Annual Report and Accounts 2012
Creating value,
Delivering quality
Key highlights for 2012
UK operational highlights
(cid:116)(cid:1)44% increase in operating profit* to £228.8 million (2011: £159.3 million**)
(cid:116)(cid:1)Completed 10,886 homes at an average selling price of £181k
(2011: 10,180 homes at £171k)
(cid:116)(cid:1)Extensive strategic landbank of 100,340 plots (2011: 86,236)
(cid:116)(cid:1)Total order book value increased by 14% to £948 million at 31 December 2012
(31 December 2011: £835 million)
(cid:116)(cid:1)Customer satisfaction increased to 93.2% (2011: 92.1%)
(cid:116)(cid:1)Reduction in waste generated per 1,000ft2 built to 3.36 tonnes (2011: 3.44 tonnes)
(cid:116)(cid:1)Contributed over £175 million to our local communities via Section 106 and
Section 75 planning obligations (2011: £130 million)
(cid:116)(cid:1)Continue to compare favourably with the construction industry with an Annual Injury
Incidence Rate (AIIR) of 389 versus the 2011/12 ‘Construction Sector Rate’ of 589
Our 2012 financial performance
Continuing operations
Revenue
(£m)
Operating profit*
(£m)
£2,019.0m
£230.1m
Profit/(loss) before
tax and exceptional
items (£m)
£185.3m
Exceptional items
before tax
(£m)
£22.4m
Adjusted basic
earnings/(loss)
per share (p)
4.7p
230.1
185.3
22.4
4.7
1,767.7
1,808.0
2,019.0
159.5
88.3
(27.9)
89.9
(11.3)
2.1
(1.5)
(138.9)
2010
2011
2012
2010†††
2011
2012
2010†††
2011
2012
2010
2011
2012
2010
2011
2012
Total Group
Profit for the year
(£m)
£149.3m
259.3
Basic earnings
per share
(p)
7.3p
8.1
7.3
Tangible net assets
per share†
(p)
61.5p
KPI
56.9
57.3
61.5
149.3
99.0
3.1
Return on net
operating assets***
(%)
13.6%
KPI
13.6
9.8
5.3
Year end net debt
(£m)
£59.0m
654.5
116.9
59.0
2010
2011
2012
2010
2011
2012
2010
2011
2012
2010
2011
2012
2010
2011
2012
* Operating profit is defined as profit on ordinary activities from continuing operations before finance costs and exceptional items, after share of results of joint ventures.
** 2011 comparatives have been restated to consolidate the UK Housing and Corporate segment, as the Group now only reports two operating segments.
*** Return on net operating assets is defined as operating profit divided by the average of the opening and closing net operating assets, which is defined as capital
employed plus intangibles less tax balances.
† Tangible net assets per share is defined as net assets, excluding goodwill and intangible assets, divided by the number of shares in issue at the period end.
† † † 2010 comparative excludes a one-off pension curtailment credit of £12.0 million in the UK.
Taylor Wimpey plc is a UK-focused residential developer which also
has operations in Spain. Our vision is to become the UK’s leading
residential developer for creating value and delivering quality.
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Inside this report
Business overview
An overview of our
operations in the UK
and Spain, including
regional performance
p2
Corporate
responsibility
Our approach
to corporate
responsibility
p14
Directors’ Report:
Business Review
Operational and financial
performance in 2012 and
prospects for 2013.
02 Business overview
04 Chairman’s statement
06 Chief Executive’s review
Strategy & Group key
08
performance indicators
12 Principal risks and uncertainties
14 Corporate responsibility
15 UK Housing
23 Spain Housing
24 Group financial review
Chairman’s statement
An overview of 2012 and
shareholder information
Chief Executive’s review
Including an explanation
of our business model
and our strategy
p4
p6
Group financial review
Governance
An overview of our
Group financial
performance
An overview of our corporate
governance processes
p24
p28
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.
Board of Directors
28
30 Corporate Governance Report
37 Audit Committee Report
41 Remuneration Report
57
Statutory, regulatory and
other formal information
Independent Auditor’s Report
61
62 Consolidated Income Statement
Consolidated Statement of
63
Comprehensive Income
64 Consolidated Balance Sheet
Consolidated Statement of
65
Changes in Equity
Consolidated Cash Flow Statement
Notes to the Consolidated
Financial Statements
66
67
Shareholder Information
Notice of Annual General Meeting,
information regarding your shares
and how to contact us.
112 Notice of Annual General Meeting
120 Shareholder Facilities
121 Principal Operating Addresses
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Corporate responsibility
A full Corporate Responsibility Report is published
separately on-line and is available from
plc.taylorwimpey.co.uk/corporateresponsibility.
Key information about our approach to sustainable
development is available in the following areas of this report:
Governance
Pages 5, 28-60
Approach & policies
Pages 4, 7, 14
Environment
Pages 14, 16, 20
Community
Pages 8-9, 12, 14, 18
Employees
Pages 4-5, 8-9, 10, 13, 14, 21-22, 59
KPIs
Pages 8-9, 12-13, 16, 23
Health & safety
Pages 12, 14, 16, 18, 23
102 Independent Auditor’s Report
103 Company Balance Sheet
104 Notes to the Company
Financial Statements
110 Particulars of Principal
Subsidiary Undertakings
111 Five Year Review
Visit us on-line
The Taylor Wimpey plc corporate Web site:
plc.taylorwimpey.co.uk
Key to other items in this report
Throughout this report you will find
the following icons for particular points
of interest
Learn more about Taylor Wimpey
about.taylorwimpey.co.uk
Cross reference to information on-line
Cross reference to information in this report
KPI Key performance indicator
Corporate responsibility
Business model
Taylor Wimpey plc plc.taylorwimpey.co.uk
1
Business overview
Taylor Wimpey is one of the largest residential developers
in the UK with national coverage from 24 regional offices.
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Proportion of continuing Group revenue
(cid:81)(cid:3) UK Housing
(cid:81)(cid:3) Spain Housing
Completions
10,886
Average selling price
£181k
Average sales outlets (sites)
311
Short term landbank
65,409 plots
2
UK Housing map key
Head Office
Regional Offices
Taylor Wimpey plc Annual Report & Accounts 2012
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UK Housing
Overview
(cid:116)(cid:1) 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 £750,000.
Market conditions
(cid:116)(cid:1) Mortgage availability was the key constraint
on the market, although we saw further
incremental improvement over the course
of 2012.
(cid:116)(cid:1) In addition, we build affordable housing
across the UK, which represented 18%
of our 2012 completions.
(cid:116)(cid:1) We aim to deliver aspirational homes for
our customers that are efficient to build.
(cid:116)(cid:1) Government initiatives started to have
a positive impact.
(cid:116)(cid:1) Market sales prices remained flat.
(cid:116)(cid:1) Modest increases in volumes of
homes built.
Priorities
(cid:116)(cid:1) Ongoing focus on both short and long
term margin performance.
(cid:116)(cid:1) Delivering planning and adding value to
our existing land assets.
(cid:116)(cid:1) Adding new sites to our land portfolio.
Our regional operations
We operate as a network of 24 local businesses, supported by a Head Office in High Wycombe.
North
South
Our North Division covers Scotland, the North East,
the North West and the West Midlands.
Our South Division incorporates our businesses in the East,
South East, South West and South Wales.
Completions(a) (%)
Average selling price
Completions(a) (%)
Average selling price
£160k
£153k
£170k
£160k
£190k
£175k
£209k
£194k
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Eastern
31%
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Scotland and
North East 33
%
r e a n d
t h W e s t
Y o r k s h i
N o r
3 8 %
Scotland
and North
East
Yorkshire
and North
West
West
Midlands
Average
Selling
Price
North
(Average selling price North in 2011: £159k)
d
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(2011: 3,995)
See pages 15-22 for more information
6,715
(2011: 6,128)
Spain Housing
We build high-quality homes in popular locations.
Overview
(cid:116)(cid:1) We have operations on the Costa Blanca, Costa del
Sol and the island of Mallorca.
(cid:116)(cid:1) We build high-quality homes that appeal to both foreign
and Spanish buyers.
See page 23 for more information
(a) Excluding joint ventures
Taylor Wimpey plc plc.taylorwimpey.co.uk
Eastern
South
West and
Wales
South
East and
London
Average
Selling
Price
South
(Average selling price South in 2011: £179k)
3
Chairman’s statement
Creating value and driving increased returns for all our stakeholders
across the cycle.
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motivation of our employees, which is crucial as we pull together to
achieve our common goals. I would like to take this opportunity to
thank our employees for their dedication and commitment.
During 2012 we conducted our first employee survey for a number of
years. The main highlights are covered in Pete Redfern’s commentary
on page 10, but we were particularly pleased to note that 99% of our
employees agree we take health and safety seriously and 94% of our
employees are proud to work for Taylor Wimpey. As you would expect,
there are however areas we can improve and we intend to focus on
these during 2013.
Corporate responsibility
Our size and substance demands a responsible approach to business.
As one of the largest homebuilders in the UK, we have social,
economic, ethical and environmental responsibilities. We have a
responsibility to do the right thing and whilst we do not get everything
right, this is a principle that we strongly embrace. Furthermore the
Board recognises that being a socially responsible company adds to
and enhances the Company’s overall value. The impact our business
activities have on the environment and the communities in which we
operate is very important to us, and of course, to our stakeholders.
We are therefore delighted with our inclusion in the Dow Jones
Sustainability Index as well as the FTSE4Good Index. Our 2012
Corporate Responsibility Report will be available from March on
plc.taylorwimpey.co.uk/CorporateResponsibility and I encourage
everyone to read it as it seeks to set out what we do, how we do it
and why, as well as our key areas of focus.
Shareholder value
Whilst driving in-year performance, we remain firmly focused on the
long term strategy for the business, knowing that this is what drives
sustainable value for shareholders. The successful implementation and
ongoing execution of our value focused strategy has allowed us to
build on the improvements which we have delivered consecutively over
the last three years. We continuously review our strategy to make sure
that it remains appropriate and aligned to creating and delivering value
to shareholders and other stakeholders.
We are delighted that our all-employee share ownership incentive
schemes are helping our staff to acquire their own personal stake in
the business. During 2012, 1,694 employees participated in one or
both of our all-employee share plans, representing 48.5% of eligible
employees. The Board encourages such participation and alignment
Total shareholder return
Source: Thomson Reuters
120
100
80
60
40
20
0
2007
2008
2009
2010
2011
2012
Taylor Wimpey plc
Sector Peer Group
FTSE 250 Index
Housebuilders Index
Taylor Wimpey plc Annual Report & Accounts 2012
“ Taylor Wimpey has delivered another year
of significant profit growth in 2012.”
Kevin Beeston
Chairman
In 2012 the Company has:
(cid:116)(cid:1)Increased adjusted basic earnings per share by 124%
to 4.7p (2011: 2.1p)
(cid:116)(cid:1)Increased tangible net assets per share† to 61.5 pence
(2011: 57.3 pence)
(cid:116)(cid:1)Proposed a final dividend per share of 0.43 pence
(2011 final: 0.38 pence)
2012 performance
2012 has been another year of significant progress for Taylor Wimpey,
with further improvement in all our strategic objectives. It is particularly
pleasing that against a backdrop of a flat housing market, we have been
able to exceed our expectations, delivering an increase in Group
operating profit* of 44.3% to £230.1 million from £159.5 million in 2011.
Delivering on our commitments
This period of success is another step on our journey as we continue to
deliver on the strategy that we clearly set out in 2011, which rightly sets
us challenging targets and ambitions. Over the course of 2012 our
performance has continued to gain momentum. It was encouraging to
see first-hand on my visits to our business units this year the difference
that the internal strategy roll out has made to the understanding and
Tangible net assets per share is defined as net assets, excluding goodwill and
intangible assets, divided by the number of shares in issue at the period end.
Operating profit is defined as profit on ordinary activities from continuing operations
before finance costs and exceptional items, after share of results of joint ventures.
†
*
4
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with shareholders’ interests and has made considerable efforts to
achieve a broad spread of participation, which currently includes 51%
of male employees; 49% of female employees; and 31% of weekly-
paid employees. More details of our share schemes can be found on
page 48.
Corporate governance
As a Board, we continue to firmly believe that good corporate
governance is essential and it remains a top priority. Your Board
works well and is effective.
However, governance should not be confined to the boardroom
and therefore strong corporate governance and risk management
are essential. The way in which we run our business is of paramount
importance to us and is what enables us to successfully deliver our
business plans and objectives. We have systems in place to identify,
analyse and manage key risks arising from both our operations and
the wider macro economic environment, and develop continuously
improving business methods. The policies and guidelines we have
in place set standards concerning ethics, sound business practices
and wider governance and can be found on our Web site:
plc.taylorwimpey.co.uk/investorrelations/corporategovernance. The
governance of companies has continued to attract attention throughout
the year. In September 2012 the Financial Reporting Council (FRC)
issued a revised UK Governance Code (UKGC) which the Board
welcomed. The Board considered the UKGC early in order to ensure
compliance with it as soon as practicably possible and ahead of being
formally required to do so. On the same date, the FRC issued a revised
Stewardship Code which the Board also welcomed. The Board very
much values the dialogue which it regularly has with shareholders.
Executive remuneration has also continued to be in the spotlight. We
have a strong track record of taking a considered approach to this and
we again consulted very constructively with our major shareholders,
and their representative bodies, on remuneration. The 2012
Remuneration Report is set out on pages 41 to 56.
Dividend
Given the current outlook of the UK housing market, and the strength
of the Group’s asset base, I am pleased to confirm that the Board will
be recommending the payment of a final dividend for the year of 0.43
pence per share (2011: 0.38 pence per share). Combined with the
interim dividend of 0.19 pence per share (2011: nil) this gives a total
dividend for the year of 0.62 pence per share (2011: 0.38 pence
per share). Subject to shareholder approval at the Annual General
Meeting (‘AGM’),the final dividend will be paid on 21 May 2013 to
shareholders on the register at close of business on 19 April 2013.
This dividend will be paid as a conventional cash dividend but
shareholders are once again being offered the opportunity to reinvest
all of their dividend under the Dividend Re-Investment Plan, details of
which are contained in the Shareholder Information section.
Diversity
Taylor Wimpey operates in diverse communities. We believe that
embracing this diversity will enable us to succeed through a workforce
that is inclusive, creative and representative of our communities. We
also acknowledge that we must continue to promote diversity in order
to create an organisation that attracts, supports and promotes the
broadest range of talent. Further information on our diversity policy
as well as the number of women at senior levels and other diversity
benchmarks can be found on pages 32 to 33. We believe that
establishing an organisational culture with diversity as a core value
will better enable individuals to reach their full potential and provide
a better service to our customers.
Board changes
We announced on 1 March that Baroness Dean of Thornton-le-Fylde
would be stepping down from the Board as an Independent Non
Executive Director after nine years of committed service following the
conclusion of the 2013 Annual General Meeting on 25 April 2013.
Brenda has been an outstanding member of the Board and has offered
invaluable advice on a very wide range of matters during her time on
the Board and, on behalf of shareholders and the Company, I thank
her greatly. Following Brenda’s retirement, I am delighted that Baroness
Margaret Ford of Cunninghame will be appointed to the Board as an
Independent Non Executive Director following the conclusion of the
AGM. Margaret brings with her a wealth of relevant experience from
her time as Chair of English Partnerships and of the Olympic Legacy
Company, not to mention her wider business and public sector
experience and we look forward to her joining the Board. Margaret will
also be a member of the Nomination and Remuneration Committees.
The size and structure of the Board and its Committees are reviewed
annually. We believe we have an excellent balance, with an appropriate
mixture of skills and experience, which will continue to be the case
following the above change. During the year a Board Evaluation took
place in line with the UKGC and details of both the process and the
key outcomes are set out on page 33.
The foundations for growth that have been laid and strengthened
over the past few years are supporting the successful implementation
of our strategy. As we look forward to 2013, we are confident that we
will continue to build on our success and deliver increased value and
returns for our shareholders.
Kevin Beeston
Chairman
Corporate governance
Electronic communications
Strong corporate governance and risk management are essential in challenging
market conditions.
We make our Annual Report available electronically to those shareholders who
have not requested a paper version. This has three key benefits:
More information on our approach is contained within my statement on page 30 and the
Corporate Governance Report on pages 31 to 36, which confirms that the Company was
fully compliant with the 2010 UK Corporate Governance Code.
Shareholder information
Full details of the facilities available to shareholders can be found on page 120 of this
Annual Report and Accounts and at:
plc.taylorwimpey.co.uk/ShareholderInformation
(cid:116)(cid:1)A significant reduction in printing and postage costs, without reducing the level
of information available;
(cid:116)(cid:1)Faster access to information; and
(cid:116)(cid:1)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 at:
plc.taylorwimpey.co.uk/ShareholderInformation/ElectronicCommunications.htm
Taylor Wimpey plc plc.taylorwimpey.co.uk
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Chief Executive’s review
Our strategy has continued to gain momentum and we are pleased
to report that we continue to deliver progress across a number of
areas and against each of our strategic objectives.
Our strategy
As I laid out in my Chief Executive’s report in the 2011 Annual Report,
we communicated our strategy to all of our stakeholders last year. We
believe that it is important to communicate our strategy to all of our
stakeholders and to get their buy in, as well as keeping them updated
on how we do in a measurable way.
Our Strategic Objectives set out what we want to achieve financially.
Our progress on these can be found on page 7. Everything we do
is underpinned by our six cultural principles:
(cid:116)(cid:1) If something is worth doing, it’s worth doing properly;
(cid:116)(cid:1) If we make a mistake, we put it right;
(cid:116)(cid:1) We will not compromise in ensuring that everyone leaves our
sites safe and well;
(cid:116)(cid:1) We are competitive and don’t accept second best, we drive
for results;
(cid:116)(cid:1) We behave with integrity, and are honest and forthright, but we
support each other; and
(cid:116)(cid:1) We strive to enhance the environment and local community,
not damage it.
2012 has been a year of significant progress for Taylor Wimpey, where
we have delivered a strong financial performance and continued to
develop our business for the future.
During 2012, we’ve continued our consistent approach and focus on
margin and returns, delivering a significant increase in profits. These
results show the benefit of our short term land and strategic land asset
choices, along with our sharpened focus on capital efficiency.
Financial Review
Group revenue in 2012 increased by £211.0 million to £2,019.0 million
(2011: £1,808.0 million) from Group completions of 10,944
(2011: 10,232), excluding joint ventures, against a backdrop of a
stable UK housing market. The gross profit in the year has increased
23.8% to £356.3 million (2011: £287.7 million). The gross profit for the
year includes £85.1 million (2011: £99.6 million) of positive contribution,
on completions from sites with previously impaired inventory. Group
operating profit* increased significantly by £70.6 million, or 44.3%,
to £230.1 million (2011: £159.5 million) resulting in a Group operating
margin* of 11.4% (2011: 8.8%). Group asset turn†† increased to 1.19
times in 2012 (2011: 1.11 times), benefiting from a greater proportion
of sales from higher quality sites, resulting in Group return on net
operating assets*** increasing substantially by 3.8 percentage points
to 13.6% (2011: 9.8%).
UK market and cycle
2012 market conditions were stable throughout the year and
underlying market prices were flat. We completed 10,886 homes in
the UK at an average price of £181k (2011: 10,180 homes at £171k),
“ We have delivered a strong financial
performance and continued to develop
our business for the future.”
Pete Redfern
Chief Executive
Our corporate
responsibility highlights
(cid:116)(cid:1) 99% of our employees agree that Taylor Wimpey is committed to
Health, Safety and Environmental (HSE) and keeping people safe.
(cid:116)(cid:1) 93% of our employees agree that Taylor Wimpey takes its social
and community responsibilities seriously.
(cid:116)(cid:1) We were named ‘Housebuilder of the Year’ at the Housebuilder
Awards 2012 and also won the ‘Best Product’ category.
(cid:116)(cid:1) We achieved a 74% reduction in waste to landfill since 2007.
(cid:116)(cid:1) The Home Builders Federation (HBF) awarded us the maximum
five star rating for customer satisfaction.
(cid:116)(cid:1) We contributed over £175 million to our local communities
via Section 106 and Section 75 planning obligations
(2011: £130 million).
* Operating profit is defined as profit on ordinary activities from continuing operations
before finance costs and exceptional items, after share of results of joint ventures.
†
Tangible net assets per share is defined as net assets excluding goodwill and intangible
assets divided by the number of shares in issue at the period end.
** 2011 comparatives have been restated to consolidate the UK Housing and Corporate
†† Asset turn is defined as total revenue divided by the average of opening and closing
segment, as the Group now only reports two operating segments.
net operating assets.
*** Return on net operating assets is defined as operating profit divided by the average of
the opening and closing net operating assets, which is defined as capital employed
plus intangibles less tax balances.
††† 2010 comparative excludes a one-off pension curtailment credit of £12.0 million
in the UK.
6
Taylor Wimpey plc Annual Report & Accounts 2012
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against a backdrop of broadly flat house prices in the wider market.
This increase has been driven primarily by the enhanced quality of our
locations. Our net private reservation rate for the full year was 0.58
homes per outlet per week (2011: 0.54). We would consider a more
normalised market environment to be one where market sales prices
move at least in line with general inflation and annual average sales
rates are around 0.70.
Different stages in the housing and economic cycle require different
actions in order to deliver value and returns across the cycle. While it is
impossible to judge the peaks and troughs exactly right, a fundamental
part of our strategy is to take a more active approach to managing the
cycle than has been undertaken in the business historically.
Successfully implementing our strategy
The impact of our strategy has continued to gain momentum and
we are pleased to report that we continue to deliver progress across
a number of areas and against each of our strategic objectives. Our
vision is to become the UK’s leading residential developer for creating
value and delivering quality for customers and other stakeholders.
We are confident of achieving this by concentrating on our key
drivers of value:
(cid:116)(cid:1) Absolute commitment that a strong margin performance is the
way to drive the best sustainable returns;
(cid:116)(cid:1) Margin underpinned by timing and quality of short term
acquisitions and enhanced by extensive strategic land;
(cid:116)(cid:1) Continual improvement philosophy with a relentless focus on
adding value to every existing and new site;
(cid:116)(cid:1) Significant ongoing investment in great quality people and processes;
(cid:116)(cid:1) Increasing focus on asset efficiency and maximising the returns on
our land investments; and
(cid:116)(cid:1) Active management of investments and structure over the housing
cycle, to reduce risk and maximise returns over the long term.
Our landbank
Our landbank is an investment portfolio which is critical to our success
and underpins the future performance of our business. We have
continued to enhance the quality of our short term landbank by actively
managing our portfolio: taking advantage of the attractive opportunities
we are currently seeing at this point in the cycle and continuously
adding value to our existing landbank. As at 31 December 2012,
our short term owned and controlled landbank in the UK comprised
65,409 plots across our 24 regional businesses (31 December 2011:
65,264). The strength of our UK strategic landbank, which stands at
100,340 plots (including pipeline) (2011: 86,236) reflects the investment
we have made over the last few years and further builds on our
confidence in delivering sustainable returns through the cycle.
Our business model
Our business model is based on a value cycle on page 8 first set out
in our 2010 Annual Report and Accounts. Each component of the
value cycle is important and in order to achieve our strategic objectives
we constantly work to optimise each stage, while never forgetting that
we need to attract, develop and retain the right team to deliver this.
We strongly believe that having specific and identifiable objectives as
well as a clear business model creates long term value and delivers our
strategic priorities in each area of activity and in turn our business. Our
results have shown that this strategy is already reaping benefits and
that it can navigate the short term market challenges and deliver in
the future.
Our strategic objectives
(cid:116)(cid:1)Driving further UK operating margin progression
beyond 2012
(cid:116)(cid:1)Delivering at least a 15% return on net operating assets
through the cycle
(cid:116)(cid:1)Growing net assets by 10% per annum on average
through the cycle
UK
operating
margin* (%)
11.5%
9.0
6.4
Group return
on net operating
assets*** (%)
13.6%
11.5
13.6
Tangible net
asset value
per share† (p)
61.5p
56.9
57.3
61.5
9.8
5.3
2010†††
2011**
2012
2010†††
2011
2012
2010
2011
2012
KPIs
Having a set of clear and consistent Key Performance Indicators (KPIs)
is important to us and holds us to account in a clear and measurable
way. These KPIs are set out in detail on page 16 and include both
financial information and non-financial metrics across the business
in areas such as the environment, health and safety and people.
Each of our 24 businesses adheres to an Internal Operating
Framework. A description of the Company’s internal control system
for management, particularly of financial risks, is in the Audit Committee
Report on pages 37 to 40. An analysis of the key business risks facing
the Group appears in the Business Review on pages 12 and 13.
Corporate responsibility
We want to create value and drive returns for our stakeholders, but
how we deliver this is just as important to us. With our scale and
importance to the UK economy, comes social, environmental,
economic and ethical responsibilities and a call to lead by example. We
take these responsibilities seriously and integrate them into our
business activities to effectively manage our environmental, economic
and social impacts. We strive to make a positive difference to the
communities in which we operate. This objective is set within a context
of achieving a sustainable long term UK business.
As a business dedicated to building homes and creating communities, we
care deeply about housing and homelessness issues. During 2012 we
continued to support Centrepoint and also set up a unique network of
regional charities.
Taylor Wimpey also publishes on its Web site an annual Corporate
Responsibility Report which details the practices, strategies and
policies being implemented across the divisions. Within our Annual
Report and Accounts there are various links to corporate responsibility
and you will see how ingrained this is within our business.
Taylor Wimpey plc plc.taylorwimpey.co.uk
7
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Chief Executive’s review continued
Our business model
The table provides a description of each component of
the value cycle, and how each is important to our strategy
to create and deliver enhanced value and quality. It also
highlights the progress we have made in 2012 and our
priorities for 2013.
We monitor several Key Performance Indicators (KPIs) which
we derive from our value cycle and which we use to measure
our success.
O p timising value
Caring about
our customers
Selecting
land
Simply the
best people
Getting the
homebuilding
basics right
Managing the
planning and
community
engagement
process
See page 16 for more information on our KPIs
Components of the value cycle
Selecting land
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 and
at the right point in the cycle is a key driver of
shareholder value.
See page 17 for more information
Managing the planning and
community engagement process
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.
See page 18 for more information
Getting the homebuilding basics right
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.
See page 18 for more information
Caring about our customers
Buying a home 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.
See page 20 for more information
Optimising value
Developing sustainable homes and communities
is a time-consuming process, but this provides us
with the opportunity to undertake regular reviews
over the life of each development to identify
potential improvements.
See page 21 for more information
Simply the best people
This value cycle requires significant input
from skilled and committed people to deliver
aspirational, high-quality homes and communities
for our customers.
See page 21 for more information
8
Taylor Wimpey plc Annual Report & Accounts 2012
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Our strategy to deliver enhanced value
Progress in 2012
Priorities for 2013
We are highly selective with regard to the types of sites that
we buy, focusing on the quality of the land rather than the
number of plots acquired. We employ dedicated land teams
in each of our 24 regional businesses, who use their expertise
and local knowledge to identify potential high-quality,
sustainable sites. Our regional businesses are also supported
by our strategic land teams who operate throughout the UK
and are tasked with identifying areas where population
growth, or other local demand, could create opportunities to
promote land through the planning system. The importance
we place on effective partnerships, along with our expertise
and track record for delivering planning consents, makes us
an attractive partner for landowners.
Added 14,172 plots to the short term
landbank on favourable terms. Average
selling prices increased for 2012 to £181k
(2011: £171k) primarily as the result of
enhanced locations which contributed to
the increase in contribution per legal
completion to £33.9k from £28.6k in 2011.
Also added 14,104 plots to the strategic
landbank which stood at 100,340 plots as
at 31 December 2012. 24% of 2012
completions were from strategically
sourced land, up from 17% in 2011.
We believe that a positive and structured approach to working
with others is at the heart of a successful scheme. Residential
development is a local business and we work in partnership
with the communities in which we build to deliver homes that
meet their requirements and aspirations. We have rolled out a
continuous process of community engagement over the
lifetime of each development, which will enable us to identify
the best use of each site to meet the needs of local residents,
to deliver appropriate financial returns for our shareholders, to
ensure that we have a mix of homes that meets local market
demand and that the site is optimised for safe, efficient and
considerate development.
Contributed over £175 million to our local
communities via Section 106 and Section
75 planning obligations (2011: £130 million).
Introduced a new set of community
engagement tools and continued to
provide engagement training for employees.
Continued to maintain the About Taylor
Wimpey Web site. Ranked in joint first
place on the ‘Impact on Society and
Economy’ section of the 2012
NextGeneration benchmark.
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, minimise
disruption to residents in the surrounding areas and to
protect and enhance the value of each site.
Developed a new training programme on
adopting a collective responsibility for
health and safety and delivered training to
over 500 individuals from senior managers
to Board directors.
Our ReUSE programme was ‘Highly
Commended’ in the waste category of
the Constructing Excellence National
Awards 2012.
Awarded ‘Housebuilder of the Year’ and ‘Best
Product’ for our innovative PresRoof at the
Housebuilder Awards in November 2012.
Further reduced the construction waste
produced as a result of our activities to
3.36 tonnes in 2012 per 1,000ft2 built
(2011: 3.44 tonnes).
Continue to manage
our investments and
landbank in line with the
cycle. We aim to source
30% of completions from
strategic land over the
next three years.
Our UK operational
Key Performance Indicators
KPI
Owned and
controlled plots
with planning
65,409
6
3
,
5
5
6
6
5
,
2
6
4
6
5
,
4
0
9
Contribution per
legal completion
(£k)
33.9
3
3
.
9
2
8
.
6
2
2
.
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2010 2011 2012
2010 2011 2012
Monitor the use of tools
provided in the community
engagement manual and
seek detailed feedback
from regional businesses.
Further develop the About
Taylor Wimpey Web site
and develop our approach
to on-line community
engagement.
Contribution per
legal completion
(£k)
33.9
3
3
.
9
2
8
.
6
2
2
.
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Owned and
controlled plots
with planning
65,409
6
3
,
5
5
6
6
5
,
2
6
4
6
5
,
4
0
9
Decrease the number of
RIDDOR reportable injuries
to 2011 levels.
Provide a minimum of two
days HSE training for our
site management and
operational staff.
2010 2011 2012
2010 2011 2012
Health and safety
incident rate
389
5
5
7
3
7
8
3
8
9
Waste generated
per 1,000 square
feet built (tonnes)
3.36
4
.1
8
33.9
3
.
3
6
3
.
4
4
2010 2011 2012
2010 2011 2012
No matter what the size or price of a property, for each
customer the home that they are buying is aspirational to
them. We will maintain our focus on delivering high-quality
homes and a consistently excellent ‘Customer Journey’ to all
of our customers. We continue to make improvements to our
on-line capabilities, including our Web site and use of social
media such as Facebook and Twitter.
Awarded the HBF five star rating in March
2012, the highest rating, reflecting our
commitment to customers.
Customer satisfaction increased to 93.2%
in 2012 (2011: 92.1%).
Launched the Taylor Wimpey Sales Academy.
Continue to focus on
providing an excellent
‘Customer Journey’
for our customers.
Launch our new Taylor
Wimpey Web site.
Customer
satisfaction score
(%)
93.2
9
2
.1
9
3
.
2
8
7
.1
Forward order book
as a percentage
of completions (%)
55.3
5
3
.1
5
5
.
3
4
7.
2
2010 2011 2012
2010 2011 2012
We look to optimise the value of each site not only during
the initial acquisition process, but throughout the planning
and development stages so that the original value is not only
protected but enhanced. We achieve this by undertaking a
series of thorough reviews of each site at all stages of its
lifecycle, using our value improvement and tracking processes
to ensure that we are continually optimising and delivering
the value within our land portfolio.
Migrated 15 businesses to our new
IT system.
Continued to review every site through our
value improvement meetings.
We want to be the residential developer of choice for
employees. We want to attract and retain the best people
by having a culture that people identify with, where they
can realise their full potential and achieve success and
satisfaction. We will continue to seek a balance of internal
and external appointments, in order to combine career
development with the introduction of new perspectives
and innovative approaches.
Conducted an employee survey and
undertook an audit of the diversity of
our employees.
Complete roll out of our
new IT system to all our
business units.
Continue to actively
review every site and
optimise new sales outlets
prior to opening.
Draw up action plans to
improve areas highlighted
by our employee survey.
Develop a modular training
programme for production
and technical employees.
Contribution per
legal completion
(£k)
33.9
3
3
.
9
2
8
.
6
2
2
.
9
2010 2011 2012
Employee
turnover
(%)
10
1
0
1
0
9
2010 2011 2012
Taylor Wimpey plc plc.taylorwimpey.co.uk
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Chief Executive’s review continued
Group Management Team
The Group Management Team (GMT) is responsible for the day to day running of the Company and comprises:
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Pete Redfern
Chief Executive
Ryan Mangold
Group Finance Director
Responsibilities
As head of the GMT, my responsibilities
include key strategic and operational
decisions, corporate responsibility and
health and safety.
Responsibilities
Ryan’s role covers all areas of Finance,
including tax and treasury, as well as
Information Technology. Ryan also
plays an active part in our Investor
Relations programme.
James Jordan
Group Legal Director and
Company Secretary
Responsibilities
James is responsible for our Company
Secretariat department, as well as
overseeing all legal matters from plot
conveyancing to land buying.
Fergus McConnell
Divisional Chairman, North
Responsibilities
Fergus oversees the 10 regional
businesses within our North Division.
He is also the project sponsor for our
new IT system.
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Peter Truscott
Divisional Chairman, South
Peter Andrew
Director of Land and Planning
Maria Pilfold
Group Human Resources Director
Responsibilities
Peter heads our South Division, which
contains 14 regional businesses, and
also has responsibility for our business
in Spain.
Responsibilities
Peter oversees our Strategic Land
team and is leading our response to
the evolving UK planning system.
Responsibilities
Maria has responsibility for all areas
of Human Resources, including
recruitment, benefits, talent and
performance management.
External recognition
We are committed to delivering high-quality homes for all of our
customers. During 2012, Taylor Wimpey won a number of awards,
recognising excellence across various areas of the business, including
‘Housebuilder of the Year’ and ‘Best Product’ for our innovative
PresRoof at the Housebuilder Awards in November. We were
particularly pleased to win 66 NHBC Pride in the Job Quality Awards
(2011: 65), representing 21% of our active sites, 16 Seals of Excellence
(2011: 18) and a further two (2011: two) Regional Awards, which are
based on build quality and site management excellence.
People and culture
Our employees are critical to our success and provide us with a
sustainable competitive advantage that can neither be easily, nor
quickly, replicated.
During 2012 we conducted our first employee survey for a number of
years. We were particularly pleased to note that 99% of our employees
agree we take health and safety seriously and 94% of our employees
are proud to work for Taylor Wimpey. Following the roll out of our
strategy to all employees in 2011, the survey also highlighted that 98%
of employees understand how their work fits into Taylor Wimpey, 97%
understand what Taylor Wimpey wanted to achieve in 2012, and 97%
are clear about what is expected from them on a day to day basis. This
buy in and understanding makes a big difference. Importantly, this
survey also highlighted areas for improvement and we intend to focus
on these during 2013.
I would also like to take this opportunity to reiterate Kevin’s words and
say thank you to our employees who have implemented the strategy
and delivered this great result with such enthusiasm.
Outlook
It is too early to predict the market for the year and we believe that
mortgage availability will remain the key constraint on the market,
although we have seen improvement over the last few months and
hope that this will continue. This, combined with a tentative
improvement in consumer confidence, gives us grounds for cautious
optimism in the short term.
Our strategy focuses on building and applying our key competencies:
margin performance; land investment and management; continuously
adding value; people; and an active approach to managing the market
cycle to maximise returns. Our results already show the benefit of the
successful implementation of our strategy, while our high-quality land
portfolio, increased order book and strong balance sheet give us
confidence to target further progress in 2013 and beyond.
10
Taylor Wimpey plc Annual Report & Accounts 2012
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Our approach to risk management
As with any business, Taylor Wimpey faces a number of risks and uncertainties in the course
of its day to day operations. It is only by effectively identifying and managing these risks that
we will be able to deliver on our strategic priorities of improving operating margin, return on
net operating assets and net asset value.
Strategic Priorities
Principal
Risks &
Uncertainties
Group Material
Risk Register
BU & Central
Risk Registers
BU & Central forecast
and planning process
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Our risk assessment and management process
The successful management of risk is essential to enable the Group
to deliver on its strategic priorities. The risk management and internal
control framework define the procedures that manage rather than
eliminate the risk facing the business and can only provide reasonable
and not absolute assurance against material misstatement or loss.
The risk management framework consists of risk registers at all
organisational levels which detail the risk faced by the Group, its
operating companies and the central service teams. The registers
identify key operational and financial risks while strategic risks are
identified as part of the business planning process although it is
expected that strategic risks will be included on risk registers. The risk
registers take into account the significance of environmental, social
and governance matters of the Company and use a standardised
methodology for the assessment of risk.
The standard methodology used in risk management requires
each risk identified to be assessed and ranked according to a risk
matrix which accounts for the likelihood and impact of each risk.
The risks identified are assessed for potential effect on the Company’s
short and long term value. The completion of risk registers is iterative
and refreshed on an ongoing basis. The risk registers feed into a
formal half yearly risk assessment that identifies the principal risks
(see pages 12 and 13) and allows the Board to re-evaluate the
identified strategic risks facing the Group.
The Board oversees the risk and control framework of the Group
and the Chief Executive is responsible for implementing any necessary
improvements with the support of the GMT. In line with our report
last year and consistent with the UK Governance Code, the Board
increased the frequency of its formal risk reviews to half yearly and in
addition the GMT conducts a detailed review as part of the business
planning process.
At its half year and year end meetings the Board reviewed the risk
profile of the Group and the significant risks with the mitigating factors.
At the year end meeting in February 2013 following the annual review
by the Audit Committee on the effectiveness of internal controls and a
formal assessment of risk, which included a detailed risk assessment
by the GMT, the Board completed its annual assessment of risks for
the year end 31 December 2012. The key risks affecting the Group
were identified and agreed with the Board together with processes
for their elimination or mitigation and actions required to reduce the
likelihood of each risk to the Group.
More information on risk management and internal control is contained
within the Audit Committee Report on pages 37 to 40.
Taylor Wimpey plc plc.taylorwimpey.co.uk
11
Chief Executive’s review continued
Principal risks and uncertainties
The table below summarises the Group’s principal risks and uncertainties. We also maintain
a Sustainability and Climate Change Risk and Opportunity Register to monitor other non-
financial issues that could affect the Group. More information is available in our Corporate
Responsibility Report at plc.taylorwimpey.co.uk/CorporateResponsibility/CRreports/
Relevance to strategy
Potential impact on KPIs
Mitigation
Progress in 2012
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Impact of market
environment on demand
Ongoing uncertainty in the wider
economy, government austerity
measures, flat economic growth and the
potential for increased unemployment
could suppress demand for housing.
