Other items included in finance costs are
a net pension interest charge of £23.4
million (2009: £34.3 million), a mark-to-
market loss on derivatives of £4.6 million
(2009 gain: £11.8 million), and a total
imputed interest charge for land creditors
of £9.0 million (2009: £18.4 million).
Exceptional items
The majority of the Group’s pre-tax
exceptional items of £146.4 million
relate to the costs associated with the
refinancing of the Group’s debt facilities in
December 2010. We incurred exceptional
interest breakage charges of £83.4 million
(2009: £23.1 million) and exceptional bank
and professional fees of £31.7 million
(2009: £44.8 million).
The remaining charge is primarily related
to write downs arising from the Group
undertaking a further review of the carrying
value of its land and work in progress
assets at the year end. We recorded
further write downs of £7.5 million in
North America, primarily relating to a
specific long term site in California (2009:
£78.7 million) and £17.3 million in Spain,
where the market remains weak (2009:
£3.3 million). There were no write downs
required in the UK (2009: £445.0 million).
Other exceptional items charged to profit
before tax in 2010 were £6.5 million
arising from a review of strategic options
with regard to the North America Housing
business (2009: £8.9 million relating to
restructuring of the UK Housing business).
Further detail on these exceptional items
are set out in Note 5 to the consolidated
financial statements.
Tax
We incurred a pre-exceptional tax charge
of £55.3 million which includes two
main components. Firstly, our Canadian
operations continue to be profit making
and therefore subject to cash tax.
Secondly, there are tax charges arising
from the significant movement in the UK
pensions deficit of which £30.6 million
was charged to the profit and loss
account and £15.9 million was adjusted
Our priorities for 2011
• Ongoing focus on asset turn improvement
and working capital efficiency.
• Focus on overheads to improve
operating margins.
• Roll-out of a new IT system across the
UK business.
• Continuing our review of options to reduce
the volatility of the pension scheme deficit.
Year end net debt levels
reduced from £750.9
million in 2009 to £654.5
million in 2010, a decrease
of £96.4 million.
Directors’ Report: Business Review
Group financial review continued
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through the Consolidated Statement of
Comprehensive Income.
The exceptional tax credit was £385.9
million, of which £85.9 million relates to
the release of provisions where we have
made significant progress in relation to
longstanding issues with HM Revenue
and Customs in the UK and the Internal
Revenue Service in the US and £300
million relates to the recognition of a
trading loss deferred tax asset in the UK.
The 2009 exceptional credit of £73.6
million consisted of a UK tax credit of
£25.4 million relating to the reinstatement
of the pension deferred tax asset and a
US tax credit of £48.2 million relating to
the five year net operating loss carryback.
In total, the Group has unrecognised
potential deferred tax assets as at 31
December 2010 in the UK of £78.6 million
(2009: £375.1 million), in the US of £268.8
million (2009: £267.0 million) and £29.8
million in other jurisdictions (2009: £21.4
million). The unrecognised deferred tax
asset in the UK relates to losses where
there is not sufficient certainty around
the suitability of future profits in order to
recognise the deferred tax asset in full.
Earnings per share
The pre-exceptional basic earnings per
share was 0.6 pence (2009 loss per share:
4.3 pence). The basic profit per share after
exceptional items is 8.1 pence
(2009 loss per share: 25.1 pence).
Dividends
The Board did not feel it appropriate to
propose an interim dividend for 2010.
The uncertainty in the wider economy has
eased somewhat during the second half
of 2010, however, we are not proposing
a final dividend for 2010 (2009 full year
dividend: nil). We will continue to review
our dividend policy in the light of Taylor
Wimpey’s financial position and prevailing
economic and market conditions in
the future.
Balance sheet and cash flow
Net assets at 31 December 2010 were
£1.8 billion (2009: £1.5 billion), which
equates to a tangible net asset value per
share of 56.9 pence (2009: 46.9 pence).
Gearing stood at 35.9% at 31 December
2010 (2009: 50.0%).
The Group generated a cash inflow from
operating activities of £87.9 million in 2010
(2009: £206.3 million), with the decrease
partially attributable to the £75 million one-
off pension deficit reduction payment
which took place in December 2010
and £28 million cash paid in relation to
refinancing fees. Year end net debt levels
reduced from £750.9 million in 2009 to
£654.5 million in 2010, a decrease of
£96.4 million. This improvement was
achieved despite the exceptional cash
payments of £187 million relating to the
refinancing completed in December 2010
as the Group benefited from strong trading
performance and was able to return to
more normal payment procedures upon
exit of the Override Agreement.
Land creditors were £369.2 million at
31 December 2010 (2009: £325.7 million),
with the increase due to the Group
being more active in the land market
during 2010.
Debt refinancing
We entered discussions with our banks
during 2010 regarding an early refinancing
of the Group’s debt facilities, all of which
were scheduled to fall due in July 2012.
Having reached agreement with the banks
on the terms of a new £950 million credit
facility in November, we completed the
refinancing in December 2010 following
the agreement of a £100 million term
facility and the successful issue of £250
million Senior Notes.
The new facilities provide the Group with
a simplified £1.3 billion debt structure and
an extended maturity profile of 3.5 years,
as summarised below:
• £950 million revolving credit facility.
£350 million of this facility matures in
July 2012, with the remaining £600
million maturing in November 2014.
• £100 million term facility maturing in
June 2015.
• £250 million Senior Notes maturing in
December 2015.
The new facilities will result in a blended
interest rate of around 7.5% based on
average borrowings and current LIBOR
levels. This is a significant improvement on
the blended rate of the previous facilities,
which stood at approximately 11% for the
first half of 2010.
The terms and conditions, including
covenants, contained in the new facilities
are in line with normal commercial terms
for the sector and remove a number of
the operational restrictions of the previous
facilities. This increases our flexibility with
regard to future operational decisions
significantly and, in particular, there is
no longer a specific restriction on new
land acquisitions.
30
Taylor Wimpey plc Annual Report & Accounts 2010
Directors’ Report: Business Review
Further information is contained within the
Corporate Governance Report and Note 1
to the consolidated financial statements.
Accounting standards
The consolidated financial statements
have been produced in accordance
with International Financial Reporting
Standards (IFRS) as endorsed and
adopted for use in the EU. The financial
statements are also in compliance with
IFRS as issued by the International
Accounting Standards Board. There
have been no changes to International
Accounting Standards during 2010
that have a material impact on the
Group results.
Ryan Mangold
Group Finance Director
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Treasury management and funding
The Group operates within policies and
procedures approved by the Board. These
are set out in detail in Note 20 to the
consolidated financial statements.
The Group has three sources of
borrowings: bank, term facility and public
Senior Notes, with maturity dates as set
out above.
The Group’s preference is to manage
market risks without the use of derivatives
but derivatives will be used where
necessary and appropriate to reduce
the levels of volatility to both income
and equity. The use of such derivatives
is strictly controlled and they are not
permitted to be used for speculative or
trading purposes.
Derivatives and foreign currency
borrowings are used to hedge our
foreign investments selectively in order
to protect their Sterling value. Interest
rate derivatives, while not satisfying the
strict requirements for hedge accounting,
continue to provide an economic hedge to
the volatility of interest costs.
Taking into account term borrowings and
committed revolving credit facilities, the
Group has access to committed funding
of £1.3 billion (2009: £1.9 billion), with
the first £350 million of revolving credit
facilities maturing in July 2012. At the year
end, £477 million (2009: £1.1 billion) was
committed but undrawn.
The Group is operating well within its
revised financial covenants and limits
of available funding. The Group does
not require any additional funding in the
near future.
Pensions
The IAS19 deficit, which appears on the
Group’s balance sheet is £248.5 million
at 31 December 2010 (2009: £406.4
million). The reduction in the deficit is
due to the contributions made during
the year, the benefit of the impact of the
government announced switch from
RPI to CPI reducing the future deferred
member liabilities, and the lower inflation
assumption offset by lower discount rates
and higher mortality assumption. The
balance sheet also includes £2.0 million
of post-retirement healthcare benefit
obligations (2009: £2.9 million).
Formal actuarial valuations of both of the
Company’s main pension schemes, the
Taylor Woodrow Group Pension & Life
Assurance Fund (TWGP&LAF) and the
George Wimpey Staff Pension Scheme
(GWSPS), as at 31 March 2010 were
completed during February 2011. The
results of these valuations are a deficit of
£264 million relating to the TWGP&LAF
(previous deficit £163 million) and a deficit
of £259 million relating to the GWSPS
(previous deficit £215 million).
Following the completion of the triennial
valuation, the Group’s deficit reduction
payments in respect of the TWGP&LAF will
be £22 million per annum (previously £20
million). The deficit reduction payments to
the GWSPS will be £24 million per annum
(previously £25 million). A one-off deficit
reduction payment of £75 million was
made in December 2010 following the
completion of the Group’s refinancing and
was split equally between the schemes.
Both schemes are now closed to future
accrual, with the GWSPS closed to future
accrual on 31 August 2010.
We continue to review and implement
options to manage the volatility of the
pension deficit actively. Each proposal
is reviewed with the respective pension
trustees on behalf of the members prior to
consultation with the members.
Further details relating to the pension
schemes of the Group are presented
in Note 21 to the consolidated
financial statements.
Going concern
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position
are set out in the Group Chief Executive’s
Review on pages 8 to 11. The financial
position of the Group, its cash flows,
liquidity position and borrowing facilities
are described in this Group Financial
Review. In addition, Note 20 to the
financial statements includes details
of the Group’s financial instruments,
hedging activities and its exposure to
and management of credit risk and
liquidity risk.
The Directors remain of the view
that, whilst the economic and market
conditions continue to be challenging and
not without risk, the Group’s financing
package is sufficiently robust as to the
adequacy of both facility and covenant
headroom, to enable the Group to operate
within its terms for at least the next 12
months. Accordingly, the consolidated
financial statements are prepared on a
going concern basis.
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Taylor Wimpey plc Annual Report & Accounts 2010
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Directors’ Report: Governance
Board of Directors & Group Company Secretary
The strength and depth
of our Board and senior
management adds
value to the effective
control and leadership
of the Company.
9
5
10
3
8
1
6
7
2
4
1. Kevin Beeston
Chairman
Appointed to the post of Chairman on
1 July 2010, Kevin chairs the Nomination
Committee and is a member of the
Remuneration Committee. He is currently
a Non Executive Director of IMI plc and
chairs two private businesses which are
Partnerships in Care Group Limited and
Domestic & General Limited. He was formerly
Chairman of Serco Group plc.
3. Ryan Mangold
Group Finance Director
Ryan was appointed as a Director and to
the post of Group Finance Director on 16
November 2010 having previously held the
post of Group Financial Controller since April
2009. Before joining Taylor Wimpey, Ryan
was Group Financial Controller of Mondi
Group for five years, prior to which he held a
number of senior finance roles with the Anglo
American plc group of companies.
2. Pete Redfern
Group Chief Executive
Appointed as a Director and to the post of
Group Chief Executive in July 2007 following
the merger with George Wimpey Plc, Pete
is a member of the Nomination Committee.
In addition he has full day to day operational
responsibility for the UK Housing division.
Prior to the merger he was Group Chief
Executive of George Wimpey Plc and before
that successively held the posts of Finance
Director and Chief Executive of George
Wimpey’s UK Housing business.
4. Sheryl Palmer
President and CEO of Taylor Morrison
Appointed as a Director on 5 August 2009,
Sheryl has over 20 years’ experience of the
US housing industry which includes senior
regional positions with Morrison Homes,
Pulte and Blackhawk Corporation. In 2007,
she was appointed as President and Chief
Executive Officer of Taylor Morrison with
executive responsibility for the US and
Canadian businesses.
32
Taylor Wimpey plc Annual Report & Accounts 2010
5. Baroness Dean of Thornton-le-Fylde
Independent Non Executive Director
Appointed as a Non Executive Director in July
2007, Brenda is a member of the Remuneration
and Nomination Committees. She is a member
of the House of Lords and is active in a
number of public areas, including the House of
Lords Appointments Commission. Brenda is
Chairman of the New Covent Garden Market
Authority, a Partnership Director of National Air
Traffic Services and a Non Executive Director
of Dawson Holdings PLC. Brenda was a Non
Executive Director of George Wimpey Plc prior
to its merger with Taylor Woodrow in July 2007.
6. Andrew Dougal
Independent Non Executive Director
Appointed as a Non Executive Director
in November 2002, Andrew, a Chartered
Accountant, is a member of the Audit and
Nomination Committees. He is a Non Executive
Director of Premier Farnell plc and Creston
plc. Andrew was formerly Group Finance
Director of Hanson, the Anglo-American
diversified industrial group, until it demerged.
He was subsequently Group Chief Executive of
Hanson plc, the international building materials
company, and he was also a Non Executive
Director of BPB plc. Andrew will stand down
from the Board prior to the Annual General
Meeting on 21 April 2011.
Directors’ Report: Governance
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Audit Committee
Current members: Rob Rowley
(Committee Chairman), Andrew Dougal
and Tony Reading.
For more information
see page 37
Nomination Committee
Current members: Kevin Beeston
(Committee Chairman), Brenda Dean,
Andrew Dougal, Katherine Innes Ker, Tony
Reading, Pete Redfern and Rob Rowley.
For more information
see page 38
Remuneration Committee
Current members: Tony Reading
(Committee Chairman), Kevin Beeston,
Brenda Dean, Katherine Innes Ker and
Rob Rowley.
For more information
see pages 38 and 41
7. Katherine Innes Ker
Independent Non Executive Director
Appointed as a Non Executive Director in
July 2001, Katherine is a member of the
Remuneration and Nomination Committees.
Katherine has considerable experience as
a financial analyst in the media sector. She
is a Non Executive Director of Tribal Group
plc, St. Modwen Properties PLC and The
Go-Ahead Group plc. She was formerly
Chairman of Shed Media Limited, Deputy
Chairman of Marine Farms ASA (Norway) and
a Non Executive Director of the Ordnance
Survey. Katherine will stand down from the
Board prior to the Annual General Meeting on
21 April 2011.
8. Anthony Reading MBE
Independent Non Executive Director
Appointed as a Non Executive Director in July
2007, Tony is Chairman of the Remuneration
Committee and a member of the Audit and
Nomination Committees. He was previously
a Director of Tomkins Plc and Chairman and
Chief Executive of Tomkins Corp. USA, a Non
Executive Director of Spectris Plc and was a
Non Executive Director of George Wimpey
Plc prior to its merger with Taylor Woodrow.
He is a Non Executive Director of Laird Plc
and e2v Technologies plc.
9. Robert Rowley
Independent Non Executive Director and
Senior Independent Director
Appointed as a Non Executive Director on
1 January 2010, Rob is Chairman of the
Audit Committee and a member of the
Remuneration and Nomination Committees.
He was appointed Senior Independent
Director on 1 April 2010. He was previously a
Director of Reuters Plc, Deputy Chairman of
Cable and Wireless plc and a Non Executive
Director of Prudential plc and Taylor Nelson
Sofres plc. He is a Non Executive Director
and Chairman of the Audit Committee
of both Capital Shopping Centres Group
plc (formerly Liberty International plc) and
moneysupermarket.com group plc.
10. James Jordan
Group Company Secretary
and General Counsel
Appointed in July 2007, James, a solicitor,
is the Taylor Wimpey plc Group Company
Secretary and General Counsel. Previously
he held the same position with George
Wimpey Plc following his appointment in
February 2002.
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Taylor Wimpey plc Annual Report & Accounts 2010
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Directors’ Report: Governance
Corporate Governance Report
The Board is fully committed to high and
transparent standards of governance
and corporate responsibility throughout
the Group.
Kevin Beeston
Chairman
Corporate governance statement
The Board is fully committed to high
standards of governance and corporate
responsibility throughout the Group. The
Board supports the principles of corporate
governance contained in the 2008 edition
of the Combined Code on Corporate
Governance which is appended to the
Listing Rules of the Financial Services
Authority (the ‘Combined Code’), as
supplemented by the Disclosure and
Transparency Rules, all of which applied
throughout 2010. These, together, set out
the governance rules which apply to all UK
companies which are listed on the London
Stock Exchange.
The Board also supports the new UK
Corporate Governance Code (the
‘Governance Code’) which applies to
the Company for the 2011 reporting
period. The Governance Code was the
subject of a thorough review by the
Board in September 2010 in order to
ensure an early understanding of the new
main Principles and Code Provisions for
compliance by the Company with effect
from 1 January 2011. A copy of the
Governance Code is available to download
from the FRC Web site: www.frc.org.uk.
This Report on Corporate Governance
together with the Remuneration Report
on pages 41 to 50 are intended to
explain how the Company has applied
the principles of the Combined Code,
how it proposes to apply the updated
principles set out in the Governance
Code, and to provide an insight into how
the Board and management run the
business for the benefit of shareholders.
The Chairman’s Statement and the Group
Chief Executive’s Review seek to present
a balanced assessment of the Company’s
position and prospects.
Statement of compliance
For the year ended 31 December
2010, the Company complied with all
the provisions of the Combined Code
including the Principles set out in Section
1, and with the provisions of the Disclosure
and Transparency Rules on Audit
Committees and Corporate Governance
Statements (DTR 7).
The Board and its Committees
As at the date of this Report the Board
consists of nine Directors, namely: the
Chairman, three Executive Directors and
five Independent Non Executive Directors.
Their names, responsibilities and other
details appear on pages 32 to 33.
Changes in the Board composition
since 31 December 2009 are set out
on page 51.
The Board met on 13 occasions during
the year. Details of the attendance of
each Director are set out in the table
on page 36.
Directors make every effort to attend
all Board and Committee meetings, as
evidenced by the attendance records
over several years. Where exceptionally,
a Director is unable to attend a meeting,
it is Board policy that the Chairman and/
or the Group Company Secretary will, as
soon as possible, brief the Director fully
on the business transacted at the meeting
and on any decisions that have been
taken. In addition, the views of the Director
are sought ahead of the meeting and
34
Taylor Wimpey plc Annual Report & Accounts 2010
conveyed to it by the Chairman and/or the
Secretary as appropriate.
The Board discharges its responsibilities
by providing strategic and entrepreneurial
leadership of the Company, within a
framework of prudent and effective
controls and a culture of openness and
transparency, which enables opportunities
and risks to be assessed and managed. It
sets the Company’s strategic aims, ensures
that the necessary financial and human
resources are in place for the Company
to meet its objectives and reviews
management performance. The Board
also defines the Company’s values and
standards and ensures that its obligations
to its shareholders and other stakeholders
are clearly understood and met.
As set out in our 2010 Corporate
Responsibility Report, the Board is
committed to providing a safe place in which
our employees and sub-contractors can
work and to high standards of environmental
management. The Board receives detailed
reports on health, safety and environmental
matters at each Board meeting in respect
of the Company’s operations in the UK,
North America and Spain.
The following documents are available for
review on the Company’s Web site www.
taylorwimpeyplc.com/InvestorRelations/
CorporateGovernance:
• Schedule of matters specifically reserved
for the decision of the Board;
• Terms of Reference of the Board
Committees: Audit, Nomination and
Remuneration, which outline their
objectives and responsibilities and
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Directors’ Report: Governance
Board and Committee Structure
Audit
Committee
Nomination
Committee
Remuneration
Committee
process against which objective criteria
recommended by the Nomination
Committee are used. Typically the process
of appointment, prior to the decision of
the Board, will include the engagement of
recruitment consultants, interviews with
members of the Board and the taking up
of detailed references. This process was,
for example, followed in the appointments
of Kevin Beeston (Chairman) and Rob
Rowley (Independent Non Executive
Director). It was also followed with regard
to the appointment of the new Group
Finance Director in November 2010,
which entailed as part of the process, the
interviewing of four external candidates
and which resulted in the appointment
of Ryan Mangold to the post from his
existing role with the Company as the
Group Financial Controller.
the Group Chief Executive have been
reviewed again by the Board. In line with
the Combined Code, the roles of each
position have been clearly defined, set out
in writing and signed by Kevin Beeston
and Pete Redfern.
The governance framework, including
delegated authorities, is periodically
reviewed in order to ensure that it remains
appropriate and meets the requirements
of the Group going forward.
In order to assist Directors to comply with
their duty to avoid conflicts (or possible
conflicts) of interest the Company
maintains a Register of Potential Conflicts
of Interest whereby Directors disclose
Directorships or other interests in outside
companies and organisations (and any
changes thereto).
The Nomination Committee also guides the
Board in regularly assessing whether the
Board has the correct balance of expertise
and in arranging orderly succession
planning for appointments to the Board
and in respect of senior management
across the Group.
The Board undertakes a regular review of
each Director’s interests, if any, outside of
the Company and remains satisfied that
where there are such commitments, they
do not detract from the extent or quality of
time which the Director is able to devote
to the Company.
As set out in the Governance Code, the
Nomination Committee also has due
regard to the benefits of diversity on the
Board including gender, but also takes into
account other aspects of diversity such as
age, experience and thinking.
The work of each of the Board Committees
is described in this Report.
The Board has an adopted framework
of delegated financial, commercial and
operational authorities, which define the
scope and powers of the Group Chief
Executive and of operational management.
Following the appointment of Kevin
Beeston as Chairman, the roles and
responsibilities of the Chairman and
Whenever any Director considers that
he or she is, or may be, interested in
any contract or arrangement to which
the Company is or may be a party, the
Director gives due notice to the Board
in accordance with the Companies Act
2006 and the Company’s articles. In such
cases, unless allowed by the articles,
any Director with such an interest is not
permitted to participate in any discussions
or decisions relating to the contract
or arrangement.
One of the new Main Principles introduced
by the Governance Code and supported
by the Board is that every Director
should seek election or re-election, as
appropriate, at each year’s Annual General
35
Taylor Wimpey plc Annual Report & Accounts 2010
which define a programme of activities
to support the discharge of those
responsibilities; and
• Board policies covering operational,
compliance and stakeholder matters.
All Directors have access to the advice
and services of the Group Company
Secretary and General Counsel. The
Board has an established procedure
whereby Directors may take independent
professional advice at the Company’s
expense where they judge it necessary
to do so in order to discharge their
responsibilities as Directors.
The Board took detailed advice during
the year with regard to the refinancing of
its existing debt facilities. This included
a £950m Revolving Credit Facility with a
syndicate of banks; the issue of £250m
10.375% Senior Notes due in 2015; and
the agreement of a £100m facility with
the Prudential/M & G UK Companies
Financing Fund. These were utilised in
repaying certain existing facilities and the
mutual termination of the existing Override
Agreement, all of which was completed
in December 2010. Advice was provided
to the Board by specialist restructuring
advisers N M Rothschild & Sons Limited
(‘Rothschild’), Lloyds Banking Group
(‘LBG’) and the Company’s legal advisers,
Slaughter and May. Representatives of
Rothschild and LBG attended the relevant
part of meetings of the Board dealing with
these matters.
Prior to its annual budget review process,
the Board received presentations from the
Home Builders Federation on a number of
aspects relating to the UK market.
All businesses and employees are
expected to operate at all times to the
highest standards of integrity and conduct
in all matters concerning the Group.
Accordingly there is a Code of Business
Conduct, which sets out the standard
for individual dealings both internally
and externally.
The Board has been briefed by the Group
Company Secretary on the implications of
the Bribery Act 2010 and is considering
the implementation of further policies
and procedures as necessary, in order to
comply with this new legislation.
Board and Committee balance,
independence and effectiveness
It is the Company’s policy that
appointments to the Board are made
on merit and the Nomination Committee
has a formal, rigorous and transparent
Directors’ Report: Governance
Corporate Governance Report continued
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Taylor Wimpey plc Board
Kevin Beeston: Chairman
Number of meetings in 2010
Members
Kevin Beeston (a)
Chairman
Pete Redfern
Group Chief Executive
Ryan Mangold (b)
Group Finance Director
Sheryl Palmer
President & CEO of Taylor Morrison
Rob Rowley (c)
Senior Independent Director
Brenda Dean
Independent Non Executive Director
Andrew Dougal
Independent Non Executive Director
Katherine Innes Ker
Independent Non Executive Director
Tony Reading
Independent Non Executive Director
Norman Askew (d)
Former Chairman
Chris Rickard (e)
Former Director
David Williams (f)
Former Director
(a) Appointed 01/07/2010
(b) Appointed 16/11/2010
(c) Appointed 01/01/2010
(d) Resigned 30/06/2010
(e) Resigned 16/11/2010
(f) Resigned 31/03/2010
13
Attendance
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12
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7
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Meeting. Accordingly, at the Annual
General Meeting to be held on 21 April
2011 (the ‘AGM’) (and at each subsequent
AGM), every Director, irrespective of
the date of his or her appointment and
the length of his or her service on the
Board, will be submitted for election or
re-election, as appropriate. Details of the
resolutions to be proposed in this respect
and supporting biographical details of the
Directors appear in the Notice of Meeting
on page 104.
be seeking election by shareholders at
the AGM. Also on 21 April 2011, after
more than eight and nine years’ service
respectively, Andrew Dougal and Katherine
Innes Ker will be standing down from the
Board as Non Executive Directors prior to
the commencement of the AGM and will
not be seeking re-election.
The Board was also pleased to appoint
Ryan Mangold to the post of Group
Finance Director with effect from 16
November 2010.
The Board has reviewed and re-affirmed
that it considers each of the Non
Executive Directors to be independent in
character and judgement and that there
are no relationships which could affect
the Director’s judgement. The Chairman,
at the time of his appointment, met the
independence criteria as set out in the
Combined Code.
Performance evaluation of the Board,
its Committees and other functions
In line with the Combined Code, a formal
and rigorous annual evaluation of the
performance and effectiveness of the
Board, its Committees and of individual
Directors was carried out (save in respect
of Ryan Mangold who was appointed to
the Board on 16 November 2010 and
was subject to a detailed appraisal by
the Nomination Committee as part of the
selection process).
Following the appointment of Kevin
Beeston as Chairman in July 2010,
the Board determined that the 2010
evaluation would not be carried out by
a third party facilitator. The evaluation
process was therefore carried out by
the Chairman and the Group Company
Secretary. The process consisted of a
bespoke questionnaire which was sent
by the Group Company Secretary to all
Directors for completion. At the request
of the Chairman, for the first time,
the Secretary also participated in the
performance evaluation and completed a
questionnaire in full.
The questionnaire focused on the
performance of the Board, each of the
three Board Committees, each Director
(by way of self assessment and also by
way of a confidential evaluation by the
Chairman) and finally the performance of
the Chairman.
The Company was pleased to announce
on 3 February 2011 that Kate Barker CBE
will be joining the Board with effect from
21 April 2011. Kate Barker will therefore
In accordance with the Combined Code
the evaluation also specifically included a
particularly rigorous assessment of each
Director who has served on the Board
36
Taylor Wimpey plc Annual Report & Accounts 2010
for more than six years or will have done
so by the time of the AGM. This took into
account, where applicable, past service on
the George Wimpey Plc Board prior to the
merger with Taylor Woodrow in July 2007.
The Secretary collated all of the responses to
the questionnaire and produced a summary
in respect of each performance area.
The Chairman and the Secretary then
reviewed the summaries in respect of
each performance area and in respect of
each Director (except those completed
with regard to the Chairman) and formally
presented the findings to the Board on a
non-attributable basis for discussion.
As part of the appraisal process the
Chairman also discussed the evaluation on
a one-to-one basis with each contributor.
A number of action points designed to
increase the effectiveness of the Board
came out of the 2010 performance
evaluation and have either already been
implemented or will be implemented
during 2011. These include: changes
and improvement in the way that certain
operational matters are reported to the
Board; additional reporting on specialist
topics related to housebuilding; to
maintain an ongoing review of Board
composition; and an increased focus on
succession planning across the Group.
These actions points will be kept under
regular review.
In addition, as part of the 2010 evaluation
it was agreed that the 2011 Board
performance evaluation should be carried
out by a third party facilitator. This will be
consistent with the Governance Code
which requires the evaluation to take
place once every three years with effect
from 2011.
As part of the 2010 process, the Non
Executive Directors, led by the Senior
Independent Director, undertook the
evaluation of the Chairman’s performance.
The evaluation was based on the
non-attributable summary prepared by the
Secretary on the feedback received from
the Non Executive Directors, Executive
Directors and the Secretary. The summary
was reviewed by the Non Executive
Directors in the absence of the Chairman,
following which Rob Rowley in his capacity
as the Senior Independent Director
provided feedback direct to the Chairman.
In line with the Combined Code, the
Chairman holds meetings with the Non
Executive Directors without the Executive
Directors present. The Senior Independent
Director also holds and leads meetings with
only the Non Executive Directors present.
Committee during 2011 and will be
reported on in 2011.
As mentioned above, a particularly rigorous
evaluation was undertaken with regard to
Brenda Dean, Andrew Dougal, Katherine
Innes Ker and Tony Reading (as he will
have completed six years’ service by the
time of the AGM although he had not
done so as at the time of the performance
evaluation). Following their evaluation,
the Board was entirely satisfied with the
respective performance and contribution of
each Non Executive Director in addition to
their ongoing independence of character
and judgement.
The Board changes that have occurred or
been announced during 2010 and 2011 to
date, are set out below:
• Rob Rowley was appointed as an
Independent Non Executive Director
on 1 January 2010 and subsequently
as the Senior Independent Director on
1 April 2010;
• David Williams resigned as a Director
(and as the Senior Independent Director)
on 31 March 2010;
• Norman Askew resigned as a Director
and as Chairman on 30 June 2010;
• Kevin Beeston was appointed as a
Director and to the role of Chairman on
1 July 2010;
• Chris Rickard resigned as a Director
and Group Finance Director on
16 November 2010;
• Ryan Mangold was appointed as a
Director and Group Finance Director on
16 November 2010;
• Andrew Dougal and Katherine Innes Ker
will stand down as Independent Non
Executive Directors with effect from 21
April 2011;
• Kate Barker will join the Board as an
Independent Non Executive Director
with effect from 21 April 2011.
The Board considers that its Directors
possess an appropriate balance of skills
and experience for the requirements of the
business. The Board and its Committees
operate within a framework of scheduled
core meetings. Additional meetings were
held during the latter part of the year to
oversee the refinancing of the Company’s
debt facilities.
External auditors: Deloitte LLP was
selected as external auditors to the
Company as a result of a comprehensive
formal competitive tender process
conducted in 2007 and will be proposed
for re-appointment as the Company’s
auditors at the Annual General Meeting.
Their performance is kept under
regular review by the Board and the
Audit Committee.
The Deloitte partner responsible for the
Company’s external audit has acted in
this capacity for two years, which is within
the five year maximum period set out in
the Smith Guidance, and there are no
contractual restrictions on the Company’s
selection of its external auditors.
Information and professional
development
The Company has procedures whereby
newly appointed Directors (including
Non Executive Directors) receive a
formal induction. This includes training
and continuing familiarisation with the
Company’s business, operations and
systems, the principles underlying the
discharge of their duties as Directors and
wider issues relating to the housing sector.
All Directors visit Group operations on a
regular basis, engaging with employees
at all levels in order to foster and maintain
an understanding of the business. Board
visits are arranged each year to operations
in both the UK and elsewhere within the
Group. In 2010, in addition to individual
visits, the entire Board visited operations
in California and also the Taylor Wimpey
Midlands region during which site visits,
regional presentations and formal Board
meetings took place.
The Group Company Secretary and
General Counsel acts as Secretary to
the Board and its Committees and he
attends all meetings. It is Board policy
that wherever possible a formal agenda
and written reports are issued to Directors
in respect of all Board and Committee
meetings one week prior to the meeting
in order to allow sufficient time for detailed
review and consideration beforehand.
Formal minutes are prepared in respect
of all Board and Committee meetings
and are then circulated and submitted for
approval at the next meeting.
Internal Audit: An independent formal
evaluation of the Internal Audit function
will be carried out on behalf of the Audit
The Chairman, Group Chief Executive and
Secretary meet sufficiently in advance of
each Board meeting in order to ensure
37
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Directors’ Report: Governance
Audit Committee
Reports directly to the Taylor Wimpey plc Board
Rob Rowley, Chairman
Number of meetings in 2010
4
Members
Rob Rowley (appointed 01/01/2010)
Andrew Dougal
Tony Reading
David Williams (resigned 31/03/2010)
Attendance
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Main Objective
To assist the Board in fulfilling its
corporate governance responsibilities
relating to the Group’s internal control
framework, risk management, financial
reporting practices and external
audit process.
action points from previous meetings have
been implemented and to prepare the
agenda and matters to be covered at the
next and at future Board and Committee
meetings as appropriate.
Board Committees and their work
Audit Committee and auditors
The Committee is chaired by Rob Rowley.
All members of the Committee are
Independent Non Executive Directors as
required by the Combined Code. The
Board has determined that Rob Rowley,
who currently chairs the Audit Committee
at both Capital Shopping Centres Group
plc (formerly Liberty International plc) and
moneysupermarket.com group plc, has
recent and relevant financial experience.
The Chairman of the Company and
other Non Executive Directors, the
Group Chief Executive, Group Finance
Director, Head of Internal Audit and other
senior executives attend meetings of the
Committee by invitation. Deloitte LLP
is also invited to attend meetings of the
Audit Committee. The Committee also
meets privately with representatives from
Deloitte during at least two Committee
meetings per annum which normally
take place around the Full and Half Year
financial statements, in order to discuss
Directors’ Report: Governance
Corporate Governance Report continued
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any matters which the auditors may wish
to raise without any Executive Directors
being present.
During the year the Audit Committee
met on four occasions. Details of the
attendance of each Director are set out in
the table on page 36. The meetings were
typically also attended by the other Non
Executive Directors.
The Committee’s remit includes reviewing
the internal control framework, the internal
audit process, the financial reporting
practices, the external audit process and
recommending to the Board whether
to re-appoint the external auditors.
It ensures that the Board regularly
assesses business risks including their
management and mitigation. In doing so,
the Committee places reliance on regular
reports from executive management,
Internal Audit and the external auditors.
In monitoring the financial reporting
practices the Audit Committee reviewed
accounting policies, areas of judgement,
the going concern assumption and
compliance with accounting standards
and the requirements of the Combined
Code. During the year the Committee
reviewed, prior to publication, the Full
and Half Year financial statements and
other statements affecting the Group
concerning price sensitive information
as necessary.
Appointment of the auditors for
non-audit services
The Audit Committee has approved a
policy on whether to employ the external
auditors to provide services other than
audit services, which is to require a
competitive tender except in narrowly
defined circumstances where it is
considered that based on confidentiality,
past knowledge and other commercial
reasons, there is an advantage in using
a single tender procurement procedure.
The Committee has determined that the
following assignments should not be
undertaken by the auditors:
• bookkeeping or other services related
to the accounting records or financial
statements;
• internal audit outsourcing services;
• the provision of advice on large
Information Technology systems;
• services connected with valuation,
litigation support, legal, recruitment
or remuneration.
The Board is satisfied that this policy is
conducive to the maintenance of auditor
independence and objectivity. During
the year the external auditors undertook
non-audit work primarily related to key
project work.
The Audit Committee is satisfied that the
carrying out of this work would not impair
the independence of the external auditors
and recognises that from time to time,
there is a clear commercial advantage
based on cost and timetable requirements
in using the Company’s auditors.
Corporate Responsibility Committee
During the year, the Board took the view
that corporate responsibility had been
sufficiently integrated into day to day
management culture and processes and
would be more effectively managed at
the operational level with direct reporting
lines to the Board. The Group Chief
Executive and the President and CEO of
North America have retained the ultimate
responsibility for corporate responsibility.
As demonstrated by the achievements
and initiatives set out in the Company’s
2010 Corporate Responsibility Report,
corporate responsibility has of course
retained the same level of priority as
before. The 2010 Corporate Responsibility
Report is available in electronic form
on the Company’s Web site at
www.taylorwimpeyplc.com.
Nomination Committee
The Committee is chaired by the
Chairman of the Board and is composed
of a majority of Non Executive Directors
as required by the Combined Code. Its
members are set out in the table above.
As set out earlier in this Report, the
Committee has procedures in place with
regard to maintaining a formal, rigorous
and transparent process for Board
appointments, ensuring that appointments
to the Board are made on merit and
assessed against objective criteria, guiding
the Board in regularly assessing whether
there is a correct balance of expertise and
in arranging the orderly succession for
appointments to the Board and in respect
of senior management across the Group.
A description of how appointments are
typically made to the Board is set out
on page 35.
The Committee met on three occasions
during the year and details of the
attendance of each Director are set out
in the table above.
38
Taylor Wimpey plc Annual Report & Accounts 2010
Nomination Committee
Reports directly to the Taylor Wimpey plc Board
Kevin Beeston, Chairman
Number of meetings in 2010
3
Members
Kevin Beeston (Appointed 01/07/2010)
Brenda Dean
Andrew Dougal
Katherine Innes Ker
Tony Reading
Pete Redfern
Rob Rowley (Appointed 01/01/2010)
Norman Askew (Resigned 30/06/2010)
Attendance
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3
3
3
3
3
3
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Main Objective
To ensure there shall be a formal,
rigorous and transparent process for
the appointment of new Directors to
the Board, its Committees and to other
senior roles and to ensure effective
succession planning processes across
the Group.
Remuneration Committee and
remuneration
The Board’s policy and approach to the
setting of remuneration for Directors and
senior executives and the activities of the
Remuneration Committee are described
in detail in the Directors’ Remuneration
Report on pages 41 to 50. The Committee
is constituted in accordance with the
Combined Code and its members are set
out on page 39.
The levels of remuneration are considered
by the Committee to be sufficient to
attract, retain and motivate Directors
and other senior management of the
necessary calibre required to run the
Company successfully, without being
excessive. A significant proportion
of Directors’ remuneration is linked
to rewarding corporate and personal
performance and there is linkage to
effective risk management. There is
a formal and transparent procedure
for developing policy on executive
remuneration and agreeing the
Directors’ Report: Governance
Remuneration Committee
Reports directly to the Taylor Wimpey plc Board
Tony Reading, Chairman
Number of meetings in 2010
4
Members
Tony Reading
Kevin Beeston (Appointed 01/07/2010)
Brenda Dean
Katherine Innes Ker
Rob Rowley (Appointed 01/01/2010)
David Williams (Resigned 31/03/2010)
Attendance
4
4
4
3
4
0
Main Objective
To establish and maintain formal and
transparent procedures for developing
policy on executive remuneration
and for agreeing the remuneration
packages of individual Directors and
senior executives and to monitor and
report on them.
remuneration packages of individual
Directors, none of whom is involved in
deciding his or her own remuneration.
The Committee is chaired by Tony
Reading and consists of four Independent
Non Executive Directors and also the
Chairman of the Board. During the year
the Remuneration Committee met on
four occasions.
Internal control
The Board has applied Principle C.2 of
the Combined Code and has recognised
the greater emphasis on risk management
as set out in the Governance Code. It
has established a continuous process for
identifying, evaluating and managing the
significant risks the Group faces. It regularly
reviews its application of the Revised
Turnbull Guidance on Internal Control to
ensure the process of internal control,
which has been in place throughout 2010,
is in accordance with Internal Control: the
Revised Guidance for Directors on the
Combined Code. The Board is responsible
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for the Group’s system of internal control
and for reviewing its effectiveness. Such
a system is designed to manage rather
than eliminate the risk of failure to achieve
business objectives, and can only provide
reasonable and not absolute assurance
against material misstatement or loss. In
compliance with the Combined Code, the
Board regularly reviews the effectiveness of
the Group’s processes of risk management
and internal control and the progress made
in embedding these processes into the
business. The Board’s monitoring covers all
controls, including financial, operational and
compliance controls and risk management.
This process is based principally on
reviewing reports from management to
consider whether significant risks are
correctly identified, evaluated, managed
and controlled as part of the process of
managing the Group’s operations and
whether any significant weaknesses are
promptly remedied or indicate a need for
more extensive monitoring.
Key elements of the systems of internal
control and risk management are
detailed below:
• a Group-level review is carried out to
identify the major risks facing the Group
and to develop and implement appropriate
initiatives to manage those risks;
• strategic risk reviews are carried out in
each of the operating divisions to identify
business risk, evaluate existing controls
and develop strategies to manage the
risks that remain;
• key operational and financial risks are
identified and assessed at the operating
process level, while strategic risks are
identified as a part of the business
planning process. These risk reviews
take account of the significance of
environmental, social and governance
matters to the business of the Company.
Such risks are identified and assessed
for potential effect on the Company’s
short and long term value, as well
as opportunities that may arise to
enhance value.
Throughout 2010 and into 2011, the
Audit Committee continued to assess the
Group’s risk management and internal
control framework, and reviewed business
change issues and Internal Audit activities
across the Group.
During 2010, the enhanced reporting,
approval and control processes
introduced to monitor and ensure
compliance with the Override Agreement
39
Taylor Wimpey plc Annual Report & Accounts 2010
that was in place with certain lenders,
were closely monitored by the Board and
audited by Internal Audit. In December
2010 the Company substantially mitigated
these risks by reaching an agreement
with its creditors to exit the Override
Agreement and through raising new debt
finance as set out earlier in this report.
The Board oversees the risk and control
framework of the Group and the Group
Chief Executive is responsible for
implementing any necessary improvements
with the support of the Group Executive
Committee. The Executive Committee
comprises the Executive Directors of the
Company, the Group Company Secretary
and other designated senior management.
The Board ensures that the Company has
in place effective systems to manage and
mitigate significant risks. At its December
2010 meeting the Board, following a
detailed review undertaken by the Group
Executive Committee of operations,
companies and major departments,
completed its annual assessment for the
year to 31 December 2010 of the key risks
affecting the Group. The Audit Committee
also assists the Board in discharging its
review of risk. The key risks were identified
and agreed by the Board together with
processes in place for their elimination or
mitigation and actions required to reduce
the likelihood or impact of each risk to the
Company and the Group. The Board has
noted the requirement to both identify and
monitor risks as set out in the Governance
Code. Consequently, the Board will review
risk at least twice a year and the Group
Executive Committee will review risk at
least quarterly.
A more detailed review of the principal
risks and uncertainties facing the Group
during the year and in the future, is set
out in Principal Risks and Uncertainties on
pages 12 and 13.
Management
The Group Chief Executive has
responsibility for preparing and reviewing
strategic plans for the Group and the
annual budgetary process. These are
subject to formal approval by the Board.
Budgets are re-examined in comparison
with business forecasts throughout the
year to ensure they are sufficiently robust
to reflect the possible impact of changing
economic conditions and circumstances.
The Group Chief Executive and the Board
conduct regular reviews of actual results
and future projections with comparison
against budget and prior year, together
with various treasury reports. Enhanced
Directors’ Report: Governance
Corporate Governance Report continued
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cash and debt reporting systems
continue to assist in managing the Group
through the current market difficulties
and in meeting its refinancing obligations.
Disputes that may give rise to significant
litigation or contractual claims are
monitored at each meeting of the Board
with specific updates on any material
developments or new matters.
The Group has clearly defined policies,
processes and procedures governing all
areas of the business which will continue
to be reviewed and refined in order to
meet the requirements of the business
and changing market circumstances.
Defined authority limits continue to be
closely monitored in response to prevailing
market conditions. These ensured we
remained in compliance with the terms of
the Override Agreement, now superseded,
and the financial covenants contained in
our new debt facilities. Any investment,
acquisition or disposal of land requires
detailed appraisal and is subject to
approval by the Board or the Group Chief
Executive, depending on the value and
nature of the investment or contract.
There is a clearly identifiable organisational
structure and a framework of delegated
authority approved by the Board within
which individual responsibilities of senior
executives of Group companies are
identified and can be monitored. These
activities are reinforced through process
compliance and other audits conducted
by Internal Audit.
The Internal Audit function reviews the
effectiveness and efficiency of the systems
of internal control in place to safeguard the
assets, to quantify, price, transfer, avoid or
mitigate risks and to monitor the activities
of the Group in accomplishing established
objectives. Internal Audit reports are
provided to the Executive Directors,
indicating improvements proposed or
made where appropriate, and summaries
of these reports are provided to the Board
and the Audit Committee. The Group Chief
Executive, Group Executive Committee
members and senior management
consider the reviews on a regular
basis and are responsible for ensuring
that improvements are made, where
required. A number of new initiatives have
been introduced to ensure the Company’s
Internal Audit function meets current best
practice. An Internal Audit Charter codifies
the aims, modus operandi and outputs
of internal auditing; a rolling schedule of
business improvements identified during
internal audits is monitored against action
taken by the businesses, with progress
reviewed by the Audit Committee; and the
performance of the Internal Audit team is
to be externally appraised.
The Head of Internal Audit has direct
access to the Chairman of the Audit
Committee, the Chairman of the Board and
the Group Chief Executive. A database of
audit recommendations and improvement
initiatives is maintained. Follow-up
processes ensure that such improvements
are implemented in a timely manner.
The annual employee performance
appraisal process is objective-based,
with individual objectives cascaded down
from the appropriate business objectives.
Reviews identify training needs to support
achievement of objectives.
