Delivering
quality
Annual Report and Accounts 2017
s
t
n
e
t
n
o
C
Strategic Report
Working Together to Build Your Dreams
At a Glance
Where we Operate
Chairman’s Statement
Our UK Market
Chief Executive’s Statement
Our Investment Case
Our Strategy
Our Business Model
Our People
Selecting Land
Managing the Planning and
Community Engagement Process
Getting the Homebuilding Basics Right
Delivering Customer Service
Optimising Value
Our Approach to Risk Management
Principal Risks and Uncertainties
Group Financial Review
Directors’ Report: Governance
Board of Directors
Corporate Governance
Audit Committee Report
Nomination Committee Report
Remuneration Committee Report
Statutory, Regulatory and Other Information
Financial Statements
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Consolidated Financial Statements
Company Balance Sheet
Company Statement of Changes in Equity
Notes to the Company Financial Statements
Particulars of Subsidiaries, Associates
and Joint Ventures
Five Year Review and
Alternative Performance Measures
Shareholder Information
Notice of Annual General Meeting
Notes to the Notice of Annual General Meeting
Shareholder Facilities
1
2
4
6
10
12
19
20
21
22
24
26
28
32
34
36
38
42
46
48
62
67
74
93
98
103
104
105
106
107
108
138
139
140
144
148
151
155
158
We are one of the UK’s largest
residential developers. We do
much more than build homes
– we add social, economic
and environmental value to
the wider communities in which
we operate. We are first and
foremost a local business and
an important contributor to
local communities.
Our mission is to create great
places to live and deliver
excellent service which inspires
and delights our customers, our
people and our shareholders.
Connect with us
There are several ways you can get in
touch with us or follow our news:
www.taylorwimpey.co.uk/corporate
www.twitter.com/taylorwimpeyplc
www.linkedin.com/company/taylor-wimpey
Navigating this report
The icons below help to signpost where you can find more information.
Read more
Key Performance Indicators
Q&A
Question and answers
Link to Remuneration
1
Working Together
to Build Your
Dreams
At Taylor Wimpey we are defined not just by who we are
today, but by what we want to be in the future. Our vision is
to work together to build your dreams. This extends and
applies to all of our stakeholders.
We believe that our strategy differentiates us as a company
to invest in, work for, engage and partner with and buy a
home from.
We are a value-driven business with a long term,
sustainable focus:
Demonstrating excellence through improved
operational efficiency and discipline
Read more on pages 14 and 28 to 31.
Developing and nurturing stakeholder relationships
which play a key role in our business success
Read more on pages 15 and 51.
Driving financial performance in the right way to deliver
sustainable shareholder returns
Read more on pages 42 to 45.
Read more about our vision, mission and values on page 20.
taylorwimpey.co.uk
2
At a Glance
A strong
performance for 2017
Revenue (£m)
3,965.2
Adjusted
operating
profit* (£m)
841.2
Profit before
tax (£m)
682.0
Total dividend
paid per share (p)
13.79
Return on net
operating assets**
(%)
32.4
Year end
net cash (£m)
511.8
4,500
1,000
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
.
8
9
3
1
3
,
.
2
5
6
9
3
,
.
2
6
7
6
3
,
.
2
1
4
8
800
.
3
4
6
7
.
0
7
3
6
600
400
200
5
1
0
2
6
1
0
2
7
1
0
2
0
5
1
0
2
6
1
0
2
7
1
0
2
4
.
2
3
.
7
0
3
.
1
7
2
9
.
2
3
7
.
0
2
8
6
.
2
3
0
6
800
700
600
500
400
300
200
100
0
9
7
.
3
1
1
9
0
1
.
9
4
9
.
15
12
9
6
3
0
35
30
25
20
15
10
5
0
.
8
1
1
5
.
7
4
6
3
.
3
3
2
2
600
500
400
300
200
100
0
5
1
0
2
6
1
0
2
7
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
Alternative Performance Measures
The Group uses Alternative Performance Measures (APMs) as key financial performance indicators (KPIs) to assess underlying performance of the Group. The APMs used are widely used
industry measures, form the measurement basis of the key strategic targets (return on net operating assets** and operating profit* margin) and are linked directly to executive remuneration.
All references to adjusted operating profit or operating profit throughout this report meet the definition of an APM.
Definitions of the APMs discussed throughout this Annual Report and Accounts, and a reconciliation to the equivalent statutory measure, are detailed on pages 148 to 150.
Taylor Wimpey plc Annual Report and Accounts 2017
Strategic Report
3
KPIs
Read more
Link to Remuneration
Tangible net
asset value per
share† (p)
95.7
Adjusted basic
earnings per
share†† (p)
20.2
Basic earnings
per share (p)
17.0
Customer
satisfaction (%)
88
Annual Injury
Incidence Rate
(per 100,000
employees and
contractors)
152
105
7
.
5
9
.
6
8
8
90
.
5
3
8
75
60
45
30
15
0
2
.
0
2
.
1
8
1
22
20
18
16
.
9
4
1
14
12
10
8
6
4
2
0
20
100
220
1
1
2
.
1
8
1
.
0
7
1
.
1
5
1
15
10
5
0
80
60
40
20
0
8
8
200
6
8
5
8
5
7
1
180
2
5
1
160
140
120
100
80
60
40
20
0
5
1
0
2
6
1
0
2
7
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
Definitions can be found in the Group Financial Review on page 43.
NB Customer satisfaction and Annual Injury Incidence Rate are UK only measures.
taylorwimpey.co.uk
4
Where we Operate
We strive to be the
homebuilder of choice
We operate at a local level
from 24 regional businesses
across the UK, and we also
have operations in Spain.
North Division
Our North Division covers our East and West Scotland,
North East, North Yorkshire, Yorkshire, North West,
Manchester, North Midlands, Midlands and West Midlands
regional businesses.
Central and South West Division
Our Central and South West Division covers our East
Midlands, South Midlands, East Anglia, Oxfordshire,
South Wales, Bristol, Southern Counties and Exeter
regional businesses.
London and South East Division
including Central London
Our London and South East Division includes Central London
and covers our East London, North Thames, South East,
South Thames and West London regional businesses.
Spain
We build high-quality homes in the popular locations
of Costa Blanca, Costa del Sol and the islands of Mallorca
and Ibiza.
North Division
regional offices
Central and South West
Division regional offices
London and South East
Division regional offices
UK map key
Head office
London market
Completions
Taylor Wimpey plc Annual Report and Accounts 2017
North Division: 6,076
Central and South West Division: 5,135
London and South East Division including Central London: 3,176
Strategic Report 5
Operating profit* by region
£294.9mNorth Division
£318.0mCentral and South West Division
£271.4m
London and South East Division including Central London
Read more on pages 42 to 45.
£26.8m
Spain
taylorwimpey.co.uk
6
Chairman’s Statement
Kevin Beeston
Chairman
“ We are delighted to have
delivered another year of growth
in shareholder returns in 2017.”
Taylor Wimpey plc Annual Report and Accounts 2017
A responsible
business
Introduction
On behalf of your Board, I am delighted to report that we have made good
progress on both our financial and operational metrics and delivered another
year of growth in shareholder returns, with £451 million returned to
shareholders in 2017 in total dividends. Group revenue for the year increased
by 7.9% to £3,965.2 million (2016: £3,676.2 million) and we were pleased to
report an operating profit* of £841.2 million, an increase of 10.1% year on year
(2016: £764.3 million). More detailed information on our financial performance
can be found on pages 42 to 45. During the year, we completed
14,541 much-needed new homes in the UK, which represents a 4.8% growth
on last year, whilst also continuing to make a significant contribution to the
communities in which we operate, where we invested over £400 million
through planning obligations. I am proud to report that since we implemented
our strategy outlined in 2011, Taylor Wimpey has delivered nearly 87k new
homes across the country and returned £1.2 billion to shareholders.
The housing cycle
Trading performance and customer demand remained resilient throughout
the year and in our core geographies. You can find more perspective on
market conditions on pages 10 and 11. We recognise that the outcome of
the General Election, combined with the on-going Brexit negotiations, has
resulted in greater political uncertainty. We maintain and welcome an open
and active dialogue with the Government and the main political parties. We
are pleased to note that all the main parties understand the importance of
housebuilding to the country. Whist we have not seen any adverse impact
on the new build housing market or consumer confidence, we are monitoring
both the consumer and political environment. We remain confident that our
strategy, with a robust balance sheet, high-quality landbank and a highly
experienced management team, provides the resilience and flexibility to
enable us to deal with changing market conditions, as required, and to
perform well through changing market conditions. More information on our
strategy can be found on pages 20 and 21 and you will see the key themes
reflected throughout this document, and importantly in our general approach
to business.
Health and safety
Health and safety will always be our non-negotiable top priority and continues
to be the first item discussed at every plc Board and regional board meeting
throughout the business. It also remains one of the highest rated questions
in our annual employee engagement survey, with 98% of employees believing
Taylor Wimpey takes health and safety in the workplace seriously
(2016: 98%). We are pleased to note our Annual Injury Incidence Rate (AIIR)
for reportable injuries per 100,000 employees and contractors was a record
low of 152 in 2017 (2016: 211) and our efforts and level of focus on health
and safety will of course continue. More information can be found on pages
28 to 30, including details of our own internal review following the tragic events
at Grenfell Tower, London, in June 2017.
Customer service
Customer service continues to be a key priority for all Taylor Wimpey
employees. You may recall that in last year’s Annual Report and Accounts,
I advised that during 2016 we implemented several changes to our customer
service approach. These included enhancing the structure of our customer
service teams, through the creation of a new role of Head of Customer
Service in each of our 24 regional businesses, which has helped our overall
performance. During 2017, we worked hard throughout the business to instil
Strategic Report 7
and embed these new initiatives into our standard operating processes and
culture. It is here that I would like to take the opportunity to thank each and
every employee on behalf of our shareholders and the Board for all their efforts
in this area. I have been impressed by the hard work and commitment shown
by all of our teams. While we recognise that we don’t get everything right and
there is still, of course, more work to do, it has been very pleasing to see a
significant improvement in our customer satisfaction scores in recent months,
which validates the investments and efforts we have made into enhancements
in this area. We will be prioritising further improvements in customer service
in 2018.
It is, however, equally, if not more important, to acknowledge, reflect on and
address situations where we have not always got it right. Following concern
expressed by some customers, during 2017 we carried out a review of
historic lease structures and, in particular, ten-year doubling ground rent
clauses, which we had stopped using on new developments from late 2011.
Whilst Taylor Wimpey implemented these leases in good faith and the terms
were clearly set out in the relevant leases, it was clear from our review that
the impact of these doubling rent review clauses was causing some of
our customers understandable concern, particularly from a mortgageability
and saleability perspective. We acknowledge that the introduction of these
doubling clauses in 2007 was not consistent with our high standards of
customer service and we have quite rightly apologised to customers for
the unintended consequences and concern that we caused. In our Annual
General Meeting trading update of April 2017, we announced that we
would make a provision, before tax, of £130 million in the first half accounts
to allow us to put things right for our affected customers. At the same time,
we implemented, on a voluntary basis, the Taylor Wimpey Ground Rent
Review Assistance Scheme, to enable us to work with the relevant freeholders
who own the leases, in order to convert our customers’ ten-year doubling
ground rent clauses to leases based on RPI, should they elect to participate
in the Scheme.
As part of our review, we also stopped selling houses on a leasehold basis
on our new developments with effect from the start of 2017, other than in
exceptional circumstances such as where Taylor Wimpey does not own
the site on a freehold basis.
Charities and local community groups
We believe that as a responsible business, we must actively contribute to
helping others whether financially, with our time, energy or expertise. We
remain highly committed to supporting charities and local community groups
in the areas in which we operate, and I am extremely proud to see the
personal commitments our employees continue to make to our charitable
partners. We aim to be an aspirational housebuilding brand that is recognised
for the good that is given back to our local communities by both our
employees and our business as a whole. Our primary goal is to genuinely
improve the position of the causes that we support. The other goal is to
engage our employees in these activities as we recognise it is good for their
personal development and self-awareness. During 2017, it was pleasing to
see many of our employees participate in our volunteering scheme, which
allows employees to take paid time off to volunteer at one of our national
charities. We hope to see an increasing number take advantage of this
opportunity in 2018.
Total shareholder return (TSR)
3,000
2,500
2,000
1,500
)
d
e
s
a
b
e
r
(
)
£
(
1,000
l
e
u
a
V
500
0
1 Jan
2009
31 Dec
2009
31 Dec
2010
31 Dec
2011
31 Dec
2012
31 Dec
2013
31 Dec
2014
31 Dec
2015
31 Dec
2016
31 Dec
2017
Taylor Wimpey
Housebuilders Index
FTSE 350
This graph shows the value of £100 invested in Taylor Wimpey plc on 1 January 2009 compared with the value of £100 invested in the FTSE 350 and in the average of the Housebuilder Index
introduced for the 2012 Performance Share Plan awards onwards and as varied subsequently for the 2014 and 2016 awards.
Read more about TSR on page 85.
taylorwimpey.co.uk
8
Chairman’s Statement continued
In addition to our planning obligations during 2017, we donated and
fundraised over £1 million for registered charities (2016: over £875k).
In addition, a further c.£90k was donated to other organisations (2016:
c.£159k), sponsoring community events, local sports teams, social clubs and
many other initiatives. More information can be found within our Sustainability
Report 2017 which will be available on our website in March 2018.
Dividends
A key part of our investment proposition is our commitment to a reliable
dividend stream for our investors through the housing market cycle.
Subject to shareholder approval each year, the Company will pay an ordinary
dividend of approximately 5% of Group net assets which will be at least
£150 million in dividends per annum. This is intended to provide a reliable
minimum annual return to shareholders throughout the cycle. This Ordinary
Dividend Policy was subject to prudent and comprehensive stress testing
against various downside scenarios, which also included a reduction of 20%
in average selling prices and a 30% reduction in volumes.
The payment of ordinary dividends will continue to be supplemented by
additional significant special dividends at appropriate times in the cycle.
Our Special Dividend Policy will pay out to shareholders the free cash
generated by the Group after land investment, all working capital, taxation
and other cash requirements of the business in executing our strategy in
the medium term, and once the Group’s ordinary dividends have been met.
Subject to shareholder approval the 2017 final ordinary dividend of c.2.44
pence per share will be paid on 18 May 2018 to shareholders on the register
at the close of business on 6 April 2018 (2016 final dividend: 2.29 pence
per share). In combination with the interim dividend of 2.30 pence per share
(2016 interim dividend: 0.53 pence per share) this gives a total ordinary
dividend for the year of c.4.74 pence per share (2016 ordinary dividend:
2.82 pence per share).
This dividend will be paid as a cash dividend, and shareholders are once again
being offered the opportunity to reinvest all of their ordinary dividend under the
Dividend Re-Investment Plan (DRIP), details of which are available from our
Registrar and on our website. Elections to join the Plan must reach the
Registrar by 26 April 2018 in order to be effective for this dividend. Further
details can be found on our website www.taylorwimpey.co.uk/corporate
In addition, on 14 July 2017, we returned £300.5 million to shareholders
by way of a special dividend, equating to 9.2 pence per ordinary share.
As previously announced in August 2017 we intend to return c.£340 million
to shareholders in July 2018, equating to 10.4 pence per ordinary share,
subject to shareholder approval at the Annual General Meeting (AGM). This is
proposed to be paid on 13 July 2018 as a cash dividend to all shareholders
on the register at close of business on 1 June 2018. Shareholders will be
offered the opportunity to reinvest all of their 2018 special cash dividend under
the DRIP, for which elections to join the Plan must reach the Registrar by
22 June 2018.
The Board confirms its intention to keep the mechanics of how the Company
will pay special dividends, including the merits of undertaking a share buyback
at some point in the future should it become appropriate to do so, under
regular review.
“ Corporate governance is embedded
at every level within the business and
is a reflection of our core values and
culture, policies, and relationships
with all our stakeholders.”
Taylor Wimpey plc Annual Report and Accounts 2017
Corporate Governance
We are and remain committed to good corporate governance and believe
that integrity and transparency are key to attaining this. Corporate governance
is embedded at every level within the business and is a reflection of our core
values and culture, policies, and relationships with all of our stakeholders.
A key part of good corporate governance is ensuring the Board which
governs has the necessary balance and skills which are both relevant and
complementary, and can benefit the Board and the business with their
experience, background and diversity. More information about each Director
can be found within the biographies on pages 46 and 47. I was delighted to
announce in January that after a rigorous process, we appointed Gwyn Burr
to the Board as an Independent Non-Executive Director, with effect from
1 February 2018. Gwyn has excellent and relevant experience gained from
both her previous executive experience, primarily focused on customer
service, and also from her more recent non-executive roles and we very much
look forward to working with her. We also announced that Rob Rowley will
stand down from the Board following the AGM on 26 April 2018. I would like
to again express both my and the Board’s gratitude for Rob’s long and valued
contribution to the Board over the past eight years, including both as the
Company’s Senior Independent Director and as Chair of the Audit Committee.
Dame Kate Barker will succeed Rob as the Board’s Senior Independent
Director, following the AGM, and as planned, Humphrey Singer succeeded
Rob as the Chairman of the Audit Committee in January 2018.
The annual Board Evaluation is an important exercise and one that your
Board as a whole and individually takes very seriously. In line with the UK
Governance Code, we ensure that the Evaluation is externally facilitated at
least once every three years, and is conducted internally in intervening years
and formally facilitated by myself and the Company Secretary. The 2017
Evaluation was externally facilitated by Manchester Square Partners (MSP)
and I am pleased to report that the outcome of the review concluded that the
Board is still functioning well, with a high degree of mutual trust, respect and
integrity whilst being open, straight-talking and challenging in nature. It was
also pleasing to note that MSP found that the Board operated with first class
governance. There were inevitably some areas for improvement and additional
focus and these are already being addressed by the Board. Further details of
the outcome of the Evaluation and how it was conducted are set out in the
Corporate Governance section of this report on page 61.
I would also like to touch on executive remuneration: last year, following
our usual constructive consultation with our shareholders, our Remuneration
Policy received very strong support at the 2017 AGM, for which we are very
grateful. This enabled the Company, via the Remuneration Committee, to take
into account a number of views and perspectives to put in place an
appropriate remuneration framework having regard to a number of factors
including: the overall economic and market environment as well as the
Company’s strategy and targets.
During 2017, we published our first Modern Slavery Statement in line with
statutory requirements, and we will publish our second statement in 2018.
We strongly support the legislation and do not tolerate any form of slavery,
forced labour or human trafficking in our business or in our supply chain. I am
pleased to confirm that our risk assessment found that in general the risk of
modern slavery occurring in our business or supply chain is low. However,
there are some higher risk areas in the supply chain and we will be engaging
with the suppliers in these areas to make sure they have the right policies and
strategies in place to mitigate these risks. We have a Modern Slavery Act
working group, chaired by our Group Legal Director and Company Secretary,
which oversees our approach.
Strategic Report 9
Board diversity
Group Management Team
Employee diversity
3
3
1,639
7
7
3,544
Note: Includes Gwyn Burr who joined on 1 February 2018.
Read more about our Board of Directors
on pages 46 and 47.
Read more about our Group Management
Team on page 17.
Note: As at 31 December 2017.
Male
Female
People
We believe in investing in our people and in developing our internal ‘bench’
and future pipeline of talent as this is key to ensuring their future success and,
in turn, that of Taylor Wimpey. The Nomination Committee plays a key role in
the oversight of our progress in this regard. An important part of our approach
is a continued investment in the skills and development of our employees
across the business, as we work to ensure that Taylor Wimpey attracts and
retains the best people in the industry through the cycle. It was therefore
particularly pleasing to be ranked as one of Glassdoor’s ‘Top 20 Best
Companies To Work For’ in the UK. This is based solely on employee and
former employee feedback and is therefore an important external benchmark.
In 2017, we undertook an employee engagement survey with an
encouragingly high participation rate of 72%. We were impressed with the
overall results and very high level of engagement across the whole business.
We were pleased to see improved scores in customer service, flexible
working, as well as training and benefits package. Perhaps more importantly,
it also identified areas, such as better collaboration between some functions,
where further work is needed and we will of course prioritise these areas
in 2018.
As part of the Government’s welcomed employee voice initiative, during
2017 we established our National Employee Forum (NEF) with elected
representatives from across the business. The main objective of the NEF,
which has already met on two occasions, will be to gather employee feedback
on individual topics important to the business and share it with the relevant
members of the senior management team – and of course vice versa. The
NEF will build upon the existing regional Employee Consultative Committee
structure to enhance the dialogue between the Board, Group Management
Team and our employees. Kate Barker, as Chairman of the Remuneration
Committee, and I will be attending the Forum from time to time, in addition to
the Group Legal Director and Company Secretary, the Group HR Director
and other senior management.