Responsibility
(cid:116)(cid:1)Group Management Team
(cid:116)(cid:1)UK Sales Director
(cid:116)(cid:1)Regional Sales and Marketing Directors
Due to economic
conditions and, in particular,
increasing unemployment,
consumer confidence
remains low. This has an
impact on demand for new
homes as individuals are
more cautious about their
financial future and so less
likely to take on major new
financial commitments
such as a mortgage.
Effective demand for new
homes below normal levels
could negatively impact on
both profitability and cash
generation. This would have
an adverse effect on return
on net operating assets
and net debt.
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Impact of economic
environment on
mortgage availability
Whilst we have seen further incremental
improvements in mortgage availability
during 2012, the restricted availability of
UK mortgage approvals remains the key
constraint on the UK housing market.
Responsibility
(cid:116)(cid:1)Group Finance Director
(cid:116)(cid:1)UK Sales Director
(cid:116)(cid:1)Group Treasurer
Government
regulations and
planning policy
The introduction of the Localism Act,
National Planning Policy Framework and
the Community Infrastructure Levy (CIL)
have introduced significant change in the
planning system.
Responsibility
(cid:116)(cid:1)Chief Executive
(cid:116)(cid:1)UK Land and Planning Director
(cid:116)(cid:1)Other members of our senior
management team
(cid:116)(cid:1)Managing Directors of our
regional businesses
Site and product safety
Building sites are inherently
dangerous places. Unsafe practices
by our employees or sub-contractors
have the potential to cause death
or serious injury.
Responsibility
(cid:116)(cid:1)Chief Executive
(cid:116)(cid:1)Head of Health and Safety
(cid:116)(cid:1)Every employee and sub-contractor
The majority of the homes
that we build are sold to
individual purchasers who
take on significant
mortgages to finance their
purchases. In particular the
ability of first time buyers
and investors to purchase
homes has decreased
since the financial downturn
due to reduced mortgage
availability at the higher loan
to value levels and hence
significant deposits
are required.
Our ability to obtain the
planning permission
required to develop
communities is dependent
on our ability to meet the
relevant regulatory and
planning requirements.
The new planning system is
still in its infancy so could
result in extended
timescales for gaining
planning consents or
increased legal challenges
as the powers within the
new processes are clarified
and tested. These factors
increase uncertainty and
increase the commercial
risk of projects.
The success of our
operations requires 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.
Credit availability remains
below normal historic levels.
As a result the level of
effective demand for new
homes is below historic
trends, which could
negatively impact on both
profitability and cash
generation. This would have
an adverse effect on return
on net operating assets
and net debt.
Inability to obtain suitable
consents, or unforeseen
delays, 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.
The locally produced CIL
charge schedules could
increase costs and therefore
impact on the viability of
current developments. All
of these would have a
detrimental impact on the
contribution per plot.
In addition to the potentially
tragic personal impact of an
accident on site or after
customer completion, there is
potential for legal proceedings,
financial penalties, reputational
damage and delay to the
site’s progress.
Our local teams select the locations and
home designs that best meet the needs
of the local community and customer
demand in the present and future. We
evaluate new outlet openings on the
basis of local market conditions and
regularly review the pricing and
incentives that we offer.
We minimise the level of speculative
build that we undertake and strive to
reduce build costs, while maintaining
quality, through operational efficiencies
and price reductions. We continuously
look to optimise our marketing Web
site to increase the conversion rate of
visitors to customers.
We use a range of sales incentives like
‘Easymover’ and ‘Deposit Match’. We
also offer, on certain sites, the
government backed ‘FirstBuy’ and
NewBuy (MI New Home In Scotland)
products to reduce customer up-front
costs and the level of finance required.
We continue to work with the
government and with the lenders
in order to further improve
mortgage availability.
We have responded to the changes
in planning policy by developing a
comprehensive community led
planning strategy. This has improved
communications between our regional
businesses, communities and local
authorities, enhancing our ability
to deliver developments that meet
local requirements.
We consult with the UK government
on upcoming legislation, both directly
and indirectly as a member of industry
groups, to highlight potential issues
and to understand any proposed
changes to regulations.
We were amongst the first
in the industry to offer the
government-backed
NewBuy scheme when it
launched in March 2012
and we have seen strong
interest in the scheme
amongst our customers.
The confidence and
ability of banks to lend
has improved during 2012
as concerns regarding the
Eurozone have eased.
Although in its early stages,
the introduction of the
Funding for Lending
Scheme (FLS) by the UK
government also appears
to be having a positive
effect and the introduction
of the NewBuy mortgage
scheme has been
well received.
We have made
significant strides in the
implementation of our
customer and community
engagement planning
strategy and have been
encouraged by the early
successes that we
have achieved.
We are participating in the
local Plans Management
Group (PMG) via the HBF
to ensure local plans are
robust and CIL charge
schedules are appropriate.
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 and build houses that
comply with the required regulations.
All health and safety issues are reviewed
by the Group Management Team and,
where appropriate, action plans are put
in place to rectify any issues.
We continue to compare
favourably to the UK
construction industry in
terms of site safety. Having
been made aware of an
incident of suspected
exposure to carbon
monoxide at a property
with an extended gas flue
(EGF), we undertook a
prioritised programme
of inspections at the site,
as well as extending our
existing nationwide
EGF programme.
12
Taylor Wimpey plc Annual Report & Accounts 2012
Relevance to strategy
Potential impact on KPIs
Mitigation
Progress in 2012
Land purchasing
The purchase of land of poor quality,
at too high a price, or incorrect timing
of land purchases in relation to the
economic cycle could impact
future profitability.
Responsibility
(cid:116)(cid:1)Group Management Team
(cid:116)(cid:1)Divisional Managing Directors
(cid:116)(cid:1)Regional Managing Directors
(cid:116)(cid:1)Regional Land and
Planning Directors
(cid:116)(cid:1)Strategic Land Managing Directors
Land is the major ‘raw
material’ for the Group and
the limited availability of
good-quality land at an
attractive price leads to
significant competition.
Purchasing land of the
appropriate quality on
attractive terms at the right
point in the economic cycle
will enhance the Group’s
ability to deliver future profit
growth as housing
markets recover.
Purchasing poor-quality or
mispriced land, or incorrectly
timing land purchases would
have a detrimental impact on
our profitability and returns.
The purchasing of insufficient
land would reduce the
Group’s ability to actively
manage its land portfolio, and
create value for shareholders.
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At this point in the
economic cycle we
continue to see a number
of attractive opportunities
in the land market.
The lower level of
competition from other
potential purchasers
enables us to acquire
land at higher than
normal returns.
Our local land teams select and
appraise each site. Our appraisal
process ensures each project is
financially viable, consistent with our
strategy and appropriately authorised,
dependent on the proposed scale
of expenditure.
We strive to be the developer of
choice by adopting a comprehensive
approach encompassing landholders,
land agents, local councils and
local communities.
Our strategic land teams work
alongside regional businesses to
identify and secure land with the
potential for future development and
promote it through the planning system.
We have regular meetings with the
pension trustees to discuss investment
performance, regulatory changes and
proposals to manage the deficit actively.
We have started the
process of merging the
two pension schemes
in 2013.
We continue to implement the agreed
investment strategy for the schemes
through the established joint
investment sub-committee.
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 and have
succession plans in place for key
roles within the Group. We hold
regular development reviews to
identify training requirements.
We are also in the process
of creating a Pensions
Funding Partnership (PFP)
to accelerate the timescale
for reducing the scheme
deficit. The creation of the
PFP will enable the
Company to provide
funding in the form of
assets, reducing the level of
cash contributions required
from the Company.
During 2012, we have
conducted our first
employee survey for a
number of years, which
has highlighted some areas
for improvement that we
will focus on in 2013.
We have also introduced
our Sales Academy
during the year.
Continuing economic
uncertainty could lead to
further reductions in the value
of scheme assets, further
reductions in the discount
rate and/or increases in
inflation could result
in further increases in
scheme liabilities.
Improvements in the
economic environment could
have a beneficial effect on the
value of assets and reduce
the level of liabilities.
Not having the right teams in
place could lead to delays,
quality issues, reduced sales
levels, poor customer care
and reduced profitability.
If the availability of
sub-contractors or
materials is insufficient to
meet demand this could
lead to increased build
times, increased costs
and, therefore,
reduced profitability.
Lack of skilled sub-
contractors could also result
in higher levels of waste being
produced from our sites and
lower build quality.
We maintain regular contact
with suppliers regarding volume
requirements and negotiate contract
pricing and duration as appropriate.
As part of our sub-contractor
selection process key competencies
are considered, particularly in
relation to health and safety, quality,
previous site performance and
financial stability.
We also work to address the skills
shortage in the industry through
apprenticeship schemes and the
Construction Industry Training Board.
Industry volumes remain
subdued, as do markets in
other economies that have
the potential for significant
demand for construction
raw materials.
We have made further
progress with the
introduction of our
standard house types
and regional cost
benchmarking, both
of which are delivering
increased build efficiency.
Pensions
The volatility of the pension deficit has
the potential to impact on the Group’s
share price, balance sheet and cash
flow. The current economic uncertainty
is driving discount rate volatility, resulting
in increased liabilities and reduced
investment returns, which have in
turn led to an increased deficit and
the potential for increased deficit
recovery payments.
Responsibility
(cid:116)(cid:1)Group Finance Director
(cid:116)(cid:1)Head of Pensions
Ability to attract
and retain high-calibre
employees
Recruiting employees with inadequate
skills or in insufficient numbers, or not
being able to retain key staff with the
right skills for the future, could have a
detrimental impact on our business.
Responsibility
(cid:116)(cid:1)Chief Executive
(cid:116)(cid:1)Group HR Director
(cid:116)(cid:1)Every employee managing people
Material costs and availability
of sub-contractors
Supply of labour and materials has
reduced as industry volumes declined
over recent years. However, as markets
recover, there will be greater demand and
competition for key skills and materials
which could lead to increased prices.
Responsibility
(cid:116)(cid:1)Head of Procurement
(cid:116)(cid:1)Regional Commercial Directors
Our strategic objective of
growing net asset value
by 10% per annum on
average through the cycle
will be impacted by any
increase in the pension
deficit eroding net asset
value delivered through
operational performance.
Cash contributed to the
pension schemes in order
to reduce the deficits is not
available to the Company
for operational uses such
as land spend.
Our value cycle requires
significant input from skilled
people to deliver quality
homes and communities
for our customers.
The challenging market
conditions and changing
planning environment have
meant that the retention of
high-quality trained
employees continues to
be key to achieving our
strategic goals.
In order to optimise our
build cost efficiency, whilst
retaining the flexibility to
commence work on new
sites as planning consents
and local market conditions
allow, the vast majority of
work carried out on site
is performed by
sub-contractors.
Some sub-contractors
and suppliers have gone
out of business as a result
of the downturn, with
others reducing prices
to secure orders. As
demand increases, labour
and material prices
could increase.
Taylor Wimpey plc plc.taylorwimpey.co.uk
13
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Chief Executive’s review continued
Corporate responsibility
We seek to be a responsible organisation and to manage our business to make positive
social, environmental and economic contributions to the regions in which we operate.
Evaluating our progress
Priorities
Progress
Status
Targets for 2013
Our homes and
communities
(cid:116)(cid:1)Continued to work with Waste Resources and Action Programme
(WRAP) and have achieved a 74% reduction in construction waste to
landfill per home completed since 2007. Further reduced construction
waste to 3.36 tonnes in 2012 (2011: 3.44 tonnes).
(cid:116)(cid:1)Introduced a new set of community engagement tools and continued
to provide engagement training for employees.
(cid:116)(cid:1)Engaged with the Building for Life (BfL) partners behind the standard,
and finalised our internal tool in 2012 for launch in 2013, which will
reflect the new BfL12 standard.
(cid:116)(cid:1)Started to measure soil to landfill and water use and will start to
publish figures in 2013.
(cid:116)(cid:1)Monitor the use of tools provided in the community engagement
manual and seek detailed feedback from our regional businesses.
(cid:116)(cid:1)Further develop the About Taylor Wimpey Web site and investigate
how we could approach on-line community engagement.
(cid:116)(cid:1)Launch our BfL tool and develop a major training programme for
design and technical staff covering all aspects of their work, including
sustainability and BfL.
(cid:116)(cid:1)Undertake a review of supply chain resource efficiency covering
energy, carbon, water and waste.
(cid:23)
Our customers
(cid:116)(cid:1)Continued to focus on our Customer Journey and customer service,
(cid:116)(cid:1)Continue to monitor all aspects of customer service in order to continually
achieving a five star ranking from HBF.
improve our performance.
(cid:116)(cid:1)Introduced new signage into our sales centres including details of
energy efficiency and sustainability performance of homes.
(cid:116)(cid:1)Introduced the Taylor Wimpey Sales Academy with the aim of developing
the most knowledgeable and competent sales and marketing teams in
the industry.
(cid:23)
(cid:116)(cid:1)Sales executives identified for career development will commence
a new sales development programme and we will design a similar
programme for sales managers.
(cid:116)(cid:1)Start development of sustainability and community led planning modules
for the Taylor Wimpey Sales Academy programme.
Our people
(cid:116)(cid:1)Conducted an employee survey and undertook a review of the diversity
(cid:116)(cid:1)Draw up action plans to improve areas highlighted by our
of our employees.
(cid:116)(cid:1)Developed a new training programme on adopting a collective
responsibility for health and safety and delivered training to over
500 individuals from senior managers to Board directors.
(cid:116)(cid:1)Continued to compare favourably to the construction industry with
an Annual Injury Incidence Rate (AIIR) of 389 versus the 2011/12
‘Construction Sector Rate’ of 589.
employee survey.
(cid:23)
(cid:116)(cid:1)Develop a modular training programme for production and
technical employees.
(cid:116)(cid:1)Decrease the number of RIDDOR reportable injuries to 2011 levels
and continue to provide a minimum of two days HSE training for our
site management and operational staff.
Our partners
(cid:116)(cid:1)Vetted all of our national suppliers in the UK to ensure that they continued
(cid:116)(cid:1)Develop guidance for our regional businesses to ensure ongoing supplier
to comply with our health and safety requirements.
(cid:116)(cid:1)Worked towards introducing a zero tolerance policy on safe delivery
and vehicle off-loading by engaging with the UK Building Products
Delivery Working Group on policy and procedures to introduce.
(cid:116)(cid:1)Continued to work with our 12 largest suppliers on reducing
packaging waste.
compliance with our health and safety standards.
(cid:23)
(cid:116)(cid:1)Introduce zero tolerance policy on safe delivery and vehicle off-loading.
(cid:116)(cid:1)Identify and approach another tranche of major suppliers with a view to
working with them on packaging waste initiatives.
Our sustainability recognition
During 2012, Taylor Wimpey was selected as a
component of the Dow Jones Sustainability
Europe Index and a constituent of the
FTSE4Good Index Series. Companies in these
indices have met stringent environmental,
social and governance criteria and are
positioned to capitalise on the benefits of
responsible business practice.
Visit our Corporate Responsibility Web site for
more details and to download a copy
of our Corporate Responsibility Report:
plc.taylorwimpey.co.uk/CorporateResponsibility
Visit our About Taylor Wimpey Web site for more
details about our approach to land & planning,
sustainability, design and developing
communities, as well as case studies of
developments we have built in your area:
about.taylorwimpey.co.uk
Our approach to corporate responsibility
This is the sixth year that we have produced a Corporate Responsibility
Report as Taylor Wimpey. We believe that this is an important tool in
highlighting how we address and embrace corporate responsibility.
We strive to make a positive difference to the communities in which
we operate by providing or enhancing community facilities, education,
employment, infrastructure, as well as housing. During 2012, Taylor
Wimpey contributed over £175 million to our local communities via
Section 106 and Section 75 planning obligations (2011: £130 million).
As a business dedicated to building homes and creating communities
we care deeply about housing and homelessness issues. During 2012
we continued to support Centrepoint and also set up a unique network
of regional charities, allowing each of our 24 businesses to work with
a charity within their area and for our employees to see the difference
their efforts makes. We are proud of our charity partnership and of the
big impact that we have had on a number of small organisations.
More information on what we do and why, as well as our key areas
of focus can be found within our dedicated Corporate Responsibility
Report, our plc Web site and our About Taylor Wimpey brochure
and Web site.
14
Taylor Wimpey plc Annual Report & Accounts 2012
Pete Redfern
Chief Executive
UK Housing
Managing the housing market cycle to create value and deliver
increased returns.
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UK housing market
Mortgage availability remained the key constraint on the market for
another year. In 2012, the total value of mortgage approvals for home
purchases was £91,139 million (2011: £82,454 million) according to
Bank of England data. During 2012, private industry housing starts
decreased slightly to 78,120 (2011: 78,250) according to the National
House-Building Council (NHBC).
Underscoring the importance of homebuilding to the UK economy,
the Government implemented several initiatives during 2012, including
NewBuy and extending FirstBuy. We have welcomed these initiatives
and during 2012 supported 1,203 customers to purchase homes
using FirstBuy and 546 homes using NewBuy and MI New Home.
UK financial performance
2012 has been a year of strong growth and operational
performance. Revenue has increased by 11.7% to £1,987.0 million
(2011: £1,779.4 million), primarily driven by an improved mix and quality
of locations, resulting in higher sales prices and an increase in home
completions. It is therefore very pleasing to report growth of 43.6%
in operating profit* to £228.8 million (2011: £159.3 million**) as we
continue to prioritise margin performance from new and old land.
This value focus resulted in an increase in operating margin* to
11.5% for the full year (2011: 9.0%**).
Net operating assets in the UK were £1,667.2 million
(2011: £1,607.2 million) with a strong increase in our return
on net operating assets*** for the year to 14.0% (2011: 10.2%**).
2012 UK market conditions
(cid:116)(cid:1) Housing market remained stable, however mortgage availability
remained constrained.
(cid:116)(cid:1) UK Government introduced several initiatives including
NewBuy and Funding for Lending and extended FirstBuy
which had a positive impact.
Revenue
£1,987m
Operating profit*
£229m
This increase has been driven primarily by the enhanced quality
of our locations. Our overall average selling price has increased to
£181k (2011: £171k). During 2012, we completed 10,886 homes
(2011: 10,180 homes), of which 8,842 were private homes
(2011: 8,075), 1,946 were affordable (2011: 2,048) and 98 joint
venture completions (2011: 57). The average selling price of affordable
completions was slightly lower at £112k (2011: £116k). During 2012
we were selling from an average of 311 outlets (2011: 305). Our net
private reservation rate for the full year was 0.58 homes per outlet
per week (2011: 0.54) with cancellation rates remaining low at
15.2% (2011: 15.8%).
Sales, completion and pricing
The best way to deliver sustainable returns for our shareholders is by
focusing on delivering strong margin performance. Our average selling
prices on private sales increased by 6.5% to £197k (2011: £185k)
against a backdrop of broadly flat house prices in the wider market.
We achieved an increase of 14% in order book value, ending the
year with a total of £948 million (31 December 2011: £835 million),
and an increase of 11% in volume ending the year at 5,966 homes
(31 December 2011: 5,379 homes). We have not compromised on
our focus on driving margin and we are pleased to report further
Market data
We continually monitor where we are in the cycle using external indicators to assess the macro environment.
Mortgage/Earnings ratio
Gross secured lending
Average annual
house price change
Housing starts,
Great Britain
1997
2012
1997
2012
1997
2012
1997
2012
Source: Halifax
The mortgage/earnings ratio provides an
indication of the affordability of housing, taking
into account the underlying mortgage interest
rates. Affordability is significantly improved as a
result of recent declines in both house prices and
Bank of England base rates.
Source: Bank of England
The correlation between the gross secured
lending chart above and the housing starts chart
to the right reflects the impact of restricted credit
availability on the housing market.
Source: Average of Halifax and
Nationwide House Price Indices
There has been significant variation in the
average annual house price change since 1997,
with very strong growth from 2001 to 2003 and
price declines in 2008 and 2009.
Source: Communities and Local Government
Total housing starts do not exhibit the same
strong growth as house prices in the period from
1997 to 2006, but fell sharply from 2007 to 2009.
* Operating profit is defined as profit on ordinary activities from continuing operations
before finance costs and exceptional items, after share of results of joint ventures.
** 2011 comparatives have been restated to consolidate the UK Housing and Corporate
segment, as the Group now only reports two operating segments.
*** Return on net operating assets is defined as operating profit divided by the average of
the opening and closing net operating assets, which is defined as capital employed
plus intangibles less tax balances.
Taylor Wimpey plc plc.taylorwimpey.co.uk
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UK Housing continued
Our UK Housing strategic priorities
(cid:116)(cid:1) Retain our consistent disciplined approach to acquiring short
term land, maintaining a longer land portfolio at this stage in
the market cycle.
(cid:116)(cid:1) Become the industry leader in managing the planning process
across our industry.
(cid:116)(cid:1) Deliver an excellent Customer Journey consistently for all of
(cid:116)(cid:1) Focus on adding new sites to our strategic land portfolio and
our customers.
delivering planning and value from existing sites.
(cid:116)(cid:1) Deliver on our aspiration to add value to every site after acquisition.
Our UK Housing Key Performance Indicators (KPIs)
Objective
Definition
Why is it key to our strategy?
Contribution per
legal completion
KPI
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 (excluding joint ventures).
We continue to prioritise both short
and long term margin performance ahead
of volume growth. Increasing the contribution
per plot is a key driver to achieving
this priority.
Forward order book
as a percentage
of completions
KPI
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
KPI
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 and enables us to be selective
in land purchases.
Customer
satisfaction
KPI
We strive to maintain and
improve our customer
satisfaction scores.
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.
Delivering high levels of customer satisfaction
enhances the reputation of our business and
reduces the costs associated with rectifying
poor-quality work.
Health and safety
KPI
We want our employees
and sub-contractors to go
home safe and uninjured,
day after day.
Reportable injury frequency rate per
100,000 employees and contractors
(Annual Injury Incidence Rate).
As well as having a moral duty to maintain
safety on site, accidents and injuries can
have a detrimental impact on the business
through additional costs, delays and/or
reputational damage.
Waste generated
per home
KPI
We aim to reduce the level
of waste generated per
home each year.
Total tonnage of construction waste
per 1,000 square feet built.
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.
£33.9k
3
3
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9
2
8
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6
2
2
.
9
2010 2011 2012
55.3%
5
3
.1
5
5
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3
4
7.
2
2010 2011 2012
65,409 plots
6
3
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5
5
6
6
5
,
2
6
4
6
5
,
4
0
9
2010 2011 2012
93.2%
9
2
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9
3
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2
8
7
.1
2010 2011 2012
389
5
5
7
3
7
8
3
8
9
2010 2011 2012
3.36
4
.1
8
33.9
3
.
3
6
3
.
4
4
2010 2011 2012
Our UK Housing Risks
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 2012 are:
(cid:116)(cid:1) Lack of mortgage availability, which in part is helped by Funding for Lending and NewBuy; and
(cid:116)(cid:1) Change in government planning policy and the Community Infrastructure Levy for which we are actively reviewing and implementing processes.
16
Taylor Wimpey plc Annual Report & Accounts 2012
improvement in the margin on sales in the order book, with the growth
driven by the strength of the private order book. Private average selling
price in the order book stands at £203k (31 December 2011: £189k),
again primarily the result of better quality locations. We entered 2013
with 327 active outlets (31 December 2011: 312).
Selecting land
With land, location is of course critical. We are first and foremost a
local business. We have a network of 24 businesses, which are located
across the country in most key markets. Our completions and land
buying are approximately weighted 60% to the South and 40% to the
North. We have a strong presence in the South East and in London,
with 19 active sites and 31 landbank sites in the capital. Each land
purchase we make, regardless of geography, is tested against our strict
evaluation criteria, which includes margin, return on capital, market
demand and site specific risk assessment.
During 2012, we approved the purchase of 14,172 new plots
on 112 new sites at an average contribution margin of c.23%
(2011: 11,756 plots on 106 sites). Total land spend including land
creditors was £427 million (2011: £398 million). As we have set
out, our strategy is to manage the business in line with the cycle,
to maximise returns. We continue to see a number of attractive
opportunities in the land market and we have been able to capitalise
on the current reduced level of competition to invest in land that will
deliver strong financial returns. At this point in the cycle, this offers the
best return proposition for our shareholders. We continue to monitor
the land market and other macro factors carefully and we are
committed to the principle of returning cash to our shareholders
when the number of attractive land opportunities decreases as
competition in the land market heats up and we reach what we
believe is optimal scale.
A key focus in 2012 was to maintain and develop our land partnerships
and relationships across the business with the aim to become the land
buyer that vendors and local communities want to deal with. We were
delighted to be selected with London & Quadrant to build the first
residential phase of Queen Elizabeth Olympic Park, Chobham Manor.
As at 31 December 2012, our short term owned and controlled
landbank stood at 65,409 plots, representing 6.1 years of supply
(31 December 2011: 65,264, 6.4 years). The strength of our landbank
reinforces our ability to maintain a disciplined approach to new land
investment and make investments only where we see value.
We are driven by returns and we will undertake land sales where
we feel the price achieved delivers value and the land does not
fit our strategy or is excess to our requirements in a particular
local market. Revenue from land sales totalled £16.2 million in
2012 (2011: £23.4 million) with a gross profit of £3.5 million
(2011: £6.3 million).
Selecting land
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Chobham Manor, Queen Elizabeth Olympic Park
Our East London business unit and partner London & Quadrant
(L&Q) were selected by the London Legacy Development
Corporation (LLDC) to build the first of five housing developments
on the Queen Elizabeth Olympic Park.
The 9.3 hectare site will provide 870 new homes and is one of
the most high profile and strategically important developments in
London. The build is scheduled to begin later in 2013, with the
first homes due for completion by the end of 2014.
UK Housing land portfolio
Plots
Detailed planning
Outline planning
Resolution to grant
Subtotal
Allocated strategic
Non-allocated strategic
Total
Taylor Wimpey plc plc.taylorwimpey.co.uk
Owned
35,226
11,900
3,488
50,614
3,759
28,506
82,879
2012
Controlled
3,546
3,921
7,328
14,795
5,867
60,527
81,189
Pipeline
256
546
753
1,555
36
1,645
3,236
Total
39,028
16,367
11,569
66,964
9,662
90,678
167,304
2011
Total
36,853
21,846
8,300
66,999
9,349
76,887
153,235
17
UK Housing continued
Managing the planning and
community engagement process
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Barnard Castle, County Durham
Our site at Barnard Castle demonstrates how effective
consultation and engagement can ensure our planning
applications have the support and buy-in of the local
community and local council.
Our North East regional Land and Planning team initially met
with the local Parish Council and it was agreed to publish adverts
in the local paper and undertake letter drops to publicise the
consultation and encourage as many local residents as possible
to give their views. The reaction was overwhelmingly positive.
Our planning application, which had the full support of Barnard
Castle Town Council, was approved at committee.
We hope to start on site shortly.
2012 highlights
Completions
10,886
Average selling price
£181k
Average sales outlets (sites)
311
Order book as at
31 December 2012
£948m
The short term landbank only tells part of the story. The
ongoing quality of the short term landbank is protected by the
strength of our strategic landbank that stood at 100,340 plots as
at 31 December 2012 (including pipeline plots), an increase of 16%
(31 December 2011: 86,236). Throughout 2012, we have continued
to add to our strategic land portfolio, both by the promotion of existing
sites through the planning process and by the targeted addition of new
potential plots. Our short term landbank comprises 43% of strategically
sourced land (2011: 41%) and 24% of our 2012 completions
(2011: 17%) were on strategically sourced land. We aim to increase
this percentage to 30% of completions from strategically sourced land
over the next three years, which underpins our confidence in future
margin progression.
Managing the planning and community engagement process
A year on from the release of the National Planning Policy Framework
and the enactment of the Localism Act, we have changed our business
significantly to embrace the principle of community engagement. A key
element of our strategy is to become the industry leader in managing
the planning process across our business, recognising the value this
adds both to our local communities and Taylor Wimpey. We aim to
engage with communities and all interested stakeholders before we
submit a planning application and during the life cycle of the site. In this
way we can listen to their concerns and incorporate these within our
plans where possible.
We have made significant strides during 2012 and are further
encouraged by the success that we have achieved to date, which
we believe has resulted from being very early to adapt our approach.
We were also pleased to receive external recognition of our progress
by being ranked in joint first place in the ‘Impact on Society and
Economy’ section of the 2012 NextGeneration benchmark.
Getting the homebuilding basics right
In order to achieve our objectives and maximise our returns,
consistency and efficiency of process in everything that we do
is key, from health and safety through to build cost control.
Health and safety
Health and safety at Taylor Wimpey is a non negotiable top priority – we
will not compromise in ensuring that everyone leaves our sites safe and
well. We have a formal, comprehensive and fully integrated health,
safety and environmental management programme in place across
our business.
We continue to compare favourably with the UK construction industry
in terms of site safety, but remain committed to reducing our incident
rates further. In 2012, the UK Health and Safety Executive (HSE)
changed the definition of reportable injuries from a three day period
of absence from work to a seven day period. Given the timing of the
industry collection, 2011/12 industry figures are reported using the
previous three day classification where we recorded an Annual Injury
Incidence Rate (AIIR) of 389 in the UK (2011: 378). This is significantly
below the 2011/12 ‘All Home Builder Rate’ of 493 declared by the
18
Taylor Wimpey plc Annual Report & Accounts 2012
Home Builders Federation and the ‘Construction Sector Rate’ 2011/12
of 589 declared by the HSE. Taylor Wimpey’s AIIR on the new basis
is 311 (2011: 222). We recorded 44 RIDDOR (Reporting of Injuries,
Diseases and Dangerous Occurrences Regulations) injuries against
30 in 2011, using the new basis of definition. During 2012 we had
one case of enforcement action (2011: nil), where we received one
Abatement Notice in respect of dust nuisance, which was
quickly rectified.
The health and safety of our customers is of paramount importance to
us and we were made aware of an incident of suspected exposure to
carbon monoxide at our Grand Union Village (GUV) development in
Northwest London which occurred in January 2012. The apartment
had a type of boiler system which uses what is known as an extended
gas flue (EGF), where the pipes transporting exhaust gases from the
boiler pass through and are concealed within a void in order to reach
the outside wall. Such systems have been widely used by the gas
industry since around 2000 and are installed and certified by
independent Gas Safe registered engineers.
We responded with a prioritised programme of flue inspections of
properties with EGFs at the development and extended our existing
nationwide programme of EGF inspections, which we had instigated
in line with revised gas industry safety guidance issued in June 2007.
We also took the decision to write to around 150,000 homes built since
2000 in order to highlight the risks of carbon monoxide, the importance
of regular boiler servicing and to offer to supply audible carbon
monoxide alarms free of charge. Audible carbon monoxide alarms
are now fitted as standard in all new Taylor Wimpey properties with
a gas appliance.
We also believe we should play our part in educating our site teams
about how to stay safe on site and during 2012 we ran a very
successful campaign to improve heavy machinery awareness on site.
Our commitment to health and safety is reflected by the fact that it
continues to form part of all senior managers’ business objectives.
Build costs and efficiency
We have made significant targeted savings in the last four years.
During 2012, we have continued to implement and improve our house
type portfolio. These homes are designed to be high quality, extremely
energy efficient and straightforward, cost effective and safe to build.
They are also extremely flexible with different internal layouts and
exteriors that can be varied easily to complement local landscapes
and streetscapes. The housetypes are designed to meet specific
space standards and comply with Secured by Design principles, the
nationwide initiative intended to reduce crime through home and
scheme design. They are also capable of achieving Lifetime Homes
standards of accessibility and adaptability for changing lifestyles, where
appropriate. As at January 2013, these housetypes were plotted on
approximately 150 sites. This will continue to have a positive impact
on build efficiencies, and costs, mitigating build cost inflation.
We also take steps to ensure our supply chain is efficient. Our scale
affords us the benefit of strong purchasing power and we achieve
significant cost savings across our regional businesses with national
agreements with a number of suppliers.
Getting the homebuilding
basics right
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Nightingale Gardens, Salford
The former Pendlebury Children’s Hospital site is of great
significance to the local community as it is home to a well
known local landmark. We carried out an extensive community
engagement process to ensure that our proposals for its
redevelopment were sensitive to the requirements of local people
and the heritage of the hospital buildings.
Taylor Wimpey purchased the site on a ‘subject to planning
permission’ basis and then worked alongside the Central
Manchester University Hospitals NHS Foundation Trust, and
their planning consultants, in order to secure planning consent
for 234 homes (we also agreed the sale of half of the site to
another developer). We attended meetings with the planning
authority and their urban design team, as well as local councillors,
prior to submitting our planning application.
One of the unique features of the site is the locally listed main
administration building and associated single storey gatehouse,
both of which date back to 1872. As part of our proposals for
the site we agreed to retain these buildings and convert the
main administration building into 12 apartments and the
gatehouse into a children’s nursery that will serve both new
and neighbouring residents. We are also incorporating a number
of other heritage features, ensuring that the history of the site
is reflected through its redevelopment.
Taylor Wimpey plc plc.taylorwimpey.co.uk
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UK Housing continued
Caring about our customers
In 2012, we were awarded the maximum
five star rating for customer satisfaction in
an independent survey by the Home
Builders Federation (HBF).
The UK-wide survey is sent to all new home
purchasers eight weeks after their moving in
date, and asks them to rate their homebuilder
on the service they received and the quality of their new home.
We have been officially ranked as a five star builder, with nine
out of 10 of our customers saying they were satisfied with the
quality of their new home and would recommend Taylor Wimpey
to a friend.
We take great pride in putting our customers first and ensuring
that their whole move goes as smoothly as possible, and this
award is extra assurance of our continued commitment to
customer service and the quality of the homes we build.
Product range
We continue to offer a wide range of homes from apartments to
five bedroom houses, with prices ranging from under £100k to
above £750k.
In 2012, the proportion of apartments in our private completions
was 24% (2011: 26%).
The average square footage of our private completions also remained
broadly the same at 1,013 square feet (2011: 1,012 square feet).
Environment
We continue to focus on waste management and the reduction of
waste produced from our sites. This is not only the responsible thing
to do, but it also makes a positive contribution to site efficiency and
reduced build costs. We continue to work with the Waste Resources
and Action Programme (WRAP) and have achieved a 74% reduction
in construction waste to landfill per home completed since 2007 under
WRAP’s ‘Halving Waste to Landfill’ commitment. We further reduced
the construction waste produced as a result of our activities to
3.36 tonnes in 2012 per 1,000 square feet built (2011: 3.44 tonnes).
This has been achieved by careful planning of operations and giving
due consideration to eliminating, reducing or reusing all potential waste
wherever possible. In 2012, our ReUSE programme was ‘Highly
Commended’ in the waste category of the Constructing Excellence
National Awards 2012. ReUSE is designed to share suitable surplus
soil and recycled aggregates between sites and between Taylor
Wimpey regional business units.
We are committed to improving the water efficiency of the homes that
we build, for example, using water-efficient fittings and appliances as
standard. In 2012, we started to measure the water use of our sites,
offices and home plots before sale in order to monitor and identify ways
to further increase water efficiency. We will start to publish water use
data from 2013.
We are changing our emissions measurement and methodology to
ensure compliance with the UK Government mandatory carbon
reporting requirements ahead of its introduction in 2013.
Quality
We are committed to delivering high-quality homes for all of our
customers. During 2012, Taylor Wimpey won a number of awards,
recognising excellence across various areas of the business, including
‘Housebuilder of the Year’ and ‘Best Product’ for our innovative
PresRoof at the Housebuilder Awards in November. We were
particularly pleased to win 66 NHBC Pride in the Job Quality Awards
(2011: 65), representing 21% of our active sites, 16 Seals of Excellence
(2011: 18) and a further two (2011: two) Regional Awards, which are
based on build quality and site management excellence.
Caring about our customers
Regardless of the size or price, every home we build is aspirational
to our customer. We have been pleased that our efforts have not gone
unnoticed and our customer satisfaction has continued to improve.
During 2012, we achieved 93.2% on the externally measured customer
service scale (2011: 92.1%) and were awarded the HBF five star rating
in March 2012, the highest rating reflecting our commitment to our
customers. Nine out of 10 of our customers said they were satisfied
with the quality of their new home and would recommend us to
a friend.
Buying a home is a significant financial and emotional
investment for our customers. In everything we do, we try to
make the process as easy as possible. We have a dedicated
customer service Web site, which aims to make reporting problems
easier and quicker. Our customer charter can be found on our Web site
www.taylorwimpey.co.uk while our Customer Journey is a special set
of procedures that we have designed to guide our customers through
the process and is consistently applied on each site development.
Sales and marketing
Our approach to sales and marketing, like every other area of our
business, is to drive value. Our prices are set locally and we use
targeted customer incentives, on a site by site basis, knowing that
our customers’ circumstances vary.
First time buyers account for 32% of our sales (2011: 30%). We
continue to offer a wide range of products to assist first time buyers.
Our Mortgage Myths and First Time Buyer Guide won the ‘Highly
Commended’ award at the Housebuilder Awards 2012.
20
Taylor Wimpey plc Annual Report & Accounts 2012
Our customers’ communication preferences have changed over the
last few years, resulting in a greater use of the internet. We work to
harness technology to make it easier for our customers and to allow
us to communicate more effectively. In 2012, 16,196 appointments
were made on our on-line booking system (2011: 13,064). In 2012,
we developed our social media presence through Facebook and
Twitter. We have created a blog to which our senior management
team regularly contribute. Throughout 2012, we have been developing
our new Web site and anticipate a launch in late 2013. This will provide
a more user friendly experience for our customers, investors and
other stakeholders.
Optimising value
We have the expertise to buy a good piece of land and make it great.
Our ability to constantly increase efficiency and tightly control costs is
part of the Taylor Wimpey culture and remains central to delivering
enhanced returns.
We actively review every site, both new and old, through our value
improvement meetings, which are held quarterly and are tracked
centrally. This allows us to benchmark our success and identify
opportunities for further improvement, ranging from replanning of
sites to redesign and selective enhancements to our specification.
Our primary goal with new outlets continues to be to optimise
planning consents and value-engineer sites prior to opening and we
will not compromise on this. We continue to deliver enhanced returns
on newly acquired sites as we open them for home sales.
In 2012, we migrated 15 of our business units over to our COINS
based Enterprise Resource Planning (ERP) system. We anticipate that
we will complete this by the second half of 2013, by which time all 24
business units will be using the same system. This new IT system is
expected to deliver significant savings through the retirement of a
number of legacy systems, as well as supporting our focus on value
improvement through improved management information, reporting
and analysis.