Whistleblowing
The Group’s whistleblowing policy
is supported by a clear process that
includes an externally facilitated hotline
through which any person, including
employees of the Company, may, in
confidence, raise concerns about possible
improprieties in financial reporting, other
operational matters or inappropriate
personal behaviours in the work place. All
whistleblowing cases are investigated by
the Head of Internal Audit, Group Human
Resources Director and/or the Group
Company Secretary. Whistleblowing
incidents and their outcome are reported
to the Audit Committee. Whistleblowing is
a standing item on each Audit Committee
agenda which allows the Committee to
regularly review the adequacy of the policy
in line with its requirements to do so under
the Combined Code.
Relations with shareholders
The Board actively seeks and encourages
engagement with major institutional
shareholders and other stakeholders and
supports the new initiatives set out in the
Governance Code and its supporting
Stewardship Code which aim to foster a
more pro-active governance role by major
shareholders. The Board has put in place
arrangements designed to facilitate contact
about business, governance, remuneration
and other issues. This provides the
opportunity for meetings with the Chairman,
the Senior Independent Director as well as
the Group Chief Executive, Group Finance
Director and other executives in order
to establish a mutual understanding of
objectives. The Company also operates a
structured programme of investor relations,
based on formal announcements and
publications covering the full year and half
year results.
Following his appointment as Chairman
in July 2010, Kevin Beeston wrote to
40
Taylor Wimpey plc Annual Report & Accounts 2010
the Company’s largest institutional
shareholders. This was then followed up
by a series of meetings which were used
to discuss governance, strategy and
market related issues.
All Directors receive formal reports and
briefings during the year about the
Company’s investor relations programme
and receive detailed feedback through
surveys, direct contact and other means,
through which they are able to develop
an understanding of the views of major
shareholders about the Company.
The Board encourages all shareholders to
participate in the Annual General Meeting,
which is attended by all Directors.
Shareholders’ attention is drawn to the
Notice of Meeting on page 104 which sets
out details of the rights of shareholders
in connection with the notice of, and
participation in, general meetings of
the Company.
Information about the Company, including
full year and half year results and other
major announcements, and additional
information about shareholder facilities,
is published on the Company’s Web site
www.taylorwimpeyplc.com
Debt refinancing and going concern
The consolidated financial statements
have been prepared on a going concern
basis and on a historical cost basis except
as otherwise stated in the Notes to the
Consolidated Financial Statements on
pages 61 to 93.
The Taylor Wimpey plc Group’s (the
‘Group’) business performance and
position, along with the significant factors
that are likely to influence its future
activities are set out in the Group Chief
Executive’s Review on pages 8 to 13.
The ability of the Group to continue as a
going concern is reliant upon the continued
availability of external debt financing. The
Group renegotiated and signed its new
financing agreements on 14 December
2010. The Group has met all interest and
other payment obligations on time from debt
resources available to it, and after reviewing
forecasts for a period of at least 12 months
from the date of signing these financial
statements, the Directors are satisfied that,
whilst the economic and market conditions
continue to be challenging and not without
risk, the refinancing package is sufficiently
robust as to adequacy of both facility and
covenant headroom to enable the Group to
operate within its terms for at least the next
12 months. Accordingly the consolidated
financial statements have been prepared on
a going concern basis.
Remuneration Report
Directors’ Report: Governance
The aim of our remuneration policy is
to attract and retain leaders who are
focused and adequately incentivised to
deliver outstanding business results.
Tony Reading
Chairman
Introduction
The philosophy of the Remuneration
Committee (the ‘Committee’) is to attract
and retain leaders who are focused and
incentivised to deliver the Company’s
business priorities within a remuneration
framework which is aligned with the
interests of our shareholders.
The Committee has adopted the principles
of good governance relating to Directors’
remuneration as set out in the 2008
Combined Code on Corporate Governance
(the ‘Combined Code’) and also complies
with the Listing Rules of the Financial
Services Authority and the relevant
provisions of the Companies Act 2006 and
regulations thereunder (the ‘Regulations’).
The Board reviewed last year the new
Main Principles, Supporting Principles
and Code Provisions of the UK Corporate
Governance Code (the ‘Governance Code’)
relating to remuneration in order to ensure
compliance with the Governance Code
which applies to the Company with effect
from 1 January 2011.
The Regulations require that the
Company’s auditors report to shareholders
on certain parts of this Report and state
whether in their opinion those parts
of it have been properly prepared in
accordance with the above Regulations.
Accordingly, the Report has been divided
into separate sections consisting of
unaudited and audited information. A
resolution to approve this Report will be
proposed at the Annual General Meeting
of the Company on 21 April 2011. Details
of the resolution and its status as an
advisory vote are set out on page 105 and
page 109 respectively.
This Report has been prepared by the
Remuneration Committee on behalf of
the Board.
During the year, the Committee agreed
the remuneration for Kevin Beeston in his
new role as Chairman of the Board with
effect from 1 July 2010. In the latter part of
2010 the Committee also agreed a salary
and benefits package for Ryan Mangold
following his promotion to the post of
Group Finance Director on 16 November
2010, consistent with the Company’s
current framework for Executive Directors.
The Company’s remuneration policy and
practices are kept under regular review
by the Committee which consults with
the Company’s major shareholders and
their representative bodies as appropriate.
Going forward, the Committee intends
to undertake a formal review of
remuneration across the Group on a
three yearly basis, the first of which will
take place during 2011. The outcome of
this review will be reported in next year’s
Remuneration Report. The main objective
of the review will be to ensure that the
remuneration arrangements support the
Committee’s philosophy.
For 2011 itself, the Committee considers
that the arrangements operated in 2009
and 2010 remain broadly appropriate
and support the Committee’s long term
philosophy. Following consultation with
major shareholders and investor bodies
however, the Committee has decided
to make some changes in 2011 relating
to both the long term and short term
incentives currently in place in order to
make them both more appropriate to
41
Taylor Wimpey plc Annual Report & Accounts 2010
the current market and to incentivise
the Company’s leaders more effectively
whilst, at the same time, maintaining
alignment to shareholders’ interests.
Long term incentive plan: while measures
will continue to be based on total
shareholder return (40% of the award)
and return on capital employed (30%), a
new performance measure based on the
margin achieved on homes by the UK
business will also be introduced. Unlike
2009 and 2010 the Committee does
not propose to scale back the 2011
long term incentive awards to participants
and for UK Executive Directors it is
proposed that award levels return to
their previous levels of 200% of salary.
Short term incentive arrangements: in
2009 and 2010, the Committee capped
the maximum short term incentive potential
of its UK Executive Directors to 75% of the
maximum achievable of 150% of salary
(i.e. a maximum potential of 112.5% of
base salary). For 2011, the Committee
has decided to increase their cap to 130%
of base salary (86.6% of the pre-2009
maximum of 150%) and they will still be
required to defer 25% of any bonus into
shares in the Company for a period of
three years with no matching element.
Part 1: Unaudited Information:
Remuneration Committee
The Remuneration Committee has clearly
defined terms of reference which are
available on the Company’s Web site
www.taylorwimpeyplc.com. The key
remit of the Committee is to recommend
to the Board the remuneration strategy
and framework for Executive Directors
and senior management in line with the
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Directors’ Report: Governance
Remuneration Report continued
Combined Code/Governance Code and
related investor guidance. Within this
framework the Committee’s main role and
responsibilities are to:
• determine the remuneration, including
pension arrangements, of the Executive
Directors and the Group Company
Secretary and General Counsel;
• monitor and make recommendations in
respect of remuneration for the tier of
senior management one level below that
of the Board;
• approve annual and long term incentive
arrangements together with their targets
and levels of awards;
• determine the level of fees for the
Chairman of the Board; and
• select and appoint the external advisers
to the Committee.
The Committee currently comprises four
Independent Non Executive Directors
and the Chairman. Tony Reading is the
Committee Chairman and he chaired the
Committee throughout the year. The other
members of the Committee are Katherine
Innes Ker, Brenda Dean and Rob
Rowley (who were Committee members
throughout the year) and Kevin Beeston,
who was appointed to the Committee
with effect from 1 July 2010. Membership
of the Committee is in line with the
Combined Code.
David Williams was a member of the
Committee until he stood down from the
Board on 31 March 2010.
Details of attendance at Remuneration
Committee meetings held during 2010 are
set out in the table on page 39.
No Director or other executive is involved
in any decisions about his/her own
specific remuneration.
Advice to the Committee
The Committee keeps itself fully informed
on developments and best practice in the
field of remuneration and it seeks advice
from external advisers when appropriate.
The Committee appoints its own
independent remuneration advisers and
during the year, it continued to retain the
services of Hewitt New Bridge Street in
that capacity. Hewitt New Bridge Street
is now part of Aon Corporation and is a
trading name of that organisation.
Hewitt New Bridge Street provides no
other services to the Company. The wider
Aon Corporation group of companies
provides insurance broking and pension
administration support services to the
Company. These are services which
were provided to the Company prior to
the merger between the Aon and Hewitt
entities and the Committee is satisfied that
they do not create any conflicts of interest.
The Committee also received legal advice
during the year from Slaughter and May
and pension related advice from PwC.
In line with the statement that was
included in last year’s Remuneration
Report relating to fees, and also reflecting
recent best practice guidelines, the fees
paid to the Committee’s main adviser
– Hewitt New Bridge Street – in 2010
were £74,000 in total, which reflects a full
year’s appointment.
The Group Chief Executive, Group
Company Secretary and General Counsel
and the Group Human Resources
Director attend Committee meetings by
invitation only but are not present for any
discussions that relate directly to their
own remuneration.
Remuneration policy
A key part of the Committee’s role is to
ensure that the remuneration of Executive
Directors and senior management is
aligned to the Company’s strategic
objectives as stated earlier in this
Remuneration Report. It is of course, key
that the Company is able to attract and
retain leaders who are focused and also
appropriately incentivised to deliver the
Company’s strategic objectives within a
framework which is also aligned with the
interests of the Company’s shareholders.
This alignment is achieved through a
combination of deferral into shares of a
percentage of the short term incentive
arrangements, shareholding requirements
and also via retention requirements which
apply to any shares that vest under long
term incentive plans – details of these
requirements are set out later in this
Remuneration Report on page 46.
The Committee’s remuneration strategy
continues to ensure that a significant
percentage of the overall package
of Executive Directors and senior
management remains at risk.
With all packages substantially geared
towards share incentive schemes and
performance, the Committee believes
that the pay and benefits of its Executive
Directors and senior management
adequately takes account of reward
versus risk. The chart above shows the
42
Taylor Wimpey plc Annual Report & Accounts 2010
Proportion of fixed to performance
based remuneration (%) (2011)
100
80
60
40
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Annual Salary
On-target Bonus.
Long Term Incentives -
CEO and UK-Based
Directors.
proportion of fixed to performance based
remuneration for 2011. Fixed remuneration
comprises base salary. Performance
based remuneration comprises an annual
short term cash incentive and, for the CEO
and the UK-based Directors, a long term
incentive plan. The chart illustrates the
mix of remuneration assuming that target
levels of short term incentive arrangements
and the annualised expected value of long
term incentive provision are met.
In line with the Association of British
Insurers’ Guidelines on Responsible
Investment Disclosure, the Remuneration
Committee ensures that the incentive
structure for Executive Directors and
senior management will not raise
environmental, social or governance
(‘ESG’) risks by inadvertently motivating
irresponsible behaviour. More generally,
the Committee under its terms of reference
may, where it considers appropriate,
take ESG matters into account when
considering the overall remuneration
structure. The Committee considers
that no element of the remuneration
arrangements will encourage inappropriate
risk taking or behaviour by any executive.
Directors’ Report: Governance
External non executive director positions
Subject to Board approval and provided
that such appointments fall within the
general requirements of the Combined
Code (and do not give rise to any conflict
issues which cannot be managed by the
Board), Executive Directors are permitted
to take on non executive positions with
other companies. Executive Directors are
permitted to retain their fees in respect of
such positions. During 2010 and to the
date of this Report, no Executive Director
held any relevant non executive positions.
Base salary
The Remuneration Committee reviews
the base salaries of Executive Directors
annually in order to ensure that they
remain competitively aligned with external
market practices and are competitive
when measured against FTSE peers.
The salaries of the Executive Directors
and that of the Group Company
Secretary and General Counsel have not
been increased since July 2007. Ryan
Mangold’s remuneration was reviewed
at the time of his appointment as Group
Finance Director in November 2010. At
that time his salary was increased to
£285,000 which is below the Committee’s
assessment of a mid-market salary for
this role. This positioning reflects Ryan
Mangold’s current level of experience
in the role and the Committee expects
to increase his salary to a mid-market
level over time. For 2011, in line with
the general increase awarded to all staff
(subject to a small number of exceptions),
the Committee has decided to award
its UK Executive Directors an increase
of 2.5% to apply with effect from 1 April
2011. When the Committee considers
base salaries, it seeks independent advice
from Hewitt New Bridge Street and takes
into account the following:
• salary levels in comparably-sized
companies and other major housebuilders;
• the economic climate, general market
conditions and the performance of
the Company;
• the level of pay awards across the rest
of the business; and
• the performance, role and responsibility
of each individual Director.
Reflecting the above increase of 2.5%,
the salaries of the UK Executive Directors
effective from 1 April 2011 are as follows:
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Name
Pete Redfern
Ryan Mangold
Amount
£717,500
£292,125
exceptionals), cash performance, build
cost, customer service and also the
successful completion of the 2010
£1.3 billion refinancing project.
Salaries are paid monthly and in cash.
Other benefits, including benefits-in-kind
The Executive Directors receive additional
benefits which include an expensed
Company-provided car or a cash
allowance in lieu, life assurance and
private medical insurance. Benefits-in-kind
are not pensionable.
Details of the pension arrangements in
place for Executive Directors are set out
later in this report.
Short term incentive arrangements
(‘STIA’)
The Company operates performance
related short term incentives based on
achieving stretching performance targets.
In 2009 and 2010, the Remuneration
Committee capped STIA opportunities
for Executive Directors at 75% of the
maximum of 150% of salary. For 2010
the maximum and on-target STIA
opportunities for UK-based Executive
Directors were therefore 112.5% and
60% of base salary, respectively. It was
a requirement that 25% of any STIA
awarded in respect of 2009 and 2010 was
deferred into shares for three years with
no further performance conditions other
than continued employment.
For 2011, in light of the Company’s
improved profitability, the Committee has
reviewed the operation of the cap and,
following consultation with shareholders,
has decided that for UK Executive
Directors it should be increased to
130% of salary (86.6% of the maximum
STIA of 150% of base salary) with 60%
of base salary payable for on-target
performance. In addition, the three year
deferral requirement of 25% of the STIA
will be retained. The maximum STIA
opportunity will be kept under review by
the Committee in light of the performance
of the business.
The STIA has a clawback mechanism
whereby the deferred element can be
proportionately recovered in the event of
a material misstatement of the Company’s
accounts.
For 2010 the STIA targets for the Group
Chief Executive and Group Finance
Director were based on a number of
specific and stretching targets which
included: profit before tax (before
43
Taylor Wimpey plc Annual Report & Accounts 2010
For the STIA outcome for 2010, the
Committee has measured performance
against each performance target which
has resulted in a payment to the Group
Chief Executive of equivalent to 84.9% of
maximum STIA potential, of which 25%
is required to be deferred into shares for
three years as described above.
Ryan Mangold was appointed as Group
Finance Director on 16 November 2010.
His STIA will be pro-rated based on his
base salary prior to his appointment and
on his new salary for the balance of the
year. Ryan Mangold will defer 25% of his
STIA for the period 16 November 2010 to
31 December 2010 and will be required to
defer 25% of his overall STIA for 2011.
The amounts paid to Pete Redfern and
Ryan Mangold in respect of 2010 are set
out in the remuneration table on page 48.
For the Group Chief Executive and Group
Finance Director, challenging and specific
targets have been put in place for 2011
and are as set out below:
Measure
PBIT
Cash generated (before land spend)
ROCE
Order book
Customer service
Strategic objectives/successful
debt reduction
Build costs
Waste tonnage reduction
Weighting
40%
10%
10%
10%
10%
10%
5%
5%
No element of any STIA is pensionable.
Sheryl Palmer’s remuneration
Sheryl Palmer is the President and Chief
Executive Officer of Taylor Wimpey’s
North American business. Details of
her remuneration are set out in the
remuneration table on page 48.
With effect from 1 April 2011 her base
salary will be increased by 2.5% from
$615,000 (£399,000) to $630,375
(£404,087).
The 2010 STIA put in place for Sheryl
Palmer was based on a number of
stretching targets which included: profit
before interest and tax (pre-exceptionals),
cash performance, order book in each
of the USA and Canada and customer
service. As explained in last year’s
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Directors’ Report: Governance
Remuneration Report continued
Remuneration Report, North American
annual bonus opportunities are typically
set at higher levels than in the UK,
particularly in the housebuilding industry.
The maximum STIA arrangement for
Sheryl Palmer for 2010 was 500% of
base salary. Certain elements of the STIA
targets were met resulting in a bonus
payment to Sheryl Palmer of 429% of
base salary. It is a requirement that 25%
of any amount paid to Sheryl Palmer
over and above 150% of base salary is
deferred and paid out in cash equally
over a three year period pursuant to the
terms of the Taylor Morrison Annual Bonus
Deferral Plan.
As announced, the Board’s intention is
to refocus the business of the Group on
the UK market in the medium term. In
view of this, the Committee has put in
place a bonus opportunity for the first six
months of 2011 based on the following
performance targets, which it will extend
as appropriate for the balance of the year:
Performance measures
PBIT
Cash Flow
Order Book / Closings (US)
Order Book / Closings (Canada)
Weighting
% of award
40%
40%
10%
10%
The STIA multiple of salary that will apply
for 2011 will be the same as 2010 but
pro rated as appropriate for the first six
months (i.e. 250% of base salary).
Details of Sheryl Palmer’s long term
incentive awards to date are set out
on page 49. Awards made to Sheryl
Palmer are lower than those made to UK
Executive Directors in order to reflect the
higher STIA maximum opportunity which
is available to her.
Long Term Incentive Plans
Current plans
The Company has two long term
incentive plans, the Taylor Wimpey
Performance Share Plan (‘TWPSP’) and
the Taylor Wimpey Share Option Plan
(‘TWSOP’), both of which were approved
by shareholders at the 2008 Annual
General Meeting.
Other than in exceptional circumstances,
the combined value of awards made
under the two plans may not exceed that
of an expected value of a TWPSP award
with a face value of 200% of base salary,
in the case of Executive Directors, or
300% of base salary in the case of other
LTIP Performance Criteria
TWSOP
TWPSP
2008
ROCE > cost of
capital (50%)
2009
Absolute ROCE
(50%)
EPS growth (25%)
TSR vs FTSE 100
(12.5%)
TSR vs industry
peer group (12.5%)
–
–
TSR vs FTSE 250
(25%)
TSR vs industry
peer group (25%)
–
2010
2011
–
Absolute ROCE
(40%)
TSR vs FTSE 250
(30%)
TSR vs industry
peer group (30%)
–
–
Absolute ROCE
(30%)
TSR vs FTSE 250
(20%)
TSR vs industry
peer group (20%)
Margin (30%)
employees. The Committee has not made
any exceptional awards in excess of these
limits since the plans were introduced.
In calculating the value of awards, one
TWPSP award is deemed to have the
same expected value as two options
granted under the TWSOP.
The Committee’s current policy is to make
awards under the TWPSP only, as awards
of performance shares are less dilutive
than awards of share options and are
consistent with prevailing market practice.
2011 awards
The performance targets governing the
vesting of these awards are set out in the
LTIP Performance Criteria table above
and include a new measure based on the
margin achieved on new homes by the
UK business.
Margin is regarded as a key measure for
the housebuilding industry and challenging
targets have been put in place by the
Committee requiring the achievement of
double digit margins in the 2013 financial
year. The margin targets for the 2011
awards are as follows:
% of this element of
the award vesting
0%
20%
100%
Margin in
2013
Less than
10%
10%
13%
20%-100% 10%-13%
Below Threshold
Threshold
Maximum
Between
threshold and
maximum
TSR performance is measured against
two TSR peer groups comprising the
constituents of the FTSE 250 index at the
date of grant and, secondly, a sector peer
group comprising: Barratt Developments,
Bellway, Berkeley Group, Bovis Homes
Group, Galliford Try, Kier, Marshalls,
Persimmon, Redrow, SIG, Travis Perkins
and Wolseley. TSR performance is
measured over three years beginning
44
Taylor Wimpey plc Annual Report & Accounts 2010
from the date of grant. The Committee
considers that TSR performance remains
appropriate as it rewards management for
delivering superior returns to shareholders
than its peers. The TSR targets for the
2011 awards are as follows:
% of this
element of the
award vesting
Ranking against
comparator group
over 3 years
from grant
0% Below median
Median
100% Upper quartile
20%
20%-100%
Median to
upper quartile
Below Threshold
Threshold
Maximum
Between
threshold and
maximum
ROCE is also considered appropriate as
it directly measures the efficient use of
capital. The ROCE targets for the 2011
awards, which will be measured in the
2013 financial year, are as follows:
% of this element of
the award vesting
0%
20%
100%
Absolute
ROCE in 2013
Less than
10%
10%
20%
20%-100% 10%-20%
Below Threshold
Threshold
Maximum
Between
threshold and
maximum
As mentioned on page 41, it is proposed
that award levels for UK Executive
Directors return to their previous levels
of 200% of salary. Details of these
awards will be included in the 2011
Remuneration Report.
Previous awards
Awards made to Ryan Mangold in 2010
were made prior to his appointment to
the Board as Group Finance Director in
November 2010 (namely, when he held
the position of Group Financial Controller).
His 2010 awards were accordingly made
at a multiple of 90% of his then base
salary (which reflected the scale-back
applied to all participants).
Directors’ Report: Governance
Vesting of the awards made between
2008 and 2011 is subject to the
achievement of a combination of
Return on Capital Employed (‘ROCE’),
Earnings per Share (‘EPS’), relative TSR
performance and, for 2011, Margin.
The table opposite summarises the
performance conditions attached to each
year’s awards.
The ROCE and EPS elements of the
2008 LTIPs will not vest following the
outcome of the performance tests. Based
on recent performance testing, the TSR
element is unlikely to vest when the final
calculation is performed in mid-April. The
position will be confirmed in the 2011
Remuneration Report.
Since 2009 awards have been made to
Executive Directors and a small number
of designated senior executives. The
Committee will review levels of participation
throughout the Group as part of its overall
remuneration review to take place during
2011 as referred to on page 41.
The performance targets for awards made
during 2009 are that the Company’s TSR
performance over the period compared
to its peer group shall be at least 50th
percentile (for 25% of the TSR-related
award to vest) or 75th percentile (for 100%
of the TSR-related award to vest). There
would be straight line vesting between
these TSR thresholds.
During 2010, awards were made in two
tranches to 23 executives (2009: 23) over
an aggregate of 13,879,107 shares
(2009: 6,087,533), based on share prices
of 40.01 pence, 35.1 pence and 31.3
pence (2009: 39.34 pence), exercisable
on: first tranche – 22 March 2013 or, if
later, the announcement of the Group’s
2012 full year results (save for one award
made to a new joiner which would vest
20 May 2013); second tranche – 6 August
2013 or, if later, the announcement of
the Group’s 2013 half year results. The
associated performance calculations will
take place in or around March 2013 (for
the first tranche) and in or around August
2013 (for the second tranche). Details
of awards made to Executive Directors
appear on page 49.
Taylor Wimpey Share Option Plan
Awards under this plan may be income
tax-approved up to HMRC’s aggregate
limit of £30,000. Awards normally vest
after three years, and after four years for
awards made during 2009 from the start
of the performance measurement period
provided that the performance condition
has then been achieved. No awards
were made under the TWSOP in 2010
and none are proposed to be made in
2011. Details of awards held by Executive
Directors appear on page 49.
Additional performance test
An additional requirement for any vesting
under the current share-based incentive
plans is that at the time of approving the
vesting, the Committee must be satisfied
with the overall financial performance of
the Group.
With regard to margin, the Committee
will retain the right (as part of its overall
discretion) to reduce the vesting of this
part of the award if volumes (i.e. the
number of homes sold) have not been
satisfactory during the performance period.
Pre-merger share plans
The various share plans that were in place
prior to the merger of Taylor Woodrow and
George Wimpey in July 2007, principally
(and using their pre-merger names):
• the Taylor Woodrow Performance
Share Plan;
• the Taylor Woodrow Executive Share
Option Plan; and
• the George Wimpey Executive Share
Option Scheme
have all been effectively closed. No
Executive Director has any ongoing
participation or interest in any of the
above plans.
All-employee share plans
The Company encourages share
ownership by employees and, accordingly,
it operates all-employee share plans. The
Company operates a Sharesave Plan and
a Share Incentive Plan (the ‘UK Share
Purchase Plan’) both with standard terms
under which all UK employees with at
Total shareholder return (£)
least three months’ service can participate.
During 2010, 600 employees (2009: 746)
applied to join the Sharesave Plan. Options
were granted over 11,532,281 shares
(2009: 7,101,166) at an option price of
22.88 pence per share. During 2010, 568
participants contributed to the UK Share
Purchase Plan (2009: 611) and purchased
1,563,702 partnership shares (2009:
1,780,078). Such shares are eligible for a
1:1 match if held for three years. Details of
awards held during the year by Executive
Directors appear on page 49.
Performance graph
The graph below shows the Company’s
performance, measured by TSR, for the
five year period to 31 December 2010,
compared with the performance of the
FTSE 100 and the FTSE 250 Share Indices
and the TWPSP peer group. The FTSE
100 and FTSE 250 comparator groups are
those used in successive years’ awards
under the TWPSP, described above.
Other share plan information
In accordance with International Financial
Reporting Standards, details of the
sources of shares issued or transferred
during the year to meet maturing or vesting
rights under the Company’s share-based
reward schemes, and the potential further
requirement for shares to satisfy options
and awards outstanding at the end of
the year, are shown in Note 23 to the
consolidated financial statements. Share
plans are also compliant with Association
of British Insurers’ dilution guidelines and
meet investor guidelines.
The Company’s present intention is
to meet the requirement for shares in
respect of share plans, by a mix of market
purchases and utilising the remaining
balance of shares in the appropriate
Employee Share Trust, wherever it is
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200
150
100
50
0
05
06
07
08
09
10
Taylor Wimpey plc
FTSE 100 Index
FTSE 250 Index
TW PSP Peer Group
Source: Thomson Reuters
This graph shows the value, by 31 December 2010, of £100 invested in Taylor Wimpey plc on 31 December 2005 compared with the value
of £100 invested in the FTSE 100 Index, the FTSE 250 Index and in the bespoke peer group used for the Taylor Wimpey Performance Share
Plan. The other points plotted are the values at intervening financial year-ends.
45
Taylor Wimpey plc Annual Report & Accounts 2010
of this scheme to the lesser of the actual
increase in basic salary or the RPI, subject
to a maximum of 5% per annum.
The Fund ceased future accrual on
30 November 2006 and from 1 December
2006 existing active Fund members were
invited to participate in the PCP.
Taylor Wimpey Personal Choice Plan
The PCP was introduced on 1 April 2002.
It is a defined contribution stakeholder
pension scheme, which all new eligible
UK employees are invited to join. All
active members of the defined benefit
arrangements were invited to join the
PCP when those arrangements closed
to future accrual.
Pete Redfern has a pension allowance
of 20% of the earnings cap, with effect
from 1 September 2010, in lieu of pension
membership, due to legislative changes
introduced in 2009. For 2010 a total of
£8,240 was paid. The payment is made in
addition to his existing pension allowance
of 25% of salary above the earnings cap
as described above.
George Wimpey Stakeholder Scheme
Contributions to this defined contribution
arrangement ceased on 31 August 2010.
No Executive Director was a member of
the stakeholder scheme.
Life assurance arrangements
Life assurance of up to four times
basic salary and a pension of up to
two-thirds of the member’s entitlement
for a spouse on death in service, or in
retirement, are provided, together with a
children’s allowance of up to 100% of the
dependant’s pension for three or more
eligible children.
Directors’ Report: Governance
Remuneration Report continued
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possible to do so. Where there are
relatively small requirements for shares,
these will continue to be met for
administrative convenience from other
sources, including new issue.
Share retention and target director
shareholdings
The Remuneration Committee has
approved guidelines relating to target
shareholdings in the Company and share
retention requirements in respect of
shares received under long term incentive
plans. The purpose of the guidelines is to
align the interests of Directors and senior
management with those of shareholders
through the creation of a ‘community of
interest’. The guidelines and requirements
are set out below and it is intended to
keep them under regular review:
1. Within five years of 1 January 2008 or
from the date of appointment if later:
• Executive Directors will be ordinarily
required to build up a shareholding
in Taylor Wimpey broadly equal to
1x base salary;
• other Executive Committee members
will be ordinarily required to build up
a shareholding broadly equal to 0.5x
base salary.
2. Executive Directors and members of
the Corporate, UK and NA leadership
teams who participate in the
Performance Share Plan (‘PSP’) and/
or the Share Option Plan (‘SOP’) will be
ordinarily required to retain shares for
one year as set out below:
• 50% of the net amount of any shares
that vest under the PSP in the case
of Executive Directors and 25% in
the case of other participants;
• 50% of the net gain of shares
following the exercise of any
executive share options under
the SOP in the case of Executive
Directors and 25% in the case of
other participants.
3. Shares that vest or are received
following the exercise of any option,
count towards the targets set out in
point 1 above. Subject to the Model
Code and any other applicable rules
governing dealings in shares and
subject to the retention policy set out in
point 2 above, such shares may be sold
provided that the target holdings are
met within the applicable timeframe.
4. Shares that are held on trust for any
executive pursuant to the deferred
bonus scheme will count towards the
target shareholding.
5. The Chairman and the Non Executive
Directors are expected to hold shares
in the Company in order to align their
interests with those of shareholders.
The Committee will keep these guidelines
under regular review to ensure that they
remain both reasonable and appropriate
and this will be covered as part of the
2011 remuneration review previously
referred to on page 41.
Pension arrangements
Details of the Group’s principal UK pension
schemes are given in Note 21 on page 83
to the consolidated financial statements.
Taylor Wimpey Pension Schemes
The George Wimpey Staff Pension Scheme
Pete Redfern is a member of the
Executive section of The George Wimpey
Staff Pension Scheme (‘the Scheme’).
He has a Normal Retirement Age under
this Scheme of 62. The Scheme was
closed to new members on 1 January
2002 and was closed to future accrual on
31 August 2010. All active members were
invited to join the Taylor Wimpey Personal
Choice Plan (‘PCP’) from 1 September
2010, referred to below and to which
members and the Company contribute.
Pensions in payment are guaranteed
to increase in line with the Retail Price
Index to a maximum of 5% per annum for
service up to 5 April 2006 and a maximum
of 2.5% for all service thereafter.
Pete Redfern also receives a pension
allowance amounting to 25% of the
difference between his basic salary
and the pension scheme earnings cap.
For 2010 a total of £144,100 (2009:
£144,775) was paid. Pension allowances
do not count towards the calculation of
any bonus awards which are based only
on base salary.
Details of the pension arrangements for
Ryan Mangold and Sheryl Palmer are set
out on page 50.
Taylor Woodrow Group Pension and Life
Assurance Fund (the ‘Fund’)
The Fund was closed to new entrants
from 31 March 2002. With effect from
1 September 2004, a restriction was
applied so as to limit the amount of any
increase in pensionable salary of members
46
Taylor Wimpey plc Annual Report & Accounts 2010
Directors’ Report: Governance
Directors’ contracts
It is the Company’s policy that Executive Directors should have contracts of employment providing for a maximum of one year’s notice.
Service contracts for all Executive Directors and letters of appointment for all Non Executive Directors are available for inspection as
described in the Notice of 2011 Annual General Meeting.
Details of the Directors’ contracts are summarised in the table below:
Name
Pete Redfern
Ryan Mangold
Sheryl Palmer
Date of contract
13 October 2004
16 November 2010
4 August 2009
Unexpired
term (months)
12
12
12
Notice period
by Company
(months)
12
12
12
Notice period
by Director
(months)
12
12
12
Normal
retirement
age
60
65
65
Current
age
40
39
49
As mentioned earlier, all Directors will submit themselves for election or re-election, as appropriate, at the Annual General Meeting in
accordance with the Governance Code.
It is the Company’s policy that liquidated damages should not automatically apply on the termination of an Executive Director’s
contract. In accordance with this approach, payment for early termination of contract (without cause) by the Company is to be
determined, in the case of each of the Executive Directors, having regard to normal legal principles which require mitigation of
liability on a case-by-case basis. Any such payment would typically be determined by reference to the main elements of a Director’s
remuneration, namely: salary, bonus entitlement (subject to Committee discretion as appropriate), benefits-in-kind and pension
entitlements. Phased payments will be considered by the Company where appropriate. There are no change of control provisions that
apply in relation to the service contract of any Executive Director.
Chairman and Non Executive Directors
Neither the Chairman nor the Non Executive Directors have service contracts. Their terms of engagement are regulated by letters of
appointment as follows:
Name
Kevin Beeston
Brenda Dean
Andrew Dougal
Katherine Innes Ker
Tony Reading
Rob Rowley
Date of appointment
as a Director
1 July 2010
3 July 2007
18 November 2002
1 July 2001
3 July 2007
1 January 2010
Date of initial letter
of appointment
13 May 2010
21 November 2007
31 October 2002
21 May 2001
21 November 2007
1 December 2009
Term of
appointment
3 years, reviewed annually
3 years, reviewed annually
3 years, reviewed annually
3 years, reviewed annually
3 years, reviewed annually
3 years, reviewed annually
Notice
period by
Company
(months)
6
6
6
6
6
6
Notice
period by
Director
(months)
6
6
6
6
6
6
The Chairman was appointed on 1 July 2010 and has an annual fee of £250,000 which is paid monthly. The Chairman’s fees were
fixed by the Board prior to his appointment as Chairman following independent advice provided by Hewitt New Bridge Street.
Andrew Dougal and Katherine Innes Ker will be standing down from the Board immediately prior to the Annual General Meeting on
21 April 2011. All other Directors will submit themselves for election or re-election at the Annual General Meeting in accordance with
the Governance Code.
Brenda Dean, Anthony Reading and David Williams were independent non executive directors of George Wimpey Plc (‘GW’) until
the merger with Taylor Woodrow on 3 July 2007. Their respective dates of appointment were 7 October 2003, 15 April 2005 and
1 May 2001 and, as set out in the Corporate Governance Report, time spent as a director of GW is deemed to count towards
each Director’s overall term of office as a Director of the Company.
The fees of Non Executive Directors were determined by the Board in their absence taking into account the research carried out by
independent remuneration consultants of fees paid to Non Executive Directors of similar sized companies and the sector-based peer
group. Non Executive Director fees are subject to the aggregate annual limit of £1,000,000 imposed by the Articles of Association
and will be reviewed annually.
The basic fee paid to each Non Executive Director is £50,000 per annum and has been at this level since July 2007. The Senior
Independent Director receives an additional payment of £10,000 per annum in respect of the performance of this role. The standard
fee for chairing a Board Committee is £10,000 per annum. The Chairman does not receive any additional fee for chairing the
Nomination Committee.
Neither the Chairman nor the Non Executive Directors participate in any of the Company’s share plans or bonus plans and are not
eligible to join the Company’s pension scheme.
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Taylor Wimpey plc Annual Report & Accounts 2010
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Directors’ Report: Governance
Remuneration Report continued
Part 2: Audited Information
Directors’ emoluments
Basic
salary/fee
£000
Pension
allowance
£000
Benefits-
in-kind
£000(a)
STIA in
respect of
2010
£000
Other
benefits/
payments
£000(a)
2010
total
(b) £000
Executive
Pete Redfern
Ryan Mangold (Appointed 16 November 2010)
Sheryl Palmer (Appointed 5 August 2009)
Chris Rickard (Resigned 16 November 2010)(b)
700
36 (d)
399
334
Non Executive
Kevin Beeston (Appointed 1 July 2010)(c)
Brenda Dean
Andrew Dougal
Katherine Innes Ker
Tony Reading
Rob Rowley (Appointed 1 January 2010)
Norman Askew (Resigned 30 June 2010)
David Williams (Resigned 31 March 2010)
Mike Davies (Resigned 1 September 2009)
Aggregate emoluments
2009
125
50
50
56
60
68
100
18
–
1,996
152
–
–
–
–
–
–
–
–
–
–
–
–
152
21
–
13
1
–
–
–
–
–
–
–
–
–
35
670
34
1,690
323
–
–
–
–
–
–
–
–
–
2,717
20
6
22
555
–
–
–
–
–
–
–
–
–
603
1,563
76
2,124
1,213
125
50
50
56
60
68
100
18
–
5,503
Basic salary
p.a. with
effect from
01.04.2011
(e)
£000
2009
total
£000
1,687
–
1,044
905
718
292
404
–
Fees p.a.
with effect
from
01.01.2011
250
50
50
50
60
70
–
–
–
–
50
56
60
60
–
200
65
33
4,160
(a) Benefits-in-kind includes non-cash payments such as health insurance, company car provision and fuel allowances. Other benefits include car allowance and employer’s contribution to a pension scheme.
(b) Chris Rickard received a base salary at the rate of £380,000 p.a. for the period 1 January 2010 to his date of resignation from the Company on 16 November 2010. On leaving, he received contractual payments of 12
months’ basic pay, benefits, including car allowance and private health care and a sum in lieu of employer’s pension contributions which together amounted to £469,000 (2009: £477,000) which is included in Other
Benefits in the table above. The STIA payment to Chris Rickard for 2010 amounted to £323,000 and was paid at the same time as other participants (i.e. in March 2011) and was subject to the satisfaction of the 2010
STIA performance conditions. Chris Rickard’s interests in the Taylor Wimpey Performance Share Plan and the Taylor Wimpey Share Option Plan all lapsed in their entirety as at 16 November 2010.
(c) The Company also paid £10,416 (2009: £nil) at the rate of £2,083.33 per month as a contribution towards the Chairman’s annual office and related administration costs incurred in carrying out his role. Kevin Beeston’s
base fee is £250,000 per annum.
(d) Ryan Mangold’s annual salary was £152,250 prior to 16 November 2010 and £285,000 post 16 November 2010. Ryan Mangold has joined the Flexible Pension Arrangement (salary exchange) operated by the
Company and the amount exchanged since his appointment as a Director on 16 November 2010 was £2,138. The Flexible Pension Arrangement is a voluntary arrangement, the effect of which is to allow members
and the Company to benefit from savings in National Insurance contributions through the sacrifice of a portion of salary, which would then be paid into a pension scheme as a Company contribution, prior to NIC being
calculated. The Scheme therefore reduces the effective salary of the individual.
(e) With effect from 1 April 2011, the base salaries of Pete Redfern, Ryan Mangold and Sheryl Palmer will be £717,500, £292,125 and £404,087 ($630,375) respectively reflecting the proposed salary increase of 2.5%.
An exchange rate of £1:$1.56 has been used with respect to Sheryl Palmer’s emoluments.
Aggregate emoluments of the Executive Committee (excluding Executive Directors)
7 members
(a) Includes non-cash payments.
(b) There are only 5 members from 1 January 2011.
Basic
salary/fee
£000
1,304
Pension
allowance
£000
65
Benefits-
in-kind
£000(a)
92
STIA in
respect of
2010
£000
1,483
Other
benefits
£000
173
2010
total
£000
3,117
Basic salary
p.a. with
effect from
01.04.2011
£000 (b)
1,261
2009
total
£000
2,821
In addition, a charge of £424,000 (2009: £235,000) was booked in respect of share-based payments.
48
Taylor Wimpey plc Annual Report & Accounts 2010
Directors’ Report: Governance
Directors’ share-based reward and options
Aggregate emoluments disclosed opposite do not include any amounts for the value of options to acquire ordinary shares in the
Company and any other share-based reward granted to or held by the Directors. No Director exercised an option or conditional
award over ordinary shares during the year (2009: nil).
Details of options and conditional awards over shares held by Directors who served during the year are as follows:
Name of Director
Pete Redfern
Ryan Mangold
Sheryl Palmer
Plan
Bonus Plan
Bonus Plan
Performance Share Plan
Performance Share Plan
Performance Share Plan
Performance Share Plan
Share Option Plan
Share Option Plan
Long Term Incentive Plan
Total
Sharesave Plan
Performance Share Plan
Performance Share Plan
Performance Share Plan
Share Option Plan
Total
Performance Share Plan
Performance Share Plan
Performance Share Plan
Performance Share Plan
Share Option Plan
Share Option Plan
1 January
2010(a)
305,345
–
637,902
1,601,423
–
–
1,497,345
3,202,846
341,713
7,586,574
39,335
190,645
171,238
218,889
381,291
1,001,398
140,280
416,508
–
–
329,278
833,016
Granted
(number)
–
497,284(b)
–
–
1,574,606(c)
2,012,779(d)
–
–
–
4,084,669
–
–
–
–
–
–
–
–
454,499(c)
580,974(d)
–
–
Total
1,719,082
1,035,473
Lapsed
(number)
–
–
–
–
–
–
–
–
341,713
341,713
–
–
–
–
–
–
–
–
–
–
–
–
–
31 December
Exercised
2010
(number)
305,345
–
497,284
–
637,902
–
1,601,423
–
1,574,606
–
2,012,779
–
1,497,345
–
3,202,846
–
–
–
– 11,329,530
–
39,335
190,645
–
171,238
–
218,889
–
381,291
–
1,001,398
–
140,280
–
416,508
–
454,499
–
580,974
–
329,278
–
833,016
–
–
2,754,555
Exercise
price
(pence)(d)
–
–
–
–
–
–
93.49
39.34
–
22.88
–
–
–
39.34
–
–
–
–
93.49
39.34
Date of
grant
13.03.08
22.03.10
17.04.08
07.08.09
22.03.10(f)(g)
06.08.10(f)(g)
28.04.08
07.08.09(h)
02.04.07
06.10.10
07.08.09
22.03.10(f)(g)
06.08.10(f)(g)
07.08.09(h)
17.04.08
07.08.09(h)
22.03.10(f)(g)
06.08.10(f)(g)
28.04.08
07.08.09(h)
Date
from which
exercisable
31.12.10
31.12.12
17.04.11
01.01.13(e)
22.03.13(e)
06.08.13(e)
28.04.11
07.08.12
02.04.10
01.12.13
01.01.13(e)
22.03.13(e)
06.08.13(e)
07.08.12
17.04.11
01.01.13(e)
22.03.13(e)
06.08.13(e)
28.04.11
07.08.12
Expiry date
31.12.10
31.12.12
17.04.11
01.01.13(e)
22.03.13(e)
06.08.13(e)
28.04.18
07.08.19
02.04.10
31.05.14
01.01.13(e)
22.03.13(e)
06.08.13(e)
07.08.19
17.04.11
01.01.13(e)
22.03.13(e)
06.08.13(e)
28.04.18
07.08.19
(a) Or date of appointment.
(b) Market value per share on date of grant 22 March 2010 was 38.86 pence.
(c) Market value per share on date of grant 22 March 2010 was 38.86 pence.
(d) Market value per share on date of grant 6 August 2010 was 31.38 pence.
(e) Or later publication of the preliminary full year or half year results announcement on which the associated performance condition will be calculated.
(f) Due to the timing of the 2009 awards, the 2010 awards were made in two equal tranches, after the full year and half year announcements. This was to reduce the potential overlap of the vesting of the 2009 and 2010
awards in 2013 due to the fact that the 2009 awards were effectively based on four year performance periods.
(g) Vesting will be 20% for both tranches of the 2010 award and also for the 2011 award (2009: 25%) for threshold performance (50th percentile for TSR; 10% ROCE) and 100% (2009: 100%) for upper quartile
performance (75th percentile for TSR; 20% ROCE) with straight line vesting between these two thresholds.
(h) For awards made in 2009, the performance target is that ROCE is 10% or more (for 25% of the award to vest) or 20% or more (for 100% of the award to vest), with straight-line vesting between the two thresholds.
There have been no variations to the terms and conditions or performance criteria for outstanding share options during the
financial year.
The performance criteria relating to the Performance Share Plans and Share Option Plans appear earlier in this Directors’
Remuneration Report.
The market price of the ordinary shares on 31 December 2010 was 31.51 pence and the range during the year was 22.3 pence to
43.99 pence.
Details of any share awards made to Executive Directors during 2011 will be included in the 2011 Remuneration Report.
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Directors’ Report: Governance
Remuneration Report continued
Directors’ interests in shares of the Company
Directors’ interests in 1p ordinary shares held (fully paid) (‘ordinary shares’):
Kevin Beeston
Pete Redfern
Ryan Mangold
Sheryl Palmer
Brenda Dean
Andrew Dougal
Katherine Innes Ker
Tony Reading
Rob Rowley
(a) Or date of appointment
Directors’ pension entitlements
Defined benefit schemes
at 01.01.10(a)
ordinary shares
511,581
195,410
16,510
200,000
26,696
15,000
12,000
40,000
–
at 31.12.10
ordinary shares
905,562
548,427
28,510
456,229
33,065
15,000
12,000
300,000
200,000
Executive Directors’ share
interests at 31.12.10 valued
at 31.12.10 share price and
expressed as a percentage
of basic salary at 01.04.11
–
24%
3%
36%
–
–
–
–
–
The George Wimpey Staff Pension Scheme
Pete Redfern is a member of The George Wimpey Staff Pension Scheme (‘GWSPS’). The following table sets out the transfer value of
his accrued benefits under the Scheme calculated in a manner consistent with ‘The Occupational Pension Schemes (Transfer Values)
Regulations 2008’.