Diversity
We value diversity in every sense at Taylor Wimpey and aim to be an inclusive
employer attracting, retaining and promoting employees from all backgrounds.
This contributes to creativity and innovation in our workforce, widens our talent
pool, boosts employee engagement, helps us to better reflect our customer
base and ultimately improves our decision-making. Whilst we have made
great strides since setting up our Diversity and Inclusivity Steering Committee,
we recognise there is more to do and we are committed to improving further.
All our senior leaders have attended our Open Minds diversity training course
and from 2018, we will extend this further and all new employees will
complete an e-learning module on diversity and inclusion as part of their
induction. During 2017 we also held networking sessions for senior women in
our business to meet with Group Management Team members and share
experiences and insights.
Outlook
We are confident that we can adapt to changing market conditions from a
position of strength and perform well, underpinning our value proposition to
shareholders and other stakeholders. Reflecting on the good progress made
in 2017 and the lessons learnt, the Taylor Wimpey team is looking forward to
the challenges and opportunities that 2018 will bring.
I have already thanked all of our employees earlier in this Statement, so I
would like to end by thanking all of our customers, shareholders and other
stakeholders for their ongoing support.
Kevin Beeston
Chairman
taylorwimpey.co.uk
10
Our UK Market
Understanding
our markets
Taking a proactive approach to managing through the cycle
EU Referendum implications
Despite the initial concerns in the immediate
aftermath of the Referendum, we have continued
to experience robust customer demand in the
period since the UK’s vote to leave the European
Union (EU) in 2016. Our initial reaction to the
Referendum result in 2016 was to reflect our
caution and uncertainty on its impact, by
increasing our required investment margin and
return expectations on new land acquisitions.
There has, however, been no negative
impact to the land market following the
EU Referendum result.
We have experienced no material change in build
cost inflation patterns since the EU Referendum
result. Throughout 2017 there were increases in
underlying build cost (excluding house type mix
impact) of c. 3.5%, largely due to continued
pressure on resources to deliver the higher level
of homebuilding. We do not foresee any material
change in either the supply or pricing of labour and
materials in 2018, and forecast another year of
overall build cost inflation of around 3-4%.
Risk
A
B C
Our place in the UK market
New housebuilding accounts for 10-15% of
the total housing market. We are one of the
largest residential developers in the UK,
building nearly 15k homes in 2017 across
Scotland, England and Wales.
Our key market drivers
We operate in a cyclical market, where
factors such as customer confidence and
mortgage cost inevitably have a direct
impact on the short term outlook. A key part
of managing through the cycle is the need
to continually monitor market conditions
using external indicators. These help us
assess where we are in the cycle and, whilst
we will not always get this right, we can
adapt our tactics accordingly.
UK market outlook
We have been encouraged by early trading
patterns at the start of the year and despite
some wider macroeconomic uncertainty,
customer confidence remains robust and
market fundamentals are solid.
Customers continue to benefit from a
competitive mortgage market and
continued low interest rates. Help to Buy is
a key differentiator for new build housing
and remains popular with customers,
enabling them to take the first step onto or
move up the housing ladder. Customer
demand and pricing in Central London
remain stable.
How we are positioned
We have made a good start to 2018 and
are encouraged by solid levels of demand
coming into the spring selling season. The
fundamentals for new build housing in the
UK remain good with strong customer
confidence in our core geographies.
Whilst we have seen no adverse impact on
trading, we are conscious of the wider
political and economic risks.
We are confident that our well-capitalised
balance sheet together with our high-quality
landbank with outlets located in places
where demand is high and where people
want to live provides the flexibility and
resilience needed to manage all types of
market conditions through the cycle.
Taylor Wimpey plc Annual Report and Accounts 2017
Government policy and
planning
Both the 2017 Budget and the Housing White
Paper in February 2017 recognised the
importance of housing to the UK and the part all
housebuilders can play in the economy. We
broadly welcome the measures set out in the
White Paper which are balanced and aim to
sustainably increase the delivery of much-
needed homes.
We welcome the commissioning of the
independent Hackitt Review on building
regulations and fire safety, following the tragic
fire at Grenfell Tower in June 2017. We look
forward to working positively with Government
and other agencies to ensure that the outcomes
are effective and appropriate for the long term.
Help to Buy remains a popular purchasing tool
for our customers, and the new build housing
market more widely. The Government
announcement in the Autumn regarding further
funding for Help to Buy provided clarity for the
period up to 2021, although we still await an
update from the Government on the future of the
Help to Buy scheme in the period after 2021. We
reflect and account for the current uncertainty on
the long term future of Help to Buy within our
business planning.
Planning has historically been a constraint on
the ability of the industry to build a sufficient
number of new homes. We believe that the
land market and planning environment have
significantly changed over recent years. Whilst
the planning process remains complex and is
often slow, there is better clarity in many local
authority areas and a better supply of suitable
land that has good planning prospects with
reduced competition.
Risk
A
Read more about our approach to risk
management on pages 36 to 41.
Strategic Report 11
Mortgage availability and affordability
Mortgage availability and affordability in the UK is a key dynamic for the
housebuilding sector and our customers.
Despite a modest increase in the Bank of England base rate of 0.25% in
November 2017, the first increase in the last decade, borrowing costs remain
at a low level when considered in a long term historical context. The availability
of mortgage credit remains good with a healthy level of competition amongst
lenders. We believe the financial attraction of purchasing a house relative to
rental costs (of an equivalent house) remains compelling.
Commentary from the Bank of England after the November 2017 base rate
increase indicated its expectation of only modest further increases in the
coming years, so we do not currently envisage any material change in the
overall conditions in the mortgage market in the near term.
The tighter lending requirements, introduced in 2014 as part of the Mortgage
Market Review, continued to help ensure that monthly payments remained
affordable, aiding the stability of the market.
Wider housing market
There continues to be a fundamental demand and supply imbalance in new
build housing, with the Government stating in the 2017 Budget its intent to
increase new supply in England to 300k by the mid 2020s.
Through 2017, demand for new build housing has remained robust
supported by healthy employment trends, a competitive mortgage market
and the Government’s Help to Buy scheme. The Help to Buy scheme
continues to be a differentiator for new build housing, and remains a useful
and popular product for our customers. Help to Buy was used in c.43% of
total sales in 2017.
Overall housing transactions in the second hand market remained more
subdued on average over the year.
Whilst there were some regional variations, we saw generally strong demand
throughout 2017 and the UK housing market remained resilient. Trading in
Central London was stable, with customer confidence improving through the
year, while the outer London market remained robust.
Risk
B
Risk
A
B C E
Value of approvals and lending secured on dwellings
Quarterly house price inflation
n
o
i
l
l
i
m
£
25,000
20,000
15,000
10,000
5,000
0
Jan 2016
Dec 2016
Dec 2017
Value of approvals for lending secured on dwellings
(house purchase) (seasonally adjusted)
Value of gross lending secured on dwellings (seasonally adjusted)
First time buyer affordability measure
Mortgage payments as % of mean take home pay
y
a
p
e
m
o
h
e
k
a
t
f
o
%
100%
80%
60%
40%
20%
0
London
UK
Interest Rate
Source: Bank of England
Source: Nationwide / Bank of England
%
e
t
a
r
t
s
e
r
e
t
n
I
16
14
12
10
8
6
4
2
0
450
400
350
300
250
200
150
100
50
0
30
25
20
15
10
5
0
-5
-10
-15
-20
e
g
n
a
h
c
%
)
0
0
1
=
3
9
9
1
(
x
e
d
n
i
e
c
i
r
p
e
s
u
o
H
93
95
97
99
01
03
05
07
09
11
13
15
17
Index Q1 1993=100
Year % change
Source: Nationwide
taylorwimpey.co.uk
12
Chief Executive’s Statement
Pete Redfern
Chief Executive
“ 2017 has been another strong year
for Taylor Wimpey as we made good
progress towards our medium term
financial targets and improved our
operational performance.”
Demonstrating excellence through improved
operational efficiency and discipline
Developing and nurturing stakeholder relationships
which play a key role in our business success
Driving financial performance in the right way to
deliver sustainable shareholder returns
Taylor Wimpey plc Annual Report and Accounts 2017
Continuing to drive
value from the
business for all
our stakeholders
2017 was another strong year for Taylor Wimpey and we enter 2018 in a
good position with positive forward momentum. We have been encouraged
by early trading patterns at the start of the year and despite some wider
macroeconomic uncertainty, consumer confidence remains robust and
market fundamentals are solid.
We grew volumes to nearly 15,000 homes during the year and are focused
on delivering much-needed homes across the UK to the highest quality and
standard. Importantly, we are pleased to see that our investment in customer
service has resulted in a notable improvement in our customer
satisfaction scores.
Group financial summary
Group revenue increased by 7.9% to £3,965.2 million in 2017
(2016: £3,676.2 million) from 14,688 completions (2016: 14,112). The
increase was driven by increased completions and improved selling prices
in the UK. We delivered a gross profit for the year of £1,033.0 million
(2016: £939.9 million), 9.9% up on the prior year and a profit, before
exceptional items, for the year of £660.3 million (2016: £589.7 million),
12.0% up on the prior year due to the improvement in the operational
result, lower net finance costs and lower effective tax rate. Profit for the year
was £555.3 million (2016: £589.3 million). This represents improved underlying
trading offset by the exceptional provision recognised in the year in relation to
the leasehold review. More information on our financial performance can be
found within our Group Financial Review on pages 42 to 45.
UK operational performance summary
Whilst there were some regional variations, we saw generally strong demand
throughout 2017 and the UK housing market remained resilient. Trading in
Central London was stable, with customer confidence improving through the
year, while the outer London market remained robust. We traded on an
average of eight Central London schemes in 2017, of which the average size
was 118 plots.
In 2017, total UK home completions (including joint ventures) increased by
4.8% to 14,541 (2016: 13,881). During 2017, we delivered 2,809 affordable
homes, including joint ventures, (2016: 2,690), equating to 19.3% of total
completions (2016: 19.4%). Our net private reservation rate for the year was
0.77 homes per outlet per week (2016: 0.72).
Private cancellation rates for the year remained low at 13% (2016: 13%).
Average selling prices on private completions increased by 3.5% to £296k
(2016: £286k), once again benefiting from our focus on better quality locations
and the improvement of specification in line with product and location. Our
total average selling price increased by 3.5% to £264k (2016: £255k). We
estimate that market-led house price growth for our regional mix was c.4% in
the 12 months to 31 December 2017 (2016: 5%).
Strategic Report 13
First time buyers accounted for 41% of total sales in 2017 (2016: 38%).
Investor sales continued to be at a very low level of c.3% (2016: 3%).
More information on our medium term targets and how they link through to
our long term strategy can be found on pages 20 and 21.
During 2017, approximately 43% of total sales used the Help to Buy scheme,
and we worked with 6,069 households to take the first step to home
ownership or to move up the housing ladder (2016: 39% and 5,393).
Approximately 77% of sales through Help to Buy in 2017 were to first time
buyers (2016: 77%). During the year 27% of sales in the London market used
Help to Buy London, which launched in February 2016.
During 2017, we opened 109 new high-quality outlets (2016: 105) in
locations in villages, towns and cities where people want to live, and
which are supported by strong demographics and local economies.
As at 31 December 2017 we were operating from 278 outlets
(31 December 2016: 285).
As at 31 December 2017 our order book represented 7,136 homes
(31 December 2016: 7,567 homes) with a value of £1,628 million
(31 December 2016: £1,682 million), excluding joint ventures. The order
book remains strong, and has fallen slightly year on year, as we increased
the pace of production throughout 2017.
Group strategy and returns
We believe that a long term view and a proactive approach are needed to
deliver value through the housing cycle and in the wider environment in
which we operate. Key to this approach is our management of risk,
which protects shareholder value whilst still enabling us to take advantage
of opportunities and drive further growth from the business.
We have remained disciplined in building and optimising a short term
landbank of c.75k plots, of which 52% is strategically sourced, in the relatively
balanced land market we have experienced since 2011. We have added in
excess of 57k potential plots to the strategic pipeline since 2013, at a reduced
cost and which, importantly, continues to give us increased flexibility and
choices. Given this strength and quality of the landbank, we are focused on
delivering value and maximising returns from our investments. We believe we
can continue to drive further value from our landbank and our business model,
as we focus on our customers, delivery and efficiency and also increased
cash generation.
We believe that financial results must be achieved in the right way and as a
responsible business we acknowledge both our obligations to the
communities we operate in and the opportunity to work with our stakeholders
to create value together. We will be hosting a Strategy Day in May 2018,
where we will update the market on our views of long term strategy.
Medium term targets
Our targets are set to be stretching, and we are pleased to have made good
progress against both our financial targets and operational metrics, since we
set out our medium term targets in 2016.
These targets sit within our long term strategy, ensuring we are focused on
operational efficiency as well as strategic investments. We believe these to be
the best medium term measures. They target further improvement across
three key areas in the period from 2016 to 2018:
– An average annual return on net operating assets** of 30%
– An average operating profit* margin of c.22%
– A total of £1.3 billion of dividends to be paid in cash to shareholders over
the period
With a total dividend of c.£500 million to be paid in 2018, subject to
shareholder approvals, the Group is on track to meet its target to pay
£1.3 billion in dividends in total for the 2016-18 period. The return on net
operating assets** of 32.4% in 2017 is above the target level for another year
and as such we expect to meet or exceed our return on net operating
assets** target. We continue to deliver further expansion in the operating
profit* margin, although as we have noted before, the target remains a
challenging one in the time frame set out.
Dividends
We are committed to providing a reliable dividend stream for our investors
through the cycle. Our dividend strategy includes sustaining a significant
ordinary dividend to shareholders on an annual basis, including through a
‘normal downturn’, combined with a special dividend to be paid at appropriate
times in the cycle. This enables shareholders to benefit from the success of
our strategy at all stages of the cycle.
In 2017 shareholders received total dividends (including ordinary and special
dividends) of £451 million (or 13.8 pence per share).
As previously announced, and subject to shareholder approval at the 2018
Annual General Meeting scheduled for 26 April 2018, we intend to pay
c.£340 million to shareholders in July 2018 by way of a special dividend.
Accordingly, subject to shareholder approval at the 2018 Annual General
Meeting, in 2018 shareholders will receive a total dividend of c.£500 million
(c.15.3 pence per share), comprising an ordinary dividend of c.£160 million
(c.4.9 pence per share) and a special dividend of c.£340 million (10.4 pence
per share).
Our people
I would like to take this opportunity to reiterate Kevin’s words of thanks to the
teams and the individuals across our business. Individually, and working
together, our people are an important competitive advantage. I believe we
have the best people and culture in the industry. I am particularly proud of the
personal and professional commitments our employees make towards our
charity partners and their local communities. A great example of this is our
Taylor Wimpey Challenge, which is now into its fourth year. To date, our
employees from across all of our regional businesses and functions have
participated and together have raised more than £171k for the Youth
Adventure Trust and other charities. More information can be found on our
case study on page 34.
A key aspiration, and goal, for the Group Management Team is to make
Taylor Wimpey the employer of choice and establish a culture where
individuals from all backgrounds can reach their full potential. We were
pleased to have been named in the 'Top 20 Places To Work' in the UK, by
Glassdoor, as voted for by employees, the only commercial housebuilder to
make the list.
Our employee engagement survey, conducted in 2017, highlighted key
strengths but more importantly has highlighted areas for improvement and
these will be a key area of focus for 2018. We aim to do this annually so we
can measure performance. More information can be found on page 22 and
throughout this report.
Definitions can be found in the Group Financial Review on page 43.
taylorwimpey.co.uk
14
Chief Executive’s Statement continued
Customers
Customer service continues to be a key priority for all employees at Taylor
Wimpey and is integral to our vision for the future of the business. We aim to
put the needs of our customers at the heart of our decision-making. During
2017 we built on the early success of our new customer service approach,
which focuses on getting it right first time and improving the clarity and
openness of our communication with customers, and have continued to
make good progress implementing this approach across the business. Whilst
we recognise there is more to do, we are particularly pleased to see a positive
trend in customer satisfaction feedback, with scores in the last six months
averaging over 90%. Internally, we are pleased to see the approach
embedding well in the business, where 95% of Taylor Wimpey employees
believe that Taylor Wimpey aims to deliver the best customer service in the
homebuilding industry, based on our employee survey. In an industry that is
growing at pace, delivery of quality alongside volume growth is not always
easy and it has been a priority to ensure that our people have the right
resources, and that we are clear that we prioritise delivering the right quality
over short term financial results.
During 2017, we achieved a customer satisfaction score of 88% (2016: 85%),
reflecting the number of customers who were satisfied with the quality of their
Taylor Wimpey home and 89% of customers would recommend Taylor
Wimpey to a friend, based on the Home Builders Federation (HBF) survey.
The survey is conducted by the National House-Building Council (NHBC) at
eight weeks after completion to monitor our performance and identify areas
for improvement.
As we have previously announced and as Kevin sets out in more detail on
page 7, we have made good progress in securing agreements with
freeholders representing over 90% of historic leases with a ten-year doubling
ground rent clause, to enable our customers to convert to an RPI-based
structure, should they elect to participate in our assistance scheme. We
continue to work with the remaining freeholders to address the small number
of remaining leases. A provision of £130 million, before tax, was recorded as
an exceptional item in the H1 2017 accounts as a result of the leasehold
review, and remains unchanged in the full year 2017 accounts.
Research and development
Research and development is a key area of focus as we seek to understand
what our future customers will want and need. Our Project 2020 design
competition in partnership with the Royal Institute of British Architects (RIBA)
attracted over 100 entries from 14 different countries. The two-stage
competition invited architects from across the globe to design new house type
typologies with the brief of being innovative, pragmatic, cost effective, capable
of high-quality mass production and which would appeal to future customers
and their changing needs.
The ‘Infinite House’ designed by OpenStudio Architects, based in London,
was chosen and will be built into a prototype in 2018. We selected a design
that can be easily adapted both internally and externally to suit different sites
and customer demographics. We are using the winning design to create a
series of prototype homes on three of our developments. We achieved
planning permission for the sites during 2017 and construction will begin in
2018. More information can be found within our Sustainability Report 2017.
Demonstrating excellence through improved operational efficiency
and discipline
We continue to improve our business through our investment in people, product, processes and systems
through research and development and embedding improvements to our customer service processes.
Research and development
Research and development will help us to meet the changing needs
and aspirations of our customers. By exploring new approaches and
technologies we can also improve efficiency in construction and reduce
the environmental impact of the homes we build, helping to future-proof
our business.
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 the right point in
the cycle, is an important driver of value. We have remained disciplined
since we re-entered the land market in 2011 and have built a short term
landbank of c.75k plots, of which 52% is strategically sourced. Given this
strength and quality of the landbank, we are focused on delivering value
and maximising returns from our investments.
Build
We work with selected subcontractors 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.
Our health, safety and environmental management system covers
all our business activities. It includes procedures and processes to keep
noise, dust and disturbance to a minimum on all our operational sites to
prevent pollution incidents and to protect the biodiversity of the
local environment.
Outlets
Our selling outlets are located in villages, towns and cities where people
want to live, and which are supported by strong demographics and
local economies.
Taylor Wimpey plc Annual Report and Accounts 2017
Strategic Report
15
Developing and nurturing stakeholder relationships which play a key role
in our business success
We work in partnership with a wide range of companies, organisations and individuals and aim to be the
partner of choice. We strive to be an open, transparent and responsive company for all our stakeholders
and to work with them to understand and address the wider social, economic and environmental impacts
resulting from our operations. We believe that our strategy will differentiate us as a company to buy a home
from, partner and engage with, work for and invest in.
Our employees
Our employees are one of our greatest assets
and a key competitive advantage. They are
crucial to executing our strategy and driving our
success. We continuously strive to improve and
make Taylor Wimpey a great place to work and
an employer of choice.
Our customers
Regardless of the role that any Taylor Wimpey
employee fulfils in the business, we all contribute
to the final result for 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 and
enjoyable as possible for our customers.
Our partners
We work in partnership with a wide range of
companies and aim to be a partner of choice.
This includes landowners (who we buy land from
or develop land with), delivery partners (who we
work with to manage our land and deliver our
developments), our supply chain (who provide
the materials we use) and the subcontractors
who work on our sites.