Simply the best people
Our employees are critical to our success and provide us with a
sustainable competitive advantage that can neither be easily, nor
quickly, replicated. During 2012, we conducted our first employee
survey for a number of years. We were particularly pleased to note that
99% of our employees agree we take health and safety seriously and
94% of our employees are proud to work for Taylor Wimpey. Following
the roll out of our strategy to all employees in 2011, the survey also
highlighted that 98% of employees understand how their work fits into
Taylor Wimpey and 97% understand what Taylor Wimpey wanted to
achieve in 2012. Importantly, this survey also highlighted areas for
improvement and we intend to focus on these during 2013.
Optimising value
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Frampton View, Rushall
We achieved planning consent on this five acre site, which
we bought jointly with another homebuilder, in 2007. The
development comprised 106 homes, of which 65% were
apartments, and 25% designated as affordable housing.
When the market deteriorated in 2008, it became apparent that
the high volumes of apartments meant the product mix was
inappropriate and, ultimately, not viable.
We embarked on a value engineering programme to replan
the site, look for cost savings, and to maximise value. The replan
changed the mix from predominately apartments to two storey
homes, a product that was more in demand in the local area and
which helped to maintain the required price per square foot. We
renegotiated the Section 106 agreement on the grounds of
viability and had the full support of the Local Planning Authority.
We benchmarked build costs in detail and carried out a thorough
review of all specifications, notably this resulted in a change in the
types of foundations used. We retained soil on site, and adjusted
levels where appropriate, producing savings against budget.
The result of the value engineering process was completions
for 2011 and 2012 at improved margin.
This value engineering process is embedded in our culture
and is a process we go through on each and every site, both
existing and new.
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UK Housing continued
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Buckinghamshire UTC
We are one of four lead partners supporting the new
Buckinghamshire University Technical College (BUTC) in
Aylesbury. The Government funded college will specialise in
IT and construction and will offer full-time technically orientated
courses for students aged 14-19. The curriculum includes a
blend of core academic and technical qualifications and is
heavily influenced by local and national employers.
We are working with BUTC to develop the construction
course curriculum, which aims to prepare young people for
a career in the construction industry. Senior Taylor Wimpey
employees, including members of our Group Management
Team and Regional Directors, will ensure the programmes of
study are relevant, current and progressive.
The greater part of the learning will revolve around real life work
projects and case studies that we have put forward. Talks and
lectures will be delivered by members of our regional teams and
Taylor Wimpey employees will support students as they progress
through the course. We will provide apprenticeships and work
placements to a number of the students.
During 2012 97% of our salaried employees received training.
We believe strongly in internal succession and believe that internal
candidates make valuable business leaders because they understand
our culture and approach. Our employee turnover rate for 2012
remained at 10% (2011: 10%).
In early 2012, we launched the Taylor Wimpey Sales Academy, a
modular accreditation programme which aims to develop the most
competent and knowledgeable sales and marketing teams in the
industry. This has been highly successful and, as such, we will look
to introduce similar programmes for other disciplines in the future,
prioritising the skills that are important for our future business.
Throughout the downturn, we maintained our graduate programme,
believing firmly in the importance of investing for the future. During
2012, we recruited seven individuals for our graduate programme,
13 management trainees and 34 apprentices. From 2013, each of
our regional business units will be required to take on at least three
apprentices per year. These groups are monitored throughout their
career progression.
We continue to support the UK construction industry’s Construction
Skills Certification Scheme (CSCS) which was set up to improve quality,
reduce accidents and provide evidence of workers’ occupational
competence. A total of 91.8% of our workforce, including sub-
contractors, were CSCS carded at the end of December 2012
(December 2011: 98.2%).
In 2012, we went one step further and Taylor Wimpey entered into an
innovative partnership with Buckinghamshire University Technical
College (BUTC), a Government funded college for students aged 14 to
19 due to launch in 2013. For more information, please see our case
study to the left.
Current trading and outlook
We have continued to build on our excellent order book position,
which stood at over £1,076 million as at 24 February 2013
(26 February 2012: £982 million). We are around 50% forward sold
for 2013 completions. Sales rates and visitor trends have improved
in recent weeks, particularly in the South and Midlands, and we have
seen a noticeable increase in the number of NewBuy reservations
in the first eight weeks of the year.
Our proactive approach to managing the cycle and optimising our UK
residential development business will stand us in good stead for the
year ahead. We anticipate a natural growth in completions as our
strong order book, recent land acquisitions and planning approvals on
strategic sites will organically increase our outlet numbers during 2013
and will deliver further growth in completions, subject to ongoing stable
market conditions.
22
Taylor Wimpey plc Annual Report & Accounts 2012
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Spain Housing
“In tough conditions and wider economic uncertainty, our Spanish
business has made a profit and contributed cash to the Group.”
Javier Ballester
Managing Director, Spain
Order book volume as a percentage of completions
Total landbank plots
Customer satisfaction
Health and safety
Key market drivers
2012
33.9%
1,815
100%
915
2011
46.8%
1,668
100%
749
• Wider macro uncertainty remains key challenge.
• Surplus of homes in mainland Spain.
• Local demand and consumer confidence affected.
• Mortgage availability remains restricted.
Financial and operational performance
The wider macro economic uncertainty has contributed to the
challenging market conditions in Spain. Mortgage availability has
remained restricted and there remains a surplus of homes in mainland
Spain. Against this backdrop, we have been pleased to deliver an
increase in homes completed to 156 homes (2011: 109) at an average
selling price of €245k (2011: €275k ).The reduction in average selling
price is primarily the result of mix changes, however with higher
volumes, 2012 revenue increased to £32.0 million (2011: £28.6 million).
We achieved an operating profit* of £1.3 million (2011: £0.2 million) in
spite of the challenging market conditions, which is a testament to the
strength of the operating team we have in Spain. Our Spanish housing
business has also continued to contribute operational cash flow before
land spend to the Group.
Our total landbank in Spain stands at 1,815 plots (2011: 1,668).
We are pleased to report that in 2012, 100% of our customers in Spain
said they would recommend us to friends and family (2011: 100%).
Current trading and outlook
Conditions continue to be challenging, with the wider macro
environment impacting on consumer confidence.
Lagunas Del Sol, a development of three bedroom townhouses on the Costa Blanca with communal swimming pool and landscaping.
* Operating profit is defined as profit on ordinary activities from continuing operations before finance costs and exceptional items, after share of results of joint ventures.
Taylor Wimpey plc plc.taylorwimpey.co.uk
23
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Group financial review
Strong operational performance and underlying strength
of our balance sheet drives improvement across each of
our strategic objectives.
Group summary
The Group has continued to make good progress in line with the
strategic goals with all key financial measures improving during 2012,
reflecting the strong operational performance.
The strong operational results have been used to reduce our net debt
and invest in new land opportunities, as well as refocus the capital
structure with the repurchase of £15.2 million of the 10.375% Senior
Notes in 2012 (2011: £85.4 million).
UK Housing
2012 has been a year of strong growth and operational
performance. Revenue has increased by 11.7% to £1,987.0 million
(2011: £1,779.4 million), primarily driven by an improved mix and
quality of locations resulting in higher sales prices and an increase
in home completions. It is therefore very pleasing to report growth of
43.6% in operating profit* to £228.8 million (2011: £159.3 million**)
as we continue to prioritise margin performance from new and old land.
This value focus resulted in an increase in operating margin* to 11.5%
for the full year (2011: 9.0%**).
Net operating assets in the UK were £1,667.2 million
(2011: £1,607.2 million) with a strong increase in our return
on net operating assets*** for the year to 14.0% (2011: 10.2%**).
Spain Housing
We achieved an operating profit* of £1.3 million (2011: £0.2 million) in
spite of the challenging market conditions, which is a testament to the
strength of the operating team we have in Spain. Our Spanish Housing
business has also continued to contribute operational cash flow before
land spend to the Group.
Group financial review of continuing operations
We have delivered a significant improvement in profit before
exceptional items and tax, which has more than doubled to
£185.3 million (2011: £89.9 million) driven by improved underlying
operating performance and lower net debt finance costs.
(cid:116)(cid:1) 44% increase in Group operating profit* to £230.1 million
(cid:116)(cid:1) 124% increase in adjusted basic earnings per share to 4.7p
(cid:116)(cid:1) Balance sheet strength with adjusted gearing, including land
creditors, of 21.8% (2011: 23.1%)
(cid:116)(cid:1) Agreed with the trustees to merge the two pension schemes
as part of ongoing pension exposure management
(cid:116)(cid:1) Agreed option to extend maturity of £100 million term loan
facility to 2020
(cid:116)(cid:1) Positive cash generated by operations in the period
“ Continued strong operational performance
and balance sheet strength has driven
an increase of 124% in adjusted basic
earnings per share.”
Ryan Mangold
Group Finance Director
Financial highlights
Adjusted basic earnings
per share – continuing Group
4.7p
for 2012 (2.1p for 2011)
Tangible net
assets per share†
61.5p
at 31 December 2012
(57.3p at 31 December 2011)
Net debt
£59.0m
at 31 December 2012
(£116.9m at 31 December 2011)
Return on net
operating assets***
13.6%
for 2012
(9.8% for 2011)
* Operating profit is defined as profit on ordinary activities from continuing operations before finance costs and exceptional items, after share of results of joint ventures.
** 2011 comparatives have been restated to consolidate the UK Housing and Corporate segment, as the Group now only reports two operating segments.
*** Return on net operating assets is defined as operating profit divided by the average of the opening and closing net operating assets, which is defined as capital employed plus
intangibles less tax balances.
† Tangible net assets per share is defined as net assets, excluding goodwill and intangible assets, divided by the number of shares in issue at the period end.
†† Asset turn is defined as total revenue divided by the average of opening and closing net operating assets.
24
Taylor Wimpey plc Annual Report & Accounts 2012
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Group revenue in 2012 increased by £211.0 million to
£2,019.0 million (2011: £1,808.0 million) from Group completions of
10,944 (2011: 10,232), excluding joint ventures, against a backdrop
of a stable housing market.
Gross profit of £356.3 million (2011: £287.7 million) is up by 23.8%
and reflects our strategy of maximising the value achieved from each
home completion. The gross profit for the year includes £85.1 million
(2011: £99.6 million) of positive contribution on completions from sites
with previously impaired inventory. The positive contribution is the
estimation difference between the realised value on completions
compared to the value assumed in the net realisable value review.
These amounts are stated before the allocation of overheads that are
excluded from the Group’s net realisable value exercise. In the year,
46% (2011: 63%) of the Group’s completions in the UK were from
sites that had been previously impaired. As at 31 December 2012,
26% (2011: 39%) of our short term UK owned and controlled land
is impaired. Only 120 plots (2011: 89) were sold in Spain that had
previously been impaired. This gross profit improvement was due to
the combination of cost improvements through replans and cost
reduction initiatives and higher mix driven selling prices. Gross profit
is stated after a cost of £12.3 million in respect of our proactive
programme of Extended Gas Flue inspections, rectification work
where required and supply of audible carbon monoxide alarms.
In the UK, contribution per completion increased to £33.9k
(2011: £28.6k), benefiting from lower build cost and direct selling
expenses, as well as selling from better quality locations and
newly acquired sites.
Group operating profit* increased by £70.6 million, or 44.3%, to
£230.1 million (2011: £159.5 million) and Group operating margin*
rose to 11.4% (2011: 8.8%) as a result of the improved trading
performance with gross margins increasing from 15.9% to 17.6%.
Group overheads have remained static year on year and, excluding
the impact of inflation, overheads are, in real terms, £11.1 million
below 2010 levels. We remain on track to deliver a further £10 million
overhead saving by 2014 relative to 2010.
Group asset turn†† increased to 1.19 times in 2012 (2011: 1.11 times),
benefiting from our investment in higher quality locations. This results in
an increase in the Group’s return on net operating assets*** of 3.8
percentage points to 13.6% (2011: 9.8%).
Our year end adjusted gearing, including land creditors, at 21.8%
(31 December 2011: 23.1%), is comfortably below our indicative
maximum working range of 30% to 40% for this point in the cycle.
Net finance costs
Pre-exceptional finance costs totalled £44.8 million
(2011: £69.6 million), net of £1.2 million of interest receivable
(2011: £3.7 million).
Interest on borrowings was £29.3 million (2011: £52.3 million) with
the reduction in interest reflecting the lower average net debt level of
the Group during 2012 of £228.3 million (2011: £540.9 million) and
increased net debt efficiency following the repurchase of a further
£15.2 million of the 10.375% Senior Notes due 2015 in 2012,
reducing the amount outstanding to £149.4 million.
Other items included in finance costs are a net pension interest charge
of £9.9 million (2011: £14.1 million), which is lower due to the impact of
lower discount rates, a mark-to-market and foreign exchange loss on
derivatives of £0.3 million (2011: £1.0 million gain), a premium of £1.7
million for the repurchase of £15.2 million of 10.375% Senior Loan
Notes due 2015 and a total imputed interest charge for land creditors
and other payables of £4.1 million (2011: £7.9 million).
Exceptional items
The 2012 exceptional credit relates to the release of tax associated
accruals and provisions following the favourable resolution of an historic
liability with HMRC. This is reflected in the pre-tax exceptional credit of
£22.4 million (2011: charge £11.3 million) for an interest accrual release
and £59.6 million (2011: £1.5 million) for the UK tax in respect of the
historic potential tax liability. Further details of these exceptional items
are set out in Notes 7 and 8 to the consolidated financial statements.
Tax
The Group incurred a pre-exceptional tax charge of £36.0 million
(2011: £24.2 million) which equates to an underlying tax rate of 19.4%
(2011: 26.9%). This differed from the average tax rate for the year of
24.5%, mainly due to the recognition of additional deferred tax assets
of £16.5 million (2011: £22.1 million) relating to previously unrecognised
temporary differences in the UK following another year of profitability
and utilisation of brought forward unrecognised losses of £11.7 million
(2011: £nil) offsetting the impact of the UK Government reducing the
corporation tax rate by 2%, which resulted in a deferred tax asset
write-off of £21.1 million (2011: £22.2 million).
2012 Group results
Completions
Revenue (£m)
Operating profit* (£m)
Operating margin* (%)
Profit before tax and before exceptional items (£m)
Exceptional items (£m)
Profit before tax (£m)
Tax, including exceptional credit (£m)
Profit for the year (£m)
Adjusted earnings per share (p)
Dividends per share (p)
Taylor Wimpey plc plc.taylorwimpey.co.uk
UK Housing
10,886
1,987.0
228.8
11.5
Spain Housing
156
32.0
1.3
4.1
Consolidated
11,042
2,019.0
230.1
11.4
185.3
22.4
207.7
23.6
231.3
4.7
0.62
25
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Group financial review continued
Our priorities for 2013
(cid:116)(cid:1) Further drive operational improvement
(cid:116)(cid:1) Continue to improve balance sheet capacity, strength and
debt efficiency
(cid:116)(cid:1) Merge pension scheme as part of ongoing pension exposure
management using £100 million Pension Funding Partnership
backed by market value show homes
(cid:116)(cid:1) Complete the roll out of our new integrated IT system
Earnings per share
The pre-exceptional basic earnings per share increased 124% to 4.7p
(2011: 2.1p). The basic earnings per share after exceptional items are
7.3p (2011: 3.1p).
Dividend
A key element of our strategy is the ongoing management of the
Group’s capital structure, operating structure and level of land
investment to maximise performance across the housing market cycle.
We are committed to our strategy of actively managing the housing
market cycle, in particular with respect to the Group’s capital structure.
This approach to managing capital during the housing market cycle is
intended to balance the capital requirements of the business and
returning excess capital to shareholders, whilst at all times maintaining
balance sheet strength and flexibility.
Our dividend policy remains unchanged with our intention that
shareholder returns will be in the form of both regular maintenance
dividend payments through the cycle and additional returns where
appropriate. The regular maintenance dividend payments will be
calculated with reference to the net asset value of the Group. These
dividends are declared at the Half Year Results and the Full Year
Results in an approximate one-third/two-thirds split respectively. It is
our intention to make additional returns to shareholders based on the
prevailing market conditions and the returns available on alternative
uses of the capital.
Given the current outlook in the UK housing market, and the strength
of the Group’s asset base, the Directors believe that it is appropriate
to continue with dividend payments to shareholders on an unchanged
basis of 1% of Net Asset Yield resulting in a final dividend of 0.43 pence
per share (2011: 0.38 pence per share). Combined with the interim
dividend of 0.19 pence per share, this gives a 2012 total dividend
of 0.62 pence per share (2011: 0.38 pence per share).
Balance sheet and cash flow
Net assets at 31 December 2012 were up £154.5 million
in the year to £2.0 billion (31 December 2011: £1.8 billion)
which equates to a tangible net asset value per share† of 61.5p
(31 December 2011: 57.3p), driven by profit in the period offset partially
by the increased pension deficit, £18.2 million dividend payments and
£10.0 million share purchases. Adjusted gearing (including land
creditors) at the year end is 21.8% (31 December 2011: 23.1%).
The Group acquired £10.0 million of its own shares for future vesting
of share awards (2011: £10.0 million), representing 20.9 million shares.
Land creditors were £375.0 million at 31 December 2012
(31 December 2011: £306.4 million), with the increase due to
more land being acquired on deferred terms and the timing of land
acquisitions around the year end. The use of land creditors remains a
useful tool for financing land purchases, however we continue to use
them selectively due to our very low marginal cost of borrowings.
In total, the Group has recognised deferred tax assets of
£319.6 million (31 December 2011: £342.8 million) of which
£248.0 million (31 December 2011: £289.8 million) relate to losses
and £56.2 million (31 December 2011: £52.7 million) relate to
deferred tax on retirement obligations.
The Group has unrecognised potential deferred tax
assets as at 31 December 2012 in the UK of £34.1 million
(31 December 2011: £67.6 million) and £28.1 million in other
jurisdictions (31 December 2011: £24.7 million).
The work in progress spend is tightly controlled with an
average of £2.2 million gross work in progress per outlet
(31 December 2011: £2.2 million), resulting in a WIP turnover
ratio of 2.8 times (31 December 2011: 2.4 times).
As at 31 December 2012, the Group had mortgage debtors of
£91.4 million (2011: £66.5 million), the majority of which relates to
shared equity which has increased over 2012 mainly due to the
success of the Government backed FirstBuy scheme.
Year end net debt levels reduced from £116.9 million in 2011
to £59.0 million in 2012, a decrease of £57.9 million. This
reduction in net debt is a result of the Group generating a
cash inflow from operating activities of £78.4 million in 2012
(2011: cash outflow £34.8 million) with the inflow due to improved
underlying operations result and working capital efficiency. Total land
spend including land creditors was £436.5 million (2011: £403.2
million). £52.4 million (2011: £84.7 million) was paid to our pension
funds in the year and £33.3 million (2011: £57.3 million) was paid in
finance costs.
Treasury management and funding
The Group operates within policies and procedures approved by
the Board. The Group has three sources of committed debt funding:
a £600 million syndicated revolving credit facility; a £100 million term
loan maturing June 2015; and £149.4 million remains outstanding in
respect of 10.375% Senior Notes due 2015. We repurchased
£15.2 million of our Senior Notes during the year (2011: £85.4 million).
The average maturity across these sources of borrowings is 2.2 years.
During the year the Group agreed an option to extend the maturity
date of its £100 million term loan by over five years to mature in
December 2020 which becomes effective following redemption
of the 10.375% Senior Notes due 2015, that are callable on
31 December 2013 at 105.2.
Taking into account term borrowings and committed revolving credit
facilities, the Group has access to committed funding of £849.4 million
as at 31 December 2012 (31 December 2011: £864.6 million), with
the first £600 million of revolving credit facilities maturing in
November 2014.
The Group is operating well within its financial covenants and limits
of available funding.
26
Taylor Wimpey plc Annual Report & Accounts 2012
Pensions
The IAS19 pension deficit, which appears on the Group’s
balance sheet, is £242.5 million at 31 December 2012
(31 December 2011: £208.2 million). The Company contributed
a total of £52.4 million over the year, including £46.0 million in
deficit recovery contributions and the enhanced transfer value
exercise completed in April 2012.
The changes in actuarial assumptions resulted in a loss of
£156.4 million in the year, due to the decrease in discount rate of
0.60% per annum leading to an increase in the liabilities, offset partially
by the decrease in the inflation assumption of 0.15% per annum for
both RPI and CPI inflation. In addition, the schemes’ assets
outperformed expectations by £82.5 million.
Following the completion of the triennial actuarial funding valuations,
in February 2011, the Group’s deficit reduction payments in respect
of the Taylor Woodrow Group Pension & Life Assurance Fund
(TWGP&LAF) are £22 million per annum and the deficit reduction
payments to the George Wimpey Staff Pension Scheme (GWSPS)
are £24 million per annum. Both schemes are now closed to future
benefit accrual.
We continue to review and implement options to manage the volatility
of the pension deficit actively. Each proposal is reviewed with the
pension trustees.
During the first quarter of 2012, the Group concluded the Enhanced
Transfer Value (ETV) exercise for the GWSPS, which was in the process
of being completed as at the previous year end 31 December 2011,
with 764 members electing to transfer out.
We have agreement in principle with the Trustees to merge
GWSPS and TWGP&LAF into a new scheme, the Taylor Wimpey
Pension Scheme, and members have been informed of the merger
that is expected to complete in the first half of 2013 subject to
regulatory guidance. At the same time we are introducing a
£100 million Pension Funding Partnership utilising show homes
in a sale and leaseback structure.
This proposal will simplify scheme management, reduce
administration costs by circa £0.8 million per annum and provide
a way of managing future deficit repair contributions. The new Taylor
Wimpey Pension Scheme will benefit from a contingent funding
structure, backed principally by show homes, should the Group be
unable to meet the cash payments under the funding agreement.
Existing employees of the Company are offered a Defined Contribution
(DC) pension called the Taylor Wimpey Personal Choice Plan (PCP).
During 2012 this DC scheme was awarded the Pensions Quality
“ We have continued to improve our
debt efficiency in 2012 through the
repurchase of £15.2 million of the
10.375% Senior Notes expiring 2015
(2011: £85.4 million).”
Mark Plus by the NAPF (National Association of Pensions Funds),
acknowledging that the PCP contribution levels, governance and
communication meet the industry’s highest standard.
In response to the Government’s decision to change pensions
auto-enrolment Staging Dates in the UK for some companies,
including Taylor Wimpey, the Group will now auto-enrol its employees
from November 2013. All employees not currently in an existing
pension provided by the Group will be auto-enrolled into the People’s
Pension provided by B&CE.
Further details relating to the pension schemes of the Group are
presented in Note 20 to the consolidated financial statements.
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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 Chief Executive’s Review on pages 6 to 14. The financial position
of the Group, its cash flows, liquidity position and borrowing facilities
are described in this Group Financial Review. In addition,
Note 19 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.
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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 provides both the necessary 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.
Further information on going concern and risks facing the Group
is contained in the Audit Committee 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 2012 that have a
material impact on the Group results.
Ryan Mangold
Group Finance Director
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Taylor Wimpey plc plc.taylorwimpey.co.uk
27
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Board of Directors
The strength, balance and depth of our Board
adds value to the effective control, direction and
leadership of the Company.
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 a Partnership Director
of National Air Traffic Services. Previously
Brenda was Chairman of the New Covent
Garden Market Authority, a Non Executive
Director of George Wimpey Plc and a Non
Executive Director of Dawson Holdings PLC.
Robert Rowley
Independent Non Executive Director
and Senior Independent Director
Appointed as a Non Executive Director in
January 2010 and as Senior Independent
Director in April 2010, Rob is Chairman of
the Audit Committee and a member of the
Remuneration and Nomination Committees.
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 Intu Properties plc
(formerly named Capital Shopping Centres
Group plc) and Moneysupermarket.com
Group PLC.
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.
Kevin Beeston
Chairman
Appointed to the post of Chairman in July
2010, Kevin chairs the Nomination Committee
and is a member of the Remuneration
Committee. He was appointed Chairman of
Equiniti Group Limited in September 2011.
Kevin also chairs two further private
businesses: Partnerships in Care Limited and
Domestic & General Limited. He was formerly
Chairman of Serco Group plc and a Non
Executive Director of IMI plc.
Pete Redfern
Chief Executive
Appointed as a Director and to the post of
Chief Executive in July 2007. Pete is a
member of the Nomination Committee. In
addition he has full day-to-day operational
responsibility for the UK Housing division. He
was previously 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. He is a
director of the Home Builders Federation and
a Trustee of the homelessness charity Crisis.
Ryan Mangold
Group Finance Director
Ryan was appointed as a Director and to the
post of Group Finance Director in 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.
James Jordan
Group Legal Director and Company Secretary
Appointed Group Legal Director and
Company Secretary in July 2011, James,
a solicitor, was previously Group Company
Secretary and General Counsel of George
Wimpey Plc from February 2002 until July
2007 when he was appointed to the same
position with Taylor Wimpey plc. Before joining
the Group, James held senior legal and
company secretary roles in industry which
included positions with The Rugby Group Plc
and English China Clays Plc.
Top to bottom
Kevin Beeston
Pete Redfern
Ryan Mangold
James Jordan
Baroness Dean of Thornton-le-Fylde
28
Taylor Wimpey plc Annual Report & Accounts 2012
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Board tenure
(cid:81) 1-4 years
(cid:81) > 4 years
Board composition
(cid:81)(cid:3) Chairman
(cid:81)(cid:3) Independent Non Executive Directors
(cid:81)(cid:3) Executives
Top to bottom
Robert Rowley
Anthony Reading MBE
Mike Hussey
Kate Barker CBE
Mike Hussey
Independent Non Executive Director
Appointed as a Non Executive Director in
July 2011, Mike is a member of the Audit and
Nomination Committees. He is Chief Executive
of Almacantar, a private property investment
and development company which he founded
in February 2010. He has held a number of
senior roles in the property sector, most
recently as an Executive Board Director of
Land Securities plc. Prior to that position,
Mike was Head of Leasing and Marketing for
Canary Wharf Group plc, a partner at Knight
Frank, Chairman of the Regeneration and
Development Committee of the British
Property Federation and a Trustee of
LandAid, the property industry charity.
Kate Barker CBE
Independent Non Executive Director
Appointed as a Non Executive Director in
April 2011, Kate is a member of the Audit and
Nomination Committees. She is a business
economist and is presently a Senior Adviser
to Credit Suisse and a Non Executive Director
of Electra Private Equity plc and the Yorkshire
Building Society. Previously, Kate was a
member of the Bank of England’s Monetary
Policy Committee (MPC) from 2001 until May
2010. During this period, she also led two
major policy reviews for Government, on
housing supply and on land use planning.
Before joining the MPC she was Chief
Economic Adviser at the CBI. Kate was
awarded a CBE in 2005 for services to
social housing.
Audit Committee Current members:
Rob Rowley (Committee Chairman), Kate Barker,
Mike Hussey and Tony Reading.
For more information see page 35
Nomination Committee Current members:
Kevin Beeston (Committee Chairman), Kate Barker,
Brenda Dean, Mike Hussey, Tony Reading, Pete Redfern
and Rob Rowley.
For more information see pages 34 and 35
Remuneration Committee Current members:
Tony Reading (Committee Chairman), Kevin Beeston,
Brenda Dean and Rob Rowley.
For more information see page 35
Taylor Wimpey plc plc.taylorwimpey.co.uk
29
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Corporate Governance
The Board takes corporate governance very seriously.
This Report explains the processes in place for the delivery
of long term success, compliance and shareholder value.
Dear shareholder
I am very pleased to be able to take this opportunity again to make
a personal statement on the Company’s approach to corporate
governance. As mentioned earlier in this Annual Report, the
Board takes corporate governance very seriously and this has
been demonstrated over many years, with full compliance with
the 2010 UK Corporate Governance Code (the ‘Code’) and its
predecessor versions.
This Report on Corporate Governance therefore sets out and explains
in clear terms the processes in place which are essential for the delivery
of long term success whilst ensuring that we comply with all applicable
laws and regulations as well as, of course, meeting the requirements of
our shareholders and their representative bodies. The Board believes
that good governance should be focused not only on how the Board
itself operates but also how all our businesses operate.
In addition, this Report explains what your Board of Directors actually
does and describes how it is responsible for setting the values of the
Company, ensuring that the Company is run in the best interests of
our shareholders and other stakeholders, and how it interacts with
its shareholders in explaining the Company’s strategic goals and
performance against them. From a governance perspective it is not
just a case of what is done but also and just as importantly, how it is
done – therefore, we try and avoid a simple box ticking approach,
preferring our governance to be something that is embedded in
our processes and decision making.
A key part of my role as Chairman of the Board is to ensure that the
Board retains an appropriate level of independence in order to allow
the independent Non Executive Directors to challenge the Executive
constructively whilst also supporting them to implement the strategy
and run the business effectively. Another key part of my role is to
ensure that the Board has the right blend of skill, independence and
knowledge and this is something that is kept under regular review
in conjunction with the Nomination Committee.
As a Board we regularly review health and safety, our strategy, risks,
the market, operational matters, human resources, our financial
position and performance, governance and legal matters and our
shareholders. This is done through reports submitted by and
discussions with the Executive Directors and through other reports
and presentations by our senior management. The Board and its
members also undertake visits to our regional businesses and also
to their development sites.
During 2012 there were a number of enhancements to good
governance, including:
(cid:116)(cid:1) An update to the Code, published by the Financial Reporting Council
(‘FRC’) in September 2012 (the ‘New Code’);
(cid:116)(cid:1) An update to the Stewardship Code, published by the FRC;
(cid:116)(cid:1) Draft proposals from the Department of Business, Innovation and
Skills (‘BIS’) to clarify and improve the reporting of executive pay; and
(cid:116)(cid:1) The Kay Review of the performance of the UK equity markets in
enhancing company performance and investor returns.
Your Board welcomes these proposals and, in line with best practice
and our previous approach to governance, has already adopted or
embraced, as appropriate, many of the New Code provisions and BIS
proposals in this year’s reporting in advance of their formal introduction.
Board evaluation
Following an externally facilliated 2011 Board evaluation carried out by
Egon Zehnder International, the 2012 Board evaluation was conducted
internally by myself and the Company Secretary. The evaluation
confirmed that the Board is effective and continues to work well as a
unit, but with good constructive challenge and debate. It has managed
Board succession effectively with the appointment of a number of high
quality directors over the past two to three years.
The main action items coming out of the 2012 evaluation related to
further developing our succession planning and our ambitions relating
to diversity. Both of these key areas will remain firmly on the Board’s
agenda during 2013. More detail, including the ways in which the
findings of the 2011 review were addressed during the year, and the
process for the 2012 evaluation is set out on pages 33 and 34. The
Code requires the evaluation to be carried out via external facilitation
once every three years and we will therefore look to do this in 2014.
Diversity
Diversity has continued to be a key item on the overall UK governance
agenda during 2012. Within Taylor Wimpey, diversity has remained on
the Board’s agenda and this will continue to be the case during 2013.
Our ambitions and views on diversity are set out in our Diversity Policy
which can be found on page 32 and on the Company’s Web site:
plc.taylorwimpey.co.uk/CorporateResponsibility/Policies. Although the
Board will continue to appoint on merit we recognise that boards will
generally perform better when they include top quality people from a
range of backgrounds and perspectives. Diversity will continue to be a
key consideration when contemplating the composition and refreshing
of the Board and indeed our senior and wider management. We
recognise that whilst the overall balance of gender is good within the
Group, with 32% of employees being female as at December 2012, we
recognise that we still have more work to do in order to fulfill our overall
diversity ambitions.
30
Taylor Wimpey plc Annual Report & Accounts 2012
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The Board consists of nine Directors two of whom are women
(22%) and we will aspire to maintain at least this level of diversity
going forward consistent with our past practice, the Code and our
response to the recommendations made by Lord Davies of Abersoch’s
report on Women on Boards in 2011 (‘Davies Report’).
Appointments and succession
We announced on 1 March 2013 that Baroness Dean of
Thornton-le-Fylde (Brenda Dean) would be stepping down from
the Board immediately after the 2013 Annual General Meeting on
25 April 2013 (‘AGM’) broadly coinciding with her third three year
term of office. We also announced that Baroness Ford of Cunninghame
(Margaret Ford) will be appointed a Non Executive Director on
25 April 2013 at the conclusion of the AGM. Margaret Ford will
stand for election by shareholders to the Board at the 2014
Annual General Meeting.
At the AGM, all Directors (with the exception of Brenda Dean) will again
be subject to re-election by shareholders in accordance with the Code.
Biographical details of each Director can be found on pages 28 to 29.
Board Committees
The Nomination Committee has been involved in not only refreshing
the Board but also ensuring that succession plans are in place or being
developed for all key positions throughout the Company. Additional
reporting on its activities, in line with the Code is set out on page 34.
The Remuneration Committee has reviewed the draft proposals
from BIS referred to opposite and has decided to implement a
number of them in advance of their scheduled introduction. It has also
continued to implement and measure the findings of the successful
Remuneration Review, carried out at all levels within the Group during
2011, more details of which are set out on page 45. and to engage
with major shareholders and their representative bodies on key
remuneration matters.
The Audit Committee has continued to focus closely on the key area
of risk management and internal controls so as to monitor closely our
exposure to risks which could impact upon the future prospects of the
Company and achievement of its strategic objectives. In line with the New
Code, the Audit Committee has established processes so as to enable it
to satisfy and recommend to the Board that the information presented to
shareholders in this Report and Accounts is, as a whole, a fair, balanced
and understandable assessment of our position and prospects.
As ever, I very much look forward to meeting with shareholders at the
AGM on 25 April 2013 and as always, along with all of your Directors,
remain available to answer or respond to your questions, concerns and
suggestions at any time. Overall, I think your Board is effective and
working well, and that we are in good shape on our governance, but
as always we continually look for ways to learn and improve.
Yours sincerely
Statement of compliance
For the year ended 31 December 2012, the Company complied with
all the provisions of the Code and with the provisions of the Disclosure
and Transparency Rules on Audit Committees and Corporate
Governance Statements (DTR 7). The Code is publicly available at
www.FRC.org.uk.
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 28 to 29. There have been no changes to the
composition of the Board since 1 January 2012.
The role of the Independent Non Executive Directors is to offer advice
and guidance to the Executive Directors, using their wide experience
in business and from their diverse backgrounds. They also provide a
constructive challenge, scrutinising the performance of the Executive
Directors and satisfying themselves as to the integrity of the financial
information made available both to the Board and to the Company’s
shareholders. The Non Executive Directors also play an important part
in the appointment or removal of Executive Directors and in general
succession planning for the Board and other top executive positions
immediately below Board level.
The Board met on eight occasions during 2012. Directors make every
effort to attend all Board and applicable Committee meetings, as
evidenced by the exceptional 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 Legal Director and
Company Secretary (the ‘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 conveyed to those attending the
meeting by the Chairman and/or the Secretary as appropriate. Details
of the attendance of each Director at Board and Committee meetings
are set out in the tables on pages 32, 34 and 35.
The Board discharges its responsibilities by providing strategic and
entrepreneurial leadership of the Company, within a framework of
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.
Our Board and Committee structure
Kevin Beeston
Chairman
Audit
Committee
Nomination
Committee
Remuneration
Committee
Taylor Wimpey plc plc.taylorwimpey.co.uk
31
Corporate Governance continued
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Chairman
8
Attendance
Number of meetings in 2012
Directors
Kevin Beeston
Chairman
Pete Redfern
Chief Executive
Ryan Mangold
Group Finance Director
James Jordan
Group Legal Director and Company Secretary
Rob Rowley
Senior Independent Director
Kate Barker
Independent Non Executive Director
Brenda Dean
Independent Non Executive Director
Mike Hussey
Independent Non Executive Director
Tony Reading
Independent Non Executive Director
8
8
8
8
8
8
8
7
8
The Board is responsible for defining and setting the Company’s values
and standards which it does, amongst other things, through a number
of policies and codes of conduct, and ensures that its obligations to its
shareholders and other stakeholders are clearly understood and met.
The Board is led in these respects by the Chairman, who ensures that
the Board operates correctly, setting the culture and, by extension,
the culture of the Company in its operations and its dealings with
all stakeholders.
As also set out in our 2012 Corporate Responsibility Report, the Board
is fully committed to providing a safe place in which our employees and
sub-contractors can work, and that our customers can visit, 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 and Spain.
Operational management of the Company’s business is undertaken by
the Chief Executive who receives advice from the Group Management
Team (‘GMT’). The GMT is the most senior executive committee and,
in addition to the Chief Executive, consists of the Group Finance
Director, the Secretary, the Group HR Director, the Land and Planning
Director and the two UK Housing (‘UKH’) Divisional Chairmen.
The Board also receives regular reports and minutes from the Treasury
Committee, under the chairmanship of the Group Finance Director, and
which also comprises the Secretary, the Group Treasurer and a UKH
Divisional Chairman. The key activities of the Treasury Committee are,
broadly, to monitor and keep under review the Group’s financial risks,
financial policies, financial facilities and covenant compliance.
The following documents are available for review on the Company’s
Web site
plc.taylorwimpey.co.uk/InvestorRelations/CorporateGovernance:
(cid:116)(cid:1) schedule of matters specifically reserved for the decision
of the Board;
(cid:116)(cid:1) terms of reference of the Board Committees: Audit, Nomination and
Remuneration, which outline their objectives and responsibilities and
which define a programme of activities to support the discharge of
those responsibilities; and
(cid:116)(cid:1) Board policies covering operational, compliance, corporate
responsibility and stakeholder matters, which are reviewed
whenever necessary to take account of developments in corporate
governance, changes in legislation and revised processes.
All Directors have access to the advice and services of the Secretary.
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 advice during the year from PricewaterhouseCoopers
LLP (‘PwC’) on the details of an Enhanced Transfer Value offer made to
certain members of one of the Company’s pension schemes and from
Slaughter and May on the proposed merger of the Group’s two UK
pension funds, described in more detail in Note 20 to the Accounts
on page 89.
The Board also took advice during the year on dealing with issues
arising from the installation of extended gas flues by registered Gas
Safe engineers at certain of its developments following which a number
of initiatives were implemented across the business so as to raise
awareness and minimise risk.
The Board receives at each meeting a report from J.P. Morgan
Cazenove on the sector and the relative performance of the Company’s
share price. Jefferies Hoare Govett attended the Board during the
year in order to provide a detailed presentation on the industry, UK
stock market and the wider economy.
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. Formal policies have been adopted, which set out the ethical
framework within which all Taylor Wimpey companies are required to
undertake their business – this includes Bribery Act compliance sign
off. These policies are available for review on the Company’s Web site
plc.taylorwimpey.co.uk/InvestorRelations/CorporateGovernance.