Accrued pension
as at
31 December 2009
£
24,720
Increase in accrued
pension from
31 December 2009
to 31 December
2010
£
1,831
Accrued
pension as at
31 December 2010(a)
£
26,551
Transfer value
gross of Director’s
contributions at
31 December 2010(b)
£
269,800
Transfer
value gross
of Director’s
contributions at
31 December 2009(b)
£
232,700
Increase in transfer
value from
31 December
2009 to
31 December 2010
less Director’s
contributions(c)
£
28,860
Increase in accrued
pension from
31 December 2009
to 31 December
2010 less inflation
£
1,065
Transfer value
of accrued
pension
increase less
Director’s
contribution(d)
£
300
Pete Redfern
(a) The GWSPS closed to future accrual on 31 August 2010 so pension accrual ceased on that date. Pension accrual shown above is the amount which would be paid annually on retirement based on service to 31 August 2010.
(b) Transfer values have been calculated in accordance with the occupational Pension Schemes (Transfer Value) Regulations 2008.
(c) The increase in the transfer value includes the effect of fluctuations in the transfer value due to factors beyond the control of the Company and Directors, such as financial market movements.
(d) The transfer value of accrued pension increase less Director’s contribution represents the incremental value to the Director of his service during the period to 31 August 2010. It is based on the increase in accrued
pension (less inflation) after deducting the Director’s contribution.
(e) Pension benefits include a dependent’s pension of two-thirds of the employee’s entitlement.
Non-Group pension arrangements
Ryan Mangold and Sheryl Palmer have non-Group pension arrangements, to which contributions were paid by the Company as set
out below:
Ryan Mangold(a) (b)
Sheryl Palmer
(a) From appointment
(b) In addition to this amount, the Company contributed a further £2,138 as part of the Flexible Pension Arrangement outlined on page 48.
2010
£
4,275
7,300
2009
£
–
7,077
Approval
This Remuneration Report was approved by the Board of Directors on 2 March 2011 and signed on its behalf by the Remuneration
Committee Chairman:
Anthony Reading
2 March 2011
50
Taylor Wimpey plc Annual Report & Accounts 2010
Statutory, regulatory and other formal information
Directors’ Report: Governance
Introduction
This section contains the remaining
matters on which the Directors are required
to report each year, which do not appear
elsewhere in this Directors’ Report. Certain
other matters required to be reported on in
this report appear elsewhere in the Report
and Accounts as detailed below:
• a list of the subsidiary and associated
undertakings, including branches
outside the UK, principally affecting the
profits or net assets of the Group in the
year appears on page 102;
• changes in asset values are set out in
the consolidated balance sheet on page
58 and in the Notes to the accounts on
pages 61 to 101;
• the Group’s profit before taxation and the
profit after taxation and minority interests
appear in the consolidated income
statement on page 56 and in the Notes
to the accounts on pages 61 to 101;
• a detailed statement of the Group’s
treasury management and funding is set
out in Note 20 on page 78.
Directors
The following Directors held office
throughout the year:
Pete Redfern, Group Chief Executive;
Brenda Dean, Independent Non
Executive Director;
Andrew Dougal, Independent
Non Executive Director;
Katherine Innes Ker, Independent
Non Executive Director;
Sheryl Palmer, President and CEO
of Taylor Morrison;
Tony Reading MBE, Independent
Non Executive Director.
The following changes took place during
the year:
Rob Rowley was appointed as an
Independent Non Executive Director
on 1 January 2010 (and the Senior
Independent Director with effect from
1 April 2010);
Kevin Beeston was appointed as a
Director and Chairman of the Board
on 1 July 2010;
Ryan Mangold was appointed as a
Director and Group Finance Director
on 16 November 2010;
David Williams, Independent Non
Executive Director, resigned as a Director
on 31 March 2010;
Norman Askew resigned as a Director and
Chairman of the Board on 30 June 2010;
Chris Rickard resigned as a Director
and Group Finance Director on
16 November 2010.
As announced on 3 February 2011, Kate
Barker CBE will be appointed by the
Board as an Independent Non Executive
Director with effect from 21 April 2011. Kate
Barker will seek election to the Board by
shareholders at this year’s Annual General
Meeting on 21 April 2011 (the ‘AGM’).
As also announced on 3 February 2011,
Andrew Dougal and Katherine Innes Ker will
stand down from the Board immediately
prior to the AGM and, accordingly, will not
be seeking re-election.
Directors together with their biographical
information are shown on pages 32
and 33.
Retirement, election and re-election
The Company has determined that in
accordance with the UK Corporate
Governance Code, all Directors should
seek election or re-election at this year’s
AGM as explained in the Notes to the
Notice of Meeting and on pages 36 and
37 of the Corporate Governance Report.
Each of the Directors proposed for
election or re-election at the AGM is
being unanimously recommended by
all of the other members of the Board.
This recommendation follows the
completion of the annual performance
evaluation process, which included
a detailed appraisal of the Board, its
Committees and in respect of each
Director with the exception of Kate
Barker and Ryan Mangold due to the
date of their respective appointments to
the Board. Further information relating
to the evaluation is set out below and in
the Corporate Governance Report on
pages 36 and 37.
The Articles of Association of the
Company further regulates the
appointment and removal of Directors, as
does the Companies Act 2006 and related
legislation. The Company’s Articles of
Association may be amended by special
resolution of the shareholders. The powers
of the Directors are described in the
Corporate Governance Report.
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Qualifying third party indemnity
The Company has granted an indemnity
in favour of its Directors and officers and
those of its Group companies against the
financial exposure that they may incur in
the course of their professional duties as
Directors and officers of the Company
and/or its subsidiaries. The indemnity
has been put in place in accordance with
section 234 of the Companies Act 2006.
Audit and auditors
Each Director has, as at the date of
approval of this Report, confirmed that:
• to the best of their knowledge there
is no relevant audit information of
which the Company’s auditors are
unaware; and
• they have taken all the steps that they
ought to have taken as a Director in
order to make themselves aware of
any relevant audit information and to
establish that the Company’s auditors
are aware of that information.
This confirmation is given and should
be interpreted in accordance with
the provisions of section 418 of the
Companies Act 2006.
Deloitte LLP have confirmed their
willingness to continue in office as
auditors of the Company and a resolution
to re-appoint them will be proposed at
the AGM.
It is the Company’s general policy that
its auditors will not carry out non-audit
services except where it is appropriate
to do so and in accordance with the
Company’s policy for such work. Deloitte
LLP provided non-audit services to the
Group during the year within the policy
framework as described in the Corporate
Governance Report.
Annual General Meeting
The AGM will be held at 11:00 am on
21 April 2011 at The British Medical
Association, BMA House, Tavistock
Square, London, WC1H 9JP.
Formal notice of the AGM including details
of special business is set out in the Notice
of Meeting on page 104 and on the
Company’s Web site
www.taylorwimpeyplc.com. Voting on all
resolutions at this year’s AGM will again be
conducted by way of a poll as the Board
believes this gives as many shareholders
as possible the opportunity to have their
votes counted, whether their votes are
tendered by proxy in advance of, or in
person at the AGM.
Directors’ Report: Governance
Statutory, regulatory and other formal information continued
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Web communication
With shareholders’ consent, the Company
has adopted web communication. The
benefits of web communication are that it:
• enables the Company to significantly
reduce its printing and postage costs;
• enables shareholders to access
information faster, on the day
documents are published on the
Company’s Web site; and
• reduces the amount of resources
consumed, such as paper, and lessens
the impact of printing and mailing
activities on the environment.
Shareholder communications (including
the 2010 Annual Report and Accounts)
are available electronically through the
Company’s Web site.
The Company provides hard copy
documentation to those shareholders who
have requested this and is, of course,
happy to meet any such requests.
Registrar
The Company’s registrar is Capita
Registrars. Their details, together
with information on facilities available
to shareholders, are set out in the
Shareholder Information section on
page 111.
Capital structure
Details of the Company’s issued share
capital, together with details of the
movements in the Company’s issued
share capital during the year are shown in
Note 23 on page 87.
The Company has two classes of shares:
Ordinary Shares of 1p, each of which
carries the right to one vote at general
meetings of the Company and such
other rights and obligations as set out in
the Company’s Articles of Association;
and Deferred Shares which carry no
voting rights.
As part of the debt restructuring
announced on 7 April 2009 the Company
issued Warrants to certain of its lenders
giving the holders the right, up to 29 April
2014, to subscribe for up to an aggregate
of approximately 58 million Ordinary
Shares (representing approximately 5%
of the Company’s issued share capital
at the time the Warrants were issued).
Warrants remain over approximately
1.77% of the current issued share capital
at the subscription price per share of
17.4473 pence (25 pence prior to the
Placing and Open Offer). The Warrants
Substantial interests in the Company’s shares as at 2 March 2011
Name
Schroders plc
BlackRock Inc
JPMorgan Asset Management Holdings Inc
Legal & General Group Plc
Ignis Asset Management Limited
Standard Life Investments Limited
are transferable and carry entitlement to
subscription for three months after the
passing of a resolution for the winding-
up of the Company. To date, aggregate
exercises of Warrants have resulted in the
issue of 1,257,115 new Ordinary Shares
of 1p each.
The authority given by shareholders at the
Annual General Meeting on 29 April 2010
for the Company to purchase a maximum
of 319.7 million of its own shares remained
valid at 31 December 2010. The authority
was not exercised during 2010 or prior to
the date of this Report and the Company
has no intention of exercising the authority
in the present economic conditions but
will nevertheless be seeking the usual
authority at the AGM. The Company
currently holds no shares in treasury.
There are no specific restrictions on the
size of a holding, the exercise of voting
rights, nor on the transfer of shares, which
are governed by the Articles of Association
and prevailing legislation. The Directors
are not aware of any agreements between
holders of the Company’s shares that
may result in restrictions on the transfer of
securities or on voting rights.
Details of employee share schemes are
set out in the Remuneration Report on
pages 41 to 50. The Employee Share
Ownership Trusts generally abstain from
voting in respect of shares held by them.
No person has any special rights of control
over the Company’s share capital and all
issued shares are fully paid.
Substantial interests
The persons set out in the table above
have notified the Company pursuant
to Rule 5.1 of the Disclosure and
Transparency Rules of their interests in the
ordinary share capital of the Company.
Number of shares
held (millions)
448.38
313.62
159.64
127.16
97.50
96.39
Percentage of issued
voting share capital
14.02
9.81
4.99
3.97
3.05
3.01
Directors’ interests, including interests in
the Company’s shares, are shown in the
Remuneration Report.
Dividend
The Board did not feel it appropriate to
propose an interim dividend for 2010.
Although the uncertainty in the wider
economy has eased somewhat during
the second half of 2010, the Board is not
proposing a final dividend for 2010. The
Board will continue to review its dividend
policy in the light of the Company’s
financial position and prevailing economic
and market conditions in the future.
Research and development
The Company remains committed to
investing in research and development
projects where there are clearly defined
business benefits.
In the UK our efforts were focused on
five main areas together with a variety of
contributions to industry-wide initiatives.
We constructed prototype new houses to
test new approaches to meeting current
regulations and the efficiency of our build
processes, reviewing the outcome with
customers and the supply processes with
our suppliers, to ensure we met customer,
regulatory and efficiency parameters. Work
was commenced on developing detailed
guidance to meet the criteria of Building
For Life in improving urban design quality,
involving all local stakeholders.
The development of our building fabric to
improve energy efficiency has progressed,
evaluating new products and our supply
chain towards the delivery of low-end
zero-carbon solutions. Roof systems
have been improved to deliver occupancy
space together with improved site safety
and reduced wastage through programme
and cost efficiencies.
At 2 March 2011, no change in these
holdings had been notified nor, according
to the register of members, did any other
shareholder at that date have a disclosable
holding of the Company’s issued
share capital.
A landfill site is being used for trials of
innovative and sustainable reclamation
solutions which will maximise the re-use
of existing materials, reduce waste and
minimise the impact of materials transport
through the local community.
52
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Directors’ Report: Governance
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We continue to lead and support a wide
variety of industry initiatives in the area of
zero carbon emissions, lifetime homes
and membership of the CBI’s climate
change board and working groups.
Work on improving the efficient use of
brownfield land includes working with
the Construction Industry Research
body (CIRIA) in developing guidance
on the management of risk in building
on contaminated land; chairing the
Brownfield Working Group researching
the management of environmental
liability, and advising on EU research into
sustainable solutions for the long-term
use of brownfield sites. We also assisted
Government research into improving
resource efficiency in our business and
are integrating the results into improved
processes and procedures.
In 2010, Taylor Morrison completed a
large scale survey of recent homebuyers
and qualified shoppers in all of its North
American markets to redefine its consumer
segmentation model. Over 1,100 surveys
were completed with a healthy sample in
each of the Company’s business localities
including Canada. The research resulted
in a clearer understanding of today’s
consumer opinions about housing needs
and desires. This knowledge will assist
the Company with decisions such as
where to build, what to build and how to
reach certain consumer groups, deemed
actionable. Seven home buying consumer
groups were isolated with demographics
ranging from young singles to active
adults. Full implementation of the research
is expected in early 2011.
Employee involvement and
communication
The Company is committed to ensuring
open and regular communication
throughout the Group on both business-
related issues and issues of general
interest. There is a formal Employee
Consultative Committee structure in place
in all operations and elected representatives
meet with management to consult on
appropriate issues. Intranet systems
are continually updated which provide
a valuable communication tool across
the Group and an important facility for
providing employees with access to a wide
range of information. Information is regularly
cascaded throughout the Group via e-mail
– including regular communications from
the Group Chief Executive, verbal briefings
and by management presentations.
A recent initiative has been the setting up
of a forum on the intranet called “Open
Door” which allows direct communication
with the Group Chief Executive on
strategic areas of focus and other matters
in order to enable all employees to
contribute and comment. All employees
will be encouraged to participate and use
the forum.
The Company promotes all-employee
share plans, including the Save As You
Earn share option scheme and the Share
Incentive Plan, as widely as possible
across the Group.
Equal opportunities
The Company remains committed
to equality of opportunity in all of its
employment practices, policies and
procedures across the Group. To this end,
within the framework of applicable law,
we are committed, wherever practicable,
to achieving and maintaining a workforce
which broadly reflects that of the local
catchment area within which we operate.
No employee or potential employee will
receive less favourable treatment due to
their race, creed, colour, nationality, ethnic
origin, religion, political or other opinion,
affiliation, gender, sexual orientation,
marital status, family connections, age,
membership or non-membership of a
trade union, or disability, unless justifiable
in exceptional circumstances, for example
due to health and safety considerations.
Instruction on equal opportunities is part
of the induction programme.
Employment of disabled persons
It is our policy that people with disabilities
should have fair consideration for all
vacancies within the Group.
The Company is therefore committed,
where possible, to ensuring that people
with disabilities are supported and
encouraged to apply for employment
and to achieve progress once employed.
They will be treated so as to ensure
that they have an equal opportunity to
be selected, trained and promoted. In
addition, every reasonable effort is made
for disabled persons to be retained in the
employment of the Group by investigating
the possibility of making reasonable
adjustments to the job, workplace or
equipment.
Charitable donations
The Company has a Charity Committee,
which operates within written terms
of reference and charitable guidelines
approved by the Board. The Committee’s
53
Taylor Wimpey plc Annual Report & Accounts 2010
aims are to monitor and review charitable
donations made by regional businesses as
against the guidelines and to assess and
administer larger donations centrally. The
members of the Committee are the Group
HR Director (Chairman), Group Company
Secretary and General Counsel, Group
Finance Director, UK Land and Planning
Director, Vice President Human Resources
– Taylor Morrison, Group Investor Relations
Manager and Assistant Company Secretary.
During the year, Group companies
donated £199,000 (2009: £236,000) to
various charities, £95,000 (2009: £55,000)
in the UK and Europe and £104,000
(2009: £181,000) in North America.
Further information on the Group’s
donations, activities and initiatives
can be found in the 2010 Corporate
Responsibility Report which is available
on the Company’s Web site:
www.taylorwimpeyplc.com.
Political donations
The Company does not make donations
to political parties and neither does it
intend to. The Company does support
certain industry-wide organisations which
directly assist the housebuilding industry
such as the Home Builders Federation
in the UK. Whilst we do not regard this
as political in nature, legislation relating
to ‘political organisations’ is very wide
and in certain circumstances a donation
or a subscription to a charity or other
organisation could retrospectively be
categorised as a political donation.
Accordingly, the Company will be seeking
the usual annual dispensation at the
Annual General Meeting.
Policy on payment of suppliers
The nature of the Group’s operations
means that there is no single Group
standard in respect of payment terms to
suppliers. Generally, business units are
responsible for establishing payment terms
with suppliers when entering into each
transaction or series of linked transactions.
In the absence of dispute, valid payment
requests are met as expeditiously as
possible within such terms. In the UK,
commencing on 1 January 2010, our new
suite of standard framework agreements
with suppliers established the due date
for payment as 30 days from the later of
the date of issue of the invoice or request
for payment, or the relevant month end
notified by the employer.
Trade creditor days for the Group for the
year ended 31 December 2010 were 30
and the undertakings included in the
consolidation taken as a whole; and
• the management report, which is
incorporated into the Directors’ Report,
includes a fair review of the development
and performance of the business
and the position of the Company
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks
and uncertainties that they face.
This Report of the Directors was approved
by the Board of Directors on 2 March 2011.
James Jordan
Group Company Secretary
and General Counsel
Taylor Wimpey plc
Directors’ Report: Governance
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days (2009: 20 days). This is based on
the ratio of year end Group trade creditors
(excluding sub-contract retentions
and unagreed claims of £34.4 million
(2009: £35.3 million) and land creditors,
see Note 19 to the Consolidated Financial
Statements) to amounts invoiced during
the year by trade creditors. The Company
had no significant trade creditors at 31
December 2010.
Agreements
Apart from a small number of borrowing
agreements, pursuant to which the
Company borrows or is able to borrow
money, and land related agreements in
North America, which could potentially
be terminated by the other party upon a
change of control of the Company, there
are no significant contracts or agreements
which take effect, alter or terminate upon
a change of control of the Company.
Important events since the year end
There have been no important events
affecting the Company or any of its
subsidiary undertakings since 31
December 2010.
Directors’ responsibilities statement
The Directors are responsible for preparing
the Annual Report and the Financial
Statements in accordance with applicable
law and regulations.
Company law requires the Directors
to prepare financial statements for
each financial year. Under that law the
Directors are required to prepare the
Group financial statements in accordance
with International Financial Reporting
Standards (IFRSs) as adopted by the
European Union and Article 4 of the IAS
Regulation and have elected to prepare
the parent company financial statements
in accordance with United Kingdom
Generally Accepted Accounting Practice
(United Kingdom Accounting Standards
and applicable law). Under company
law the Directors must not approve the
accounts unless they are satisfied that
they give a true and fair view of the state
of affairs of the Company and of the profit
or loss of the Company for that period.
In preparing the parent company financial
statements, the Directors are required to:
• select suitable accounting policies and
then apply them consistently;
• make judgements and accounting
estimates that are reasonable and
prudent;
• state whether applicable UK Accounting
Standards have been followed,
subject to any material departures
disclosed and explained in the financial
statements; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
In preparing the Group financial
statements, International Accounting
Standard 1 requires that Directors:
• properly select and apply accounting
policies;
• present information, including
accounting policies, in a manner that
provides relevant, reliable, comparable
and understandable information;
• provide additional disclosures
when compliance with the specific
requirements in IFRSs are insufficient to
enable users to understand the impact
of particular transactions, other events
and conditions on the entity’s financial
position and financial performance; and
• make an assessment of the Company’s
ability to continue as a going concern.
The Directors are responsible for keeping
adequate accounting records that
are sufficient to show and explain the
Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Company and
enable them to ensure that the financial
statements comply with the Companies
Act 2006. They are also responsible for
safeguarding the assets of the Company
and hence for taking reasonable steps for
the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on
the Company’s Web site. Legislation
in the United Kingdom governing the
preparation and dissemination of financial
statements may differ from legislation in
other jurisdictions.
Responsibility statement
The Directors confirm that to the best of
their knowledge:
• the financial statements, prepared in
accordance with the relevant financial
reporting framework, give a true and fair
view of the assets, liabilities, financial
position and profit or loss of the Company
54
Taylor Wimpey plc Annual Report & Accounts 2010
Independent Auditor’s Report
to the members of Taylor Wimpey plc
We have audited the Group financial statements of Taylor Wimpey plc for the year
ended 31 December 2010 which comprise the Consolidated Income Statement,
the Consolidated Statement of Comprehensive Income, the Consolidated Balance
Sheet, the Consolidated Cash Flow Statement, the Consolidated Statement of
Changes in Equity, and the related Notes 1 to 31. The financial reporting framework
that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
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.
Respective responsibilities of Directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the Directors
are responsible for the preparation of the Group financial statements and for being
satisfied that they give a true and fair view. Our responsibility is to audit and
express an opinion on the Group financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting policies are appropriate
to the Group’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the
Directors; and the overall presentation of the financial statements.
Opinion on financial statements
In our opinion the Group financial statements:
• give a true and fair view of the state of the Group’s affairs as at 31 December
2010 and of its profit for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the
European Union; and
• have been prepared in accordance with the requirements of the Companies Act
2006 and Article 4 of the IAS Regulation.
Financial Statements
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year
for which the financial statements are prepared is consistent with the Group
financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• 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.
Under the Listing Rules we are required to review:
• the Directors’ statement contained within the Directors’ Report on Corporate
Governance in relation to going concern;
• the part of the Corporate Governance Statement relating to the Company’s
compliance with the nine provisions of the June 2008 Combined Code specified
for our review; and
• certain elements of the report to shareholders by the Board on directors’
remuneration.
Other matters
We have reported separately on the parent Company financial statements of
Taylor Wimpey plc for the year ended 31 December 2010 and on the information
in the Directors’ Remuneration Report that is described as having been audited.
Colin Hudson, FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Registered Auditor
London, United Kingdom
2 March 2011
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Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Consolidated Income Statement
for the year to 31 December 2010
£ million
Revenue
Cost of sales
Gross profit/(loss)
Net operating expenses
Profit/(loss) on ordinary activities before finance costs
Interest receivable
Finance costs
Share of results of joint ventures
Profit/(loss) on ordinary activities before taxation
Taxation (charge)/credit
Profit/(loss) for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Adjusted basic earnings/(loss) per share
Adjusted diluted earnings/(loss) per share
Before
exceptional
items
2010
Exceptional
items
(Note 5)
2010
Note
2,603.3
(2,239.4)
363.9
(179.7)
184.2
3.8
(122.8)
9.9
75.1
(55.3)
19.8
–
(24.8)
(24.8)
(38.2)
(63.0)
–
(83.4)
–
(146.4)
385.9
239.5
3
5
7
13
8
25
Note
9
9
9
9
Before
exceptional
items
2009
Exceptional
items
(Note 5)
2009
2,595.6
(2,365.4)
230.2
(192.5)
37.7
10.6
(150.0)
5.6
(96.1)
(14.3)
(110.4)
–
(527.0)
(527.0)
(53.7)
(580.7)
–
(23.1)
–
(603.8)
73.6
(530.2)
Total
2010
2,603.3
(2,264.2)
339.1
(217.9)
121.2
3.8
(206.2)
9.9
(71.3)
330.6
259.3
259.3
–
259.3
2010
8.1p
7.9p
0.6p
0.6p
Total
2009
2,595.6
(2,892.4)
(296.8)
(246.2)
(543.0)
10.6
(173.1)
5.6
(699.9)
59.3
(640.6)
(640.4)
(0.2)
(640.6)
2009
(25.1p)
(25.1p)
(4.3p)
(4.3p)
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Taylor Wimpey plc Annual Report & Accounts 2010
Consolidated Income Statement
for the year to 31 December 2010
Consolidated Statement of Comprehensive Income
for the year to 31 December 2010
Profit/(loss) on ordinary activities before finance costs
Share of results of joint ventures
Profit/(loss) on ordinary activities before taxation
£ million
Revenue
Cost of sales
Gross profit/(loss)
Net operating expenses
Interest receivable
Finance costs
Taxation (charge)/credit
Profit/(loss) for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Adjusted basic earnings/(loss) per share
Adjusted diluted earnings/(loss) per share
Note
3
5
7
13
8
25
Note
9
9
9
9
Before
Exceptional
Before
Exceptional
£ million
exceptional
items
2010
2,603.3
(2,239.4)
363.9
(179.7)
184.2
3.8
(122.8)
9.9
75.1
(55.3)
19.8
items
(Note 5)
2010
–
(24.8)
(24.8)
(38.2)
(63.0)
(83.4)
–
–
(146.4)
385.9
239.5
Total
2010
2,603.3
(2,264.2)
339.1
(217.9)
121.2
3.8
(206.2)
9.9
(71.3)
330.6
259.3
exceptional
items
2009
2,595.6
(2,365.4)
230.2
(192.5)
37.7
10.6
(150.0)
5.6
(96.1)
(14.3)
(110.4)
items
(Note 5)
2009
(527.0)
(527.0)
(53.7)
(580.7)
(23.1)
–
–
–
(603.8)
73.6
(530.2)
Profit/(loss) for the year
Exchange differences on translation of foreign operations
Movement in fair value of hedging derivatives
Actuarial gain/(loss) on defined benefit pension schemes
Tax on items taken directly to equity
Other comprehensive income/(expense) for the year net of tax
Total recognised income/(expense) for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Total
2009
2,595.6
(2,892.4)
(296.8)
(246.2)
(543.0)
10.6
(173.1)
5.6
(699.9)
59.3
(640.6)
(640.4)
(0.2)
(640.6)
2009
(25.1p)
(25.1p)
(4.3p)
(4.3p)
259.3
–
259.3
2010
8.1p
7.9p
0.6p
0.6p
Financial Statements
Note
25
21
14
2010
259.3
33.9
(3.6)
46.9
(15.9)
61.3
320.6
320.6
–
320.6
2009
(640.6)
(5.0)
11.5
(141.8)
87.6
(47.7)
(688.3)
(688.1)
(0.2)
(688.3)
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Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Consolidated Balance Sheet
at 31 December 2010
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Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Interests in joint ventures
Trade and other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Tax receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Tax payables
Bank loans and overdrafts
Provisions
Net current assets
Non-current liabilities
Trade and other payables
Debenture loans
Bank and other loans
Retirement benefit obligations
Deferred tax liabilities
Provisions
Total liabilities
Net assets
Equity
Share capital
Share premium account
Own shares
Merger relief reserve
Other reserves
Retained earnings
Equity attributable to parent
Non-controlling interests
Total equity
Consolidated Statement of Changes in Equity
for the year to 31 December 2010
Cash cost of satisfying share options
Exchange differences on translation of foreign operations
Decrease in fair value of hedging derivatives
Actuarial gain on defined benefit pension schemes
£ million
Balance as at 1 January 2010
New share capital subscribed
Utilisation of treasury shares
Share-based payment credit
Deferred tax asset
Transfer to retained earnings
Profit for the year
Equity attributable to parent
Non-controlling interests
Total equity
For the year to 31 December 2009
£ million
Balance as at 1 January 2009
New share capital subscribed
Share-based payment credit
Other financing costs
Issue of equity instruments
Deferred tax asset recognised
Transfer to retained earnings
Loss for the year
Equity attributable to parent
Non-controlling interests
Cancellation and utilisation of treasury shares
Exchange differences on translation of foreign operations
Increase in fair value of hedging derivatives
Actuarial loss on defined benefit pension schemes
Share
capital
287.7
Share
premium
753.6
0.1
shares
(5.0)
4.4
Own
Merger relief
reserve
Other
reserves
76.7
Retained
earnings
385.5
1,498.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
287.7
753.7
(0.6)
Share
premium
753.6
Share
capital
289.6
21.3
(23.2)
Own
shares
Merger relief
reserve
(275.7)
270.7
488.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
33.9
(3.6)
(5.6)
101.4
Other
reserves
64.7
5.5
(5.0)
11.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(4.4)
2.8
(0.4)
–
–
46.9
(15.9)
5.6
259.3
679.4
Retained
earnings
838.3
(247.5)
1.0
(0.5)
–
–
–
–
(141.8)
87.6
488.8
(640.4)
385.5
Total
0.1
–
2.8
(0.4)
33.9
(3.6)
46.9
(15.9)
–
259.3
1,821.6
1.5
1,823.1
Total
1,670.5
510.1
–
1.0
(0.5)
5.5
(5.0)
11.5
(141.8)
87.6
–
(640.4)
1,498.5
2.4
1,500.9
287.7
753.6
(5.0)
76.7
(488.8)
Note
2010
2009
For the year to 31 December 2010
10
11
12
13
16
14
15
16
16
19
17
22
19
18
17
21
14
22
23
24
26
25
25
25
2.4
1.0
7.6
49.7
96.5
372.4
529.6
3,436.2
155.7
19.8
183.9
3,795.6
4,325.2
(902.9)
(162.7)
(15.1)
(46.8)
(1,127.5)
2,668.1
(257.1)
(250.0)
(573.3)
(250.5)
(0.8)
(42.9)
(1,374.6)
(2,502.1)
2.4
–
8.2
51.9
65.0
119.6
247.1
3,603.3
130.5
61.0
132.1
3,926.9
4,174.0
(760.0)
(242.6)
(12.7)
(47.8)
(1,063.1)
2,863.8
(278.6)
(721.9)
(148.4)
(409.3)
(0.8)
(51.0)
(1,610.0)
(2,673.1)
1,823.1
1,500.9
Total equity
287.7
753.7
(0.6)
–
101.4
679.4
1,821.6
1.5
1,823.1
287.7
753.6
(5.0)
–
76.7
385.5
1,498.5
2.4
1,500.9
The financial statements of Taylor Wimpey plc (registered number: 00296805) were approved by the Board of Directors and authorised for issue on 2 March 2011.
They were signed on its behalf by:
P Redfern
Director
R Mangold
Director
58
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Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Interests in joint ventures
Trade and other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Tax receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Tax payables
Bank loans and overdrafts
Provisions
Net current assets
Non-current liabilities
Trade and other payables
Debenture loans
Bank and other loans
Retirement benefit obligations
Deferred tax liabilities
Provisions
Total liabilities
Net assets
Equity
Share capital
Share premium account
Own shares
Merger relief reserve
Other reserves
Retained earnings
Equity attributable to parent
Non-controlling interests
Total equity
They were signed on its behalf by:
Financial Statements
Consolidated Balance Sheet
at 31 December 2010
Consolidated Statement of Changes in Equity
Consolidated Statement of Changes in Equity
for the year to 31 December 2010
for the year to 31 December 2010
Financial Statements
For the year to 31 December 2010
For the year to 31 December 2010
£ million
£ million
Balance as at 1 January 2010
Balance as at 1 January 2010
New share capital subscribed
New share capital subscribed
Utilisation of treasury shares
Utilisation of treasury shares
Share-based payment credit
Share-based payment credit
Cash cost of satisfying share options
Cash cost of satisfying share options
Exchange differences on translation of foreign operations
Exchange differences on translation of foreign operations
Decrease in fair value of hedging derivatives
Decrease in fair value of hedging derivatives
Actuarial gain on defined benefit pension schemes
Actuarial gain on defined benefit pension schemes
Deferred tax asset
Deferred tax asset
Transfer to retained earnings
Transfer to retained earnings
Profit for the year
Profit for the year
Equity attributable to parent
Equity attributable to parent
Non-controlling interests
Non-controlling interests
Total equity
Total equity
For the year to 31 December 2009
For the year to 31 December 2009
£ million
£ million
Balance as at 1 January 2009
Balance as at 1 January 2009
New share capital subscribed
New share capital subscribed
Cancellation and utilisation of treasury shares
Cancellation and utilisation of treasury shares
Share-based payment credit
Share-based payment credit
Other financing costs
Other financing costs
Issue of equity instruments
Issue of equity instruments
Exchange differences on translation of foreign operations
Exchange differences on translation of foreign operations
Increase in fair value of hedging derivatives
Increase in fair value of hedging derivatives
Actuarial loss on defined benefit pension schemes
Actuarial loss on defined benefit pension schemes
Deferred tax asset recognised
Deferred tax asset recognised
Transfer to retained earnings
Transfer to retained earnings
Loss for the year
Loss for the year
Equity attributable to parent
Equity attributable to parent
Non-controlling interests
Non-controlling interests
Total equity
Total equity
Share
Share
capital
capital
Share
Share
premium
premium
Own
Own
shares
shares
Merger relief
Merger relief
reserve
reserve
Other
Other
reserves
reserves
Retained
Retained
earnings
earnings
287.7
287.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
287.7
287.7
Share
Share
capital
capital
289.6
289.6
21.3
21.3
(23.2)
(23.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
287.7
287.7
753.6
753.6
0.1
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
753.7
753.7
Share
Share
premium
premium
753.6
753.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
753.6
753.6
(5.0)
(5.0)
–
–
4.4
4.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.6)
(0.6)
Own
Own
shares
shares
(275.7)
(275.7)
–
–
270.7
270.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5.0)
(5.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
76.7
76.7
–
–
–
–
–
–
–
–
33.9
33.9
(3.6)
(3.6)
–
–
–
–
(5.6)
(5.6)
–
–
101.4
101.4
385.5
385.5
–
–
(4.4)
(4.4)
2.8
2.8
(0.4)
(0.4)
–
–
–
–
46.9
46.9
(15.9)
(15.9)
5.6
5.6
259.3
259.3
679.4
679.4
Merger relief
Merger relief
reserve
reserve
Other
Other
reserves
reserves
Retained
Retained
earnings
earnings
–
–
488.8
488.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(488.8)
(488.8)
–
–
–
–
64.7
64.7
–
–
–
–
–
–
–
–
5.5
5.5
(5.0)
(5.0)
11.5
11.5
–
–
–
–
–
–
–
–
76.7
76.7
838.3
838.3
–
–
(247.5)
(247.5)
1.0
1.0
(0.5)
(0.5)
–
–
–
–
–
–
(141.8)
(141.8)
87.6
87.6
488.8
488.8
(640.4)
(640.4)
385.5
385.5
Total
Total
1,498.5
1,498.5
0.1
0.1
–
–
2.8
2.8
(0.4)
(0.4)
33.9
33.9
(3.6)
(3.6)
46.9
46.9
(15.9)
(15.9)
–
–
259.3
259.3
1,821.6
1,821.6
1.5
1.5
1,823.1
1,823.1
Total
Total
1,670.5
1,670.5
510.1
510.1
–
–
1.0
1.0
(0.5)
(0.5)
5.5
5.5
(5.0)
(5.0)
11.5
11.5
(141.8)
(141.8)
87.6
87.6
–
–
(640.4)
(640.4)
1,498.5
1,498.5
2.4
2.4
1,500.9
1,500.9
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Note
2010
2009
10
11
12
13
16
14
15
16
16
19
17
22
19
18
17
21
14
22
23
24
26
25
25
25
3,436.2
3,603.3
2.4
1.0
7.6
49.7
96.5
372.4
529.6
155.7
19.8
183.9
3,795.6
4,325.2
(902.9)
(162.7)
(15.1)
(46.8)
(257.1)
(250.0)
(573.3)
(250.5)
(0.8)
(42.9)
2.4
–
8.2
51.9
65.0
119.6
247.1
130.5
61.0
132.1
3,926.9
4,174.0
(760.0)
(242.6)
(12.7)
(47.8)
(278.6)
(721.9)
(148.4)
(409.3)
(0.8)
(51.0)
(1,127.5)
2,668.1
(1,063.1)
2,863.8
(1,374.6)
(2,502.1)
(1,610.0)
(2,673.1)
1,823.1
1,500.9
287.7
753.7
(0.6)
–
101.4
679.4
287.7
753.6
(5.0)
–
76.7
385.5
1,821.6
1,498.5
1.5
2.4
1,823.1
1,500.9
The financial statements of Taylor Wimpey plc (registered number: 00296805) were approved by the Board of Directors and authorised for issue on 2 March 2011.
P Redfern
Director
R Mangold
Director
58
Taylor Wimpey plc Annual Report & Accounts 2010
59
Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Consolidated Cash Flow Statement
for the year to 31 December 2010
£ million
Net cash from operating activities
Investing activities
Interest received
Dividends received from joint ventures
Proceeds on disposal of property, plant and investments
Purchases of property, plant and investments
Purchases of software
Amounts invested in joint ventures
Amounts loaned to joint ventures
Acquisition of subsidiaries
Net cash from investing activities
Financing activities
Proceeds from sale of own shares
Cash cost of satisfying share options
Other financing activities
Repayment of debenture loans
Increase in debenture loans
Repayment of overdrafts, bank and other loans
Increase in bank and other loans
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
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Note
27
12
11
27
2010
87.9
0.8
17.1
0.1
(3.7)
(1.0)
(1.0)
(3.9)
–
8.4
–
(0.4)
–
(732.4)
250.0
(348.7)
781.7
(49.8)
46.5
132.1
5.3
183.9
2009
206.3
10.0
9.6
1.5
(2.5)
–
(0.2)
(2.0)
(2.8)
13.6
510.1
–
(0.5)
(200.4)
–
(1,124.9)
–
(815.7)
(595.8)
752.3
(24.4)
132.1
60
Taylor Wimpey plc Annual Report & Accounts 2010
Consolidated Cash Flow Statement
for the year to 31 December 2010
Notes to the Consolidated Financial Statements
for the year to 31 December 2010
Financial Statements
£ million
Net cash from operating activities
Investing activities
Interest received
Dividends received from joint ventures
Proceeds on disposal of property, plant and investments
Purchases of property, plant and investments
Purchases of software
Amounts invested in joint ventures
Amounts loaned to joint ventures
Acquisition of subsidiaries
Net cash from investing activities
Financing activities
Proceeds from sale of own shares
Cash cost of satisfying share options
Other financing activities
Repayment of debenture loans
Increase in debenture loans
Repayment of overdrafts, bank and other loans
Increase in bank and other loans
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
Note
27
12
11
27
2010
87.9
0.8
17.1
0.1
(3.7)
(1.0)
(1.0)
(3.9)
–
8.4
(0.4)
–
–
(732.4)
250.0
(348.7)
781.7
(49.8)
46.5
132.1
5.3
183.9
2009
206.3
10.0
9.6
1.5
(2.5)
–
(0.2)
(2.0)
(2.8)
13.6
(1,124.9)
510.1
(0.5)
(200.4)
–
–
–
(815.7)
(595.8)
752.3
(24.4)
132.1
1. Significant accounting policies
Basis of preparation
The consolidated financial statements have been prepared on a going concern
basis and on a historical cost basis except as otherwise stated below.
The Group completed the refinancing of its debt on the 14 December 2010
providing it with access to £1.3 billion of financing. As part of the refinancing
arrangement the Group has agreed to new covenants. Based on the latest
available forecasts the Group is expected to be able to be in compliance with the
new covenants and has sufficient headroom in the facilities for at least the next
12 months.
The principal accounting policies adopted, which have been applied consistently,
except as otherwise stated, are set out below.
Basis of accounting
The consolidated financial statements have been prepared in accordance with
applicable International Accounting Standards (IAS), International Financial
Reporting Standards (IFRS) and International Financial Reporting Interpretations
Committee (IFRIC) interpretations as adopted for use in the European Union and
those parts of the Companies Act 2006 applicable to companies reporting under
IFRS relevant to the Group’s operations and effective for accounting periods
beginning on 1 January 2010.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the
Company and entities controlled by the Company (its subsidiaries) made up to
31 December each year. Control is achieved where the Company has the power
to govern the financial and operating policies of an investee entity so as to
obtain benefits from its activities. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity.
On acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the identifiable net
assets acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below the fair values of the identifiable net assets acquired
(i.e. discount on acquisition) is credited to the income statement in the period
of acquisition. The interest of minority shareholders is stated at the minority’s
proportion of the fair values of the assets and liabilities recognised.
Subsequently, any losses applicable to the non-controlling interest in excess
of the non-controlling interest are allocated against the interests of the parent.
The results of subsidiaries acquired or disposed of during the year are included in
the Consolidated Income Statement from the effective date of acquisition or up to
the effective date of disposal, as appropriate. Where a subsidiary is disposed of
which constituted a major line of business, it is disclosed as a discontinued
operation. Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by the
Group. All intra-Group transactions, balances, income and expenses are
eliminated on consolidation.
Joint ventures
Undertakings are deemed to be a joint venture when the Group has joint control
via either voting rights or a formal agreement which includes that unanimous
consent is required for strategic, financial and operating decisions. Joint ventures
are consolidated under the equity accounting method. On transfer of land and/or
work in progress to joint ventures, the Group recognises only its share of any
profits or losses, namely that proportion sold outside the Group.
Where a jointly controlled operation is undertaken the related assets and liabilities
are consolidated on a proportional consolidation basis.
Segmental reporting
The Group is divided into four operating divisions for management reporting
and control:
• Housing United Kingdom;
• Housing North America;
• Housing Spain and Gibraltar; and
• Corporate
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In 2009, the Group disposed of its remaining construction operations in Ghana
to existing local management for £1 in cash, giving rise to a profit on sale of
£0.2 million. The 2009 results of the Ghana operations have been presented
within the Corporate business segment.
Revenue
Revenue comprises the fair value of the consideration received or receivable, net
of value added tax, rebates and discounts and after eliminating sales within the
Group. Revenue and profit are recognised as follows:
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(a) Private housing development properties and land sales
Revenue is recognised in the income statement when the significant risks and
rewards of ownership have been transferred to the purchaser. Revenue in
respect of the sale of residential properties is recognised at the fair value of the
consideration received or receivable on legal completion.
(b) Cash incentives
Cash incentives are considered to be a discount from the purchase price offered
to the acquirer and are therefore accounted for as a reduction to revenue.
(c) Contracting work
Where the outcome of a construction contract can be estimated reliably, revenue
and costs are recognised by reference to the stage of completion of the contract
activity at the balance sheet date. This is normally measured by surveys of work
performed to date. Variations in contract work, claims and incentive payments are
included to the extent that it is probable that they will result in revenue and they are
capable of being reliably measured.
Where the outcome of a construction contract cannot be estimated reliably,
contract revenue is recognised to the extent of contract costs incurred that it is
probable will be recoverable. Contract costs are recognised as expenses in the
period in which they are incurred. When it is probable that total contract costs
will exceed total contract revenue, the expected loss is recognised as an
expense immediately.
(d) Interest receivable
Interest income on bank deposits is recognised on an accruals basis.
Exceptional items
Exceptional items are defined as items of income or expenditure which, in the
opinion of the Directors, are material and unusual in nature or of such significance
that they require separate disclosure on the face of the income statement in
accordance with IAS 1 Presentation of Financial Statements.
Foreign currencies
The individual statements of each Group company are presented in the currency
of the primary economic environment in which it operates (its functional currency).
Transactions in currencies other than the functional currency are recorded at the
rates of exchange prevailing on the dates of the transactions. At each balance
sheet date, monetary assets and liabilities that are denominated in foreign
currencies other than the functional currency are retranslated at the rates prevailing
on the balance sheet date. Non-monetary assets and liabilities carried at fair value
that are denominated in foreign currencies are translated at the rates prevailing at
the date when the fair value was determined. Gains and losses arising on
retranslation are included in net profit or loss for the period.
61
Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Notes to the Consolidated Financial Statements continued
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1. Significant accounting policies (continued)
On consolidation, the assets and liabilities of the Group’s overseas operations are
translated at exchange rates prevailing on the balance sheet date. Income and
expense items are translated at an appropriate average rate for the year. Exchange
differences arising are classified as equity and transferred to the Group’s
translation reserve. Such translation differences are recognised as income or as
expenses in the period in which the operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are
treated as assets and liabilities of the foreign entity and translated at the closing
rate. The Group has elected to treat goodwill and fair value adjustments arising
on acquisitions before the date of transition to IFRS as assets and liabilities
denominated in the functional currency of the company in which they arose.
The Group enters into forward contracts in order to hedge its exposure to certain
foreign exchange transaction risks relating to the functional currency in
accordance with Group policy. It also uses foreign currency borrowings and
currency swaps to hedge its net investment exposure to certain overseas
subsidiaries (see below for details of the Group’s accounting policies in respect
of such derivative financial instruments).
Operating leases
The Group as lessee
Rentals payable under operating leases are charged to income on a straight-line
basis over the term of the relevant lease. Benefits received and receivable (and
costs paid and payable) as an incentive to enter into an operating lease are also
spread on a straight-line basis over the lease term.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition
over the Group’s interest in the fair value of the identifiable assets and liabilities
of a subsidiary, joint venture, associate or jointly controlled entity at the date of
acquisition. Goodwill is initially recognised as an asset at cost and is subsequently
measured at cost less any accumulated impairment losses. Goodwill which is
recognised as an asset is reviewed for impairment at least annually. Any
impairment is recognised immediately in the income statement and is not
subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to cash-generating
units. The allocation is made to those cash-generating units that are expected
to benefit from the business combination in which the goodwill arose. Cash-
generating units to which goodwill has been allocated are tested for impairment
annually, or more frequently when there is an indication that the unit may be
impaired. If the recoverable amount of the cash-generating unit is less than the
carrying amount of the unit, the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the unit and then to the other assets
of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
On disposal of a subsidiary or jointly-controlled entity, the carrying value of any
attributable goodwill is included in the determination of the profit or loss on disposal.