Our investors
We are a value-driven business with a long term
sustainable focus. This defines our investment
case and, we believe, differentiates us.
Our communities
We are committed to working with local people
and stakeholders throughout the planning
process. We engage with local communities
on every development.
More information on how we
engage with our stakeholders
can be found on page 51. More
information on the KPIs which
apply to each group can be
found on pages 20 and 21.
taylorwimpey.co.uk
16
Chief Executive’s Statement continued
Driving financial performance in the right way to deliver sustainable
shareholder returns
Total dividend paid (£m) in 2017
£450.5m
Operating profit* margin (%) in 2017
21.2%
Return on net operating assets** (%)
in 2017
32.4%
500
400
300
200
100
0
25
20
15
10
5
0
35
30
25
20
15
10
5
0
Taylor Wimpey plc Annual Report and Accounts 2017
2012
2013
2014
2015
2016
2017
2012
2013
2014
2015
2016
2017
2012
2013
2014
2015
2016
2017
Strategic Report 17
The Group Management Team (GMT)
Pete Redfern
Chief Executive
Ryan Mangold
Group Finance Director
James Jordan
Group Legal Director
and Company Secretary
Anne Billson-Ross
Group Human
Resources Director
Jennie Daly
Group Operations
Director
Responsibilities
As head of the GMT, my
responsibilities include
key strategic and
operational decisions,
sustainability, customer
service and health
and safety.
Responsibilities
Ryan’s role covers
all areas of finance,
including tax, treasury
and managing the
Group’s defined benefit
pension scheme, as well
as overall responsibility for
our commercial and
information technology
functions. Ryan
also plays an active
part in our investor
relations programme.
Responsibilities
James is responsible
for our Company
Secretariat department,
as well as overseeing
all legal matters from
plot conveyancing
to landbuying.
Responsibilities
Anne has responsibility
for all areas of human
resources, including
recruitment, benefits,
talent and performance
management.
Responsibilities
Jennie oversees our land,
planning, design and
technical, production and
supply chain functions, in
addition to managing the
Taylor Wimpey Logistics
business. As part of her
land and planning role,
Jennie also leads our
response to the evolving
UK planning system.
Nigel Holland
Divisional Chairman,
Central and South West
Chris Carney
Divisional Chairman,
London and South East
Daniel McGowan
Divisional Chairman,
North
Responsibilities
Nigel oversees our
Central and South West
Division, covering our
East Midlands, South
Midlands, East Anglia,
Oxfordshire, South
Wales, Bristol, Southern
Counties and Exeter
regional businesses and
our Spanish business.
Responsibilities
Chris oversees our
London and South
East Division, which
includes our East
London, Central London,
North Thames, South
East, South Thames and
West London regional
businesses.
Responsibilities
Daniel oversees our
North Division which
covers our East and
West Scotland, North
East, North Yorkshire,
Yorkshire, North West,
Manchester, North
Midlands, Midlands
and West Midlands
regional businesses.
Ingrid Osborne
Divisional Managing
Director, Central and East
London
Lee Bishop
Major Developments
Director
Responsibilities
Ingrid oversees the
Central London and
East London regional
businesses and also
has responsibility
for the integrated
London strategy.
Responsibilities
Lee manages our
Major Developments
business which has
been specifically created
to secure and project
manage large scale
land opportunities.
taylorwimpey.co.uk
Following the introduction of a number of changes to our customer service
approach in early 2016, we have been particularly pleased to see a significant
improvement in customer satisfaction, averaging a score of over 90% in the
last six months. Ensuring that we get the product quality and service right for
our customers is a key priority for us.
As previously announced, we will pay a total dividend in 2018 of c.£500
million, subject to shareholder approvals, and confirm our intention
to make further material capital returns in 2019 and beyond.
Whilst we have seen no adverse impact on trading, we are conscious of the
wider political and economic risks. We are confident that our well-capitalised
balance sheet together with our high-quality landbank with outlets located in
places where demand is high and where people want to live provides the
flexibility and resilience needed to manage all types of market conditions
through the cycle.
Pete Redfern
Chief Executive
18
Chief Executive’s Statement continued
Health and safety
The health and safety of individuals on our sites will always be our number one
priority and it continues to be the first item discussed at every plc and regional
board meeting. It remains one of the highest rated questions in our annual
employee engagement survey, with 98% of employees believing Taylor
Wimpey takes health and safety in the workplace seriously.
Following the tragic fire at Grenfell Tower in London in June 2017, we
conducted an internal review into our current and historic developments,
working, as appropriate, with building owners, management companies,
independent fire safety experts and local fire and rescue services. On sites
where there are tall buildings with Aluminium Composite Material cladding,
we have sought advice from independent fire safety experts, and, where
required, have put in place additional measures to ensure that the buildings
are fully compliant with the Government’s guidance on interim fire safety
measures. We welcome the commissioning of the independent Hackitt
Review on building regulations and fire safety, and look forward to working
positively with Government and other agencies to ensure that the outcomes
are effective and appropriate for the long term.
UK current trading and outlook
We have made a good start to 2018 and are encouraged by solid levels of
demand coming into the spring selling season. The fundamentals for new
build housing in the UK remain good with strong customer confidence in
our core geographies.
Customers continue to benefit from a competitive mortgage market and
continued low interest rates. Help to Buy is a key differentiator for new build
housing and remains popular with customers, enabling them to take the first
step onto or move up the housing ladder. Customer demand and pricing in
Central London remain stable.
The net private sales rate for the year to date (w/e 18 February 2018) remains
high at 0.81, against a very strong comparator (2017 equivalent period: 0.91),
and remains in line with our expectations and plans for 2018.
As at 18 February 2018, we were c.47% forward sold for private completions
for 2018, with a total order book value of £1,968 million (2017 equivalent
period: £1,978 million), excluding joint ventures. This order book represents
8,415 homes (2017 equivalent period: 8,573). In Central London c.52% of
private completions for 2018 are forward sold, as at 18 February 2018 (2017
equivalent period: 58%). We prioritise getting outlets open efficiently and in the
right way for our customers. As at 18 February 2018, we are building on 97%
of our sites with implementable planning.
We expect underlying build cost increases during 2018 to be at a similar level
to 2017, at around 3-4%.
Taylor Wimpey plc Annual Report and Accounts 2017
Strategic Report Our Investment Case
Why we are different
19
Our strategy is differentiated by a long term focus on value and on achieving
both our financial and quality objectives sustainably in a cyclical environment.
We are a value-driven business, with a long term, sustainable focus.
Our focus remains on adding value and sustainable growth as we maximise
efficiency through operational excellence and discipline on our sites and
throughout our business.
We have a clear strategy and a strong focus on where we can add further
value to the business. In this way, we are confident that we can adapt to all
market conditions from a position of strength and perform well, underpinning
our value proposition to shareholders and other stakeholders.
We believe that financial results must be achieved in the right way and as a
responsible business we acknowledge both our obligations to the
communities we operate in and the opportunity to work with our stakeholders
to create value together.
Since setting out our strategy in 2011, we have made significant progress
towards our financial objectives. More information on our strategy, updated
targets and performance can be found on pages 16 and 20.
Today we have a strong landbank of c.75k plots underpinned by a strategic
pipeline of c.117k potential plots.
We will be hosting a Strategy Day in May 2018, where we will update the
market on our views of long term strategy.
1
2
3
Strategy set to manage through the cycle
The housing market is cyclical and so factors such as customer confidence and mortgage cost inevitably have a direct impact
on the short term outlook. We believe that a long term view and a proactive and flexible approach are needed to manage
through the cycle. Our strategy is built on this and so seeks to protect growth whilst mitigating future downside risk. This
applies to all areas of the business, from landbuying to our Dividend Policy.
Read more on pages 10 and 11.
High earnings quality with high margin driven by strong landbank
Steady growth has created a sustainable business focused on good-quality locations where people want to live.
We believe that quality of location is a key determinant of a home purchase and that this remains true through all
market conditions.
We have taken a very disciplined approach since we set out the strategy back in 2011. This applies to all areas from the returns
we expect to deliver from our sites through to the quality of those locations which we believe will differentiate us irrespective
of the cycle.
Read more on pages 24 and 25.
Quality business with further continuous operational improvement
We have always been clear that our quality measures are as important to us as our financial objectives and are key to the way
we run our business. We believe that these areas will become more important during this cycle, and will become an area of
clear differentiation for Taylor Wimpey and contribute to our long term success. We will maintain a firm focus on health and
safety, which will always be our non-negotiable top priority. We will continue to improve the business through our investment in
our people, product, processes and systems, through research and development and embedding improvements to our
customer service processes.
Read more on page 21.
Dual stream dividend underpins value
We are confident that the quality of our short term landbank, with the underpin of our significant strategic land pipeline,
combined with a high-quality balance sheet, will mean that we can continue to be cash generative through the cycle, enabling
us to sustain a significant ordinary dividend to shareholders on an annual basis, including through a ‘normal’ downturn. We will
also supplement this with special dividends at appropriate times in the cycle.
4 Read more on pages 8 and 13.
taylorwimpey.co.uk
20
Our Strategy
Working
together
Our brand focuses on who we are and what we want to be.
Vision:
Working together to build your dreams.
Mission:
To create great places to live and deliver excellent service which
inspires and delights our customers, our people and our shareholders.
Core values and cultural principles:
These are the Taylor Wimpey values that will help us achieve our vision
and mission, and the cultural principles that underpin them:
Be respectful, fair and
deliver together
– Communicate well
and collaborate
– Encourage and
embrace diversity
– Set clear professional
standards
– Develop good
Continuously improve
and innovate
– Be future-focused and
drive change
– Find solutions
and don’t accept
second best
– Make informed
decisions
Build a proud legacy
– Never compromise
on safety
– Be passionate about
customers
– Deliver right first time
and keep promises
– Commit to a
sustainable future
relations and behave
with integrity
– Be well planned and
organised
Read more inside
21
Our Business Model
Striving for
excellence at
every stage
This is based on a value cycle and each component of the value cycle
is important in order to achieve our strategy. The business model is
presented at UK level only as the majority of metrics are not
comparable in our Spanish business.
Our
people
Selecting
land
Managing the
planning and
community
engagement
process
Getting the
homebuilding
basics right
Delivering
customer
service
Optimising
value
Our strategy
Our strategy has been focused on driving sustainable value through
the housing cycle and delivering enhanced margins and returns, whilst
continuing to invest in the future profitability and quality of the business
for all stakeholders.
Read more inside
Creating
value across
the cycle
We believe that a long term view and a proactive
approach are needed to deliver value through the
housing cycle and in the wider environment in which
we operate. Key to this approach is our management
of risk, which protects shareholder value whilst still
enabling us to take advantage of opportunities and
drive further growth from the business. We believe that
financial results must be achieved in the right way and
as a responsible business we acknowledge both our
obligations to the communities we operate in and the
opportunity to work with our stakeholders to create
value together. We believe that we can deliver
enhanced value through the housing cycle and benefit
shareholders by driving the outputs of our strategy in
three main areas:
– Dividend Policy
– Medium term financial targets (2016-2018)
– Further continuous operational improvement
Our medium
term targets
(2016-2018)
An average annual
return on net operating
assets** of:
30%
An average operating
profit* margin of:
2017
performance
32.4%
c.22%
21.2%
Total dividends to be paid
in cash to shareholders
over the period:
£1.3bn
£450.5m
Our long term strategic goals:
– Deliver at least a 15% return on net operating
assets** through the housing cycle
– Earn top quartile operating profit* margin
– Grow net assets by 10% per annum on average
through the housing cycle (including returns
to shareholders)
We will be hosting a Strategy Day in May
2018, where we will update the market
on our views of long term strategy.
Definitions can be found in the Group Financial
Review on page 43.
For more details on our bonus schemes,
please see the Remuneration Committee Report
on page 74.
l
e
d
o
m
s
s
e
n
s
u
B
i
Our people
We aim to be the employer of choice in the
housebuilding industry.
What we do
We aim to be the employer of choice in the housebuilding industry,
attracting and retaining the best people to establish a culture that gives
all individuals the opportunity and support to develop to their full potential,
regardless of market conditions or their background.
Why is it important for all our stakeholders?
Individually, and by working together, our employees are crucial to driving
our success. We believe that having the right people with the right skills at
all levels in our organisation is critical to building a quality, sustainable
business and delivering our strategy.
How are we different?
We have a strategic approach to our human resources and have further
improved our approach to talent, succession, resourcing and reward, as
well as learning and development.
Our KPIs
14.0%
Voluntary
employee turnover
Risk link to KPI
D
Read more on
pages 22 and 23.
Progress in 2017
Having introduced
many new initiatives
and frameworks in
2016 including
enhanced flexible
benefits, new
development
programmes and
widening our hiring
channels, 2017 has
focused on ensuring
that these are
embedded and owned
by the business, and
seen as ‘business
as usual’.
Priorities for 2018
With the ongoing
challenge for skills and
resources in the
housebuilding sector
and the targets we
have set ourselves, we
will continue to focus
on how we effectively
attract, develop, and
retain our people so
that they are fully
engaged with the
company to deliver
both our short term
targets and longer term
strategic goals. In
doing so, we aspire to
become known in the
sector as the ‘employer
of choice’.
Our vision and mission: underpinned by our core values
and cultural principles.
Selecting land
We believe that the quality of our landbank is one of the key
strengths for Taylor Wimpey.
Managing the planning and community
engagement process
We aim to be the industry leader in managing the planning
and community engagement process.
What we do
Good-quality land with planning is the critical ‘raw material’ for our
business. The land that we acquire, together with the planning potential
we work with local authorities and communities to create, is key to
defining products, locations, target customer base and prices, and
underpins our confidence in our future financial performance.
Why is it important for all our stakeholders?
The value we create for our shareholders, communities and customers
all starts with land. We add value through planning, allowing us to
generate the best quality returns. Land is a scarce resource and we want
to make the best use of what is available, select the right sites and
transform them into vibrant and thriving communities.
How are we different?
We have a strong short term landbank at c.75k plots. Our investment
and scale are based on our view of land quality and capital risk in a
cyclical market. We are focused on selecting the right land and
developing it in a sustainable manner. We have one of the largest
strategic land pipelines in the sector with c.117k potential plots.
What we do
We aim to be the industry leader in all aspects of planning and to obtain
the right planning consents that enable us to respond to a changing
market, reflect the desires of our customer base and deliver the quality
homes we want to build, whilst meeting our financial objectives.
Why is it important for all our stakeholders?
We believe that local communities should have a say in development.
This enables us to achieve the right planning permissions and ensure our
developments are valued by their local communities.
How are we different?
We actively seek the views of local communities and other stakeholders.
We develop a tailored planning and community engagement strategy for
each site and work closely with communities and other local
stakeholders throughout all aspects of the planning process. We believe
that we have a responsibility to contribute to our local communities and
that this responsibility grows with our success.
Our KPIs
53%
Strategically sourced
completions
74,849
Owned and controlled
plots with planning or
resolution to grant
planning
Risk link to KPI
A E
Progress in 2017
Our future profitability
is underpinned by our
short term landbank
of c.75k plots with
52% sourced from
the strategic land
pipeline. In 2017,
53% of completions
were built on land
previously sourced
from the strategic
pipeline. We continue
to prioritise opening
our outlets as
efficiently as possible.
Read more on
pages 24 to 25.
Priorities for 2018
Continue to work with
land vendors,
communities and
local authorities to
convert land from the
strategic pipeline into
the short term
landbank. Continue to
work on ‘land light’
structures and active
management as we
continue to drive a
higher return on
capital employed.
Continue to focus on
selecting the right
land and developing it
in a sustainable
manner.
Our KPIs
7,863
Plots converted from
the strategic
land pipeline to the
short term landbank
Risk link to KPI
A
Read more on
pages 26 and 27.
Progress in 2017
In 2017, we contributed
£413 million to the local
communities in which
we build across the UK
via planning obligations,
providing, for example,
local infrastructure,
affordable homes,
public transport and
education facilities
(2016: £363 million).
As at 18 February
2018, we are building
on 97% of our sites
with implementable
planning.
Priorities for 2018
Continue to maintain
best practice
community
engagement.
Continue to
investigate ways to
engage with a wider
and more diverse
range of people
within the local
communities in
which we operate.
Stakeholder engagement: We strive to be an open, transparent and responsive company for all our stakeholders.
Getting the homebuilding basics right
Delivering customer service
Getting the basics right means effective processes are
consistently applied across our regional businesses.
We remain focused on and are committed to delivering an
excellent customer service to all of our customers at every
stage of their journey.
What we do
We work with selected subcontractors 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.
What we do
We want to ensure that we always deliver our homes to the quality
standard to which we aspire and that our service is always proactive,
positive and professional. Our customer vision is to help our customers
make our houses their homes.
Why is it important for all our stakeholders?
There is nothing more important to us than providing a safe place in
which our employees and subcontractors 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.
How are we different?
We believe that quality objectives matter as much as financial objectives.
Heath and safety is our non-negotiable top priority. Operating sustainably
is both the right thing to do and makes good business sense.
Why is it important for all our stakeholders?
Whilst we operate in a cyclical market, we strongly believe that a
customer-centric approach is needed throughout the cycle. We
recognise that buying a home is a major financial and emotional
investment and it is critical that we give our customers the
right experience.
How are we different?
We are in the process of embedding our new customer approach across
the business with our focus on three main areas: our culture, structure
and process.
Our KPIs
152
Annual Injury
Incidence Rate
Risk link to KPI
A C D F
Read more on
pages 28 to 31.
Priorities for 2018
Health and safety of
our people, the build
process and
customer service will
all continue to be of
critical focus for the
Group in 2018. We
also continue to
examine potential
improvements to the
build process whilst
also always
considering the
environmental
impacts of
our process.
Progress in 2017
Health and safety on
site remains a number
one priority and we
recorded a reduction
in the AIIR rate for the
year. We were
pleased to receive a
higher number of
NHBC Pride in the
Job Awards and
record improved
customer satisfaction
scores through
the year.
We reduced our
carbon emissions by
38.7% from 2013,
well ahead of our
target of 25%.
Our KPIs
88%
Customer satisfaction
Risk link to KPI
D E
F
KPI link to
remuneration
Read more on
pages 32 and 33.
Priorities for 2018
The key priority for
2018 will be to
continue to enhance
our customer service
offering, and we will
therefore be aiming
for a further increase
in our customer
satisfaction score and
aim to become a five
star housebuilder. In
2018, we will also
continue the rollout of
our customer portal
which improves the
information flow
between our
customer facing
teams and
homebuyers at every
stage of their contact
with Taylor Wimpey.
Progress in 2017
Having introduced a
number of customer
service initiatives in
recent years, such as
the newly created role
of Head of Customer
Service and the
Home Quality
Inspection (HQI), a
key focus in 2017 has
been embedding the
new processes and
delivering a consistent
standard. We are
pleased that during
2017 we received a
customer satisfaction
score of 88%, an
improvement on the
85% of last year and
just short of our target
of 90%. Whilst we
have made great
strides, we know
there is still
more to do.
Measuring our progress: Our KPIs are directly linked to our business model and strategy
Optimising value
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.
What we do
Our ability to constantly increase efficiency and tightly control costs is part
of the Taylor Wimpey culture and remains central to delivering enhanced
returns. This extends to and encompasses all aspects of our business as
we strive to optimise and capture value at every level from procurement
through to delivery. We also aim to add value to the charities we support
and to our wider partnerships.
Why is it important for all our stakeholders?
The discipline of continually reviewing and challenging ourselves to do more
ensures we do more than simply protect the business, we enhance the value.
We believe that as a responsible business we must actively contribute to
helping others, whether financially, with our time or with our expertise.
How are we different?
We have a relentless focus on value at every stage of our business model
and this is ingrained into the Taylor Wimpey mindset. We also balance our
desire to improve quality with a focus on making our assets work harder for
us and our stakeholders.
Priorities for 2018
Continue to actively review
every site and optimise
new sales outlets prior to
opening. Continue to
focus on building a strong
order book for the future.
Continued commitment to
supporting charities and
local community groups in
the areas in which we
operate.
Our KPIs
£69.3k
Contribution per
legal completion
49.6%
Forward order book
as a percentage
of completions
Risk link to KPI
A B C D E F
Read more on
pages 34 and 35.
Progress in 2017
In the year, we achieved a
1.7 percentage points
margin upside on
completions from land
acquired since 2009,
compared with the
expected margin at the
point of acquisition.
We further increased
contribution per
completion in 2017.