Board and Committee balance, diversity, independence
and effectiveness
It is the Company’s policy, in line with the Code, that the composition
of the Board, proposed appointments to the Board, and succession
planning, are each based on merit, judged against objective criteria,
whilst also having due regard to the benefits of diversity, including
gender, age, ethnicity, experience and thinking. The Board also
continues to recognise its responsibility to comply with the
recommendations of the Davies Report and has stated that it will
aspire at least to maintain the current level of representation of
women on the Board (two out of nine, representing 22% of Directors).
32
Taylor Wimpey plc Annual Report & Accounts 2012
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The Nomination Committee, which is composed of a majority of
Independent Non Executive Directors in line with the Code, oversees
on behalf of the Board the identification, assessment and selection of
candidates for appointment to the Board. The Committee has a formal,
rigorous and transparent process against objective criteria. Typically
the process of appointment, prior to the decision of the Board, will
include the engagement of recruitment consultants, interviews by
the candidate with all members of the Board and the taking up of
detailed references.
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. As part
of this process, management below Board level is regularly provided
with access to the Board, including the opportunity to attend Board
Meetings and Board dinners in order to give presentations on
specialist topics and project work.
Board and Committee roles and responsibilities
The work of each of the Board Committees (Nomination, Remuneration
and Audit) is described later in this Report.
The Board has an established framework of delegated financial,
commercial and operational authorities, which define the scope and
powers of the Chief Executive and of operational management.
In line with the Code, the roles and responsibilities of the Chairman
and the Chief Executive have been clearly defined, set out in writing
and signed by Kevin Beeston and Pete Redfern.
In order to assist Directors in complying with their duty to avoid conflicts
(or possible conflicts) of interest, it is standard procedure that the Board
must first give its clearance to such potential conflicts of interest (which
would include directorships or other interests in outside companies and
organisations) following which, an entry is then made in the statutory
register which the Company maintains for this purpose.
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 of Association. 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.
During 2012 no such matters arose.
The Board undertakes a regular review of each Director’s interests,
if any, outside of the Company and is satisfied that, in line with the
Code, all Directors are able to allocate sufficient time to the Company
to enable them to discharge their responsibilities as Directors effectively.
Where there have been any outside commitments, the Board is
satisfied that they do not detract from the extent or quality of time
which the Director is able to devote to the Company.
The Code requires every Director to seek election or re-election,
as appropriate, at each year’s Annual General Meeting. Accordingly,
at the 2013 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 re-election other than Brenda Dean, who will be standing
down at the conclusion of the AGM.
Details of the resolutions to be proposed in this respect and supporting
biographical details of the Directors appear in the Notice of Meeting on
pages 112 to 119.
relationships which could affect the Director’s judgement. A more
rigorous review took place with regard to those directors who had
completed more than six years service as a Non Executive Director.
The Chairman, at the time of his appointment on 1 July 2010, met
the independence criteria as set out in the Code.
In addition, and in line with the Code, the Chairman and the Senior
Independent Director, independent of each other, hold meetings at
least annually with the Non Executive Directors without the Executive
Directors present.
Performance evaluation of the Board, its Committees and
other functions
The 2011 Board evaluation was externally facilitated by Egon Zehnder
International and was reported on in detail in last year’s Report. The
main action points arising from that exercise are set out below:
(cid:116)(cid:1) continue to improve the succession planning process;
This continues to be reviewed by the Nomination Committee and the
Board and the review includes all senior management and up and
coming talent amongst employees as well as Board level roles. During
the year the Board had greater exposure to management and
employees including at Board dinners so as to facillitate a higher level
of engagement and insight into the future pool of talent that exists
within the Company.
(cid:116)(cid:1) the improvement of reporting to the Board in certain defined areas;
These areas included greater external benchmarking of the Company’s
performance; and more forward-looking data.
Financial reporting to the Board has been further improved and
includes additional comparative analysis and evaluation of strategic
targets relative to the Company’s performance.
(cid:116)(cid:1) arranging for additional time to be devoted by the Board on strategy
and risk related matters;
The Board considers its strategic objectives regularly and has also
introduced a post-capital review process. Risk is kept under constant
review and in addition is formally reviewed and monitored twice-yearly.
Following the external facilitation of the 2011 evaluation, as described
above, the Board determined that the 2012 evaluation process should
be conducted in-house. The evaluation process was therefore carried
out by the Chairman and the Secretary and consisted of a bespoke
questionnaire which the Secretary sent individually to all Directors
for completion.
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 on each
Director) and finally the performance of the Chairman. In line with the
Code, the questionnaire also had a separate section in respect of the
two Non Executive Directors who had completed more than six years
of service (Brenda Dean and Tony Reading) so as to enable the further
evaluation of their independence. In calculating the length of service,
time served on the board of George Wimpey Plc, prior to the merger
with Taylor Woodrow plc in mid-2007, was taken into account.
The questionnaire required detailed consideration by each Director
of the balance of skills; experience; independence; knowledge of
the Company; diversity; succession planning; gender; how the
Board works as a unit; and other factors relevant to the Board’s
effective operation.
As part of the 2012 Board Evaluation process the Board 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
Once completed, the Secretary then collated all of the responses
to the questionnaire and produced a summary in respect of each
performance area.
Taylor Wimpey plc plc.taylorwimpey.co.uk
33
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Corporate Governance continued
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 in respect of
which the process is set out below) and then formally presented the
findings to the Board for discussion at the December Board meeting
on a non-attributable basis.
As part of the appraisal process the Chairman also discussed the
evaluation on a one-to-one basis with each contributor as necessary.
A number of action points designed to increase the overall
effectiveness of the Board came out of the 2012 performance
evaluation and have either already been implemented or will be
implemented during 2013 which include:
Nomination Committee
(cid:116)(cid:1) additional focus by the Board on the performance of the Company’s
regional business units and operating divisions;
Number of meetings in 2012
Reports directly to the
Taylor Wimpey plc Board
Kevin Beeston
Chairman
2
Attendance
2
2
2
2
1
2
2
Directors
Kevin Beeston
Kate Barker
Brenda Dean
Mike Hussey
Tony Reading
Pete Redfern
Rob Rowley
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.
The Chairman, Chief Executive and the Secretary meet sufficiently in
advance of each Board meeting in order to ensure 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
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 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. It guides the
Board in regularly assessing whether there is a correct balance of
expertise, reviewing progress towards compliance with the Davies
Report and wider diversity considerations, 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 33.
The Board has adopted a policy on diversity which is available on the
Company’s Web site plc.taylorwimpey.co.uk. The Company actively
embraces the business and local communities in which we operate
and will strive to reflect their richness and character to include such
aspects as gender, race and religion but also diversity of thought,
background and experience. The Company believes that everyone
(cid:116)(cid:1) greater involvement and contact between the Board and the
Company’s senior management and talent pool;
(cid:116)(cid:1) the carrying out of further work and initiatives to further develop
the Company’s strategy and progress to date on diversity; and
(cid:116)(cid:1) further work on succession planning.
These action points will be kept under regular review by the Board and
progress against them will be reported on in the 2013 Annual Report
and Accounts.
As part of the 2012 process, the Non Executive Directors, led by
the Senior Independent Director, undertook the evaluation of the
Chairman’s performance. The evaluation was based on a non-
attributable summary prepared by the Secretary on the feedback
received from the Non Executive Directors and Executive Directors in
response to the questionnaire. The Secretary’s 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.
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 and
during 2012, in addition to individual visits, the Board visited operations
in the Taylor Wimpey Yorkshire region over a three day period during
which regional presentations and a formal Board meeting took place,
as well as site visits.
The Group Legal Director and Company Secretary 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 reports are
issued electronically 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.
The Secretary provides regular briefings to the Board on regulatory and
governance matters which are included as part of his formal regular
reporting to the Board.
34
Taylor Wimpey plc Annual Report & Accounts 2012
Audit Committee
Remuneration Committee
Reports directly to the
Taylor Wimpey plc Board
Reports directly to the
Taylor Wimpey plc Board
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Chairman
Tony Reading
Chairman
Number of meetings in 2012
4
Number of meetings in 2012
Directors
Rob Rowley
Kate Barker
Tony Reading
Attendance
Directors
4
4
4
Tony Reading
Kevin Beeston
Brenda Dean
Rob Rowley
Main Objective
To assist the Board in fulfilling its corporate governance
responsibilities relating to the Group’s internal control framework,
internal audit process, risk management, financial reporting
practices and external audit process.
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.
2
Attendance
2
2
2
2
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should have the right to equal access to employment and, when in our
employ, to equal pay and access to training and career development.
The Company is also committed to ensuring that our people are free
from any direct or indirect discrimination, harassment or bullying.
Audit Committee
The members of the Audit Committee are as set out above. Details
of the Committee’s activities during 2012 are contained in the Audit
Committee Report on page 37.
The Company has put in place systems to measure and monitor
diversity around the Group more effectively. Currently (in addition to
Board diversity referred to above) there is one woman out of seven
on the GMT (14%) and one woman out of 24 Regional Managing
Directors (4%). Across the Group the Company employs approximately
1,185 women representing 33% of the workforce. Of the new starters
with the Company during 2012, 53% were women. Within the
Company’s new mentor programme for the development of staff,
48% of the participants are women.
This detailed information on the types and extent of various forms of
diversity around the Group, is taken into account when considering
where recruitment, training and career development work is necessary,
with a view to ensuring that there is a suitable recruitment pool at all
levels from which to increase diversity, where appropriate.
The Company’s plans and progress in implementing its diversity
policy, benchmarked against appropriate targets, are set out on
pages 32 and 33. Progress is measured and monitored by the
Nomination Committee and the Board.
The Committee met on two occasions during the year to consider
detailed short and long term succession planning for Directors and key
executives, together with appropriate development plans. There were
no changes in the composition of the Board during 2012. Details of the
attendance of each Director are set out in the table on page 34.
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 56. The Committee is constituted in
accordance with the Code and its members are set out above.
The levels of remuneration are considered by the Committee to be
sufficient to attract, retain and motivate Directors and other senior
management of the quality required to run the Company successfully,
without being excessive. A significant proportion of Executive Directors’
remuneration is linked to rewarding corporate and individual
performance and there is linkage to effective risk management.
There is a formal and transparent procedure for developing policy
on executive remuneration, including shareholder consultation and
professional advice, and for agreeing the remuneration packages of
individual Directors, none of whom is involved in deciding his or her
own remuneration.
The 2012 Remuneration Report has adopted a number of the draft
BIS proposals in order to help to clarify and improve the reporting of
executive pay, which the Committee welcomes.
The Committee is chaired by Tony Reading and consists of three
Independent Non Executive Directors and also the Chairman of the
Board. During the year the Remuneration Committee met on two
occasions and details of the attendance of each Director are set out
in the table on this page.
Taylor Wimpey plc plc.taylorwimpey.co.uk
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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 112 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
plc.taylorwimpey.co.uk
This 2012 Annual Report and Accounts
Your Directors have responsibility for preparing this 2012 Annual Report
and Accounts and for making certain confirmations concerning it. In
accordance with the Code provision C.1.1 the Board considers that,
taken as a whole, it is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company’s
performance, business model and strategy.
The Board reached this conclusion after receiving advice from the
Audit Committee.
The Board also notes Provision C.1.1 of the New Code (which
will apply to the 2013 Financial Year) and has been mindful when
considering the 2012 Annual Report and Accounts that going forward,
the Company’s Annual Report and Accounts will be required to be
prepared in a fair, balanced and understandable way as a whole to
shareholders in order to comply with the New Code.
Corporate Governance continued
Management
Progress in achieving the Group Strategy is reviewed at each Board
meeting and is reported on page 9. The 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 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. 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. Any
investment, acquisition or significant disposal of land requires detailed
appraisal and is subject to approval by the Board or the 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 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.
Relations with shareholders
The Board actively seeks and encourages engagement with major
institutional shareholders and other stakeholders and supports the
initiatives set out in the Code and the 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 Chief Executive, Group Finance
Director, Group Legal Director and Company Secretary 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.
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.
36
Taylor Wimpey plc Annual Report & Accounts 2012
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Audit Committee Report
We continue to focus on strengthening all elements of
the Group’s governance framework. As a Committee we
support the Board in fulfilling its responsibilities relating
to the Group’s internal control framework, internal audit
process, risk management, financial reporting practices
and external audit process.
In 2012 the Company has
(cid:116)(cid:1) Fully embedded a robust risk management framework across
all operational businesses and all corporate activities.
(cid:116)(cid:1) Reviewed the Whistleblowing policy, processes and reporting
to ensure best practice across the Group.
(cid:116)(cid:1) Established a Steering Committee to oversee all aspects of
policy and processes governing the review of the Extended
Gas Flues issue.
(cid:116)(cid:1) Reviewed the implementation of the 1B1S ERP system (‘One
Business One System’), being rolled out across the UK operating
business that commenced in 2012, including the review of the
effectiveness of the project management and the impact on the
overall control environment of the business.
(cid:116)(cid:1) Reviewed the Internal Audit Planning and Methodology following the
implementation of the new 1B1S ERP system that will be operational
across all our business units during 2013 and, as a result of the new
processes and procedures, will require a new approach to our
Internal Audit process and risk management.
Highlights for 2012
(cid:116)(cid:1) Fully embedded a robust risk management framework across the
whole business.
(cid:116)(cid:1) Review by Internal Audit in relation to the Extended Gas Flues issue
including a thorough review of all developments and the close out of
all actions identified.
Priorities for 2013
(cid:116)(cid:1) Ensure common processes are embedded across all businesses in
order to support and gain maximum benefits from the completed
ERP system.
(cid:116)(cid:1) Introduce the new Internal Audit approach to auditing in the new
ERP environment across all businesses.
Dear shareholder
I am pleased to be able to take this opportunity as Chairman
of the Audit Committee to summarise the ongoing objectives and
responsibilities of the Committee and the work that has been carried
out during 2012.
Following a review in July 2012 it was determined that the terms
of reference of the Audit Committee remain valid and no significant
changes were considered necessary. A key requirement of the Audit
Committee is that it should evaluate its performance against its key
objectives on an annual basis. The 2012 performance against
objectives was formally assessed at the meeting of 25 February 2013.
During 2012 the Audit Committee met with the management team
of the pilot business unit for the new 1B1S ERP system along with
the Project Team, to ensure that we were satisfied with the processes
and plans in place. As a Plc Board, we visited a business unit that had
been using the new system for a period of time to obtain feedback
and confirmation that there were no significant issues with utilising the
system from an operational point of view. I am pleased to confirm that
there are no significant issues and that the rollout of the system
continues to plan.
A key priority for 2013 is to ensure that, once the 1B1S ERP system
has been completed, as an organisation we can maximise the benefits
and ensure continuous improvement supported by a targeted Internal
Audit approach to auditing in the new environment.
The Committee will continue to focus on ensuring that all the relevant
codes and regulations are in place to ensure that the business is
operating in a controlled and managed environment.
Yours sincerely
Rob Rowley
Chairman of the Audit Committee
Taylor Wimpey plc plc.taylorwimpey.co.uk
37
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Audit Committee Report continued
Audit Committee and auditors
The Audit Committee is chaired by Rob Rowley. All members
of the Committee are Independent Non Executive Directors as
required by the Code. The Board has determined that Rob Rowley,
who currently chairs the Audit Committee at both Intu Properties plc
and Moneysupermarket.com Group PLC, has recent and relevant
financial experience as required by the Code. The Chairman of the
Company and other Non Executive Directors, the Chief Executive,
Group Finance Director, Head of Internal Audit and other senior
executives attend Committee meetings by invitation. Deloitte LLP,
the external auditor, is also invited to attend Committee meetings.
The Committee also meets privately with representatives from Deloitte
LLP during at least two Committee meetings per annum, which
normally take place around the time of the Full and Half Year financial
statements, in order to discuss any matters which the auditors may
wish to raise without any Executive Directors (other than the Secretary)
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 35.
The meetings around the full and half year results are typically also
full and half attended by the Non Executive Directors who are not
members of the Committee.
The Committee’s remit includes reviewing the internal control
framework, the internal audit process, risk management, 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 assumptions and compliance with
accounting standards and the requirements of the 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. The Committee
will also be further considering Provision C.1.1. of the New Code which
will require future Annual Reports and Accounts, taken as a whole, to
be presented in a fair, balanced and understandable way so as to
provide the information necessary for shareholders to assess the
Company’s performance, business model and strategy.
In addition, the other significant issues considered by the Committee
during 2012 and to date were:
1B1S: in November 2011 the Company commenced a programme
of updating its business systems. The process, which is due to be
completed in June 2013, represented a significant change to the
internal control environment. The Audit Committee has received
regular briefings on the progress of this project and Internal Audit
has undertaken a series of detailed reviews into these revised
business practices.
Extended Gas Flues: as noted on page 19, an issue was identified
during the year which related to the previous installation by independent
Gas Safe registered engineers of extended gas flues (‘EGFs’) at certain
of the Company’s developments. In order to support the Company’s
response to the issue, across all businesses, Internal Audit undertook
a comprehensive review so as to ensure compliance with a number of
instructions relating to EGFs. The Audit Committee received regular
updates throughout the period.
External auditor
Deloitte LLP is the Company’s external auditor and will be proposed for
re-appointment at the 2013 AGM. Their performance is kept under
regular review by the Board and the Audit Committee.
Deloitte was the external auditor of Taylor Woodrow plc at the time
of the merger with George Wimpey Plc in 2007. Shortly following the
merger, a formal competitive tender process was carried out with
regard to the appointment for the 2008 audit, following which Deloitte
was selected as external auditor to the Company. The Company notes
that one of the provisions of the New Code states that FTSE 350
companies should put the external audit contract out to tender at least
every ten years. The Company also notes the guidance issued by the
FRC by way of transitional arrangements. Therefore, having gone out
to tender since 2000 (i.e. in 2007/2008) the Company intends to defer
tendering until completion of the next partner’s rotation in 2019 but will
of course keep the matter under regular review taking into account
performance as well as other relevant factors. There are no contractual
restrictions on the Company’s selection of its external auditor.
Appointment of the auditor for non-audit services
The Audit Committee has an approved policy on whether to
employ the external auditor to provide services other than audit
services. This policy requires that there should be a competitive
tender process – 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:
(cid:116)(cid:1) bookkeeping or other services related to the accounting records
or financial statements;
(cid:116)(cid:1) internal audit outsourcing services;
(cid:116)(cid:1) the provision of advice on large Information Technology systems; and
(cid:116)(cid:1) 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.
Non-audit services in 2012 and 2011 predominantly relate to work
undertaken as a result of Deloitte’s role as auditors, or work resultant
from knowledge and experience gained as part of the role. Other
assurance services related to advisory services relating to pension
liability management consultation. The services in 2011 included
necessary work related to certain attest services in relation to the
interested party offers for the North American business. The 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
included advisory services for Taylor Wimpey plc and its subsidiaries.
38
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The Audit Committee fully recognises and supports the importance
of the independence of auditors. It is satisfied that the carrying out
of the above work would not impair the independence of the external
auditor 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. As a result of a reduction in the overall
level of major strategic corporate level project work, the level of
non-audit services work significantly reduced from £1.2m in 2011
to £0.3m in 2012.
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.
Following each review an Internal Audit report is provided to both
the management responsible for the area reviewed and the Group
Management Team (‘GMT’). These reports outline Internal Audit’s
opinion of the management control framework in place together
with actions indicating improvements proposed or made as
appropriate. The Chief Executive, the GMT and senior management
consider the reports on a regular basis and are responsible for
ensuring that improvements are made as agreed. A database of
audit recommendations and improvement initiatives is maintained.
Follow-up and escalation processes ensure that such improvements
are implemented and fully embedded in a timely manner.
We belong to and participate in industry-wide forums and other
initiatives aimed at combating fraud within the construction industry.
Summaries of all key Internal Audit review and activity and resulting
reports are provided to the Audit Committee for review and discussion.
The Internal Audit function also reviews proposed related party
transactions, such as purchases by executives from Group companies,
to ensure proper procedures are followed and that such procedures
are undertaken in accordance with the formal policy in place.
The most recent independent formal evaluation of the Internal Audit
function was carried out on behalf of the Audit Committee during 2011
by PwC and its finding was that Internal Audit is operating effectively.
A number of initiatives were progressed during 2012 to ensure the
Internal Audit function continues to meet both current best practice
and the evolving needs of the Group. The Internal Audit Charter, which
codifies the aims, modus operandi and outputs of Internal Audit, was
reviewed for ongoing appropriateness. Following this assessment of
control and process risk and how that assessment influences Internal
Audit review priorities was updated and enhanced to ensure alignment
with the Group’s risk management framework and to allow for the
impact of the implementation of the integrated ERP system which
is in progress.
The Head of Internal Audit has direct access to the Chairman of the
Audit Committee, the Chairman of the Board, the Chief Executive and
the other Executive Directors.
During the first half of 2012 the Internal Audit team supported the
work being carried out to establish which developments in each Region
should be addressed and ensuring that all processes were correctly
followed and closed out.
Risk Management and Internal Control
The Group has established an ongoing process of risk management
and internal control applying principle C2 of the Code. The Board is
responsible for the effectiveness of the system of internal control, which
has been designed and implemented to meet the requirements of the
Group and the risks it encounters.
Internal Control is managed according to a framework which consists
of clearly defined processes and objectives which are assigned to
individuals. This framework defines the way the Company operates
and how it is managed on a day-to-day basis. In the Group (UK) this
is achieved through an established Operating Framework supported
by functional manuals covering the main disciplines. Compliance with
policies, processes and procedures is required to ensure business
effectiveness and efficiency (see Management on page 36). Every
employee is required to comply with Group policies and specific
responsibilities and accountabilities are identified at each process level,
yet the governance framework supports and encourages, individual
and team initiatives. The control framework in place establishes
procedures to identify, evaluate and manage significant risks faced by
the Group. These procedures 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.
The successful management of risk is essential to enable the Group
to deliver on its strategic priorities. The risk management framework
consists of risk registers at all organisational levels which detail the risks
faced by the Group, its operating companies and the central service
teams. The registers identify key operational and financial risks while
strategic risks are identified as part of the business planning process
although it is expected that strategic risks will be included on risk
registers. The risk registers take into account the significance of
environmental, social and governance matters of the Company
and use a standardised methodology for the assessment of risk.
This methodology requires each risk identified to be assessed and
ranked according to a risk matrix which accounts for the likelihood
and impact of each risk. The risks identified are assessed for potential
effect on the Company’s short and long term value. The completion of
risk registers is iterative and refreshed on an ongoing basis. The risk
registers feed into a formal half yearly risk assessment that identifies
the principal risks (see pages 12 to 13) and allows the Board to
re-evaluate the identified strategic risks facing the Group.
The Board oversees the risk and control framework of the Group
and the Chief Executive is responsible for implementing any necessary
improvements with the support of the GMT. The Board conducts
formal risk reviews half-yearly, consistent with the Code, and the
GMT conducts a more detailed review as part of the business
planning process.
In compliance with the Code, the Board regularly reviews the
effectiveness of the Group’s system of internal control in providing a
responsible assessment and mitigation of risks. The Board’s monitoring
covers all controls, including financial, operational, compliance and
assurance controls which include risk management.
Taylor Wimpey plc plc.taylorwimpey.co.uk
39
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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 67 to 101.
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 Chief Executive’s Review on
pages 6 to 14.
The Group has recorded profits in the current year and has maintained
its drawn debt facilities at the reduced level achieved following the
disposal of the North America business in 2011. During 2012 we
signed an agreement with Prudential/M&G UK Companies Financing
Fund LP to extend our existing £100 million term loan, giving us the
option to extend the loan for a further 5.5 years to mature in November
2020. This extension is subject to redemption of the 10.375% Senior
Notes due 2015, prior to 30 June 2015 of which £149.4 million
currently remains outstanding.
The Group is still reliant on external debt financing and has to meet all
the covenant measures included in its debt facilities. The Group has
also prepared forecasts, with certain sensitivities, for a period of at least
12 months from the date of signing these financial statements, and as
such, whilst market conditions have stabilised, there continues to be
certain risks, including mortgage availability and weakened demand
due to market environment. However, the Directors are satisfied that
the Group will be able to continue to operate within the available
financing facilities for at least the next 12 months from the date of
signing these financial statements.
Accordingly the consolidated financial statements have been prepared
on a going concern basis.
Audit Committee Report continued
This process is based principally on reviewing reports from
management to consider whether significant risks are correctly
managed and controlled as part of managing the Group’s
operations. The Board is assisted in the assessment of risks by
the Audit Committee’s review of risk management procedures for
appropriateness and effectiveness (see Audit Committee remit
page 38). Throughout 2012 and into 2013 the Audit Committee
continued to assess the Group’s risk management and internal
control framework by reviewing the business change issues and
Internal Audit activities across the Group.
At its half year and year end meetings the Board reviewed the risk
profile of the Group and the mitigating factors identified with the
significant risks. At the year end meeting in February 2013 following
the annual review by the Audit Committee on the effectiveness of
internal controls and a formal half year assessment of risk, which
included a detailed risk assessment by the GMT, the Board completed
its annual assessment of risks for the year end 31 December 2012.
The key risks affecting the Group were identified and agreed with the
Board together with processes for their elimination or mitigation and
actions required to reduce the likelihood of each risk to the Company
and the Group.
A detailed review of the principal risks and uncertainties facing the
Group is set out in the Business Review: See Principal Risks and
Uncertainties on pages 12 to 13.
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 Health and Safety Director (where appropriate), Group
Human Resources Director and/or the Secretary depending on the
nature and seriousness of the issue. The Chief Executive is apprised of
all allegations and review conclusions.
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 requirement to do so under
the Code. During the year a number of initiatives took place to raise
the profile of the whistleblowing service. These initiatives included a
full review of the process and related reporting by both the Group
Management Team and the Audit Committee to ensure ongoing
appropriateness and effectiveness.
40
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Remuneration Report
The aim of our remuneration policy is to attract,
develop and retain leaders who are focused and
adequately incentivised to deliver outstanding
business results.
Dear shareholder
I am very pleased to be able to again take this opportunity in my
capacity as Chairman of the Remuneration Committee to summarise
the Company’s remuneration strategy and the way it has been
implemented during 2012.
The Government’s Business, Innovation and Skills Department (BIS)
has confirmed that there will be a number of changes designed to clarify
and improve the reporting of remuneration by public limited companies.
We are currently awaiting the final details which are likely to apply to
the 2013 reporting year. The Remuneration Committee notes these
proposals and has therefore decided to incorporate a number of them
in advance of their formal implementation in this Remuneration Report
for 2012.
With regard to this year’s Remuneration Report, the most obvious
change for shareholders has been that it has been divided into two
parts, the first dealing with the Company’s strategy and framework
for future years on executive pay entitled “Remuneration Policy”
and, the second dealing with the implementation of the current
remuneration strategy during the reporting year entitled
“Remuneration Implementation”.
Many of the anticipated BIS proposals will expand our existing
reporting and I believe that they will assist shareholders’
understanding of how our remuneration strategy supports the
delivery of the Company’s overall strategy and how reward during
the year directly relates to our performance.
From and including the 2014 AGM it is expected under the BIS
proposals that shareholders will be invited to vote on each separate
part of the Report with the vote on the Policy section being a binding
vote requiring a simple majority. Shareholders will then be able to track
the Company’s compliance with its policy in future years via the
Implementation section where there will be a non-binding vote.
The Committee has continued its practice of engaging with key
institutional investors and shareholder representative bodies with regard
to Director level remuneration. As in previous years, the Committee has
taken into account the feedback which it has received and is, as ever,
very grateful for the constructive engagement and feedback.
Following a review of the share ownership guidelines in place for
Executive Directors the target shareholding has been increased from
100% of base salary to 200%. Further details are set out on page 48.
The Committee firmly believes in the alignment of its Executive Directors
with shareholders and this increase will only help to enhance
this objective.
At the 2013 AGM we are proposing to renew for a further period of ten
years our two “all employee share plans”, namely, the Taylor Wimpey
Savings-Related Share Option Scheme and the Taylor Wimpey Share
Incentive Plan, on similar terms, amended only to take account of
changes recommended or required by HM Revenue and Customs.
The above two plans have proved to be an effective way of enabling
share ownership by our employees throughout the business, which we
very much encourage. Full details of the proposals are set out in the
Notes to the Notice of Meeting on page 118.
With regard to salaries, the general increase throughout the Company
to take effect from 1 April 2013 will be 2.5%. This will also apply to the
Executive Directors except that Ryan Mangold’s salary will be increased
by 9.5% which now brings him more into line with a mid market level
which we have previously highlighted as the Committee’s objective
subject to performance.
In 2009 we capped the maximum level of our short term incentive for
Executive Directors at 75% by reducing the maximum from 150% of
base salary to 112.5%. For 2011 and 2012, based on the improved
performance of the Company we increased the maximum opportunity
to 130% of base salary. In light of the continued improvement in
performance and following consultation with our shareholders and advice
from the Committee’s advisers, the Committee has decided to increase
the maximum back to 150% for 2013. Executive Directors will still be
required to defer an element of their annual bonus into shares for three
years and this will be increased from 25% to 33% with no matching
element as before.
With regard to the payment to Executive Directors and our senior
management of the short term incentive (cash bonus), I confirm that this
will be paid in March 2013 at the usual time and in the usual way and will
not be deferred to take into account the reduction in the higher rate of tax
scheduled to take place in April 2013.
Following several years of the Company’s long term incentive plans (LTIP)
not vesting at all, I am pleased to confirm that the 2009 LTIP will vest in
part for participants. This clearly reflects an improvement of performance
against key targets such as total shareholder return and return on capital
employed. Further details of the 2009 LTIP together with an update on
the first tranche of the 2010 LTIP award are set out on page 46.
The Committee continues to believe that the remuneration policy set
out in the first section of the Report will both support and motivate
our senior team whilst aligning them both to the Company’s strategic
objectives and to achieving long term growth for our shareholders.
We also believe that the remuneration of executives and the whole
team during 2012 and the incentives for further improving performance
that have been awarded during the year, support the Company’s strategy
to deliver enhanced returns to shareholders, and that the short term
incentive payments and the proportionate vesting of awards under the
Company’s Performance Share Plan reflect our success to date in the
delivery of that strategy.
I do hope that you will feel able to support both the level of remuneration
paid during 2012 and the Committee’s policy for the future, at this year’s
Annual General Meeting.
Yours sincerely
Tony Reading
Chairman of the Remuneration Committee
Taylor Wimpey plc plc.taylorwimpey.co.uk
41
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Remuneration Report continued
Introduction
The role of the Remuneration Committee (the ‘Committee’) is to
recommend to the Board a strategy and framework for remuneration
for Executive Directors and senior management in order to attract
and retain leaders who are focused and incentivised to deliver
the Company’s strategy 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 Code (as defined
earlier in this Corporate Governance Report). The Company also
complied with the Listing Rules of the Financial Services Authority, and
with the relevant provisions of the Companies Act 2006 and regulations
thereunder (the “Regulations”). It has also elected to follow a number
of the BIS proposals, which are expected to apply to the Company
with effect from 2014.
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 Regulations. The Remuneration Policy section
of the Report (Part 1) contains unaudited information and elements
of the Remuneration Implementation section (Part 2) contains
audited information.
A resolution to approve both Part 1 and Part 2 of this Report collectively
will be proposed at the Annual General Meeting of the Company on
25 April 2013 (‘AGM’). Details of the resolution and its status as an
advisory vote are set out in the Notes to the Notice of Meeting on
page 118.
This Report has been prepared by the Remuneration Committee on
behalf of the Board.
The Company’s remuneration strategy and its implementation are
kept under regular review by the Committee which consults with
the Company’s major shareholders and their representative bodies
as appropriate.
Detailed information on the Company’s remuneration strategy, and
its implementation during 2012 and during 2013 to the date of this
Report, is set out below.
Part 1: Remuneration Policy: Unaudited information
Remuneration Committee
The Remuneration Committee has clearly defined terms of reference
which are available on the Company’s Web site plc.taylorwimpey.co.uk.
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 Code and related investor
guidance. Within this framework the Committee’s main
responsibilities are to:
(cid:116)(cid:1) establish and maintain formal and transparent procedures for
developing policy on executive remuneration and for fixing the
remuneration packages of individual Directors, and to monitor
and report on them;
(cid:116)(cid:1) determine the remuneration, including pension arrangements,
of the Executive Directors;
(cid:116)(cid:1) monitor and make recommendations in respect of remuneration
for the tier of senior management one level below that of the Board;
(cid:116)(cid:1) approve annual and long term incentive arrangements together
with their targets and levels of awards;
(cid:116)(cid:1) determine the level of fees for the Chairman of the Board; and
(cid:116)(cid:1) select and appoint the external advisers to the Committee.
The Committee currently comprises three Independent Non Executive
Directors and the Chairman of the Board. Tony Reading is the
Committee Chairman and he chaired the Committee throughout the
year. The other members of the Committee are Kevin Beeston, Brenda
Dean and Rob Rowley. Membership of the Committee did not change
during 2012 and is in line with the Code.
As announced on 1 March 2013, when Brenda Dean retires from the
Board at the conclusion of the 2013 AGM, Margaret Ford will join the
Remuneration Committee as an independent Non Executive Director
with effect from the conclusion of the AGM.
Details of attendance at Remuneration Committee meetings held
during 2012 are set out in the table on page 35.
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 New Bridge
Street (an Aon Hewitt company). New Bridge Street’s ultimate parent
company is Aon plc.
New Bridge Street provides no other services to the Company. The
wider Aon plc group of companies provides insurance broking and
pension administration support services to the Company and the
Committee is satisfied that the provision of such services does not
create any conflicts of interest. New Bridge Street were appointed in
February 2009 following a comprehensive tendering process.
The Committee also receives legal advice from Slaughter and May as
and when necessary. This relates to technical advice on share schemes
and also relating to senior appointments and termination arrangements.
The fees paid to the Committee’s advisers in 2012 were: New Bridge
Street £43,000 (2011: £137,000) representing a full year’s appointment.
The fees were higher in 2011 as a result of the detailed remuneration
review which took place during that year.
The Chief Executive, Group Legal Director and Company Secretary
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.
How shareholder views are taken into account
The Remuneration Committee considers shareholder feedback
received in relation to the AGM each year and guidance from
shareholder representative bodies more generally. Shareholder views
were key inputs when shaping 2013 remuneration policy.
During the year the Committee engaged with its largest shareholders
regarding the policy for 2012, including the long-term incentive
performance metrics for awards made in 2012 and changes to the
Company’s share ownership guidelines which it has again increased
for 2013 and for future years with regard to the requirement for
Executive Directors. The Committee has also engaged with its
shareholders with regard to 2013 remuneration and has taken into
account such feedback.
The Committee has followed the principles of good governance relating
to Directors’ remuneration as set out in the Main Principles, Supporting
principles and Code Provisions of the Code relating to remuneration.
The Committee has reviewed and taken into account a number of
governance related developments and guidance issued during the year
including the remuneration guidelines and guidance issued by the
Association of British Insurers (‘ABI’) and RREV, and as stated earlier,
certain of the BIS proposals.
42
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Remuneration strategy
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 set out 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
aligned with the interests of the Company’s shareholders. This alignment
is achieved through a combination of a deferral into shares of a
percentage of the short term incentive arrangements for Executive
Directors’ shareholding requirements (which have been revised and
increased for 2013 (33% for any payment made in respect of 2013))
and also via retention requirements which apply to shares that vest
under long term incentive plans – details of these requirements are set
out later in this Remuneration Report on page 48.
The performance criteria used to measure vesting of awards under
the long term incentive plan and awards under the short term incentive
arrangements are directly linked to the Company’s strategic aims. For
2012 these covered Operating Margin, Return On Capital Employed
(ROCE) and Total Shareholder Return for the long term incentive plan;
and Profit Before Interest and Tax, Cash generation, ROCE, Order
book, Customer Service metrics, Relative Margin compared to other
housebuilders, and Waste for the short term incentive scheme.
Performance criteria pay chart – 2013
(£000’s)
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 below illustrates the level
and mix of remuneration for 2013 depending on the achievement of
threshold, target and maximum for the Executive Directors .
In line with the ABI’s 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.
4,000
3,200
2,400
1,600
800
0
Below
Target
Target
Maximum
Below
Target
Target
Maximum
Below
Target
Target
Maximum
Chief Executive Officer
Group Finance Director
Group Legal Director & Company Secretary
(cid:81) Long-Term Share Awards (cid:81) Annual Bonus (cid:3)(cid:3)(cid:3)(cid:3)(cid:81) Benefits & Pensions (cid:81) Salary
Notes:
1 For the annual Short Term Incentive Arrangement the target and maximum vesting is 75% and 150% of salary respectively.
2 For performance share awards under the long term incentive plan the target (assumed for these purposes to be at threshold performance) and maximum vesting is 40% and 200%
of salary respectively.
Change in Company performance relative to change in remuneration
Profit before tax & exceptional items
Dividends paid per ordinary share
– interim 2011 / interim 2012 0p / 0.19p )
– final 2011 / final 2012 0.38p / 0.43p )
Employee pay in aggregate
Employee pay average per employee
2012
2011
Change %
£185.3m
£89.9m
+ 106%
0.62p
0.38p
+ 63%
£172.1m £170.4m
£48,795
£48,286
+ 1%
+ 1%
Taylor Wimpey plc plc.taylorwimpey.co.uk
43
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–
Performance targets
Change from prior policy
–
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Remuneration Report continued
Table of pay elements
Element
Purpose and Link to Strategy Operation
Salary
To recruit and reward executives
of a suitable calibre for the role
and duties required
Reviewed annually to ensure that
they remain competitive with external
market practices and are competitive
when measured against FTSE peers
(other non-financial companies of
a similar size in terms of market
capitalisation and other large
UK housebuilders).
Other than when an executive
changes role or where benchmarking
indicates individual salaries require
realignment, salary increases will not
exceed the general level of increases
for the Group’s employees.
Takes into account the following:
− the performance, role
and responsibility of each
individual Director;
− the economic climate, general
market conditions and the
performance of the Company;
− the level of pay awards across
the rest of the business; and
− salary levels in comparably-sized
companies and other
major housebuilders.
Short term
(‘STIA’)
Rewards the achievement
of stretching objectives that
support the Company’s annual
and strategic goals.
Compulsory deferral is designed
to further align
the interests of Directors
with shareholders.
Targets are set at the beginning of
each year.
Bonus level is determined by the
Committee after the year end, based
on performance against targets.
One-third of any bonus paid is
deferred into shares for three years.
The maximum STIA
opportunity for Executive
Directors is set at 150% of
base salary but was capped
at 130% of salary in 2010
and 2011.
The measures for 2013
are based on a scorecard
of key financial, operational
and environmental measures
and are described in the
table below.