Other intangible assets
Brands
Internally generated brands are not capitalised. Acquired brands are capitalised.
Their values are calculated based on the Group’s valuation methodology, which
is based on valuations of discounted cash flows. Brands are stated at cost, less
accumulated amortisation and any accumulated impairment losses.
Software development costs
Costs that are directly associated with the production of identifiable and unique
software controlled by the Group, and that generate economic benefits beyond
one year, are recognised as intangible assets. Computer software development
costs recognised as assets are amortised on a straight-line basis over three to five
years from the time of implementation, and are stated at cost less accumulated
amortisation and any accumulated impairment losses.
Property, plant and equipment
Land and buildings held for use in the production or supply of goods or services,
or for administrative purposes, are stated in the balance sheet at cost less
accumulated depreciation and any accumulated impairment losses. Freehold land
is not depreciated. Buildings are depreciated over 50 years.
Plant and equipment is stated at cost less depreciation. Depreciation is charged so
as to write off the cost or valuation of assets over their estimated useful lives.
Depreciation is charged, where material, on buildings over the expected useful life
of the asset. Other assets are depreciated using the straight-line method, on the
following bases:
Plant, fixtures and equipment 20-25%; and computer equipment 33%.
The gain or loss arising on the disposal or retirement of an asset is determined
as the difference between the sale proceeds, less any selling expenses, and the
carrying amount of the asset and is recognised in the income statement.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible
and intangible assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of
the impairment loss (if any). Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying
amount, the carrying amount of the asset is reduced to its recoverable amount.
If the recoverable amount of a cash-generating unit is estimated to be less than
its carrying amount, impairment losses are allocated first to the intangible assets
in the cash-generating unit.
If the full impairment of intangible assets is not sufficient to reduce the carrying
value of the cash-generating unit to its recoverable amount, tangible fixed assets
must then be reviewed for impairment. If the recoverable amount of tangible fixed
assets exceeds their carrying value, no further impairment is required. An
impairment loss is recognised as an expense immediately, unless the relevant
asset is carried at a revalued amount, in which case the impairment loss is treated
as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset
or cash-generating unit is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been
recognised for the asset or cash-generating unit in prior years. A reversal of an
impairment loss is recognised as income immediately, unless the relevant asset
is carried at a revalued amount, in which case the reversal of the impairment loss
is treated as a revaluation increase.
62
Taylor Wimpey plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements continued
1. Significant accounting policies (continued)
years from the time of implementation, and are stated at cost less accumulated
On consolidation, the assets and liabilities of the Group’s overseas operations are
amortisation and any accumulated impairment losses.
translated at exchange rates prevailing on the balance sheet date. Income and
expense items are translated at an appropriate average rate for the year. Exchange
differences arising are classified as equity and transferred to the Group’s
translation reserve. Such translation differences are recognised as income or as
expenses in the period in which the operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are
treated as assets and liabilities of the foreign entity and translated at the closing
rate. The Group has elected to treat goodwill and fair value adjustments arising
on acquisitions before the date of transition to IFRS as assets and liabilities
denominated in the functional currency of the company in which they arose.
The Group enters into forward contracts in order to hedge its exposure to certain
foreign exchange transaction risks relating to the functional currency in
Property, plant and equipment
Land and buildings held for use in the production or supply of goods or services,
or for administrative purposes, are stated in the balance sheet at cost less
accumulated depreciation and any accumulated impairment losses. Freehold land
is not depreciated. Buildings are depreciated over 50 years.
Plant and equipment is stated at cost less depreciation. Depreciation is charged so
as to write off the cost or valuation of assets over their estimated useful lives.
Depreciation is charged, where material, on buildings over the expected useful life
of the asset. Other assets are depreciated using the straight-line method, on the
following bases:
Plant, fixtures and equipment 20-25%; and computer equipment 33%.
accordance with Group policy. It also uses foreign currency borrowings and
The gain or loss arising on the disposal or retirement of an asset is determined
currency swaps to hedge its net investment exposure to certain overseas
as the difference between the sale proceeds, less any selling expenses, and the
subsidiaries (see below for details of the Group’s accounting policies in respect
carrying amount of the asset and is recognised in the income statement.
of such derivative financial instruments).
Operating leases
The Group as lessee
Rentals payable under operating leases are charged to income on a straight-line
basis over the term of the relevant lease. Benefits received and receivable (and
costs paid and payable) as an incentive to enter into an operating lease are also
spread on a straight-line basis over the lease term.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition
over the Group’s interest in the fair value of the identifiable assets and liabilities
of a subsidiary, joint venture, associate or jointly controlled entity at the date of
acquisition. Goodwill is initially recognised as an asset at cost and is subsequently
measured at cost less any accumulated impairment losses. Goodwill which is
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible
and intangible assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of
the impairment loss (if any). Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been adjusted.
recognised as an asset is reviewed for impairment at least annually. Any
If the recoverable amount of an asset is estimated to be less than its carrying
impairment is recognised immediately in the income statement and is not
amount, the carrying amount of the asset is reduced to its recoverable amount.
subsequently reversed.
If the recoverable amount of a cash-generating unit is estimated to be less than
its carrying amount, impairment losses are allocated first to the intangible assets
For the purpose of impairment testing, goodwill is allocated to cash-generating
units. The allocation is made to those cash-generating units that are expected
in the cash-generating unit.
to benefit from the business combination in which the goodwill arose. Cash-
If the full impairment of intangible assets is not sufficient to reduce the carrying
generating units to which goodwill has been allocated are tested for impairment
value of the cash-generating unit to its recoverable amount, tangible fixed assets
annually, or more frequently when there is an indication that the unit may be
must then be reviewed for impairment. If the recoverable amount of tangible fixed
impaired. If the recoverable amount of the cash-generating unit is less than the
assets exceeds their carrying value, no further impairment is required. An
carrying amount of the unit, the impairment loss is allocated first to reduce the
impairment loss is recognised as an expense immediately, unless the relevant
carrying amount of any goodwill allocated to the unit and then to the other assets
asset is carried at a revalued amount, in which case the impairment loss is treated
of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
as a revaluation decrease.
On disposal of a subsidiary or jointly-controlled entity, the carrying value of any
Where an impairment loss subsequently reverses, the carrying amount of the asset
attributable goodwill is included in the determination of the profit or loss on disposal.
or cash-generating unit is increased to the revised estimate of its recoverable
Other intangible assets
Brands
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been
recognised for the asset or cash-generating unit in prior years. A reversal of an
Internally generated brands are not capitalised. Acquired brands are capitalised.
impairment loss is recognised as income immediately, unless the relevant asset
Their values are calculated based on the Group’s valuation methodology, which
is carried at a revalued amount, in which case the reversal of the impairment loss
is based on valuations of discounted cash flows. Brands are stated at cost, less
is treated as a revaluation increase.
accumulated amortisation and any accumulated impairment losses.
Software development costs
Costs that are directly associated with the production of identifiable and unique
software controlled by the Group, and that generate economic benefits beyond
one year, are recognised as intangible assets. Computer software development
costs recognised as assets are amortised on a straight-line basis over three to five
Financial Statements
is no longer expected to occur, the net cumulative gain or loss recognised
in reserves is transferred to the income statement for the period.
Customer deposits
Customer deposits are recorded as a liability within ‘other payables’ on receipt
and released to the income statement as revenue upon legal completion.
Provisions
Provisions are recognised when the Group has a present obligation as a result
of a past event, and it is probable that the Group will be required to settle that
obligation. Provisions are measured at the Directors’ best estimate of the
expenditure required to settle the obligation at the balance sheet date and are
discounted to present value where the effect is material.
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Inventories
Inventories are initially stated at cost or at the fair value at acquisition date when
acquired as part of a business combination and then held at the lower of this initial
amount and net realisable value. Cost comprises direct materials and, where
applicable, direct labour costs and those overheads that have been incurred in
bringing the inventories to their present location and condition. Net realisable value
represents the estimated selling price less all estimated costs of completion and
costs to be incurred in marketing, selling and distribution. Land is recognised in
inventory when the significant risks and rewards of ownership have been
transferred to the Group.
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Non-refundable land option payments are initially recognised in inventory. They are
reviewed regularly and written off to the income statement when it is not probable
that they will be exercised.
Taxation
The tax charge represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit
differs from net profit as reported in the income statement because it excludes
items of income or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The Group’s liability for
current tax is calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between
the carrying amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit, and is accounted
for using the balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and 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. Such assets and liabilities are
not recognised if the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets and liabilities in a
transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are also recognised for taxable temporary differences arising
on investments in subsidiaries and interests in joint ventures, except where the
Group is able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future.
Deferred taxation is measured on a non-discounted basis using the tax rates and
laws that have then been enacted or substantially enacted by the balance sheet date.
1. Significant accounting policies (continued)
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance
sheet when the Group becomes a party to the contractual provisions of
the instrument.
Trade receivables and other receivables
Trade receivables on normal terms excluding derivative financial instruments
do not carry any interest and are stated at their nominal value as reduced by
appropriate allowances for estimated unrecoverable amounts. Trade receivables
on extended terms, particularly in respect of land, are measured at amortised cost
using the effective interest method, less any impairment. Interest income is
recognised by applying the effective interest rate. Derivative financial instruments
are measured at fair value.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the substance
of the contractual arrangements entered into. An equity instrument is any contract
that evidences a residual interest in the assets of the Group after deducting all of
its liabilities. Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
Borrowings
Interest bearing bank loans and overdrafts are recorded at the proceeds received,
net of direct issue costs. Finance charges, including premiums payable on
settlement or redemption and direct issue costs, are accounted for on an accruals
basis to the income statement using the effective interest method and are added
to the carrying amount of the instrument to the extent that they are not settled in
the period in which they arise.
Trade payables
Trade payables on normal terms are not interest bearing and are stated at their
nominal value. Trade payables on extended terms, particularly in respect of land, are
recorded at their fair value at the date of acquisition of the asset to which they relate.
The discount to nominal value is amortised over the period of the credit term and
charged to finance costs. Derivative financial instruments are measured at fair value.
Derivative financial instruments and hedge accounting
The Group uses forward exchange contracts to hedge transactions denominated
in foreign currencies. The Group also uses foreign currency borrowings and
currency swaps to hedge its net investment exposure to movements in exchange
rates on translation of certain individual financial statements denominated in
foreign currencies other than Sterling which is the functional currency of the parent
Company. Interest rate derivatives are used to manage interest rate risk in respect
of borrowings. The Group does not use derivative financial instruments for
speculative purposes.
Changes in the fair value of derivative financial instruments that are designated and
effective as hedges of net investments in foreign operations are recognised directly
in reserves and the ineffective portion, if any, is recognised immediately in the
Consolidated Income Statement.
For an effective hedge of an exposure to changes in the fair value, the hedged item
is adjusted for changes in fair value attributable to the risk being hedged with the
corresponding entry in the Consolidated Income Statement. Gains or losses from
remeasuring the derivative, or for non-derivatives the foreign currency component
of its carrying amount, are also recognised in the income statement.
Changes in the fair value of derivative financial instruments that do not qualify for
hedge accounting are recognised in the income statement as they arise.
Hedge accounting is discontinued when the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge accounting. At that time,
any cumulative gain or loss on the hedging instrument recognised in reserves is
retained in reserves until the forecasted transaction occurs. If a hedged transaction
63
Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Notes to the Consolidated Financial Statements continued
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1. Significant accounting policies (continued)
The carrying amount of deferred tax assets is reviewed at each balance sheet date
and reduced to the extent that it is no longer probable that sufficient taxable profits
will be available to allow all or part of the asset to be recovered. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to reserves, in which case the deferred tax is also dealt
with in reserves.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based payments.
In accordance with the transitional provisions, IFRS 2 has been applied to all
grants of equity instruments after 7 November 2002 that were unvested as of
1 January 2005.
The Group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value at the date of
grant. The fair value is expensed on a straight-line basis over the vesting period,
based on the Group’s estimate of shares that will eventually vest after adjusting
for the effect of non-market vesting conditions.
Employee benefits
The Group accounts for pensions and similar benefits under IAS 19 Employee
benefits. In respect of defined benefit plans, obligations are measured at
discounted present value whilst plan assets are recorded at fair value. The
operating and financing costs of such plans are recognised separately in the
income statement; service costs are spread systematically over the lives of
employees; and financing costs are recognised in the periods in which they arise.
Actuarial gains and losses are recognised immediately in the statement of
comprehensive income.
Payments to defined contribution schemes are charged as an expense as they
fall due.
Key sources of estimation uncertainty and critical
accounting judgements
Estimation of costs to complete
In order to determine the profit that the Group is able to recognise on the
proportion of completions for the period, internal site valuations are carried out
for each development at regular intervals throughout the year. The valuations will
include an estimation of the costs to complete and remaining revenues which may
differ from the actual costs incurred and revenues received on completion.
Carrying value of land and work in progress
In order to assess the appropriateness of the carrying value of land and work in
progress, the Group is required to make estimations of sales prices, costs and
margins expected on sites in order to determine whether any write downs or
reversals are required to ensure inventory is stated at the lower of cost and net
realisable value. Given the continued volatility in market conditions experienced
from 2007, the Group has again undertaken a detailed review on a site-by-site
basis of the net realisable value of its land and work in progress. As a result, the
Group has written down the value of its land and work in progress in North
America, and Spain by net £24.8 million (2009: £527.0 million), as shown in Note 5.
While market conditions have stabilised in our major geographic locations, the
Group has not recorded any other reversals of net realisable value as there is no
clear evidence of a sustained change in the economic circumstances at the
balance sheet date.
Gross profit includes a positive contribution of £122.4 million (2009: £59.6 million),
relating to realisation of written down inventory above its originally estimated net
realisable value, where the combination of selling prices and cost, or mix
improvements have exceeded our original market assumptions. These amounts
are stated before the allocation of overhead excluded from the Group’s net
realisable value exercise.
Impairment of goodwill and other intangible assets
The determination of whether goodwill and other intangible assets are impaired
requires an estimation of the value in use of the cash-generating units to which
the asset has been allocated. The value in use calculation involves significant
judgement including an estimate of the future cash flows expected to arise from
the cash-generating unit, the future growth rate of revenue and costs, and a
suitable discount rate. Impairment of goodwill may not be reversed. If the current
weak trading conditions reverse, the impairment provision relating to other
intangible assets may reverse in part or in whole.
Pensions
The value of plan assets and liabilities is determined based on various long term
actuarial assumptions, including future rates of inflation, salary growth, yields,
returns on investments and mortality rates. Changes in these assumptions over
time and differences to the actual outcome will be reflected in the Group’s
Statement of Comprehensive Income. Note 21 details the main assumptions in
accounting for the Group’s defined benefit pension schemes.
Tax and deferred tax
Aspects of tax accounting require management judgement and interpretation of
tax legislation across many jurisdictions, in some cases relating to items which
may not be resolved with the relevant tax authority for many years.
In determining the carrying amounts of deferred tax assets, management is
required to assess the timing of the utilisation of provisions for tax purposes and
whether it is probable that sufficient taxable profits will be available to enable the
asset to be recovered.
Going concern
The ability of the Taylor Wimpey plc group (“the Group”) to continue as a going
concern is reliant upon the continued availability of external debt financing. The
Group renegotiated and signed its new financing agreements on 14 December
2010. The Group has met all interest and other payment obligations on time from
debt resources available to it, and after reviewing forecasts and certain relevant
sensitivities for a period of at least 12 months from the date of signing these
financial statements, the Directors are satisfied that, whilst the economic and
market conditions continue to be challenging and not without risk, the refinancing
package is sufficiently robust as to adequacy of both facility and covenant
headroom to enable the Group to operate within its terms for at least the next
12 months. Accordingly the consolidated financial statements have been prepared
on a going concern basis.
Adoption of new and revised Standards and Interpretations
The following new and revised Standards and Interpretations have been adopted
in the current year. Their adoption has not had any significant impact on the
amounts reported in these financial statements but may impact the accounting
for future transactions and arrangements.
IAS 39 (Amendment) Eligible hedged items (effective from 1 July 2009).
The amendment to the Standard was endorsed by the European Union on
15 September 2009. The amendment requires that inflation may only be hedged
if changes in inflation are a contractually specified portion of cash flows of a
recognised financial instrument. The amendment also permits an entity to
designate purchased options as a hedging instrument in a hedge of a financial
or non-financial item.
IFRS 1 (revised) First-time Adoption of International Financial Reporting Standards
(effective from 1 July 2009). The objective of the revised version of IFRS 1 is to
improve the structure of the Standard – no new or revised technical material has
been introduced.
64
Taylor Wimpey plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements continued
1. Significant accounting policies (continued)
Impairment of goodwill and other intangible assets
The carrying amount of deferred tax assets is reviewed at each balance sheet date
The determination of whether goodwill and other intangible assets are impaired
and reduced to the extent that it is no longer probable that sufficient taxable profits
requires an estimation of the value in use of the cash-generating units to which
will be available to allow all or part of the asset to be recovered. Deferred tax is
the asset has been allocated. The value in use calculation involves significant
charged or credited in the income statement, except when it relates to items
judgement including an estimate of the future cash flows expected to arise from
charged or credited directly to reserves, in which case the deferred tax is also dealt
the cash-generating unit, the future growth rate of revenue and costs, and a
with in reserves.
Share-based payments
1 January 2005.
suitable discount rate. Impairment of goodwill may not be reversed. If the current
weak trading conditions reverse, the impairment provision relating to other
intangible assets may reverse in part or in whole.
The Group has applied the requirements of IFRS 2 Share-based payments.
In accordance with the transitional provisions, IFRS 2 has been applied to all
Pensions
grants of equity instruments after 7 November 2002 that were unvested as of
The value of plan assets and liabilities is determined based on various long term
The Group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value at the date of
grant. The fair value is expensed on a straight-line basis over the vesting period,
based on the Group’s estimate of shares that will eventually vest after adjusting
actuarial assumptions, including future rates of inflation, salary growth, yields,
returns on investments and mortality rates. Changes in these assumptions over
time and differences to the actual outcome will be reflected in the Group’s
Statement of Comprehensive Income. Note 21 details the main assumptions in
accounting for the Group’s defined benefit pension schemes.
for the effect of non-market vesting conditions.
Tax and deferred tax
Employee benefits
The Group accounts for pensions and similar benefits under IAS 19 Employee
benefits. In respect of defined benefit plans, obligations are measured at
Aspects of tax accounting require management judgement and interpretation of
tax legislation across many jurisdictions, in some cases relating to items which
may not be resolved with the relevant tax authority for many years.
discounted present value whilst plan assets are recorded at fair value. The
In determining the carrying amounts of deferred tax assets, management is
operating and financing costs of such plans are recognised separately in the
required to assess the timing of the utilisation of provisions for tax purposes and
income statement; service costs are spread systematically over the lives of
whether it is probable that sufficient taxable profits will be available to enable the
employees; and financing costs are recognised in the periods in which they arise.
asset to be recovered.
Actuarial gains and losses are recognised immediately in the statement of
comprehensive income.
Going concern
Payments to defined contribution schemes are charged as an expense as they
concern is reliant upon the continued availability of external debt financing. The
The ability of the Taylor Wimpey plc group (“the Group”) to continue as a going
Group renegotiated and signed its new financing agreements on 14 December
2010. The Group has met all interest and other payment obligations on time from
debt resources available to it, and after reviewing forecasts and certain relevant
sensitivities for a period of at least 12 months from the date of signing these
financial statements, the Directors are satisfied that, whilst the economic and
fall due.
Key sources of estimation uncertainty and critical
accounting judgements
Estimation of costs to complete
In order to determine the profit that the Group is able to recognise on the
market conditions continue to be challenging and not without risk, the refinancing
proportion of completions for the period, internal site valuations are carried out
package is sufficiently robust as to adequacy of both facility and covenant
for each development at regular intervals throughout the year. The valuations will
headroom to enable the Group to operate within its terms for at least the next
include an estimation of the costs to complete and remaining revenues which may
12 months. Accordingly the consolidated financial statements have been prepared
differ from the actual costs incurred and revenues received on completion.
on a going concern basis.
Carrying value of land and work in progress
Adoption of new and revised Standards and Interpretations
In order to assess the appropriateness of the carrying value of land and work in
The following new and revised Standards and Interpretations have been adopted
progress, the Group is required to make estimations of sales prices, costs and
in the current year. Their adoption has not had any significant impact on the
margins expected on sites in order to determine whether any write downs or
amounts reported in these financial statements but may impact the accounting
reversals are required to ensure inventory is stated at the lower of cost and net
for future transactions and arrangements.
realisable value. Given the continued volatility in market conditions experienced
from 2007, the Group has again undertaken a detailed review on a site-by-site
basis of the net realisable value of its land and work in progress. As a result, the
Group has written down the value of its land and work in progress in North
America, and Spain by net £24.8 million (2009: £527.0 million), as shown in Note 5.
While market conditions have stabilised in our major geographic locations, the
Group has not recorded any other reversals of net realisable value as there is no
clear evidence of a sustained change in the economic circumstances at the
balance sheet date.
Gross profit includes a positive contribution of £122.4 million (2009: £59.6 million),
relating to realisation of written down inventory above its originally estimated net
realisable value, where the combination of selling prices and cost, or mix
improvements have exceeded our original market assumptions. These amounts
are stated before the allocation of overhead excluded from the Group’s net
realisable value exercise.
IAS 39 (Amendment) Eligible hedged items (effective from 1 July 2009).
The amendment to the Standard was endorsed by the European Union on
15 September 2009. The amendment requires that inflation may only be hedged
if changes in inflation are a contractually specified portion of cash flows of a
recognised financial instrument. The amendment also permits an entity to
designate purchased options as a hedging instrument in a hedge of a financial
or non-financial item.
IFRS 1 (revised) First-time Adoption of International Financial Reporting Standards
(effective from 1 July 2009). The objective of the revised version of IFRS 1 is to
improve the structure of the Standard – no new or revised technical material has
been introduced.
Financial Statements
1. Significant accounting policies (continued)
IFRS 3 (revised) Business Combinations, IAS 27 (revised) Consolidated and
Separate Financial Statements, and IAS 28 (revised) Investments in Associates
(effective from 1 July 2009). The revisions include a greater emphasis on the use
of fair value, focusing on changes in control as a significant economic event and
focusing on what is given to the vendor as consideration.
IAS 32 (Amendment) Financial Instruments: Presentation and IAS 1 Presentation of
Financial Statements (effective from 1 January 2010). Relevant for companies that
have puttable financial instruments or instruments, or components of instruments,
that impose an obligation on the entity to deliver to another party a pro-rata share
of net assets on liquidation only.
IFRIC 17 Distributions of Non-Cash Assets to Owners. IFRIC 17 requires that
distributions of non-cash assets to owners should be recognised and measured at
the fair value of the non-cash assets when the dividend is appropriately authorised,
and that the difference between the carrying amount of the assets distributed and
the dividend payable should be recognised in profit or loss on settlement of the
dividend payable.
IFRIC 18 Transfer of assets from customers. IFRIC 18 clarifies the requirements
of IFRSs for agreements where an entity receives assets or cash to provide a
customer with ongoing access to goods or supplies.
The following amendments were made as part of Improvements to IFRSs (2009).
Their adoption has not had any significant impact on the amounts reported in
these financial statements but may impact the accounting for future transactions
and arrangements.
Amendment to IFRS 2 Share-based Payment. IFRS 2 has been amended,
following the issue of IFRS 3(2008), to confirm that the contribution of a business
on the formation of a joint venture and common control transactions are not within
the scope of IFRS 2.
Amendment to IAS 17 Leases. IAS 17 has been amended such that it may be
possible to classify a lease of land as a finance lease if it meets the criteria for that
classification under IAS 17.
Amendment to IAS 39 Financial Instruments: Recognition and Measurement. IAS 39
has been amended to state that options contracts between an acquirer and a selling
shareholder to buy or sell an acquiree that will result in a business combination at a
future acquisition date are not excluded from the scope of the standard.
Standards and interpretations in issue but not yet effective
At the date of authorisation of these financial statements, the following Standards
and Interpretations which have not been applied in these financial statements were in
issue but not yet effective (and in some cases had not yet been adopted by the EU):
IFRS 9 Financial instruments. Covers the classification and measurement of
financial assets and is the first part in the project to replace IAS 39.
IAS 24 (amended) Related party disclosures. Clarifies and simplifies the definition of a
related party and will require certain entities to make additional disclosures. The
amendment is not expected to have any impact on the Group’s financial statements.
IAS 32 (amended) Financial instruments presentation. Classification of Rights
issue, where offered for a fixed amount of foreign currency, these should be
classified as equity. The amendment is not expected to have any impact on the
Group’s financial statements.
IFRIC 19 Extinguishing financial liabilities and equity instruments. Requires that
where a debtor issues equity instruments to a creditor to settle all or part of a
financial liability, these instruments should be deemed fully paid and measured at
the fair value of the liability extinguished. The amendment is not expected to have
any impact on the Group’s financial statements.
IFRIC 14 (amended) Prepayments of a minimum funding requirement. These
amendments correct an unintended consequence of IFRIC 14 where in some
circumstances entities are not entitled to recognise as an asset some voluntary
prepayments for minimum funding contributions. This was not intended when
IFRIC 14 was issued.
The adoption of IFRS 9 which the Group plans to adopt for the year beginning
on 1 January 2013 will impact both the measurement and disclosures of
Financial Instruments.
The directors do not expect that the adoption of the other Standards listed above
will have a material impact on the financial statements of the Group in future periods.
2. General information
Taylor Wimpey plc is a company incorporated in the United Kingdom under the
Companies Act 2006. The address of the registered office is given on page 111.
The nature of the Group’s operations and its principal activities are set out in
Note 4 and in the Chief Executive’s Review on pages 8 to 13.
These financial statements are presented in pounds Sterling because that is
the currency of the primary economic environment in which the Group operates.
Foreign operations are included in accordance with the policy set out on
pages 61 to 62.
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65
Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Notes to the Consolidated Financial Statements continued
3. Revenue
An analysis of the Group’s revenue is as follows:
£ million
Housing
Land sales
Other revenues (including Construction)
Consolidated revenue
Interest receivable
Total Group
2010
2,583.1
20.2
–
2,603.3
3.8
2,607.1
2009
2,527.4
58.3
9.9
2,595.6
10.6
2,606.2
Housing revenue includes £128.0 million (2009: £114.5 million) in respect of the value of properties accepted in part exchange by the Group.
4. Operating segments
IFRS 8 Operating segments requires information to be presented in the same basis as it is reviewed internally. The Group’s Board of Directors view the businesses on a
geographic basis when making strategic decisions for the Group and as such the Group is organised into four operating divisions – Housing United Kingdom, Housing
North America, Housing Spain and Gibraltar, and Corporate.
In 2009, the results and net assets of a minor residual construction operation, which was disposed of in April 2009, are presented within the ‘Corporate’ segment.
Segment information about these businesses is presented below:
For the year to 31 December 2010
£ million
Revenue:
External sales
Result:
Operating profit/(loss) before joint ventures and exceptional items
Share of results of joint ventures
Profit/(loss) on ordinary activities before finance costs, exceptional items and after
share of results of joint ventures
Exceptional items
Profit/(loss) on ordinary activities before finance costs, after share of results
of joint ventures
Finance costs, net (including exceptional finance costs)
Loss on ordinary activities before taxation
Taxation (including exceptional tax)
Profit for the year – total Group
Housing
United
Kingdom
Housing
North
America
Housing
Spain and
Gibraltar
Corporate
Consolidated
1,736.6
835.6
31.1
–
2,603.3
123.3
(0.3)
123.0
–
123.0
83.6
10.2
93.8
(7.5)
(3.6)
–
(3.6)
(17.3)
(19.1)
–
(19.1)
(38.2)
86.3
(20.9)
(57.3)
184.2
9.9
194.1
(63.0)
131.1
(202.4)
(71.3)
330.6
259.3
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66
Taylor Wimpey plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements continued
An analysis of the Group’s revenue is as follows:
3. Revenue
£ million
Housing
Land sales
Other revenues (including Construction)
Consolidated revenue
Interest receivable
Total Group
4. Operating segments
Housing revenue includes £128.0 million (2009: £114.5 million) in respect of the value of properties accepted in part exchange by the Group.
IFRS 8 Operating segments requires information to be presented in the same basis as it is reviewed internally. The Group’s Board of Directors view the businesses on a
geographic basis when making strategic decisions for the Group and as such the Group is organised into four operating divisions – Housing United Kingdom, Housing
North America, Housing Spain and Gibraltar, and Corporate.
In 2009, the results and net assets of a minor residual construction operation, which was disposed of in April 2009, are presented within the ‘Corporate’ segment.
Segment information about these businesses is presented below:
For the year to 31 December 2010
£ million
Revenue:
External sales
Result:
Share of results of joint ventures
share of results of joint ventures
Exceptional items
Operating profit/(loss) before joint ventures and exceptional items
Profit/(loss) on ordinary activities before finance costs, exceptional items and after
Profit/(loss) on ordinary activities before finance costs, after share of results
of joint ventures
Finance costs, net (including exceptional finance costs)
Loss on ordinary activities before taxation
Taxation (including exceptional tax)
Profit for the year – total Group
Housing
United
Kingdom
Housing
North
America
Housing
Spain and
Gibraltar
Corporate
Consolidated
83.6
10.2
93.8
(7.5)
(3.6)
–
(3.6)
(17.3)
–
–
(19.1)
(19.1)
(38.2)
86.3
(20.9)
(57.3)
123.3
(0.3)
123.0
–
123.0
184.2
9.9
194.1
(63.0)
131.1
(202.4)
(71.3)
330.6
259.3
2010
2009
2,583.1
2,527.4
20.2
–
2,603.3
3.8
2,607.1
58.3
9.9
2,595.6
10.6
2,606.2
4. Operating segments (continued)
At 31 December 2010
£ million
Assets and liabilities:
Segment operating assets
Joint ventures
Segment operating liabilities
Continuing Group net operating assets/(liabilities)
Goodwill
Net current taxation
Net deferred taxation
Net debt
Net assets
2010
£ million
Other information:
Property, plant and equipment additions
Software development costs
Depreciation – plant and equipment
1,736.6
835.6
31.1
2,603.3
2009 segment information about these businesses is presented below:
For the year to 31 December 2009
£ million
Revenue:
External sales
Result:
Operating profit/(loss) before joint ventures and exceptional items
Share of results of joint ventures
Profit/(loss) on ordinary activities before finance costs, exceptional items
and after share of results of joint ventures
Exceptional items
Loss on ordinary activities before finance costs, after share of results
of joint ventures
Finance costs, net (including exceptional finance costs)
Loss on ordinary activities before taxation
Taxation (including exceptional tax)
Loss for the year – total Group
Financial Statements
Housing
United
Kingdom
Housing
North
America
Housing
Spain and
Gibraltar
Corporate
Consolidated
2,719.4
33.7
(1,124.5)
1,628.6
884.7
15.8
(287.8)
612.7
82.6
0.2
(12.9)
69.9
10.3
–
(75.0)
(64.7)
3,697.0
49.7
(1,500.2)
2,246.5
2.4
(142.9)
371.6
(654.5)
1,823.1
Housing
United
Kingdom
Housing
North
America
Housing
Spain and
Gibraltar
Corporate
Consolidated
1.7
1.0
2.2
1.9
–
1.9
0.1
–
0.2
–
–
–
3.7
1.0
4.3
Housing
United
Kingdom
Housing
North
America
Housing
Spain and
Gibraltar
Corporate
Consolidated
1,700.4
824.3
61.0
9.9
2,595.6
15.3
(1.0)
14.3
(452.8)
41.5
6.6
48.1
(79.8)
(438.5)
(31.7)
(1.4)
–
(1.4)
(3.3)
(4.7)
(17.7)
–
(17.7)
(44.8)
(62.5)
37.7
5.6
43.3
(580.7)
(537.4)
(162.5)
(699.9)
59.3
(640.6)
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Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Notes to the Consolidated Financial Statements continued
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4. Operating segments (continued)
At 31 December 2009
£ million
Assets and liabilities:
Segment operating assets
Joint ventures
Segment operating liabilities
Net operating assets/(liabilities)
Goodwill
Net current taxation
Net deferred taxation
Net debt
Net assets
2009
£ million
Other information:
Property, plant and equipment additions
Depreciation – plant and equipment
Housing
United
Kingdom
Housing
North
America
Housing
Spain and
Gibraltar
Corporate
Consolidated
2,865.4
30.0
(1,202.3)
1,693.1
805.4
21.7
(269.0)
558.1
124.5
0.2
(21.2)
103.5
11.6
–
(54.1)
(42.5)
3,806.9
51.9
(1,546.6)
2,312.2
2.4
(181.6)
118.8
(750.9)
1,500.9
Housing
United
Kingdom
Housing
North
America
Housing
Spain and
Gibraltar
Corporate
Consolidated
0.8
2.3
0.8
1.5
0.7
0.7
0.2
0.2
2.5
4.7
5. Net operating expenses and profit on ordinary activities before finance costs
£ million
Administration expenses
Net other income
Exceptional items
Net other income includes profits on the sale of property, plant and equipment and broker fees from mortgage origination services.
Exceptional items:
£ million
Net land and work in progress write downs
Restructuring costs
Refinancing expenses
Exceptional items
2010
185.2
(5.5)
38.2
217.9
2010
24.8
6.5
31.7
63.0
2009
198.9
(6.4)
53.7
246.2
2009
527.0
8.9
44.8
580.7
Market conditions have stabilised in our major geographic locations, however there continues to be uncertainty in a small number of sub-locations due to continued
scarcity of mortgage finance, unemployment and a significantly reduced buyer market. The Group has completed its assessment on the carrying value of land and work
in progress which has resulted in further land and work in progress net write downs of £24.8 million (31 December 2009: £527.0 million) to the lower of cost and net
realisable value. During the year the Group reversed £1.3 million of write downs (2009: £29.8 million) where management’s estimates of the recoverable value for certain
land and work in progress had improved. This reversal is treated as exceptional income and netted off the exceptional charge.
Restructuring costs of £6.5 million are predominantly in relation to actions relating to the Group’s review of strategic options with regards to the North American business.
Refinancing expenses of £31.7 million (31 December 2009: £44.8 million) were predominantly fees payable to lenders and advisors in relation to the refinancing of the
Group’s debt which was completed on 14 December 2010. Refinancing interest related breakage costs of £83.4 million (31 December 2009: £23.1 million) are included
within exceptional finance costs in the Consolidated Income Statement.
68
Taylor Wimpey plc Annual Report & Accounts 2010
5. Net operating expenses and profit on ordinary activities before finance costs (continued)
Profit on ordinary activities before financing costs for continuing operations has been arrived at after charging/(crediting):
£ million
Cost of inventories recognised as expense in cost of sales, before write downs of inventories
Write downs of inventories
Reversal of specific write downs of inventories
Depreciation – plant and equipment
Minimum lease payments under operating leases recognised in income for the year
The remuneration paid to Deloitte LLP, the Group’s external auditors, is as follows:
£ million
Fees payable to the Company’s auditors for the audit of the Company’s annual accounts
and consolidated financial statements
The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Other services pursuant to legislation
Tax services
Corporate finance services
Other services
Total non-audit fees
Total fees
Financial Statements
2010
2009
2,129.9
26.1
(1.3)
4.3
8.1
2,244.1
556.8
(29.8)
4.7
7.5
2010
2009
0.2
0.6
0.8
0.1
0.7
–
2.0
2.8
3.6
0.2
0.6
0.8
0.1
0.6
0.4
0.5
1.6
2.4
Non-audit services in 2010 predominantly relate to work undertaken as a result of Deloitte LLP’s role as auditors, or work resultant from knowledge and experience
gained as part of the role. Other services include necessary work related to the Group’s refinancing process and certain attest services in relation to the interested party
offers for the North American business. Their work was either the subject of a competitive tender or was best performed by the Group’s auditors because of their
knowledge of the Group. Tax services include tax compliance work and advisory services for Taylor Wimpey plc and subsidiaries. See page 38 for details of the Group’s
policies in respect of non-audit services and approval by the Audit Committee.
6. Staff costs
Total Group
Average number employed
Housing United Kingdom including corporate office
Housing North America
Housing Spain and Gibraltar
Construction*
United Kingdom
Overseas
* The 2009 Construction staff numbers represent employees of the residual Construction businesses disposed of in April 2009.
£ million
Remuneration
Wages and salaries
Redundancy costs
Social security costs
Other pension costs
2010
Number
2009
Number
3,484
731
85
–
4,300
3,484
816
4,300
3,469
849
102
334
4,754
3,469
1,285
4,754
2010
2009
191.5
1.1
20.2
8.8
221.6
203.6
2.0
18.5
10.5
234.6
The information required by the Companies Act 2006 and the Listing Rules of the Financial Services Authority is contained on pages 41 to 50 in the Directors’
Remuneration Report.
69
Taylor Wimpey plc Annual Report & Accounts 2010
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Financial Statements
Notes to the Consolidated Financial Statements continued
7. Finance costs
Finance costs from continuing operations are analysed as follows:
£ million
Interest on overdrafts, bank and other loans
Interest on debenture loans
Movement on interest rate derivatives and foreign exchange movements
Unwinding of discount on land creditors and other payables
Notional net interest on pension liability (Note 21)
Exceptional finance costs:
Bank loans and debenture fees and interest
2010
27.8
58.0
4.6
90.4
9.0
23.4
122.8
83.4
206.2
2009
46.5
62.6
(11.8)
97.3
18.4
34.3
150.0
23.1
173.1
The exceptional finance costs incurred in 2010 relate to one-off interest related breakage payments following the early redemption of our loan notes, bonds and certain
arrangement fees associated with the new facilities.
The 2009 exceptional finance costs include £5.5 million in relation to the fair value of 57.8 million warrants issued to the Group’s lenders as part of the debt refinancing
and £15.5 million of one-off interest payments payable to the Group’s lenders as a consequence of early repayment of a portion of the Group’s debt, following the
equity raise.
8. Tax
Tax credited/(charged) in the income statement for continuing operations is analysed as follows:
£ million
Current tax:
UK corporation tax:
Foreign tax:
Deferred tax:
UK:
Foreign:
Current year
Prior years
Current year
Prior years
Current year
Current year
Prior years
2010
2009
Adjusted basic earnings/(loss) per share
Adjusted diluted earnings/(loss) per share
(0.8)
60.8
(22.7)
25.1
62.4
269.4
(1.2)
–
268.2
330.6
(1.1)
5.5
32.0
(2.4)
34.0
25.4
(0.4)
0.3
25.3
59.3
Corporation tax is calculated at 28% (2009: 28%) of the estimated assessable loss (2009: loss) for the year in the UK. Taxation outside the UK is calculated at the rates
prevailing in the respective jurisdictions.
Earnings/(loss) for adjusted basic and adjusted diluted earnings per share
The tax credit for the year includes an amount in respect of exceptional items of £385.9 million (2009: £73.6 million credit). This is made up of a credit of £360.8 million
(2009: £25.4 million) in respect of UK tax and a credit of £25.1 million (2009: £48.2 million charge) in respect of US tax. The credit in the UK relates to the recognition of a
deferred tax asset of £300.0 million relating to trading losses carried forward, and the settlement of various issues with HM Revenue & Customs. The credit in respect of
the US relates to progress made in relation to open issues with the Internal Revenue Service.
Deferred tax recognised in the Group’s Statement of Comprehensive Income is due to actuarial losses on post-retirement liabilities at the prevailing rate in the
relevant jurisdiction and in 2009 the reinstatement of the deferred tax asset relating to post–retirement liabilities.
10. Goodwill
£ million
Cost and carrying amount
At 1 January 2009
Additions
At 31 December 2009 and 2010
In 2009 the North America business acquired the remaining stake in a mortgage advisory service which resulted in the recognition of £2.4 million of goodwill.
Weighted average number of shares for basic earnings/(loss) per share – million
Weighted average number of shares for diluted earnings/(loss) per share – million
Weighted average number of shares for adjusted diluted earnings/(loss) per share – million
Adjusted basic and adjusted diluted earnings per share, which exclude the impact of exceptional items and the associated net tax charges, are shown to provide clarity
on the underlying performance of the Group. A reconciliation of earnings attributable to equity shareholders used for basic and diluted earnings per share to that used for
adjusted earnings per share is shown below.
£ million
Add exceptional items (Notes 5 and 7)
Deduct exceptional tax items (Note 8)
Earnings/(loss) for basic loss per share and diluted earnings per share
70
Taylor Wimpey plc Annual Report & Accounts 2010
The credit for the year can be reconciled to the loss per the income statement as follows:
8. Tax (continued)
£ million
Loss before tax
Tax at the UK corporation tax rate of 28% (2009: 28%)
Over provision in respect of prior years
Tax effect of expenses that are not deductible in determining taxable profit
Non-taxable income
Losses not recognised
Effect of higher rates of tax of subsidiaries operating in other jurisdictions
Reinstatement of pension deferred tax asset
Recognition of deferred tax asset relating to trading losses
Current year impact of settlement with Tax Authorities
Temporary differences not recognised
Tax credit for the year
9. Earnings per share
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
2010
(71.3)
20.0
85.9
(5.9)
0.4
2.4
(41.6)
–
300.0
(23.7)
(6.9)
330.6
2010
8.1p
7.9p
0.6p
0.6p
3,193.8
3,297.6
3,297.6
2,551.8
2,551.8
2,551.8
2010
259.3
146.4
(385.9)
19.8
2009
(640.4)
603.8
(73.6)
(110.2)
2009
(699.9)
196.0
3.4
(8.0)
3.7
6.9
(186.0)
29.6
–
–
13.7
59.3
2009
(25.1p)
(25.1p)
(4.3p)
(4.3p)
–
2.4
2.4
Financial Statements
Notes to the Consolidated Financial Statements continued
7. Finance costs
£ million
Finance costs from continuing operations are analysed as follows:
Interest on overdrafts, bank and other loans
Interest on debenture loans
Movement on interest rate derivatives and foreign exchange movements
Unwinding of discount on land creditors and other payables
Notional net interest on pension liability (Note 21)
Exceptional finance costs:
Bank loans and debenture fees and interest
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equity raise.
8. Tax
£ million
Current tax:
UK corporation tax:
Foreign tax:
Deferred tax:
UK:
Foreign:
Current year
Prior years
Current year
Prior years
Current year
Current year
Prior years
The exceptional finance costs incurred in 2010 relate to one-off interest related breakage payments following the early redemption of our loan notes, bonds and certain
arrangement fees associated with the new facilities.
The 2009 exceptional finance costs include £5.5 million in relation to the fair value of 57.8 million warrants issued to the Group’s lenders as part of the debt refinancing
and £15.5 million of one-off interest payments payable to the Group’s lenders as a consequence of early repayment of a portion of the Group’s debt, following the
2010
27.8
58.0
4.6
90.4
9.0
23.4
2009
46.5
62.6
(11.8)
97.3
18.4
34.3
122.8
150.0
83.4
206.2
23.1
173.1
(0.8)
60.8
(22.7)
25.1
62.4
269.4
(1.2)
–
268.2
330.6
(1.1)
5.5
32.0
(2.4)
34.0
25.4
(0.4)
0.3
25.3
59.3
Corporation tax is calculated at 28% (2009: 28%) of the estimated assessable loss (2009: loss) for the year in the UK. Taxation outside the UK is calculated at the rates
prevailing in the respective jurisdictions.
The tax credit for the year includes an amount in respect of exceptional items of £385.9 million (2009: £73.6 million credit). This is made up of a credit of £360.8 million
(2009: £25.4 million) in respect of UK tax and a credit of £25.1 million (2009: £48.2 million charge) in respect of US tax. The credit in the UK relates to the recognition of a
deferred tax asset of £300.0 million relating to trading losses carried forward, and the settlement of various issues with HM Revenue & Customs. The credit in respect of
the US relates to progress made in relation to open issues with the Internal Revenue Service.
Deferred tax recognised in the Group’s Statement of Comprehensive Income is due to actuarial losses on post-retirement liabilities at the prevailing rate in the
relevant jurisdiction and in 2009 the reinstatement of the deferred tax asset relating to post–retirement liabilities.