In total, during 2017 we
donated and fundraised
over £1 million for
registered charities (2016:
over £875k), in addition to
c.£90k for other
organisations, such as
scout groups and other
local community causes
(2016: c.£159k).
Building a
sustainable
business
We are one of the largest residential developers in the
UK, building nearly 15,000 homes in 2017. Our business
touches many lives.
For our customers, the home they buy from us is often the
biggest and most important purchase they will ever make.
It’s where they will spend most of their time, and where
many of the important events in their lives will happen. So
the way we design and build our homes and
developments can have a significant influence on our
customers’ future happiness and wellbeing. As a
responsible homebuilder we seek to design and build our
developments in the right way, so that they become
thriving, inclusive and sustainable communities for
generations to come.
We directly employ nearly 5,000 people, with many
thousands more on our sites and in our supply chain.
We aim to treat everyone we work with fairly and
provide support and development opportunities for our
employees so that they can enjoy a satisfying career
with Taylor Wimpey.
Reducing our impact on the environment is very important
to us, so we consider it at every stage of our operations. We
work with our partners in the supply chain to source
sustainable materials, and with our subcontractors to
minimise the impact of our sites. We also design homes to
be resource efficient.
Our Legacy, Engagement and Action for the Future (LEAF)
committee oversees our sustainability programme and
management of sustainability risks. It is chaired by Lee
Bishop, our Major Developments Director and
representative of the GMT. Its members include our Head
of Sustainability and senior executives from our
procurement, production, and design functions and from
our regional businesses.
Sustainability is integrated into our values and cultural
principles, particularly our commitment to a sustainable
future and to build a proud legacy. We will be doing further
work in 2018 to develop our sustainability strategy,
focusing on the issues that matter most for our customers,
our business and our stakeholders.
TBC
View our Sustainability
Report 2017 online from
March 2018.
Read more about our stakeholder
engagement on pages 15 and 51.
Our Business Model
22
Our People
Attracting and
retaining the
best people
l
e
p
o
e
p
We aim to be the employer of choice in the
housebuilding industry.
Our approach
We want to attract and retain the best people and
treat them fairly and with respect.
We continue to make a significant investment in
and commitment to the recruitment of our next
generation of future leaders, including extending
our trainee schemes and investing in the skills
and development of our employees across the
business, to ensure that Taylor Wimpey attracts
and retains the best people in the industry
through the cycle.
We aim to be the employer of choice in the
housebuilding industry, attracting and retaining the
best people to establish a culture that gives all
individuals the opportunity and support to develop
to their full potential, regardless of market
conditions or their background. We were pleased
to have been named in the top 20 places to work
in the UK, by Glassdoor, as voted for by
employees, the only commercial housebuilder to
make the list.
During 2017 we directly employed, on average,
4,999 people across the UK (2016: 4,697)
and provided opportunities for a further 13,442
operatives on our sites. Our voluntary employee
turnover rate remained low at 14.0%
(2016: 13.9%).
What makes us different
Our people matter
With the ongoing challenge for skills and resources
in the housebuilding sector and the targets we
have set ourselves, we have continued to focus on
how we effectively attract, develop, and retain our
people so that they are fully engaged with the
company to deliver both our short term targets
and longer term strategic goals.
Case study
Ingrid Osborne was selected for the Cranfield
School of Management’s “100 Women to Watch
2017”. Ingrid joined the group as a graduate
trainee in 2001, and worked in various roles before
being appointed Managing Director of Central
London in 2010. Ingrid is now Divisional Managing
Director for Central and East London and has
been a member of the General Management
Team since 2013. Ingrid commented:
“A broad range of opinions, backgrounds and
experiences are always beneficial in business. So
the more we can encourage and embrace
diversity, the better. As one of three women on our
leadership team, it’s important that we share our
experiences with colleagues and help mentor and
encourage the next generation to achieve their
goals. As leaders we have a critical role to play in
creating the right culture and leading by example. I
want people to know that I use flexible working
options, so that they feel able to do the same. By
treating people as individuals and working
together, we build trust and that positively impacts
engagement and productivity.”
2017 employee survey
% of employees who agree or strongly agree
Response rate
Taylor Wimpey takes health and
safety in the workplace seriously.
Taylor Wimpey is committed to
becoming an inclusive organisation
with a diverse workforce.
72%
2017
55%
2016
98%
2017
98%
2016
94%
2017
92%
2016
Taylor Wimpey plc Annual Report and Accounts 2017
Strategic Report Investing in our people
Through our learning and development initiatives,
aimed at growing talent from within, we give our
employees the opportunities and skills to become
our future business leaders and develop their
careers with Taylor Wimpey.
There is a significant skills shortage in our industry
and we are committed to playing our part in
addressing this. We have made a significant
investment in, and commitment to, the recruitment
of our next generation of future leaders, including
extending our trainee schemes and investing in the
skills and development of our employees across
the business, to ensure that Taylor Wimpey
attracts and retains the best people in the industry
through the cycle. During 2017, we recruited 204
apprentices (including 67 site management
apprentices), 28 management trainees and 31
graduates, whilst improving our apprenticeship
and trainee schemes across a number of areas
(2016 total: 147). We are also planning to relaunch
our management trainee programme in summer
2018. This will offer three-year development
programmes and will also significantly increase the
overall number of trainee positions.
Listening to our people
We launched and held our first National Employee
Forum (NEF) in 2017. The main objective of the
NEF will be to gather employee feedback on
individual topics important to the business and
share it with the relevant members of senior
management. The NEF will build upon the existing
regional Employee Consultative Committee
structure so as to enhance the dialogue between
the Board, Group Management Team and
our employees.
In 2017 we undertook an employee engagement
survey, ‘Talkback’, with an encouragingly high
participation rate of 72%. We were impressed with
the overall results and high level of engagement
across the whole business. We were particularly
pleased to see improved scores in customer
service, flexible working and our training and
benefits package. Importantly it highlighted areas
which needed further work, including better
collaboration between teams, and we will be
focusing on this in 2018.
Striving to become a more
diverse business
We aim to be an inclusive employer and to attract,
retain and promote employees from all
backgrounds. Encouraging and embracing
diversity is now one of our cultural principles. We
have developed a Diversity and Inclusion Strategy
that focuses on the impact of leadership for
creating and maintaining a diverse and inclusive
culture; improving how diversity and inclusion are
embedded into our policies and procedures, and
reflecting our commitment to this.
Human rights
We support the United Nations’ Universal
Declaration of Human Rights and have policies
and processes in place to ensure that we act in
accordance with our cultural values which
encompass areas such as business conduct,
equal opportunities, anti-corruption and
whistleblowing. We do not consider this a material
issue in our business.
Our KPIs
Employee turnover
Objective
We aim to attract and retain the best people in
the industry and give them opportunities to
develop to their full potential.
Definition
Voluntary resignations divided by number of
total employees.
Why is it key to our strategy?
Our employees are one of our greatest
competitive advantages and they are crucial to
executing the strategy. We aim to keep this
within a range of 5-15%.
23
Q&A
How is Taylor Wimpey
addressing the construction
skills shortage?
We can play a part in addressing the
skills shortage facing the housebuilding
sector and wider construction industry.
We offer a range of trainee positions to
attract young people and address
specific skills gaps. We now have 575
people in entry-level positions. We are
piloting a new approach to hiring
trades professionals increasing the
number we employ directly (rather
than via subcontractors). We also
partner with others through initiatives
such as the Home Building
Skills Partnership.
Case study
Apprentice Assistant Site Manager Jone
Da Cruz, who works at the Chobham Manor
development in East London, was named
‘Ambassador of the Year’ in the Queen
Elizabeth Olympic Park Apprenticeship Awards
in July 2017. These awards recognise the role
of local young people and employers in
delivering the legacy of the London 2012
Olympic and Paralympic Games and recognise
more than 240 apprentices who have played
key roles in the new chapter of the Park,
helping transform the former Olympic Stadium
into a world-class, multi-use venue.
14.0%
%
9
3
1
.
%
0
4
1
.
%
3
3
1
.
16
12
8
4
0
5
1
0
2
6
1
0
2
7
1
0
2
taylorwimpey.co.uk
24
Selecting Land
High-quality
landbank
d
n
a
l
Taylor Wimpey plc Annual Report and Accounts 2017
We believe that the quality of our landbank
is one of the key strengths of Taylor Wimpey.
During the year, and as previously announced,
we added a further site to our Major Developments
portfolio of large scale land opportunities. The land
acquired is a regeneration scheme at Clapham
Junction in central London and is a joint venture
with Wandsworth London Borough Council. It is
expected to deliver over 2,200 homes. Furthermore,
as previously announced, our Central London
business acquired 681 plots in 2017 from the
Royal Mail that forms part of the Mount Pleasant
estate, some of which will be retained by the
Royal Mail Group.
Short term landbank
Our short term landbank stands at c.75k plots,
equating to c.5.1 years of supply at current
completion levels as at 31 December 2017. During
2017 we acquired 8,040 plots (2016: 6,355 plots)
at anticipated contribution margins of c.28% and
return on capital employed*** of c.34%.
In the year, we achieved a 1.7 percentage points
margin upside on completions from land acquired
since 2009, compared with the expected margin
at the point of acquisition.
The average cost of land as a proportion of
average selling price within the short term owned
landbank remains low at 14.8% (2016: 15.4%).
The average selling price in the short term owned
landbank in 2017 increased by 8.1% to £280k
(2016: £259k).
Our approach
We believe that the land market and planning
environment have significantly changed over recent
years. Whilst the planning process remains
complex and is often slow, there is better clarity in
many local authority areas and a better supply of
suitable land that has good planning prospects
with reduced competition. Our ability to buy
high-quality land at the right time in the cycle and
enhance it through planning, remains an important
driver of value as it enables us to build and sell the
right product, create the right community and
deliver the right service to our customers.
We believe that quality of location is a key
determinant of value through all market conditions.
Our landbank is broadly spread across the country
in targeted quality locations, supported by strong
demographics and economics, in the villages,
towns and cities where people want to live.
What makes us different
New opportunities
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. We have a targetted approach to
our land investment. This is focused on where we
can add value as we seek to maximise the returns
from our investments, while continuing to ensure
that the business is optimally positioned to deliver
those returns on a sustainable basis.
Case study
In August 2017, the Group completed contracts
to purchase part of the Mount Pleasant estate,
in Central London, from the Royal Mail Group, after
enabling works by Royal Mail Group had been
completed. The site has a detailed development
planning consent, secured by the Royal Mail
Group in 2015, to create 681 residential units
including affordable housing, retail and office
space and public areas.
Strategic Report Strategic pipeline in place for
long term success
A key strength of Taylor Wimpey is our strategic
land pipeline. Strategic land is any land which does
not have any form of residential consent at the time
we take a commercial interest. This provides an
enhanced supply of land at a reduced cost.
Importantly, it gives us greater control over the
planning permissions we receive. We have one of
the largest strategic pipelines in the sector which
stood at a record of c.117k potential plots as at
31 December 2017 (31 December 2016: c.108k
potential plots). During 2017, we converted a
further 7,863 plots from the strategic pipeline to
the short term landbank (2016: 9,519 plots). We
continue to seek new opportunities and added a
net 17.1k new potential plots to the strategic
pipeline in 2017 (2016: 10.8k). In the year, a record
53% of our completions were sourced from the
strategic pipeline (2016: 51%).
Q&A
How is sustainability
integrated into land selection?
Our land teams integrate sustainability into
the land acquisition process from the start,
looking at factors such as how well
connected the site is to transport links, the
potential impact on habitats and species,
the risk of flooding and whether the
development will support local economic
activity. Our Land Assessment and
Management Process (LAMP) helps us to
identify and manage sustainability risks at
site-level before and during construction.
25
Our KPIs
Strategically sourced
completions
Owned and controlled plots
with planning
Objective
Objective
We aim to source more than 40% of our
completions from the strategic pipeline per
annum in the medium term.
We aim to maintain sufficient land in our
portfolio to enable us to remain selective in
future purchases.
Definition
Definition
Number of completions which originally did not
have planning permission when we acquired a
commercial interest in them, expressed as a
percentage of total completions.
Why is it key to our strategy?
The strategic pipeline enhances our ability to
increase the contribution per legal completion
because of the inherent margin uplift from
strategic plots. It also allows us to take a long
term view of sites.
The total number of plots that we either own or
control, with some form of planning consent.
Why is it key to our strategy?
Having a portfolio of land in place is key to
planning the required scale of our building
operations for future home completions. It
enables us to be selective in land purchases.
53%
60
3
5
1
5
50
7
4
40
30
20
10
0
74,849 plots
0
1
7
5
7
,
4
3
2
6
7
,
9
4
8
4
7
,
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
5
1
0
2
6
1
0
2
7
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
Case study
In 2017, Taylor Wimpey Midlands purchased freehold land known as Flying Fields, Southam,
Warwickshire. The land was acquired with an outline planning permission for 535 new homes of
which 35% is to be affordable housing. Extensive areas of open space and a small retail store are to
be accommodated as part of the development. The 60 acre site is agricultural land which was used
as an airfield during the war. Southam is a popular market town in the district of Stratford upon Avon
where demand for new homes is strong owing to its proximity to Coventry and ease of access to the
M40 motorway and employment opportunities. Taylor Wimpey has another successful scheme of
165 new homes currently under construction in Southam. The land and planning team at Taylor
Wimpey Midlands has worked closely with the District Council and Southam Town Council to
implement the masterplan for the site, which incorporates extensive landscaping throughout to reflect
its rural edge of town setting.
taylorwimpey.co.uk
26
Managing the Planning and Community Engagement Process
Planning and
community
engagement
We aim to be the industry leader in managing the
planning and community engagement process.
i
g
n
n
n
a
p
l
Taylor Wimpey plc Annual Report and Accounts 2017
Our approach
Whilst we have a national presence, we are proud
to operate as a local homebuilder with 24 regional
businesses across the country. We continually
explore ways in which we can work more closely
with local communities. We are committed to
working with local people and other stakeholders
throughout the planning process and seek to
engage, consult and work in partnership with
communities and all interested stakeholders.
We do this by creating a tailored planning and
community engagement strategy for each site
which reflects the needs of the local area. Our
approach goes well beyond regulatory
requirements, with engagement starting before we
submit a planning application and continuing
throughout the development process. Wherever
possible, we use the feedback obtained as part of
our community engagement to develop and
improve our design proposals.
To fully understand local views, it is important that
we reach a wide range of stakeholders from
residents, property owners and local authorities, to
businesses, schools, residents’ associations and
other groups.
We are committed to publishing information on
proposed developments online so that members
of local communities and other interested parties
can easily find out what we are planning and
where. The Taylor Wimpey website includes pages
for all of our proposed developments throughout
the UK. We would like people to register their
interest so we can update them on progress.
Above all, we want wider and more diverse groups
and individuals to get involved and tell us their
views, whether positive or negative.
Our KPIs
Conversion of strategic pipeline
Objective
We aim to convert on average c.6k plots per
annum in the medium term.
Definition
Number of plots, which originally did not have
planning permission when we took a
commercial interest in the land, and which we
have promoted through the planning process
to achieve some form of planning. In this way
we convert potential plots from the strategic
pipeline to plots in the short term landbank.
Why is it key to our strategy?
The strength of our strategic pipeline (plots
without residential planning consent) is a key
differentiator and enables us to be extremely
selective in the short term land market and also
reduces the pressure on the teams. We work
with landowners, local authorities and
communities to promote the strategic pipeline
through the planning process and achieve
planning permission. Strategic land pipeline
conversions can be variable year on year and
so we view an average target as the
appropriate measure.
7,863 plots
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
9
1
5
9
,
0
6
6
8
,
3
6
8
7
,
5
1
0
2
6
1
0
2
7
1
0
2
Strategic Report 27
Case study
At our Newton Farm (Phase 2) development, in our
West Scotland business, Taylor Wimpey agreed
with South Lanarkshire Council to contribute
c.£9.4m and 7.2 net developable acres for the
development of a new school as part of the
Section 75 (S75) agreement. Construction of the
school was the responsibility of South Lanarkshire
Council. The Council had a desire to open the new
school facility by August 2017 for the new school
term. In order to facilitate the school construction
programme, and meet our obligations under the
S75 agreement, we installed part of the
development’s new spine road by December
2015, providing access and a serviced site for the
Council. South Lanarkshire Council was therefore
able to commence works on site in early 2016,
and deliver the school on programme, opening in
August 2017. Our West Scotland business
maintains engagement with the school, providing
health and safety talks, demonstrations and
other initiatives.
How do you engage a wide range of local stakeholders?
We seek views from a wide range of stakeholders from neighbouring residents and property
owners to local authorities, businesses, schools and other groups. We use a variety of channels
including meetings, exhibitions, workshops, newsletters and information boards. We have also
been trialling the use of social media, particularly Facebook and Twitter, to help capture and
respond to feedback and to reach a wider audience.
Q&A
We aim to create development proposals that are
financially viable, benefit the local community and
provide the housing that is needed. We prioritise
getting outlets open efficiently and in the right way
for our customers. As at 18 February 2018, we are
building on 97% of sites with implementable
planning.
We believe that the land market and planning
environment have significantly changed over recent
years. Whilst the planning process remains
complex and is often slow, there is better clarity in
many local authority areas and a better supply of
suitable land that has good planning prospects
with reduced competition.
What makes us different
We build much more than homes
We work with communities and our partners to
create well designed, sustainable neighbourhoods
where our customers want to live, grow and thrive
and which are valued by our local communities.
We aim to create great places to live, work and
play; designing our developments to become
thriving and inclusive communities with a strong
sense of place and character. We have appointed
an urban designer to work with our regional
businesses on placemaking and launched our
Design Academy covering the core principles of
urban design and how to create sustainable
communities where people want to live.
We make a significant contribution to the local
communities we operate in. In 2017, we
contributed £413 million to the local communities
in which we build across the UK via planning
obligations, providing, for example, local
infrastructure, affordable homes, public transport
and education facilities (2016: £363 million).
Our developments create economic benefits for
local communities. As well as new housing, these
can include new jobs on site and in the supply
chain, increased revenues for local businesses
during construction and from new residents, and
benefits arising from our investment in new
infrastructure and amenities. We use our
Economic Benefits toolkit to estimate and
communicate these benefits to stakeholders
during the planning process.
Stakeholder engagement
We introduced a comprehensive community
engagement framework in 2011 and have been
regularly improving and updating it since. We are
proud of our approach to community engagement
and the way that our employees deliver it. The
framework applies to every stage of the
development timeline, from pre-planning
consultation to ongoing communication with
existing and new residents during and after
construction. We also have a Building Our
Reputation toolkit that provides information and
practical tools to help our employees communicate
honestly and openly with communities and
customers throughout the development process.
We believe that a positive and structured approach
to working with others is at the heart of a
successful scheme. We work in partnership with
the communities in which we build to deliver
homes that meet their requirements
and aspirations.
Expertise in planning
We aim to be the industry leader in all aspects of
planning and to secure the right planning consents
that enable us to respond to a changing market,
reflect the desires of our customer base and
deliver the quality homes we want to build, whilst
meeting our financial objectives.
Planning is fundamental to the success of our
business, and we aim to progress sites through
the planning process to enable us to develop our
sites as efficiently as possible. During 2017 we
worked with communities, planners and
landowners to convert a further 7,863 plots from
the strategic pipeline.
taylorwimpey.co.uk
28
Getting the Homebuilding Basics Right
Focusing on the
homebuilding
basics
Getting the basics right means effective processes are
consistently applied across our regional businesses.
Our approach
The health and safety of individuals on our sites will
always be our number one priority and continues
to be the first item discussed at every plc and
regional board meeting. It remains one of the
highest rated questions in our annual employee
engagement survey with 98% of employees
believing Taylor Wimpey takes health and safety in
the workplace seriously.
We are committed to providing a safe place in
which our employees and subcontractors can
work and our customers can live, and we will not
compromise on ensuring that everyone leaves our
sites safe and well. We have a comprehensive
Health, Safety and Environmental (HSE) Strategy
and a fully integrated HSE Management System in
place which is regularly reviewed at all levels.
Our Annual Injury Incidence Rate (AIIR) for
reportable injuries per 100,000 employees and
contractors reduced to 152 in 2017 (2016: 211).
Our AIIR for major injuries per 100,000 employees
and contractors was 54 in 2017 (2016: 53).
Our AIIR remains below both the HBF Home
Builder Average and Health and Safety Executive
Construction Industry Average.