A clawback mechanism applies to all
participants in the event of a material
misstatement of the Group’s accounts
and also for other defined reasons.
No element of any STIA
is pensionable.
Long term
incentives
Annual grants of share-based
long term incentives assist with
retention and help to incentivise
senior executives to achieve
returns for shareholders through
the inclusion of TSR as a
measure and the use of shares,
driving further UK operating
margin progression; improving
return on net operating assets
through the cycle.
Executive Directors and members
of the Group Management Team
currently receive annual awards
of performance shares.
Awards of performance shares
provide alignment with shareholders
as they deliver the full value of
the shares, which can increase
and decrease over the
performance period.
Normally 200% of
base salary.
Measures based on ROCE,
(RONA), relative TSR
measured against the
FTSE 250 and industry
peers and margin.
Vesting of awards is also
subject to the achievement
of an underpin.
The 2013 targets and
weightings as well as those
for previous awards are
described below.
Pension
The Company aims to provide
competitive retirement benefits
that represent an appropriate
level of cost and risk for the
Group’s shareholders.
Pension benefits for Executive
Directors are provided through one
or more of the following
arrangements: Personal Choice
Plan; George Wimpey Staff Pension
Scheme; or as cash allowances.
–
Pete Redfern: cash
allowance of 20% of salary
up to the HMRC earnings
cap (‘the cap’) and 25% of
salary above the cap.
James Jordan: cash
allowance of 20% of salary
up to the cap and 28% of
salary above the cap.
Ryan Mangold: cash
allowance of 20% of salary.
In view of the increase in
profit for 2011 and 2012,
and the resumption of
dividend payments to
shareholders the
Committee has decided
that it is appropriate to
amend the cap and return
to a maximum of 150%
of salary.
The proportion of bonus
deferred will also be
increased from 25% to
33% of any bonus paid.
–
–
44
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Element
Purpose and Link to Strategy
Operation
Maximum
Performance targets
Change from prior policy
Other
Benefits,
including
benefits
in kind
Provides a competitive
package of benefits to
assist with recruitment
and retention of staff.
Expensed Company-provided
car or a cash allowance in lieu,
life assurance and private medical
insurance. Benefits-in-kind are
not pensionable.
All-employee
share
schemes
All employees including
Executive Directors are
encouraged to become
shareholders through the
operation of all-employee
share plans such as the
HMRC approved Sharesave
plan and a SIP.
The Sharesave plan and SIP
have standard terms under which
all UK employees with at least three
months service can participate.
The rules for these plans are to
be submitted to shareholders for
renewal at the 2013 AGM.
Share
Ownership
Guidelines
The guidelines are intended to
demonstrate the Committee’s
commitment to aligning the
interests of its Executive
Directors and management with
those of its shareholders.
The guidelines cover the Board and
a larger number of executives who
participate in share schemes, with all
participating executives required to
build up shareholdings through the
retention of shares vesting under the
Company’s share plans.
The Chairman and the Non
Executive Directors are also
encouraged to hold shares in the
Company in order to align their
interests with those of shareholders.
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.
Sharesave: Employees can
elect for a savings contract
of either three or five years,
with a maximum saving
of £250 per month. Options
can be exercised during the
six months following the end
of the contract.
SIP: Employees can elect
to contribute up to £125 per
month or up to £1,500 per
tax year by one or more
lump sums.
200% of salary for Executive
Directors to be achieved
pursuant to a personal plan
agreed with the Company. In
addition Executive Directors
are required to retain at least
50% of their net of taxes
gain arising from any shares
vesting or acquired under
the long term incentive share
plans, until such time as the
upper limit of their share
ownership target has been
met. Lower shareholding
requirements apply for other
members of the
management team.
Non Executive
Director fees
Non Executive Director
remuneration should be in
line with recognised best
practice and sufficient to attract
and retain high-calibre
non-executives.
–
Set by reference to the responsibilities
undertaken by the non-executive,
taking into account that each Non
Executive Director is expected to be a
member of the Nomination
Committee and / or the Audit
Committee and Remuneration
Committee. Fees are taken by way of
cash fees paid monthly. Non
Executive Directors do not participate
in share plans operated by the Group
or receive any benefits in kind. Fees
are reviewed annually in conjunction
with New Bridge Street. There has
been no increase since 2007.
–
–
–
–
–
–
–
–
External non executive director positions
Subject to Board approval and provided that such appointments fall
within the general requirements of the Code (and do not give rise to
any conflict issues which cannot be managed by the Board and the
Executive), 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 2012 and up to
the date of this Report, no Executive Director held any non executive
positions with other public limited companies.
Remuneration policy for the wider workforce
The Company has continued to implement the recommendations
from its comprehensive review of remuneration across the Group
and for all levels of employee, undertaken during 2011.
These include: the ability for many employees not participating in
the executive short term incentive arrangements to elect to take their
performance payment in shares rather than cash (further enhancing
the link between shareholder value and employee reward throughout
the Company); the introduction of the Land Value Plan for certain senior
executives below Executive Director level; improvements to
the company car scheme; and a number of new flexible and
voluntary benefits.
The exercise was considered very useful and the Committee
intends to undertake a similar review on a three yearly basis,
as previously reported.
Taylor Wimpey plc plc.taylorwimpey.co.uk
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Remuneration Report continued
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 listed peers.
As explained in Part 2 of this Report (Implementation), at the time of his
appointment as Finance Director in 2011, Ryan Mangold’s salary was
positioned below the mid-market level for his role, with the intention of
increasing his salary progressively to a mid-market level as he gained
experience in the role. In 2012 he received an increase of 8.5%. In the
light of his continued strong performance during the past twelve
months, the Committee has decided to make a further increase
in April 2013, of 9.5% which it believes will then bring his salary more
in line with an appropriate mid market base salary position.
Having reviewed the performance of the Executive Directors during
the past twelve months, the Committee has decided to award
increases of 2.5% for Pete Redfern and James Jordan, with effect from
1 April 2013, in line with the equivalent general increase made to all
employees (subject to a very small number of exceptions).
Reflecting the above increases of 2.5% for Pete Redfern and James
Jordan and 9.5% for Ryan Mangold, the salaries of the Executive
Directors effective from 1 April 2013 will be as follows:
Name
Pete Redfern
James Jordan
Ryan Mangold
Amount
£753,823
£349,989
£347,067
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’)
Challenging and specific targets for 2013 have been put in place
for the Executive Directors by the Committee and these are detailed
above right. The Committee has made the targets more challenging to
achieve and also decided to make some changes to the performance
measures including replacing the Relative Margin and Build Cost
measures with an increased focus on Return On Capital Employed
(‘ROCE’). In addition, although there will continue to be a strong
ongoing focus on waste reduction, the Committee decided to replace
the environmental related performance measure (waste) with one
based on energy reduction:
Measure
Strategic Objective
Weighting
Profit Before Interest
and Tax
ROCE
Cash generated
(before land spend)
Order book
Energy reduction
To increase profit
Delivering an average 15%
return on net operating
assets through the cycle
Growing net assets by 10%
per annum on average
Driving further UK operating
margin progression
Customer service
Caring about our customers
40%
25%
15%
10%
5%
5%
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 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 policy continues to be to make awards under the
TWPSP only. Awards of performance shares provide better alignment
with shareholders than awards of share options, as they deliver the full
value of the shares, which can increase and decrease over the
performance period.
Long term incentive targets for existing awards
2009
Name
2010
2011
2012
TWSOP
Absolute
ROCE (50%)
TWPSP
–
TSR vs
FTSE 250
(25%)
TSR vs
industry
peer group
(25%)
–
–
–
Absolute
ROCE
(40%)
TSR vs
FTSE 250
(30%)
Absolute
ROCE
(30%)
TSR vs
FTSE 250
(20%)
Absolute
ROCE*
(30%)
TSR vs
FTSE 250
(20%)
TSR vs
industry
peer group
(30%)
TSR vs
industry
peer group
(20%)
TSR vs
housebuilders
index (20%)
–
– Margin (30%) Margin (30%)
* Defined as Return on Net Operating Assets
Full details of the performance conditions for each award are
provided on pages 46 and 47.
Details of awards held by Executive Directors under the above plans
appear on page 54.
46
Taylor Wimpey plc Annual Report & Accounts 2012
Vesting of long term incentive awards in 2013
Details of the partial vesting of the 2009 Awards and an update on the
first tranche of 2010 Awards appear on page 53. Details of Awards
held by Executive Directors appear on page 54.
Long term incentive targets for 2013 PSP Awards
The performance targets governing the vesting of the 2013 PSP
awards are set out in the tables below and are substantially based on
the targets put in place with regard to the 2012 awards namely, Margin
(30% weighting), Total Shareholder Return (‘TSR’) versus the FTSE 250
(20% weighting), TSR versus the housebuilders index (20% weighting)
and RONA (30% weighting).
Margin: margin achieved on new homes by the UK business was
introduced as a measure in 2011. The Committee regards margin as a
key measure for the Company and the housebuilding industry and the
inclusion of margin improvement is consistent with the strategy that has
been presented to shareholders.
Challenging targets have again been put in place by the Committee
requiring the achievement of double digit margins in the 2015 financial
year and these have been increased significantly compared to the 2012
awards. The Margin targets for the 2013 awards are as follows:
Below threshold
Threshold
Maximum
Between threshold
and maximum
% of this
element of the
award vesting
0%
20%
100%
Margin in 2015
Less than
11.5%
11.5%
16%
20%-100% 11.5%-16%
TSR performance will continue to be measured against two TSR peer
groups as in 2012 being a FTSE 250 peer group and an unweighted
sector index comprising Barratt Developments, Bellway, Berkeley
Homes, Bovis Homes Group, Galliford Try, Persimmon and Redrow.
The performance period for TSR has, in the past, been linked to the
third anniversary of the award date. This represented a disconnect to
the equivalent performance period for both Margin and RONA, which
is three reporting years. The Committee has decided to further align
reward with performance in a reporting year, by bringing these
performance periods into line. Awards for 2013 and beyond will have
a TSR performance period of three years from end of the reporting year
(31 December) preceding the year in which the award is made.
ROCE is also considered an appropriate measure, as it directly
measures the efficient use of capital. It applies to the 2012 and 2013
awards by way of an alignment to the Company’s RONA which is
defined as ‘operating profit, divided by the average of the opening and
closing net operating assets, which is defined as capital employed plus
intangibles less tax balances’. The ROCE targets for the 2013 awards,
which will be measured for the 2015 financial year, are as follows:
Below threshold
Threshold
Maximum
Between threshold
and maximum
% of this
element of the
award vesting
Absolute
ROCE in 2015
0% Less than 10%
20%
100%
10%
20%
20%-100%
10%-20%
An underlying 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 performance measure, 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 relevant performance period.
Consistent with awards made in 2012, the Committee has
determined award levels for Executive Directors will be maintained
at 200% of salary.
% of this
element of the
award vesting
Performance vs
FTSE 250
peer group
Performance vs
sector index
On 6 March 2013 and as announced, awards under the TWPSP
were made to the Executive Directors as set out below:
Below threshold
Threshold
Maximum
0%
20%
100%
Below
median
Pete Redfern
1,784,608 shares
Below index
James Jordan
828,568 shares
Median% Equal to index
Ryan Mangold
769,123 shares
Upper
quartile
Index +
8% p.a.
Between threshold
and maximum
Between
median and
upper quartile
Between index
and index +
8% p.a.
20%-100%
The Committee considers that TSR performance remains appropriate
as it rewards management for delivering superior returns to
shareholders than its peers. The Committee will keep the choice and
composition of the peer groups under review.
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
from the start of the performance measurement period (four years for
awards made during 2009) provided that the performance condition
has then been achieved. No awards were made under the TWSOP
for the period 2010 to 2012 and no awards will be made under the
TWSOP in 2013. Details of the vesting of the 2009 awards appear
on page 53 and details of awards held by Executive Directors appear
on page 54.
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Taylor Wimpey plc plc.taylorwimpey.co.uk
47
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Remuneration Report continued
Land Value Plan
Arising out of the 2011 remuneration review, the Company introduced
during 2012 the Taylor Wimpey Land Value Plan (‘LVP’). The LVP is
open to designated senior executives below Executive Director level
and is designed to reward participants for managing the landbank in a
way which adds value, through a combination of managing and adding
value to the existing land portfolio and buying land and adding value
over and above the base case for each acquisition. Performance is
measured over a three year period and awards to senior participants
are in shares which are required to be retained for 12 months. In time,
the Committee may consider linking the vesting of part of the long-term
incentive awards to the Executive Directors to similar measures. This
would, however, be subject to a prior and comprehensive shareholder
consultation before any implementation takes place.
All employee share plans
The Company encourages share ownership by employees in order
to help to align employee interest with that of the Company and its
shareholders. Accordingly, it operates two all employee share plans,
a Sharesave Plan and a Share Incentive Plan (‘UK Share Purchase
Plan’). Both Schemes are HMRC approved and have standard terms
under which all UK employees with at least three months’ service
can participate.
Both Plans were approved by shareholders at the 2004 Annual General
Meeting for a period of 10 years. Renewed approval will be sought at
the 2013 AGM and resolutions adopting both Plans for a further period
of 10 years, are set out in the Notice of Annual General Meeting on
page 113. We are also proposing certain amendments to the Rules of
each Plan and the Trust Deed of the UK Share Purchase Plan, details
of which are set out and explained on page 118. These amendments
reflect current guidance from HM Revenue & Customs (‘HMRC’) and
the amended Rules and Trust Deed, if approved at the AGM, are
subject to approval by HMRC.
During 2012, 620 employees (2011: 800) applied to join the Sharesave
Plan. Options were granted over 4,565,514 shares (2011: 15,030,026)
at an option price of 46.4 pence per share (2011 24.04 pence per
share). A total of 744 participants (2011: 663) contributed to the UK
Share Purchase Plan and purchased 1,306,895 partnership shares
(2011: 1,408,537). 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 54.
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 22 to the consolidated financial statements. Share
plans are also compliant with the ABI’s 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 possible to do so. Where there are relatively
small requirements for shares from time to time, these may continue
to be met for administrative convenience from other sources, including
new issue.
Share ownership guidelines
These are designed to encourage greater levels of shareholding
by employees at all levels within the Company for the purpose of
alignment with the Company’s shareholders which the Committee
believes is very important. The guidelines cover the Board and a
number of executives who participate in long term incentive plans
namely, the TWPSP, TWSOP and the LVP, with all participating
executives required to build up shareholdings through the retention
of shares vesting under the Company’s share plans.
The Committee has decided to increase the level of shareholding for
Executive Directors under the guidelines from one times base salary
to two times base salary from 2013. Executive Directors will however
still be expected to achieve a holding equivalent to one times base
salary within five years of their appointment with this increased
requirement. There will be no set time limit for achieving a two times
salary holding and each Executive Director will be required to agree
a personal plan with the Chairman. Executive Directors will also be
required to retain at least 50% of their net of taxes gain arising from
any shares vesting or acquired pursuant to the Company’s long term
incentive share plans, until such time as the guidelines have been met.
The net amount of shares held on trust by way of deferral under the
STIA will continue to count towards the target shareholding for each
Executive Director, as will shares held on trust under the UK Share
Purchase Plan. Members of the Group Management Team and other
designated executives are expected to maintain a shareholding of
equivalent to 50% and 20% of their base salaries respectively and will
accordingly, also be required to retain at least 50% of shares vesting
or acquired pursuant to the Company’s long term incentive plans until
such guidelines are met.
The Committee will keep the guidelines under regular review.
The Chairman and the Non Executive Directors are also encouraged to
hold shares in the Company in order to align their interests with those
of shareholders.
Pension arrangements
Details of the Group’s principal UK pension schemes are given in
Note 20 on page 89 to the consolidated financial statements.
Taylor Wimpey Pension Schemes
The Group has three principal UK pension schemes: Taylor Wimpey
Personal Choice Plan; The George Wimpey Staff Pension Scheme;
Taylor Woodrow Group Pension and Life Assurance Fund. The latter
was closed to new entrants in 2002 and no Director is a participant in
it. Details of the other two schemes are set out below:
48
Taylor Wimpey plc Annual Report & Accounts 2012
Taylor Wimpey Personal Choice Plan (‘PCP’)
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.
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 either way.
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All active members of the defined benefit arrangements were invited
to join the PCP when those arrangements closed to future accrual.
Pete Redfern and James Jordan each have a pension allowance of
20% of the earnings cap, in lieu of pension membership, due to
legislative changes introduced in 2009. For 2012 a total of £27,090
(2011: £25,920) was paid to Pete Redfern and a total of £27,090
(2011 £10,800) was paid to James Jordan.
The payment is made in addition to their respective existing pension
allowance of 25% of salary (Pete Redfern) and 28% of salary (James
Jordan) above the earnings cap as described below – details of these
payments are set out below under The George Wimpey Staff Pension
Scheme section.
The George Wimpey Staff Pension Scheme
Pete Redfern and James Jordan are members of the Executive section
of The George Wimpey Staff Pension Scheme (‘the Scheme’). They
have 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 PCP from 1 September 2010, referred to above and to which
members and the Company contribute.
In addition, as mentioned above, Pete Redfern receives a pension
allowance amounting to 25% of the difference between his basic
salary and the notional pension scheme earnings cap. For 2012 a
total of £148,876 (2011: £171,876) was paid in respect of Pete
Redfern. James Jordan also receives a pension allowance amounting
to 28% of the difference between his basic salary and the pension
scheme earnings cap. For 2012 a total of £57,098 (2011 £36,996)
was paid in respect of James Jordan.
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 are set out on page 56.
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 2013 Annual General Meeting on page 112.
Details of the Executive Directors’ service contracts are summarised
in the table below:
Name
Date of contract
Pete
Redfern
13 October
2004
Ryan
Mangold
16 November
2010
James
Jordan
20 September
2005
Unexpired
term
(months)
Notice
period by
Company
(months)
Notice
period by
Director
(months)
Normal
retirement
age
Current
age
12
12
12
12
12
12
12
62
12 Note 1
12
62
42
41
51
Note 1: Ryan Mangold is a member of the Taylor Wimpey Personal Choice Plan, a
stakeholder pension scheme described earlier, which can be taken any time after reaching
age 55, the Minimum Pension Age.
Each of the Executive Directors’ service contracts provides for:
(cid:116)(cid:1) the payment of a base salary (details of which are set out
on page 45);
(cid:116)(cid:1) an expensed Company-provided car or a cash allowance in lieu; a
fuel allowance; life assurance; and private medical insurance (details
of which are set out on pages 46 and 51);
(cid:116)(cid:1) employer’s contribution to a pension scheme (details of which are set
out on pages 48 and 56);
(cid:116)(cid:1) a notice period by the Company of 12 months;
(cid:116)(cid:1) a provision requiring a Director to mitigate losses on termination
(details of which are set out on page 50).
Chairman and Non Executive Directors
The terms of engagement of the Chairman and the Non Executive Directors are regulated by letters of appointment as follows:
Name
Kevin Beeston
Kate Barker
Brenda Dean
Mike Hussey
Tony Reading
Rob Rowley
Taylor Wimpey plc plc.taylorwimpey.co.uk
Date of
appointment
as a Director
Date of
initial letter
of appointment
Term of
appointment
Notice period
by Company
(months)
Notice period
by Director
(months)
1 July 2010
13 May 2010
3 years, reviewed annually
21 April 2011
7 February 2011
3 years, reviewed annually
3 July 2007
21 November 2007
3 years, reviewed annually
1 July 2011
30 June 2011
3 years, reviewed annually
3 July 2007
21 November 2007
3 years, reviewed annually
1 January 2010
1 December 2009
3 years, reviewed annually
6
6
6
6
6
6
6
6
6
6
6
6
49
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Remuneration Report continued
The service contract for each of Pete Redfern and James Jordan
additionally provides for a pension allowance (details of which are
set out on pages 49 and 51).
Each service contract contains the following performance-related
provisions:
(cid:116)(cid:1) participation in the STIA (details of which are set out on pages 46
and 51) ;
(cid:116)(cid:1) participation in the Long Term Incentive Plans (the SOP and PSP,
details of which are set out on pages 46 and 54);
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.
The Chairman receives 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 New Bridge Street.
Brenda Dean and Tony Reading were independent non executive
directors of George Wimpey Plc (‘GW’) until the merger with Taylor
Woodrow plc on 3 July 2007. Their respective dates of appointment
were 7 October 2003 and 15 April 2005 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 from a Code perspective. As reported on
page 31, Brenda Dean will not be seeking re-election to the Board at
the 2013 AGM and will down from the Board at the conclusion of the
meeting. Margaret Ford will be appointed as an Independent Non
Executive Director upon the conclusion of the AGM and will, on
appointment, have terms of engagement in line with those set out
above for the other Non Executive Directors.
Fees of Non Executive Directors are 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 are
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.
All Directors (except Brenda Dean) will submit themselves for
re-election at the AGM in accordance with the Code.
Part 2: Implementation of the Remuneration Policy During
2012: Audited information
Performance graph
The graph below shows the Company’s performance, measured by
TSR, for the five year period to 31 December 2012, compared with the
performance of the FTSE 250 index and the Housebuilders index used
for TWPSP awards.
Total shareholder return
Source: Thomson Reuters
120
100
80
60
40
20
0
2007
2008
2009
2010
2011
2012
Taylor Wimpey plc
Sector Peer Group
FTSE 250 Index
Housebuilders Index
50
Taylor Wimpey plc Annual Report & Accounts 2012
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Part 2: Implementation of the Remuneration Strategy During 2012: Audited information continued
Directors’ emoluments
Basic
salary/fee
£000
Pension
allowance
£000
Benefits-
in-kind
£000(a)
STIA in
respect of
2012
£000
Other
benefits/
payments
£000(a)
2012
total
£000
2011
total
£000
Gains
on options
and awards
exercised/
vested in
2012
Pension
entitlements
Non-Group
pension
arrangements
Total
Remuneration
for 2012
Total
Remuneration
for 2011
See page
45
See page
49
See page
46
See page
46
See page
48
See page
54
See page
56
See page
56
Executive
Pete Redfern
Ryan Mangold(c)(d)
James Jordan
(Appointed 21 July 2011)
Sheryl Palmer
(Resigned 21 July 2011)
Chairman and Non
Executive Directors
Kevin Beeston(b)
Kate Barker
(Appointed 21 April 2011)
Brenda Dean
Mike Hussey
(Appointed 1 July 2011)
Tony Reading
Rob Rowley
Andrew Dougal
(Resigned 21 April 2011)
Katherine Innes Ker
(Resigned 21 April 2011)
731
311
176
43
339
84
27
1
34
903
389
419
–
250
50
50
50
60
70
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,837 1,674
61
805
649
–
–
–
–
–
–
–
–
–
–
876
556
–
218
250
250
50
50
50
60
70
35
50
25
60
70
15
15
3,617
–
–
–
–
–
–
–
–
–
–
–
–
5
–
–
5
–
–
–
–
–
–
–
–
5
190
–
51
–
–
–
–
–
–
–
–
–
1,837
1,771
856
881
674
654
218
Total Fees
For 2012
Total Fees
2011
250
250
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50
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60
70
–
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35
50
25
60
70
15
15
Aggregate emoluments
1,911
303
62
1,711
61
4,048
2011
4,104
51
25
3,837
(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) The Company also paid £25,000 (2011: £25,000) 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.
(c) Ryan Mangold is a member of the Flexible Pension Arrangement (salary exchange) operated by the Company and the amount exchanged during the year was £32,000
(2011: £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.
(d) This includes £51,000 (2011: £25,600) company contribution in lieu of salary to Ryan Mangold’s non-Group pension arrangements described on page 56.
Aggregate emoluments of the Group Management Team (excluding Executive Directors)
Basic salary/
fee £000(a)
Pension
allowance
£000
Benefits
-in-kind
£000(b)
STIA in
respect of
2012
£000
Other
benefits
£000
2012
total
£000
2011
total
£000
4 members(c)
859
81
55
1,168
165
2,328 2,265
(a) Includes a long-service award to one member of £2,000 (2011: £0).
(b) Includes non-cash payments.
(c) There were four members who were not Executive Directors (2011 five members until 21 July 2011 and thereafter four).
In addition, a charge of £494,000 (2011: £281,000) was booked in respect of share-based payments.
Salary increases for these four Group Management Team members were in line with the general level of increase awarded to employees, at 2.5%. With effect from 1 April 2013 their
aggregate basic salary will be £884,000.
Taylor Wimpey plc plc.taylorwimpey.co.uk
51
Remuneration Report continued
Short term incentive arrangements (‘STIA’) in respect of 2012
For 2012, the Committee measured performance against each individual performance target, which is directly linked to the achievement of the
Company’s strategy, as follows:
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1
Measure
PBIT
Order book
Strategic Objective
Weighting
Summary of targets
Result
% of
maximum
% of salary
paid in cash
% of salary
deferred in
shares
To increase profit
Driving further
UK operating
margin progression
40%
15%
Entry £176m
Target £210m
Stretch £225m £230.2m
100%
40%
13%
Entry £558m
target 600m
Stretch £650m £655.3m
100%
15%
5%
Relative margin
(compared to other
housebuilders)
To increase margin and
outperform peers
Waste tonnage reduction Getting the
homebuilding
basics right
Cash generated
(before land spend)
Growing net assets
by 10% per annum
on average
ROCE
Customer service
Delivering an average
15% return on net
operating assets
through the cycle
Caring about
our customers
Ranking Award %
1st 10%
2nd 8%
3rd 6%
4th 2%
10%
5th or 6th 0%
3rd
60%
5%
2%
Entry 3.35 tonnes per sq. ft.
Target 3.25 tonnes per sq. ft.
5%
Stretch 3.11 tonnes per sq. ft.
Entry £770m
Target £810m
2.75
tonnes
100%
5%
2%
15%
10%
5%
Stretch £850m £896.5m
100%
15%
5%
Entry 8%
Target 9.5%
Stretch 12%
11.3%
85%
7%
2%
Entry 87%
Target 89%
Stretch 90%
91.3%
100%
5%
2%
Performance against these measures has resulted in a payment to the Executive Directors of 94.5% of their maximum STIA potential, of which
25% is required to be deferred into shares for three years, as described above.
The amounts paid to Pete Redfern, Ryan Mangold and James Jordan in respect of 2012 are set out in the remuneration table on page 51.
52
Taylor Wimpey plc Annual Report & Accounts 2012
Vesting of Long-term Incentive awards in 2013
2009 Awards
Performance testing for the 2009 awards (which were made in August of that year) was undertaken after the conclusion of the performance
period (31 December 2012). The outcome was as follows:
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TWPSP 2009
Measure
Weighting
Vesting scale
Performance achieved
% of this
award vesting
TSR vs FTSE
250*
TSR vs Peer
Group”
50%
50%
TWSOP 2009
No vesting below median, 25% vests at median, 100% vests at
upper quartile. Pro-rata vesting between median and upper quartile
131st out of 204 companies
in peer group
No vesting below median, 25% vests at median, 100% vests at
upper quartile. Pro-rata vesting between median and upper quartile
7th out of 13 (median)
Measure
Weighting
Vesting scale
Performance achieved
ROCE†
100%
ROCE <10%: 0% vests, ROCE = 10% 25% vests, ROCE => 20%,
100% vests. Pro-rata vesting for ROCE between 10% and 20%
13.6%
* As at third anniversary of date of award, on 7 August 2012. There were 204 companies left of the original FTSE 250 used for this award.
“ As at third anniversary of date of award, on 7 August 2012. There were 13 companies, including Taylor Wimpey plc, in the Peer Group.
† As at 31 December 2012, as reported on page 7.
0%
25%
% of this
award vesting
51.63%
The aggregate vesting of the 2009 LTIP was 32% and the resultant shares were converted into nil cost options exercisable between 1 March 2013 and 31 August 2013.
2010 Awards
Performance testing for the first tranche of the 2010 awards which were made in March of that year will be undertaken in two stages.
The performance of the ROCE element of the award (40% of the overall award) was tested at the conclusion of the performance period
(31 December 2012) and is based on the Company’s audited results. Based on a ROCE of 13.6% the percentage of the award vesting equates
to 48.4%. The TSR measures making up the remaining 60% of the awards will be tested on 22 March 2013 at the end of the applicable three
year performance period relating to those measures and details of any awards that vest, following Remuneration Committee consideration will
be reported on in the 2013 Remuneration Report.
With regard to the second tranche of the 2010 awards, made in August 2010, performance testing will be undertaken at the conclusion of the
performance period, on 30 June 2013 (for the ROCE element of the award) and 5 August 2013 (for the TSR elements of the award). Any vesting
will only take place after the announcement of the 2013 Half Year results in or around August 2013 and following Remuneration Committee
consideration.
In deciding whether, and to what extent, any vesting of awards should take place under the TWPSP and/or TWSOP the Committee considers
the overall financial performance of the Company during the period.
2012 Awards
On 5 March 2012, awards were made to 15 executives (2011: 21) over an aggregate of 7,699,454 shares (2011: 11,902,398), based on a share
price of 49.37 pence (2011: 41.18 pence). Dependant upon the performance conditions as set out in the table on page 46, the awards will be
tested after the conclusion of the performance period at the end of 2014 (for the ROCE element of the award) and 4 March 2015 (for the TSR
elements of the award), with any vesting to only take place after the announcement of the 2014 Full Year results in or around March 2015.
Details of awards made to Executive Directors appear on page 54.
Taylor Wimpey plc plc.taylorwimpey.co.uk
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Remuneration Report continued
Directors’ share-based reward and options
Aggregate emoluments disclosed on page 51 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 (2011: one) exercised options over ordinary shares during the year.
Details of options and conditional awards over shares held by Directors who served during the year are as follows:
Name of Director Plan
Pete Redfern Deferred Shares (STIA)(h)
Deferred Shares (STIA)(h)
Deferred Shares (STIA)(h)
Performance Share Plan(h)
Performance Share Plan(h)
Performance Share Plan(h)
Performance Share Plan(h)
Performance Share Plan(h)
Share Option Plan(h)
Sharesave Plan
Total
Ryan Mangold Deferred Shares (STIA)(h)
Deferred Shares (STIA)(h)
Performance Share Plan(h)
Performance Share Plan(h)
Performance Share Plan(h)
Performance Share Plan(h)
Performance Share Plan(h)
Share Option Plan(h)
Sharesave Plan
Total
James Jordan Deferred Shares (STIA)(h)
Deferred Shares (STIA)(h)
Deferred Shares (STIA)(h)
Performance Share Plan(h)
Performance Share Plan(h)
Performance Share Plan(h)
Performance Share Plan(h)
Performance Share Plan(h)
Share Option Plan(h)
Sharesave Plan
Total
Granted/
Awarded in
2012
(number)
–
–
377,537(b)
–
–
–
–
1 January
2012(a)
497,284
409,674
–
1,601,423
1,574,606
2,012,779
3,484,701
– 2,906,623(c)
3,202,846
63,331
–
–
12,846,644 3,284,160
–
20,848
–
190,645
171,238
218,889
1,418,771
153,711(b)
–
–
–
–
– 1,183,410(c)
381,291
39,335
–
–
2,441,017 1,337,121
–
–
230,882
190,205
–
557,638
548,300
700,878
1,617,897
175,284(b)
–
–
–
–
– 1,349,503(c)
1,115,277
63,331
–
–
5,024,408 1,524,787
Dividend
Re-
investment
shares
added
during 2012
(number)
Exercised/
vested
(number)
31
December
2012
Exercise
price
(pence)
Date of
grant
Date
from which
exercisable
/capable of
vesting
Expiry date
5,982
4,928
4,541
–
–
–
–
–
–
–
15,451
251
1,848
–
–
–
–
–
–
–
2,099
2,777
2,287
2,109
–
–
–
–
–
–
–
7,173
503,266
–
414,602
–
382,078
–
1,601,423
–
1,574,606
–
2,012,779
–
3,484,701
–
2,906,623
–
3,202,846
–
–
63,331
– 16,146,255
–
21,099
155,559
–
190,645
–
171,238
–
218,889
–
1,418,771
–
1,183,410
–
381,291
–
39,335
–
3,780,237
–
233,659
–
192,492
–
177,393
–
557,638
–
548,300
–
700,878
–
1,617,897
–
1,349,503
–
1,115,277
–
63,331
–
6,556,368
–
–
22.03.10
– 04.04.11
– 23.03.12
07.08.09
–
22.03.10(e)
–
06.08.10(e)
–
01.04.11
–
05.03.12(f)
–
07.08.09(g)
39.34
11.10.11
24.04
–
04.04.11
– 23.03.12
07.08.09
–
22.03.10(e)
–
06.08.10(e)
–
01.04.11
–
05.03.12(f)
–
07.08.09(g)
39.34
06.10.10
22.88
22.03.10
–
–
04.04.11
– 23.03.12
07.08.09
–
22.03.10(e)
–
06.08.10(e)
–
01.04.11
–
05.03.12(f)
–
07.08.09(g)
39.34
11.10.11
24.04
30.06.13
31.12.12
30.06.14
31.12.13
31.12.14
30.06.15
01.01.13(d) 01.07.13
22.03.13(d) 22.09.13
06.08.13(d) 06.02.14
01.04.14(d) 01.10.14
05.03.15(d) 05.09.15
01.01.13(d) 07.08.19
31.05.17
01.12.16
30.06.14
31.12.13
30.06.15
31.12.14
01.01.13(d) 01.07.13
22.03.13(d) 22.09.13
06.08.13(d) 06.02.14
01.04.14(d) 01.10.14
05.03.15(d) 05.09.15
01.01.13(d) 07.08.19
31.05.14
01.12.13
31.12.12
30.06.13
31.12.13
30.06.14
30.06.15
31.12.14
01.01.13(d) 01.07.13
22.03.13(d) 22.09.13
06.08.13(d) 06.02.14
01.04.14(d) 01.10.14
05.03.15(d) 05.09.15
01.01.13(d) 07.08.19
31.05.17
01.12.16
Details of options and conditional awards over shares held by Directors who served during the year notes:
(a) Or date of appointment.
(b) Market value per share on date of grant 23 March 2012 was 50.6 pence.
(c) Market value per share on date of grant 5 March 2012 was 47.39 pence.
(d) Or later publication of the preliminary full year or half year results announcement on which the associated performance condition will be calculated.
(e) 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.
(f) Vesting will be 20% for the 2012 award (2011 and 2010 award for both tranches 20%; 2009 award 25%) for threshold performance (50th percentile for TSR; 10% ROCE; 10%
margin (2012 and 2011 awards only)) and 100% (2011 and 2010 award for both tranches and 2009: 100%) for upper quartile performance (75th percentile for TSR; 20% ROCE;
13% margin (2012 and 2011 awards only)) with straight line vesting between these two thresholds.
(g) Vesting will be 25% for threshold performance (2009: 10% ROCE; 2008: ROCE to exceed Cost of Capital (‘CoC’)) and 100% for upper quartile performance (2009: 20% ROCE;
2008: ROCE to exceed CoC by 3%) with straight line vesting between these two thresholds.
(h) In line with current practice the Committee has decided in 2013 to make an administrative change to the rules of the TWPSP (and also to the STIA rules) so as to convert
the contingent award structure to a nil-cost option structure with a short term exercise period of six months following which the option will lapse if not exercised. This change applied
to all outstanding awards held by current Directors and employees and are expected to apply, in normal circumstances, to all future awards.
54
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There have been no variations to the terms and conditions or performance criteria for outstanding share awards 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 2012 was 65.8 pence and the range during the year was 36.93 pence to 66.65 pence.
Details of any share awards made to Executive Directors during 2013 will be included in the 2013 Remuneration Report.
Directors’ interests in shares of the Company
Directors’ interests in 1p ordinary shares held (fully paid) (‘ordinary shares’):
Executive Directors’
share interests
(including Deferred
Shares) at 31.12.12
valued at 31.12.12
share price and
expressed as a
percentage of
base salary at
31.12.12(c)
Executive Directors’
share interests
(including Deferred
Shares) at 31.12.12
valued at 28.02.13
share price and
expressed as a
percentage of
base salary at
01.04.13(d)
197%
69%
166%
236%
77%
200%
Deferred
Shares held on
trust under
the STIA(b)
1,299,946
176,658
603,544
at 01.01.12
ordinary
shares(a)
at 31.12.12
ordinary shares
1,055,562
1,155,562
832,239
56,370
220,825
20,000
59,704
75,000
400,000
200,000
897,196
154,410
259,310
40,000
59,848
125,000
400,000
200,000
Kevin Beeston
Pete Redfern(e)
Ryan Mangold(e)
James Jordan(e)
Kate Barker
Brenda Dean
Mike Hussey
Tony Reading
Rob Rowley
(a) Or date of appointment.
(b) Shares conditionally held as deferral of Company bonus count towards the achievement of the share retention targets described on page 45. Accordingly, only the net amount of
shares has been included in this column and in the percentages set out in the fifth and sixth columns.
(c) Percentage of shareholding achieved at 31 December 2012 towards the targets described on page 45 calculated on 2012 salary and at 31 December 2012 share price. Salaries
as at 31 December 2012 for Pete Redfern, Ryan Mangold and James Jordan were £735,437, £316,956 and £341,453 respectively.
(d) Percentage of shareholding achieved at 31 December 2012 towards the targets described on page 45 calculated on 1 April 2013 salary and at 28 February 2013 share price.
Salaries as at 1 April 2013 for Pete Redfern, Ryan Mangold and James Jordan will be £753,823, £347,067 and £349,989 respectively.
(e) Including partnership and matching shares held under the Share Purchase Plan described on page 48.
Note: The Share price on 31 December 2012 and used in the above calculation was 65.8 pence per share and on 28 February 2013 was 81.1 pence per share.
Note: The above table does not include the deferral into shares of 25% of the 2012 STIA for any Executive Director.
Taylor Wimpey plc plc.taylorwimpey.co.uk
55
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Remuneration Report continued
Directors’ pension entitlements
Defined benefit schemes
The George Wimpey Staff Pension Scheme
Pete Redfern and James Jordan are members of The George Wimpey Staff Pension Scheme (‘GWSPS’). The following table sets out the transfer
value of their accrued benefits under the Scheme calculated in a manner consistent with ‘The Occupational Pension Schemes (Transfer Values)
Regulations 2008’.