8. Tax (continued)
8. Tax (continued)
The credit for the year can be reconciled to the loss per the income statement as follows:
The credit for the year can be reconciled to the loss per the income statement as follows:
£ million
£ million
Loss before tax
Loss before tax
Tax at the UK corporation tax rate of 28% (2009: 28%)
Tax at the UK corporation tax rate of 28% (2009: 28%)
Over provision in respect of prior years
Over provision in respect of prior years
Tax effect of expenses that are not deductible in determining taxable profit
Tax effect of expenses that are not deductible in determining taxable profit
Non-taxable income
Non-taxable income
Effect of higher rates of tax of subsidiaries operating in other jurisdictions
Effect of higher rates of tax of subsidiaries operating in other jurisdictions
Losses not recognised
Losses not recognised
Reinstatement of pension deferred tax asset
Reinstatement of pension deferred tax asset
Recognition of deferred tax asset relating to trading losses
Recognition of deferred tax asset relating to trading losses
Current year impact of settlement with Tax Authorities
Current year impact of settlement with Tax Authorities
Temporary differences not recognised
Temporary differences not recognised
Tax credit for the year
Tax credit for the year
9. Earnings per share
9. Earnings per share
Basic earnings/(loss) per share
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Diluted earnings/(loss) per share
Tax credited/(charged) in the income statement for continuing operations is analysed as follows:
2010
2009
Adjusted basic earnings/(loss) per share
Adjusted basic earnings/(loss) per share
Adjusted diluted earnings/(loss) per share
Adjusted diluted earnings/(loss) per share
Financial Statements
2010
2010
(71.3)
(71.3)
20.0
20.0
85.9
85.9
(5.9)
(5.9)
0.4
0.4
2.4
2.4
(41.6)
(41.6)
–
–
300.0
300.0
(23.7)
(23.7)
(6.9)
(6.9)
330.6
330.6
2010
2010
8.1p
8.1p
7.9p
7.9p
0.6p
0.6p
0.6p
0.6p
2009
2009
(699.9)
(699.9)
196.0
196.0
3.4
3.4
(8.0)
(8.0)
3.7
3.7
6.9
6.9
(186.0)
(186.0)
29.6
29.6
–
–
–
–
13.7
13.7
59.3
59.3
2009
2009
(25.1p)
(25.1p)
(25.1p)
(25.1p)
(4.3p)
(4.3p)
(4.3p)
(4.3p)
Weighted average number of shares for basic earnings/(loss) per share – million
Weighted average number of shares for basic earnings/(loss) per share – million
Weighted average number of shares for diluted earnings/(loss) per share – million
Weighted average number of shares for diluted earnings/(loss) per share – million
Weighted average number of shares for adjusted diluted earnings/(loss) per share – million
Weighted average number of shares for adjusted diluted earnings/(loss) per share – million
3,193.8
3,193.8
3,297.6
3,297.6
3,297.6
3,297.6
2,551.8
2,551.8
2,551.8
2,551.8
2,551.8
2,551.8
Adjusted basic and adjusted diluted earnings per share, which exclude the impact of exceptional items and the associated net tax charges, are shown to provide clarity
Adjusted basic and adjusted diluted earnings per share, which exclude the impact of exceptional items and the associated net tax charges, are shown to provide clarity
on the underlying performance of the Group. A reconciliation of earnings attributable to equity shareholders used for basic and diluted earnings per share to that used for
on the underlying performance of the Group. A reconciliation of earnings attributable to equity shareholders used for basic and diluted earnings per share to that used for
adjusted earnings per share is shown below.
adjusted earnings per share is shown below.
£ million
£ million
Earnings/(loss) for basic loss per share and diluted earnings per share
Earnings/(loss) for basic loss per share and diluted earnings per share
Add exceptional items (Notes 5 and 7)
Add exceptional items (Notes 5 and 7)
Deduct exceptional tax items (Note 8)
Deduct exceptional tax items (Note 8)
Earnings/(loss) for adjusted basic and adjusted diluted earnings per share
Earnings/(loss) for adjusted basic and adjusted diluted earnings per share
10. Goodwill
10. Goodwill
£ million
£ million
Cost and carrying amount
Cost and carrying amount
At 1 January 2009
At 1 January 2009
Additions
Additions
At 31 December 2009 and 2010
At 31 December 2009 and 2010
2010
2010
259.3
259.3
146.4
146.4
(385.9)
(385.9)
19.8
19.8
2009
2009
(640.4)
(640.4)
603.8
603.8
(73.6)
(73.6)
(110.2)
(110.2)
–
–
2.4
2.4
2.4
2.4
In 2009 the North America business acquired the remaining stake in a mortgage advisory service which resulted in the recognition of £2.4 million of goodwill.
In 2009 the North America business acquired the remaining stake in a mortgage advisory service which resulted in the recognition of £2.4 million of goodwill.
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Financial Statements
Notes to the Consolidated Financial Statements continued
11. Other intangible assets
£ million
Cost
At 1 January 2010
Additions
At 31 December 2010
Amortisation/impairment
At 1 January 2010
Charge for the year
At 31 December 2010
Carrying amount
31 December 2010
31 December 2009
Software
development
costs
18.7
1.0
19.7
(18.7)
–
(18.7)
1.0
–
Brands
140.2
–
140.2
(140.2)
–
(140.2)
–
–
Total
158.9
1.0
159.9
(158.9)
–
(158.9)
1.0
–
The Group is required to test goodwill for impairment on an annual basis or sooner when there are indicators that it might be impaired, and to test other intangible assets
for impairment if there are indications that the assets might be impaired.
The Group has evaluated its performance in the current year and concluded that it would not be appropriate to reverse any of the previously recognised impairment charges.
12. Property, plant and equipment
£ million
Cost
At 1 January 2009
Additions
Disposals
Changes in exchange rates
At 31 December 2009
Additions
Disposals
Changes in exchange rates
At 31 December 2010
Accumulated depreciation
At 1 January 2009
Disposals
Charge for the year
Changes in exchange rates
At 31 December 2009
Disposals
Charge for the year
Changes in exchange rates
At 31 December 2010
Carrying amount
£ million
At 31 December 2010
At 31 December 2009
Freehold land
and buildings
Plant and
equipment
1.5
–
(0.4)
(0.1)
1.0
–
–
–
1.0
–
–
–
–
–
–
–
–
–
60.8
2.5
(35.9)
(1.2)
26.2
3.7
(4.7)
0.3
25.5
(46.8)
31.6
(4.7)
0.9
(19.0)
4.7
(4.3)
(0.3)
(18.9)
Freehold land
and buildings
Plant and
equipment
1.0
1.0
6.6
7.2
Total
62.3
2.5
(36.3)
(1.3)
27.2
3.7
(4.7)
0.3
26.5
(46.8)
31.6
(4.7)
0.9
(19.0)
4.7
(4.3)
(0.3)
(18.9)
Total
7.6
8.2
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Taylor Wimpey plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements continued
13. Interests in joint ventures
£ million
Aggregated amounts relating to share of joint ventures
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Carrying amount
Loans to joint ventures
Total interests in joint ventures
The Group is required to test goodwill for impairment on an annual basis or sooner when there are indicators that it might be impaired, and to test other intangible assets
£ million
for impairment if there are indications that the assets might be impaired.
The Group has evaluated its performance in the current year and concluded that it would not be appropriate to reverse any of the previously recognised impairment charges.
12. Property, plant and equipment
Share of post-tax profits from joint ventures
Revenue
Cost of sales
Gross profit
Net operating expenses
Profit on ordinary activities before finance costs
Finance costs
Profit on ordinary activities before tax
Taxation
Share of joint ventures’ post-tax results for the year
The Group has three (2009: three) principal joint ventures.
Particulars of principal joint ventures are as follows:
Country of incorporation
Great Britain
USA
(a) Interest held by subsidiary undertakings.
Financial Statements
2010
2009
–
60.0
60.0
(2.7)
(36.0)
(38.7)
21.3
28.4
49.7
–
63.5
63.5
(10.6)
(27.6)
(38.2)
25.3
26.6
51.9
2010
2009
21.4
(11.5)
9.9
–
9.9
–
9.9
–
9.9
16.3
(10.0)
6.3
(0.6)
5.7
–
5.7
(0.1)
5.6
Name of joint venture equity accounted
in the consolidated accounts
Strada Developments Limited (a)
Academy Central Limited Liability Partnership (a)(b)
Taylor Woodrow Communities/Steiner Ranch Limited (a)
Taylor Wimpey plc
interest in the issued
ordinary share capital
50%
62%
50%
(b) The Group is equally represented on the Board of Academy Central Limited Liability Partnership. It and the other partner have equal voting rights over operational management of the entity.
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and buildings
Plant and
equipment
Software
development
costs
18.7
1.0
19.7
(18.7)
–
(18.7)
1.0
–
60.8
2.5
(35.9)
(1.2)
26.2
3.7
(4.7)
0.3
25.5
(46.8)
31.6
(4.7)
0.9
(19.0)
4.7
(4.3)
(0.3)
(18.9)
Brands
140.2
140.2
(140.2)
(140.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.5
–
(0.4)
(0.1)
1.0
1.0
Freehold land
and buildings
Plant and
equipment
1.0
1.0
6.6
7.2
Total
158.9
1.0
159.9
(158.9)
–
(158.9)
1.0
–
Total
62.3
2.5
(36.3)
(1.3)
27.2
3.7
(4.7)
0.3
26.5
(46.8)
31.6
(4.7)
0.9
(19.0)
4.7
(4.3)
(0.3)
(18.9)
Total
7.6
8.2
11. Other intangible assets
£ million
Cost
At 1 January 2010
Additions
At 31 December 2010
Amortisation/impairment
At 1 January 2010
Charge for the year
At 31 December 2010
Carrying amount
31 December 2010
31 December 2009
At 1 January 2009
£ million
Cost
Additions
Disposals
Additions
Disposals
Changes in exchange rates
At 31 December 2009
Changes in exchange rates
At 31 December 2010
Accumulated depreciation
At 1 January 2009
Disposals
Charge for the year
Changes in exchange rates
At 31 December 2009
Disposals
Charge for the year
Changes in exchange rates
At 31 December 2010
Carrying amount
£ million
At 31 December 2010
At 31 December 2009
73
Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Notes to the Consolidated Financial Statements continued
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14. Deferred tax
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior reporting year.
£ million
At 1 January 2009
Credit/(charge) to income
Credit to equity
Disposal of subsidiaries
Changes in exchange rates
At 31 December 2009
Credit/(charge) to income
Charged to equity
Changes in exchange rates
At 31 December 2010
Losses
–
–
–
–
–
–
300.0
–
–
300.0
Capital
allowances
Short term timing
differences
Retirement benefit
obligations
(1.3)
0.1
–
0.4
–
(0.8)
–
–
–
(0.8)
6.6
(1.9)
–
–
0.2
4.9
(1.2)
–
0.4
4.1
–
27.1
87.6
–
–
114.7
(30.6)
(15.9)
0.1
68.3
Total
5.3
25.3
87.6
0.4
0.2
118.8
268.2
(15.9)
0.5
371.6
In 2009 the Group reinstated the deferred tax asset relating to the pension deficit, including £47.2 million written off in the prior year, on the basis that the deficit is a long
term liability of circa 15 years that will be satisfied from future profitability.
Closing deferred tax on UK temporary differences has been calculated at the substantively enacted rate of 27% (2009: 28%). The effect of the reduction in the UK
corporation tax rate from 28% to 27% is a reduction in the net deferred tax asset at the end of 2010 of an amount of £2.4 million. Of this £2.4 million, £0.4 million has
been charged directly to the Statement of Comprehensive Income.
The proposed reduction in the main rate of corporation tax by 1% per year to 24% is expected to be enacted separately each year. The Group will assess the impact of
the reduction in rate in line with its accounting policy in respect of deferred tax at each balance sheet date.
The net deferred tax balance is analysed into assets and liabilities as follows:
£ million
Deferred tax assets
Deferred tax liabilities
2010
372.4
(0.8)
371.6
2009
119.6
(0.8)
118.8
At the balance sheet date, the Group has unused UK capital losses of £253.0 million (2009: £409.2 million), of which £253.0 million (2009: £271.7 million) are agreed as
available for offset against future capital profits. During the year the Group conceded a significant proportion of capital losses as part of a wider settlement agreement
with HM Revenue & Customs. No deferred tax asset has been recognised in respect of the remaining capital losses at 31 December 2010 because the Group does not
believe that it is probable that these capital losses will be utilised in the foreseeable future. In addition, some of the capital losses would be further restricted as to offset
dependent on the source within the Taylor Wimpey Group of any gains and previous losses.
The Group has not recognised potential deferred tax assets relating to inventory charges and tax losses carried forward amounting to £78.6 million (2009: £375.1 million)
in the UK , £268.8 million (2009: £267.0 million) in the US and £29.8 million (2009: £21.4 million) in other jurisdictions. Local tax legislation permits losses to be carried
forward 20 years in the US, 15 years in Spain and indefinitely in the UK. Unrecognised deferred tax assets relating to tax losses were also utilised as part of the settlement
negotiations with HM Revenue & Customs during the period.
15. Inventories
£ million
Raw materials and consumables
Finished goods and goods for resale
Residential developments:
Land*
Development and construction costs
Commercial, industrial and mixed development properties
* Details of land creditors are in Note 19.
2010
1.7
19.4
2,248.4
1,159.6
7.1
3,436.2
2009
1.6
12.1
2,341.8
1,242.8
5.0
3,603.3
The Directors consider all inventories to be current in nature. The operational cycle is such that the majority of inventory will not be realised within 12 months. It is not
possible to determine with accuracy when specific inventory will be realised, as this will be subject to a number of issues such as consumer demand and planning
permission delays.
Non-refundable land option payments of £79.0 million (2009: £81.2 million) are recorded within ‘Residential developments: Land’.
Gross profit includes a positive contribution of £122.4 million (2009: £59.6 million), relating to realisation of written down inventory above its originally estimated net
realisable value, where the combination of selling prices and cost, or mix improvements have exceeded our original market assumptions. These amounts are stated
before the allocation of overhead excluded from the Group’s net realisable value exercise.
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Taylor Wimpey plc Annual Report & Accounts 2010
14. Deferred tax
£ million
At 1 January 2009
Credit/(charge) to income
Credit to equity
Disposal of subsidiaries
Changes in exchange rates
At 31 December 2009
Credit/(charge) to income
Charged to equity
Changes in exchange rates
At 31 December 2010
£ million
Deferred tax assets
Deferred tax liabilities
Notes to the Consolidated Financial Statements continued
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior reporting year.
Losses
allowances
differences
obligations
Capital
Short term timing
Retirement benefit
–
–
–
–
–
–
–
–
300.0
300.0
(1.3)
0.1
0.4
(0.8)
–
–
–
–
–
(0.8)
6.6
(1.9)
–
–
0.2
4.9
(1.2)
–
0.4
4.1
27.1
87.6
–
–
–
114.7
(30.6)
(15.9)
0.1
68.3
Total
5.3
25.3
87.6
0.4
0.2
118.8
268.2
(15.9)
0.5
371.6
Closing deferred tax on UK temporary differences has been calculated at the substantively enacted rate of 27% (2009: 28%). The effect of the reduction in the UK
corporation tax rate from 28% to 27% is a reduction in the net deferred tax asset at the end of 2010 of an amount of £2.4 million. Of this £2.4 million, £0.4 million has
been charged directly to the Statement of Comprehensive Income.
The proposed reduction in the main rate of corporation tax by 1% per year to 24% is expected to be enacted separately each year. The Group will assess the impact of
the reduction in rate in line with its accounting policy in respect of deferred tax at each balance sheet date.
The net deferred tax balance is analysed into assets and liabilities as follows:
At the balance sheet date, the Group has unused UK capital losses of £253.0 million (2009: £409.2 million), of which £253.0 million (2009: £271.7 million) are agreed as
available for offset against future capital profits. During the year the Group conceded a significant proportion of capital losses as part of a wider settlement agreement
with HM Revenue & Customs. No deferred tax asset has been recognised in respect of the remaining capital losses at 31 December 2010 because the Group does not
believe that it is probable that these capital losses will be utilised in the foreseeable future. In addition, some of the capital losses would be further restricted as to offset
dependent on the source within the Taylor Wimpey Group of any gains and previous losses.
The Group has not recognised potential deferred tax assets relating to inventory charges and tax losses carried forward amounting to £78.6 million (2009: £375.1 million)
in the UK , £268.8 million (2009: £267.0 million) in the US and £29.8 million (2009: £21.4 million) in other jurisdictions. Local tax legislation permits losses to be carried
forward 20 years in the US, 15 years in Spain and indefinitely in the UK. Unrecognised deferred tax assets relating to tax losses were also utilised as part of the settlement
negotiations with HM Revenue & Customs during the period.
15. Inventories
£ million
Raw materials and consumables
Finished goods and goods for resale
Residential developments:
Land*
Development and construction costs
Commercial, industrial and mixed development properties
2010
372.4
(0.8)
371.6
2009
119.6
(0.8)
118.8
2010
1.7
19.4
2009
1.6
12.1
2,248.4
1,159.6
7.1
2,341.8
1,242.8
5.0
3,436.2
3,603.3
* Details of land creditors are in Note 19.
permission delays.
The Directors consider all inventories to be current in nature. The operational cycle is such that the majority of inventory will not be realised within 12 months. It is not
possible to determine with accuracy when specific inventory will be realised, as this will be subject to a number of issues such as consumer demand and planning
Non-refundable land option payments of £79.0 million (2009: £81.2 million) are recorded within ‘Residential developments: Land’.
Gross profit includes a positive contribution of £122.4 million (2009: £59.6 million), relating to realisation of written down inventory above its originally estimated net
realisable value, where the combination of selling prices and cost, or mix improvements have exceeded our original market assumptions. These amounts are stated
before the allocation of overhead excluded from the Group’s net realisable value exercise.
16. Other financial assets
Trade and other receivables
£ million
Trade receivables
Currency and interest rate derivatives
Other receivables
Financial Statements
Current
Non-current
2010
94.0
–
61.7
155.7
2009
77.3
–
53.2
130.5
2010
74.8
6.2
15.5
96.5
2009
48.0
11.1
5.9
65.0
In 2009 the Group reinstated the deferred tax asset relating to the pension deficit, including £47.2 million written off in the prior year, on the basis that the deficit is a long
term liability of circa 15 years that will be satisfied from future profitability.
Cash and cash equivalents comprise cash held by the Group and short term bank deposits with an original maturity of three months or less. The carrying amount of
these assets approximates their fair value in both years.
The average credit period taken on sales is 16 days (2009: 13 days). An allowance has been made for estimated irrecoverable amounts from trade receivables of £8.3
million (2009: £7.0 million). This allowance has been determined by reference to past default experience.
Cash and cash equivalents
£ million
Cash and cash equivalents (see Note 20)
2010
183.9
2009
132.1
17. Overdrafts, bank and other loans
£ million
Bank overdrafts repayable on demand
Bank loans
Other loans
Amount due for settlement within one year
Amount due for settlement after one year
Total bank borrowings
£ million
Analysis of borrowings by currency:
31 December 2010
Sterling
Canadian dollars
Euros
US dollars
31 December 2009
Sterling
Canadian dollars
Euros
2010
12.1
476.3
100.0
588.4
15.1
573.3
588.4
2009
12.7
148.4
–
161.1
12.7
148.4
161.1
Bank
overdraft
Bank and
other loans
–
12.1
–
–
12.1
–
12.7
–
12.7
152.0
–
97.4
326.9
576.3
41.2
–
107.2
148.4
Bank borrowings and overdrafts are arranged at floating rates of interest, from 2.5% to 6.0% (2009: 3% to 4%).
Secured bank loans and overdrafts outstanding totalled £15.1 million (2009: £12.7 million). Secured bank loans and overdrafts are secured on certain fixed asset
properties, land and mortgages receivable.
Other loans comprise of a £100.0 million bi-lateral variable rate fixed loan with an investment fund.
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Financial Statements
Notes to the Consolidated Financial Statements continued
18. Debenture loans
£ million
Unsecured
10.375% £250m Senior Notes 2015
9.00% US$35m notes 2009 (a)
5.73% US$110m notes 2009 (a)
5.53% US$75m notes 2011 (a)
6.625% £250m guaranteed bonds 2012 (a)
6.21% US$70m notes 2012 (a)
6.80% £30m notes 2012 (a)
4.72% US$28m notes 2013 (a)
6.31% US$110m notes 2014 (a)
6.03% US$175m notes 2014 (a)
4.98% US$38m notes 2015 (a)
6.72% US$30m notes 2017 (a)
5.29% US$30m notes 2018 (a)
6.375% £200m bonds 2019 (a)
Carrying value
Fair value
2010
2009
250.0
–
–
–
–
–
–
–
–
–
–
–
–
–
250.0
–
15.2
47.5
38.0
207.6
31.7
22.0
12.5
50.5
90.0
16.9
14.0
13.4
162.6
721.9
261.2
681.9
The fair value for all debenture loans has been derived from inputs that are observable for the liability either directly or indirectly, relevant for the term and currency.
(a) The descriptions presented above refer to the titles of the debenture loan issues at their original issue date. As a result of negotiations concluding in April 2009 the terms of the debentures
were changed such that they were either extended to mature on 3 July 2012 or capable of being repaid early on the same date. As a result of the refinancing in December 2010 these have
been fully repaid.
£ million
Repayable
Total falling due in more than one year
Interest rates and currencies of debenture loans:
31 December 2010
Sterling
31 December 2009
Sterling
US dollars
2010
2009
250.0
250.0
721.9
721.9
Weighted
average
interest rate
%
Weighted
average time
until maturity
years
Fixed rate
£ million
250.0
250.0
392.2
329.7
721.9
10.4
10.4
8.6
8.1
8.3
5.0
5.0
2.5
2.5
2.5
As part of the Group’s £250.0 million Senior Notes issued on 14 December 2010, disclosures of certain metrics are required to be annually presented, including
the following:
• ‘Net financial expense’, considered to be the Group’s interest on overdrafts, bank and other loans and interest on debenture loans less bank interest receivable was
£85.8 million (2009: £17.7 million).
• ‘Interest coverage ratio’, defined as profit on ordinary activities before finance costs and exceptional items over the net financial expense. In the year this ratio was
2.1 (2009: 0.3).
• ‘Net debt/EBITDA’ defined as the Group’s overdrafts, debenture, bank and other loans less cash and cash equivalents over Profit/(loss) on ordinary activities before
finance costs, exceptional items, depreciation and amortisation and after share of results of joint ventures. At 31 December 2010 the ratio was 3.3 (2009: 15.6).
76
Taylor Wimpey plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements continued
18. Debenture loans
£ million
Unsecured
10.375% £250m Senior Notes 2015
9.00% US$35m notes 2009 (a)
5.73% US$110m notes 2009 (a)
5.53% US$75m notes 2011 (a)
6.625% £250m guaranteed bonds 2012 (a)
6.21% US$70m notes 2012 (a)
6.80% £30m notes 2012 (a)
4.72% US$28m notes 2013 (a)
6.31% US$110m notes 2014 (a)
6.03% US$175m notes 2014 (a)
4.98% US$38m notes 2015 (a)
6.72% US$30m notes 2017 (a)
5.29% US$30m notes 2018 (a)
6.375% £200m bonds 2019 (a)
Carrying value
Fair value
been fully repaid.
£ million
Repayable
Total falling due in more than one year
Interest rates and currencies of debenture loans:
31 December 2010
Sterling
31 December 2009
Sterling
US dollars
the following:
£85.8 million (2009: £17.7 million).
2.1 (2009: 0.3).
As part of the Group’s £250.0 million Senior Notes issued on 14 December 2010, disclosures of certain metrics are required to be annually presented, including
• ‘Net financial expense’, considered to be the Group’s interest on overdrafts, bank and other loans and interest on debenture loans less bank interest receivable was
• ‘Interest coverage ratio’, defined as profit on ordinary activities before finance costs and exceptional items over the net financial expense. In the year this ratio was
• ‘Net debt/EBITDA’ defined as the Group’s overdrafts, debenture, bank and other loans less cash and cash equivalents over Profit/(loss) on ordinary activities before
finance costs, exceptional items, depreciation and amortisation and after share of results of joint ventures. At 31 December 2010 the ratio was 3.3 (2009: 15.6).
The fair value for all debenture loans has been derived from inputs that are observable for the liability either directly or indirectly, relevant for the term and currency.
(a) The descriptions presented above refer to the titles of the debenture loan issues at their original issue date. As a result of negotiations concluding in April 2009 the terms of the debentures
were changed such that they were either extended to mature on 3 July 2012 or capable of being repaid early on the same date. As a result of the refinancing in December 2010 these have
19. Trade and other payables
£ million
Trade payables
Joint ventures
Currency and interest rate derivatives
Other payables
Financial Statements
Current
Non-current
2010
374.5
–
9.0
519.4
902.9
2009
249.7
1.3
12.9
496.1
760.0
2010
175.9
–
–
81.2
257.1
2009
203.7
–
–
74.9
278.6
Trade payable days were 30 days (2009: 20 days), based on the ratio of year end trade payables (excluding sub-contract retentions and unagreed claims of £34.4 million
(2009: £35.3 million) and land creditors) to amounts invoiced during the year by trade creditors.
Other payables include customer deposits for reserving plots of £83.8 million (2009: £91.5 million).
Land creditors (included within trade payables) are due as follows:
£ million
Due within one year
Due in more than one year
Land creditors are denominated as follows:
£ million
Sterling
US dollars
Canadian dollars
Euros
2010
198.4
170.8
369.2
2010
317.1
1.6
47.2
3.3
369.2
2009
124.3
201.4
325.7
2009
275.6
1.0
38.6
10.5
325.7
Land creditors of £160.2 million (2009: £195.0 million) are secured against land acquired for development, or supported by bond or guarantee.
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2009
250.0
–
–
–
–
–
–
–
–
–
–
–
–
–
207.6
–
15.2
47.5
38.0
31.7
22.0
12.5
50.5
90.0
16.9
14.0
13.4
162.6
721.9
250.0
261.2
681.9
2010
2009
250.0
250.0
721.9
721.9
Weighted
average
interest rate
%
Weighted
average time
until maturity
years
Fixed rate
£ million
250.0
250.0
392.2
329.7
721.9
10.4
10.4
8.6
8.1
8.3
5.0
5.0
2.5
2.5
2.5
77
Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Notes to the Consolidated Financial Statements continued
20. Financial instruments
Capital management
The Group’s objective is to obtain a strong credit rating for the business and to have an appropriate funding structure based on a minimum interest cover and maximum
gearing. Shareholders’ equity and long term debt are used to finance fixed assets and medium to long term land bank. Revolving credit facilities are used to fund net
current assets including work in progress and short term land. As a result of the refinancing completed in December 2010 the Group now has a more appropriate blend
of funding from both bank and non bank sources together with a staggered maturity profile to minimise refinancing risk.
Financial assets and financial liabilities
Categories of financial assets and financial liabilities are as follows:
Financial assets
£ million
Cash and cash equivalents
Derivative financial instruments:
Designated as effective hedging instruments
Held for trading
Loans and receivables:
Land receivables
Trade and other receivables
Mortgage receivables
Note
(b)
(a)
(a)
(b)
(b)
(b)
2010
Carrying
value
183.9
–
6.2
15.4
121.1
54.9
381.5
Land receivables and trade and other receivables are included in the balance sheet as trade and other receivables for current and non-current amounts.
Current and non-current trade and other receivables, as disclosed in Note 16, include £70.0 million (2009: £41.8 million) of non-financial assets.
Financial liabilities
£ million
Derivative financial instruments:
Designated as effective hedging instruments
Held for trading
Amortised cost:
Overdrafts, bank and other loans
Land creditors
Trade and other payables
Debenture loans
Note
(a)
(a)
(b)
(b)
(c)
2010
Carrying
value
–
9.0
588.4
369.2
571.6
250.0
1,788.2
2009
Carrying
value
132.1
11.1
–
21.0
121.6
41.7
327.5
2009
Carrying
value
–
12.9
161.1
325.7
577.8
721.9
1,799.4
Land creditors and trade and other payables are included in the balance sheet as trade and other payables for current and non-current amounts.
Current and non-current trade and other payables, as disclosed in Note 19, include £210.2 million (2009: £122.2 million) of non-financial liabilities.
(a) Derivative financial instruments are carried at fair value. The fair values are derived from inputs that are observable for the asset or liability either directly or indirectly and relevant for the term,
currency and instrument.
(b) The Directors consider that the carrying amount of other financial assets and liabilities recorded in the financial statements approximates their fair values.
(c) Details of fair values of debenture loans are provided in Note 18.
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Taylor Wimpey plc Annual Report & Accounts 2010
Financial assets and financial liabilities
Categories of financial assets and financial liabilities are as follows:
Financial assets
£ million
Cash and cash equivalents
Derivative financial instruments:
Designated as effective hedging instruments
Held for trading
Loans and receivables:
Land receivables
Trade and other receivables
Mortgage receivables
Financial liabilities
£ million
Derivative financial instruments:
Designated as effective hedging instruments
Held for trading
Amortised cost:
Overdrafts, bank and other loans
Land creditors
Trade and other payables
Debenture loans
Land receivables and trade and other receivables are included in the balance sheet as trade and other receivables for current and non-current amounts.
Current and non-current trade and other receivables, as disclosed in Note 16, include £70.0 million (2009: £41.8 million) of non-financial assets.
Note
(b)
(a)
(a)
(b)
(b)
(b)
Note
(a)
(a)
(b)
(b)
(c)
2010
Carrying
value
183.9
–
6.2
15.4
121.1
54.9
381.5
2009
Carrying
value
132.1
11.1
–
21.0
121.6
41.7
327.5
2010
Carrying
value
2009
Carrying
value
–
9.0
588.4
369.2
571.6
250.0
–
12.9
161.1
325.7
577.8
721.9
1,788.2
1,799.4
Land creditors and trade and other payables are included in the balance sheet as trade and other payables for current and non-current amounts.
Current and non-current trade and other payables, as disclosed in Note 19, include £210.2 million (2009: £122.2 million) of non-financial liabilities.
(a) Derivative financial instruments are carried at fair value. The fair values are derived from inputs that are observable for the asset or liability either directly or indirectly and relevant for the term,
currency and instrument.
(b) The Directors consider that the carrying amount of other financial assets and liabilities recorded in the financial statements approximates their fair values.
(c) Details of fair values of debenture loans are provided in Note 18.
Notes to the Consolidated Financial Statements continued
20. Financial instruments
Capital management
The Group’s objective is to obtain a strong credit rating for the business and to have an appropriate funding structure based on a minimum interest cover and maximum
gearing. Shareholders’ equity and long term debt are used to finance fixed assets and medium to long term land bank. Revolving credit facilities are used to fund net
current assets including work in progress and short term land. As a result of the refinancing completed in December 2010 the Group now has a more appropriate blend
of funding from both bank and non bank sources together with a staggered maturity profile to minimise refinancing risk.
20. Financial instruments (continued)
The Group has the following types of derivatives:
Designated as held for trading:
Floating £ to fixed £ interest
US$160.5m floating US$ to fixed £ interest
Designated as hedging instruments:
US$160.5m floating US$ to fixed £ interest
Financial Statements
2010
Notional
amount
2010
Weighted
average fixed
2009
Notional
amount
2009
Weighted
average fixed
£185.0m
£100.0m
5.28% £185.0m
–
6.63%
5.28%
–
–
–
£100.0m
6.63%
In addition, forward contracts have been entered into to hedge transaction risks on intra-Group loans to buy against Sterling: C$192.0 million (2009: US$37 million, €2.5
million and C$54.5 million). The fair values of the forward contracts are not material as they were entered into on or near 31 December in each year and mature not more
than one month later. The cross currency SWAP was de-designated as hedging instruments following the early repayment of the fixed rate debenture in December 2010.
Loss before tax has been arrived at after charging/(crediting) the following gains and losses:
£ million
Change in fair value of financial liabilities designated as effective hedged items
Change in fair value of derivatives designated as effective hedging instruments
Change in fair value of derivatives classified as held for trading
2010
1.2
(1.2)
2.5
2.5
2009
(0.5)
0.5
(2.1)
(2.1)
Market risk
The Group’s activities expose it to the financial risks of changes in both foreign currency exchange rates and interest rates. The Group aims to manage the exposure to
these risks by the use of fixed or floating rate borrowings, foreign currency borrowings and derivative financial instruments.
(a) Interest rate risk management
The Group is exposed to interest rate risk as the Group borrows funds at both fixed and floating interest rates. The exposure to these borrowings varies during the year
due to the seasonal nature of cash flows relating to housing sales and the less certain timing of land payments. A combination of fixed rate borrowings and interest rate
swaps are used to manage the volatility risk such that at the year end, taking all interest rate derivatives into account, fixed rate borrowings are not more than 70% of
total borrowings but not less than 50%. Group policy does not allow the use of derivatives to speculate against changes to future interest rates and they are only used to
manage exposure to volatility.
In order to measure the risk, floating rate borrowings and the expected interest cost for the year are forecast on a monthly basis and compared to budget using
management’s expectations of a reasonably possible change in interest rates. Interest expense volatility remained within acceptable limits throughout the year. At the
year end the Group had £335.0 million (2009: £802.0 million) of fixed rate exposure equivalent to 51% (2009: 107%) of net debt.
Hedge accounting
Hedging activities are evaluated periodically to ensure that they are in line with Group policy.
The cross currency, fixed to floating interest rate swaps have been bifurcated for hedging purposes and designated as fair value hedges such that the Group receives
interest at a fixed rate of 6.625% based on a nominal value of £100.0 million matching the underlying borrowing and pays US dollar floating rates on a nominal value of
US$160.5 million. The fair value hedge was discontinued in December 2010 when the hedged debt was repaid. During the period, the hedge was 100% effective (2009:
100%) in hedging the fair value exposure to interest rate movements.
A number of derivatives are held which, while providing an economic hedge to the volatility of interest rates, do not satisfy the strict requirements for hedge accounting
and are therefore designated as held for trading.
79
Taylor Wimpey plc Annual Report & Accounts 2010
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Financial Statements
Notes to the Consolidated Financial Statements continued
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20. Financial instruments (continued)
Interest rate sensitivity
The effect on both income and equity, based on exposure to non-derivative floating rate instruments at the balance sheet date, for a 1% (2009: 1%) rise in interest rates
is £(4.0) million (2009: £(0.3 million)), before tax, a 1% (2009: 1%) fall in interest rates gives the same but opposite effect. For derivatives the fair values have been
calculated based on rates available from a recognised financial information provider adjusted for the sensitivity as shown in the tables below.
In 2009 due to seasonal fluctuations the level of net borrowings at the financial year end are not representative of floating rate borrowings during the year and therefore
interest rate sensitivity before tax for a reasonably possible 1% rise in floating rate instruments as shown below for 2009 is based on a monthly average for the year. In
December 2010 the composition of fixed to floating was changed due to the refinancing and the sensitivity in the table for 2010 is based on the floating rate borrowings
at that date as being more representative of the risk. The table assumes all other variables remain constant and in accordance with IFRS 7 does not attempt, for example,
to include the effects of any resultant change in exchange rates.
1% increase in interest rates
£ million
Derivatives
Non-derivatives (based on average for the year for 2009)
1% decrease in interest rates
£ million
Derivatives
Non-derivatives (based on average for the year)
Sensitivity
income
2010
Sensitivity
equity
2010
Sensitivity
income
2009
Sensitivity
equity
2009
0.4
(4.0)
(3.6)
0.4
(4.0)
(3.6)
3.2
(4.2)
(1.0)
3.4
(4.2)
(0.8)
Sensitivity
income
2010
Sensitivity
equity
2010
Sensitivity
income
2009
Sensitivity
equity
2009
(0.4)
4.0
3.6
(0.4)
4.0
3.6
(3.3)
4.2
0.9
(3.5)
4.2
0.7
(b) Foreign currency risk management
The Group’s overseas activities expose it to the financial risks of changes in foreign currency exchange rates primarily to US dollars, Canadian dollars and the Euro.
The Group is not materially exposed to transaction risks as nearly all Group companies conduct their business in their respective functional currencies. Group policy
requires that transaction risks are hedged to the functional currency of the subsidiary using foreign currency borrowings or derivatives where appropriate.
The Group is also exposed to the translation risk of accounting for both the income and the net investment held in functional currencies other than Sterling. The net
investment risk is partially hedged using foreign currency borrowings and derivatives. Assets and liabilities denominated in non-functional currencies are retranslated
each month using the latest exchange rates and resultant exchange gains or losses monitored each month. Income is also measured monthly using the latest exchange
rates and compared to a budget held at historical exchange rates. Other than the natural hedge provided by foreign currency borrowings the translation risk of income is
not hedged using derivatives. The policy is kept under periodic review.
The Group’s exposure to, and the way in which it manages, exchange rate risk has not changed from the previous year.
Hedge accounting
Until the refinancing in December 2010 the bifurcated cross currency swaps were designated in a hedging relationship such that the nominal amount of US$160.5 million
(2009: $160.5 million) was used to hedge part of the Group’s net investment in US$ denominated assets and liabilities. The net investment hedge using these derivatives
was discontinued as a result of the refinancing.
The Group has also designated the carrying value of US$138.0 million and €75.0 million (2009: US$287.5 million and €75.0 million) borrowings as a net investment hedge
of part of the Group’s investment in US dollar and Euro denominated assets respectively.
Due to net realisable value provisions determined at the year end in our Spanish operations the designated hedging instruments exceeded the carrying value of hedged
investments on the last day of the year and in accordance with policy any exchange gains or losses on the excess hedge have been recognised in the Consolidated
Income Statement. The change in the carrying amount of the derivatives which were effective hedging instruments and the change in the carrying value of the borrowings
offset the exchange movement on the Group’s US dollar and € net investments and are included in the translation reserve.
80
Taylor Wimpey plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements continued
Financial Statements
20. Financial instruments (continued)
Interest rate sensitivity
The effect on both income and equity, based on exposure to non-derivative floating rate instruments at the balance sheet date, for a 1% (2009: 1%) rise in interest rates
is £(4.0) million (2009: £(0.3 million)), before tax, a 1% (2009: 1%) fall in interest rates gives the same but opposite effect. For derivatives the fair values have been
calculated based on rates available from a recognised financial information provider adjusted for the sensitivity as shown in the tables below.
20. Financial instruments (continued)
Foreign currency sensitivity
The Group is primarily exposed to US dollars, Canadian dollars and the Euro. The following table details how the Group’s income and equity would increase/(decrease)
on a before tax basis, to a 15% increase (2009: 20%) in the respective currencies against Sterling and in accordance with IFRS 7, all other variables remaining constant.
A 15% (2009: 20%) decrease in the value of Sterling would have an equal but opposite effect.
In 2009 due to seasonal fluctuations the level of net borrowings at the financial year end are not representative of floating rate borrowings during the year and therefore
The 15% (2009: 20%) change represents a reasonably possible change in the specified foreign exchange rates in relation to Sterling.
interest rate sensitivity before tax for a reasonably possible 1% rise in floating rate instruments as shown below for 2009 is based on a monthly average for the year. In
December 2010 the composition of fixed to floating was changed due to the refinancing and the sensitivity in the table for 2010 is based on the floating rate borrowings
at that date as being more representative of the risk. The table assumes all other variables remain constant and in accordance with IFRS 7 does not attempt, for example,
to include the effects of any resultant change in exchange rates.
£ million
US dollar
Canadian dollar
Euro
Income
sensitivity
2010
Equity
sensitivity
2010
Income
sensitivity
2009
Equity
sensitivity
2009
0.1
(0.2)
(0.3)
(0.4)
(13.1)
(29.9)
(9.9)
(52.9)
(5.4)
(1.2)
(0.8)
(7.4)
29.6
(37.7)
(14.1)
(22.2)
Credit risk
Credit risk is the risk of financial loss where counterparties are not able to meet their obligations.
The Group’s policy is that surplus cash when not used to repay borrowings is placed on deposit with the Group’s revolving credit facility syndicate banks and with other
banks based on a minimum credit rating. Credit risk on derivatives where the fair value is positive is closely monitored and remains within acceptable limits.
Land receivables arise from sales of surplus land on deferred terms. A policy is in place such that if the risk is not acceptable then the deferred payment must have
adequate security either by the use of an appropriate guarantee or a charge over the land. The fair value of any land held as security is considered by management to be
sufficient in relation to the carrying amount of the receivable to which it relates.
Trade and other receivables comprise mainly amounts receivable from various housing associations and other housebuilders. Management considers that the credit
quality of the various debtors is good in respect of the amounts outstanding and therefore credit risk is considered to be low. There is no significant concentration of risk.
A small allowance for credit losses against sundry debtors is held, however, the balance is not material in relation to the gross carrying value of this particular class of
financial asset.
The Group is not materially exposed to transaction risks as nearly all Group companies conduct their business in their respective functional currencies. Group policy
requires that transaction risks are hedged to the functional currency of the subsidiary using foreign currency borrowings or derivatives where appropriate.
The carrying amount of financial assets, as detailed above, represents the Group’s maximum exposure to credit risk at the reporting date assuming that any security held
has no value.
Liquidity risk
Liquidity risk is the risk that the Group does not have sufficient financial resources available to meet its obligations as they fall due. The Group manages liquidity risk by
continuously monitoring forecast and actual cash flows, matching the expected cash flow timings of financial assets and liabilities and ideally through the use of term
borrowings, overdrafts and committed revolving credit facilities for a minimum of 12 months from maturity. Future borrowing requirements are forecast on a weekly and
monthly basis and funding headroom is maintained above forecast peak requirements to meet unforeseen events. As a result of the refinancing in December 2010 the
Group now has a range of maturities with an average life of 3.5 years (2009: 2.5 years).
In addition to term borrowings and committed overdraft facilities the Group has access to committed revolving credit facilities and cash balances. At the balance sheet
date, the total unused committed amount was £477.0 million (2009: £1,078.3 million) and cash and cash equivalents of £183.9 million (2009: £132.1 million).
1% increase in interest rates
£ million
Derivatives
Non-derivatives (based on average for the year for 2009)
1% decrease in interest rates
£ million
Derivatives
Non-derivatives (based on average for the year)
(b) Foreign currency risk management
Sensitivity
Sensitivity
Sensitivity
Sensitivity
income
2010
0.4
(4.0)
(3.6)
income
2010
(0.4)
4.0
3.6
equity
2010
0.4
(4.0)
(3.6)
equity
2010
(0.4)
4.0
3.6
income
2009
3.2
(4.2)
(1.0)
(3.3)
4.2
0.9
Sensitivity
Sensitivity
Sensitivity
income
2009
Sensitivity
equity
2009
equity
2009
3.4
(4.2)
(0.8)
(3.5)
4.2
0.7
The Group’s overseas activities expose it to the financial risks of changes in foreign currency exchange rates primarily to US dollars, Canadian dollars and the Euro.
The Group is also exposed to the translation risk of accounting for both the income and the net investment held in functional currencies other than Sterling. The net
investment risk is partially hedged using foreign currency borrowings and derivatives. Assets and liabilities denominated in non-functional currencies are retranslated
each month using the latest exchange rates and resultant exchange gains or losses monitored each month. Income is also measured monthly using the latest exchange
rates and compared to a budget held at historical exchange rates. Other than the natural hedge provided by foreign currency borrowings the translation risk of income is
not hedged using derivatives. The policy is kept under periodic review.
The Group’s exposure to, and the way in which it manages, exchange rate risk has not changed from the previous year.
Hedge accounting
was discontinued as a result of the refinancing.
Until the refinancing in December 2010 the bifurcated cross currency swaps were designated in a hedging relationship such that the nominal amount of US$160.5 million
(2009: $160.5 million) was used to hedge part of the Group’s net investment in US$ denominated assets and liabilities. The net investment hedge using these derivatives
The Group has also designated the carrying value of US$138.0 million and €75.0 million (2009: US$287.5 million and €75.0 million) borrowings as a net investment hedge
of part of the Group’s investment in US dollar and Euro denominated assets respectively.
Due to net realisable value provisions determined at the year end in our Spanish operations the designated hedging instruments exceeded the carrying value of hedged
investments on the last day of the year and in accordance with policy any exchange gains or losses on the excess hedge have been recognised in the Consolidated
Income Statement. The change in the carrying amount of the derivatives which were effective hedging instruments and the change in the carrying value of the borrowings
offset the exchange movement on the Group’s US dollar and € net investments and are included in the translation reserve.
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Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Notes to the Consolidated Financial Statements continued
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20. Financial instruments (continued)
The maturity profile of the anticipated future cash flows including interest using the latest applicable relevant rate based on the earliest date on which the Group can be
required to pay financial liabilities on an undiscounted basis is as follows:
Financial liabilities
£ million
On demand
Within one year
More than one year and less than two years
More than two years and less than five years
In more than five years
31 December 2010
Financial liabilities
£ million
On demand
Within one year
More than one year and less than two years
More than two years and less than five years
In more than five years
31 December 2009
Overdrafts,
bank and other
loans
Land
creditors
Other trade
payables
Debenture
loans
15.1
22.1
194.4
432.3
–
663.9
–
201.0
86.6
65.3
38.0
390.9
–
499.8
19.3
20.0
2.4
541.5
–
28.0
25.9
327.8
–
381.7
Bank loans
and overdraft
Land
creditors
Other trade
payables
Debenture
loans
12.7
4.4
4.4
150.6
–
172.1
–
132.5
90.9
95.4
29.8
348.6
–
414.8
18.1
21.4
–
454.3
–
59.8
59.8
747.3
–
866.9
Total
15.1
750.9
326.2
845.4
40.4
1,978.0
Total
12.7
611.5
173.2
1,014.7
29.8
1,841.9
The following table represents the undiscounted cash flow profile of the Group’s derivative financial instruments and has been calculated using implied interest rates and
exchange rates derived from the respective yield curves. Interest rate swaps are settled net and foreign currency swaps and forward contracts are settled gross except in
the case of a default by either party where the amounts may be settled net.