Following the tragic fire at Grenfell Tower in
London in June 2017, we conducted an internal
review into our current and historic developments,
working, as appropriate with building owners,
management companies, independent fire safety
experts and local fire and rescue services. On sites
where there are tall buildings with Aluminium
Composite Material cladding, we have sought
advice from independent fire safety experts, and,
where required, have put in place additional
measures to ensure that the buildings are fully
compliant with the Government’s guidance on
interim fire safety measures. We welcome the
commissioning of the independent Hackitt Review,
and look forward to working positively with
Government and other agencies to ensure that the
outcomes are effective and appropriate for the
long term.
Case study
Taylor Wimpey Logistics, our supply chain
business, plays an important role in our supply
chain management. Around 300 of our sites,
managed by 21 of our regional businesses, are
supplied with build materials from Taylor
Wimpey Logistics. Working on a plot-by-plot
basis, the business sources bulk materials
directly from manufacturers to prepare ‘just in
time’ delivery of build packs for each stage of
the building process, ensuring materials arrive
on sites at the appropriate times in the build
process. This reduces both work in progress
on site and the potential for loss or damage of
materials, thus driving build efficiency on
our schemes.
During peak periods, Taylor Wimpey Logistics
pick, package and dispatch up to 100,000
items in 1,500 build packs on around 60
lorries per week.
i
l
i
g
n
d
u
b
e
m
o
h
Taylor Wimpey plc Annual Report and Accounts 2017
Strategic Report
29
Q&A
How do you manage risks
relating to climate change?
Climate change has the potential to impact
our business strategy in a number of ways.
For example, physical changes such as
rising temperatures and an increase in flood
risk could affect our customers and
influence where and how we build our
homes. We use our Sustainability and
Climate Change Risk and Opportunity
Register to guide the climate change
adaptation of our business practices and
the homes we build. See our Sustainability
Report 2017 for more information.
Case study
Underpinning the importance we
place on the build process and the
quality of our final product, we were
very pleased to record an increase in
Taylor Wimpey’s performance in the
National House-Building Council’s
(NHBC) Pride in the Job Awards. We
achieved a total of 62 Quality Awards
(2016: 57), 24 Seals of Excellence
Awards (2016: 16) and 2 Regional
Awards in 2017 (2016: 2). Our two
Regional Winners were Paul
McLachlan from Taylor Wimpey
North Yorkshire and Michael
Wickham from Taylor Wimpey South
Thames. Our regional winner Paul
went on to achieve runner up in the
large builder category of the
Supreme Awards.
Paul commented: “Winning the
Regional Award and then being
named a runner up in the Supreme
Awards has been unbelievable, it’s
been the highlight of working for the
company as over the years the
competition gets stronger, the quality
rises and the standard increases.”
What makes us different
We do not compromise on
health and safety
We not only create homes that our customers
want to live in, we want to ensure that every step
of the way, health and safety is at the forefront.
Partnering with contractors on safety issues is
critical to keeping everyone safe on site. Before we
agree to work with a contractor, we require details
of their risk assessment process and safety
procedures for their area of activity.
We clearly communicate critical safety messages
to site operatives through our ‘Operative’s
Journey’ process, which starts with our HSE site
induction. One of the key issues to address is
preventing ‘safety sign blindness’, and keeping
safety at the front of everyone’s minds on site.
The HSE induction is supported by regular poster
campaigns and talks on key topics. In 2017, we
re-launched our ‘toolbox talks’ as ‘site safe
briefings’ and made the content more engaging
for site operatives.
Our Site Support Team brings together
representatives from Taylor Wimpey and our
contractors such as trades supervisors,
groundworkers supervisors or site operatives to
encourage a safety mindset. Members are
nominated by the Site Manager and given a blue
hat to make them visible on site. Site Support
Teams participate in improving site safety and
operatives can talk to members of the team about
HSE issues, concerns or suggestions. During
2017 we ran training sessions and team building
events for Site Support Team members.
The square footage of our total completions also
decreased slightly to 1,013 square feet
(2016: 1,021 square feet).
Quality product range
We build homes that people want to live in. We
are proud of the homes we build and the
communities we create. Our focus is on providing
high-quality, well-designed, sustainable homes
and communities that meet the needs and
aspirations of local residents. Our mix of homes is
informed by the local area.
We have clear quality and finish standards for all
Taylor Wimpey homes and during 2017 we
continued to strengthen our quality assurance
processes. Each one of our homes should meet
our quality standards and we want every customer
to receive excellent service. During the year, we
appointed a UK Head of Production, a newly
created role as we seek to ensure we consistently
achieve a high-quality build for our customers.
It is expected that this will increase customer
satisfaction and save time and money for the
business in getting the home delivery right first
time. There are also sustainability benefits
associated with achieving high-quality standards,
including greater durability, less waste and fewer
resources used for repairs and maintenance.
We continue to offer a wide range of homes from
one-bedroom apartments to six-bedroom houses,
with prices ranging from under £70k to over
£4 million. In 2017 the proportion of apartments in
our private completions was 16% (2016: 14%).
Following the success of our standard house type
range, which is in place on over 70% of Taylor
Wimpey sites, in 2017 we introduced a specific
timber frame house type range. We will be
reviewing the wider standard house type range to
further refine in 2018.
Build costs
Our scale affords us the benefit of strong
purchasing power, and we can achieve significant
cost savings across our regional businesses with
national agreements with a number of suppliers.
During 2017, underlying build cost per unit
increased to £143.7k (2016: £137.2k), reflecting
underlying build cost inflation as well as some mix
impact of product delivery in the year. In the
period, there were increases in underlying build
cost (excluding house type mix impact) of c.3.5%
year on year (2016: c.4%), largely due to continued
pressure on resources to deliver the higher level
of homebuilding.
Taylor Wimpey Logistics plays an important part in
our supply chain management, providing us with
an alternative route to delivery and aiding efficiency
with the preparation of ‘just in time’ build packs for
each stage of the building process.
taylorwimpey.co.uk
30
Getting the Homebuilding Basics Right continued
Our KPIs
Health and safety
Objective
We are committed to providing a safe place
in which our employees and subcontractors
can work and our customers can live.
Definition
Reportable (all reportable) injury frequency
rate per 100,000 employees and
contractors (Annual Injury Incidence Rate).
Why is it key to our strategy?
Health and safety is our non-negotiable top
priority. 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.
Annual Injury Incidence
Rate (AIIR).
152
240
200
160
120
80
40
0
1
1
2
5
7
1
2
5
1
5
1
0
2
6
1
0
2
7
1
0
2
Responsible procurement
A significant proportion of our procurement,
particularly for materials sourcing, is through large
contracts with national suppliers. However, we
also work with many smaller businesses, providing
labour and services, including companies that are
local to our development sites. This can benefit the
business by giving us access to a more diverse
range of skills and experience and help support the
local economies in which we work. We provide
advice and help to small and medium sized
businesses with HSE risk assessments and other
site-specific procedures that they need to prepare
in order to tender for work with us.
The Company welcomes the aims and objectives
of the Modern Slavery Act 2015 and takes its
responsibilities under the Act very seriously. As part
of this we have strengthened oversight of
standards in our supply chain to make sure we are
selecting partners who share our commitment to
responsible business. We published our first
Modern Slavery Act Statement on our website in
March 2017. We have been following up with
suppliers identified as higher risk for further
engagement. Further information can be found on
our website.
Greenhouse Gas (GHG) emissions for period 1 January to 31 December
Category total emissions (tonnes CO2e)
Emissions from combustion
of fuel (scope 1)
Emissions from electricity, heat, steam and cooling
purchased for own use (scope 2)
(market-based method)(a)
Total scope 1 and 2 emissions (market-based
methodology)
Emissions per 100 sqm of completed homes
(scope 1 and 2)
Percentage reduction in direct carbon emissions
intensity (scope 1 and 2) since 2013
2017
2016
2015
2014
18,889
17,983
17,768
16,436
4,794
10,827
12,947
13,326
23,683
28,809
30,716
29,672
1.73
2.13
2.40
2.56
38.7%
24.5%
14.9%
9.2%
Notes: Data is provided as tonnes of carbon dioxide equivalent (CO2e) for all operations. Scope 1 and 2 emissions are from our
sites, offices, show homes and sales areas, plots before sale and car fleet. Data on our estimated scope 3 emissions is available
in our Sustainability Report 2017 (categories: purchased goods and services, business travel, waste generated in operations
and fuel and energy related activities).
(a) We are now using the market-based method of the revised version of the GHG Protocol Scope 2 Guidance for calculating
our scope 2 emissions. This allows us to reflect the carbon intensity of the electricity purchased in our carbon footprint.
We have used the GHG Protocol Corporate Accounting and Reporting Standard (revised edition) for data gathered to fulfil our
requirements under the Mandatory Carbon Reporting (MCR) requirements, and emission factors from the Government’s GHG
Conversion Factors for our corporate reporting.
We have reported on the emissions sources required under the Companies Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013 apart from the exclusions noted. The reported sources fall within our Consolidated Financial Statements and
are for emissions over which we have financial control. We do not have responsibility for any emissions sources that are not
included in our consolidated statement.
The following sources of emissions were excluded or part-excluded from this report:
–
Fugitive emissions (refrigerant gases): excluded on the basis of expected immateriality and difficulty in acquiring data
– Gas and electricity of part-exchange properties: excluded on the basis of immateriality due to very few completions of
this type
– Certain joint venture properties: where Taylor Wimpey was not part of the handover process. In these cases other
homebuilders have captured MCR-related data
See our Carbon Reporting Methodology Statement for more detail on our calculations at
www.taylorwimpey.co.uk/corporate/sustainability
Taylor Wimpey plc Annual Report and Accounts 2017
Strategic Report
31
Sustainability reporting
recognition
We are constituents of the Dow Jones
Sustainability Europe Index and the
FTSE4Good Index series, the leading
responsible investment indices.
We also participate in the CDP climate
change report and in the CDP Water
benchmark. The latter assesses companies’
corporate water stewardship practices
and performance.
In addition, we are a member of
NextGeneration, a rigorous and detailed
sustainability performance benchmark of the
UK’s largest homebuilders.
More information about our performance in
the above benchmarks is available in our
Sustainability Report 2017.
DISCLOSURE INSIGHT ACTION
Our contributions to the environment
We strive to keep any adverse effects that our
activities may have on local environments and
communities, such as pollution and ecological
damage, to a minimum and to make a positive
contribution to the environment of the areas
we build in.
We acknowledge the global threat of climate
change and are committed to reducing our
emissions, energy use and waste and
reviewing water use.
We have a comprehensive Waste and Resource
Strategy and Action Plan for our housing
operations and our supply chain. We focus on
seeing materials as resources, using them more
efficiently through design and on-site recovery, and
keeping generated waste to a minimum.
During 2017 our construction waste increased by
6.3% per 100 square metres of completed build.
We recycled 95% of UK construction waste.
Environmentally sustainable homes
New homes are considerably more energy-
efficient than older housing stock, and we are
committed to building increasingly energy-efficient
homes in line with Government policy and
Building Regulations. Our ‘fabric first’ approach to
energy efficiency, which concentrates on highly
insulated walls and windows, helps owners to
save energy and money.
Our greenhouse gas emissions (GHG)
We continue to take steps to improve our
approach to climate change mitigation, adaptation
and transparency. Our target was a 25% reduction
in scope 1 and 2 greenhouse gas emissions per
100 square metres of completed homes by 2018
compared with 2013. We have met this goal, and
exceeded the target, a year early, achieving a
38.7% reduction in carbon emissions from 2013.
We held a carbon workshop with the Carbon Trust
during 2017 to review our approach. As a result,
we have set a new target to achieve a 50%
reduction in our direct emissions (scope 1 and 2)
intensity over 10 years against our 2013 baseline.
We are reviewing our approach to scope 3
emissions and exploring whether we can set a
target aligned with climate science. We will be
doing further work in this area internally and with
the Carbon Trust during 2018.
We participate in the CDP climate change report
and received a score of B in 2017 (2016: B). We
have achieved the Carbon Trust Standard for our
overall approach to carbon management, including
our policy, strategy and verification of our data and
processes. We are the first homebuilder to
achieve this.
Case study
Taylor Wimpey received the CDP award for the
most improved water management performance
in the UK, with a score of A- in the leadership tier,
during 2017. The feedback stated that “Taylor
Wimpey plc has implemented a range of best
practice actions to manage water and mitigate
water risk, both in its own operations and beyond
them”. CDP runs the most comprehensive
collection of self-reported environmental data in the
world to help companies to measure and manage
their environmental impacts.
DISCLOSURE INSIGHT ACTION
taylorwimpey.co.uk
32
Delivering Customer Service
Putting customers
at the heart of
what we do
s
r
e
m
o
t
s
u
c
Taylor Wimpey plc Annual Report and Accounts 2017
We remain focused on customer service and are
committed to delivering an excellent customer service
to all of our customers at every stage of their journey.
Our approach
Customer service continues to be a key priority for
all at Taylor Wimpey and is integral to our vision for
the future of the business. We aim to put the
needs of our customers at the heart of our
decision-making.
We have made great strides in our customer
service approach. However, there are things that
we can and must do better.
Across our business operations, we want our
employees to adopt our customer-centric culture
and to understand the important role they play with
our customers. Regardless of the role that any
Taylor Wimpey employee fulfils in the business, we
all contribute to the final result for our customers.
Our aim is to keep our customer at the centre of
our decisions and coordinate our input to deliver
a quality home first time, with great service
throughout their customer journey. This will help
our customers to settle in quickly and make our
houses their homes.
During 2017 we built on the early success of our
new customer service approach, which focuses
on getting it right first time and improving the clarity
and openness of our communication with
customers, and have continued to make good
progress implementing this approach across the
business.
What makes us different
Our strong and sustainable
customer base
Approximately 97% of our customers are
owner-occupiers. First time buyers accounted for
41% of total sales in 2017 (2016: 38%). Investor
sales continued to be at a very low level at 3%
(2016: 3%).
Understanding our customers
Over the years our customers’ communication
preferences have changed. We continue to make
improvements to our online capabilities, including
our website and use of social media such as
Facebook, Twitter and Instagram. During 2017 we
launched a new customer portal. More information
can be found within our case study.
A responsible business
We acknowledge that we do not always get it right
for our customers and sometimes fall short of our
high standards. Where this is the case, we work
with customers to put this right and learn from our
mistakes. Whilst we recognise there is more to do,
we are particularly pleased to see a positive trend
in customer satisfaction feedback, with scores in
Case study
Touchpoint, our customer portal and online
options system, was officially launched in 2017.
After a successful pilot phase, the portal is now
being rolled out across the wider business.
Touchpoint plays a critical part in improving the
information flow between our customer facing
teams and homebuyers at every stage of their
contact with Taylor Wimpey, from the moment
they reserve and throughout the aftercare process.
Once a home is reserved, the portal guides our
customers through the homebuying process
letting them know what they need to do next and
giving immediate access to important updates, for
example, how the build of their home is
progressing, counting down to legal completion
and move-in dates. Touchpoint also offers new
homeowners useful information about the various
appliances and systems in their home and enables
them to log any issues there and then through the
portal. Touchpoint aims to complement the
personal service delivered by our Sales Executives,
Site Managers and Customer Relations Managers,
offering another more flexible means of
communication with Taylor Wimpey.
Strategic Report 33
the last six months averaging over 90%. Internally,
we are pleased to see the approach embedding
well in the business, where 95% of Taylor Wimpey
employees believe that Taylor Wimpey aims to
deliver the best customer service in the
homebuilding industry, according to our employee
survey. In an industry growing at pace, delivery of
quality alongside volume growth is not always easy
and it has been a priority to ensure that our people
have the right resources, and that we are clear that
we prioritise delivering the right quality over short
term financial results.
We strive to be a five star builder and we have
made significant investment to improve our
customer journey. The results from this are starting
to be realised in a customer satisfaction score of
88%, up from 85% in 2016, showing progress
towards our target.
Looking ahead to 2018 and beyond
The continued rollout of our Touchpoint customer
portal will be a key focus in 2018. Touchpoint will
not only provide an improved service for our
customers but should ensure a more helpful and
informative homebuying experience for
our customers.
Reflecting the success of our academy-based
approach in other key areas of the business, our
new Academy of Customer Excellence (ACE) was
launched in 2017. It aims to build the skills of our
customer service, production and sales teams and
develop further their knowledge of our product
range, ensuring consistent customer service
delivery across our regional businesses.
Q&A
Does Taylor Wimpey monitor
long term customer satisfaction?
We carry out post-occupancy research to
help deepen our understanding of customer
views and the longer term success of our
developments. In 2017, this included
research at 16 completed sites that
explored the impact of design and
placemaking on customer satisfaction. It
showed that residents value developments
with character that are easy to navigate and
where there is good landscaping and
access to open and green spaces.
Customer representation
1
1 First time buyers:
41%
(2016: 38%)
3 Affordable:
17%
(2016: 23%)
2 Second time
buyers:
39%
(2016: 36%)
4 Investors:
3%
(2016: 3%)
2
Our KPIs
Customer satisfaction
Objective
We strive to maintain and improve our customer
satisfaction scores at 90% or above.
Definition
Percentage of customers satisfied or very satisfied with the
quality of their new home as measured by the National
New Homes Survey undertaken by the NHBC on behalf of
the HBF eight weeks after legal completion.
Why is it key to our strategy?
We believe it is the right thing to do. Delivering high levels of
customer satisfaction enhances the reputation of our
business and reduces the costs associated with rectifying
poor-quality work.
3
4
88%
100
%
6
8
%
5
8
%
8
8
80
60
40
20
0
5
1
0
2
6
1
0
2
7
1
0
2
taylorwimpey.co.uk
34
Optimising Value
Optimising and
enhancing value
e
u
a
v
l
Q&A
How is Taylor Wimpey
investing in research
and innovation?
Through Project 2020, our research
initiative, we are exploring different
approaches to meet the changing needs
and aspirations of our customers, improve
efficiency in construction and reduce the
environmental impact of the homes we
build. For example, following our design
competition with the RIBA, we will be
building a series of prototype homes
incorporating sustainable build technologies
and off-site production techniques.
Taylor Wimpey plc Annual Report and Accounts 2017
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.
Our approach
We achieve this optimisation of value by
undertaking a series of thorough reviews of each
site at all stages of its life cycle, using our value
improvement and tracking processes to ensure
that we are continually optimising and delivering
the value within our land portfolio.
We also believe in the value of working together
with our partners, suppliers and other stakeholders
and are committed to supporting charities and
local community groups.
What makes us different
Capturing value
We have a relentless focus on value at every stage
of our business model and this is ingrained into the
Taylor Wimpey mindset. We also balance our
desire to improve quality with a focus on making
our assets work harder for us and our stakeholders.
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 re-planning of sites to redesign and selective
enhancements to our specification. We are
committed to not only delivering what we set out
to do but, by delivering more, instilling a discipline
of capturing inflation. In the year, we achieved a
1.7 percentage points margin upside on
completions from land acquired since 2009,
compared with the expected margin at the
point of acquisition.
Higher return potential
It is important to also develop approaches that
enable us to control land in a capital-light way,
without unduly burdening the business. This ‘light
touch’ improves our returns, frees money for other
investment and reduces risk in the event of
negative changes in the market. Taking this
approach can also help if, and when, there is
greater competition in high growth areas. A good
example of this can be found within our Major
Developments business. More information can be
found within the case study on page 35.
Partnerships
We strive to be an open, transparent and
responsive company for all our stakeholders and
to work with them to understand and address the
wider social, economic and environmental impacts
resulting from our operations.
Case study
The fourth annual Taylor Wimpey
Challenge took place in the Lake
District in May 2017, with around
400 staff from across the regional
businesses in the UK and Spain
participating. As with the previous
challenges, this latest team-focused
fundraising event was organised in
partnership with the Youth
Adventure Trust (YAT), which
provides adventure camps and day
activities for disadvantaged young
people. As a result of our teams
fundraising efforts more than £171k
was donated to the YAT and a
selection of charities local to our
regional businesses.
Strategic Report Efficiency
During 2017 we achieved an average annual
return on net operating assets** of 32.4%
(2016: 30.7%) which is ahead of our medium term
target of 30% as set out in May 2016.
We have improved our UK net operating asset
turn†* to 1.52 times (2016: 1.46 times), benefiting
from a low land cost as a percentage of average
selling price in the short term owned landbank, as
a result of higher margin land acquired in recent
years and increased strategic pipeline conversion.
The higher proportion of strategic land conversion
results in higher work in progress spend, due to
these sites generally requiring greater
infrastructure investment.