Increase in
accrued
pension from
31 December
2011 to
31 December
2012
£
Accrued pension
as at 31
December
2012(a)
£
Transfer value
gross of
Director’s
contributions at
31 December
2012(b)
£
Transfer value
gross of
Director’s
contributions at
31 December
2011(b)
£
Increase in
transfer value
from 31
December 2011
to 31 December
2012 less
Director’s
contributions(c)
£
Increase in
accrued pension
from 31
December 2011
to 31 December
2012 less
inflation
£
Transfer value of
accrued pension
increase less
Director’s
contributions(d)
£
615
546
28,547
25,348
366,650
430,500
366,600
425,300
50
5,200
0
0
0
0
Accrued
pension as
at 31 December
2011
£
27,932
24,802
Pete Redfern
James Jordan
(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. Pension benefits include a two thirds spouse’s pension. Pensions accrued up to 5 April 2006 are guaranteed to increase in payment
in line with inflation limited each year to 5%. Pensions accrued after 5 April 2006 are guaranteed to increase in payment in line with inflation limited each year to 2.5%. Pensions
accrued up to 5 April 2009 will revalue in deferment in line with inflation subject to an overall cap of 5% per annum. Pensions accrued after 5 April 2009 will revalue in deferment in
line with inflation subject to an overall cap of 2.5% per annum. We have only taken into account defined benefits accrued over the period to 31 August 2010 and have not included
any Defined Contribution pension benefits accrued after this date.
(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 GWSPS closed to future accrual on 31 August 2010 and so no contributions were made after 31 August 2010.
There was no change to benefits during the year and thus no difference between the changes to any Director’s pension benefits in comparison
with those of other employees.
Non-Group pension arrangements
Ryan Mangold has non-Group pension arrangements, to which contributions were paid by the Company as set out below:
Ryan Mangold(a)
2012
£
2011
£
51,194(b)
24,861
(a) Ryan Mangold also received a pension allowance of £43,224 in 2012 (2011: £33,928) in lieu of Company pension contributions over the Annual Allowance limit introduced in April
2011 of £50,000.
(b) Ryan Mangold elected to have £30,000 of the non-deferred portion of his STIA cash bonus, earned for 2011 performance and paid in 2012, paid as additional pension contribution.
Statement of shareholder voting
At the 2012 Annual general meeting, 93.22% of our shareholders who voted, voted in favour of the Company’s 2011 Remuneration Report and,
as stated earlier, we have consulted further with our shareholders on remuneration matters during the year. Whilst we are in no way complacent
about the need to ensure that remuneration continues to reflect the achievement of the Company’s strategic objectives and the level of return
being delivered to shareholders, in view of the enhanced reporting recommended by BIS noted earlier (most of which is reflected in this year’s
reporting), we believe the current situation is satisfactorily explained and we hope that shareholders will, again, support the Remuneration Report
at the AGM on 25 April 2013.
Approval
This Remuneration Report was approved by the Board of Directors on 28 February 2013 and signed on its behalf by the Remuneration
Committee Chairman:
Tony Reading
28 February 2013
56
Taylor Wimpey plc Annual Report & Accounts 2012
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Statutory, regulatory and other formal information
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 appear elsewhere in the Report and Accounts as detailed below:
(cid:116)(cid:1) 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 110;
(cid:116)(cid:1) changes in asset values are set out in the consolidated balance sheet
on page 64 and in the Notes to the accounts on pages 67 to 109;
(cid:116)(cid:1) the Group’s profit before taxation and the profit after taxation and
minority interests appear in the consolidated income statement on
page 62 and in the Notes to the accounts on pages 67 to 109; and
(cid:116)(cid:1) a detailed statement of the Group’s treasury management and
funding is set out in Note 19 on page 86.
Directors
The following Directors held office throughout the year:
Kevin Beeston, Chairman;
Pete Redfern, Chief Executive;
Ryan Mangold, Group Finance Director;
James Jordan, Group Legal Director and Company Secretary;
Kate Barker CBE, Independent Non Executive Director;
Brenda Dean, Independent Non Executive Director;
Mike Hussey, Independent Non Executive Director;
Tony Reading MBE, Independent Non Executive Director;
Rob Rowley, Independent Non Executive Director and Senior
Independent Director.
The Directors together with their biographical information are shown
on pages 28 and 29.
Retirement, election and re-election
The Company has determined that in accordance with the UK
Corporate Governance Code, all Directors should seek re-election
at this year’s AGM as explained in the Notes to the Notice of Meeting
and on page 33 of the Corporate Governance Report.
Each of the Directors proposed for 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. Further
information relating to the evaluation is set out below and in the
Corporate Governance Report on page 33.
The Articles of Association of the Company further regulate 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.
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/
affiliates. The indemnity has been put in place in accordance with
section 234 of the Companies Act 2006 in respect of which the
Company took advice from Slaughter and May.
Audit and auditor
Each Director has, at the date of approval of this Report,
confirmed that:
(cid:116)(cid:1) to the best of their knowledge there is no relevant audit information
of which the Company’s auditor is unaware; and
(cid:116)(cid:1) 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 auditor is 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 auditor 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 formal policy for the carrying out
of 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, details of which are set out in
Note 5 on page 75.
Annual General Meeting
The AGM will be held at 11:00 am on 25 April 2013 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 112 and on the Company’s Web
site plc.taylorwimpey.co.uk. 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.
Web communication
With shareholders’ consent, the Company has adopted Web
communication. The benefits of Web communication are that it:
(cid:116)(cid:1) enables the Company to significantly reduce its printing and
postage costs;
(cid:116)(cid:1) enables shareholders to access information faster, on the day
documents are published on the Company’s Web site; and
(cid:116)(cid:1) 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 2012 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.
Taylor Wimpey plc plc.taylorwimpey.co.uk
57
Statutory, regulatory and other formal information continued
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Registrar
The Company’s registrar is Capita Registrars. Their details, together
with information on facilities available to shareholders, are set out in
the Shareholder Facilities section on page 120.
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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 22 on page 94.
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 are 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 21 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% 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
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 33,877,396 new Ordinary Shares of 1p each.
The authority given by shareholders at the AGM held on 26 April 2012
for the Company to purchase a maximum of 321.5 million of its own
shares remained valid at 31 December 2012. The authority was not
exercised during 2012 or prior to the date of this Report. The Company
has no current intention of exercising the authority but will nevertheless
be seeking the usual renewal of this 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 page 41. 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 below 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.
At 28 February 2013, 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.
Directors’ interests, including interests in the Company’s shares,
are shown in the Remuneration Report.
Substantial interests in the Company’s shares as at
28 February 2013
Name
Schroders plc
BlackRock Inc
J.P. Morgan Asset Management
Holdings Inc
Third Avenue Management LLC
Legal & General Group Plc
Standard Life Investments Limited
Number of
shares held
(millions)
Percentage of
issued voting
share capital
353.2
181.0
159.6
125.9
103.4
96.4
10.93
5.62
4.99
3.91
3.20
3.02
Dividend
Information relating to the recommended 2012 final dividend is set out
in the Chairman’s Statement on page 4 and in the notes to resolution 2
on page 116 in the Notes to the Notice of Annual General Meeting.
The Company will be operating a Dividend Re-Investment Plan, further
details of which are set out on page 116 of this Annual Report.
The right to receive any dividend has been waived in part by the
Trustee of the Company’s Employee Share Ownership Trusts over
those Trusts’ combined holding of 37,581,131 shares.
Research and development
During 2012 the Company began to build the new standard house
type range in significant numbers. This enabled us to validate the work
that been undertaken in developing them. Already we can see delivery
of the customer offering, urban design, cost and process benefits that
had been targeted. Feedback from customers and the Company’s
regional business units will allow us to continue to refine the range and
ensure we have the best house type range to support the business and
to provide customers with what they want. To that end our continued
development work will look at ways of enhancing the homes and
offering more customer choice as well as capturing best practice in
their use within urban design.
With the 2013 changes to the building regulations still not finalised,
we have continued to evaluate the options available to us when, and
if further increases in energy efficiency are announced. To this end we
continue to work with our supply chain to identify new products and
techniques available to us and appraise them before they will be
needed. We are also continuing to push our strategy of fabric first in
meeting energy efficiency as well as evaluating carbon offset methods
of meeting allowable solutions on an individual site basis. As an adjunct
to our R & D we continue to contribute to several industry working
groups looking at energy efficiency, changes to building regulations and
standards and how to close the gap between design and performance.
Taylor Wimpey sits on the Advisory Board of HOMBRE (Holistic
Management of Brownfield Regeneration), a four year Seventh
Framework EU funded research project looking at sustainable
brownfield re-use. We continue to work with WRAP (Waste and
Resources Action Programme), most notably on their programme on
Clay Bricks & Blocks Resource Efficiency Action Plan (REAP), and have
provided time and a letter of support for a proposal for funding from the
University of Newcastle entitled ‘Urban Carbon Capture: Engineering
Soils for Climate Change’.
58
Taylor Wimpey plc Annual Report & Accounts 2012
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Through CIRIA (Construction Industry Research Information
Association) Taylor Wimpey personnel have contributed to Steering
Groups on asbestos in soils and quality control for the installation
of gas proof membranes.
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 Chief Executive
– and via verbal briefings and by management presentations.
There is an internal forum on the Group’s intranet inviting employees
to comment and make suggestions on the Company’s strategy and
its implementation with each one being read by the Chief Executive
and responded to.
This is in addition to the continuing forum on the intranet called
‘Open Door’ which allows direct communication with the Chief
Executive on strategic areas of focus and other matters in order
to enable all employees to contribute and comment. All employees
are encouraged to participate and use the forum.
The Company promotes share ownership as widely as possible.
One of the findings from our review during 2011 of the reward
structure across the business was that many employees would value
the opportunity to exchange part of any cash bonus for exceptional
performance, into shares of the Company. This scheme was
introduced, for those not already participating in the STIA, for the
2012 cash bonus, payable for exceptional performance during 2011,
offering a 20% enhancement to the value if taken entirely in shares
with a holding period of 12 months. This first offer of the scheme
resulted in 934,516 shares (2011: Nil) being acquired by 255
employees (2011: Nil).
In addition, the Company maintains all-employee share plans,
including the Save As You Earn share option plan and the Share
Incentive Plan (‘SIP’), which are offered as widely as possible across
the Group. Almost half of our eligible employees (48.5%) participate in
one or both plans.
Each all-employee plan is nearing the end of the ten year period for
which it was approved by shareholders at the 2004 AGM, and the
rules of each have been updated to take advantage of recent
changes in HM Revenue & Customs requirements for such plans.
Details of the proposed new rules for each plan and the associated
trust deed for the SIP are set out in the notes to resolutions 18 and 19
on pages 118 to 119 in the Notes to the Notice of Annual General
Meeting, together with details of the changes proposed. Each is again
proposed to be approved for a further ten years.
Equal opportunities
As set out in our Diversity Policy, we remain committed to equality of
opportunity in all of our 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.
Our Diversity Policy which can be found on the Company’s Web site:
plc.taylorwimpey.co.uk/CorporateResponsibility/Policies
Employment of people with disabilities
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 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 Legal
Director and Company Secretary, UK Land and Planning Director,
Group Investor Relations Manager and Group Financial Controller.
The Company and the Committee encourage non-financial
contributions also and for employees to participate in
charitable causes.
During the year, Group companies donated £247,000 (2011:
£211,000) and an additional 476 hours of volunteer time to various
charities in the UK.
Further information on the Group’s donations, activities and initiatives
can be found in the 2012 Corporate Responsibility Report which is
available on the Company’s Web site: plc.taylorwimpey.co.uk/
CorporateResponsibility
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 and the CBI. Whilst we do not regard
this as political in nature, the Companies Act 2006 definition of ‘political
organisations’ and related terms 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 as a matter of prudency.
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. Our standard
framework agreements with contractors establish 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, and for suppliers, the due date for payment is the end of the
month following the month of receipt of the supplier’s invoice for goods
and/or services delivered to the Company.
Taylor Wimpey plc plc.taylorwimpey.co.uk
59
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Statutory, regulatory and other formal information continued
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:
(cid:116)(cid:1) 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 and
the undertakings included in the consolidation taken as a whole; and
(cid:116)(cid:1) 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 28 February 2013.
James Jordan
Group Legal Director and Company Secretary
Taylor Wimpey plc
28 February 2013
Trade creditor days for the Group for the year ended 31 December
2012 were 36 days (2011: 32 days). This is based on the ratio of year
end Group trade creditors (excluding sub-contract retentions and
unagreed claims of £38.9 million (2011: £31.2 million) and land
creditors, see Note 18 to the Consolidated Financial Statements) to
amounts invoiced during the year by trade creditors. The Company
had no significant trade creditors at 31 December 2012.
Agreements
Apart from a small number of borrowing agreements, pursuant to
which the Company borrows or is able to borrow money, 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 2012.
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:
(cid:116)(cid:1) select suitable accounting policies and then apply them consistently;
(cid:116)(cid:1) make judgements and accounting estimates that are reasonable
and prudent;
(cid:116)(cid:1) state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained
in the financial statements; and
(cid:116)(cid:1) 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:
(cid:116)(cid:1) properly select and apply accounting policies;
(cid:116)(cid:1) present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
(cid:116)(cid:1) 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
(cid:116)(cid:1) make an assessment of the Company’s ability to continue as
a going concern.
60
Taylor Wimpey plc Annual Report & Accounts 2012
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Independent Auditor’s Report
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion the information given in the Directors’ Report for the
financial year for which the Group 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:
(cid:2)(cid:3) certain disclosures of Directors’ remuneration specified by law are
not made; or
(cid:2)(cid:3) we have not received all the information and explanations we
require for our audit.
Under the Listing Rules we are required to review:
(cid:2)(cid:3) the Directors’ Statement contained within the Directors’ Report
on Corporate Governance in relation to going concern;
(cid:2)(cid:3) the part of the Corporate Governance Statement relating to the
Company’s compliance with the nine provisions of the UK
Corporate Governance Code specified for our review; and
(cid:2)(cid:3) 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 2012 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
28 February 2013
We have audited the Group financial statements of Taylor Wimpey plc
for the year ended 31 December 2012 which comprise the
Consolidated Income Statement, the Consolidated Statement of
Comprehensive Income, the Consolidated Balance Sheet, the
Consolidated Statement of Changes in Equity, the Consolidated Cash
Flow Statement and the related notes 1 to 32. The financial reporting
framework that has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRS) 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. In addition, we read all the
financial and non-financial information in the annual report to identify
material inconsistencies with the audited financial statements. If we
become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the Group financial statements:
(cid:2)(cid:3) give a true and fair view of the state of the Group’s affairs as at
31 December 2012 and of its profit for the year then ended;
(cid:2)(cid:3) have been properly prepared in accordance with IFRSs as adopted
by the European Union; and
(cid:2)(cid:3) have been prepared in accordance with the requirements of the
Companies Act 2006 and Article 4 of the IAS Regulation.
Taylor Wimpey plc plc.taylorwimpey.co.uk
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Consolidated Income Statement
for the year to 31 December 2012
£ million
Continuing operations
Revenue
Cost of sales
Gross profit
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 from continuing operations
Discontinued operations
Profit for the year
Profit/(loss) for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Basic earnings per share – total Group
Diluted earnings per share – total Group
Basic earnings per share – continuing operations
Diluted earnings per share – continuing operations
Adjusted basic earnings per share
– continuing operations
Adjusted diluted earnings per share
– continuing operations
Before
exceptional
items
2012
Exceptional
items
(Note 7 and 8)
2012
Note
Before
exceptional
items
2011
Exceptional
items
(Note 5)
2011
Total
2012
3
5
7
12
8
Note
9
9
9
9
9
9
2,019.0
(1,662.7)
356.3
(128.6)
227.7
1.2
(46.0)
2.4
185.3
(36.0)
149.3
–
149.3
–
–
–
–
–
–
22.4
–
22.4
59.6
82.0
–
82.0
2,019.0
(1,662.7)
356.3
(128.6)
227.7
1.2
(23.6)
2.4
207.7
23.6
231.3
1,808.0
(1,520.3)
287.7
(129.4)
158.3
3.7
(73.3)
1.2
89.9
(24.2)
65.7
–
231.3
43.1
108.8
–
–
–
(5.8)
(5.8)
–
(5.5)
–
(11.3)
1.5
(9.8)
–
(9.8)
231.3
–
231.3
2012
7.3p
7.1p
7.3p
7.1p
4.7p
4.6p
Total
2011
1,808.0
(1,520.3)
287.7
(135.2)
152.5
3.7
(78.8)
1.2
78.6
(22.7)
55.9
43.1
99.0
99.0
–
99.0
2011
3.1p
3.0p
1.8p
1.7p
2.1p
2.0p
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Consolidated Statement of Comprehensive Income
for the year to 31 December 2012
£ million
Exchange differences on translation of foreign operations
Movement in fair value of hedging derivatives
Actuarial loss on defined benefit pension schemes
Tax credit on items taken directly to equity
Other comprehensive expense for the year net of tax
Profit for the year
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Note
24
20
13
2012
0.2
–
(76.8)
16.8
(59.8)
231.3
171.5
171.5
–
171.5
2011
1.8
3.0
(33.2)
4.8
(23.6)
99.0
75.4
75.4
–
75.4
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Consolidated Balance Sheet
at 31 December 2012
£ million
Non-current assets
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
Other reserves
Retained earnings
Equity attributable to parent
Non-controlling interests
Total equity
Note
2012
2011
10
11
12
15
13
14
15
15
18
16
21
18
17
16
20
13
21
22
23
25
24
24
5.2
7.1
31.5
102.0
319.6
465.4
2,788.8
96.0
9.7
190.4
3,084.9
3,550.3
(772.6)
(8.7)
–
(84.4)
(865.7)
2,219.2
(190.8)
(149.4)
(100.0)
(244.2)
–
(10.7)
(695.1)
(1,560.8)
5.1
5.0
31.9
70.3
342.8
455.1
2,686.6
72.5
10.9
147.7
2,917.7
3,372.8
(697.8)
(70.4)
–
(76.6)
(844.8)
2,072.9
(199.7)
(164.6)
(100.0)
(210.2)
–
(18.5)
(693.0)
(1,537.8)
1,989.5
1,835.0
288.0
758.8
(15.9)
44.6
912.6
1,988.1
1.4
1,989.5
287.7
754.4
(8.4)
46.7
753.1
1,833.5
1.5
1,835.0
The financial statements of Taylor Wimpey plc (registered number: 296805) were approved by the Board of Directors and authorised for issue on
28 February 2013. They were signed on its behalf by:
R Mangold
Director
P Redfern
Director
64
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Consolidated Statement of Changes in Equity
for the year to 31 December 2012
For the year to 31 December 2012
£ million
Balance as at 1 January 2012
Exchange differences on translation of foreign operations
Actuarial loss on defined benefit pension schemes
Deferred tax credit
Other comprehensive income/(expense)
for the year net of tax
Profit for the year
Total comprehensive income for the year
New share capital subscribed
Own shares acquired
Utilisation of own shares
Share-based payment credit
Cash cost of satisfying share options
Transfer to retained earnings
Dividends approved and paid
Equity attributable to parent
Non-controlling interests
Total equity
For the year to 31 December 2011
£ million
Balance as at 1 January 2011
Exchange differences on translation of foreign operations
Movement in fair value of hedging derivatives
Actuarial loss on defined benefit pension schemes
Deferred tax credit
Other comprehensive income/(expense)
for the year net of tax
Profit for the year
Total comprehensive income for the year
New share capital subscribed
Own shares acquired
Utilisation of own shares
Share-based payment credit
Cash cost of satisfying share options
Transfer to retained earnings
Recycling of translation reserve on disposal of subsidiaries
Equity attributable to parent
Non-controlling interests
Total equity
Share
capital
287.7
–
–
–
–
–
-
0.3
–
–
–
–
–
–
288.0
Share
premium
Own
shares
Other
reserves
Retained
earnings
754.4
–
–
–
–
–
–
4.4
–
–
–
–
–
–
758.8
(8.4)
–
–
–
–
–
–
–
(10.0)
2.5
–
–
–
–
(15.9)
46.7
0.2
–
–
0.2
–
0.2
–
–
–
–
–
(2.3)
–
44.6
753.1
–
(76.8)
16.8
(60.0)
231.3
171.3
–
–
–
4.8
(0.7)
2.3
(18.2)
912.6
Total
1,833.5
0.2
(76.8)
16.8
(59.8)
231.3
171.5
4.7
(10.0)
2.5
4.8
(0.7)
–
(18.2)
1,988.1
1.4
1,989.5
Share
capital
287.7
Share
premium
753.7
Own
shares
(0.6)
Other
reserves
101.4
Retained
earnings
Total
679.4
1,821.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
287.7
–
–
–
–
–
–
–
0.7
–
–
–
–
–
–
754.4
–
–
–
–
–
–
–
–
(10.0)
2.2
–
–
–
–
(8.4)
1.8
3.0
–
–
4.8
–
4.8
–
–
–
–
–
(0.4)
(59.1)
46.7
–
–
(33.2)
4.8
(28.4)
99.0
70.6
–
–
–
3.9
(1.2)
0.4
–
753.1
1.8
3.0
(33.2)
4.8
(23.6)
99.0
72.4
0.7
(10.0)
2.2
3.9
(1.2)
–
(59.1)
1,833.5
1.5
1,835.0
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Consolidated Cash Flow Statement
for the year to 31 December 2012
£ million
Net cash from/(used in) 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 repaid from joint ventures
Disposal of subsidiaries
Net cash (used in)/from investing activities
Financing activities
Proceeds from sale of own shares
Cash cost of satisfying share options
Purchase of own shares
Repayment of debenture loans
Increase in debenture loans
Repayment of overdrafts, bank and other loans
Dividends paid
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
2012
78.4
2011
(34.8)
0.9
0.4
0.7
(3.5)
(0.8)
–
2.1
–
(0.2)
4.7
(0.7)
(7.7)
(15.2)
–
–
(18.2)
(37.1)
41.1
147.7
1.6
190.4
6.3
10.9
0.8
(1.7)
(4.1)
–
2.5
562.3
577.0
0.7
(1.2)
(7.9)
(85.4)
–
(487.1)
–
(580.9)
(38.7)
183.9
2.5
147.7
11
10
26
27
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Notes to the Consolidated Financial Statements
for the year to 31 December 2012
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 has significantly strengthened its balance sheet by
reducing debt through the year. Following the preparation of
forecasts for a period greater than 12 months, the Group is
expected to have sufficient financial capacity to continue trading
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 2012.
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
all comprehensive income is attributed to the owners and the
non-controlling interests that may result in the non-controlling
interest having a debit balance.
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 two operating divisions for management
reporting and control:
(cid:2)(cid:3) Housing United Kingdom
(cid:2)(cid:3) Housing Spain
The Group completed the disposal of its North American business
in July 2011. The results of this business in 2011 have been presented
as discontinued operations.
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:
(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) Part exchange
In certain instances property may be accepted in part consideration
for a sale of a residential property. It is recorded at its fair value,
established by independent surveyors, less cost to sell. Net proceeds
generated from the subsequent sale of part exchange properties are
recorded as a reduction to cost of sales.
(c) 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.
(d) Contracting work and social housing contracts
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.
(e) Interest receivable
Interest income on bank deposits is recognised on an accruals basis.
Also included in interest receivable are interest and interest related
payments the Group receives on other receivables.
Taylor Wimpey plc plc.taylorwimpey.co.uk
67
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Notes to the Consolidated Financial Statements continued
1. Significant accounting policies continued
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 financial 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.
On consolidation, the assets and liabilities of the Group’s overseas
operation 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 derivatives 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 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 expense 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. This difference
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.
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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.
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.
Mortgage receivables relate to sales incentives including shared
equity. Where the receivable is due over one year it is discounted
to present value.
Shared equity loans are separated into a loan receivable and a
non-closely related embedded derivative asset for accounting
purposes as allowed under IAS 39 ‘Financial instruments’. The loan
is measured at amortised cost less any provision for default and the
embedded derivative is measured at fair value through the income
statement. The fair value of the derivative is established using the
average movement on two national house price indices.
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 and hedge accounting
The Group uses forward exchange contracts to hedge transactions
denominated in foreign currencies. The Group also uses foreign
currency borrowings and derivatives 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.
Derivative financial instruments are measured at fair value. 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 is no longer
expected to occur, the net cumulative gain or loss recognised in
reserves is transferred to the income statement for the period. In
the situation that a derivative financial instrument does not meet
the specific criteria of IAS 39 ‘Financial instruments’ for hedging
it is presented as a held for trading asset or liability.
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.
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.
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.
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.
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. Costs
comprise 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
Taylor Wimpey plc plc.taylorwimpey.co.uk
69
Notes to the Consolidated Financial Statements continued
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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 probable that they will not 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 substantively
enacted by the balance sheet date.
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. This is to ensure any funding advances are only recognised as
revenue when the work has been completed including the appropriate
allocation of infrastructure.
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 inventory
In order to assess the appropriateness of the carrying value of
inventory, 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.
Following previous significant impairments of inventories, 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. The net realisable
value exercise is highly sensitive to the assumptions used and we
therefore also consider when the inventory is likely to be realised,
whether or not there has been a sustained change in market
conditions that previously caused the inventory to be written down and
the wider economic environment existing at the balance sheet date.
Whilst market conditions have stabilised in the United Kingdom, the
Spanish market has not materially changed in the year and continues
to be challenging. The Group has not recorded any additional write-
downs or reversals of previous write-downs to net realisable value
as there is no clear evidence of a sustained change in the economic
circumstances at the balance sheet date. The Chief Executive’s
Review on page 6 includes a summary of our view of the outlook of
the wider economic conditions and the impact on the UK housing
market.
In the year 46% (2011: 63%) of the Group’s completions in the
UK were from sites that had been previously impaired. As at
31 December 2012, 26% (2011: 39%) of our UK short term owned
and controlled land is impaired. Only 120 plots (2011: 89) were
sold in Spain that had previously been impaired.
The gross profit for the year includes £85.1 million (2011: £99.6 million)
of positive contribution, on completions from sites with previously
impaired inventory. The positive contribution is the estimation
difference between the realised value on completions compared to
the value assumed in the net realisable value review. These amounts
are stated before the allocation of overheads that are excluded from
the Group's net realisable value exercise.
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This is due to the actual selling prices and or costs on these
completions being favourable to the estimates and market
assumptions used in the net realisable value review. This estimation
difference is due to a combination of actions taken by the Group
including cost reductions through replans, the implementation of
standard house types and slightly higher selling prices.
Impairment of other intangible assets
The determination of whether 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.
If the current trading conditions significantly improve, 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 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 Consolidated Statement of
Comprehensive Income. Note 20 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.
investment property under IAS 40 ‘Investment Property’, introducing a
presumption that recovery of the carrying amount of an investment
property will normally be through sale.
Standards and Interpretations in issue but not yet effective
At the date of publishing these financial statements the following new
and revised standards and interpretations were in issue but were not
yet effective (and in some cases had not yet been adopted by the EU).
None of these new and revised standards and interpretations have
been adopted early by the Group:
(cid:2)(cid:3) Annual improvements to IFRSs 2009-2011 Cycle
(cid:2)(cid:3) IFRS 1 (amended) ‘Severe Hyperinflation and Removal of Fixed
Dates for First-time Adopters’
(cid:2)(cid:3) IFRS 1 (amended) ‘Government Loans’
(cid:2)(cid:3) IFRS 7 (amended) ‘Disclosure – Offsetting Financial Assets and
Financial Liabilities’
(cid:2)(cid:3) IFRS 9 ‘Financial Instruments’
(cid:2)(cid:3) IFRS 10 ‘Consolidated Financial Statements’
(cid:2)(cid:3) IFRS 10 (amended) ‘Investment Entities’
(cid:2)(cid:3) IFRS 11 ‘Joint Arrangements’
(cid:2)(cid:3) IFRS 12 ‘Disclosures of Interests in Other Entities’
(cid:2)(cid:3) IFRS 12 (amended) ‘Investment Entities’
(cid:2)(cid:3) IFRS 13 ‘Fair Value Measurement’
(cid:2)(cid:3) IAS 1 (amended) ‘Presentation of Items of Other
Comprehensive Income’
(cid:2)(cid:3) IAS 12 (amended) ‘Deferred Tax: Recovery of Underlying Assets’
(cid:2)(cid:3) IAS 19 (revised) ‘Employee Benefits’
(cid:2)(cid:3) IAS 27 (revised) ‘Separate Financial Statements’
(cid:2)(cid:3) IAS 27 (amended) ‘Investment Entities’
Going concern
The Group continues to be profitable and has significantly reduced
debt and has a strengthened balance sheet. The markets which the
Group operates in have remained stable, although certain risks remain.
The Group has prepared detailed forecasts with certain sensitivities,
taking into account the principal risks identified on pages 12 to 13.
(cid:2)(cid:3) IAS 28 (revised) ‘Investments in Associates and Joint Ventures’
(cid:2)(cid:3) IAS 32 (amended) ‘Offsetting Financial Assets and Liabilities’
The Directors do not expect that the adoption of the standards listed
above will have a material impact on the financial statements of the
Group in future periods, except as follows:
Based on these forecasts the Directors are satisfied that the Group will
be able to continue trading for at least the next 12 months from the
date of signing these financial statements.
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.
Amendment to IFRS 7 ‘Disclosure – Transfer of Financial Assets’. IFRS
7 has been amended such that enhanced disclosures are required for
transactions involving the transfer of financial assets. The Group has
not transferred any financial assets during the current year and
accordingly no additional disclosures have been included in these
financial statements.
Amendments to IAS 12 ‘Income taxes’. The amendment provides a
practical solution to the application of these requirements in relation to
IFRS 11 will impact both the measurement and disclosure of joint
arrangements.
IFRS 13 will impact the measurement of fair value for certain assets
and liabilities as well as the associated disclosures.
IAS 19 (revised) will impact the measurement of the various
components representing movements in the defined benefit pension
obligation and associated disclosures, but not the Group’s total
obligation.
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 121. The nature of the Group’s operations and its
principal activities are set out in the Chief Executive’s Review on pages
6 to 14.
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 page 68.
Taylor Wimpey plc plc.taylorwimpey.co.uk
71
Notes to the Consolidated Financial Statements continued
3. Revenue
An analysis of the Group’s continuing revenue is as follows:
£ million
Housing
Land sales
Consolidated revenue
Interest receivable
Total revenue for the year
2012
2011
2,002.8
16.2
2,019.0
1.2
2,020.2
1,783.1
24.9
1,808.0
3.7
1,811.7
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Housing revenue includes £139.3 million (2011: £143.9 million) in respect of the value of properties accepted in part exchange by the Group.
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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
views the businesses on a geographic basis when making strategic decisions for the Group and as such the Group is organised into two
operating divisions – Housing United Kingdom and Housing Spain.
Previously the Group reported a Corporate segment which has been consolidated into the Housing United Kingdom segment. The 2011 results
and position have been restated to reflect the two segments.
The results of the North American business have been presented as discontinued operations in 2011, in accordance with IFRS 5 ‘Non-current
assets held for sale and discontinued operations’.
Segment information about these businesses is presented below:
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For the year to 31 December 2012
£ million
Revenue:
External sales
Result:
Profit on ordinary activities before joint ventures, finance costs and exceptional items
Share of results of joint ventures
Profit on ordinary activities before finance costs, exceptional items and after share
of results of joint ventures
Exceptional items
Profit on ordinary activities before finance costs, after share of results
of joint ventures and exceptional items
Finance costs, net (including exceptional finance costs)
Profit on ordinary activities before taxation
Taxation (including exceptional tax)
Profit for the year – total Group
Housing
United
Kingdom
Housing
Spain Consolidated
1,987.0
32.0
2,019.0
226.4
2.4
228.8
22.4
251.2
1.3
–
1.3
–
1.3
227.7
2.4
230.1
22.4
252.5
(44.8)
207.7
23.6
231.3
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Taylor Wimpey plc Annual Report & Accounts 2012
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4. Operating segments continued
At 31 December 2012
£ million
Assets and liabilities:
Segment operating assets
Joint ventures
Segment operating liabilities
Continuing Group net operating assets
Net current taxation
Net deferred taxation
Net debt
Net assets
2012
£ million
Other information – continuing operations:
Property, plant and equipment additions
Software development costs
Depreciation – plant and equipment
For the year to 31 December 2011 (restated)
£ million
Revenue:
External sales
Housing
United
Kingdom
2,922.6
31.3
(1,286.7)
1,667.2
Housing
Spain Consolidated
76.5
0.2
(16.0)
60.7
2,999.1
31.5
(1,302.7)
1,727.9
1.0
319.6
(59.0)
1,989.5
Housing
United
Kingdom
Housing
Spain Consolidated
3.0
0.8
1.2
0.1
–
0.1
3.1
0.8
1.3
Housing
United
Kingdom
Housing
Spain Consolidated
1,779.4
28.6
1,808.0
Result:
Profit on ordinary activities before joint ventures, finance costs and exceptional items
Share of results of joint ventures
Profit on ordinary activities before finance costs, exceptional items
and after share of results of joint ventures
Exceptional items
Profit on ordinary activities before finance costs, after share of results
of joint ventures and exceptional items
Finance costs, net (including exceptional finance costs)
Profit on ordinary activities before taxation
Taxation (including exceptional tax)
Profit from continuing operations:
Profit from discontinued operations:
Profit for the year from discontinued operations
Profit for the year – total Group
158.1
1.2
159.3
(5.8)
153.5
0.2
–
0.2
–
0.2
Taylor Wimpey plc plc.taylorwimpey.co.uk
158.3
1.2
159.5
(5.8)
153.7
(75.1)
78.6
(22.7)
55.9
43.1
99.0
73
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Notes to the Consolidated Financial Statements continued
4. Operating segments continued
At 31 December 2011 (restated)
£ million
Assets and liabilities – continuing operations:
Segment operating assets
Joint ventures
Segment operating liabilities
Net operating assets
Net current taxation
Net deferred taxation
Net debt
Net assets
2011
£ million
Other information – continuing operations:
Property, plant and equipment additions
Software development costs
Depreciation – plant and equipment
Housing
United
Kingdom
2,763.4
31.7
(1,187.9)
1,607.2
Housing
United
Kingdom
0.8
4.1
0.6
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(cid:3229)equipment, VAT refunds and ground rents receivable.
Exceptional items:
£ million
Refinancing expenses
Pension enhanced transfer value offer
Exceptional items
Housing
Spain Consolidated
76.1
0.2
(14.9)
61.4
2,839.5
31.9
(1,202.8)
1,668.6
(59.5)
342.8
(116.9)
1,835.0
Housing
Spain Consolidated
0.1
–
0.2
2012
138.1
(9.5)
–
128.6
0.9
4.1
0.8
2011
136.4
(7.0)
5.8
135.2
2012
2011
–
–
–
–
5.8
5.8
Market conditions in the United Kingdom continue to remain stable, however mortgage finance availability and unemployment continue to
impact wider economic confidence. The Spanish market has not materially changed in the year and continues to be challenging. The Group
has completed its assessment of the carrying value of inventory which has not resulted in further inventory write-downs (2011: £nil million) to
the lower of cost and net realisable value, nor any reversals of previous write-downs (2011: £nil million) as there is no clear evidence of a
sustained change in the economic circumstances at the balance sheet date.
In the year the Group released £22.4 million of accrued interest relating to a historic potential tax liability for which favourable resolution was
reached. In the prior year the Group paid a premium over nominal value of £5.5 million following the repurchase of £85.4 million of Senior Notes
10.375% due 2015. These items are presented as exceptional finance charges (Note 7).
The prior year exceptional charge of £5.8 million was for the enhanced transfer value exercise for the George Wimpey Staff Pension Scheme.
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Taylor Wimpey plc Annual Report & Accounts 2012
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:
£ million
Cost of inventories recognised as expense in cost of sales, before 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 auditor, is as follows:
£ million
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
and consolidated financial statements
Fees payable to the Company’s auditor and their associates for other services to the Group
The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Other services pursuant to legislation
Tax services
Corporate finance services
Other assurance services
Total non-audit fees
Total fees
2012
2011
1,589.9
1.2
6.4
1,454.4
0.8
6.6
2012
0.1
2011
0.1
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0.3
0.4
0.1
0.1
–
0.1
0.3
0.7
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0
0.3
0.4
0.1
0.5
0.2
0.4
1.2
1.6
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Non-audit services in 2012 and 2011 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 assurance services relate to advisory services relating to pension liability
management consultation. The services in the prior year included necessary work related to certain attest services in relation to the interested
party offers for the North American business. The 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 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
Continuing Group
Average number employed
Housing United Kingdom including corporate office
Housing Spain
United Kingdom
Overseas
Discontinued operations
£ million
Remuneration
Wages and salaries
Redundancy costs
Social security costs
Other pension costs
Discontinued operations
2012
Number
2011
Number
3,465
62
3,527
3,465
62
3,527
3,464
65
3,529
3,464
65
3,529
–
337
2012
2011
145.0
0.6
17.5
9.0
172.1
143.9
1.8
18.1
6.6
170.4
–
33.2
The information required by the Companies Act 2006 and the Listing Rules of the Financial Services Authority is contained on pages 41 to 56 in
the Directors’ Remuneration Report.
Taylor Wimpey plc plc.taylorwimpey.co.uk
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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 20)
Exceptional finance items:
Tax liability interest credit
Senior Note 10.375% due 2015 on repurchase
2012
13.6
18.1
0.3
32.0
4.1
9.9
46.0
(22.4)
–
23.6
2011
29.1
23.2
(1.0)
51.3
7.9
14.1
73.3
–
5.5
78.8
In 2012 interest on debenture loans includes a £1.7 million premium paid on the repurchase of £15.2 million of Senior Notes 10.375% due
2015. In the prior year the Group reported an exceptional charge of £5.5 million premium on repurchase of £85.4 million of Senior Notes
10.375% due 2015.
The exceptional credit in 2012 relates to the release of an interest accrual associated with the favourable resolution of a historic potential
tax liability.
8. Tax
Tax credit/(charged) in the income statement for continuing operations is analysed as follows:
£ million
Current tax:
UK corporation tax:
Foreign tax:
Deferred tax:
UK:
S
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Current year
Prior years
Current year
Prior years
Current year
Prior year
2012
2011
–
63.6
–
–
63.6
(39.7)
(0.3)
(40.0)
23.6
–
6.0
–
(0.2)
5.8
(28.5)
–
(28.5)
(22.7)
Corporation tax is calculated at 24.5% (2011: 26.5%) of the estimated assessable profit for the year in the UK. Taxation outside the UK is
calculated at the rates prevailing in the respective jurisdictions.
The tax charge for the year includes a credit in respect of exceptional items of £59.6 million (2011: £1.5 million credit) in respect of UK tax. The
2012 exceptional tax credit of £59.6 million relates to the favourable resolution of a historic potential tax liability. No tax charge has arisen on the
associated exceptional interest release due to the utilisation of unrecognised losses.
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8. Tax continued
The credit for the year includes a charge of £21.1 million (2011: £22.2 million) relating to the impact on the deferred tax asset of the 2% reduction
in UK corporation tax from 25% to 23% (2011: 27% to 25%).