Derivatives
£ million
Within one year
More than one year and less than two years
More than two years and less than five years
31 December 2010
Derivatives
£ million
Within one year
More than one year and less than two years
More than two years and less than five years
31 December 2009
Net-settled
derivatives
net amount
Gross-settled
derivatives
receivable
Gross-settled
derivatives
payable
(7.7)
(1.4)
–
(9.1)
6.6
106.6
–
113.2
(2.6)
(104.5)
–
(107.1)
Net-settled
derivatives
net amount
Gross-settled
derivatives
receivable
Gross-settled
derivatives
payable
(7.7)
(4.7)
(0.7)
(13.1)
6.6
6.6
113.3
126.5
(2.6)
(4.1)
(107.5)
(114.2)
Total
(3.7)
0.7
–
(3.0)
Total
(3.7)
(2.2)
5.1
(0.8)
82
Taylor Wimpey plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements continued
Financial Statements
20. Financial instruments (continued)
required to pay financial liabilities on an undiscounted basis is as follows:
The maturity profile of the anticipated future cash flows including interest using the latest applicable relevant rate based on the earliest date on which the Group can be
21. Retirement benefit schemes
Retirement benefit obligation comprises gross pension liability of £248.5 million (2009: £406.4 million) and gross post-retirement healthcare liability of £2.0 million
(2009: £2.9 million).
The following table represents the undiscounted cash flow profile of the Group’s derivative financial instruments and has been calculated using implied interest rates and
exchange rates derived from the respective yield curves. Interest rate swaps are settled net and foreign currency swaps and forward contracts are settled gross except in
the case of a default by either party where the amounts may be settled net.
Financial liabilities
£ million
On demand
Within one year
Financial liabilities
£ million
On demand
Within one year
Derivatives
£ million
Within one year
Derivatives
£ million
Within one year
More than one year and less than two years
More than two years and less than five years
In more than five years
31 December 2010
More than one year and less than two years
More than two years and less than five years
In more than five years
31 December 2009
More than one year and less than two years
More than two years and less than five years
31 December 2010
More than one year and less than two years
More than two years and less than five years
31 December 2009
Overdrafts,
bank and other
Land
Other trade
Debenture
creditors
payables
loans
15.1
22.1
194.4
432.3
–
663.9
12.7
4.4
4.4
150.6
–
172.1
381.7
1,978.0
Bank loans
and overdraft
Land
creditors
Other trade
payables
Debenture
loans
–
201.0
86.6
65.3
38.0
390.9
–
132.5
90.9
95.4
29.8
348.6
(7.7)
(1.4)
–
(9.1)
(7.7)
(4.7)
(0.7)
(13.1)
–
499.8
19.3
20.0
2.4
541.5
–
414.8
18.1
21.4
–
454.3
6.6
106.6
–
113.2
6.6
6.6
113.3
126.5
Net-settled
Gross-settled
Gross-settled
derivatives
net amount
derivatives
receivable
derivatives
payable
Net-settled
derivatives
net amount
Gross-settled
Gross-settled
derivatives
receivable
derivatives
payable
loans
–
28.0
25.9
327.8
–
–
59.8
59.8
747.3
–
866.9
(2.6)
(104.5)
–
(107.1)
(2.6)
(4.1)
(107.5)
(114.2)
Total
15.1
750.9
326.2
845.4
40.4
Total
12.7
611.5
173.2
1,014.7
29.8
1,841.9
Total
(3.7)
0.7
–
(3.0)
Total
(3.7)
(2.2)
5.1
(0.8)
The Group operates defined benefit and defined contribution pension schemes. In the UK, the Taylor Woodrow Group Pension and Life Assurance Fund (TWGP&LAF)
and the George Wimpey Staff Pension Scheme (GWSPS) are funded defined benefit schemes and are managed by boards of Trustees. The TWGP&LAF merged with the
Bryant Group Pension Scheme (BGPS) on 24 June 2002 and with the Wilson Connolly Holdings Pension Scheme (WCHPS), the Wainhomes Ltd Pension Scheme
(WHLPS) and the Prestoplan Pension Scheme (PPS) on 27 August 2004. The Group’s defined benefit schemes are closed to new entrants. The TWGP&LAF was closed
to future pension accrual with effect from 30 November 2006 and the GWSPS was closed to future accrual with effect from 31 August 2010. An alternative defined
contribution arrangement, the Taylor Wimpey Personal Choice Plan (TWPCP), is offered to new employees and to members of the defined benefit schemes when they
were closed to future accrual. Legacy George Wimpey staff were members of a UK Stakeholder arrangement and contributions to the arrangement ceased with effect
from 31 August 2010. These members were offered membership of the TWPCP. The Group also operates a number of small overseas pension schemes including
defined benefit schemes in the US and Canada. Of the defined benefit pension scheme net deficit of £248.5 million (2009: £406.4 million) at 31 December 2010, £244.0
million (2009: £401.4 million) related to the TWGP&LAF and GWSPS schemes in the UK and £4.5 million (2009: £5.0 million) related to defined benefit schemes in the US
and Canada. Future revaluation of deferred member benefits in the UK defined benefit schemes will be based on the CPI in line with scheme rules. Pensioner increases
will continue to be based on RPI. The Company made an additional payment of £37.5 million to each of the UK defined benefit schemes following the refinancing
agreement in December 2010.
The pension scheme assets of the Group’s principal defined benefit pension schemes, TWGP&LAF and GWSPS, are held in separate trustee-administered funds to meet
long term pension liabilities to past and present employees. The Trustees of the schemes are required to act in the best interests of the schemes’ beneficiaries. The
appointment of trustees is determined by each scheme’s trust documentation. The Group has a policy that at least one-third of all trustees should be nominated by
members of the scheme. The Trustees have implemented a Joint Investment Sub Committee to manage the investment of the combined defined benefit scheme assets.
The Company and the Trustees have undertaken a review of the scheme investment strategy, implementation of the investment changes will occur during 2011.
The most recent formal triennial valuations of the TWGP&LAF and the GWSPS were carried out as at 31 March 2010. The Group agreed revised funding schedules under
which the Group will make annual funding contributions of £22.0 million per annum in respect of the TWGP&LAF over 10 years from the valuation date and £24.0 million
per annum in respect of the GWSPS from the valuation date. Previously the Group was making annual funding contributions of £20.0 million per annum over eight years
in respect of the TWGP&LAF and £25.0 million per annum over 10 years in respect of the GWSPS. Following the last valuation of the GWSPS, the ordinary contribution
rate was set at 18% of pensionable salaries, which was applicable until the scheme was closed to future accrual in August 2010. The projected unit method was used in
all valuations and assets were taken into account using market values.
Contributions of £4.1 million (2009: £10.6 million) were charged to income in respect of defined contribution schemes.
The main financial assumptions, which were used for the triennial funding valuation and are all relative to the inflation assumption, are as set out below:
Assumptions
RPI inflation
Discount rate – pre/post-retirement
General pay inflation
Real pension increases
Valuation results
Market value of assets
Past service liabilities
Scheme funding levels
TWGP&LAF
3.60%
6.85%-5.10%
–
0.00%
TWGP&LAF
£758m
£1,022m
74%
GWSPS
3.85%
6.75%-4.75%
–
0.00%
GWSPS
£694m
£953m
73%
There have been two significant post valuation events, the future revaluation of deferred member benefits to be based on CPI from 1 January 2011, which will reduce
liabilities by £20.0 million for the TWGP&LAF and £19.0 million for the GWSPS and the additional Company payment to each scheme of £37.5 million has increased
assets for both schemes. Annual funding contributions take into account these post valuation events.
The results of the March 2010 valuations of the Group’s pension schemes have been updated to 31 December 2010 and the position of overseas schemes has been
included within the IAS 19 disclosures. The principal actuarial assumptions used in the calculation of the disclosure items are as follows:
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83
Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Notes to the Consolidated Financial Statements continued
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21. Retirement benefit schemes (continued)
As at 31 December
Discount rate for scheme liabilities
Expected return on scheme assets
General pay inflation
Deferred pension increases
Pension increases
United Kingdom
North America
2010
2009
2010
2009
5.40%
5.70% 5.25%-5.37% 5.94%-6.00%
5.55%-5.92% 5.90%-6.20% 6.50%-7.00% 6.50%-8.00%
4.30% 3.00%-3.50% 3.00%-3.50%
0.00%
3.30%
0.00%
2.20%-3.65% 2.30%-3.20% 0.00%-3.00% 0.00%-3.00%
n/a
2.45%
The basis for the above assumptions are prescribed by IAS 19 and do not reflect the assumptions that may be used in future funding valuations of the Group’s
pension schemes.
The current life expectancies (in years) underlying the value of the accrued liabilities for the main UK plans are:
Life expectancy
Member currently age 65
Member currently age 45
2010
Male
Female
86
88
90
92
2009
Male
86
87
Female
89
90
The life expectancies have been derived using mortality assumptions that were based on the results of a recent investigation into the mortality experience of the
schemes. The base tables used are the PA92 series tables with appropriate age rating adjustments. Future improvements in life expectancy are allowed for in the form of
the medium cohort projections, with a 1% per annum underpin to future improvements in life expectancy.
The fair value of assets and present value of obligations of the Group’s defined benefit pension schemes are set out below:
31 December 2010
Assets:
Equities
Bonds
Gilts
Other assets
Present value of defined benefit obligations
Deficit in schemes recognised as non-current liability
31 December 2009
Assets:
Equities
Bonds
Gilts
Other assets
Present value of defined benefit obligations
Deficit in schemes recognised as non-current liability
Expected rate of
return
% p.a
United
Kingdom
£ million
North
America
£ million
Total plans
£ million
Percentage of
total plan
assets held
7.65%
5.40%
4.15%
3.20%-7.65%
7.90%
5.70%
4.40%
3.30%-7.90%
587.3
324.9
481.0
191.2
1,584.4
(1,828.4)
(244.0)
527.9
294.0
444.8
129.7
1,396.4
(1,797.8)
(401.4)
10.0
7.0
–
2.7
19.7
(24.2)
(4.5)
9.8
5.4
–
0.7
15.9
(20.9)
(5.0)
597.3
331.9
481.0
193.9
1,604.1
(1,852.6)
(248.5)
537.7
299.4
444.8
130.4
1,412.3
(1,818.7)
(406.4)
37%
21%
30%
12%
100%
38%
21%
32%
9%
100%
To develop the expected long term rate of return on assets assumption, the Group considered the current level of expected returns on investments (particularly
government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future
returns of each asset class were then weighted based on the asset allocation to develop the expected long term rate of return on assets assumption for the portfolio.
The expected return on scheme assets is based on market expectations at the beginning of the financial period for returns over the life of the related obligation. The
expected yield on bond investments with fixed interest rates can be derived exactly from their market value. Some of these bond investments are issued by the UK
Government. The risk of default on these is very small. The trustees also hold bonds issued by public companies. There is a more significant risk of default on these
which is assessed by various rating agencies.
The trustees also have a substantial holding of equity investments. The investment return related to these is variable, and they are generally considered ‘riskier’ investments.
It is generally accepted that the yield on equity investments will contain a premium, ‘the equity risk premium’, to compensate investors for the additional risk of holding
this type of investment. There is significant uncertainty about the likely size of this risk premium.
84
Taylor Wimpey plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements continued
21. Retirement benefit schemes (continued)
21. Retirement benefit schemes (continued)
A summary of the target asset allocations of the major defined benefit schemes are shown below:
Financial Statements
TWGP&LAF
GWSPS
UK Equities
Non-UK Equities
Index-Linked Gilts
Fixed-Interest Gilts
Other UK bonds
GTAA
Property
£ million
Amount charged against income:
Current service cost
Curtailment gain
Operating income/(cost)
Expected return on scheme assets
Interest cost on scheme liabilities
Finance charges
Total charge
The actual return on scheme assets was a gain of £145.7 million (2009: £41.5 million).
£ million
Actuarial gains in the Statement of Comprehensive Income:
Difference between actual and expected return on scheme assets
Experience (losses)/gains arising on scheme liabilities
Changes in assumptions
Total gain/(loss) recognised in the Statement of Comprehensive Income
The cumulative amount of actuarial losses recognised in the Statement of Comprehensive Income is £168.7 million loss (2009: £ 215.6 million loss).
£ million
Movement in present value of defined benefit obligations
1 January
Changes in exchange rates
Service cost
Curtailment gain
Benefits paid and expenses
Contributions – employee
Interest cost
Actuarial gains
31 December
£ million
Movement in fair value of scheme assets
1 January
Changes in exchange rates
Expected return on scheme assets and expenses
Contributions – employer and employee
Benefits paid
Actuarial gains
31 December
85
Taylor Wimpey plc Annual Report & Accounts 2010
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17%
30%
15%
10%
25%
–
3%
18%
12%
25%
16%
24%
5%
–
2010
2009
(3.7)
12.6
8.9
74.9
(98.3)
(23.4)
(14.5)
(4.1)
–
(4.1)
61.2
(95.5)
(34.3)
(38.4)
2010
2009
70.8
(9.7)
(14.2)
46.9
102.7
29.1
(273.6)
(141.8)
2010
2009
1,818.7
0.7
3.7
(12.6)
(81.0)
0.9
98.3
23.9
1,852.6
1,557.7
(1.6)
4.1
–
(83.1)
1.6
95.5
244.5
1,818.7
2010
2009
1,412.3
0.7
74.9
126.4
(81.0)
70.8
1,604.1
1,280.5
(0.7)
61.2
51.7
(83.1)
102.7
1,412.3
The basis for the above assumptions are prescribed by IAS 19 and do not reflect the assumptions that may be used in future funding valuations of the Group’s
The current life expectancies (in years) underlying the value of the accrued liabilities for the main UK plans are:
The life expectancies have been derived using mortality assumptions that were based on the results of a recent investigation into the mortality experience of the
schemes. The base tables used are the PA92 series tables with appropriate age rating adjustments. Future improvements in life expectancy are allowed for in the form of
the medium cohort projections, with a 1% per annum underpin to future improvements in life expectancy.
The fair value of assets and present value of obligations of the Group’s defined benefit pension schemes are set out below:
As at 31 December
Discount rate for scheme liabilities
Expected return on scheme assets
General pay inflation
Deferred pension increases
Pension increases
pension schemes.
Life expectancy
Member currently age 65
Member currently age 45
31 December 2010
Assets:
Equities
Bonds
Gilts
Other assets
31 December 2009
Assets:
Equities
Bonds
Gilts
Other assets
Present value of defined benefit obligations
Deficit in schemes recognised as non-current liability
United Kingdom
North America
2010
2009
2010
2009
5.40%
5.70% 5.25%-5.37% 5.94%-6.00%
5.55%-5.92% 5.90%-6.20% 6.50%-7.00% 6.50%-8.00%
n/a
2.45%
4.30% 3.00%-3.50% 3.00%-3.50%
3.30%
0.00%
0.00%
2.20%-3.65% 2.30%-3.20% 0.00%-3.00% 0.00%-3.00%
2010
86
88
Male
Female
90
92
2009
Male
86
87
Female
89
90
Expected rate of
return
% p.a
United
Kingdom
£ million
North
America
£ million
Total plans
£ million
Percentage of
total plan
assets held
7.65%
5.40%
4.15%
3.20%-7.65%
7.90%
5.70%
4.40%
3.30%-7.90%
587.3
324.9
481.0
191.2
1,584.4
(1,828.4)
(244.0)
527.9
294.0
444.8
129.7
1,396.4
(1,797.8)
(401.4)
10.0
7.0
–
2.7
19.7
(24.2)
(4.5)
9.8
5.4
–
0.7
15.9
(20.9)
(5.0)
597.3
331.9
481.0
193.9
1,604.1
(1,852.6)
(248.5)
537.7
299.4
444.8
130.4
1,412.3
(1,818.7)
(406.4)
37%
21%
30%
12%
100%
38%
21%
32%
9%
100%
Present value of defined benefit obligations
Deficit in schemes recognised as non-current liability
To develop the expected long term rate of return on assets assumption, the Group considered the current level of expected returns on investments (particularly
government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future
returns of each asset class were then weighted based on the asset allocation to develop the expected long term rate of return on assets assumption for the portfolio.
The expected return on scheme assets is based on market expectations at the beginning of the financial period for returns over the life of the related obligation. The
expected yield on bond investments with fixed interest rates can be derived exactly from their market value. Some of these bond investments are issued by the UK
Government. The risk of default on these is very small. The trustees also hold bonds issued by public companies. There is a more significant risk of default on these
which is assessed by various rating agencies.
The trustees also have a substantial holding of equity investments. The investment return related to these is variable, and they are generally considered ‘riskier’ investments.
It is generally accepted that the yield on equity investments will contain a premium, ‘the equity risk premium’, to compensate investors for the additional risk of holding
this type of investment. There is significant uncertainty about the likely size of this risk premium.
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Financial Statements
Notes to the Consolidated Financial Statements continued
21. Retirement benefit schemes (continued)
£ million
2010
2009
2008
2007
2006
History of experience gains and losses:
Fair value of scheme assets
Present value of defined benefit obligations
Deficit in the scheme
Difference between actual and expected return on scheme assets:
Amount
Percentage of scheme assets
Experience adjustments on scheme liabilities:
Amount
Percentage of scheme liabilities
1,604.1
(1,852.6)
(248.5)
1,412.3
(1,818.7)
(406.4)
1,280.5
(1,557.7)
(277.2)
1,434.2
(1,650.6)
(216.4)
749.7
(955.6)
(205.9)
70.8
4.4%
(9.7)
0.5%
102.7
7.3%
(210.4)
16.4%
29.1
1.6%
(22.1)
1.4%
(12.7)
1.0%
26.7
2.0%
24.2
3.0%
0.2
0.0%
The estimated amounts of contributions expected to be paid to the TWGP&LAF during 2011 are £22.0 million and to the GWSPS are £24.0 million.
The Group liability is the difference between the scheme liabilities and the scheme assets. Changes in the assumptions may occur at the same time as changes in the
market value of scheme assets. These may or may not offset the change in assumptions. For example, a fall in interest rates will increase the scheme liability, but may
also trigger an offsetting increase in the market value of the assets so there is no net effect on the Company liability.
Assumption
Discount rate
Rate of inflation
Rate of mortality
Change in assumption
Impact on scheme liabilities
Increase by 0.1% p.a.
Increase by 0.1% p.a.
Members assumed to live 1 year longer
Decrease by £28.3m
Increase by £22.6m
Increase by £58.8m
The projected liabilities of the defined benefit scheme are apportioned between members’ past and future service using the projected unit actuarial cost method. The
defined benefit obligation makes allowance for future earnings growth.
The gross post-retirement liability also includes £2.0 million at 31 December 2010 (2009: £2.9 million) in respect of continuing post-retirement healthcare insurance
premiums for retired long-service employees. The liability is based upon the actuarial assessment of the remaining cost by a qualified actuary on a net present value basis
at 31 December 2008.
The cost is calculated assuming a discount rate of 3.6% per annum (2009: 3.6%) and an increase in medical expenses of 10% per annum (2009: 10.0%). The premium
cost to the Group in respect of the retired long-service employees for 2010 was £0.2 million (2009: £0.2 million).
22. Provisions
£ million
At 1 January 2009
Additional provision in the year
Utilisation of provision
Released
Transfers and Reclassification
Changes in exchange rates
At 31 December 2009
Additional provision in the year
Utilisation of provision
Released
Changes in exchange rates
At 31 December 2010
£ million
Amount due for settlement within one year
Amount due for settlement after one year
31 December 2010
Housing
maintenance Restructuring
39.0
6.2
(7.8)
(0.8)
(24.5)
(3.0)
9.1
4.2
(4.9)
(0.2)
0.4
8.6
22.1
4.2
(9.4)
(0.2)
(0.2)
(0.6)
15.9
–
(3.7)
–
0.1
12.3
Other
46.0
12.9
(8.0)
(0.2)
24.7
(1.6)
73.8
18.0
(22.8)
(1.0)
0.8
68.8
Total
107.1
23.3
(25.2)
(1.2)
–
(5.2)
98.8
22.2
(31.4)
(1.2)
1.3
89.7
46.8
42.9
89.7
86
Taylor Wimpey plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements continued
21. Retirement benefit schemes (continued)
£ million
History of experience gains and losses:
Fair value of scheme assets
Present value of defined benefit obligations
Deficit in the scheme
Percentage of scheme assets
Experience adjustments on scheme liabilities:
Amount
Amount
Percentage of scheme liabilities
Difference between actual and expected return on scheme assets:
2010
2009
2008
2007
2006
1,604.1
(1,852.6)
(248.5)
1,412.3
1,280.5
1,434.2
(1,818.7)
(1,557.7)
(1,650.6)
(406.4)
(277.2)
(216.4)
749.7
(955.6)
(205.9)
70.8
4.4%
(9.7)
0.5%
102.7
7.3%
(210.4)
16.4%
29.1
1.6%
(22.1)
1.4%
(12.7)
1.0%
26.7
2.0%
24.2
3.0%
0.2
0.0%
The estimated amounts of contributions expected to be paid to the TWGP&LAF during 2011 are £22.0 million and to the GWSPS are £24.0 million.
The Group liability is the difference between the scheme liabilities and the scheme assets. Changes in the assumptions may occur at the same time as changes in the
market value of scheme assets. These may or may not offset the change in assumptions. For example, a fall in interest rates will increase the scheme liability, but may
also trigger an offsetting increase in the market value of the assets so there is no net effect on the Company liability.
Change in assumption
Increase by 0.1% p.a.
Increase by 0.1% p.a.
Impact on scheme liabilities
Decrease by £28.3m
Increase by £22.6m
Members assumed to live 1 year longer
Increase by £58.8m
The projected liabilities of the defined benefit scheme are apportioned between members’ past and future service using the projected unit actuarial cost method. The
defined benefit obligation makes allowance for future earnings growth.
The gross post-retirement liability also includes £2.0 million at 31 December 2010 (2009: £2.9 million) in respect of continuing post-retirement healthcare insurance
premiums for retired long-service employees. The liability is based upon the actuarial assessment of the remaining cost by a qualified actuary on a net present value basis
The cost is calculated assuming a discount rate of 3.6% per annum (2009: 3.6%) and an increase in medical expenses of 10% per annum (2009: 10.0%). The premium
cost to the Group in respect of the retired long-service employees for 2010 was £0.2 million (2009: £0.2 million).
Assumption
Discount rate
Rate of inflation
Rate of mortality
at 31 December 2008.
22. Provisions
£ million
At 1 January 2009
Additional provision in the year
Utilisation of provision
Released
Transfers and Reclassification
Changes in exchange rates
At 31 December 2009
Additional provision in the year
Utilisation of provision
Released
Changes in exchange rates
At 31 December 2010
£ million
Amount due for settlement within one year
Amount due for settlement after one year
31 December 2010
Housing
maintenance Restructuring
39.0
6.2
(7.8)
(0.8)
(24.5)
(3.0)
9.1
4.2
(4.9)
(0.2)
0.4
8.6
22.1
4.2
(9.4)
(0.2)
(0.2)
(0.6)
15.9
(3.7)
–
–
0.1
12.3
Other
46.0
12.9
(8.0)
(0.2)
24.7
(1.6)
73.8
18.0
(22.8)
(1.0)
0.8
68.8
Total
107.1
23.3
(25.2)
(1.2)
–
(5.2)
98.8
22.2
(31.4)
(1.2)
1.3
89.7
46.8
42.9
89.7
Financial Statements
22. Provisions (continued)
The housing maintenance provision arises principally from warranties and other liabilities on housing sold. Whilst such warranties extend to a period of 10 years, payment
of these costs is likely to occur within a period of two years. The Group restructuring provision relates to the reorganisation of the UK and US businesses following the
merger with George Wimpey Plc in 2007. It is anticipated that the majority of this provision, which comprises predominantly of empty property costs will be utilised within
six years.
Other provisions consist of a remedial work provision, provisions for legal claims and other contract-related costs. The remedial work provision covers various
obligations, including aftercare at Springfield Environmental Limited which has a legal responsibility of a long term nature for the management of old, completed sites and
provisions for losses on construction contracts. Also included in other provisions are amounts for legal claims and contract-related costs associated with various matters
arising across the Group, the majority of which are anticipated to be settled within a three-year period.
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23. Share capital
£ million
Authorised:
22,200,819,176 ordinary shares of 1p each (2009: 22,200,819,176 ordinary shares of 1p)
1,158,299,201 deferred ordinary shares of 24p each (2009: 1,158,299,201)
Issued and fully paid:
1 January 2009
Treasury Share cancellation
Share warrants exercised
Placing and open offer
31 December 2009
Share warrants exercised
31 December 2010
2010
2009
222.0
278.0
500.0
222.0
278.0
500.0
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Number of shares
£ million
1,158,299,201
(92,732,927)
166,786
2,131,132,548
3,196,865,608
318,092
3,197,183,700
289.6
(23.2)
–
21.3
287.7
–
287.7
The Company issued 2,131.1 million new ordinary shares on 1 June 2009, as part of a placing and open offer. Prior to the placing and open offer issue the 25p ordinary
shares of the Company were split into 1,158.3 million ordinary shares of 1p and 1,158.3 million deferred shares of 24p each. The unissued 25p share capital was split into
1p shares. The new share issue was executed such that the amounts received above nominal share capital, net of issue costs, were recorded as part of the merger relief
reserve and then subsequently transferred to distributable reserves.
During the year, options were exercised on 156,674 (2009: 139,062) ordinary shares of which nil (2009: nil) were new issues with the balance coming from Treasury/ESOT
at varying prices from nil pence to 25.5p and shares were issued for a total consideration of nil (2009: nil). Under the Group’s senior executives’ share option scheme and
executive share option plan, employees held options at 31 December 2010 to purchase 23,606,831 shares (2009: 32,840,430) at prices between 39.3p and 171.6p per
share exercisable up to 7 August 2019. Under the Group’s savings-related share option schemes, employees held options at 31 December 2010 to purchase 37,487,029
shares (2009: 33,719,220) at prices between 22.9p and 189.2p per share exercisable up to 5 April 2016. Under the Group’s cash bonus deferral plan and executive
bonus plan, employees held options at 31 December 2010 in respect of nil shares (2009: 96,927) at nil pence per share. Under the Group’s performance share plan
employees held conditional awards at 31 December 2010 in respect of 22,640,446 shares (2009: 15,744,982) at nil pence per share exercisable up to 6 August 2013.
Under the Group’s share purchase plan employees held conditional awards at 31 December 2010 in respect of 5,628,627 shares (2009: 6,521,631) at nil pence per share.
The former George Wimpey plans were acquired as part of the merger in 2007. Under the George Wimpey Sharesave Scheme, employees held options at 31 December
2010 to purchase 200,572 shares (2009: 512,708) at prices between 160.1p and 188.0p per share exercisable up to 31 May 2012. Under the George Wimpey Executive
Option Scheme, employees held awards at 31 December 2010 in respect of 1,327,341 shares (2009: 2,163,415) at prices between 144.3p and 310.0p per share
exercisable up to 2 April 2017. Under the George Wimpey Long Term Incentive Plan, employees held awards at 31 December 2010 in respect of nil shares (2009:
955,036) at nil pence per share.
Under the Override Agreement, signed in April 2009, the Company agreed to issue 57.8 million warrants giving the holders the right to subscribe to an equivalent number
of ordinary shares in Taylor Wimpey plc at par value. The warrants may be exercised at par by the holder within five years of the date of issue and as at 31 December
2010 484,878 warrants had been exercised.
24. Share premium account
£ million
Balance at 1 January 2009
Share warrants exercised
Balance at 31 December 2009
Share warrants exercised
Balance at 31 December 2010
753.6
–
753.6
0.1
753.7
87
Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Notes to the Consolidated Financial Statements continued
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25. Reserves
£ million
Balance at 1 January 2009
New share capital subscribed
Cancellation and disposal of treasury shares
Issuance of equity instruments
Share-based payment credit
Actuarial loss as defined benefit pension schemes
Deferred tax asset recognised
Transfer to retained earnings
Exchange differences on translation of overseas
operations, net of tax
Increase in fair value of hedging derivatives
Other financing costs
Net loss for the year
Balance at 31 December 2009
Cancellation and disposal of treasury shares
Share-based payment credit
Cash cost of satisfying share options
Actuarial benefit as defined benefit pension schemes
Deferred tax asset
Exchange differences on translation of overseas
operations, net of tax
Increase in fair value of hedging derivatives
Transfer to retained earnings
Net profit for the year
Balance at 31 December 2010
Retained
earnings
Merger relief
reserve
Capital
redemption
reserve
Translation
reserve
Share-based
payment tax
reserve
Other
Total other
reserves
838.3
–
(247.5)
–
1.0
(141.8)
87.6
488.8
–
–
(0.5)
(640.4)
385.5
(4.4)
2.8
(0.4)
46.9
(15.9)
–
–
5.6
259.3
679.4
–
488.8
–
–
–
–
–
(488.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31.5
–
–
–
–
–
–
–
–
–
–
–
31.5
–
–
–
–
–
–
–
–
–
31.5
22.8
–
–
–
–
–
–
–
(5.0)
11.5
–
–
29.3
–
–
–
–
–
33.9
(3.6)
–
–
59.6
5.6
–
–
–
–
–
–
–
–
–
–
–
5.6
–
–
–
–
–
–
–
(5.6)
–
–
4.8
–
–
5.5
–
–
–
–
–
–
–
–
10.3
–
–
–
–
–
–
–
–
–
10.3
64.7
–
–
5.5
–
–
–
–
(5.0)
11.5
–
–
76.7
–
–
–
–
–
33.9
(3.6)
(5.6)
–
101.4
Merger relief reserve
In 2009 in accordance with Section 612 of the Companies Act 2006 the £488.8 million premium on ordinary shares issued as part of the placing and open offer in June
2009 was initially recorded within the merger relief reserve, and subsequently transferred to the retained earnings.
Other reserves
Capital redemption reserve
The capital redemption reserve arose on the historical redemption of parent Company shares, and is not distributable.
Translation reserve
The translation reserve consists of exchange differences arising on the translation of overseas operations. It also includes changes in fair values of hedging derivatives
where such instruments are designated and effective as hedges of investment in overseas operations.
Share-based payment tax reserve
As explained in the statement of accounting policies, an expense is recorded in the Consolidated Income Statement over the period from the grant date to the vesting date
of share options granted to employees. As there is a temporary difference between the accounting and tax bases, a deferred tax asset is recorded. The deferred tax asset
arising is calculated by comparing the estimated amount of tax deduction to be obtained in the future (based on the Company’s share price at the balance sheet date)
with the cumulative amount of the expense recorded in the Consolidated Income Statement. If the amount of estimated future tax deduction exceeds the cumulative
amount of the remuneration expense at the statutory tax rate, the excess is recorded directly in equity, in this share-based payment tax reserve. As the Group had
previously written off all its deferred tax assets through the Consolidated Income Statement in prior years, it was considered appropriate to transfer the remaining reserve of
£5.6 million to retained earnings.
Other reserve
As detailed in Note 7, the Group issued 57.8 million of warrants with a fair value of £5.5 million. The full cost of the warrants was recognised in the Other reserve on
their issuance.
88
Taylor Wimpey plc Annual Report & Accounts 2010
26. Own shares
£ million
Balance at 1 January 2009
Cancellation of treasury shares
Disposed of on exercise of options
Balance at 31 December 2009
Disposed of on exercise of options
Balance at 31 December 2010
Financial Statements
275.7
(245.9)
(24.8)
5.0
(4.4)
0.6
As part of the equity raise process in June 2009, 92.7 million treasury shares held outside of the employee share ownership trusts were cancelled with an associated
charge to retained earnings of £222.8 million. This did not impact distributable reserves.
The own shares reserve represents the cost of shares in Taylor Wimpey plc purchased in the market, those held as treasury shares and held by the Taylor Wimpey plc
Employee Benefit Trust to satisfy options under the Group’s share plans.
During the year, Taylor Wimpey plc purchased none of its own shares (2009: nil).
31.5
29.3
5.6
10.3
76.7
These comprise ordinary shares of the Company:
Shares held in trust for bonus, option and performance award plans
2010
Number
2009
Number
1.5m
1.5m
3.3m
3.3m
Employee Share Ownership Trusts (‘ESOTs’) are used to hold the Company’s shares (‘shares’) which are either acquired on the market or transferred out of the
Company’s holding of shares in Treasury. These shares are used to meet the valid exercise and/or vesting of conditional awards (under the deferred bonus plan and
performance share plan) and options (under the Savings-Related, Executive Share Option, George Wimpey LTIP and Executive Bonus Plans) over shares, and the
matching award of shares under the Share Purchase Plan. During the year, nil (2009: nil) shares were transferred out of the Company’s Treasury holding to the ESOTs for
this purpose.
The ESOTs’ entire holding of shares at 31 December 2010, aggregating 1.5 million shares (2009: 3.3 million), was covered by outstanding options and conditional awards
over shares at that date.
Notes to the Consolidated Financial Statements continued
25. Reserves
£ million
Balance at 1 January 2009
New share capital subscribed
Cancellation and disposal of treasury shares
Issuance of equity instruments
Share-based payment credit
Actuarial loss as defined benefit pension schemes
Deferred tax asset recognised
Transfer to retained earnings
Exchange differences on translation of overseas
operations, net of tax
Increase in fair value of hedging derivatives
Other financing costs
Net loss for the year
Balance at 31 December 2009
Cancellation and disposal of treasury shares
Share-based payment credit
Cash cost of satisfying share options
Actuarial benefit as defined benefit pension schemes
Deferred tax asset
Exchange differences on translation of overseas
operations, net of tax
Increase in fair value of hedging derivatives
Retained
earnings
838.3
(247.5)
1.0
(141.8)
87.6
488.8
–
–
–
–
(0.5)
(640.4)
385.5
(4.4)
2.8
(0.4)
46.9
(15.9)
–
–
5.6
259.3
679.4
(488.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Merger relief
redemption
Translation
Capital
reserve
31.5
Share-based
payment tax
reserve
5.6
reserve
22.8
reserve
488.8
Other
4.8
Total other
reserves
64.7
5.5
5.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5.0)
11.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5.0)
11.5
33.9
(3.6)
(5.6)
–
33.9
(3.6)
(5.6)
31.5
59.6
10.3
101.4
Transfer to retained earnings
Net profit for the year
Balance at 31 December 2010
Merger relief reserve
Other reserves
Capital redemption reserve
Translation reserve
Share-based payment tax reserve
£5.6 million to retained earnings.
Other reserve
their issuance.
In 2009 in accordance with Section 612 of the Companies Act 2006 the £488.8 million premium on ordinary shares issued as part of the placing and open offer in June
2009 was initially recorded within the merger relief reserve, and subsequently transferred to the retained earnings.
The capital redemption reserve arose on the historical redemption of parent Company shares, and is not distributable.
The translation reserve consists of exchange differences arising on the translation of overseas operations. It also includes changes in fair values of hedging derivatives
where such instruments are designated and effective as hedges of investment in overseas operations.
As explained in the statement of accounting policies, an expense is recorded in the Consolidated Income Statement over the period from the grant date to the vesting date
of share options granted to employees. As there is a temporary difference between the accounting and tax bases, a deferred tax asset is recorded. The deferred tax asset
arising is calculated by comparing the estimated amount of tax deduction to be obtained in the future (based on the Company’s share price at the balance sheet date)
with the cumulative amount of the expense recorded in the Consolidated Income Statement. If the amount of estimated future tax deduction exceeds the cumulative
amount of the remuneration expense at the statutory tax rate, the excess is recorded directly in equity, in this share-based payment tax reserve. As the Group had
previously written off all its deferred tax assets through the Consolidated Income Statement in prior years, it was considered appropriate to transfer the remaining reserve of
As detailed in Note 7, the Group issued 57.8 million of warrants with a fair value of £5.5 million. The full cost of the warrants was recognised in the Other reserve on
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89
Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Notes to the Consolidated Financial Statements continued
27. Notes to the cash flow statement
£ million
Profit/(loss) on ordinary activities before finance costs
Non-cash exceptional items:
Impairment of fixed assets
Inventories write downs
Adjustments for:
Depreciation of plant and equipment
Pensions curtailment
Share-based payment charge
Loss on disposal of property and plant
Decrease in provisions
Operating cash flows before movements in working capital
Decrease in inventories
(Increase)/decrease in receivables
Increase/(decrease) in payables
Pension contributions in excess of charge
Cash generated by operations
Income taxes received
Interest paid
Net cash from operating activities
2010
121.2
–
24.8
4.3
(12.6)
2.8
–
(10.4)
130.1
168.8
(42.5)
91.9
(119.1)
229.2
25.7
(167.0)
87.9
2009
(543.0)
0.5
527.0
4.2
–
1.0
0.2
(3.1)
(13.2)
735.0
25.4
(432.6)
(44.7)
269.9
109.1
(172.7)
206.3
Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short term highly liquid
investments with an original maturity of three months or less.
Movement in net debt
£ million
Balance 1 January 2009
Cashflow
Business disposals*
Foreign exchange
Balance 31 December 2009
Cashflow
Foreign exchange
Balance 31 December 2010
Cash and cash
equivalents
Overdrafts, banks
and other loans
Debenture loans
Total net debt
752.3
(595.8)
–
(24.4)
132.1
46.5
5.3
183.9
(1,312.5)
1,124.9
4.1
22.4
(161.1)
(433.0)
5.7
(588.4)
(969.1)
200.4
–
46.8
(721.9)
482.4
(10.5)
(250.0)
(1,529.3)
729.5
4.1
44.8
(750.9)
95.9
0.5
(654.5)
*
In April 2009 the Group disposed of its residual construction operations to existing local management for £1. At the point of disposal the business had bank loans of £4.1 million.
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Notes to the Consolidated Financial Statements continued
Financial Statements
27. Notes to the cash flow statement
£ million
Profit/(loss) on ordinary activities before finance costs
Non-cash exceptional items:
Impairment of fixed assets
Inventories write downs
Adjustments for:
Depreciation of plant and equipment
Pensions curtailment
Share-based payment charge
Loss on disposal of property and plant
Decrease in provisions
Decrease in inventories
(Increase)/decrease in receivables
Increase/(decrease) in payables
Pension contributions in excess of charge
Cash generated by operations
Income taxes received
Interest paid
Net cash from operating activities
Operating cash flows before movements in working capital
Movement in net debt
£ million
Balance 1 January 2009
Cashflow
Business disposals*
Foreign exchange
Balance 31 December 2009
Cashflow
Foreign exchange
Balance 31 December 2010
Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short term highly liquid
investments with an original maturity of three months or less.
Cash and cash
equivalents
Overdrafts, banks
and other loans
Debenture loans
Total net debt
752.3
(595.8)
–
(24.4)
132.1
46.5
5.3
183.9
(1,312.5)
1,124.9
4.1
22.4
(161.1)
(433.0)
5.7
(588.4)
(969.1)
200.4
–
46.8
(721.9)
482.4
(10.5)
(250.0)
*
In April 2009 the Group disposed of its residual construction operations to existing local management for £1. At the point of disposal the business had bank loans of £4.1 million.
2010
121.2
–
24.8
4.3
(12.6)
2.8
–
(10.4)
130.1
168.8
(42.5)
91.9
(119.1)
229.2
25.7
(167.0)
87.9
2009
(543.0)
0.5
527.0
4.2
–
1.0
0.2
(3.1)
(13.2)
735.0
25.4
(432.6)
(44.7)
269.9
109.1
(172.7)
206.3
(1,529.3)
729.5
4.1
44.8
(750.9)
95.9
0.5
(654.5)
28. Contingent liabilities and capital commitments
General
The Company and certain subsidiary undertakings have, in the normal course of business, given guarantees and entered into counter-indemnities in respect of bonds
relating to the Group’s own contracts and given guarantees in respect of the Group’s share of certain contractual obligations of joint ventures.
The Group has entered into counter-indemnities in the normal course of business in respect of performance bonds.
Provision is made for the Directors’ best estimate of all known legal claims and all legal actions in progress. The Group takes legal advice as to the likelihood of success
of claims and actions and no provision is made where the Directors consider, based on that advice, that the action is unlikely to succeed or a sufficiently reliable estimate
of the potential obligation cannot be made.
The Group has no material capital commitments as at 31 December 2010 (2009: nil).
29. Operating lease arrangements
The Group as lessee
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
£ million
Within one year
In more than one year but not more than five years
After five years
Operating lease payments principally represent rentals payable by the Group for certain office properties and vehicles.
2010
14.0
33.4
12.2
59.6
2009
7.0
22.4
19.5
48.9
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Financial Statements
Notes to the Consolidated Financial Statements continued
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30. Share-based payments
Equity-settled share option plan
Details of all equity-settled share-based payment arrangements in existence during the year are set out in the paragraphs on ‘Executive share-based reward’ in the
Directors’ Remuneration Report on pages 41 to 50.
Schemes requiring consideration from participants:
Outstanding at beginning of year
Granted during the year
Lapsed during the year
Exercised during the year
Cancellations during the year
Open offer adjustment(a)
Outstanding at the end of the period
Exercisable at the end of the period
2010
2009
Weighted
average
exercise price
(in £)
Weighted
average
exercise price
(in £)
Options
0.52 46,642,667
0.23 19,276,238
(9,140,769)
1.30
(101,330)
0.26
(6,609,462)
0.32
– 19,168,430
0.45 69,235,774
2,181,578
2.38
1.01
0.39
1.32
0.26
0.41
0.51
0.52
2.19
Options
69,235,774
11,532,281
(11,664,539)
(142,825)
(6,338,918)
–
62,621,773
978,975
The weighted average share price at the date of exercise for share options exercised during the period was £0.26 (2009: £0.41). The options outstanding at 31 December
2010 had a range of exercise prices from £0.23 to £3.10 (2009: £0.11 to £3.22) and a weighted average remaining contractual life of 4.0 years (2009: 4.5 years).
Schemes not requiring consideration from participants include the George Wimpey Long Term Incentive Plan and the Performance Share Plans.
Schemes not requiring consideration from participants:
Outstanding at beginning of year
Granted during the year
Lapsed during the year
Exercised during the year
Cancellations during the year
Open offer adjustment(a)
Outstanding at the end of the period
Exercisable at the end of the period
2010
2009
Weighted
average
exercise price
(in £)
Weighted
average
exercise price
(in £)
Options
– 10,732,296
8,756,641
–
(1,425,497)
–
(37,732)
–
(24,351)
–
5,317,219
–
– 23,318,576
198,320
–
–
–
–
–
–
–
–
–
Options
23,318,576
15,295,654
(10,302,383)
(13,849)
(28,925)
–
28,269,073
127,439
(a) On 1 June 2009 the Group undertook the placing and open offer, as detailed in Note 23. As a result all outstanding share-based awards were adjusted by a formula approved by HM Revenue
and Customs and agreed with the Group’s Auditors.
The Conditional awards outstanding at 31 December 2010 had a weighted average remaining contractual life of 1.5 years (2009: 1.7 years).
For share plans with non-market conditions granted during the current and preceding year, the fair value of the awards at grant date was determined using the Binomial
model. The inputs into that model were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividend yield
The weighted average fair value of share awards granted during the year is £0.33 (2009: £0.21).
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the expected term.
2010
2009
£0.29
£0.18
74%
3/5 years
1.5%
0.0%
£0.39
£0.39
57%
3/5 years
3.1%
0.0%
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Taylor Wimpey plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements continued
Financial Statements
Details of all equity-settled share-based payment arrangements in existence during the year are set out in the paragraphs on ‘Executive share-based reward’ in the
30. Share-based payments (continued)
For share awards with market conditions granted during the current year, the fair value of the awards was determined using the Monte Carlo simulation model. The inputs
into that model were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividend yield
2010
2009
£0.31
Nil
98%
3/7 years
1.4%
0.0%
£0.38
nil
70%
3/7 years
2.8%
0.0%
The weighted average fair value of share options granted during the year is £0.23 (2009: £0.27).
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the expected term, however due to the exceptional volatility in this
financial year we have excluded the period between 1 May 2008 and 31 October 2008 as allowed by IFRS 2 Share-based payment. The expected life used in the model
is based on historical exercise patterns.
The Group recognised total expenses of £2.8 million and £1.0 million related to equity-settled share-based payment transactions in 2010 and 2009 respectively.
31. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this Note.
Transactions between the Group and its joint ventures are disclosed below.
Trading transactions
During the year, Group companies’ purchases from joint ventures totalled £22.8 million (2009: £26.1 million). Purchases were based on open market values.
Remuneration of key management personnel
Details of the remuneration of the Directors and Executive Committee, who are the key management personnel of the Group, are contained in the audited part of the
Remuneration Report on pages 48 to 50 and form part of these financial statements.
30. Share-based payments
Equity-settled share option plan
Directors’ Remuneration Report on pages 41 to 50.
Schemes requiring consideration from participants:
Outstanding at beginning of year
Granted during the year
Lapsed during the year
Exercised during the year
Cancellations during the year
Open offer adjustment(a)
Outstanding at the end of the period
Exercisable at the end of the period
Outstanding at beginning of year
Granted during the year
Lapsed during the year
Exercised during the year
Cancellations during the year
Open offer adjustment(a)
Outstanding at the end of the period
Exercisable at the end of the period
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividend yield
The weighted average share price at the date of exercise for share options exercised during the period was £0.26 (2009: £0.41). The options outstanding at 31 December
2010 had a range of exercise prices from £0.23 to £3.10 (2009: £0.11 to £3.22) and a weighted average remaining contractual life of 4.0 years (2009: 4.5 years).