Charity
We are committed to supporting charities and
local community groups in the areas in which we
operate. We believe that as a responsible
business, we must actively contribute to helping
others whether financially, with our time, energy or
expertise. We aim to be an aspirational
housebuilding brand that is recognised for the
good that is given back to our local communities
by our employees. Our primary goal is to genuinely
improve the position of the causes that we
support. The secondary goal is to engage our
employees in these activities as we recognise it is
good for their development and self-awareness.
Whilst there are a large number of worthy projects
and causes, we have to focus to make sure that
we are effective. 98% of Taylor Wimpey staff
believe that Taylor Wimpey is committed to being
an ethical and responsible company, according to
our employee survey.
During 2017, we continued our partnership with
our national charities as well as local charity
partners across the UK. Our six national charities
are the Youth Adventure Trust, End Youth
Homelessness, Crisis, CRASH, St Mungo’s and
Foundations Independent Living Trust. Our
national charity partners are selected by our
Charity Committee, with regional charities selected
by our regional businesses.
In total, during 2017 we donated and fundraised
over £1 million for registered charities (2016: over
£875k), in addition to c.£90k for other
organisations, such as scout groups and various
local community causes (2016: c.£159k). More
information about our local sponsorships and
charity partnerships can be found within our
Sustainability Report, which will be published on
our website in March 2018.
35
Our KPIs
Contribution per
legal completion
Objective
We strive to maximise the level of contribution
per home sold.
Definition
Revenue, net of incentives, less build costs,
land costs and direct selling costs, divided by
the number of homes completed (excluding
joint ventures).
Why is it key to our strategy?
Our strategy is focused on value and we
continue to prioritise both short and long term
margin performance. Increasing the contribution
per plot is a key driver to achieving this.
Forward order book as a
percentage of completions
Objective
We look to maintain a strong order book.
Definition
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 ventures).
Why is it key to our strategy?
A strong order book provides our customers
with good visibility and provides greater stability
for business planning and enhances our ability
to deliver the best experience for customers
whilst driving the most value for shareholders.
£69.3k
49.6%
.
3
9
6
.
5
5
6
.
4
9
5
80
70
60
50
40
30
20
10
0
.
6
6
5
.
8
4
5
.
6
9
4
70
60
50
40
30
20
10
0
5
1
0
2
6
1
0
2
7
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
Case study
Since its creation in 2015, Major Developments
has focused on the complex, mostly public land,
mixed use opportunities across the UK, specifically
with a high return and a lower risk structure. The
business works hard to seek acquisition structures
that require low upfront capital investment, offering
reduced land risk, and therefore reduced exposure
to longer term market challenges, enabling us to
create additional value, whilst further reducing
cyclical risk. In October 2017, the business
announced its most recent development which is
a joint venture with Wandsworth London Borough
Council for the regeneration of Winstanley and
York Road Estates that will provide more than
2,200 new homes, in addition to significant new
amenities and facilities for the local community.
taylorwimpey.co.uk
36
Our Approach to Risk Management
Actively
managing risks
As with any business, Taylor Wimpey faces risks and uncertainties in the course of its day to day operations. It is
only by effectively identifying and managing these risks that we are able to deliver on our medium term targets
(2016-2018) of an average operating profit* margin of c.22%, an average annual return on net operating
assets** of 30% and a total of £1.3 billion of dividends to be paid in cash to shareholders over the period.
The successful management of risk is essential to enable the Group to deliver
its strategic objectives. Our risk management and internal control framework
defines the procedures that manage and mitigate risks facing the business,
rather than eliminate risk altogether and can only provide reasonable and not
absolute assurance against material misstatement or loss.
Our risk management framework includes risk registers that are maintained at
all organisational levels throughout the business, which detail the risks faced
by the Group, its operating companies and the central teams that support the
business and external stakeholders. The registers identify key operational,
financial and strategic risks to the business, with strategic risks considered
and identified as part of the business planning process. Our risk registers take
into account the significance of health, safety and environmental issues (HSE),
together with social and governance matters relating to the Group and use a
standardised methodology for the assessment of risk.
The standard methodology used in risk management requires each identified
risk to be assessed and measured according to a risk matrix. This matrix
considers the potential impact of each risk, (whether financial, reputational,
HSE etc), the likelihood of the event occurring, together with mitigating actions
and hence the remaining or residual risk. Our risk registers are refreshed on an
ongoing basis as part of our financial planning cycle. The registers feed into a
formal risk assessment that identifies the Principal Risks and Uncertainties (see
pages 38 to 41) and other key risks which are monitored closely, and allows
both the Audit Committee and the Board to re-evaluate the identified risks
facing the Group. Our Sustainability and Climate Change Risk and
Opportunity Register highlights the material risks and opportunities facing the
Company in relation to sustainability and climate change and forms part of our
Corporate Risk Management Framework. More information is provided in our
Sustainability Report 2017.
Our risk assessment and management process
S t rategic objectives
Principal Risks and Uncertainties
The Board, supported by the GMT and the
Audit Committee, identify the Principal Risks
based on the assessment of the Material Risk
Register. The Principal Risks will be disclosed
with the half and full year results. Feedback
regarding changes to Principal Risks is
provided in detail to the risk owners who have
been identified to manage and be primarily
responsible for the specific risk on behalf of
the Group.
Forecast and Planning Process
All BU risk registers are re-evaluated and
completed as part of the formal planning
process every six months. Each BU
re-assesses with their own Senior Management
Team, the risk landscape that the business
faces and the risk register is then updated to
reflect latest forward views.
Group Material Risk Register
The Material Risk Register is maintained by the
GMT and is also reviewed by the Audit
Committee with the promotion, removal or
change of risks before consideration by the
Board. Views are collated from the bottom up
Business Unit (BU) risk registers and a top
down view of risk formed from horizon
scanning the macro-economic environment,
the political landscape and developments in
specific areas of uncertainty relating to the
business or the wider markets within which we
operate. Each material risk is assessed as to its
likely impact based on the Group’s standard
methodology, and risk items promoted or
removed as appropriate.
Business Unit Risk Register
All items reported in the BU risk registers are
reviewed for individual risks of note and for
risk-themes which may arise across the Group.
A summary of BU risks is assessed by the
GMT, with significant items promoted for
discussion by the Audit Committee. The
assessment includes a comparison of the
risk-rating of the individual items over time.
Risk management and mi t i g a t
i o n
Taylor Wimpey plc Annual Report and Accounts 2017
Strategic Report 37
Risk Materiality Process
The Board determines the nature and extent of the Principal Risks it is willing to take in achieving its strategy,
whilst maintaining sound risk management and internal control systems.
The Board oversees the risk management and internal control framework of
the Group. The Chief Executive is responsible for implementing any necessary
improvements, with the support of the GMT. In line with the UK Corporate
Governance Code, the Board holds formal risk reviews at least half yearly and
also routinely considers risk at each Board Meeting as appropriate. The Board
reviews the risk profile of the Group and the significant risks with the
mitigating factors.
At the Board meeting in February 2018, the Board completed its annual
assessment of risks. This followed the Audit Committee’s formal assessment
of risk, which was supported by the detailed risk assessment by the GMT,
and their review of the effectiveness of internal controls. The key risks affecting
the Group were identified and agreed with the Board.
Other key risks
In addition to the principal industry related risks set out in the following pages,
we also monitor closely several other key internal and external factors. These
could be risks with increasing potential impact or likelihood which are added
to our watch list, or risks arising as a result of a combination of unlikely events,
which together create a major event. These include factors that may affect our
reputation and which can come from many sources. The Group considers risk
from a wider technology and cyber perspective, and we are delivering a
programme of works across the business to reduce our exposure to
non-compliance with the EU’s General Data Protection Regulation (GDPR)
which is implemented in May 2018. We continue to invest in our technology
controls and services to mitigate the increasing cyber threats. The Group also
considers the potential impact to the business in the event that our customers’
buying-experience or any of our homes are below our high standards. Our
enhanced customer service processes and departments were established in
2016, and once fully embedded, will significantly help to ensure that the quality
of our homes is delivered as promised to our customers.
Our customers and our corporate obligation are at the heart of Taylor
Wimpey’s cultural values, which were launched to all employees in 2016.
The enhanced Customer Journey is in place and we have focused heavily
on product quality. However, during late 2016, some customers expressed
concern about certain leasehold homes which are subject to ground rents that
double every ten years until the 50th year, at which point the rent is capped.
This lease structure was introduced on some new developments by
Taylor Wimpey in good faith in 2007 until late 2011, since when our new
developments have used leases with RPI-based ground rent clauses, which
have become the industry norm. During the year, we reviewed the terms of
these leases. The doubling clauses are considered to be entirely legal, clearly
set out in the lease documentation and all our customers received
independent legal advice as part of the standard conveyancing process. That
said, it became clear that the impact of these rent review clauses was causing
some of our customers understandable concern, and we resolved that these
doubling clauses were not consistent with our cultural values. We have
implemented the Taylor Wimpey Ground Rent Review Assistance Scheme
(GRRAS), for our customers who wish to alter the terms of the doubling lease
to materially less expensive terms based on RPI, with the Group bearing the
financial cost of doing so.
The Government has recently launched a consultation on leasehold
properties, and this may result in changes to future ground rent structures.
Whilst our business model, like most other volume housebuilders, is to
transfer the freehold, management and upkeep of apartment and other
developments to third party organisations, we note that potential changes
may arise from the consultation.
In the current economic climate and with the structural shortage of housing
supply in the UK, the Government and the main political parties have housing
high on their agendas. The housebuilding industry is facing increased scrutiny
and pressure from a number of sources, including social media and pressure
groups, with the potential for greater oversight from Government through a
Design Champion and a single Housing Ombudsman. We endeavour to
deliver both the letter and the spirit of regulations and maintain this same
ethos in our relationships with our customers.
Following the tragic fire at Grenfell Tower in London in June 2017, we
conducted an internal review into our current and historic developments,
working, as appropriate with building owners, management companies,
independent fire safety experts and local fire and rescue services. On sites
where there are tall buildings with Aluminium Composite Material cladding, we
sought advice from independent fire safety experts, and, where required, have
put in place additional measures to ensure that the buildings are fully
compliant with the Government’s guidance on interim fire safety measures.
We welcome the commissioning of the Hackitt Review, and look forward to
working positively with Government and other agencies to ensure that the
outcomes are effective and appropriate for the long term.
Group Appetite for Risk
Our description of the Group’s
risk appetite is the foundation of
our Risk Management framework.
We have identified operational
categories against which both our
current risk profile and our risk
tolerance range have been
defined. Certain risk categories
are dependent on where we
believe we are in the cycle, and
may adjust accordingly. In
defining our risk appetite, the
Board has taken into account the
expectations of the company’s
shareholders, regulators and
other stakeholders.
Risk level
Low
Medium
High
Balance sheet strength, dependent on
current position in the land cycle
y
r
o
g
e
t
a
C
k
s
R
i
Landbank quality
Brand and reputation and
customer satisfaction
Operational strength
Health, safety and environment
Employee retention
Legal, regulatory and IT security
Current risk profile
Risk tolerance range
The current risk profile is within our tolerance range and overall is described as:
The Group is willing to accept a moderate level of risk in order to deliver financial returns. There may be occasions where these risks could have a moderate
adverse impact to the Group, be it financially or operationally, although it is considered that the effect could be mitigated through management actions.
taylorwimpey.co.uk
38
Principal Risks and Uncertainties
Principal Risks and Uncertainties
The table below summarises the Group’s principal risks and uncertainties. Control of each of these is critical to the ongoing success of the business. As such,
their management is primarily the responsibility of the Chief Executive and the Group Management Team (GMT), together with the roles noted below. The Board
has finalised its assessment of these risks and has concluded that the likelihood of these principal risks affecting the business has remained at the level
previously reported. We maintain a Sustainability and Climate Change Risk and Opportunity Register to monitor other sustainability issues that could affect the
Group. In addition, our climate change related risks and opportunities are available as part of our 2017 CDP submission. More information is available at
www.taylorwimpey.co.uk/corporate
Risk
Relevance to strategy
Potential impact on KPIs
Mitigation
Progress in 2017
We operate within our
comprehensive community
led planning strategy. This
improves communications
with all parties, but especially
local communities, thereby
enhancing our ability to deliver
developments that meet local
requirements.
We continually review
changes to Building
Regulations and supporting
guidance.
We consult with Government
agencies and opposition
parties on housing policy,
both directly and indirectly as
a member of industry groups,
to highlight potential issues
and to understand any
proposed changes to
regulations and policy.
Our customer and community
engagement strategy is
embedded and having a
positive effect. We have been
successful in gaining planning
consents throughout the year
with particular emphasis on
the conversion of the strategic
land pipeline.
We continue to represent the
Group, via the HBF, on
broader planning and local
plan matters, to ensure local
plans are robust and CIL
charge schedules are
appropriate. We have met
with Government officials on a
number of occasions through
the year including discussions
on HtB.
Our ability to build great
places to live is dependent
upon creating site plans
which inspire and delight our
customers, delivered at an
affordable price. Obtaining
timely planning permissions
and achieving other regulatory
requirements and permits, is
key to starting on site as soon
as possible and home
delivery.
There remains a risk of
delayed or refused planning
applications, increased
timescales to the discharge of
planning conditions and
greater complexity around
Section 106 since the
introduction of the
Community Infrastructure
Levy (CIL).
As all elements of the
anticipated changes from the
Housing White Paper are
clarified, and if the terms of
HtB are amended, there
could be a change in demand
for specific products. In turn,
this may lead to changes to
site mixes, and to extended
timeframes to gaining revised
planning consents.
Unforeseen delays, our
inability to obtain suitable
planning consents and
disruption from changes to
planning regulations, could
impact on the number or type
of homes that we build.
With the introduction of
regulation from the Housing
White Paper, we may be
required to meet higher levels
of planning obligations, so
incurring additional costs.
The locally produced CIL
charge schedules may
increase costs, impacting the
viability of developments in
our short term landbank.
Where CIL charges are not in
place, there could be an
impact on gaining planning
consent or Judicial Review
challenge. In addition, a CIL
review from 2017 is still being
considered and resulting
changes may be disruptive,
impacting volumes and
contribution per plot.
Changes to Building
Regulations on tall and other
buildings, although likely to be
limited in impact to the Group,
could introduce delays to
implementation and re-work
to current and other sites and
increased costs.
Together, these changes
could have a detrimental
impact on the contribution
per plot.
Removal of HtB completely
could see slower sales rate
particularly from first time
buyers, and potentially a
greater number of smaller
homes required by our
customers.
A Government policy and
planning regulations
The National Planning Policy Framework
(NPPF) and the Localism Act 2011 are well
established, although are insufficient to
deliver greater housing availability for the
UK. Additional initiatives and legislative and
regulatory amendments have been
signalled by a Housing White Paper,
published in February 2017, with
consultations continuing through the year
and into 2018. Consultation on
amendments to the NPPF is expected in
spring 2018.
Since April 2013, the Government-backed
Help to Buy (HtB) scheme has helped to
fund the home deposit for certain
homebuyers. The Government has
announced the scheme’s extension to
2021, however, there is potential for
change to the scheme rules, for both the
buyer and the seller, and ultimately its
discontinuation.
The Housing White Paper and changes to
the HtB scheme could have a disruptive
effect on the planning system, sales rates,
site mixes and customer behaviour.
The Review of Building Regulations and
Fire Safety, headed by Dame Judith Hackitt
(the Hackitt Review) following the Grenfell
fire tragedy in June 2017, is expected to
deliver its final report in late spring 2018.
While looking primarily at the fire safety of
tall buildings, the review is wide ranging,
taking in the regulatory frameworks around
the design, construction and management
of buildings, the advice and guidance that
supports those regulatory frameworks and
the responsibilities of those involved. This
may have a significant impact on the
regulatory framework. Changes to building
regulations are usually forward looking in
terms of implementation and it is expected
that recommended changes will generally
need to be complied with in required
timeframes.
Sir Oliver Letwin is undertaking a review (the
Letwin Review) on the gap between
planning permissions and starts on site.
The review is ongoing and the conclusions
of the review are expected to appear over
the next few months.
Responsibility
Group Operations Director
Regional Managing Directors
Taylor Wimpey plc Annual Report and Accounts 2017
Strategic Report 39
Risk
Relevance to strategy
Potential impact on KPIs
Mitigation
Progress in 2017
B Impact of market
environment on mortgage
availability and demand
The cost of servicing a mortgage continues
to be at historic lows. However, a change in
business confidence, employment
opportunities or significant changes in the
Bank of England base rate that is not
combined with wage growth could impact
the demand for housing, which may also
lead to lower selling prices.
The ability of first time buyers to purchase
homes is constrained by changes in
mortgage availability at the higher
loan-to-value levels. The Government-
backed HtB scheme helps to fund the
home-deposit for these and other
homebuyers. £10 billion additional funding
was announced at the Conservative Party
Conference in 2017 to support the HtB
scheme until its currently programmed end
in 2021. There is potential for change to the
scheme rules and ultimately its
discontinuation.
Sustained growth in interest rates and low
wage inflation could challenge mortgage
affordability. Strict guidelines are in place for
lenders to assess mortgage affordability if
interest rates were to rise. Furthermore, the
Bank of England has powers to set
loan-to-value and debt-to-income limits for
financial institutions selling residential
mortgages.
Responsibility
UK Sales and Marketing Director
Regional Sales and Marketing Directors
C Material costs and
availability of
subcontractors
A continued increase in housing production
may further strain the already reduced
availability of skilled subcontractors and
materials and put pressure on utility firms to
keep up with the pace of installation.
Further, leaving the EU could impact on the
availability of skilled workers given the
relatively large proportion of the labour
force, particularly in the South East, that is
from Eastern Europe. Together, this could
result in build programme and completion
delays and unexpected cost increases.
Responsibility
Group Operations Director
Head of Procurement
Regional Commercial Directors
A reduction in demand for
new homes below normal
levels could negatively impact
on both profit and cash
generation. This would have
an adverse effect on return on
net operating assets and cash
generation.
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 work closely with the
financial services industry to
ensure customers receive
advice on the procurement of
mortgage products.
We continue to promote the
Government backed HtB
scheme and our customers
demonstrate strong demand
for the scheme. We are
monitoring usage of HtB by
our customer base to
understand how any change
to the scheme, or its
withdrawal, may impact the
desired design and location of
homes required in the future.
Throughout 2017 we have
continued to develop good
working relationships with
established mainstream
lenders and those wishing to
increase volume within the
new build market.
The majority of the homes
that we build are sold to
individual purchasers who
take on mortgages to finance
their purchases.
Loss of economic confidence
as a result of the terms the
UK agrees on leaving the EU,
may impact on demand for
new build housing and sales
prices. This may be tempered
to some extent by the current
imbalance between demand
and supply.
However, future decisions
made by the Government
around homebuyer initiatives,
new legislation, stamp duty
and the Bank of England
about interest rates, are likely
to create both risks and
opportunities for
homebuilders and their
customers.
We aim to commence work
on new sites as soon as
planning consents allow, to
accelerate build progress and
optimise return on capital
employed. The majority of
work performed on our sites
is subcontracted, providing
flexibility and supporting our
strategy.
If the availability of
subcontractors or materials is
insufficient to meet demand,
this could lead to longer build
times and increased costs,
thereby reducing profitability
and return on capital
employed.
Lack of skilled subcontractors
could also result in higher
levels of waste being
produced from our sites and
lower build quality.
We maintain regular contact
with suppliers, negotiating
contract volumes, pricing and
duration. We provide high
level and site-specific
programme information to the
subcontractor base to aid
with demand planning.
When selecting our
subcontractors, we consider
competencies particularly in
relation to health and safety,
quality, previous performance
and financial stability.
We are well underway with a
project to take on more direct
labour across the majority of
trades.
We are assessing alternative
build methods to reduce
reliance on traditional brick
and block techniques and
resources. We work to
address the skills shortage
with apprenticeship schemes
and the Construction Industry
Training Board.
With the growth in
housebuilding, availability of
materials is generally in line
with demand but there remain
pinch points with key
products such as bricks,
blocks and roof tiles. The cost
of these key products has
risen significantly and whilst
other material costs have
been stable in 2017 we are
experiencing more cost
pressure coming into 2018.
The supply of quality
subcontractors and labour
generally remains challenging.
The Group has agreed
product lines and volumes
with key suppliers to mitigate
long lead times and
shortages.
We are continuing to trial
several different build
methods as alternatives to
conventional brick and block.
taylorwimpey.co.uk
40
Principal Risks and Uncertainties continued
Risk
Relevance to strategy
Potential impact on KPIs
Mitigation
Progress in 2017
Not filling critical roles or
having a significantly changing
work force could lead to
delays in build, quality issues,
reduced sales levels, poor
customer service and
reduced profitability.