The credit/(charge) for the year can be reconciled to the profit per the income statement as follows:
£ million
Profit before tax
Tax at the UK corporation tax rate of 24.5% (2011: 26.5%)
Net over provision in respect of prior years
Tax effect of expenses that are not deductible in determining taxable profit
Unrecognised temporary differences utilised
Losses not recognised
Recognition of deferred tax asset relating to trading losses
Impact of 2% rate reduction on deferred tax
Tax credit/(charge) for the year
9. Earnings per share
Basic earnings per share
Diluted earnings per share
Basic earnings per share – continuing operations
Diluted earnings per share – continuing operations
Basic earnings per share – discontinued operations
Diluted earnings per share – discontinued operations
Adjusted basic earnings per share – continuing operations
Adjusted diluted earnings per share – continuing operations
2012
207.7
(50.9)
63.3
(1.4)
17.2
–
16.5
(21.1)
23.6
2012
7.3p
7.1p
7.3p
7.1p
–
–
4.7p
4.6p
2011
78.6
(20.8)
5.8
(0.3)
–
(7.3)
22.1
(22.2)
(22.7)
2011
3.1p
3.0p
1.8p
1.7p
1.4p
1.3p
2.1p
2.0p
Weighted average number of shares for basic/adjusted earnings per share – million
Weighted average number of shares for diluted basic/adjusted earnings per share – million
3,186.4
3,262.4
3,190.1
3,282.3
Adjusted basic and adjusted diluted earnings per share, which exclude the impact of exceptional items and any 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
Earnings from continuing operations for basic profit per share and diluted earnings per share
Adjust for exceptional items (Note 7)
Adjust for exceptional tax items (Note 8)
Earnings from continuing operations for adjusted basic and adjusted diluted earnings per share
2012
231.3
(22.4)
(59.6)
149.3
2011
55.9
11.3
(1.5)
65.7
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Notes to the Consolidated Financial Statements continued
10. Other intangible assets
£ million
Cost
At 1 January 2011
Additions
Disposals
At 31 December 2011
Additions
At 31 December 2012
Amortisation/impairment
At 1 January 2011
Charge for the year
Disposals
At 31 December 2011
Charge for the year
At 31 December 2012
Carrying amount
31 December 2012
31 December 2011
Software
development
costs
Brands
140.2
–
–
140.2
–
140.2
(140.2)
–
–
(140.2)
–
(140.2)
–
–
19.7
4.1
(18.7)
5.1
0.8
5.9
(18.7)
–
18.7
–
(0.7)
(0.7)
5.2
5.1
Total
159.9
4.1
(18.7)
145.3
0.8
146.1
(158.9)
–
18.7
(140.2)
(0.7)
(140.9)
5.2
5.1
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 on brands.
Additions in the year relate to certain software and consultancy services relating to the continued development and roll out of a new IT system for
use by the operational business units. The amortisation of software development costs is recognised within administrative expenses in the
income statement.
In the prior year the Group disposed of software development costs which were previously held at nil book value.
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i
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p
1
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2
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1
2
1
11. Property, plant and equipment
£ million
Cost
At 1 January 2011
Additions
Disposals
Disposal of subsidiaries
Changes in exchange rates
At 31 December 2011
Additions
Disposals
Changes in exchange rates
At 31 December 2012
Accumulated depreciation
At 1 January 2011
Disposals
Disposal of subsidiaries
Charge for the year
Changes in exchange rates
At 31 December 2011
Disposals
Charge for the year
At 31 December 2012
Carrying amount
£ million
At 31 December 2012
At 31 December 2011
Freehold land
and buildings
Plant and
equipment
1.0
0.5
–
–
–
1.5
0.4
–
–
1.9
–
–
–
–
–
–
–
(0.1)
(0.1)
25.5
1.2
(4.3)
(7.8)
(0.1)
14.5
3.1
–
(0.1)
17.5
(18.9)
3.7
5.8
(1.7)
0.1
(11.0)
–
(1.2)
(12.2)
Freehold land
and buildings
Plant and
equipment
1.8
1.5
5.3
3.5
Total
26.5
1.7
(4.3)
(7.8)
(0.1)
16.0
3.5
–
(0.1)
19.4
(18.9)
3.7
5.8
(1.7)
0.1
(11.0)
–
(1.3)
(12.3)
Total
7.1
5.0
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Notes to the Consolidated Financial Statements continued
12. Interests in joint ventures
£ million
Aggregated amounts relating to share of joint ventures
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Carrying amount
Loans to joint ventures
Total interests in joint ventures
£ million
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 (2011: two) principal joint ventures.
Particulars of principal joint ventures are as follows:
Country of incorporation
Great Britain
Great Britain
Great Britain
(a) Interest held by subsidiary undertakings.
2012
2011
38.0
38.0
(2.1)
(27.9)
(30.0)
8.0
23.5
31.5
40.8
40.8
(2.6)
(32.2)
(34.8)
6.0
25.9
31.9
2012
2011
16.4
(13.0)
3.4
(0.7)
2.7
(0.2)
2.5
(0.1)
2.4
10.0
(7.7)
2.3
(0.8)
1.5
(0.2)
1.3
(0.1)
1.2
Taylor Wimpey plc
interest in the issued
ordinary share capital
50%
50%
50%
Name of joint venture equity accounted
in the consolidated accounts
Strada Developments Limited (a)
Greenwich Millennium Village Limited (a)
Academy Central Limited Liability Partnership (a)
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13. 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 2011
Credit/(charge) to income
Credit to equity
Disposal of subsidiaries
At 31 December 2011
Credit/(charge) to income
Credit to equity
At 31 December 2012
Share-
based
payments
Capital
Allowances
–
–
–
–
–
2.4
2.5
4.9
–
–
–
–
–
8.1
–
8.1
Retirement
benefit
obligations
Other
temporary
differences
68.3
(18.6)
4.8
(1.8)
52.7
(10.8)
14.3
56.2
3.3
0.3
–
(3.3)
0.3
2.1
–
2.4
Losses
300.0
(10.2)
–
–
289.8
(41.8)
–
248.0
Total
371.6
(28.5)
4.8
(5.1)
342.8
(40.0)
16.8
319.6
Closing deferred tax on UK temporary differences has been calculated at the enacted rate of 23% (2011: 25%). The effect of the reduction in the
UK corporation tax rate from 25% to 23% is a reduction in the net deferred tax asset at the end of 2012 of an amount of £26.0 million. Of this
£26.0 million, £4.9 million has been charged directly to the Statement of Comprehensive Income.
The proposed reduction in the main rate of corporation tax by 2% by 2014 is expected to be enacted in Finance Act 2013. Based on the level
of deferred tax recognised at the balance sheet date a charge of £13.9 million for each 1% reduction would arise.
The net deferred tax balance is analysed into assets and liabilities as follows:
£ million
Deferred tax assets
Deferred tax liabilities
2012
319.6
–
319.6
2011
342.8
–
342.8
The Group has not recognised temporary differences relating to tax losses carried forward and other temporary differences amounting to
£148.3 million (2011: £270.3 million) in the UK and £93.8 million (2011: £82.2 million) in Spain. The UK losses have not been recognised as they
are predominantly non trading in nature and sufficient uncertainty exists as to their utilisation. The losses in Spain have not been recognised due
to uncertainty of sufficient taxable profits existing against which to utilise the losses.
At the balance sheet date, the Group has unused UK capital losses of £252.8 million (2011: £252.4 million), all of which are agreed
as available for offset against future capital profits. No deferred tax asset has been recognised in respect of the remaining capital losses at
31 December 2012 because the Group does not believe that it is probable that these capital losses will be utilised in the foreseeable future.
14. Inventories
£ million
Raw materials and consumables
Finished goods and goods for resale
Residential developments:
Land(a)
Development and construction costs
Commercial, industrial and mixed development properties
(a) Details of land creditors are in Note 18.
2012
0.8
29.2
2,051.0
704.9
2.9
2,788.8
2011
1.2
17.9
2,018.9
643.8
4.8
2,686.6
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.
In the year 46% (2011: 63%) of the Group’s completions in the UK were from sites that had been previously impaired. As at 31 December 2012,
26% (2011: 39%) of our UK short term owned and controlled land is impaired. Only 120 plots (2011: 89) were sold in Spain that had previously
been impaired.
The gross profit for the year includes £85.1 million (2011: £99.6 million) of positive contribution, on completions from sites with previously
impaired inventory. The positive contribution is the estimation difference between the realised value on completions compared to the value
assumed in the net realisable value review. These amounts are stated before the allocation of overheads that are excluded from the Group's net
realisable value exercise.
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This is due to the actual selling prices and or costs on these completions being favourable to the estimates and market assumptions used in the
net realisable value review. This estimation difference is due to a combination of actions taken by the Group including cost reductions through
replans, the implementation of standard house types and slightly higher selling prices.
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Whilst market conditions have stabilised in the United Kingdom the Group has not recorded any additional write-downs or reversals of
previous write-downs to net realisable value as there is no clear evidence of a sustained change in the housing market and wider economic
circumstances at the balance sheet date. The Spanish market has not materially changed in the year and continues to be challenging.
At the balance sheet date the Group had inventory that had been written down to net realisable value of £834.4 million (2011: £1,129.2 million).
15. Other financial assets
Trade and other receivables
£ million
Trade receivables
Other receivables
Current
Non-current
2012
57.0
39.0
96.0
2011
44.8
27.7
72.5
2012
97.4
4.6
102.0
2011
68.2
2.1
70.3
The average credit period taken on sales is 12 days (2011: 8 days). An allowance has been made for estimated irrecoverable amounts from
trade receivables of £5.4 million (2011: £5.5 million). This allowance has been determined by reference to past default experience.
Shared equity loans are provided to certain customers. These are separated into a host contract representing a loan receivable and a non-
closely related embedded derivative asset for accounting purposes as allowed under IAS 39 ‘Financial instruments’. The loan is measured at
amortised cost less any provision for default and the embedded derivative is measured at fair value through the income statement.
Cash and cash equivalents
£ million
Cash and cash equivalents (see Note 19)
2012
190.4
2011
147.7
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.
16. 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 2012 and 31 December 2011
Sterling
2012
–
–
100.0
100.0
–
100.0
100.0
2011
–
–
100.0
100.0
–
100.0
100.0
Bank
overdraft
Bank and
other loans
–
–
100.0
100.0
Bank borrowings and other loans were borrowed at variable rates of interest, from 2.8% to 5.8% (2011: 3.0% to 6.0%) during the year.
Other loans comprise a £100.0 million (2011: £100.0 million) variable rate term loan with an investment fund.
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17. Debenture loans
£ million
Unsecured
£250m Senior Note 10.375% due 2015
Carrying value
Fair value
2012
2011
149.4
149.4
164.6
164.6
165.2
175.4
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.
During the year the Group has repurchased £15.2 million (2011: £85.4 million) of Senior Notes 10.375% due 2015.
£ million
Repayable
Total falling due in more than one year
Interest rates and currencies of debenture loans:
31 December 2012
Sterling
31 December 2011
Sterling
2012
2011
149.4
149.4
164.6
164.6
Fixed rate
£ million
Weighted
average
interest
rate %
Weighted
average time
until maturity
years
149.4
10.4
3.0
164.6
10.4
4.0
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:
(cid:2)(cid:3) ‘Net financial expense’, considered to be the Group’s interest expense on overdrafts, bank and other loans and interest expense on
debenture loans less bank interest received was £31.5 million (2011: £52.3 million).
(cid:2)(cid:3) ‘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 7.2 (2011: 3.0).
(cid:2)(cid: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 2012 the ratio was 0.3 (2011: 0.7).
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Notes to the Consolidated Financial Statements continued
18. Trade and other payables
£ million
Trade payables
Currency and interest rate derivatives
Other payables
Current
Non-current
2012
401.0
–
371.6
772.6
2011
322.2
1.4
374.2
697.8
2012
136.7
–
54.1
190.8
2011
144.4
–
55.3
199.7
Trade payable days were 36 days (2011: 32 days), based on the ratio of year end trade payables (excluding sub-contract retentions and
unagreed claims of £38.9 million (2011: £31.2 million) and land creditors) to amounts invoiced during the year by trade creditors.
Other payables include customer deposits for reserving plots of £25.3 million (2011: £17.0 million) and £142.1 million (2011: £136.4 million)
relating to certain accruals associated with completed sites.
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
Euros
2012
240.1
134.9
375.0
2012
371.7
3.3
375.0
2011
163.5
142.9
306.4
2011
303.9
2.5
306.4
Land creditors of £243.9 million (2011: £197.3 million) are secured against land acquired for development, or supported by bond or guarantee.
19. 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 maintaining
a minimum interest cover and within a maximum level of gearing adjusted for land creditors. 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
development and construction costs.
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)
2012
Carrying
value
190.4
–
–
24.0
46.2
91.4
352.0
2011
Carrying
value
147.7
–
–
9.9
41.9
66.5
266.0
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 15, include £36.4 million (2011: £24.5 million) of non-financial assets.
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19. Financial instruments continued
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
2012
Carrying
value
2011
Carrying
value
Note
(a)
(a)
(b)
(b)
(c)
–
–
–
1.4
100.0
375.0
519.4
149.4
1,143.8
100.0
306.4
501.6
164.6
1,074.0
(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 17.
Land creditors 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 18, include £69.0 million (2011: £88.1 million) of non-financial liabilities.
The Group has the following types of derivatives:
Designated as held for trading:
Floating £ to fixed £ interest
Designated as hedging instruments:
Currency forward contract to sell € against £
2012
Notional
amount
2012
Weighted
average fixed
2011
Notional
amount
2011
Weighted
average fixed
–
–
£35.0m
5.80%
€55.0m
n/a
€55.0m
n/a
In addition, forward contracts have been entered into to hedge transaction risks on intra-Group loans to buy/(sell) against Sterling: €23.5 million
and C$(0.8) million (2011: €24.5 million and C$(0.9) 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.
Profit/(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
2012
2011
–
–
–
–
–
–
1.5
1.5
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 variable 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 variable interest rates. The exposure to variable rate
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.
Group policy is to manage the volatility risk by a combination of fixed rate borrowings and interest rate swaps such that the sensitivity to potential
changes in variable rates is within acceptable levels. 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. The policy has been updated since 2011 year end as a result of the
continued low level of borrowings in relation to net assets of the Group.
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Notes to the Consolidated Financial Statements continued
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In order to measure the risk, variable 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 £149.4 million (2011: £200.0 million) of fixed rate exposure.
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Hedge accounting
Hedging activities are evaluated periodically to ensure that they are in line with Group policy. The Group had one interest rate swap which
matured during the year and there are no swaps outstanding at the year end. In 2011 the swap did not satisfy the strict requirements for
hedge accounting and was therefore designated as held for trading.
A forward contract is currently being used to hedge the net investment risk in the Spanish operations.
Interest rate sensitivity
The effect on both income and equity, based on exposure to non-derivative floating rate instruments at the balance sheet date, is shown in the
table below. For derivatives the fair values have been calculated based on rates available from a recognised financial information provider
adjusted for the specified sensitivity.
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
1% decrease in interest rates
£ million
Derivatives
Non-derivatives
Sensitivity
income
2012
Sensitivity
equity
2012
Sensitivity
income
2011
Sensitivity
equity
2011
–
0.9
0.9
–
0.9
0.9
0.3
0.4
0.7
0.3
0.4
0.7
Sensitivity
income
2012
Sensitivity
equity
2012
Sensitivity
income
2011
Sensitivity
equity
2011
–
(0.9)
(0.9)
–
(0.9)
(0.9)
(0.3)
(0.4)
(0.7)
(0.3)
(0.4)
(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. The Group completed the sale
of its North American business in July 2011 and Spain is the only remaining overseas business.
The Group is not materially exposed to transaction risks as 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
The Group has designated the carrying value of €55.0 million (2011: €55.0 million) foreign currency forward contracts as a net investment
hedge of part of the Group’s investment in Euro denominated assets.
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 foreign currency net investments and are presented in the translation reserve.
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19. Financial instruments continued
Foreign currency sensitivity
Following the disposal of the North American business in 2011, the Group is only exposed to the Euro due to its Spanish operations. The
following table details how the Group’s income and equity would increase/(decrease) on a before tax basis, to a 15% increase (2011: 15%) in
the respective currencies against Sterling and in accordance with IFRS 7, all other variables remaining constant.
The 15% (2011: 15%) change represents a reasonably possible change in the specified Euro exchange rates in relation to Sterling.
£ million
Euro 15% increase
Euro 15% decrease
Income
sensitivity
2012
Equity
sensitivity
2012
Income
sensitivity
2011
Equity
sensitivity
2011
0.9
(0.9)
(5.8)
5.8
1.0
(1.0)
(5.9)
5.9
Credit risk
Credit risk is the risk of financial loss where counterparties are not able to meet their obligations.
Group policy is that surplus cash when not used to repay borrowings is placed on deposit with the Group’s main relationship banks and with
other banks based on a minimum credit rating and maximum exposure.
Land receivables arise from sales of surplus land on deferred terms. A policy is in place such that if the credit 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 other debtors is held, however the balance is not
material in relation to the gross carrying value of this particular class of financial asset.
Mortgages receivables, including shared equity, are in connection with the various promotion schemes to support sales on a selective basis.
The mortgages are mostly secured by a second charge over the property and are held at their carrying value.
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 with the use of term cash and cash equivalents, borrowings, overdrafts and committed revolving credit facilities for a minimum of
12 months from maturity. Future borrowing requirements are forecast on a monthly basis and funding headroom is maintained above forecast
peak requirements to meet unforeseen events. The Group has a range of maturities with an average life of 2.2 years (2011: 3.2 years).
In addition to fixed term borrowings the Group has access to committed revolving credit facilities and cash balances. At the balance
sheet date, the total unused committed amount was £550.0 million (2011: £600.0 million) and cash and cash equivalents were
£190.4 million (2011: £147.7 million).
During 2012 the Group negotiated an option to extend the £100.0 million fixed term loan, for a further 5.5 years to mature November 2020.
This loan was originally due to mature in June 2015. This extension is subject to redemption of the 10.375% Senior Notes due 2015, prior to
30 June 2015 of which £149.4 million currently remains outstanding.
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Notes to the Consolidated Financial Statements continued
19. 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 2012
* Excludes land creditors.
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 2011
* Excludes land creditors.
Overdrafts,
bank and
other loans
Land
creditors
Trade and
other
payables*
Debenture
loans
–
5.2
5.2
102.6
–
113.0
–
244.3
65.6
62.6
23.4
395.9
–
471.5
29.5
17.2
1.1
519.3
–
15.5
15.5
164.9
–
195.9
Bank loans
and overdraft
Land
creditors
Trade and
other
payables*
Debenture
loans
–
5.8
5.8
108.8
–
120.4
–
169.5
84.6
57.2
16.8
328.1
–
456.7
28.3
15.0
1.6
501.6
–
17.1
17.1
198.7
–
232.9
Total
–
736.5
115.8
347.3
24.5
1,224.1
Total
–
649.1
135.8
379.7
18.4
1,183.0
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. As at
31 December 2012 the Group had no outstanding derivative instruments.
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 2012
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 2011
Net-settled
derivatives
net amount
Gross-settled
derivatives
receivable
Gross-settled
derivatives
payable
–
–
–
–
–
–
–
–
–
–
–
–
Net-settled
derivatives
net amount
Gross-settled
derivatives
receivable
Gross-settled
derivatives
payable
(1.6)
–
–
(1.6)
–
–
–
–
–
–
–
–
Total
–
–
–
–
Total
(1.6)
–
–
(1.6)
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20. Retirement benefit schemes
Retirement benefit obligation comprises defined benefit pension liability of £242.5 million (2011: £208.2 million) and post-retirement healthcare
liability of £1.7 million (2011: £2.0 million).
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 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 all new and existing monthly paid employees. Future revaluation of deferred member benefits in the UK
defined benefit schemes will be based on the Consumer Price Index in line with scheme rules. Pensioner increases will continue to be based
on Retail Price Index.
The pension scheme assets of the Group’s 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 agreed to hold
Joint Trustee Board meetings to manage the schemes jointly, and where appropriate, they have also implemented a Joint Investment Sub
Committee to manage the investment of the combined defined benefit scheme assets. The Group and the Trustees have undertaken a
review of the schemes’ investment strategy. Implementation of the investment changes started during 2011 and monitoring of these
changes is ongoing.
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 over 10 years from the valuation date. The projected unit
method was used in all valuations and assets were taken into account using market values.
The Company has an agreement in principle with the Trustees to merge GWSPS and TWGP&LAF into a new scheme, the Taylor Wimpey
Pension Scheme, and members have been informed of the merger that is expected to complete in first half 2013 subject to regulatory guidance.
At the same time we are introducing a £100 million Pension Funding Partnership utilising show homes in a sale and leaseback structure.
This proposal will simplify scheme management, reduce administration costs by circa £0.8 million per annum and provide a way of managing
future deficit repair contributions. The new Taylor Wimpey Pension Scheme will benefit from a contingent Pension Funding Partnership structure,
backed principally by show homes, should the Group be unable to meet the cash payments under the funding agreement.
Contributions of £7.1 million (2011: £6.6 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
GWSPS
3.60%
3.85%
6.85%-5.10% 6.75%-4.75%
–
0.00%
–
0.00%
TWGP&LAF
£758m
£1,022m
74%
GWSPS
£694m
£953m
73%
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Notes to the Consolidated Financial Statements continued
20. Retirement benefit schemes continued
The results of the March 2010 valuations of the Group’s pension schemes have been updated to 31 December 2012. The principal actuarial
assumptions used in the calculation of the disclosure items are as follows:
United Kingdom
2012
2011
As at 31 December
Discount rate for scheme liabilities
Expected return on scheme assets
General pay inflation
Deferred pension increases
Pension increases
4.30%
4.90%
5.13%-5.70% 5.04%-5.43%
n/a
1.95%
1.90%-3.50% 2.00%-3.55%
n/a
1.80%
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
2012
2011
Male
Female
87
88
90
92
Male
87
88
Female
90
92
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 2012
Assets:
Equities
Bonds
Gilts
Other assets(a)
Present value of defined benefit obligations
Deficit in schemes recognised as non-current liability
31 December 2011
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
Percentage of
total plan
assets held
£ million
7.50%
4.10%
3.00%
2.65%-7.50%
7.45%
4.70%
2.95%
2.80%-7.45%
762.8
540.9
653.2
(186.4)
1,770.5
(2,013.0)
(242.5)
641.8
428.3
459.2
151.3
1,680.6
(1,888.8)
(208.2)
43%
31%
37%
(11%)
38%
26%
27%
9%
100%
(a) Includes repurchase agreements and other financial derivatives shown as a negative asset, used as part of a diversified portfolio for hedging purposes and to support other
asset classes.
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) and the historical level of the risk premium associated with the other asset classes in which the
portfolio is invested. 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.
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20. Retirement benefit schemes continued
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. Similarly, the trustees have holdings in ‘alternative’ investments which are also considered riskier investments
but are intended to reduce the overall risk of the portfolio by introducing greater diversification.
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.
A summary of the target asset allocations of the major defined benefit schemes is shown below:
UK Equities
Non-UK Equities
Index-Linked Gilts
Fixed-Interest Gilts
Other bonds
Alternatives (GTAA; Opportunistic credit; EMD; Active commodities)
Property
£ million
Amount charged against income:
Settlement loss(a)
Operating loss
Expected return on scheme assets
Interest cost on scheme liabilities
Finance charges
Total charge
(a) The settlement for 2011 is in relation to an enhanced transfer value exercise.
The actual return on scheme assets was a gain of £161.5 million (2011: £96.1 million).
£ million
Actuarial gains in the Statement of Comprehensive Income:
Difference between actual and expected return on scheme assets
Experience losses arising on scheme liabilities
Changes in assumptions
Total loss recognised in the Statement of Comprehensive Income
TWGP&LAF
GWSPS
7.6%
30.4%
9.4%
5.1%
25.0%
20.5%
2.0%
5.3%
21.2%
20.3%
8.7%
25.5%
19.0%
–
2012
2011
–
–
79.0
(88.9)
(9.9)
(9.9)
(4.0)
(4.0)
82.3
(96.4)
(14.1)
(18.1)
2012
2011
82.5
(2.9)
(156.4)
(76.8)
13.8
–
(47.0)
(33.2)
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Notes to the Consolidated Financial Statements continued
20. Retirement benefit schemes continued
The cumulative amount of actuarial losses recognised in the Statement of Comprehensive Income is £278.7 million loss
(2011: £201.9 million loss).
£ million
Movement in present value of defined benefit obligations
1 January
Disposal of subsidiary
Settlement loss
Benefits paid and expenses
Interest cost
Actuarial losses
31 December
£ million
Movement in fair value of scheme assets
1 January
Disposal of subsidiary
Expected return on scheme assets and expenses
Contributions
Benefits paid
Actuarial gains
31 December
2012
2011
1,888.8
–
–
(124.0)
88.9
159.3
2,013.0
1,852.6
(24.2)
1.8
(84.8)
96.4
47.0
1,888.8
2012
2011
1,680.6
–
79.0
52.4
(124.0)
82.5
1,770.5
1,604.1
(19.7)
82.3
84.9
(84.8)
13.8
1,680.6
£ million
2012
2011
2010
2009
2008
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
1,770.5
(2,013.0)
(242.5)
1,680.6
(1,888.8)
(208.2)
1,604.1
(1,852.6)
(248.5)
1,412.3
(1,818.7)
(406.4)
1,280.5
(1,557.7)
(277.2)
82.5
4.7%
(2.9)
0.1%
13.8
0.8%
–
–
70.8
4.4%
(9.7)
0.5%
102.7
7.3%
29.1
1.6%
(210.4)
16.4%
(22.1)
1.4%
The estimated amounts of contributions expected to be paid to the TWGP&LAF during 2013 are £22.0 million and to the GWSPS are
£24.0 million, in respect of deficit repair contributions, and £2.7 million in respect of expenses and PPF levies.
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 Group 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 £34.2m
Increase by £29.7m
Increase by £69.2m
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.
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Taylor Wimpey plc Annual Report & Accounts 2012
20. Retirement benefit schemes continued
The post-retirement liability also includes £1.7 million at 31 December 2012 (2011: £2.0 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.
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The cost is calculated assuming a discount rate of 3.6% per annum (2011: 3.6%) and an increase in medical expenses of 10.6% per annum
(2011: 10.0%). The premium cost to the Group in respect of the retired long-service employees for 2012 was £0.2 million (2011: £0.2 million).
21. Provisions
£ million
At 1 January 2011
Additional provision in the year
Utilisation of provision
Released
Disposal of subsidiaries
Transfers and reclassifications
Changes in exchange rates
At 31 December 2011
Additional provision in the year
Utilisation of provision
Released
At 31 December 2012
£ million
Amount due for settlement within one year
Amount due for settlement after one year
31 December 2012
Housing
maintenance Restructuring
North America
disposal
8.6
2.4
(2.4)
(0.1)
(8.1)
–
–
0.4
0.2
(0.1)
–
0.5
12.3
0.6
(3.6)
(4.9)
(2.0)
–
–
2.4
1.8
(0.6)
(2.7)
0.9
–
–
–
–
–
58.4
–
58.4
–
–
–
58.4
Other
68.8
10.9
(12.5)
(2.3)
(30.3)
–
(0.7)
33.9
15.2
(7.6)
(6.2)
35.3
Total
89.7
13.9
(18.5)
(7.3)
(40.4)
58.4
(0.7)
95.1
17.2
(8.3)
(8.9)
95.1
84.4
10.7
95.1
The Group restructuring provision relates to the reorganisation of the business following the merger with George Wimpey plc in 2007 and
subsequent restructuring exercises.
The North America disposal provision of £58.4 million was transferred into provisions from current tax liabilities in 2011. It comprises provisions
relating to indemnities provided to the buyers of the North American business, including taxation and warranties on residential home sales.
Other provisions consist of a remedial work provision, provisions for legal claims, onerous leases 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 relating to a former business 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. Onerous leases and empty property costs included in this provision
are expected to be utilised within approximately six years.
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Notes to the Consolidated Financial Statements continued
22. Share capital
£ million
Authorised:
22,200,819,176 (2011: 22,200,819,176) ordinary shares of 1p each
1,158,299,201 (2011: 1,158,299,201) deferred ordinary shares of 24p each
Issued and fully paid:
31 December 2011
Share warrants exercised in the year
31 December 2012
2012
2011
222.0
278.0
500.0
222.0
278.0
500.0
Number of shares
£ million
3,201,359,439
26,901,161
3,228,260,600
287.7
0.3
288.0
During the year, options were exercised over 4,980,372 ordinary shares (2011: 6,029,714) all of which were met from our holding of shares
in our ESOTs at varying prices from 22.88 pence to 39.20 pence per share. Under the Group’s executive share option plans, employees held
options at 31 December 2012 to purchase up to 10,436,384 shares, subject to achievement of performance tests (2011: 10,496,846) at a
price of 39.34 pence per share nominally exercisable up to 7 August 2022.
Under the Group’s savings-related share option schemes, employees held options at 31 December 2012 to purchase 39,309,344
shares (2011: 42,841,812) at prices between 22.88 pence and 180.14 pence per share exercisable up to 31 May 2018. Under the
Group’s performance share plan employees held conditional awards at 31 December 2012 in respect of up to 37,530,685 shares, subject
to achievement of performance tests (2011: 29,831,231) at nil pence per share nominally exercisable up to 5 March 2022. Under the Group’s
share purchase plan employees held conditional awards at 31 December 2012 in respect of 6,800,851 shares (2011: 6,354,976) 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. The warrants may be exercised at 17.4473p per share by the holders within
five years of the date of issue and as at 31 December 2012 31,013,739 warrants had been exercised.
23. Share premium account
£ million
Balance at 1 January 2011
Share warrants exercised
Balance at 31 December 2011
Share warrants exercised
Balance at 31 December 2012
753.7
0.7
754.4
4.4
758.8
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24. Reserves
£ million
Balance at 1 January 2011
Share-based payment credit
Cash cost of satisfying share options
Actuarial loss on defined benefit pension schemes
Deferred tax credit
Exchange differences on translation of overseas operations, net of tax
Decrease in fair value of hedging derivatives
Transfer to retained earnings
Recycling of translation reserve on disposal of subsidiaries
Profit for the year
Balance at 31 December 2011
Share-based payment credit
Cash cost of satisfying share options
Actuarial loss on defined benefit pension schemes
Deferred tax credit
Exchange differences on translation of overseas operations, net of tax
Transfer to retained earnings
Dividends approved and paid
Profit for the year
Balance at 31 December 2012
Retained
earnings
Capital
redemption
reserve
Translation
reserve
Other
Total other
reserves
679.4
3.9
(1.2)
(33.2)
4.8
–
–
0.4
–
99.0
753.1
4.8
(0.7)
(76.8)
16.8
–
2.3
(18.2)
231.3
912.6
31.5
–
–
–
–
–
–
–
–
–
31.5
–
–
–
–
–
–
–
–
31.5
59.6
–
–
–
–
1.8
3.0
–
(59.1)
–
5.3
–
–
–
–
0.2
–
–
–
5.5
10.3
–
–
–
–
–
–
(0.4)
–
–
9.9
–
–
–
–
–
(2.3)
–
–
7.6
101.4
–
–
–
–
1.8
3.0
(0.4)
(59.1)
–
46.7
–
–
–
–
0.2
(2.3)
–
–
44.6
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. Following
the disposal of the North American business on 13 July 2011, £59.1 million was recycled through the income statement.
Other reserve
The Group issued 57.8 million of warrants with a fair value of £5.5 million in 2009 as part of its debt refinancing agreement. The full cost of the
warrants was recognised in the Other reserve on their issuance.
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Notes to the Consolidated Financial Statements continued
25. Own shares
£ million
Balance at 1 January 2011
Shares acquired
Disposed of on exercise of options
Balance at 31 December 2011
Shares acquired
Disposed of on exercise of options
Balance at 31 December 2012
0.6
10.0
(2.2)
8.4
10.0
(2.5)
15.9
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 Employee Share Ownership Trusts to satisfy options and conditional share awards under the Group’s share plans.
These comprise ordinary shares of the Company:
Shares held in trust for bonus, option and performance award plans
2012
Number
2011
Number
38.2m
38.2m
23.8m
23.8m
Employee Share Ownership Trusts (ESOTs) are used to hold the Company’s shares (shares) which have been acquired on the market. These
shares are used to meet the valid exercise of options and/or vesting of conditional awards and/or award of shares under the Executive Incentive
Scheme, Bonus deferral plan, Performance Share Plan, Executive Share Option Scheme, Savings-Related Share Option Scheme and the
matching award of shares under the Share Purchase Plan.
During the year, Taylor Wimpey plc purchased £10.0 million of its own shares which are held in the ESOTs (2011: £10.0 million).
The ESOTs’ entire holding of shares at 31 December 2012, aggregating 38.2 million shares (2011: 23.8 million), was covered by outstanding
options and conditional awards over shares at that date.
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Taylor Wimpey plc Annual Report & Accounts 2012
26. Discontinued operations
On 13 July 2011, Taylor Wimpey plc disposed of its North American business, the results of which have been presented as discontinued
operations. The Group received net proceeds of £731.9 million for the net assets of the North American business. The transaction costs
for the disposal were £16.5 million and the Group realised £59.1 million of translation reserves associated with the North American business.
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In the prior year North America contributed £8.9 million to the Group’s net operating cash flows, received £10.0 million in respect of investing
activities and £31.9 million in respect of financing activities.
£ million
Revenue
Cost of sales
Gross profit
Net operating expenses
Profit on ordinary activities before finance costs and tax
Interest receivable
Finance costs
Share of results of joint ventures
Profit on ordinary activities before taxation
Taxation charge
Profit after tax from discontinued operations
Impairment
Transaction costs
Recycling of translation reserves
Profit from discontinued operations
2011
364.3
(302.0)
62.3
(27.7)
34.6
0.7
(3.6)
4.6
36.3
(11.8)
24.5
(24.0)
(16.5)
59.1
43.1
The Group disposed of the net assets of the North American business on 13 July 2011. The net assets were impaired by £24.0 million prior
to disposal to reflect their fair value less costs to sell.
£ million
Goodwill
Property, plant and equipment
Interests in joint ventures
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Overdrafts, bank and other loans
Retirement benefit obligation
Provisions
Current taxation liability
Deferred taxation asset
Impairment
Net assets of discontinued operations
13 July
2011
2.4
2.0
11.8
753.2
117.4
199.3
(230.3)
(46.2)
(4.1)
(40.4)
(12.6)
3.4
(24.0)
731.9
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Notes to the Consolidated Financial Statements continued
27. Notes to the cash flow statement
£ million
Profit on ordinary activities before finance costs
Continuing operations
Discontinued operations
Adjustments for:
Depreciation of buildings, plant and equipment
Amortisation of software development
Pensions curtailment
Share-based payment charge
Profit on disposal of property and plant
Decrease in provisions
Operating cash flows before movements in working capital
Increase in inventories
Increase in receivables
Increase/(decrease) in payables
Pension contributions in excess of charge
Cash generated by operations
Income taxes received/(paid)
Interest paid
Net cash generated from/(used in) operating activities
2012
2011
227.7
–
1.3
0.7
–
4.8
(0.1)
–
234.4
(104.2)
(50.7)
81.6
(52.4)
108.7
3.0
(33.3)
78.4
152.5
34.6
1.7
–
1.8
3.9
(0.2)
(11.9)
182.4
(7.1)
(12.9)
(38.8)
(84.7)
38.9
(16.4)
(57.3)
(34.8)
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 2011
Cash flow
Foreign exchange
Balance 31 December 2011
Cash flow
Foreign exchange
Balance 31 December 2012
Cash and
cash
equivalents
Overdrafts,
banks and
other loans
Debenture
loans
Total
net debt
183.9
(38.7)
2.5
147.7
41.1
1.6
190.4
(588.4)
487.1
1.3
(100.0)
–
–
(100.0)
(250.0)
85.4
–
(164.6)
15.2
–
(149.4)
(654.5)
533.8
3.8
(116.9)
56.3
1.6
(59.0)
On 13 July 2011 the Group disposed of its North American business. At the point of disposal the business had cash and cash equivalents of
£199.3 million and overdrafts, bank and other loans of £46.2 million.
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Taylor Wimpey plc Annual Report & Accounts 2012
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28. Contingent liabilities and capital commitments
General
The Group in the normal course of business has 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 2012 (2011: 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
2012
9.1
21.1
6.0
36.2
2011
9.4
25.3
7.6
42.3
Operating lease payments principally represent rentals payable by the Group for certain office properties and vehicles.
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 56.
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
Outstanding at the end of the year
Exercisable at the end of the year
2012
2011
Weighted
average
exercise price
(in £)
Options
Weighted
average
exercise price
(in £)
Options
49,196,788
4,565,514
(2,678,719)
(4,065,993)
(912,425)
46,105,165
1,571,442
0.29 62,621,773
9,171,967
0.46
0.38 (15,847,421)
0.28 (4,675,629)
0.31 (2,073,902)
0.30 49,196,788
5,352,607
0.53
0.45
0.24
0.74
0.26
0.29
0.29
0.34
The weighted average share price at the date of exercise for share options exercised during the period was £0.28 (2011: £0.26). The options
outstanding at 31 December 2012 had a range of exercise prices from £0.23 to £1.89 (2011: £0.11 to £3.10) and a weighted average remaining
contractual life of 1.7 years (2011: 2.2 years). Of the outstanding options 99.6% were exercisable at a value of less than £0.50 (2011: 99.3%).
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Notes to the Consolidated Financial Statements continued
30. Share-based payments continued
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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
Outstanding at the end of the year
Exercisable at the end of the year
2012
2011
Weighted
average
exercise price
(in £)
Options
Weighted
average
exercise price
(in £)
Options
40,328,077
9,491,588
(1,852,596)
–
–
47,967,069
3,686,025
– 28,269,073
– 22,070,038
– (9,982,158)
(2,159)
–
(26,717)
–
– 40,328,077
2,662,813
–
–
–
–
–
–
–
–
Schemes not requiring consideration from participants include the George Wimpey Long Term Incentive Plan and the Performance
Share Plans. The Conditional awards outstanding at 31 December 2012 had a weighted average remaining contractual life of 2.5 years
(2011: 2.8 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
2012
2011
£0.53
£0.20
70%
3/5 years
0.3%
0.6%
£0.38
£0.16
93%
3/5 years
1.2%
0.0%
The weighted average fair value of share awards granted during the year is £0.40 (2011: £0.31).
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the expected term.
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
2012
2011
£0.47
Nil
52%
3 years
0.5%
0.8%
£0.41
Nil
105%
3 years
3.8%
0.0%
The weighted average fair value of share options granted during the year is £0.29 (2011: £0.32).