Schemes not requiring consideration from participants include the George Wimpey Long Term Incentive Plan and the Performance Share Plans.
Schemes not requiring consideration from participants:
Options
(in £)
Options
(a) On 1 June 2009 the Group undertook the placing and open offer, as detailed in Note 23. As a result all outstanding share-based awards were adjusted by a formula approved by HM Revenue
and Customs and agreed with the Group’s Auditors.
The Conditional awards outstanding at 31 December 2010 had a weighted average remaining contractual life of 1.5 years (2009: 1.7 years).
For share plans with non-market conditions granted during the current and preceding year, the fair value of the awards at grant date was determined using the Binomial
model. The inputs into that model were as follows:
2010
2009
Weighted
average
exercise price
Weighted
average
exercise price
Options
(in £)
Options
69,235,774
11,532,281
(11,664,539)
(142,825)
(6,338,918)
–
62,621,773
978,975
0.52 46,642,667
0.23 19,276,238
1.30
0.26
0.32
(9,140,769)
(101,330)
(6,609,462)
– 19,168,430
0.45 69,235,774
2.38
2,181,578
2010
2009
Weighted
average
exercise price
Weighted
average
exercise price
(in £)
23,318,576
15,295,654
(10,302,383)
(13,849)
(28,925)
–
28,269,073
127,439
– 10,732,296
8,756,641
(1,425,497)
(37,732)
(24,351)
5,317,219
– 23,318,576
198,320
–
–
–
–
–
–
(in £)
1.01
0.39
1.32
0.26
0.41
0.51
0.52
2.19
–
–
–
–
–
–
–
–
2010
£0.29
£0.18
74%
1.5%
0.0%
2009
£0.39
£0.39
57%
3.1%
0.0%
3/5 years
3/5 years
The weighted average fair value of share awards granted during the year is £0.33 (2009: £0.21).
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the expected term.
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Taylor Wimpey plc Annual Report & Accounts 2010
Matters on which we are required to report by exception
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent Company, or
• 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
returns adequate for our audit have not been received from branches not visited
by us; or
by us; or
• the parent Company financial statements and the part of the Directors’
• the parent Company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the accounting
Remuneration Report to be audited are not in agreement with the accounting
records and returns; or
records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; 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 not received all the information and explanations we require for our audit.
Other matter
Other matter
We have reported separately on the Group financial statements of Taylor Wimpey
We have reported separately on the Group financial statements of Taylor Wimpey
plc for the year ended 31 December 2010.
plc for the year ended 31 December 2010.
Colin Hudson FCA (Senior Statutory Auditor)
Colin Hudson FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditors
Chartered Accountants and Statutory Auditors
London, United Kingdom
London, United Kingdom
2 March 2011
2 March 2011
Company Balance Sheet
Company Balance Sheet
at 31 December 2010
at 31 December 2010
£ million
£ million
Fixed assets
Fixed assets
Investment in Group undertakings
Investment in Group undertakings
Current assets
Current assets
Debtors
Debtors
Cash at bank and in hand
Cash at bank and in hand
Current liabilities
Current liabilities
Bank loans and overdrafts
Bank loans and overdrafts
Creditors: amounts falling due within one year
Creditors: amounts falling due within one year
Net current assets
Net current assets
Total assets less current liabilities
Total assets less current liabilities
Creditors: amounts falling due after one year
Creditors: amounts falling due after one year
Provisions
Provisions
Net assets
Net assets
Capital and reserves
Capital and reserves
Called-up share capital
Called-up share capital
Share premium account
Share premium account
Merger relief reserve
Merger relief reserve
Capital redemption reserve
Capital redemption reserve
Translation reserve
Translation reserve
Profit and loss account
Profit and loss account
Own shares
Own shares
Shareholders’ funds
Shareholders’ funds
Financial Statements
Independent Auditor’s Report
Independent Auditor’s Report
to the members of Taylor Wimpey plc
to the members of Taylor Wimpey plc
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We have audited the parent Company financial statements of Taylor Wimpey plc
We have audited the parent Company financial statements of Taylor Wimpey plc
for the year ended 31 December 2010 which comprise the Company Balance
for the year ended 31 December 2010 which comprise the Company Balance
Sheet, and the related Notes 1 to 19. The financial reporting framework that has
Sheet, and the related Notes 1 to 19. The financial reporting framework that has
been applied in their preparation is applicable law and United Kingdom Accounting
been applied in their preparation is applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting Practice).
Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance
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
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
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
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
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
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.
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
Respective responsibilities of Directors and auditors
As explained more fully in the Directors’ Responsibilities Statement, the Directors
As explained more fully in the Directors’ Responsibilities Statement, the Directors
are responsible for the preparation of the parent Company financial statements
are responsible for the preparation of the parent Company financial statements
and for being satisfied that they give a true and fair view. Our responsibility is to
and for being satisfied that they give a true and fair view. Our responsibility is to
audit and express an opinion on the parent Company financial statements in
audit and express an opinion on the parent Company financial statements in
accordance with applicable law and International Standards on Auditing (UK and
accordance with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing Practices Board’s
Ireland). Those standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
Ethical Standards for Auditors.
Scope of the audit of the financial statements
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or error.
statements are free from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting policies are appropriate to
This includes an assessment of: whether the accounting policies are appropriate to
the parent Company’s circumstances and have been consistently applied and
the parent Company’s circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting estimates
adequately disclosed; the reasonableness of significant accounting estimates
made by the Directors; and the overall presentation of the financial statements.
made by the Directors; and the overall presentation of the financial statements.
Opinion on financial statements
Opinion on financial statements
In our opinion the parent Company financial statements:
In our opinion the parent Company financial statements:
• give a true and fair view of the state of the parent Company’s affairs as at
• give a true and fair view of the state of the parent Company’s affairs as at
31 December 2010;
31 December 2010;
• have been properly prepared in accordance with United Kingdom Generally
• have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies
• have been prepared in accordance with the requirements of the Companies
Act 2006.
Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly
• the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006; and
prepared in accordance with the Companies Act 2006; and
• the information given in the Directors’ Report for the financial year for which
• the information given in the Directors’ Report for the financial year for which
the financial statements are prepared is consistent with the parent Company
the financial statements are prepared is consistent with the parent Company
financial statements.
financial statements.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the parent Company profit and loss account.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the parent Company profit and loss account.
The financial statements were approved by the Board of Directors and authorised for issue on 2 March 2011. They were signed on its behalf by:
The financial statements were approved by the Board of Directors and authorised for issue on 2 March 2011. They were signed on its behalf by:
P Redfern
P Redfern
Director
Director
R Mangold
R Mangold
Director
Director
Financial Statements
Note
Note
2010
2010
2009
2009
4
4
5
5
6
6
7
7
9
9
10
10
11
11
12
12
13
13
14
14
15
15
18
18
1,789.0
1,789.0
1,789.0
1,789.0
2,482.3
2,482.3
66.7
66.7
2,549.0
2,549.0
–
–
(1,694.7)
(1,694.7)
(1,694.7)
(1,694.7)
854.3
854.3
2,643.3
2,643.3
(823.4)
(823.4)
(2.9)
(2.9)
287.7
287.7
753.7
753.7
–
–
31.5
31.5
50.1
50.1
694.5
694.5
(0.5)
(0.5)
1,598.4
1,598.4
1,598.4
1,598.4
2,195.4
2,195.4
–
–
2,195.4
2,195.4
(9.9)
(9.9)
(1,261.9)
(1,261.9)
(1,271.8)
(1,271.8)
923.6
923.6
2,522.0
2,522.0
(646.7)
(646.7)
(2.9)
(2.9)
287.7
287.7
753.6
753.6
–
–
31.5
31.5
36.1
36.1
768.4
768.4
(4.9)
(4.9)
1,817.0
1,817.0
1,872.4
1,872.4
1,817.0
1,817.0
1,872.4
1,872.4
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94
Taylor Wimpey plc Annual Report & Accounts 2010
95
Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Independent Auditor’s Report
Independent Auditor’s Report
to the members of Taylor Wimpey plc
to the members of Taylor Wimpey plc
Company Balance Sheet
Company Balance Sheet
at 31 December 2010
at 31 December 2010
Financial Statements
We have audited the parent Company financial statements of Taylor Wimpey plc
We have audited the parent Company financial statements of Taylor Wimpey plc
Matters on which we are required to report by exception
Matters on which we are required to report by exception
£ million
£ million
Note
Note
2010
2010
2009
2009
for the year ended 31 December 2010 which comprise the Company Balance
for the year ended 31 December 2010 which comprise the Company Balance
We have nothing to report in respect of the following matters where the
We have nothing to report in respect of the following matters where the
Sheet, and the related Notes 1 to 19. The financial reporting framework that has
Sheet, and the related Notes 1 to 19. The financial reporting framework that has
Companies Act 2006 requires us to report to you if, in our opinion:
Companies Act 2006 requires us to report to you if, in our opinion:
been applied in their preparation is applicable law and United Kingdom Accounting
been applied in their preparation is applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting Practice).
Standards (United Kingdom Generally Accepted Accounting Practice).
• adequate accounting records have not been kept by the parent Company, or
• 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
returns adequate for our audit have not been received from branches not visited
This report is made solely to the Company’s members, as a body, in accordance
This report is made solely to the Company’s members, as a body, in accordance
by us; or
by us; or
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
• the parent Company financial statements and the part of the Directors’
• the parent Company financial statements and the part of the Directors’
undertaken so that we might state to the Company’s members those matters we
undertaken so that we might state to the Company’s members those matters we
Remuneration Report to be audited are not in agreement with the accounting
Remuneration Report to be audited are not in agreement with the accounting
are required to state to them in an auditor’s report and for no other purpose. To the
are required to state to them in an auditor’s report and for no other purpose. To the
records and returns; or
records and returns; or
fullest extent permitted by law, we do not accept or assume responsibility to
fullest extent permitted by law, we do not accept or assume responsibility to
• certain disclosures of Directors’ remuneration specified by law are not made; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
anyone other than the Company and the Company’s members as a body, for our
anyone other than the Company and the Company’s members as a body, for our
• we have not received all the information and explanations we require for our audit.
• we have not received all the information and explanations we require for our audit.
audit work, for this report, or for the opinions we have formed.
audit work, for this report, or for the opinions we have formed.
Other matter
Other matter
Respective responsibilities of Directors and auditors
Respective responsibilities of Directors and auditors
We have reported separately on the Group financial statements of Taylor Wimpey
We have reported separately on the Group financial statements of Taylor Wimpey
As explained more fully in the Directors’ Responsibilities Statement, the Directors
As explained more fully in the Directors’ Responsibilities Statement, the Directors
plc for the year ended 31 December 2010.
plc for the year ended 31 December 2010.
are responsible for the preparation of the parent Company financial statements
are responsible for the preparation of the parent Company financial statements
and for being satisfied that they give a true and fair view. Our responsibility is to
and for being satisfied that they give a true and fair view. Our responsibility is to
audit and express an opinion on the parent Company financial statements in
audit and express an opinion on the parent Company financial statements in
accordance with applicable law and International Standards on Auditing (UK and
accordance with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing Practices Board’s
Ireland). Those standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
Ethical Standards for Auditors.
Scope of the audit of the financial statements
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
An audit involves obtaining evidence about the amounts and disclosures in the
London, United Kingdom
London, United Kingdom
financial statements sufficient to give reasonable assurance that the financial
financial statements sufficient to give reasonable assurance that the financial
2 March 2011
2 March 2011
Colin Hudson FCA (Senior Statutory Auditor)
Colin Hudson FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditors
Chartered Accountants and Statutory Auditors
Fixed assets
Fixed assets
Investment in Group undertakings
Investment in Group undertakings
Current assets
Current assets
Debtors
Debtors
Cash at bank and in hand
Cash at bank and in hand
Current liabilities
Current liabilities
Bank loans and overdrafts
Bank loans and overdrafts
Creditors: amounts falling due within one year
Creditors: amounts falling due within one year
Net current assets
Net current assets
Total assets less current liabilities
Total assets less current liabilities
Creditors: amounts falling due after one year
Creditors: amounts falling due after one year
Provisions
Provisions
Net assets
Net assets
Capital and reserves
Capital and reserves
Called-up share capital
Called-up share capital
Share premium account
Share premium account
Merger relief reserve
Merger relief reserve
Capital redemption reserve
Capital redemption reserve
Translation reserve
Translation reserve
Profit and loss account
Profit and loss account
Own shares
Own shares
Shareholders’ funds
Shareholders’ funds
4
4
5
5
6
6
7
7
9
9
10
10
11
11
12
12
13
13
14
14
15
15
18
18
1,789.0
1,789.0
1,789.0
1,789.0
2,482.3
2,482.3
66.7
66.7
2,549.0
2,549.0
–
–
(1,694.7)
(1,694.7)
(1,694.7)
(1,694.7)
854.3
854.3
2,643.3
2,643.3
(823.4)
(823.4)
(2.9)
(2.9)
1,817.0
1,817.0
287.7
287.7
753.7
753.7
–
–
31.5
31.5
50.1
50.1
694.5
694.5
(0.5)
(0.5)
1,817.0
1,817.0
1,598.4
1,598.4
1,598.4
1,598.4
2,195.4
2,195.4
–
–
2,195.4
2,195.4
(9.9)
(9.9)
(1,261.9)
(1,261.9)
(1,271.8)
(1,271.8)
923.6
923.6
2,522.0
2,522.0
(646.7)
(646.7)
(2.9)
(2.9)
1,872.4
1,872.4
287.7
287.7
753.6
753.6
–
–
31.5
31.5
36.1
36.1
768.4
768.4
(4.9)
(4.9)
1,872.4
1,872.4
The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the parent Company profit and loss account.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the parent Company profit and loss account.
The financial statements were approved by the Board of Directors and authorised for issue on 2 March 2011. They were signed on its behalf by:
The financial statements were approved by the Board of Directors and authorised for issue on 2 March 2011. They were signed on its behalf by:
P Redfern
P Redfern
Director
Director
R Mangold
R Mangold
Director
Director
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statements are free from material misstatement, whether caused by fraud or error.
statements are free from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting policies are appropriate to
This includes an assessment of: whether the accounting policies are appropriate to
the parent Company’s circumstances and have been consistently applied and
the parent Company’s circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting estimates
adequately disclosed; the reasonableness of significant accounting estimates
made by the Directors; and the overall presentation of the financial statements.
made by the Directors; and the overall presentation of the financial statements.
Opinion on financial statements
Opinion on financial statements
In our opinion the parent Company financial statements:
In our opinion the parent Company financial statements:
• give a true and fair view of the state of the parent Company’s affairs as at
• give a true and fair view of the state of the parent Company’s affairs as at
31 December 2010;
31 December 2010;
• have been properly prepared in accordance with United Kingdom Generally
• have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies
• have been prepared in accordance with the requirements of the Companies
Opinion on other matters prescribed by the Companies Act 2006
Opinion on other matters prescribed by the Companies Act 2006
Act 2006.
Act 2006.
In our opinion:
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly
• the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006; and
prepared in accordance with the Companies Act 2006; and
• the information given in the Directors’ Report for the financial year for which
• the information given in the Directors’ Report for the financial year for which
the financial statements are prepared is consistent with the parent Company
the financial statements are prepared is consistent with the parent Company
financial statements.
financial statements.
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94
Taylor Wimpey plc Annual Report & Accounts 2010
95
Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Notes to the Company Financial Statements
for the year to 31 December 2010
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1. Significant accounting policies
The following accounting policies have been used consistently, unless otherwise
stated, in dealing with items which are considered material.
and law. Timing differences arise from the inclusion of income and expenditure in
taxation computations in periods different from those in which they are included in
the financial statements.
Basis of preparation
The Company financial statements have been prepared on a going concern basis.
The ability of the Taylor Wimpey plc Group (‘the Group’) to continue as a going
concern is reliant upon the continued availability of external debt financing. The
Group renegotiated and signed its new financing agreements in December 2010.
The Group has continued to meet all interest and other payment obligations on
time from debt resources available to it, and after reviewing forecasts for a period
of at least 12 months from the date of signing these financial statements, the
Directors are satisfied that, whilst the economic and market conditions continue to
be challenging and not without risk, the refinancing package is sufficiently robust
as to adequacy of both facility and covenant headroom to enable the Group to
operate within its terms for at least the next 12 months.
The financial statements have been prepared in accordance with applicable
United Kingdom accounting standards and pronouncements of the Urgent Issues
Task Force under the historical cost convention. As permitted by section 408
of the Companies Act 2006 the Company has not presented its own profit and
loss account.
Under Financial Reporting Standard (FRS) 1, the Company is exempt from the
requirement to prepare a cash flow statement on the grounds that its consolidated
financial statements, which include the Company, are publicly available.
The Company has taken advantage of the exemption contained in FRS 8 ‘Related
Party Disclosures’ and has not reported transactions with fellow Group
undertakings. The Company has also taken advantage of the exemption contained
within FRS 29 ‘Financial Instrument Disclosures’ and has not presented any
disclosures required by that standard, as disclosures that comply with FRS 29 are
included within the Taylor Wimpey plc consolidated financial statements in Note 20
on pages 78 to 82.
The principal accounting policies adopted are set out below.
Investments in Group undertakings
Investments are included in the balance sheet at cost less any provision for
impairment. The Company assesses investments for impairment whenever events
or changes in circumstances indicate that the carrying value of an investment may
not be recoverable. If any such indication of impairment exists, the Company
makes an estimate of the recoverable amount of the investment. If the recoverable
amount is less than the value of the investment, the investment is considered to be
impaired and is written down to its recoverable amount. An impairment loss is
recognised immediately in the profit and loss account; if the impairment is not
considered to be a permanent diminution in value, it may reverse in a future period
to the extent it is no longer considered necessary.
Deferred taxation
Deferred taxation is provided in full on timing differences that result in an obligation
at the balance sheet date to pay more tax, or a right to pay less tax, at a future
date, at rates expected to apply when they crystallise based on current tax rates
Deferred tax assets are recognised to the extent that it is regarded as more
likely than not that they will be recovered. Deferred tax assets and liabilities are
not discounted.
Overseas currencies
Transactions denominated in foreign currencies are recorded in Sterling at actual
rates as of the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies at the year end are reported at the rates of exchange
prevailing at the year end.
Any gain or loss arising from a change in exchange rates subsequent to the date
of the transaction is included as an exchange gain or loss in the profit and loss
account. Unrealised exchange differences on intercompany long term loans and
foreign currency borrowings, to the extent that they hedge the Company’s
investment in overseas investments, are taken to translation reserve.
Derivative financial instruments and hedge accounting
The Company uses foreign currency borrowings and currency swaps to hedge its
investment in overseas operations. Changes in the fair value of derivative financial
instruments that are designated and effective as hedges of investment in overseas
operations are recognised directly in reserves and the ineffective portion, if any,
is recognised immediately in the profit and loss account. The hedged items are
adjusted for changes in exchange rates, with gains or losses from remeasuring the
carrying amount being recognised directly in reserves.
Share-based payments
The Company issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value at the date of
grant. The fair value is expensed on a straight-line basis over the vesting period,
based on the estimate of shares that will eventually vest. The cost of equity-settled
share-based payments granted to employees of subsidiary companies are borne
by the employing company.
Provisions
Provisions are recognised at the Directors’ best estimate when the Company has
a present obligation as a result of a past event and it is probable that the Company
will have to settle the obligation.
Own shares
The cost of the Company’s investment in its own shares, which comprise shares
held in treasury by the Company and shares held by employee benefit trusts for
the purpose of funding certain of the Company’s share option plans, is shown as
a reduction in shareholders’ funds.
Dividends paid
Dividends are charged to the Company’s profit and loss reserve in the period of
payment in respect of an interim dividend, and in the period in which shareholders’
approval is obtained in respect of the Company’s final dividend.
96
Taylor Wimpey plc Annual Report & Accounts 2010
Notes to the Company Financial Statements
for the year to 31 December 2010
The following accounting policies have been used consistently, unless otherwise
taxation computations in periods different from those in which they are included in
stated, in dealing with items which are considered material.
the financial statements.
Basis of preparation
Deferred tax assets are recognised to the extent that it is regarded as more
The Company financial statements have been prepared on a going concern basis.
likely than not that they will be recovered. Deferred tax assets and liabilities are
The ability of the Taylor Wimpey plc Group (‘the Group’) to continue as a going
not discounted.
concern is reliant upon the continued availability of external debt financing. The
Group renegotiated and signed its new financing agreements in December 2010.
The Group has continued to meet all interest and other payment obligations on
time from debt resources available to it, and after reviewing forecasts for a period
of at least 12 months from the date of signing these financial statements, the
Directors are satisfied that, whilst the economic and market conditions continue to
Overseas currencies
Transactions denominated in foreign currencies are recorded in Sterling at actual
rates as of the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies at the year end are reported at the rates of exchange
prevailing at the year end.
be challenging and not without risk, the refinancing package is sufficiently robust
Any gain or loss arising from a change in exchange rates subsequent to the date
as to adequacy of both facility and covenant headroom to enable the Group to
of the transaction is included as an exchange gain or loss in the profit and loss
operate within its terms for at least the next 12 months.
account. Unrealised exchange differences on intercompany long term loans and
The financial statements have been prepared in accordance with applicable
United Kingdom accounting standards and pronouncements of the Urgent Issues
foreign currency borrowings, to the extent that they hedge the Company’s
investment in overseas investments, are taken to translation reserve.
Task Force under the historical cost convention. As permitted by section 408
Derivative financial instruments and hedge accounting
of the Companies Act 2006 the Company has not presented its own profit and
The Company uses foreign currency borrowings and currency swaps to hedge its
loss account.
Under Financial Reporting Standard (FRS) 1, the Company is exempt from the
requirement to prepare a cash flow statement on the grounds that its consolidated
financial statements, which include the Company, are publicly available.
investment in overseas operations. Changes in the fair value of derivative financial
instruments that are designated and effective as hedges of investment in overseas
operations are recognised directly in reserves and the ineffective portion, if any,
is recognised immediately in the profit and loss account. The hedged items are
adjusted for changes in exchange rates, with gains or losses from remeasuring the
The Company has taken advantage of the exemption contained in FRS 8 ‘Related
carrying amount being recognised directly in reserves.
Party Disclosures’ and has not reported transactions with fellow Group
undertakings. The Company has also taken advantage of the exemption contained
within FRS 29 ‘Financial Instrument Disclosures’ and has not presented any
disclosures required by that standard, as disclosures that comply with FRS 29 are
included within the Taylor Wimpey plc consolidated financial statements in Note 20
on pages 78 to 82.
Share-based payments
The Company issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value at the date of
grant. The fair value is expensed on a straight-line basis over the vesting period,
based on the estimate of shares that will eventually vest. The cost of equity-settled
share-based payments granted to employees of subsidiary companies are borne
The principal accounting policies adopted are set out below.
by the employing company.
Investments in Group undertakings
Provisions
Investments are included in the balance sheet at cost less any provision for
Provisions are recognised at the Directors’ best estimate when the Company has
impairment. The Company assesses investments for impairment whenever events
a present obligation as a result of a past event and it is probable that the Company
or changes in circumstances indicate that the carrying value of an investment may
will have to settle the obligation.
not be recoverable. If any such indication of impairment exists, the Company
makes an estimate of the recoverable amount of the investment. If the recoverable
amount is less than the value of the investment, the investment is considered to be
impaired and is written down to its recoverable amount. An impairment loss is
recognised immediately in the profit and loss account; if the impairment is not
considered to be a permanent diminution in value, it may reverse in a future period
Own shares
The cost of the Company’s investment in its own shares, which comprise shares
held in treasury by the Company and shares held by employee benefit trusts for
the purpose of funding certain of the Company’s share option plans, is shown as
a reduction in shareholders’ funds.
to the extent it is no longer considered necessary.
Dividends paid
Deferred taxation
Deferred taxation is provided in full on timing differences that result in an obligation
at the balance sheet date to pay more tax, or a right to pay less tax, at a future
date, at rates expected to apply when they crystallise based on current tax rates
Dividends are charged to the Company’s profit and loss reserve in the period of
payment in respect of an interim dividend, and in the period in which shareholders’
approval is obtained in respect of the Company’s final dividend.
1. Significant accounting policies
and law. Timing differences arise from the inclusion of income and expenditure in
2. Particulars of employees
Directors
Financial Statements
2010
No.
3
2009
No.
2
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The Executive Directors received all of their remuneration, as disclosed in the Directors’ Remuneration Report on pages 41 to 50, from Taylor Wimpey UK Limited and
Taylor Morrison Incorporated. However, it is not practicable to allocate such costs between their services as Executives of Taylor Wimpey UK Limited, Taylor Morrison
Incorporated and their services as Directors of Taylor Wimpey plc and other Group companies. The fees of the Chairman and the Non Executive Directors, which are
wholly attributable to the Company, are disclosed on page 48 of the Directors’ Remuneration Report. The Company was recharged costs of £8.4m (2009: £8.0m) in
respect of staff costs for Directors and employees of subsidiary companies who provided services to Taylor Wimpey plc during the year, which includes amounts in
respect of employer contributions to both defined contribution and defined benefit pension schemes. Information in respect of the Group’s defined benefit pension
schemes is provided in Note 21, to the Taylor Wimpey plc consolidated financial statements. Contributions in respect of the Defined Contribution Scheme for Directors
can be found in the Directors’ Remuneration Report on page 48. There were no outstanding contributions at the year end.
3. Auditors’ remuneration
£ million
External audit services
Other services
Tax services
Corporate finance services
A description of other services is included in Note 5 on page 69 to the Group financial statements.
4. Investments in Group undertakings
£ million
Cost
31 December 2009
Changes in exchange rates
Additions
Disposals
31 December 2010
Provision for impairment
31 December 2009
Charge for the year
Disposals
31 December 2010
Carrying amount
31 December 2010
31 December 2009
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0.2
0.5
0.4
0.4
2010
0.2
2.0
0.4
–
Shares
Loans
Total
4,581.8
–
306.3
–
4,888.1
3,364.6
–
–
3,364.6
1,523.5
1,217.2
453.3
14.0
–
(129.7)
337.6
72.1
–
–
72.1
5,035.1
14.0
306.3
(129.7)
5,225.7
3,436.7
–
–
3,436.7
265.5
381.2
1,789.0
1,598.4
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All of the above investments are unlisted and particulars of principal subsidiary undertakings are listed on page 102, which forms part of these financial statements.
97
Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Notes to the Company Financial Statements continued
5. Debtors
£ million
Receivable within one year
Due from Group undertakings
Other debtors
Corporation tax debtor
Receivable after one year
Currency and interest rate derivatives
6. Creditors: amounts falling due within one year
£ million
Due to Group undertakings
Other creditors
Currency and interest rate derivatives
Corporation tax creditor
7. Creditors: amounts falling due after one year
£ million
Debenture loans
Bank loans
Other loans
Bank and other loans are repayable as follows:
In more than two years but less than five years
Other loans comprise of a £100 million bi-lateral variable rate fixed loan with an investment fund.
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2009
2,461.4
3.7
11.0
6.2
2,482.3
2010
1,623.2
14.2
41.9
15.4
1,694.7
2010
250.0
473.4
100.0
823.4
573.4
573.4
2,182.2
0.1
2.0
11.1
2,195.4
2009
1,203.9
3.6
26.7
27.7
1,261.9
2009
498.3
148.4
–
646.7
148.4
148.4
98
Taylor Wimpey plc Annual Report & Accounts 2010
5. Debtors
£ million
Receivable within one year
Due from Group undertakings
Other debtors
Corporation tax debtor
Receivable after one year
Currency and interest rate derivatives
6. Creditors: amounts falling due within one year
£ million
Due to Group undertakings
Other creditors
Currency and interest rate derivatives
Corporation tax creditor
7. Creditors: amounts falling due after one year
£ million
Debenture loans
Bank loans
Other loans
Bank and other loans are repayable as follows:
In more than two years but less than five years
Other loans comprise of a £100 million bi-lateral variable rate fixed loan with an investment fund.
2,461.4
2,182.2
3.7
11.0
0.1
2.0
6.2
2,482.3
11.1
2,195.4
2010
2009
1,623.2
1,203.9
14.2
41.9
15.4
3.6
26.7
27.7
1,694.7
1,261.9
2010
250.0
473.4
100.0
823.4
573.4
573.4
2009
498.3
148.4
–
646.7
148.4
148.4
Notes to the Company Financial Statements continued
Financial Statements
2010
2009
£ million
2010
2009
8. Debenture loans
Unsecured
10.375% £250m senior notes 2015
6.625% £250m guaranteed bonds 2012(a)
5.53% US$75m notes 2011(a)
6.03% US$175m notes 2014(a)
6.375% £200m bonds 2019(a)
Repayable
In more than five years
In more than one year but less than five years
Within one year or on demand
250.0
–
–
–
–
250.0
–
250.0
–
250.0
–
207.6
38.0
90.1
162.6
498.3
–
498.3
–
498.3
(a) The descriptions presented above refer to the titles of the debenture loan issues at their original issue date. As a result of negotiations concluding in April 2009 the terms of the above
debentures were changed such that they were either extended to mature on 3 July 2012 or capable of being repaid early on the same date.
The Group issued £250.0 million bonds at a coupon note of 10.375% on 14 December 2010 and repaid the outstanding debentures on the same date.
9. Share capital
£ million
Authorised:
22,200,819,176 (2009: 22,200,819,176) ordinary shares of 1p each
1,158,299,201 (2009: 1,158,299,201) deferred ordinary shares of 24p each
Issued and fully paid:
31 December 2009
Share warrants exercised
31 December 2010
2010
2009
222.0
278.0
500.0
222.0
278.0
500.0
Number of shares
£ million
3,196,865,608
318,092
3,197,183,700
287.7
–
287.7
The Company issued 2,131.1m new ordinary shares on 1 June 2009, as part of a placing and open offer. Prior to the placing and open offer issue the 25p ordinary shares
of the Company were split into 1,158.3 million ordinary shares of 1p and 1,158.3 million deferred shares of 24p each. The unissued 25p share capital was split into 1p
shares. The new share issue was executed such that the amounts received above nominal share capital, net of issue costs, were recorded as part of the merger relief
reserve and then subsequently transferred to distributable reserves.
During the year, options were exercised on 156,674 (2009: 139,062) ordinary shares of which nil (2009: nil) were new issues with the balance coming from Treasury/ESOT at
varying prices from nil pence to 25.5p and shares were issued for a total consideration of nil (2009: nil). Under the Group’s senior executives’ share option scheme and
executive share option plan, employees held options at 31 December 2010 to purchase 23,606,831 shares (2009: 32,840,430) at prices between 39.3p and 171.6p per share
exercisable up to 7 August 2019. Under the Group’s savings-related share option schemes, employees held options at 31 December 2010 to purchase 37,487,029 shares
(2009: 33,719,220) at prices between 22.9p and 189.2p per share exercisable up to 5 April 2016. Under the Group’s cash bonus deferral plan and executive bonus plan,
employees held options at 31 December 2010 in respect of nil shares (2009: 96,927) at nil pence per share. Under the Group’s performance share plan employees held
conditional awards at 31 December 2010 in respect of 22,640,446 shares (2009: 15,744,982) at nil pence per share exercisable up to 6 August 2013. Under the Group’s share
purchase plan employees held conditional awards at 31 December 2010 in respect of 5,628,627 shares (2009: 6,521,631) at nil pence per share. The former George Wimpey
plans were acquired as part of the merger in 2007. Under the George Wimpey Sharesave Scheme, employees held options at 31 December 2010 to purchase 200,572 shares
(2009: 512,708) at prices between 160.1p and 188.0p per share exercisable up to 31 May 2012. Under the George Wimpey Executive Option Scheme, employees held
awards at 31 December 2010 in respect of 1,327,341 shares (2009: 2,163,415) at prices between 144.3p and 310.0p per share exercisable up to 2 April 2017. Under the
George Wimpey Long Term Incentive Plan, employees held awards at 31 December 2010 in respect of nil shares (2009: 955,036) at nil pence per share.
Under the Override Agreement signed in April 2009, the Company agreed to issue 57.8 million warrants giving the holders the right to subscribe to an equivalent number
of ordinary shares in Taylor Wimpey plc at par value. The warrants may be exercised at par by the holder within five years of the date of issue and as at 31 December
2010 484,878 warrants had been exercised.
99
Taylor Wimpey plc Annual Report & Accounts 2010
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Financial Statements
Notes to the Company Financial Statements continued
Notes to the Company Financial Statements continued
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10. Share premium
10. Share premium
£ million
£ million
1 January
1 January
Share warrants exercised
Share warrants exercised
31 December
31 December
11. Merger relief reserve
11. Merger relief reserve
£ million
£ million
1 January
1 January
New share capital subscribed
New share capital subscribed
Transfer to profit and loss account
Transfer to profit and loss account
31 December
31 December
15. Own shares
£ million
Own shares
These comprise ordinary shares of the Company:
Treasury shares
Shares held in trust for bonus, options and performance award plans
2010
2010
753.6
753.6
0.1
0.1
753.7
753.7
2010
2010
–
–
–
–
–
–
–
–
2009
2009
753.6
753.6
–
–
753.6
753.6
2009
2009
–
–
488.8
488.8
(488.8)
(488.8)
–
–
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In accordance with section 612 of the Companies Act 2006, the £488.8 million premium on ordinary shares issued as part of the placing and open offer in June 2009 was
In accordance with section 612 of the Companies Act 2006, the £488.8 million premium on ordinary shares issued as part of the placing and open offer in June 2009 was
initially recorded within the merger relief reserve and subsequently transferred to the profit and loss account.
initially recorded within the merger relief reserve and subsequently transferred to the profit and loss account.
12. Capital redemption reserve
12. Capital redemption reserve
£ million
£ million
31 December 2010 and 31 December 2009
31 December 2010 and 31 December 2009
13. Translation reserve
13. Translation reserve
£ million
£ million
1 January
1 January
Transfer from profit and loss account
Transfer from profit and loss account
31 December
31 December
14. Profit and loss account
14. Profit and loss account
£ million
£ million
1 January
1 January
(Loss)/profit for the financial year
(Loss)/profit for the financial year
Transfer to translation reserve
Transfer to translation reserve
Transfer from merger relief reserve
Transfer from merger relief reserve
Cancellation and utilisation of own shares
Cancellation and utilisation of own shares
Other financing costs
Other financing costs
Issue of equity instruments
Issue of equity instruments
31 December
31 December
31.5
31.5
2009
2009
89.6
89.6
(53.5)
(53.5)
36.1
36.1
2009
2009
463.2
463.2
5.4
5.4
53.5
53.5
488.8
488.8
(247.5)
(247.5)
(0.5)
(0.5)
5.5
5.5
768.4
768.4
2010
2010
36.1
36.1
14.0
14.0
50.1
50.1
2010
2010
768.4
768.4
(55.5)
(55.5)
(14.0)
(14.0)
–
–
(4.4)
(4.4)
–
–
–
–
694.5
694.5
As permitted by section 408 of the Companies Act 2006, Taylor Wimpey plc has not presented its own profit and loss account. The loss of the Company for the financial
As permitted by section 408 of the Companies Act 2006, Taylor Wimpey plc has not presented its own profit and loss account. The loss of the Company for the financial
year was £55.5 million (2009: profit of £5.4 million).
year was £55.5 million (2009: profit of £5.4 million).
Included in the Company profit and loss account is £332.1 million (2009: £269.8 million) which is not distributable.
Included in the Company profit and loss account is £332.1 million (2009: £269.8 million) which is not distributable.
Financial Statements
2010
0.5
2009
4.9
Number
Number
–
1.5m
–
3.3m
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The market value of the shares at 31 December 2010 was £0.5 million (2009: £1.3 million) and their nominal value was £0.01 million (2009: £0.03 million).
Dividends on these shares have been waived except for 0.01p per share in respect of the shares held in trust.
Employee Share Ownership Trusts (‘ESOTs’) are used to hold the Company’s shares (‘shares’) which are either acquired on the market or transferred out of
the Company’s holding of shares in Treasury. These shares are used to meet the valid exercise and/or vesting of conditional awards (under the deferred bonus plan and
performance share plan) and awards (under the Savings-Related, Executive Share Option, George Wimpey LTIP and Executive Bonus Plans) over shares, and the
matching award of shares under the Share Purchase Plan. During 2010, no shares (2009: nil) were transferred out of the Company’s Treasury holding to the ESOTs for
The ESOTs’ entire holding of shares at 31 December 2010, aggregating 1.5 million shares (2009: 3.3 million), was covered by outstanding options and conditional awards
this purpose.
over shares at that date.
16. Share-based payments
transactions in the current or preceding year.
17. Contingent liabilities
Details of share awards granted by the Company to employees of subsidiaries, and that remain outstanding at the year end over the Company’s shares, are set out in
Note 30 to the Taylor Wimpey plc consolidated financial statements. The Company did not recognise any expense related to equity-settled share-based payment
The Company has, in the normal course of business, given guarantees and entered into counter-indemnities in respect of bonds relating to the Group’s own contracts.
Provision is made for the Directors’ best estimate of known legal claims and legal actions in progress. The Group takes legal advice as to the likelihood of success of
claims and actions and no provision is made where the Directors consider, based on that advice, that the action is unlikely to succeed or a sufficiently reliable estimate of
the potential obligation cannot be made.
In 2008, the Company issued a guarantee in respect of the Taylor Woodrow Group Pension and Life Assurance Fund, a defined benefit pension scheme in which a
number of its subsidiary companies participate, and which had a deficit under IAS 19 of £172.6 million at 31 December 2010 (2009: £199.0 million). The guarantee
commits the Company to ensure that the participating subsidiaries make deficit repair contributions in accordance with a schedule agreed with the Trustees during the
year of £22 million per annum for 10 years.
18. Reconciliation of movement in shareholders’ funds
£ million
Opening shareholders’ funds
(Loss)/profit for the financial year
New share capital subscribed
Issue of equity instruments
Other financing costs
Closing shareholders’ funds
19. Dividend
The Company does not propose to pay a final dividend in respect of the 2010 financial year (2009: nil).
2010
2009
1,872.4
1,351.9
(55.5)
0.1
–
–
5.4
510.1
5.5
(0.5)
1,817.0
1,872.4
100 Taylor Wimpey plc Annual Report & Accounts 2010
101 Taylor Wimpey plc Annual Report & Accounts 2010
In accordance with section 612 of the Companies Act 2006, the £488.8 million premium on ordinary shares issued as part of the placing and open offer in June 2009 was
In accordance with section 612 of the Companies Act 2006, the £488.8 million premium on ordinary shares issued as part of the placing and open offer in June 2009 was
initially recorded within the merger relief reserve and subsequently transferred to the profit and loss account.
initially recorded within the merger relief reserve and subsequently transferred to the profit and loss account.
Notes to the Company Financial Statements continued
Notes to the Company Financial Statements continued
10. Share premium
10. Share premium
£ million
£ million
1 January
1 January
Share warrants exercised
Share warrants exercised
31 December
31 December
11. Merger relief reserve
11. Merger relief reserve
£ million
£ million
1 January
1 January
New share capital subscribed
New share capital subscribed
Transfer to profit and loss account
Transfer to profit and loss account
31 December
31 December
12. Capital redemption reserve
12. Capital redemption reserve
£ million
£ million
31 December 2010 and 31 December 2009
31 December 2010 and 31 December 2009
13. Translation reserve
13. Translation reserve
Transfer from profit and loss account
Transfer from profit and loss account
14. Profit and loss account
14. Profit and loss account
£ million
£ million
1 January
1 January
31 December
31 December
£ million
£ million
1 January
1 January
(Loss)/profit for the financial year
(Loss)/profit for the financial year
Transfer to translation reserve
Transfer to translation reserve
Transfer from merger relief reserve
Transfer from merger relief reserve
Cancellation and utilisation of own shares
Cancellation and utilisation of own shares
Other financing costs
Other financing costs
Issue of equity instruments
Issue of equity instruments
31 December
31 December
year was £55.5 million (2009: profit of £5.4 million).
year was £55.5 million (2009: profit of £5.4 million).
As permitted by section 408 of the Companies Act 2006, Taylor Wimpey plc has not presented its own profit and loss account. The loss of the Company for the financial
As permitted by section 408 of the Companies Act 2006, Taylor Wimpey plc has not presented its own profit and loss account. The loss of the Company for the financial
Included in the Company profit and loss account is £332.1 million (2009: £269.8 million) which is not distributable.
Included in the Company profit and loss account is £332.1 million (2009: £269.8 million) which is not distributable.
15. Own shares
£ million
Own shares
2010
2010
2009
2009
These comprise ordinary shares of the Company:
Treasury shares
Shares held in trust for bonus, options and performance award plans
Financial Statements
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0.5
2009
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Number
Number
–
1.5m
–
3.3m
The market value of the shares at 31 December 2010 was £0.5 million (2009: £1.3 million) and their nominal value was £0.01 million (2009: £0.03 million).
Dividends on these shares have been waived except for 0.01p per share in respect of the shares held in trust.
Employee Share Ownership Trusts (‘ESOTs’) are used to hold the Company’s shares (‘shares’) which are either acquired on the market or transferred out of
the Company’s holding of shares in Treasury. These shares are used to meet the valid exercise and/or vesting of conditional awards (under the deferred bonus plan and
performance share plan) and awards (under the Savings-Related, Executive Share Option, George Wimpey LTIP and Executive Bonus Plans) over shares, and the
matching award of shares under the Share Purchase Plan. During 2010, no shares (2009: nil) were transferred out of the Company’s Treasury holding to the ESOTs for
this purpose.
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The ESOTs’ entire holding of shares at 31 December 2010, aggregating 1.5 million shares (2009: 3.3 million), was covered by outstanding options and conditional awards
over shares at that date.
16. Share-based payments
Details of share awards granted by the Company to employees of subsidiaries, and that remain outstanding at the year end over the Company’s shares, are set out in
Note 30 to the Taylor Wimpey plc consolidated financial statements. The Company did not recognise any expense related to equity-settled share-based payment
transactions in the current or preceding year.
17. Contingent liabilities
The Company has, in the normal course of business, given guarantees and entered into counter-indemnities in respect of bonds relating to the Group’s own contracts.
Provision is made for the Directors’ best estimate of known legal claims and legal actions in progress. The Group takes legal advice as to the likelihood of success of
claims and actions and no provision is made where the Directors consider, based on that advice, that the action is unlikely to succeed or a sufficiently reliable estimate of
the potential obligation cannot be made.
In 2008, the Company issued a guarantee in respect of the Taylor Woodrow Group Pension and Life Assurance Fund, a defined benefit pension scheme in which a
number of its subsidiary companies participate, and which had a deficit under IAS 19 of £172.6 million at 31 December 2010 (2009: £199.0 million). The guarantee
commits the Company to ensure that the participating subsidiaries make deficit repair contributions in accordance with a schedule agreed with the Trustees during the
year of £22 million per annum for 10 years.
18. Reconciliation of movement in shareholders’ funds
£ million
Opening shareholders’ funds
(Loss)/profit for the financial year
New share capital subscribed
Issue of equity instruments
Other financing costs
Closing shareholders’ funds
19. Dividend
The Company does not propose to pay a final dividend in respect of the 2010 financial year (2009: nil).
2010
2009
1,872.4
(55.5)
0.1
–
–
1,817.0
1,351.9
5.4
510.1
5.5
(0.5)
1,872.4
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2010
2010
753.6
753.6
0.1
0.1
753.7
753.7
–
–
–
–
–
–
–
–
2010
2010
36.1
36.1
14.0
14.0
50.1
50.1
2010
2010
768.4
768.4
(55.5)
(55.5)
(14.0)
(14.0)
(4.4)
(4.4)
–
–
–
–
–
–
694.5
694.5
2009
2009
753.6
753.6
–
–
753.6
753.6
488.8
488.8
(488.8)
(488.8)
–
–
–
–
31.5
31.5
2009
2009
89.6
89.6
(53.5)
(53.5)
36.1
36.1
2009
2009
463.2
463.2
5.4
5.4
53.5
53.5
488.8
488.8
(247.5)
(247.5)
(0.5)
(0.5)
5.5
5.5
768.4
768.4
101 Taylor Wimpey plc Annual Report & Accounts 2010
Financial Statements
Particulars of Principal Subsidiary Undertakings
Country of incorporation and principal operations
United Kingdom
Canada
Spain
USA
Taylor Wimpey plc interest is 100% in the issued ordinary share capital
of these undertakings included in the consolidated accounts
Taylor Wimpey Holdings Limited
George Wimpey Limited
Taylor Wimpey UK Limited (a)
Taylor Wimpey Developments Limited (a)
Taylor Wimpey 2007 Limited
Taylor Wimpey (No.4) 2005 Limited (a)
Wimpey Overseas Holdings Limited (a)
Taylor Wimpey Holdings of Canada, Corporation
Monarch Corporation (a) (b)
Monarch Development Corporation (a)
Taylor Wimpey de España S.A.U. (a) (c)
Taylor Woodrow Holdings (USA), Inc. (a)
Taylor Morrison Holdings of Arizona, Inc. (a)
Taylor Morrison of Florida, Inc. (a)
Taylor Morrison of Texas, Inc. (a)
Taylor Morrison, Inc. (a)
Taylor Morrison Services, Inc. (a)
(a) Interests held by subsidiary undertakings.