We monitor employee
turnover levels closely and
conduct exit interviews to
identify any areas for
improvement. We benchmark
our remuneration to ensure
that we are competitive within
the industry.
We extended the
management training and
graduate programme in
response to emerging gaps in
our pipeline, leading to an
increase in trainee and
graduate numbers and the
types of programme we offer.
D 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
Group HR Director
Every employee managing people
Our business model requires
significant input from skilled
people to deliver quality
homes and communities.
There continues to be
competition amongst
employers in the
housebuilding and
construction industries for
sector-specific staff.
Shortages exist across the
industry in the main manual
trades and in certain
managerial and professional
occupations. This could
impact our ability to achieve
our strategic goals.
Clear succession plans are in
place for key roles within the
Group. Our renewed
approach to succession
planning enabled more
internal candidates to be
promoted to senior roles. We
hold regular development
reviews to identify training
requirements.
Our land teams prepare
annual Land Strategy
documents to guide their land
searches to match the needs
of each individual business.
They select and appraise
each site, with the appraisal
process ensuring that each
project is financially viable,
consistent with our strategy
and appropriately authorised.
We strive to be the developer
of choice, through a
comprehensive approach
encompassing land vendors,
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 to promote
it through the planning
system.
2017 saw the trial of a new
Academy for Customer
Excellence, to improve the
skills and confidence of our
customer facing employees.
The Production Academy,
launched in 2016, saw the
first graduates and over 200
site-based staff have
progressed through the
Academy or are currently
completing the course. We
have increased the numbers
of apprentices, both direct
and indirect, in the year.
The short term land market
remained benign throughout
2017, albeit there is significant
variation in competition for
small sites compared with
larger sites. We continued to
invest in value-creating land
opportunities, maintaining
strong discipline on quality,
margin and return on capital
employed.
We are mindful of external
factors and continue to
critically assess opportunities
for robustness in changing
circumstances. The strong
level of conversion from the
strategic pipeline means our
reliance on purchasing short
term land is diminished,
providing some insulation
from land price increases.
E 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
Divisional Managing Directors
Regional Managing Directors
Regional Land and Planning Directors
Strategic Land Managing Directors
Land is a valuable resource
for the Group.
Limited availability of
good-quality land at an
attractive price throughout the
housing cycle can lead to
significant and unsustainable
competition. The disciplined
purchasing of land of the
appropriate quality, on
attractive terms and at the
right time and scale in the
economic cycle, will enhance
the Group’s ability to deliver
sustainable margins and
return on capital employed
through the cycle.
Purchasing poor quality or
mispriced land, or incorrectly
timing land purchases would
have a detrimental impact on
our profitability and return on
capital employed.
Acquiring insufficient land
would reduce our ability to
actively manage our land
portfolio and create value for
shareholders.
Taylor Wimpey plc Annual Report and Accounts 2017
Strategic Report 41
Risk
Relevance to strategy
Potential impact on KPIs
Mitigation
Progress in 2017
In addition to the potentially
tragic personal impact of an
accident on site or after
customer completion, there is
potential for legal proceedings
and civil, financial penalties,
reputational damage and
delay to the site’s progress.
Our operations involve, and
interface with, a large number
of people. This ranges from
employees and
subcontractors to customers
and their families who live on,
or visit, our sites each day.
We want everyone to go
home at the end of the day
uninjured and healthy.
Although the majority of our
developments comprise
houses and low-rise
apartment buildings, there are
a number of buildings which
are at or above 18 metres in
height.
F Site and product
safety
Construction sites and
operations can present risk to
health and safety. Suitable
and sufficient controls to
eliminate or reduce the risk
must be constantly
implemented, monitored and
measured. Unsafe practices
by our employees or
subcontractors, and unsafe
product quality, have the
potential to cause death or
serious injury.
The fire at Grenfell Tower, the
subsequent public scrutiny of
the relevant regulations and
the interim report of the
Hackitt Review, have all
brought to light that
throughout the industry,
cladding systems to tall
buildings require review.
Responsibility
Director of Health, Safety and
Environment
Group Operations Director
Group Director of Design
Every employee and
subcontractor
A comprehensive Health, Safety and
Environmental (HSE) Management System
is embedded throughout the business,
supported by policies and procedures to
ensure that we provide a safe and healthy
working environment and build homes that
comply with the required regulations.
We provide extensive HSE training for our
employees and provide HSE inductions
and regular Site Safe Briefings for our
contractors and operatives.
‘Blue Hat’ support teams from our
contractor base are integrated into our site
management teams, where they assist our
site managers to communicate the HSE
ethos and support maintaining a safe site.
Following guidance from the Government’s
Independent Expert Advisory Panel, we
have identified all buildings over 18 metres
(six storeys) constructed by or for Taylor
Wimpey, which have Aluminium Composite
Material (ACM). Where buildings have been
identified with the ACM cladding system,
we have notified the persons responsible
for those buildings and have directed them
to the interim mitigation advice from
Government.
Where appropriate, we have also followed
Government advice in seeking independent
professional advice on any further action
that should be taken.
All HSE issues are reviewed by the GMT on
a timely basis and actions put in place to
rectify issues and help prevent a
recurrence.
We continue to compare very
favourably with the UK
housebuilding and
construction industry in terms
of site safety. Our Annual
Injury Incidence Rate (AIIR) for
reportable injuries is below the
normal range for the industry.
2017 saw an AIIR for
reportable injuries at a record
low of 152 per 100,000
employees from 28 injuries
(2016: 211 from 36 injuries),
The number of injuries
classed as major was
54 in 2017 (53 in 2016).
During 2017, as a result of
our incident trend analysis,
there was an increased focus
on site housekeeping and our
groundworks operations.
We have continued our
‘supervising safely’ training,
with over 4,820 groundworks
supervisors trained and HSE
training for our ‘Blue Hat’
support workers as part of
our ‘Creating a Site Team
Approach’ initiative.
In light of Government advice
on tall buildings, we have
undertaken expert reviews on
a number of buildings.
Assessment of Prospects
We consider the long term prospects of the Group in light of our business
model. Our strategy to deliver sustainable value is achieved through
delivering high-quality homes in the locations where people want to live,
with excellent customer service, whilst carefully managing our cost base
and the Group’s balance sheet. Management re-evaluates the medium to
long term strategy, in the light of external, economic and industry changes.
If appropriate, management adapts the strategy accordingly, in light of
changes; for example, for material changes in planning and the wider
housing market fundamentals. The Group strategy is underpinned by our
short term landbank, which supports 5.1 years of development at current
completion levels. Additionally, the Group ensures a strong, long term
supply of land, with its Strategic Land business promoting land through the
constrained planning process. The Group has c. 8 years supply of land at
current completion levels in its strategic land pipeline.
Viability Statement
In accordance with provision C.2.2 of the 2014 revision of the UK Corporate
Governance Code, the Directors have assessed the prospects of the
Company over a longer period than the 12 months required by the ‘Going
Concern’ provision. Whilst our operating plan covers a period of three years,
the Board conducted their viability assessment for a period of five years,
which is an increase of two years since 2016, to better reflect the forecast
period that the Board considers. The Company operates in a market which
is prone to cyclicality, tending to follow the UK economic cycle. It is impacted
by Government policy, planning regulation and the mortgage market.
However, the Board considers that the Company has reasonable visibility
over a five-year time horizon. This period aligns with the average build out
time for a development phase from the point of land acquisition to final
delivery to our customers.
The viability assessment includes the Group’s income statement, balance
sheet, cash flows, KPIs and debt covenants, and considers the potential
impacts which may arise from the Principal Risks of the business as
described on pages 38 to 41. It includes macro-economic and industry-
wide projections as well as matters specific to the Group.
The assessment considers sensitivity analysis on a series of realistically
possible, but severe and prolonged, changes to principal assumptions. This
downside scenario reflected the potential impact of declining customer
confidence, disposable incomes, and higher interest rates as may be
experienced as a secondary impact to the Group from the UK leaving the EU.
As such, we reduced volumes by 30% and selling prices by 20% over the first
two years, with no recovery. The assessment also reflects the potential
consequences of changes to our Principal Risks, including an increase to build
costs of 10% and an adverse price movement of 10% in the land market. We
also considered mitigating actions, assuming continued investment in land,
albeit at a reduced level, and the continued payment of the annual ordinary
dividend of £150 million throughout the period. Based on the results of this
analysis, the Directors have a reasonable expectation that the Company will be
able to continue in operation and meet its liabilities as they fall due over the
five-year period of their assessment.
taylorwimpey.co.uk
42
Group Financial Review
Focused on sustainable financial
returns through the housing cycle
14,842
Group completions including joint ventures
£3,965.2m
Revenue
£841.2m
Adjusted operating profit*
£555.3m
Profit after tax
UK
14,541
3,871.0
814.4
21.0
785.2
Spain
301
94.2
26.8
28.5
26.8
Consolidated
14,842
3,965.2
841.2
21.2
812.0
555.3
17.0
20.2
13.79
Ryan Mangold
Group Finance Director
2017 Group results
Completions including joint ventures
Revenue (£m)
Adjusted operating profit* (£m)
Operating profit* margin (%)
Profit before tax and before exceptional items (£m)
Profit for the year (£m)
Basic earnings per share (p)
Adjusted basic earnings per share†† (p)
Total dividends paid per share – total (p)
Note: More information on segmental reporting can be found in Note 5 to the Consolidated Financial Statements.
Taylor Wimpey plc Annual Report and Accounts 2017
Strategic Report 43
The Group Financial Review is presented at Group level, which includes
Spain, unless otherwise indicated. A short summary of the Spanish
business follows.
South East Division saw operating profit* growth of 8.4% to £271.4 million
(2016: £250.4 million), delivering growth of 1.2 percentage points in return on
net operating assets** to 25.9% (2016: 24.7%).
Joint ventures are excluded from the operational review and are separated out
in the Group Financial Review, unless stated otherwise.
Income statement
Group revenue increased by 7.9% to £ 3,965.2 million in 2017
(2016: £3,676.2 million). This increase was driven by increased completions
and improved selling prices in the UK. Group completions increased by 4.1%
to 14,688 (2016: 14,112).
Group gross profit of £1,033.0 million (2016: £939.9 million) increased by
9.9% with the top line revenue growth partially offset by higher build costs.
Gross profit includes positive contribution of £17.4 million (2016: £13.1 million)
which represents previously written down inventory allocated to a plot which
has subsequently resulted in a gross profit on completion. This can be due to
revenue outperformance, cost efficiencies or product mix improvements.
In 2017, 5% (2016: 5%) of the Group’s UK completions were from sites that
had been previously impaired. In Spain, 35 plots (2016: 65) were completed
that had previously been impaired. The Group anticipates that c.2% of UK
2018 completions will come from sites that have been previously impaired.
Adjusted operating profit* increased by 10.1% to £841.2 million
(2016: £764.3 million), delivering an operating profit* margin of 21.2%
(2016: 20.8%) from marginally improved overhead efficiency.
The improvement in the UK was driven by improved selling prices, up 3.5% to
£264k (2016: £255k), and UK volume growth of 4.2% to 14,387 completions
(2016: 13,808). Average selling prices on private completions increased by
3.5% to £296k (2016: £286k) in the UK, with this increase being in part as a
result of our underlying shift to better quality locations and by capturing market
sales price increases.
The UK land cost per unit sold remains unchanged at £45.4k (2016: £45.4k)
in spite of the continued shift to better quality locations. Total UK land cost per
completion as a percentage of selling prices was 17.2% (2016: 17.8%).
Underlying build cost per unit in the UK increased to £143.7k (2016: £137.2k),
driven by build cost inflation, the impact of higher infrastructure costs due to a
higher proportion of strategic sites and further product quality improvements
implemented during the year. Other direct costs and selling expenses per unit
decreased marginally to £6.0k (2016: £6.2k), being 2.3% of total revenue
(2016: 2.4%). UK contribution per completion increased by 5.8% to £69.3k
for the period (2016: £65.5k).
On a divisional basis the three UK operating divisions delivered a combined
increase of 9.0% in operating profit* to £884.3 million (2016: £811.1 million).
The North Division generated a 5.3% increase in operating profit* to
£294.9 million (2016: £280.0 million), delivering a return on net operating
assets** of 35.6%, 1.2 percentage points above prior year (2016: 34.4%). The
Central and South West Division increased operating profit* by 13.3% to
£318.0 million (2016: £280.7 million), improving the return on net operating
assets** by 3.9 percentage points to 43.0% (2016: 39.1%). The London and
During the year, completions from joint ventures were 154 (2016: 73). The
total order book value of joint ventures as at 31 December 2017 was
£4 million (31 December 2016: £52 million), representing seven homes
(31 December 2016: 100). The total 2017 year end order book reflects the
development phasing at the two main joint venture sites, with delivery
expected later in 2018. Our share of results of joint ventures in the period was
£7.6 million (2016: £1.2 million).
Group net finance costs for the period were £29.2 million (2016: £30.9 million).
Interest on overdraft, bank and other loans decreased by £4.9 million year on
year and benefited from average net cash of £186.5 million (2016: net debt of
£87.4 million). Unwind of the discount on land creditors was £20.7 million
(2016: £17.7 million). The notional interest on the pension deficit was
£5.9 million (2016: £6.1 million), with lower discount rates offset by higher
average deficit level.
Pre-exceptional profit before tax for the year from operations increased by
10.7% to £812.0 million (2016: £733.4 million). The pre-exceptional tax
charge was £151.7 million (2016: £143.7 million) with an underlying tax rate of
18.7% (2016: 19.6%) that largely reflects the statutory tax rate in the UK. An
exceptional tax credit of £25.0 million was recognised in respect of the
£130.0 million exceptional provision recognised in the year.
This resulted in a profit, before exceptional items, for the year of £660.3 million
(2016: £589.7 million), 12.0% up on the prior year due to the improvement in
the operational result, lower net finance costs and lower effective tax rate.
Profit after tax was £555.3 million, down 5.8% on 2016, as a result of the
exceptional charge relating to the leasehold review. We continue to view the
provision, before tax, of £130 million as an appropriate estimate and we have
made good progress in securing agreements with freeholders representing
over 90% of historic leases with a ten-year doubling ground rent clause, to
enable our customers to convert to a RPI-based structure, should they elect
to participate in the assistance scheme we announced last April. We continue
to work with the remaining freeholders to address the small number of
remaining leases. The pace of usage of the leasehold provision will be
dependent on the number of applications received from customers with these
leases and the length of time it will take to change their lease terms with the
relevant freeholder, and the approvals that may be required from individual
mortgage providers and management companies as appropriate. It is
expected that a large proportion will be utilised and paid in 2018 and 2019
with the balance spread over a number of years.
Basic earnings per share was 17.0 pence (2016: 18.1 pence). The adjusted
basic earnings per share†† was 20.2 pence (2016: 18.1 pence), up 11.6%.
Definitions
Operating profit is defined as profit on ordinary activities before net finance costs, exceptional items and tax, after share of results of joint ventures.
*
** Return on net operating assets is defined as 12-month rolling operating profit divided by the average of the opening and closing net operating assets, which is defined as net assets less net
cash less net tax balances, excluding any accrued dividends.
*** Return on capital employed is defined as a 12-month rolling operating profit divided by the average of the opening and closing capital employed.
**** Operating cash flow is defined as cash generated by operations before tax, interest paid, and exceptional cash flows.
†
Tangible net assets per share is defined as net assets before any accrued dividends excluding goodwill and intangible assets divided by the number of ordinary shares in issue at the end
of the period.
Adjusted basic earnings per share represents earnings attributed to the shareholders of the parent, excluding exceptional items and tax on exceptional items, divided by
the number of shares in issue during the period.
Net operating asset turn is defined as total revenue divided by the average of opening and closing net operating assets. Based on rolling 12 months.
†*
†** WIP turn is defined as total revenue divided by the average of opening and closing work in progress. Based on rolling 12 months.
††
taylorwimpey.co.uk
44
Group Financial Review continued
Balance sheet
Net operating assets were £2,654.1 million (31 December 2016: £2,539.6
million), reflecting a net investment of £61.7 million (2016: £113.3 million) year
on year in land and work in progress (WIP), funded by profitability in the
period, as well as a lower pension deficit. Return on net operating assets**
increased by 1.7 percentage points to 32.4% (2016: 30.7%), mainly reflecting
improved profitability while maintaining balance sheet discipline. Net operating
asset turn†* increased to 1.53 times (2016: 1.48 times).
Pensions
As at 31 December 2017, the IAS 19 defined benefit pension scheme
valuation is in surplus by £23.9 million. This is due to significant asset
outperformance and changes in actuarial assumptions, the most significant of
which relates to the life expectancy of scheme members. During 2017, a
Medically Underwritten Mortality Study (MUMS) was commissioned in addition
to using postcode analysis data which has historically formed the basis of
member life expectancy.
The Study surveyed 3,206 members covering 45% of scheme liabilities, all
between the ages of 55 and 80 and had a 58% response rate, representing
£621 million of the scheme liabilities. The liability reduction resulting from this
study has been partially offset by a 0.15% decrease in the discount rate with
the balance of actuarial assumptions staying broadly stable. Due to the rules
of the scheme, this surplus cannot be recovered by the Group and therefore a
deficit of £63.7 million has been recognised on the balance sheet under
IFRIC14 (the limit on a defined benefit asset, minimum funding requirements
and their interaction). This deficit is equal to the present value of the remaining
committed payments under the 2013 triennial valuation. The Group continues
to work closely with the Trustees in managing pension risks, including
management of interest rate, inflation and longevity risks. The Scheme assets
are approximately 80% hedged against changes in both interest rates and
inflation expectations on the Scheme’s long term, ‘self-sufficiency’ basis. The
Scheme also benefits from a bulk annuity contract which covers some of the
largest liabilities in the Scheme, providing protection against interest rate,
inflation and longevity risk. In 2017 we paid £23.1 million in pension
contributions (2016: £23.1 million).
During 2017 we engaged with the Pension Trustees on the triennial valuation
of the pension scheme as at 31 December 2016. The agreed technical
provisions deficit at 31 December 2016 was £222 million, which has reduced
to c.£30 million as at 31 December 2017 due to the liability hedging
programme in place as well as continued asset performance. A four-year
recovery plan has been agreed with the Trustees in principle for contributions
from 1 April 2018 moving to £40 million per annum with a funding mechanism
that will be tested on a quarterly basis such that should the scheme reach a
technical provisions surplus, further contributions will be suspended and only
recommence if the funding level falls below 96% given how well capitalised
the scheme is.
Turning profit into cash
1,000
800
600
400
m
£
200
0
(200)
(400)
(600)
(800)
90
80
70
60
50
40
30
20
10
0
0
0
0
‘
s
t
o
P
l
2012
2013
2014
2015
2016
2017
EBITDA
Pensions, tax, interest
Short term land plots
Working capital
Dividends
As at 31 December 2017, the UK held short term owned land valued at £2.3
billion (2016: £2.3 billion), representing 56,619 plots (2016: 57,287). The total
controlled short term landbank represented 18,230 plots (31 December
2016: 18,947). The value of long term owned land decreased by 33.3% to
£90 million (2016: £135 million), representing 26,836 plots (2016: 27,826),
with a total controlled strategic pipeline of 90,409 plots (31 December
2016: 80,190). Total potential revenue in the owned and controlled landbank
increased to £47 billion in the period (31 December 2016: £42 billion),
reflecting underlying price improvement and the increase in the scale of
the landbank.
Average WIP per UK outlet at 31 December 2017 increased by 6.7% to
£4.8 million (2016: £4.5 million), reflecting the high proportion of strategic land
conversions which require a greater level of infrastructure investment, build
cost inflation, and our continuing focus on delivering a consistent standard to
our customers that has added, on average, two weeks to our production
programmes. UK WIP turn†** reduced marginally to 2.95 times (2016: 3.00
times) as a result. As at the balance sheet date, the Group held certain land
and work in progress that had been written down to a net realisable value of
£87.7 million (31 December 2016: £138.3 million) of which the balance in the
UK was £69.9 million (31 December 2016: £119.6 million). As at
31 December 2017, the associated write-downs were £93.3 million
(31 December 2016: £147.0 million) of which the balance in the UK was
£46.9 million (31 December 2016: £96.8 million) and principally relates to
eight locations.
As at 31 December 2017, in the UK, 2% of our short term owned and
controlled land was impaired (31 December 2016: 3%), with 83% of the short
term owned and controlled landbank purchased after 2009, 63% of which
was sourced through our strategic pipeline, resulting in a land cost to average
selling price in the short term owned landbank of 14.8% (31 December
2016: 15.4%).