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the expected term. The expected life
used in the model is based on historical exercise patterns.
The Group recognised total expenses of £4.8 million related to equity-settled share-based payment transactions in 2012 (2011: £3.9 million).
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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. The Group has loans with joint ventures that are detailed
on Note 12. The pension schemes of the Group are related parties. Arrangements between the Group and its pension schemes are disclosed in
Note 20.
In 2012, the Chief Executive, Pete Redfern, purchased a property on one of the Group’s developments under the staff discount scheme for
£90,563. The property was sold on the same terms available to all employees.
Trading transactions
During the year, Group companies’ purchases from joint ventures totalled £nil million (2011: £nil million).
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 41 to 56 and form part of these financial statements.
32. Dividends
£ million
Amounts recognised as distributions to equity holders
Paid
2011 Final: 0.38p per 1p share
2012 Interim: 0.19p per 1p share
Proposed
2011 Final: 0.38p per 1p share
2012 Interim: 0.19p per 1p share
2012 Final: 0.43p per 1p share
2012
2011
12.1
6.1
18.2
–
6.1
13.9
20.0
–
–
–
12.1
–
–
12.1
The Directors are recommending a final dividend for the year ended 31 December 2012 of 0.43 pence per share subject to shareholder
approval at the Annual General Meeting, with a resultant final dividend of £13.9 million (2011: £12.1 million).
In accordance with IAS 10 ‘Events after the balance sheet date’ the proposed dividend has not been accrued as a liability as at 31 December
2012. The dividend will be paid on 21 May 2013 to all shareholders registered at the close of business on 19 April 2013.
Taylor Wimpey plc plc.taylorwimpey.co.uk
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Independent Auditor’s Report
to the members of Taylor Wimpey plc
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion:
(cid:2)(cid:3) the part of the Directors’ Remuneration Report to be audited has
been properly prepared in accordance with the Companies Act
2006; and
(cid:2)(cid:3) the information given in the Directors’ Report for the financial year
for which the financial statements are prepared is consistent with
the parent Company financial statements.
Matters on which we are required to report by exception
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:
(cid:2)(cid:3) adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
(cid:2)(cid:3) the parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
(cid:2)(cid:3) certain disclosures of Directors’ remuneration specified by law
are not made; or
(cid:2)(cid:3) we have not received all the information and explanations
we require for our audit.
Other matters
We have reported separately on the Group financial statements
of Taylor Wimpey plc for the year ended 31 December 2012.
Colin Hudson FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditors
London, United Kingdom
28 February 2013
We have audited the parent Company financial statements of Taylor
Wimpey plc for the year ended 31 December 2012 which comprise
the Company Balance Sheet, and the related notes 1 to 18. The
financial reporting framework that has been applied in their preparation
is applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).
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 auditors
As explained more fully in the Directors’ Responsibilities Statement,
the Directors 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 audit and express
an opinion on the parent Company 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 parent Company’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the Directors; and the overall
presentation of the financial statements. In addition, we read all the
financial and non-financial information in the annual report to identify
material inconsistencies with the audited financial statements. If we
become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the parent Company financial statements:
(cid:2)(cid:3) give a true and fair view of the state of the Company’s affairs
as at 31 December 2012;
(cid:2)(cid:3) have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
(cid:2)(cid:3) have been prepared in accordance with the requirements of
the Companies Act 2006.
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Company Balance Sheet
at 31 December 2012
£ million
Fixed assets
Investment in Group undertakings
Current assets
Debtors
Cash at bank and in hand
Current liabilities
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after one year
Provisions
Net assets
Capital and reserves
Called-up share capital
Share premium account
Capital redemption reserve
Translation reserve
Profit and loss account
Own shares
Shareholders’ funds
Note
2012
2011
4
5
6
7
9
10
11
12
13
14
17
1,623.0
1,623.0
1,622.0
1,622.0
2,669.7
179.3
2,849.0
(1,845.7)
(1,845.7)
1,003.3
2,626.3
(249.4)
(0.7)
2,376.2
288.0
758.8
31.5
–
1,313.8
(15.9)
2,376.2
2,212.2
139.3
2,351.5
(1,375.7)
(1,375.7)
975.8
2,597.8
(264.6)
(2.9)
2,330.3
287.7
754.4
31.5
–
1,265.1
(8.4)
2,330.3
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 28 February 2013. They were signed
on its behalf by:
P Redfern
Director
R Mangold
Director
Taylor Wimpey plc plc.taylorwimpey.co.uk
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Notes to the Company Financial Statements
for the year to 31 December 2012
1. Significant accounting policies
The following accounting policies have been used consistently, unless
otherwise stated, in dealing with items which are considered material.
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 the 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.
Basis of preparation
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 wholly owned subsidiaries. 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 19 on pages 84 to 88.
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.
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 profit before tax 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 Company’s liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the balance
sheet date.
Any liability or credit in respect of Group relief in lieu of current tax
is also calculated using corporation tax rates that have been enacted
or substantively enacted by the balance sheet date unless a different
rate (including a nil rate) has been agreed within the Group.
Deferred tax
Deferred tax 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 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.
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2. Particulars of employees
Directors
2012
No.
3
2011
No.
3
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The Executive Directors received all of their remuneration, as disclosed in the Directors’ Remuneration Report on pages 41 to 56, from Taylor
Wimpey UK(cid:3229)Limited. In the prior year one director was remunerated by Taylor Morrison Incorporated up to the point of the sale of the North
American business on 13 July 2011.
However, it is not practicable to allocate such costs between their services as Executives of Taylor Wimpey UK Limited 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 51 of the Directors’ Remuneration Report. The Company was recharged costs of £7.8
million (2011: £4.6 million) in respect of certain payments relating to the disposal of the North American operations and 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 20 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 56. There were no outstanding contributions
at the year end.
3. Auditor’s remuneration
£ million
Total audit fees
Other services
Tax services
Corporate finance services
Total non-audit fees
A description of other services is included in Note 5 on page 75 to the Group financial statements.
4. Investments in Group undertakings
£ million
Cost
31 December 2011
Additions
31 December 2012
Provision for impairment
31 December 2011
Charge for the year
31 December 2012
Carrying amount
31 December 2012
31 December 2011
2012
2011
0.1
0.2
0.1
–
0.3
0.4
0.1
0.5
0.5
0.2
1.2
1.3
Shares
Loans
Total
5,247.3
1.0
5,248.3
3,625.3
–
3,625.3
1,623.0
1,622.0
–
–
–
–
–
–
–
–
5,247.3
1.0
5,248.3
3,625.3
–
3,625.3
1,623.0
1,622.0
All of the above investments are unlisted and particulars of principal subsidiary undertakings are listed on page 110, which forms part of these
financial statements.
In the prior year the Company recognised an impairment charge of £262.8 million against the value of its investment in subsidiary undertakings
and reversed impairments of £74.2 million reflect the permanent increase in value of assets in the underlying subsidiaries following the disposal
of the Group’s North American business.
Taylor Wimpey plc plc.taylorwimpey.co.uk
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Notes to the Company Financial Statements continued
for the year to 31 December 2012
5. Debtors
£ million
Amounts falling due within one year:
Due from Group undertakings
Other debtors
Corporation tax debtor
6. Creditors: amounts falling due within one year
£ million
Due to Group undertakings
Other creditors
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
2012
2011
2,666.7
0.5
2.5
2,669.7
2,206.1
0.7
5.4
2,212.2
2012
2011
1,842.1
2.0
1.6
1,845.7
1,369.2
4.9
1.6
1,375.7
2012
149.4
–
100.0
249.4
100.0
100.0
2011
164.6
–
100.0
264.6
100.0
100.0
Other loans comprise a £100.0 million variable rate fixed loan with an investment fund.
During 2012 the Group negotiated an option to extend the £100.0 million fixed term loan, for a further 5.5 years to mature November 2020.
This loan was originally due to mature in June 2015. This extension is subject to redemption of the 10.375% Senior Notes due 2015, prior to
30 June 2015 of which £149.4 million currently remains outstanding.
8. Debenture loans
£ million
Unsecured Senior Notes 10.375% due 2015
Repayable
In more than five years
In more than one year but less than five years
Within one year or on demand
During the current year the Company has repurchased £15.2 million of Senior Notes 10.375% due 2015.
2012
2011
149.4
164.6
–
149.4
–
149.4
–
164.6
–
164.6
106
Taylor Wimpey plc Annual Report & Accounts 2012
9. Share capital
£ million
Authorised:
22,200,819,176 (2011: 22,200,819,176) ordinary shares of 1p each
1,158,299,201 (2011: 1,158,299,201) deferred ordinary shares of 24p each
2012
2011
222.0
278.0
500.0
222.0
278.0
500.0
Number of shares
£ million
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Issued and fully paid:
31 December 2011
Share warrants exercised
31 December 2012
10. Share premium
£ million
1 January
Share warrants exercised
31 December
3,201,359,439
26,901,161
3,228,260,600
2012
754.4
4.4
758.8
287.7
0.3
288.0
2011
753.7
0.7
754.4
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During the year, options were exercised over 4,980,372 ordinary shares (2011: 6,029,714) all of which were met from our holding of shares
in our ESOTs at varying prices from 22.88 pence to 39.20 pence per share. Under the Group’s executive share option plans, employees held
options at 31 December 2012 to purchase up to 10,436,384 shares, subject to achievement of performance tests (2011: 10,496,846) at
a price of 39.34 pence per share nominally exercisable up to 7 August 2022.
Under the Group’s savings-related share option schemes, employees held options at 31 December 2012 to purchase 39,309,344
shares (2011: 42,841,812) at prices between 22.88 pence and 180.14 pence per share exercisable up to 31 May 2018. Under the
Group’s performance share plan employees held conditional awards at 31 December 2012 in respect of up to 37,530,685 shares, subject
to achievement of performance tests (2011: 29,831,231) at nil pence per share nominally exercisable up to 5 March 2022. Under the Group’s
share purchase plan employees held conditional awards at 31 December 2012 in respect of 6,800,851 shares (2011: 6,354,976) 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. The warrants may be exercised at 17.45p per share by the holder within five
years of the date of issue and as at 31 December 2012 31,013,739 warrants had been exercised.
11. Capital redemption reserve
£ million
31 December
12. Translation reserve
£ million
1 January
Transfer to profit and loss account
31 December
2012
31.5
2012
–
–
–
2011
31.5
2011
50.1
(50.1)
–
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Notes to the Company Financial Statements continued
for the year to 31 December 2012
13. Profit and loss account
£ million
1 January
Profit for the financial year
Dividends paid
Transfer from translation reserve
Cash cost of satisfying share options
31 December
2012
2011
1,265.1
67.2
(18.2)
–
(0.3)
1,313.8
694.5
521.2
–
50.1
(0.7)
1,265.1
As permitted by section 408 of the Companies Act 2006, Taylor Wimpey plc has not presented its own profit and loss account. The profit
of the Company for the financial year was £67.2 million (2011: profit of £521.2 million).
Included in the Company profit and loss account is £346.3 million (2011: £256.6 million) which is not distributable.
14. 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
2012
15.9
2011
8.4
Number
Number
–
38.2m
–
23.8m
The market value of the shares at 31 December 2012 was £25.1 million (2011: £8.9 million) and their nominal value was £0.38 million
(2011: £0.24 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 have been acquired on the market.
These shares are used to meet the valid exercise options and/or vesting of conditional awards under the Executive Incentive Scheme,
Performance Share Plan, Executive Share Option Scheme and the Savings-Related Share Option Scheme and the matching award of
shares under the Share Purchase Plan.
During the year, Taylor Wimpey plc purchased £10.0 million of its own shares which are held in the ESOTs (2011: £10.0 million).
The ESOTs’ entire holding of shares at 31 December 2012, aggregating 38.2 million shares (2011: 23.8 million), was covered by outstanding
options and conditional awards over shares at that date.
15. 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.
108
Taylor Wimpey plc Annual Report & Accounts 2012
16. 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, 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 £208.7 million at 31 December 2012
(2011: £177.4 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 £22.0 million per annum for 10 years from valuation date.
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2011
2,330.3
67.2
(18.2)
4.7
(10.0)
2.5
2,376.5
1,817.0
521.2
–
0.7
(10.0)
1.4
2,330.3
2012
2011
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18.2
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6.1
13.9
20.0
–
–
–
12.1
–
–
12.1
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17. Reconciliation of movement in shareholders’ funds
£ million
Opening shareholders’ funds
Profit for the financial year
Dividends paid
New share capital subscribed
Purchase of own shares
Utilisation of own shares
Closing shareholders’ funds
18. Dividend
£ million
Amounts recognised as distributions to equity holders
Paid
2011 Final: 0.38p per 1p share
2012 Interim: 0.19p per 1p share
Proposed
2011 Final: 0.38p per 1p share
2012 Interim: 0.19p per 1p share
2012 Final: 0.43p per 1p share
The Directors are recommending a final dividend for the year ended 31 December 2012 of 0.43 pence per share subject to shareholder
approval at the Annual General Meeting, with a resultant final dividend of £13.9 million (2011: £12.1 million).
In accordance with IAS 10 ‘Events after the balance sheet date’ the proposed dividend has not been accrued as a liability as at 31 December
2012. The dividend will be paid on 21 May 2013 to all shareholders registered at the close of business on 19 April 2013.
Taylor Wimpey plc plc.taylorwimpey.co.uk
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Particulars of Principal Subsidiary Undertakings
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Country of incorporation and
principal operations
United Kingdom
Spain
Taylor Wimpey plc interest is 100% in the issued ordinary share
capital of these undertakings included in the consolidated accounts Activity
Taylor Wimpey Holdings Limited
George Wimpey Limited
Taylor Wimpey UK Limited(a)
Taylor Wimpey Developments Limited(a)
Taylor Wimpey de España S.A.U.(a)(b)
Holding company
Holding company
United Kingdom housebuilder
Holding company
Spanish housebuilder
(a) Interests held by subsidiary undertakings.
(b) 9% cumulative, redeemable preference shares are additionally held.
110
Taylor Wimpey plc Annual Report & Accounts 2012
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Five Year Review
£ million
2012
2011
2010(f)
2009
2008(a)
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
Profit/(loss) for the financial year
Taxation, including exceptional taxation
Profit for the year from discontinued operations
Profit/(loss) for the financial year
Profit/(loss) for the financial year before tax and exceptional items
Balance sheet
Goodwill and Intangibles
Other fixed assets
Interests in joint ventures
Non-current loans and receivables
Non-current assets (excluding tax)
Inventories
Other current assets (excluding cash and debt)
Trade and other payables
Provisions
Net-current assets (excluding cash and debt)
Trade and other payables
Retirement obligations
Provisions
Non-current creditors (excluding debt) and provisions
Net assets held for sale
Net debt
Tax balances
Net assets
Capital employed excluding assets held for sale
Add back intangibles
Less tax balances
Net operating assets excluding assets held for sale
Statistics
Adjusted earnings/(loss) per share – continuing Group
Tangible net assets per share(b)
Number of shares in issue at year end (millions)(b)
Return on capital employed(c)
Operating margin
Net gearing ratio(d)
Return on net operating assets
UK short term landbank (plots)(e)
ASP UK £’000
Completions UK (homes)
Total inventory/net debt
2,019.0
227.7
2.4
–
(22.4)
207.7
23.6
–
231.3
185.3
5.2
7.1
31.5
102.0
145.8
2,788.8
96.0
(772.6)
(84.4)
2,027.8
(190.8)
(244.2)
(10.7)
(445.7)
–
(59.0)
320.6
1,989.5
2,043.3
5.2
(320.6)
1,727.9
4.7p
61.5p
3,228.3
11.5%
11.4%
3.0%
13.6%
65,409
181
10,886
47.2
1,808.0
158.3
1.2
(5.8)
(75.1)
78.6
(22.7)
43.1
99.0
89.9
5.1
5.0
31.9
70.3
112.3
2,686.6
72.5
(697.8)
(76.6)
1,984.7
(199.7)
(210.2)
(18.5)
(428.4)
–
(116.9)
283.3
1,835.0
1,946.8
5.1
(283.3)
1,668.6
2.1p
57.3p
3,201.4
8.3%
8.8%
6.4%
9.8%
65,264
171
10,180
23.0
1,767.7
100.6
(0.3)
(55.5)
(199.6)
(154.8)
329.5
84.6
259.3
(15.9)
1.0
5.4
33.9
50.7
91.0
2,680.6
74.7
(705.1)
–
2,050.2
(215.9)
(246.0)
(103.3)
(565.2)
699.5
(751.3)
298.9
1,823.1
1,873.9
1.0
(298.9)
1,576.0
(1.5)p
56.9p
3,197.2
4.9%
5.7%
41.2%
5.3%
63,566
171
9,962
3.6
2,595.6
37.7
5.6
(580.7)
(162.5)
(699.9)
59.3
–
(640.6)
(96.1)
2.4
8.2
51.9
65.0
127.5
3,603.3
130.5
(760.0)
(47.8)
2,926.0
(278.6)
(409.3)
(51.8)
(739.7)
–
(750.9)
(62.0)
1,500.9
2,249.4
–
62.0
2,311.4
(4.3)p
46.9p
3,196.9
1.5%
1.7%
50.0%
1.6%
66,089
160
10,186
4.8
3,467.7
86.3
7.6
(1,884.5)
(179.1)
(1,969.7)
76.6
53.1
(1,840.0)
(74.7)
–
15.5
67.7
47.9
131.1
4,890.6
181.3
(1,170.7)
(56.1)
3,845.1
(343.4)
(279.8)
(51.0)
(674.2)
–
(1,529.3)
(99.5)
1,673.2
3,202.5
–
99.5
3,302.0
(7.2)p
119.8p
1,526.0
2.6%
2.6%
91.4%
2.5%
74,917
171
13,394
3.2
(a) The results of the construction business which was disposed of on 9 September 2008
(d) Net gearing ratio is net debt divided by net assets.
are included within profit for the year from discontinued operations for 2008.
(e) The total number of plots that we either own or control, with some form of planning
(b) 2008 has been restated to reflect the increase in shares related to the open offer as
consent.
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 the results of the Construction division, of £2.1 million was
also included.
(f) The results of the North American business have been restated for 2010. The 2010
balance sheet has the North American assets separated as assets held for sale and
£57.8m tax liabilities have been reclassified to provisions.
Taylor Wimpey plc plc.taylorwimpey.co.uk
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Notice of Annual General Meeting
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 eighth Annual General
Meeting of the Company to be held on 25 April 2013 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 2012.
2. To declare due and payable on 21 May 2013 a final dividend of
0.43 pence per ordinary share of the Company for the year ended
31 December 2012 to shareholders on the register at close of
business on 19 April 2013.
3. To re-elect as a Director, Kevin Beeston.
4. To re-elect as a Director, Pete Redfern.
5. To re-elect as a Director, Ryan Mangold.
6. To re-elect as a Director, James Jordan.
7. To re-elect as a Director, Kate Barker CBE.
8. To re-elect as a Director, Mike Hussey.
9. To re-elect as a Director, Anthony Reading MBE.
10. To re-elect as a Director, Robert Rowley.
11. 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.
12. Subject to the passing of resolution 11, to authorise the Audit
Committee to determine the remuneration of the auditors on behalf
of the Board.
13. That the Board be generally and unconditionally 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 £10,768,587 (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 £10,768,587); and
(B) comprising equity securities (as defined in the Companies Act
2006) up to a nominal amount of £21,537,174 (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 2014 (or, if earlier, until the close of
business on 24 July 2014) 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.
Special Resolutions:
14. That, if resolution 13 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 13, 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 13 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 £1,615,288,
such power to apply until the end of the Annual General Meeting
of the Company in 2014 (or, if earlier, until the close of business
on 24 July 2014), 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.
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15. That the Company be authorised for the purposes of Section 701
of the Companies Act 2006 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 323,057,621;
(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 the highest of: (i) 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;
and (ii) the higher of the price of the last independent trade and
the highest independent bid on the trading venues where the
purchase is carried out;
(D) the authority hereby conferred shall expire at the earlier of the
conclusion of the Annual General Meeting of the Company in
2014 and 24 October 2014 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:
16. To approve the Directors’ Remuneration Report for the year ended
31 December 2012.
17. 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 2014.
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.
18. That the amendments to the Taylor Wimpey Savings-Related
Share Option Plan (the ‘Sharesave Plan’), as summarised in the
Notes to the Notice of Meeting including to extend the term for
operation of the Sharesave Plan be and are hereby approved and
adopted and the Board be and is hereby authorised to do all acts
and things as it may consider necessary or desirable to implement
the same.
19. That the amendments to the Taylor Wimpey Share Incentive Plan
(the “SIP”), as summarised in the Notes to the Notice of Meeting
including to extend the term for operation of the SIP be and are
hereby approved and adopted and the Board be and is hereby
authorised to do all acts and things as it may consider necessary
or desirable to implement the same.
20. That the sale of an apartment and parking space at The Mill
Apartments, West Hampstead, London by Taylor Wimpey UK
Limited for the sum of £709,599 to Mr Pete Redfern, a Director
of the Company, be hereby approved.
Special Resolution:
21. 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 116 to 119.
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 9:30 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 receive it by no later than 11:00 am on 23 April 2013. 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 the Company
and its 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.
Taylor Wimpey plc plc.taylorwimpey.co.uk
113
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Notice of Annual General Meeting continued
Inspection of documents
The following documents will be available for inspection at the
Company’s registered office, Gate House, Turnpike Road, High
Wycombe, Buckinghamshire HP12 3NR, 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:
(cid:116)(cid:1) copies of the Executive Directors’ service contracts;
(cid:116)(cid:1) copies of the letters of appointment of the Chairman and the
Independent Non Executive Directors;
(cid:116)(cid:1) rules of the proposed new Taylor Wimpey Savings-Related Share
Option Plan, as amended as proposed; and
(cid:116)(cid:1) rules of the proposed new Taylor Wimpey Share Incentive Plan,
as amended as proposed, and incorporating the amended Taylor
Wimpey Share Incentive Plan Trust Deed.
The rules of the proposed new Taylor Wimpey Savings-Related Share
Option Plan, established 6 August 2004, and the rules of the proposed
new Taylor Wimpey Share Incentive Plan incorporating the amended
Taylor Wimpey Share Incentive Plan Trust Deed, both rules amended
as proposed, will also be available for inspection at the office of
Slaughter and May, One Bunhill Row, London EC1Y 8YY during normal
business hours from the date of this notice of meeting until the date of
the Annual General Meeting.
A copy of the full Annual Report and Financial Statements of the
Company for the year ended 31 December 2012, including the
Directors’ Remuneration Report referred to in resolution 16,
is also available on our Web site plc.taylorwimpey.co.uk
By Order of the Board
James Jordan
Group Legal Director and Company Secretary
Taylor Wimpey plc
Registered Office:
Gate House
Turnpike Road
High Wycombe
Buckinghamshire HP12 3NR
(Registered in England and Wales under number 296805)
28 February 2013
114
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Notes to the Notice of Meeting
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 23 April 2013 (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 28 February 2013 (being the last business day prior to the
publication of this notice) the Company’s issued share capital
consisted of 3,230,576,218 ordinary shares, carrying one vote
each. Therefore, the total voting rights in the Company as at
28 February 2013 were 3,230,576,218.
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 0300 (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,
The Registry, 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 23 April 2013. 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 and 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 23 April 2013. 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 and
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 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.
Taylor Wimpey plc plc.taylorwimpey.co.uk
115
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Notes to the Notice of Meeting continued
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 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
and participate in the meeting. 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 plc.
taylorwimpey.co.uk.
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 plc.taylorwimpey.co.uk 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 2012
and the reports of the Directors and Auditors before a general meeting
of the Company.
Resolution 2: To declare a final dividend
The Directors recommend the payment of a final dividend of 0.43
pence per share in respect of the year ended 31 December 2012.
If approved at the Annual General Meeting, the dividend will be paid
on 21 May 2013 to shareholders who are on the Register of Members
at the close of business on 19 April 2013.
Dividend Re-Investment Plan
Subject to shareholders approving the dividend as set out in
Resolution 2 at the Annual General Meeting scheduled for 25 April
2013, the Company will be offering a Dividend Re-Investment Plan (the
‘DRI Plan’). For 2013 and in future years, the DRI Plan will be provided
and administered by the DRI Plan administrator, Capita IRG Trustees
Limited, which is authorised and regulated by the Financial Services
Authority (‘FSA’). The DRI Plan will offer shareholders the opportunity
to elect to invest cash dividends received on their ordinary shares, in
purchasing further ordinary shares of the Company. These shares
would be bought in the market, on competitive dealing terms.
Full details of the terms and conditions of the DRI Plan and the
actions required to participate in it are available on the Company’s
Web site: plc.taylorwimpey.co.uk or on request from the registrar,
Capita Registrars, The Registry, 34 Beckenham Road, Beckenham,
Kent, BR3 4TU, e-mail: ssd@capitaregistrars.com tel: 0871 664 0300
(UK) or +44 20 8639 3399 (overseas).
Resolutions 3 to 10: 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 (save for Brenda Dean, who retires at the
conclusion of the AGM) will retire and, being eligible, offer themselves
for re-election by shareholders at the Annual General Meeting.
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 56 of the Report
and Accounts. Full biographical information concerning each Director
is on pages 28 and 29 of the Report and Accounts.
The following summary information is given in support of the Board’s
proposal for the re-election of the Directors of the Company:
Kevin Beeston – offers himself for re-election.
Kevin has been Chairman of the Board since July 2010. The Board
is satisfied that he continues to carry out his duties to a very high
standard including at meetings of the Board and of the Nomination
Committee (which he Chairs) and the Remuneration Committee, 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 28.
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Pete Redfern – offers himself for re-election.
Pete has been Chief Executive since July 2007 and was previously
Group Chief Executive of George Wimpey Plc. His biography appears
on page 28.
Ryan Mangold – offers himself for re-election.
Ryan has been Group Finance Director since November 2010. His
biography appears on page 28.
James Jordan – offers himself for re-election.
James has been Group Legal Director since July 2011 and is also
the Group Company Secretary, a position he has held since 2007.
His biography appears on page 28.
Kate Barker CBE – offers herself for re-election.
Kate has been an Independent Non Executive Director since
April 2011. 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 Audit and Nomination 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 29.
Mike Hussey – offers himself for re-election.
Mike has been an Independent Non Executive Director since
July 2011. The Board is satisfied that he is independent in
character and judgement 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 29.
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 seven years in that capacity including previously for George Wimpey
Plc and will have completed eight 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 29.
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 29.
The Board confirms that each of the above 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 11: 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 2013 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 12: 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 Audit Committee Report. Details of non-audit
services performed by Deloitte in 2012 are given in Note 5 on
page 75 of the Report and Accounts.
Resolution 13: 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 26 April 2012 and is due to expire
at the conclusion of this Annual General Meeting. Accordingly,
Paragraph (A) of resolution 13 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 £10,768,587 (representing 1,076,858,739 ordinary shares).
This amount represents approximately one-third of the issued ordinary
share capital of the Company as at 14 March 2013, the latest
practicable date prior to publication of this notice of meeting.
In line with guidance issued by the Association of British Insurers (‘ABI’),
paragraph (B) of resolution 13 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
£21,537,174 (representing 2,153,717,478 ordinary shares), as reduced
by the nominal amount of any shares issued under paragraph (A) of
resolution 13. This amount (before any reduction) represents
approximately two-thirds of the issued ordinary share capital of the
Company as at 14 March 2013, the latest practicable date prior
to publication of this notice of meeting.
The authorities sought under paragraphs (A) and (B) of resolution
13 will expire at the earlier of 24 July 2014 and the conclusion of
the Annual General Meeting of the Company to be held in 2014.
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 (including as regards the Directors standing for
re-election in certain cases).
Special Resolutions
Resolution 14: 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 14,
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 £1,615,288 (representing
161,528,810 ordinary shares). This aggregate nominal amount
represents approximately 5% of the issued ordinary share capital of
the Company as at 14 March 2013, 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.
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Notes to the Notice of Meeting continued
The authority will expire at the earlier of 24 July 2014 and the
conclusion of the Annual General Meeting of the Company held
in 2014.
Resolution 15: 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.
Any purchases under this authority would be made in one or
more tranches and would be limited in aggregate to 10% of the
ordinary shares of the Company in issue at the close of business
on 14 March 2013.
The maximum price to be paid on any exercise of the authority
would not exceed the highest of (i) 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;
and (ii) the higher of the price of the last independent trade and the
highest current independent bid on the trading venues where the
purchase is carried out. 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. The Company currently holds no
shares in treasury.
This is a standard resolution, sought by the majority of public listed
companies at Annual General Meetings. The Board’s current intention
of utilising this authority is generally limited to acquiring shares for the
various share scheme arrangements. The Board would only consider a
more formal share purchase programme if it would result in an increase
in earnings per share and was in the best interests of shareholders
generally, having regard to all relevant circumstances.
The total number of options, conditional share awards and
warrants to subscribe for ordinary shares outstanding as at
the close of business on 14 March 2013 was 110,699,895,
representing approximately 3.4% of the issued ordinary share
capital of the Company as at that date and approximately 3.8%
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 24,037,392 ordinary shares,
representing 0.7% of the Company’s ordinary issued share capital
as at close of business on 14 March 2013. If the authority given by
Resolution 15 were to be fully used, these would represent 0.8%
of the Company’s ordinary issued share capital at that date.
This authority will last until the earlier of 24 October 2014 and the
conclusion of the Company’s Annual General Meeting in 2014.
Special Business
Ordinary Resolutions
Resolution 16: Approval of the Directors’ Remuneration Report
for the year ended 31 December 2012
The Directors’ Remuneration Report for the year ended
31 December 2012 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 56 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 17: 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 political donation
and/or expenditure. Resolution 17 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 (as set out in Resolution 17) with a separate
amount specified as permitted for each. An amount not exceeding
£250,000 for each head of the authority has been proposed. In
accordance with the Companies Act 2006, Resolution 17 extends
approval to all of the Company’s subsidiaries.
This authority will last until the conclusion of the Annual General
Meeting of the Company in 2014, 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 those of the Home Builders Federation in the UK. Whilst
the Board does 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 59 of the Report and Accounts.
Resolution 18: Taylor Wimpey Savings-Related Share Option Plan
The Taylor Wimpey Savings-Related Share Option Plan (“Sharesave
Plan”) was last adopted by shareholders at the Company’s AGM in
2004, for a period not exceeding ten years. The Company is now
seeking approval to extend the life of the Sharesave Plan for a further
ten years.
The existing Sharesave Plan, which is approved by HM Revenue &
Customs (‘HMRC’), is open to all employees and offers the benefits
set out on page 48 of this Annual Report. The Company first offered
a Sharesave Plan in 1982 and it has proved extremely popular with
employees. Almost half of our UK employees currently participate in
either the Sharesave Plan, or the Taylor Wimpey Share Incentive
Plan (“SIP”) described in Resolution 19, or in both. Both plans
encourage employees to take an interest in the Company’s share
price performance, and help to align their interests with those of
other shareholders.
Shareholder approval is being sought to extend the life of the
Sharesave Plan until 20 April 2024 (the twentieth anniversary of its
adoption) to enable the Company to continue to operate the Sharesave
Plan and to reduce the retirement age under the Sharesave Plan from
65 to 60. The Remuneration Committee has also taken the opportunity
to update the Rules of the Sharesave Plan in some respects, taking
into account modern practice.
Resolution 18 seeks approval for the amendment of the
Sharesave Plan.
Resolution 19: Taylor Wimpey Share Incentive Plan
The Taylor Wimpey Share Incentive Plan (‘SIP’) was last adopted
by shareholders at the Company’s AGM in 2004, for a period not
exceeding ten years. The Company is now seeking approval to
extend the life of the SIP for a further ten years.
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The Companies (Shareholders’ Rights) Regulations 2009 have
increased the notice period required for general meetings of the
Company to 21 clear days unless shareholders agree to a shorter
notice period, which cannot be less than 14 clear days. At the 2012
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
21 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 2014, 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.
The existing SIP, which is approved by HMRC, is open to all
employees and offers the benefits set out on page 48 of this Annual
Report. The Company first offered a SIP in 2004 and it has proved
extremely popular with employees, as described in the notes to
the preceding Resolution.
Shareholder approval is being sought to extend the life of the SIP
until 20 April 2024 (the twentieth anniversary of its adoption) to enable
the Company to continue to operate the SIP and for the retirement
age under the SIP to be reduced from 65 to 50. In addition, a de
minimis payment threshold of £2.50 is to be introduced to reduce
the administrative burden of paying very small amounts to employees
which result from a corporate action or rights issue and wording is
to be added to clarify that the SIP trustees have a 12-month period
in which to notify employees of their shareholdings. Provisions allowing
the SIP trustees to insure against loss and breach of trust, except
where such loss or breach of trust is due to the Trustees’ wilful
wrongdoing or (for loss only) negligence, are also to be included
in the SIP trust deed. The Remuneration Committee has also taken
the opportunity to update the Rules of the SIP in some respects,
taking into account modern practice.
Resolution 19 seeks approval for the amendment of the SIP.
Resolution 20: Substantial Property Transaction
Mr Pete Redfern, a Director of the Company, intends to enter into
a contract to purchase an apartment at The Mill Apartments, West
Hampstead, London once approval has been obtained for the
transaction from the shareholders of the Company, from Taylor Wimpey
UK Limited, a wholly owned subsidiary of the Company. Pete Redfern
is also a Director of Taylor Wimpey UK Limited.
As the transaction is in excess of £100,000, it constitutes a substantial
property transaction with a Director of the Company under sections
190 and 191 of the Companies Act 2006 and therefore requires the
prior approval of shareholders, which is being sought at this Annual
General Meeting.
The Mill Apartments development comprises a residential scheme
built by Taylor Wimpey UK Limited. The purchase price being paid
by Pete Redfern is £709,599 for an apartment including one parking
space. The purchase price was fixed following a rigorous review of the
prices already obtained in the open market for apartments at The Mill
Apartments adjusted for differentiating factors, less a discount of five
per cent. pursuant to the Company’s employee purchase scheme.
Otherwise, the price being paid by Pete Redfern assumes that the
transaction is an arm’s length sale.
The agreement between Taylor Wimpey UK Limited and Pete Redfern
will be a standard form sale and purchase agreement used by Taylor
Wimpey UK Limited for The Mill Apartments development. Pete
Redfern has paid a standard reservation fee to Taylor Wimpey UK
Limited prior to the Annual General Meeting, but the transaction
shall be subject to obtaining shareholder approval.
The Board believes the terms of the proposed agreement are fair
and reasonable and that the price being paid by Pete Redfern will
be the market value of the apartment and parking space (less the
discount of five per cent. as described above) as at the date of
exchange of contracts.
Special Resolution
Resolution 21: 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.
Taylor Wimpey plc plc.taylorwimpey.co.uk
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Shareholder Facilities
Annual General Meeting
11:00 am on 25 April 2013 at:
The British Medical Association, BMA House,
Tavistock Square, London WC1H 9JP
Latest date for receipt of proxy instructions for the 2013
Annual General Meeting: 11:00 am on 23 April 2012.
Group Legal Director and Company Secretary and
Registered Office
James Jordan
Gate House
Turnpike Road
High Wycombe
Buckinghamshire HP12 3NR
Tel: +44 (0)1494 558323
Fax: +44 (0)1494 885663
E-mail: james.jordan@taylorwimpey.com
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
Jefferies 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.
Making documents and information available electronically:
(cid:116)(cid:1) enables the Company to reduce printing and postage costs;
(cid:116)(cid:1) allows faster access to information and enables shareholders to
access documents on the day they are published on the Company’s
Web site;
(cid:116)(cid:1) 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.
The Company’s Web site url is plc.taylorwimpey.co.uk and shareholder
documentation made available electronically is generally accessible
at plc.taylorwimpey.co.uk/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 plc.taylorwimpey.co.uk.
On-line facilities for shareholders
You can access our Annual and Interim Reports and copies
of recent shareholder communications on-line at:
plc.taylorwimpey.co.uk/InvestorRelations.
To register for on-line access, go to
plc.taylorwimpey.co.uk/ShareholderInformation,
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.
Dividend Re-Investment Plan
You can choose to invest your cash dividends in purchasing Taylor
Wimpey shares on the market under the terms of the Dividend
Re-Investment Plan. For further information on the Plan and how
to join, contact Capita Registrars.
Dividend mandates
We strongly encourage all shareholders to receive their cash dividends
by direct transfer to a bank or building society account. This ensures
that dividends are credited promptly to shareholders without the cost
and inconvenience of having to pay in dividend cheques at a bank. If
you wish to use this cost-effective and simple facility, complete and
return the dividend mandate form attached to your dividend cheque.
Additional mandate forms may be obtained from Capita Registrars.
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 one single
entry. Please contact Capita Registrars who will be pleased to carry out
your instructions in this regard.
120
Taylor Wimpey plc Annual Report & Accounts 2012
Principal Operating
Addresses
UK
Taylor Wimpey plc
Gate House
Turnpike Road
High Wycombe
Buckinghamshire
HP12 3NR
Tel: +44 (0)1494 558323
Fax: +44 (0)1494 885663
E-mail: twplc@taylorwimpey.com
plc.taylorwimpey.co.uk
Registered in England and Wales number 296805
Taylor Wimpey UK Limited
Gate House
Turnpike Road
High Wycombe
Buckinghamshire
HP12 3NR
Tel: +44 (0)1494 558323
Fax: +44 (0)1494 885663
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
Details of all our operating locations are available
on our Web site plc.taylorwimpey.co.uk
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). Shareholders are not in any way obliged to use
this service when dealing in the Company’s shares.
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 plc.taylorwimpey.co.uk. It appears
on BBC Text 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.
Unsolicited approaches to shareholders
We have received reports from a number of Taylor Wimpey
shareholders who have each received what appear to be fraudulent
approaches from third parties during recent months with respect to
their shareholding in the Company. In some cases these are ‘cold calls’
and in others correspondence. They generally purport to be from a firm
of solicitors or an investment company and offer, or hold out the
prospect of, large gains on Taylor Wimpey shares or other investments
you may hold. The approaches normally include the seeking of an
advance payment from the shareholder, the disclosure of the
shareholder’s bank details or the sale of an unrelated investment.
Shareholders are advised to be extremely wary of such approaches
and advised to only deal with firms authorised by the UK Financial
Services Authority (‘FSA’). You can check whether an enquirer is
properly authorised and report scam approaches by contacting the
FSA on www.fsa.gov.uk/Pages/Doing/Regulated/Law/Alerts/form.shtml
or by calling 0845 606 1234 and you can contact the Taylor Wimpey
Investor Relations Department at twplc@taylorwimpey.com.
Taylor Wimpey plc plc.taylorwimpey.co.uk
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