(b) 9.5% non-cumulative, non-voting, redeemable preference shares and 9% non-cumulative, non-voting, redeemable preference shares are additionally held.
(c) 9% cumulative, redeemable preference shares are additionally held.
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102 Taylor Wimpey plc Annual Report & Accounts 2010
Particulars of Principal Subsidiary Undertakings
Five Year Review
Financial Statements
Country of incorporation and principal operations
United Kingdom
Canada
Spain
USA
Taylor Wimpey plc interest is 100% in the issued ordinary share capital
of these undertakings included in the consolidated accounts
Taylor Wimpey Holdings Limited
George Wimpey Limited
Taylor Wimpey UK Limited (a)
Taylor Wimpey Developments Limited (a)
Taylor Wimpey 2007 Limited
Taylor Wimpey (No.4) 2005 Limited (a)
Wimpey Overseas Holdings Limited (a)
Taylor Wimpey Holdings of Canada, Corporation
Monarch Corporation (a) (b)
Monarch Development Corporation (a)
Taylor Wimpey de España S.A.U. (a) (c)
Taylor Woodrow Holdings (USA), Inc. (a)
Taylor Morrison Holdings of Arizona, Inc. (a)
Taylor Morrison of Florida, Inc. (a)
Taylor Morrison of Texas, Inc. (a)
Taylor Morrison, Inc. (a)
Taylor Morrison Services, Inc. (a)
(a) Interests held by subsidiary undertakings.
(b) 9.5% non-cumulative, non-voting, redeemable preference shares and 9% non-cumulative, non-voting, redeemable preference shares are additionally held.
(c) 9% cumulative, redeemable preference shares are additionally held.
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£ million
2010
2009
2008(a)
2007(a)
2006(a)
Income statement
Revenue – continuing
Profit on ordinary activities before exceptional items, finance costs and tax
Share of results of joint ventures
Exceptional items
Net finance costs, including exceptional finance costs
(Loss)/profit for the financial year
Taxation, including exceptional taxation
Profit for the year from discontinued operations
Profit/(loss) for the financial year
2,603.3
184.2
9.9
(63.0)
(202.4)
(71.3)
330.6
259.3
2,595.6
37.7
5.6
(580.7)
(162.5)
(699.9)
59.3
–
(640.6)
3,467.7
86.3
7.6
(1,884.5)
(179.1)
(1,969.7)
76.6
53.1
(1,840.0)
4,142.8
435.5
23.4
(379.7)
(112.8)
(33.6)
(173.4)
10.3
(196.7)
3,572.1
447.7
22.1
–
(64.2)
405.6
(115.0)
–
290.6
Profit/(loss) for the financial year before tax and exceptional items
75.1
(96.1)
(74.7)
346.1
405.6
Balance sheet
Other fixed assets
Interests in joint ventures
Non-current loans and receivables
Deferred tax asset
Non-current assets
Inventories
Other current assets (excluding cash and debt)
Trade and other payables
Other current liabilities (excluding cash and debt)
Net-current assets (excluding cash and debt)
Trade and other payables
Retirement obligations
Provisions
Non-current creditors (excluding debt) and provisions
Capital employed
Goodwill and intangibles
Net debt
Net Assets
Statistics
Adjusted earnings/(loss) per share – total Group(b)
Tangible net worth per share(b)
Number of shares in issue at year end (millions)(b)
Return on capital employed(c)
Operating margin
Net gearing ratio(d)
UK short term landbank (units)(e)
NA short term landbank (units)(e)
ASP UK £’000
ASP NA £’000
Completions UK (units)
Completions NA (units)
Total inventory/net debt
7.6
49.7
96.5
372.4
526.2
3,436.2
175.5
(902.9)
(209.5)
2,499.3
(257.1)
(250.5)
(43.7)
(551.3)
2,474.2
3.4
(654.5)
1,823.1
0.6p
56.9p
3,197.2
8.2%
7.5%
35.9%
63,566
30,262
171
200
9,962
4,140
5.3
8.2
51.9
65.0
119.6
244.7
3,603.3
191.5
(760.0)
(290.4)
2,744.4
(278.6)
(409.3)
(51.8)
(739.7)
2,249.4
2.4
(750.9)
1,500.9
(4.3p)
46.9p
3,196.9
1.5%
1.7%
50.0%
66,089
29,062
160
171
10,186
4,755
4.8
15.5
67.7
47.9
6.6
137.7
4,890.6
271.7
(1,170.7)
(252.6)
3,739.0
(343.4)
(279.8)
(51.0)
(674.2)
3,202.5
–
(1,529.3)
1,673.2
(7.2p)
119.8p
1,526.0
2.6%
2.6%
91.4%
74,917
29,178
171
175
13,394
5,421
3.2
39.0
59.9
76.4
117.7
293.0
6,017.8
408.1
(1,540.3)
(202.6)
4,683.0
(418.2)
(219.1)
(38.4)
(675.7)
4,300.3
820.3
(1,415.4)
3,705.2
29.5p
249.1p
1,158.3
14.8%
11.1%
38.2%
86,155
40,603
191
182
14,862
5,197
4.3
25.5
56.2
56.0
95.4
233.1
2,946.5
314.6
(926.0)
(74.1)
2,261.0
(123.9)
(208.6)
(27.9)
(360.4)
2,133.7
363.1
(391.3)
2,105.5
50.5p
293.2p
594.2
44.0%
13.2%
18.6%
34,827
31,353
193
233
8,294
4,492
7.5
(a) The results of the construction business which was disposed of on 9 September 2008 are included within profit for the year from discontinued operations for 2008 and 2007, and within
continuing operations for 2006.
(b) 2008 has been restated to reflect the increase in shares related to the open offer as part of the equity raise on 1 June 2009.
(c) Return on capital employed is calculated as profit on ordinary activities before amortisation of brands, exceptional items, finance costs and tax but including share of results of joint ventures,
divided by the average of opening and closing capital employed. In 2008 and 2007 the results of the Construction division, of £2.1 million and £13.4 million respectively, were also included.
(d) Net gearing ratio is net debt divided by net assets.
(e) The total number of plots that we either own or control, with some form of planning consent.
103 Taylor Wimpey plc Annual Report & Accounts 2010
Shareholder Information
Notice of Meeting
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This notice of meeting is important and
requires your immediate attention. If you
are in any doubt as to the action you
should take, you are recommended to seek
your own financial advice immediately from
a stockbroker, solicitor, bank manager,
accountant, or other independent financial
adviser authorised under the Financial
Services and Markets Act 2000.
If you have sold or otherwise transferred
all of your shares in Taylor Wimpey plc (the
‘Company’), please pass this document
together with the accompanying
documents to the purchaser or transferee,
or to the person who arranged the
sale or transfer so they can pass these
documents to the person who now holds
the shares. If you have sold or transferred
part only of your holding of shares in the
Company, please consult the person who
arranged the sale or transfer.
Notice is hereby given of the seventy sixth
Annual General Meeting of the Company
to be held on 21 April 2011 at 11:00 am
at The British Medical Association, BMA
House, Tavistock Square, London, WC1H
9JP for the following purposes:
ORDINARY BUSINESS
Ordinary Resolutions:
1. To receive the Reports of the Directors
and the Auditors and the Financial
Statements for the year ended 31
December 2010.
2. To elect as a Director, Kevin Beeston
who was appointed as a Director of
the Company by the Board since the
last Annual General Meeting.
3. To elect as a Director, Ryan Mangold
who was appointed as a Director of
the Company by the Board since the
last Annual General Meeting.
4. To elect as a Director, Kate Barker
CBE who was appointed as a Director
of the Company by the Board since
the last Annual General Meeting.
5. To re-elect as a Director, Pete Redfern.
6. To re-elect as a Director, Sheryl Palmer.
7. To re-elect as a Director, Baroness
Dean of Thornton-le-Fylde.
8. To re-elect as a Director, Anthony
Reading MBE.
9. To re-elect as a Director, Robert
Rowley.
10. To re-appoint Deloitte LLP as auditors
of the Company, to hold office until the
conclusion of the next general meeting
at which accounts are laid before
the Company.
11. Subject to the passing of resolution
10, to authorise the Audit Committee
to determine the remuneration of the
auditors on behalf of the Board.
12. That the Board be authorised to allot
shares in the Company and to grant
rights to subscribe for or convert any
security into shares in the Company:
(A) up to a nominal amount of
£10,659,853 (such amount to be
reduced by the nominal amount of
any equity securities (as defined in
the Companies Act 2006) allotted
under paragraph (B) below in
excess of £10,659,853); and
(B) comprising equity securities (as
defined in the Companies Act
2006) up to a nominal amount
of £21,319,706 (such amount to
be reduced by any shares and
rights to subscribe for or convert
any security into shares allotted
under paragraph (A) above) in
connection with an offer by way of
a rights issue:
(i) to ordinary shareholders in
proportion (as nearly as may
be practicable) to their existing
holdings; and
(ii) to holders of other equity
securities as required by the rights
of those securities or as the Board
otherwise considers necessary;
and so that the Board may impose
any limits or restrictions and
make any arrangements which it
considers necessary or appropriate
to deal with treasury shares,
fractional entitlements, record
dates, legal, regulatory or practical
problems in, or under the laws of,
any territory or any other matter,
such authorities to apply until the
end of the Annual General Meeting
of the Company in 2012 (or, if earlier,
until the close of business on 20 July
2012) but, in each case, so that the
Company may make offers and enter
into agreements during this period
which would, or might, require shares
to be allotted or rights to subscribe
for or convert securities into shares to
be granted after the authority ends;
and the Board may allot shares or
grant rights to subscribe for or convert
securities into shares under any such
offer or agreement as if the authority
had not ended.
104 Taylor Wimpey plc Annual Report & Accounts 2010
Special Resolutions:
13. That, if resolution 12 is passed, the
Board be given the power to allot
equity securities (as defined in the
Companies Act 2006) for cash under
the authority given by that resolution
and/or to sell ordinary shares held by
the Company as treasury shares for
cash, free of the restriction in section
561 of the Companies Act 2006, such
power to be limited:
(A) to the allotment of equity securities
and sale of treasury shares for
cash in connection with an offer
of or invitation to apply for equity
securities (but in the case of the
authority granted under paragraph
(B) of resolution 12, by way of a
rights issue only):
(i) to ordinary shareholders in
proportion (as nearly as may
be practicable) to their existing
holdings; and
(ii) to holders of other equity
securities, as required by the rights
of those securities or, as the Board
otherwise considers necessary;
and so that the Board may
impose any limits or restrictions
and make any arrangements
which it considers necessary or
appropriate to deal with treasury
shares, fractional entitlements,
record dates, legal, regulatory or
practical problems in, or under the
laws of, any territory or any other
matter; and
(B) in the case of the authority granted
under paragraph (A) of resolution
12 and/or in the case of any sale
of treasury shares for cash, to the
allotment (otherwise than under
paragraph (A) above) of equity
securities up to a nominal amount
of £1,598,977,
such power to apply until the end
of the Annual General Meeting of
the Company in 2012 (or, if earlier,
until the close of business on 20
July 2012), but during this period
the Company may make offers, and
enter into agreements, which would,
or might, require equity securities to
be allotted (and treasury shares to be
sold) after the power ends; and the
Board may allot equity securities (and
sell treasury shares) under any such
offer or agreement as if the power had
not ended.
Shareholder Information
receive it by no later than 11:00 am on
19 April 2011. If you prefer, you can
submit your proxy electronically either via
the internet at www.capitashareportal.com
or, if you are a CREST member, through
the CREST system by completing and
transmitting a CREST proxy instruction as
described in the procedural notes below.
Recommendation
Your Directors are of the opinion that
the resolutions to be proposed at the
Annual General Meeting are in the best
interests of shareholders as a whole and
recommend you to vote in favour of them.
Each Director will be doing so in respect of
his or her own beneficial shareholding.
Inspection of documents
The following documents will be available
for inspection at the Company’s registered
office, 80 New Bond Street, London
W1S 1SB, during normal business hours
from the date of this notice of meeting until
the date of the Annual General Meeting
and at The British Medical Association,
BMA House, Tavistock Square, London
WC1H 9JP from 15 minutes before the
Annual General Meeting until it ends:
• copies of the Executive Directors’
service contracts; and
• copies of the letters of appointment of
the Non Executive Directors.
A copy of the full Annual Report and
Financial Statements of the Company
for the year ended 31 December 2010,
including the Directors’ Remuneration
Report referred to in Resolution 15, is also
available on our Web site
www.taylorwimpeyplc.com.
By Order of the Board
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James Jordan
Group Company Secretary and
General Counsel
Taylor Wimpey plc
Registered Office:
80 New Bond Street
London
W1S 1SB
(Registered in England and Wales
under number 296805)
2 March 2011
14. That the Company be authorised to
make market purchases (within the
meaning of Section 693(4) of the
Companies Act 2006) of the ordinary
shares of 1p each of the Company
(‘ordinary shares’), provided that:
(A) the maximum number of ordinary
shares hereby authorised to be
purchased shall be 319,795,593;
(B) the minimum price which may be
paid for ordinary shares is 1p per
ordinary share;
(C) the maximum price (exclusive of
expenses) which may be paid for
an ordinary share is an amount
equal to 105% of the average of
the middle market quotations for
an ordinary share (as derived from
the London Stock Exchange Daily
Official List) for the five business
days immediately preceding the
date on which such ordinary share
is purchased;
(D) the authority hereby conferred
shall expire at the earlier of the
conclusion of the Annual General
Meeting of the Company in 2012
and 20 October 2012 unless such
authority is renewed prior to such
time; and
(E) the Company may make contracts
to purchase ordinary shares under
the authority hereby conferred
prior to the expiry of such authority
which will or may be executed
wholly or partly after the expiry of
such authority, and may purchase
ordinary shares in pursuance of any
such contracts, as if the authority
conferred by this resolution had
not expired.
SPECIAL BUSINESS
Ordinary Resolutions:
15. To approve the Directors’
Remuneration Report for the year
ended 31 December 2010.
16. That in accordance with Sections 366
and 367 of the Companies Act 2006,
the Company and all companies which
are its subsidiaries when this resolution
is passed are authorised to:
(A) make political donations to political
parties and/or independent
election candidates not exceeding
£250,000 in aggregate;
(B) make political donations to political
organisations other than political
parties not exceeding £250,000 in
aggregate; and
(C) incur political expenditure not
exceeding £250,000 in aggregate,
during the period beginning with the
date of passing this resolution and
ending at the conclusion of the Annual
General Meeting of the Company
in 2012.
For the purposes of this resolution the
terms ‘political donations’, ‘political
parties’, ‘independent election
candidates’, ‘political organisation’
and ‘political expenditure’ have the
meanings given by sections 363 to
365 of the Companies Act 2006.
Special Resolution:
17. That a general meeting other than
an Annual General Meeting of the
Company may continue to be called
on not less than 14 clear days’ notice.
Explanatory notes relating to each of the
above resolutions are set out on pages
107 to 110.
Action to be taken
If you wish to attend and vote at the
Annual General Meeting in person,
please bring with you the attendance
card accompanying this document and
retain it until the end of the meeting. It will
authenticate your right to attend, speak
and vote, and will help us to register your
attendance without delay. Registration will
be available from 9:30 am on the day of
the meeting. For the safety and comfort
of those attending the meeting, large
bags, cameras, recording equipment and
similar items will not be allowed into the
building. The meeting will commence at
11:00 am and light refreshments will be
available from 10:00 am and also after
the conclusion of the meeting. There
is wheelchair access to the venue for
shareholders who require it or those with
reduced mobility. However, attendees are
strongly advised to bring their own carers
to assist with their general mobility around
the venue. An induction loop system
operates in the meeting room. Directions
to the venue can be found on the reverse
of your attendance card.
If you would like to vote on the resolutions
but cannot come to the Annual General
Meeting, please fill in the proxy form sent
to you with this notice and return it to our
registrar as soon as possible. They must
105 Taylor Wimpey plc Annual Report & Accounts 2010
Shareholder Information
Notes to the Notice of Meeting
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Procedural notes
1. To be entitled to attend and vote at
the Annual General Meeting (and
for the purpose of the determination
by the Company of the votes which
shareholders may cast), shareholders
must be registered in the Register of
Members of the Company at 6:00 pm
on 19 April 2011 (or, in the event of
any adjournment, on the date which
is two days before the time of the
adjourned meeting). Shareholders
then on the Register of Members shall
be entitled to attend and vote at the
Annual General Meeting in respect
of the number of shares registered
in their name at that time. Changes
to entries on the relevant Register of
Members after that deadline shall be
disregarded in determining the rights
of any person to attend and vote at the
Annual General Meeting.
2. As at 2 March 2011 (being the last
business day prior to the publication
of this notice) the Company’s
issued share capital consisted of
3,197,955,937 ordinary shares,
carrying one vote each. Therefore, the
total voting rights in the Company as
at 2 March 2011 were 3,197,955,937.
3. If you are a shareholder of the
Company at the time and date set
out in note 1 above, you are entitled
to appoint a proxy to exercise all or
any of your rights to attend and to
speak and vote on your behalf at the
meeting. Shareholders may appoint
more than one proxy in relation to the
Annual General Meeting provided that
each proxy is appointed to exercise
the rights attached to a different share
or shares held by that shareholder.
A proxy need not be a shareholder
of the Company but must attend the
Annual General Meeting to represent
you. A proxy form which may be used
to make such appointment and give
proxy instructions accompanies this
notice. If you do not have a proxy
form and believe that you should have
one, or if you require additional forms,
please contact Capita Registrars on
0871 664 0391 (calls cost 10p per
minute plus network extras; lines are
open 8:30 am to 5:30 pm Monday
to Friday).
4. To be valid any proxy form or other
instrument appointing a proxy must be
received by post to Freepost RSBH-
UXKS-LRBC, PXS, 34 Beckenham
Road, Beckenham, Kent, BR3 4TU,
or (during normal business hours
only) by hand at Capita Registrars,
34 Beckenham Road, Beckenham,
Kent, BR3 4TU, or, if you prefer,
electronically via the internet at www.
capitashareportal.com or, if you are
a member of CREST, via the service
provided by Euroclear UK and Ireland
Limited at the electronic address
provided in note 9, in each case no
later than 11:00 am on 19 April 2011.
All forms of proxy received after this
time will be void. A form of proxy
sent electronically at any time that
is found to contain any virus will not
be accepted.
5. The return of a completed proxy form,
other such instrument or any CREST
Proxy Instruction (as further described
in notes 8 and 9 below) will not prevent
a shareholder attending the Annual
General Meeting and voting in person
if he/she wishes to do so.
6. Any person to whom this notice is
sent who is a person nominated
under section 146 of the Companies
Act 2006 to enjoy information rights
(a ‘Nominated Person’) may, under
an agreement between him/her
and the shareholder by whom he/
she was nominated, have a right to
be appointed (or to have someone
else appointed) as a proxy for
the Annual General Meeting. If a
Nominated Person has no such proxy
appointment right or does not wish
to exercise it, he/she may, under
any such agreement, have a right to
give instructions to the shareholder
as to the exercise of voting rights.
Such persons should direct any
communications and enquiries to the
registered holder of the shares by
whom they were nominated and not to
the Company or its registrar.
7. The statement of the rights of
shareholders in relation to the
appointment of proxies in notes 3 and
4 above does not apply to Nominated
Persons. The rights described in
these notes can only be exercised by
shareholders of the Company.
8. CREST members who wish to appoint
a proxy or proxies through the CREST
electronic proxy appointment service
may do so by using the procedures
described in the CREST Manual.
CREST Personal Members or other
CREST sponsored members, and
those CREST members who have
appointed a service provider(s), should
refer to their CREST sponsor or voting
service provider(s), who will be able
to take the appropriate action on
their behalf.
9. In order for a proxy appointment or
instruction made using the CREST
service to be valid, it must be properly
authenticated in accordance with
Euroclear UK & Ireland Limited’s
specifications, and must contain
the information required for such
instruction, as described in the
CREST Manual (available via www.
euroclear.com/CREST). The message,
regardless of whether it constitutes
the appointment of a proxy or is an
amendment to the instruction given
to a previously appointed proxy must,
in order to be valid, be transmitted
so as to be received by the issuer’s
agent (ID RA10) by 11:00 am on 19
April 2011. For this purpose, the time
of receipt will be taken to be the time
(as determined by the time stamp
applied to the message by the CREST
Application Host) from which the
issuer’s agent is able to retrieve the
message by enquiry to CREST in the
manner prescribed by CREST. After
this time any change of instructions
to proxies appointed through CREST
should be communicated to the
appointee through other means.
10. CREST members and, where
applicable, their CREST sponsors, or
voting service providers should note
that Euroclear UK & Ireland Limited
does not make available special
procedures in CREST for any particular
message. Normal system timings
and limitations will, therefore, apply in
relation to the input of CREST Proxy
Instructions. It is the responsibility
of the CREST member concerned
to take (or, if the CREST member
is a CREST personal member, or
sponsored member, or has appointed
a voting service provider, to procure
106 Taylor Wimpey plc Annual Report & Accounts 2010
Shareholder Information
that his CREST sponsor or voting
service provider(s) take(s)) such action
as shall be necessary to ensure that a
message is transmitted by means of
the CREST system by any particular
time. In this connection, CREST
members and, where applicable, their
CREST sponsors or voting system
providers are referred, in particular, to
those sections of the CREST Manual
concerning practical limitations of the
CREST system and timings.
11. The Company may treat as invalid
a CREST Proxy Instruction in the
circumstances set out in Regulation
35(5)(a) of the Uncertificated Securities
Regulations 2001.
12. Any corporation which is a member
can appoint one or more corporate
representatives who may exercise on
its behalf all of its powers as a member
provided that they do not do so in
relation to the same shares.
13. Under Section 527 of the Companies
Act 2006 members meeting the
threshold requirements set out in that
section have the right to require the
Company to publish on a Web site
a statement setting out any matter
relating to:
(i) the audit of the Company’s
accounts (including the auditor’s
report and the conduct of the audit)
that are to be laid before the Annual
General Meeting; or
(ii) any circumstance connected
with an auditor of the Company
ceasing to hold office since the
previous meeting at which annual
accounts and reports were laid in
accordance with Section 437 of the
Companies Act 2006.
The Company may not require the
shareholders requesting any such Web
site publication to pay its expenses in
complying with Sections 527 or 528
of the Companies Act 2006. Where
the Company is required to place a
statement on a Web site under Section
527 of the Companies Act 2006, it
must forward the statement to the
Company’s auditor not later than the
time when it makes the statement
available on the Web site. The
business which may be dealt with at
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the Annual General Meeting includes
any statement that the Company has
been required under Section 527 of
the Companies Act 2006 to publish on
a Web site.
14. Any member attending the meeting
has the right to ask questions. The
Company must cause to be answered
any such question relating to the
business being dealt with at the
meeting but no such answer need
be given if: (i) to do so would interfere
unduly with the preparation for the
meeting or involve the disclosure of
confidential information; (ii) the answer
has already been given on a Web
site in the form of an answer to a
question; or (iii) it is undesirable in the
interests of the Company or the good
order of the meeting that the question
be answered.
15. A copy of this Notice, and other
information required by Section 311A
of the Companies Act 2006, can be
found at www.taylorwimpeyplc.com.
16. Voting on all resolutions at this
year’s Annual General Meeting will
be conducted by way of a poll,
rather than on a show of hands.
The Board believes that a poll is
more representative of shareholders’
voting intentions because it gives as
many shareholders as possible the
opportunity to have their votes counted
(whether their votes are tendered by
proxy in advance of, or in person at,
the Annual General Meeting). The
results of the poll will be announced via
a Regulatory News Service and made
available at www.taylorwimpeyplc.com
as soon as practicable after the Annual
General Meeting.
EXPLANATORY NOTES TO
THE RESOLUTIONS
ORDINARY BUSINESS
ORDINARY RESOLUTIONS
Resolution 1: To receive the annual report
and financial statements
English company law requires the
Directors to lay the Financial Statements
of the Company for the year ended 31
December 2010 and the reports of the
Directors and Auditors before a general
meeting of the Company.
Resolutions 2 to 9: Election of Directors
In accordance with the UK Corporate
Governance Code which states that
all directors of FTSE 350 companies
should be subject to annual election by
shareholders, the Board has resolved that
all Directors of the Company will retire
and, being eligible, offer themselves for
re-election or election (as appropriate)
by shareholders at the Annual General
Meeting.
Kevin Beeston, Ryan Mangold and Kate
Barker, who were each appointed as
Directors of the Company by the Board
since the last Annual General Meeting,
held in April 2010, will retire and offer
themselves for election by shareholders
for the first time, as is required by the
Company’s Articles of Association.
Details of the Directors’ service contracts,
remuneration and interests in the
Company’s shares and other securities
are given in the Directors’ Remuneration
Report to shareholders on pages 41
to 50 of the Report and Accounts. Full
biographical information concerning each
Director is on pages 32 and 33 of the
Report and Accounts.
The following information is given in
support of the Board’s proposal for the
election or re-election (as appropriate) of
the Directors of the Company:
Kevin Beeston – appointed since last AGM
and offers himself for election.
Kevin was appointed as a Director and
Chairman on 1 July 2010. He brings a
wealth of experience in the service industry
which will assist the Company’s future
strategic direction and development and
the delivery of value to shareholders. His
biography appears on page 32.
Ryan Mangold – appointed since last AGM
and offers himself for election.
Ryan was appointed as a Director and
Group Finance Director on 16 November
2010. He joined Taylor Wimpey as Group
Financial Controller in April 2009 and
played an important role in progressing the
Group’s refinancing during 2010. He was
previously Group Financial Controller of
Mondi Group for five years, prior to which
he held various other senior finance roles
with Anglo American plc. His biography
appears on page 32.
107 Taylor Wimpey plc Annual Report & Accounts 2010
Shareholder Information
Notes to the Notice of Meeting continued
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Kate Barker CBE – to be appointed prior to
the AGM and will offer herself for election.
Kate will be appointed as an Independent
Non Executive Director with effect from
21 April 2011. She has previously held
a number of high profile roles including
membership of the Monetary Policy
Committee of the Bank of England
from 2001 until 2010. She has also led
independent reviews for the Government
on UK Housing Supply and on Land Use
Planning. Kate is a Board Member of the
Homes and Communities Agency and was
also a member of its predecessor body,
the Housing Corporation, but has arranged
that she will stand down from this position
prior to joining the Board of Taylor Wimpey.
The Board is satisfied that she will be
independent in character and judgement
and that her other commitments will
not detract from the extent or quality of
time which she will be able to devote to
the Company.
Pete Redfern – offers himself for re-election.
Pete has been a Director and Group Chief
Executive since July 2007. During that
period he has safeguarded the Company
during the severe economic downturn
in the UK and, with his additional day-
to-day operational responsibility for the
Group’s UK Housing division, has led the
recovery in the Company’s prospects. His
biography appears on page 32.
Sheryl Palmer – offers herself for re-election.
Sheryl has been a Director since August
2009 and, as President and CEO of Taylor
Morrison, has operational responsibility
for the Group’s North America Housing
division. She has successfully led the
North American business through the
prolonged market downturn in the US.
Her biography appears on page 32.
Baroness Dean of Thornton-le-Fylde –
offers herself for re-election.
Brenda has been an Independent Non
Executive Director since July 2007. She
has been subjected to a rigorous annual
appraisal, having served for seven years
in that capacity including previously for
George Wimpey Plc. The Board is satisfied
that she continues to be independent in
character and judgement in applying her
expertise at meetings of the Board and
of the Nomination and Remuneration
Committees, and that her other
commitments do not detract from the
extent or quality of time which she is able
to devote to the Company. Her biography
appears on page 32.
Anthony Reading MBE – offers himself for
re-election.
Tony has been an Independent Non
Executive Director since July 2007. He
has been subjected to a rigorous annual
appraisal, having served for five years
in that capacity including previously
for George Wimpey Plc and will have
completed six years by the time of the
Annual General Meeting. The Board
is satisfied that he continues to be
independent in character and judgement
in applying his expertise at meetings
of the Board and of the Remuneration
Committee (which he Chairs) and the
Audit and Nomination Committees, and
that his other commitments do not detract
from the extent or quality of time which
he is able to devote to the Company. His
biography appears on page 33.
Robert Rowley – offers himself for re-election.
Rob has been an Independent Non
Executive Director since January 2010
and the Senior Independent Director
since April 2010. The Board is satisfied
that he continues to be independent in
character and judgement in applying his
expertise at meetings of the Board and
of the Audit Committee (which he Chairs)
and the Nomination and Remuneration
Committees, and that his other
commitments do not detract from the
extent or quality of time which he is able
to devote to the Company. His biography
appears on page 33.
The Board confirms that, with the
exception of Kate Barker and Ryan
Mangold (who were subject to a
comprehensive Nomination Committee
process), each of the Directors has
recently been subject to formal
performance evaluation, details of which
are set out in the Corporate Governance
Report, and that each continues to
demonstrate commitment and to be an
effective member of the Board.
Resolution 10: Re-appointment of Deloitte
LLP (‘Deloitte’) as auditors of the Company
In accordance with English company
law, the Company is required to appoint
auditors at each general meeting at which
accounts are laid before the shareholders.
It is therefore proposed that the auditors
are appointed from the conclusion of the
2011 Annual General Meeting until the
conclusion of the next general meeting
at which accounts are laid before
shareholders. The Board recommends
the re-appointment of Deloitte as the
Company’s auditors.
Resolution 11: Authorisation of the Audit
Committee to agree on behalf of the Board
the remuneration of Deloitte as Auditors
The Board seeks shareholders’ authority
for the Audit Committee to determine
on behalf of the Board the remuneration
of Deloitte for their services. The Board
has adopted a procedure governing the
appointment of Deloitte to carry out non-
audit services, details of which are given
in the Corporate Governance Report.
Details of non-audit services performed by
Deloitte in 2010 are given on page 38 of
the Report and Accounts.
Resolution 12: Authority to allot shares
Your Directors wish to renew the existing
authority to allot unissued shares in the
Company, which was granted at the
Company’s last Annual General Meeting
held on 29 April 2010 and is due to expire
at the conclusion of this Annual General
Meeting. Accordingly, Paragraph (A) of
resolution 12 would give the Directors
the authority to allot ordinary shares or
grant rights to subscribe for or convert
any securities into ordinary shares up to
an aggregate nominal amount equal to
£10,659,853 (representing 1,065,985,300
ordinary shares). This amount represents
approximately one-third of the issued
ordinary share capital of the Company as
at 2 March 2011, the latest practicable
date prior to publication of this notice
of meeting.
In line with guidance issued by the
Association of British Insurers, paragraph
(B) of resolution 12 would give the
Directors authority to allot ordinary
shares or grant rights to subscribe for
or convert any securities into ordinary
shares in connection with a rights issue
in favour of ordinary shareholders up to
an aggregate nominal amount equal to
£21,319,706 (representing 2,131,970,600
ordinary shares), as reduced by the
nominal amount of any shares issued
under paragraph (A) of resolution 12. This
amount (before any reduction) represents
approximately two-thirds of the issued
108 Taylor Wimpey plc Annual Report & Accounts 2010
Shareholder Information
ordinary share capital of the Company as
at 2 March 2011, the latest practicable
date prior to publication of this notice
of meeting.
The authority will expire at the earlier of
20 July 2012 and the conclusion of the
Annual General Meeting of the Company
held in 2012.
2 March 2011. If the authority given by
Resolution 14 were to be fully used, these
would represent 1.97% of the Company’s
ordinary issued share capital at that date.
The authorities sought under paragraphs
(A) and (B) of resolution 12 will expire
at the earlier of 20 July 2012 and the
conclusion of the Annual General Meeting
of the Company held in 2012.
Resolution 14: Authority to make market
purchases of shares
This resolution will be proposed as a
special resolution and therefore requires a
75% majority of votes to be cast in favour.
The Directors have no present intention
to exercise either of the authorities sought
under this resolution. However, if they
do exercise the authorities, the Directors
intend to follow ABI recommendations
concerning their use.
Any purchases under this authority
would be made in one or more tranches
and would be limited in aggregate to 10
per cent. of the ordinary shares of the
Company in issue at the close of business
on 2 March 2011.
SPECIAL RESOLUTIONS
Resolution 13: Authority to dis-apply
pre-emption rights
The Board wishes to renew the existing
authority from shareholders to allot shares
or sell any shares held in treasury for cash
otherwise than to existing shareholders
pro rata to their holdings. Resolution
13, which will be proposed as a special
resolution and therefore requires a 75%
majority of votes to be cast in favour,
would give the Directors the authority to
allot ordinary shares (or sell any ordinary
shares which the Company elects to hold
in treasury) for cash without first offering
them to existing shareholders in proportion
to their existing shareholdings.
This authority would be, similar to previous
years, limited to allotments or sales in
connection with pre-emptive offers and
offers to holders of other equity securities if
required by the rights of those shares or as
the Board otherwise considers necessary,
or otherwise up to an aggregate nominal
amount of £1,598,977 (representing
159,897,700 ordinary shares). This
aggregate nominal amount represents
approximately 5% of the issued ordinary
share capital of the Company as at 2
March 2011, the latest practicable date
prior to publication of this notice. In
respect of this aggregate nominal amount,
the Directors confirm their intention to
follow the provisions of the Pre-Emption
Group’s Statement of Principles regarding
cumulative usage of authorities within
a rolling three-year period where the
Principles provide that usage in excess of
7.5% should not take place without prior
consultation with shareholders.
The maximum price to be paid on any
exercise of the authority would not exceed
105% of the average of the middle
market quotations for the Company’s
ordinary shares for the five business days
immediately preceding the date of the
purchase. Shares purchased pursuant to
these authorities could be held as treasury
shares, which the Company can re-issue
quickly and cost-effectively, and provides
the Company with additional flexibility in
the management of its capital base. The
total number of shares held as treasury
shall not at any one time exceed 10%
of the Company’s issued share capital.
Accordingly, any shares bought back over
the 10% limit will be cancelled.
This is a standard resolution, sought by
the majority of public listed companies
at Annual General Meetings. The Board
has no current intention of utilising
this authority and would only consider
doing so if it was in the best interests of
shareholders generally.
The total number of options, conditional
share awards and warrants to subscribe
for ordinary shares outstanding as at the
close of business on 2 March 2011 was
141,938,431, representing approximately
4.44% of the issued ordinary share capital
of the Company as at that date and
approximately 4.93% of the Company’s
issued ordinary share capital following any
exercise in full of this authority to make
market purchases.
The Company has warrants over
56,657,673 Ordinary Shares, representing
1.77% of the Company’s ordinary issued
share capital as at close of business on
This authority will last until the earlier of
20 October 2012 and the conclusion of
the Company’s Annual General Meeting
in 2012.
SPECIAL BUSINESS
ORDINARY RESOLUTIONS
Resolution 15: Approval of the Directors’
Remuneration Report for the year ended
31 December 2010
The Directors’ Remuneration Report
for the year ended 31 December 2010
has been prepared in accordance with
Sections 420 and 421 of the Companies
Act 2006. Section 439 of said Act requires
the Company to give shareholders notice
of an ordinary resolution approving
the Directors’ Remuneration Report.
The Directors’ Remuneration Report is
on pages 41 to 50 of the Report and
Accounts. The Board considers that
appropriate executive remuneration
plays a vital part in helping to achieve the
Company’s overall objectives. The vote
on the Remuneration Report has advisory
status in respect of the remuneration
policy and overall remuneration packages
and is not specific to individual levels
of remuneration.
Resolution 16: Authority to make
political donations
In order to comply with its obligations
under the Companies Act 2006 and to
avoid any inadvertent infringement of
that Act, the Board wishes to renew its
existing authority for a general level of
donation and/or expenditure. Resolution
16 seeks to renew the existing authority
for the Company to make political
donations and incur political expenditure.
The Companies Act 2006 requires this
authority to be divided into three heads
with a separate amount specified as
permitted for each. We have specified
an amount not exceeding £250,000 for
each head of the authority. In accordance
with the Companies Act 2006, Resolution
16 extends approval to all of the
Company’s subsidiaries.
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109 Taylor Wimpey plc Annual Report & Accounts 2010
Shareholder Information
Notes to the Notice of Meeting continued
17 proposes its renewal. The shorter
notice period of 14 clear days would
not be used as a matter of routine for
any general meeting, but only where the
flexibility is merited by the business of a
particular meeting and is thought to be to
the advantage of shareholders as a whole.
The renewed approval will be effective until
the Company’s Annual General Meeting
in 2012, when it is intended that a similar
resolution will be proposed.
Note that in order to be able to call a
general meeting on less than 21 clear
days’ notice, the Company must in
respect of that meeting make available
electronic voting to all shareholders.
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This authority will last until the conclusion
of the Annual General Meeting of the
Company in 2012, unless renewal is
sought at that meeting.
The Company and the Group do not
make any donations to political parties
or organisations but do support certain
industry-wide initiatives such as the Home
Builders Federation in the UK. Whilst we
do not regard this as political in nature, in
certain circumstances donations made
for charitable or similar purposes could
possibly be treated as a donation to a
political organisation under the relevant
provisions of the Companies Act 2006.
For example, a donation to a humanitarian
charity which may also operate as a
political lobby, sponsorship, subscriptions,
paid leave to employees fulfilling public
duties and payments to industry
representative bodies could constitute a
donation to a political organisation within
the current definitions in the Companies
Act 2006.
Details of the Company’s and the Group’s
charitable donations appear on page 53 of
the report and accounts.
SPECIAL RESOLUTION
Resolution 17: Notice of general meetings
This resolution will be proposed as a
special resolution and therefore requires a
75% majority of votes to be cast in favour.
The Companies (Shareholders’ Rights)
Regulations 2009 have increased
the notice period required for general
meetings of the Company to 21 days
unless shareholders agree to a shorter
notice period, which cannot be less
than 14 clear days. At the 2010 Annual
General Meeting, a resolution was passed
approving the Company’s ability to call
general meetings (other than Annual
General Meetings, which will continue to
be held on at least 21 clear days’ notice)
on not less than 14 clear days’ notice. As
this approval will expire at the conclusion
of this Annual General Meeting, Resolution
110 Taylor Wimpey plc Annual Report & Accounts 2010
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Shareholder Information
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Annual General Meeting
11:00 am on 21 April 2011 at:
Making documents and information
available electronically:
The British Medical Association, BMA
House, Tavistock Square, London,
WC1H 9JP.
Latest date for receipt of proxy instructions
for the 2011 Annual General Meeting:
11:00 am on 19 April 2011.
Group Company Secretary and General
Counsel and Registered Office
James Jordan
80 New Bond Street
London W1S 1SB
Tel: +44 (0)20 7355 8100
Fax: +44 (0)20 7355 8197
E-mail: james.jordan@taylorwimpey.com
On 28 March 2011 the Company’s
Registered Office will move to Gate
House, Turnpike Road, High Wycombe
HP12 3NR.
Registrar
For any enquiries concerning your
shareholding or details of shareholder
services, please contact:
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
E-mail: ssd@capitaregistrars.com
Tel: 0871 664 0300 (UK)
(Calls cost 10p per minute plus network
extras; lines are open 8:30 am to 5:30 pm
Mon-Fri).
Tel: +44 20 8639 3399 (overseas)
Auditors
Deloitte LLP
Solicitors
Slaughter and May
Stockbrokers
J.P. Morgan Cazenove Limited
RBS Hoare Govett
Shareholders’ Services
Web Communications
Shareholders have previously passed a
resolution enabling the Company to make
documents and information available to
shareholders by electronic means and
via a Web site, rather than by sending
hard copies. This way of communicating
is enabled in accordance with the
Companies Act 2006, Rule 6 of the
Disclosure and Transparency Rules and
the Company’s Articles of Association.
• enables the Company to reduce printing
and postage costs;
• allows faster access to information
and enables shareholders to access
documents on the day they are
published on the Company’s Web site;
• reduces the amount of resources
consumed, such as paper, and lessens
the impact of printing and mailing
activities on the environment.
The Company provides hard copy
documentation to those shareholders who
have requested this and is, of course,
happy to provide hard copies to any
shareholders upon request.
On 7 January 2011 the Company wrote
to new shareholders who had joined since
3 March 2009 (the date of the last such
letter) inviting them to consider whether to
elect to receive communications by e-mail
or in hard copy.
The Company’s Web site url is:
www.taylorwimpeyplc.com and
shareholder documentation made
available electronically is generally
accessible at www.taylorwimpeyplc.com/
InvestorRelations.
Electronic communications
The Company also encourages
shareholders to elect to receive
notification of the availability of Company
documentation by means of an e-mail.
Shareholders can sign up for this facility
by logging onto our Web site at www.
taylorwimpeyplc.com.
On-line facilities for shareholders
You can access our Annual and Interim
Reports and copies of recent shareholder
communications on-line at:
www.taylorwimpeyplc.com.
To register for on-line access, go to
www.taylorwimpeyplc.com and navigate
through to Investor Relations/Shareholder
Information, and click on the service you
require. To access some of these services
you will first be required to apply on-line.
Once you have registered for access, you
can make on-line enquiries about your
shareholding and advise the Company of
changes in personal details.
Duplicate share register accounts
If you are receiving more than one copy
of our Annual Report, it may be that your
shares are registered in two or more
accounts on our register of members. You
might wish to consider merging them into
111 Taylor Wimpey plc Annual Report & Accounts 2010
one single entry. Please contact Capita
Registrars who will be pleased to carry out
your instructions in this regard.
Low-cost share dealing services
We have arranged both telephone and on-
line share dealing services for UK resident
Taylor Wimpey shareholders to buy or sell
up to £25,000 worth of Taylor Wimpey
plc shares. The services are operated by
Capita Registrars. To use the services either
visit www.capitadeal.com or telephone +44
(0)871 664 0446 (calls cost 10p per minute
plus network extras; lines open 8:00 am to
4:30 pm Mon-Fri). To deal, you will need
to provide your surname, postcode, date
of birth and investor code (which can be
found on your share certificate or any form
of proxy you have been sent).
Taylor Wimpey and ‘CREST’
Taylor Wimpey shares can be held in
‘CREST’ accounts, which do not require
share certificates. This may make it quicker
and easier for some shareholders to settle
stock market transactions. Shareholders
who deal infrequently may, however,
prefer to continue to hold their shares in
certificated form and this facility will remain
available for the time being, pending the
likely general introduction of dematerialised
shareholdings in due course.
Taylor Wimpey share price
Our share price is printed in many
of the UK daily newspapers and is
also available on our Web site www.
taylorwimpeyplc.com. It appears on
BBC Ceefax and other digital television
interactive services. It may also be
obtained by telephoning the FT Cityline
service, telephone: +44 (0)9058 171690
and ask for ‘Taylor Wimpey’ on the voice
activated response (calls cost 75p per
minute from a BT landline, other networks
may vary).
Gifting shares to charity
If you have a small holding of Taylor
Wimpey plc shares, you may wish to
consider gifting them to charity. You
can do so through ‘ShareGift’, which
is administered by a registered charity,
Orr Mackintosh Foundation Limited.
Shares gifted are re-registered into the
name of the charity, combined with other
donated shares and then sold through
stockbrokers who charge no commission.
The proceeds are distributed to a wide
range of recognised charities. For further
details, please contact Capita Registrars
or approach ShareGift directly on www.
sharegift.org or telephone them on
+ 44 (0)20 7930 3737.
Shareholder Information
Principal Operating Addresses
Spain
Taylor Wimpey de España S.A.U.
C/Aragon, 223-223A
07008 Palma de Mallorca
Mallorca
Spain
Tel: +00 (34)971 706 570
Fax: +00 (34)971 706 565
North America
Taylor Morrison, Inc.
4900 North Scottsdale Road
Suite 2000
Scottsdale
Arizona 85251
USA
Tel: +00 (1) 480 840 8100
Fax: +00 (1) 480 840 8156
Details of all our operating locations
are available on our Web site
www.taylorwimpeyplc.com
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UK
Taylor Wimpey plc
80 New Bond Street
London
W1S 1SB
On 28 March 2011 the Company’s
Registered Office will move to
Gate House, Turnpike Road,
High Wycombe, HP12 3NR.
Tel: +44 (0)20 7355 8100
Fax: +44 (0)20 7355 8197
E-mail: twplc@taylorwimpey.com
www.taylorwimpeyplc.com
Registered in England and Wales
number 296805
Taylor Wimpey UK Ltd.
Gate House
Turnpike Road
High Wycombe
Buckinghamshire
HP12 3NR
Tel: +44 (0)1494 558323
Fax: +44 (0)1494 885663
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112 Taylor Wimpey plc Annual Report & Accounts 2010
Core Uncoated is a PEFC 70 certified stock
that is produced from virgin wood fibre
sourced mainly from Germany, Canada
and Sweden. It is bleached using a Totally
Chlorine Free process and can be disposed
of by recycling, incineration for energy and
composting. It is produced in a mill that is
certified to the ISO14001 environmental
management standard. The printing of this
report is CarbonNeutral®.