We continue to use land creditors as a way of funding land acquisitions where
this results in better return on our investment for longer dated delivery
schemes and is value-enhancing for the business. Land creditors increased to
£639.1 million (31 December 2016: £599.8 million) and, combined with net
cash, resulted in adjusted gearing of 4.1% (31 December 2016: 8.1%).
£326.6 million of the land creditors is expected to be paid within 12 months
and £201.6 million between one and two years from balance sheet date.
Included within the land creditor balance is £117 million of UK land overage
commitments (31 December 2016: £130 million).
The mortgage debtor balance was £63.1 million at 31 December 2017
(31 December 2016: £78.0 million), with the decrease due to redemption
receipts of £18.5 million (31 December 2016: £21.1 million), offset by gains
(including fair value adjustment) of £0.6 million and interest income of
£2.9 million.
Our net deferred tax asset decreased to £29.3 million in the period
(31 December 2016: £57.4 million) and relates principally to our pension deficit
and our Spanish business. £9.4 million of this asset relates to the temporary
differences of our Spanish business, including brought forward trading losses.
Net assets at 31 December 2017 increased by 23.7% to £3,587.8 million,
before dividends paid in the period, and by 8.2% overall year on year to
£3,137.3 million (31 December 2016: £2,900.3 million). The net asset increase
from 31 December 2016 was driven by profitability in the period and the
pension actuarial assumptions and asset performance decreasing the pension
deficit year on year, offset by the £450.5 million dividend paid in the year.
Taylor Wimpey plc Annual Report and Accounts 2017
Strategic Report
45
Value distributed during 2014-2017 (£m)
The chart demonstrates / shows how value is contributed / distributed amongst stakeholders and invested in the business.
m
£
500
450
400
350
300
250
200
150
100
50
0
Contribution to
local communities
Employment
Pension
contributions
Taxes
Net investment
in land and WIP
Debt servicing
Dividends
2014
2015
2016
2017
Cash flow
Net cash increased to £511.8 million at 31 December 2017 from
£364.7 million at 31 December 2016, despite returning £450.5 million to
shareholders by way of dividends in the year (2016: £355.9 million). This
improvement in net cash is largely as a result of strong performance in
underlying trading and maintaining balance sheet discipline.
Going concern
The Directors remain of the view that the Group’s financing arrangements and
balance sheet strength provide both the necessary facilities and covenant
headroom to enable the Group to conduct its business for at least the next
12 months. Accordingly, the consolidated financial statements are prepared
on a going concern basis.
Net land spend, net of the movement in land creditors, was £645.6 million
(2016: £583.2 million) and we invested the sum of £2,386.7 million in work in
progress in the period (2016: £2,269.8 million). In 2017, we paid £5.1 million in
interest costs (2016: £13.5 million). During 2017, we paid £126.7 million in
corporate tax (2016: £71.0 million), reflecting the profit and loss charge.
£13.3 million was spent during the year to acquire shares for satisfying future
share scheme awards (31 December 2016: £10.6 million).
In the 12 months to 31 December 2017 we converted 87.5% of operating
profit* into operating cash flow**** (2016: 81.4%).
Financing structure
At 31 December 2017 our committed borrowing facilities were £638.7 million
with an average maturity of 2.6 years. Average net cash for 2017 was
£186.5 million (2016: £87.4 million net debt).
On 14 February 2018, we completed an amendment and extension of the
£550 million revolving credit facility to mature in 2023 on improved terms with
an option to extend for a further two years. This extends the average maturity
of the committed borrowing facilities to 5.2 years
Spain
The Spanish housing market remained positive throughout 2017. We
completed 301 homes in 2017 (2016: 304) at an average selling price of
€352k (2016: €358k). The total order book as at 31 December 2017 was 329
homes (31 December 2016: 293 homes).
The Spanish business delivered a significantly improved operating profit* of
£26.8 million for 2017 (2016: £20.6 million) and an operating profit* margin of
28.5% (2016: 22.0%) as a greater proportion of delivery is from high-quality
locations acquired more recently and as we see the benefits of an improving
wider market environment. Looking ahead, we believe the business is well
positioned for further growth in 2018.
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. There have been no changes to IFRS during 2017
that have a material impact on the Group results.
Ryan Mangold
Group Finance Director
For our Viability Statement see page 41.
Approval of the Strategic Report
This Strategic Report was approved by the Board of Directors and
signed on its behalf by
Pete Redfern
Chief Executive
taylorwimpey.co.uk
46
Board of Directors
A leadership team
committed to our stakeholders
Chairman
Executive Directors
Independent Non
Executive Directors
N
R
Kevin Beeston
Chairman
Pete Redfern
Chief Executive
Ryan Mangold
Group Finance Director
James Jordan
Group Legal Director and
Company Secretary
Date of appointment
Joined July 2010
Date of appointment
Joined July 2007
Date of appointment
Joined November 2010
Date of appointment
Joined July 2011
Skills & experience
Ryan has operational
responsibility for managing
the Company’s finances and
also oversees the
commercial, information
technology and pension
functions. He has financial,
treasury, risk and financial
control expertise including
that gained from his five
years as Group Financial
Controller of Mondi Group
and earlier whilst holding a
number of senior finance
roles with the Anglo
American plc group
of companies.
Ryan previously held the
post of Group Financial
Controller of Taylor
Wimpey plc.
Skills & experience
Kevin has significant
experience of chairing
boards and of being a non
executive director of both
public and private
companies. He also brings
a wealth of commercial,
financial and high level
management experience
including being a former
CEO of a FTSE
100 company.
Kevin was formerly
Chairman of Equiniti Group
plc; Serco Group plc and
Domestic and General
Limited; and was previously
a non executive director
of IMI plc.
External appointments
Kevin is Chairman of Elysium
Healthcare Limited and a
non executive director of
Severn Trent plc; Marston
Corporate Limited and The
Football Association Premier
League Limited.
Skills & experience
Pete 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 operations.
Pete has full day to day
operational responsibility for
delivering the Company’s
strategy in a profitable, safe
and environmentally
responsible manner. He has
significant financial,
operational and
management experience,
gained from his various roles
in industry and from his time
at KPMG.
External appointments
Pete is a non executive
director of Travis Perkins plc,
where he is also chairman of
the Stay Safe Committee
and a member of the
Remuneration Committee.
He is also Chairman of the
Youth Adventure Trust
charity and a Trustee of the
homelessness charity Crisis.
Skills & experience
James, a solicitor, was previously
Group Company Secretary and
General Counsel of George
Wimpey Plc from February 2002
until July 2007, when, following
the merger, 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.
James oversees compliance
with legal and regulatory
obligations and also manages
the Company’s Legal and
Secretariat Departments.
He has significant legal,
commercial, transactional
and regulatory / corporate
governance related
experience.
External appointments
James is a Trustee of the
Tennis Foundation charity
where he also chairs their
Audit and Remuneration
Committees.
Board gender diversity
N
A
R
Kate Barker DBE
Independent
Non Executive Director
Date of appointment
Joined April 2011
Skills & experience
Kate is a business economist
and was previously a
member of the Bank of
England’s Monetary Policy
Committee (MPC) from 2001
until May 2010. During this
period, Kate also led two
major policy reviews for the
Government, on housing
supply and on land
use planning.
Kate will become the
Company’s Senior
Independent Director on
26 April 2018.
External appointments
Kate is a Trustee Director
and Chairman of the British
Coal Superannuation
Scheme and a non executive
director of Man Group plc.
Her other roles include being
a member of the National
Infrastructure Commission
and an external member of
Oxford University’s Council.
Find out more
Read more on
our Governance
and Board
Structure
Pages 48-61
Read more on our
Board Activities
Page 55
Read more on our
Board Framework
Page 54
A
N
R
Audit Committee
Nomination
Committee
Remuneration
Committee
Chairmanship
of the Committee.
Taylor Wimpey plc Annual Report and Accounts 2017
Executive
Male: 3
Female: 0
Group Board
Non Executive
Male: 7
Female: 3
Male: 3
Female: 3
Directors’ Report: Governance 47
N
R
N
A
N
A
R
N
A
R
N
A
Gwyn Burr
Independent
Non Executive Director
Date of appointment
Joined 1 February 2018
Mike Hussey
Independent
Non Executive Director
Date of appointment
Joined July 2011
Angela Knight CBE
Independent
Non Executive Director
Date of appointment
Joined November 2016
Rob Rowley
Independent
Non Executive Director
Date of appointment
Joined January 2010
Humphrey Singer
Independent
Non Executive Director
Date of appointment
Joined December 2015
Skills & experience
Mike 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.
External appointments
Mike is a Fellow of the Royal
Institution of Chartered
Surveyors, a Trustee of the
Royal College of Surgeons
of England and a Governor
of the Southbank Centre.
Skills & experience
Angela brings to the Board a
wealth of experience gained
at a senior level in both the
public and private sectors.
Previously, Angela was a
Member of Parliament from
1992 to 1997, including two
years as the Economic
Secretary at HM Treasury.
External appointments
Angela is Chairman of the
Office of Tax Simplification in
HM Treasury; senior
independent director of
TPICAP Plc; and a non
executive director of
Arbuthnot Latham & Co.
Skills & experience
Rob has a wealth of financial,
commercial and
management expertise,
principally from his time as
Finance Director of Reuters
plc and Deputy Chairman of
Cable & Wireless plc.
Rob is the Company’s
Senior Independent Director.
External appointments
Rob is the senior
independent director and
Chairman of the audit
committee of Greene King
plc and a non executive
director of Camelot Group
where he is also Chairman of
the audit, risk and
security committee.
Skills & experience
Humphrey has a wealth of
financial experience and
expertise in the areas of
both digital solutions and
customer services. He is
Group Finance Director of
Dixons Carphone plc, a role
to which he was
appointed in 2014.
External appointments
Humphrey is Group
Finance Director
of Dixons Carphone plc and
it has been announced that
he will leave his current role
on a date to be determined,
in order to join Marks and
Spencer Group plc as their
Chief Finance Officer.
Skills & experience
Gwyn has over 25 years’
executive experience,
principally in marketing, HR
and customer service in the
retail sector, which included
the roles of Customer
Director and Customer
Service and Colleague
Director at Sainsbury plc.
Previously, Gwyn held
non executive positions
with the Principality Building
Society Limited, Wembley
National Stadium Limited
and the Financial
Ombudsman Service.
External appointments
Gwyn’s other non executive
directorships include
Hammerson plc, Just Eat
plc, Sainsbury’s Bank plc,
Metro AG (a German listed
company) and DFS
Furniture plc (where it has
been announced that she
intends to step down in the
Spring of 2018).
Non Executive Director tenure
Non Executive Director experience
0-3 years
5-6 years
7-8 years
Materials
Customer
service
Economist
3
1
2
2
1
1
Public
sector
1
Media
Marketing
Property
Financial
services
1
2
2
2
taylorwimpey.co.uk
48
Corporate Governance
Good governance is
at the heart of what we do
Governance highlights for 2017
– Fully met all of the requirements of the UK Corporate
Governance Code. Please see page 53.
– Fully met all of the requirements set out in the Financial Reporting
Council’s Guidance on Risk, Internal Control and Related Financial and
Business Reporting. Please see page 64.
– Made good progress towards achieving our strategy for improving
diversity and inclusivity at all levels throughout the Group’s businesses.
Please see page 72.
– Conducted a comprehensive externally-facilitated Board Evaluation
exercise. Please see page 61.
– Further developed and enhanced the Company’s succession and
contingency planning processes across the Group. Please see
page 70.
– Reviewed data collection in preparation for publishing the Company’s
first Gender Pay statement which will appear on our website in 2018.
– Fully embedded processes and procedures across the business and
its supply chain in compliance with the Modern Slavery Act 2015 and
prepared our second annual statement which appears on our website.
Please see page 96.
– Implemented a new Remuneration Policy and new long term
incentive plan.
– Validated the procedures and processes which will be required to
meet the new statutory reporting of payment terms during 2018.
Culture, values and ethics
The Board strongly believes that good governance should be focused not
only on how the Board itself operates effectively but also, and very importantly,
on the culture within which all of our businesses operate and conduct
themselves on a day to day basis. The culture, values and ethics set out in the
Chief Executive’s Statement on page 12 are set by the Board and then led in
our operations by the Chief Executive and the rest of our Executive and senior
management teams. The principles of good governance are embedded
throughout the organisation and by way of example, manifest themselves in
a number of different ways, including the following:
– An absolute and non-negotiable requirement to ensure the health and
safety of our employees, customers, subcontractors, suppliers and
visitors to our offices and developments. Please see page 18.
– The requirement to observe good business practice, including abiding by
all applicable laws and regulations that relate to our business. Please see
page 60.
– The provision of mandatory training on key legislation and regulations to
all of our business units.
– Our Group-wide Operating Framework control document setting out
delegated authority limits.
– A system of controls and checks underpinned by a rigorous Internal
Audit Department and overseen by the Audit Committee.
– Regular and embedded risk assessment and monitoring processes.
Please see page 64.
– Encouraging and investigating any disclosures made either directly or
through an independent whistleblowing hotline. Please see page 66.
Governance developments during the period
There were a number of significant developments in the area of corporate
governance during 2017.
Kevin Beeston, Chairman
Dear Shareholder
In my capacity as Chairman of the Board, I am very pleased to again have
this opportunity to make a personal statement on the Company’s approach
to corporate governance.
Firstly, I would like to emphasise again that the Board continues to take
corporate governance very seriously and has been able to demonstrate this
over many years with full compliance with the UK Corporate Governance
Code (the Code). The requirements of the Code are summarised in the table
on page 53 where we have included a signpost directing you to the relevant
page which sets out in detail how the Company has complied with the various
provisions of the Code. Where possible, the Company has consistently
sought to comply with planned improvements to the Code, and with wider
governance initiatives, often in advance of their formal application to our
reporting years. This proactive approach is demonstrated by the
establishment during the year of our National Employee Forum, in response to
the Government’s employee voice initiative and which is likely to form part of
the revised Code scheduled to apply to companies with effect from
1 January 2019. The Board recognises the importance of considering the
Company’s responsibilities and duties to both its shareholders and its broader
stakeholder group and this has been part of our culture and decision making
process for many years. The Directors’ duties of s.172 of the Companies Act
2006 help to underpin the good governance which is at the heart of what we
do and the Board receives regular briefings and updates on corporate
governance at its Board and Committee meetings.
This report on corporate governance aims to set out and explain in clear terms
the governance-related processes and procedures in place at Taylor Wimpey
which we believe are essential for the delivery of the long term success of the
Company. It is these processes that ensure we comply with all applicable
laws and regulations as well as, of course, meeting the requirements of
relevant stakeholders, including our shareholders and their representative
bodies with whom we are always very pleased to engage and we very much
appreciate their constructive and helpful approach.
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 49
Perhaps the most important of these was the publication in August of the
Government’s proposals for Corporate Governance reforms in certain key
areas, in respect of which the Company has already taken action to address
some of these areas, as set out below:
– Requiring annual reporting and narrative around CEO pay relative to the
workforce. Please see page 88.
– Demonstrating how the Directors met the requirement of s.172 of the
Companies Act for them to promote the success of the Company for its
members whilst also having regard to long-term success; other
stakeholders’ interests (including employees; shareholders; customers;
suppliers and the wider communities in which our business operates);
the impact on the environment; and maintaining high standards of
ethics. Please see page 51.
– Strengthening the voice of employees at Board level which I have
already mentioned. Please see pages 23, 51, 81 and 95.
Key amongst these developments is the requirement to clearly explain how
the Board led an appropriate level of engagement with stakeholders in order
to meet its duty under s.172 of the Companies Act to promote the success
of the Company whilst taking into account the interests of other
stakeholders. Details of this engagement during 2017 and into 2018,
together with our actions taken in response, are set out on page 51.
The UK Financial Reporting Council (FRC) has published its proposals for a
review of the Code, focusing particularly on the culture of the Company; on
succession planning at Board level; on proposals arising from the
Government’s consultation during 2017 on executive pay, Directors’ duties
and Board composition; and wider recommendations to promote good
corporate governance. The Board welcomes these proposals and will
explain in next year’s Annual Report and Accounts what changes were
made to the Code and how the Company has responded to them.
The Investment Association published its views on how companies should
seek to respond to the Government’s initiatives towards increasing
productivity, including greater recognition of the importance of ‘human
capital’ and a clearer focus on training and development. Details of our
initiatives in this regard appear on pages 22 to 23, 40 and 69.
The aim of these initiatives is to ensure that good governance goes deeper
than simply ‘box ticking’. The Board reviewed and welcomed these
initiatives as they are designed to help to provide shareholders and all of our
stakeholders with increased assurance that the Company is being managed
with their best interests firmly in mind, whilst also taking account of other
relevant interests and the impact of the Company’s activities on the
wider community.
The Board welcomes the Government’s proposals and will respond to
them, to the extent not already done so, as they are implemented.
Appointments and succession
There was no change to the composition of the Board during 2017.
On 10 January 2018, after a review of the Board’s composition by the
Nomination Committee, the Company announced a number of changes:
Gwyn Burr was appointed as an Independent Non Executive Director on
1 February 2018. Gwyn’s executive experience over 25 years, principally in
customer service in the retail sector, will add to the Board’s skill sets in this
area. Gwyn has excellent experience gained from both her previous executive
positions and also from her non executive roles, all of which will help to further
strengthen the Board’s expertise, including our ongoing focus on customer
service. I am delighted to welcome Gwyn to the Board and to support
Resolution 12 at the 2018 Annual General Meeting proposing her election by
shareholders, in respect of which more details appear on page 156.
Rob Rowley will stand down as an Independent Non Executive Director and
as the Senior Independent Director after the conclusion of the 2018 AGM on
26 April 2018. I should like to express both mine and the Board’s gratitude
to Rob for his long and valued contribution to the Company’s progress and
stewardship. Over the past eight years he has provided wise counsel as
Senior Independent Director to myself as Chairman, careful oversight of the
Audit Committee and an invaluable contribution to the Board. We wish him
all the very best for the future.
Kate Barker will be the Company’s Senior Independent Director following the
AGM, and brings to the role a wide range of experience, both of the Company
and of wider corporate, economic and stewardship principles.
As reported on page 62, Humphrey Singer was appointed as Chairman of the
Audit Committee on 10 January 2018 and brings wide experience of financial
reporting and compliance to the role, including from his prior period of service
on the Audit Committee prior to this appointment.
The Nomination Committee regularly reviews the composition; balance; skills;
and experience of the Board and concluded throughout 2017 and, following
the changes set out above announced earlier in 2018, that the balance and
composition of the Board, which includes a majority of Independent Non
Executive Directors, will continue to provide the right blend of experience,
expertise and challenge to ensure good governance so as to enable the
Company to successfully implement its strategy.
Board evaluation
It is a key requirement of good governance that an annual evaluation is carried
out to ensure that the Board itself operates effectively. In line with the Code
requirement that the evaluation be externally-facilitated at least every three years,
the evaluation for 2017 was facilitated by Manchester Square Partners. Full
details of the evaluation methodology and its outcome are set out on page 61.
Diversity
Diversity and inclusivity has continued to be a key item on the overall UK
governance agenda during 2017, as the Company works towards the target
introduced by Lord Davies of Abersoch’s review for the proportion of women
on each FTSE 350 company’s board to increase from the current 25% target
to 33% by 2020. The Board also welcomes the Hampton Alexander Review
which proposes to increase Board and senior leadership diversity, more
details of which are set out on page 71. The Board very much welcomes
these increased targets which are designed to give greater impetus to the
progress of enhanced gender diversity on PLC boards. This, together with
other aspects of diversity, such as the latest proposals from the FRC to
require greater consideration of ethnic and social diversity when planning
Board appointments, is very much in the thinking of the Nomination
Committee when reviewing the balance and composition of the Board and
the structuring of talent development initiatives across the Group.
The Company fully recognises the importance of diversity and its policy is to
appoint or promote, as appropriate, the best person for the role in question
without taking account of factors such as educational or professional
backgrounds save as appropriate for the position; age; gender; ethnicity; or
disability. The objective of this policy is to ensure that diversity is built into the
Company’s appointment and promotion process and that only relevant
factors are taken into account when considering such matters. The policy
has been implemented through training sessions on unconscious bias for
management teams throughout the Company’s business and its head office
functions. Progress to date in this area is set out on page 70.
Conclusion
I believe that your Board remains effective and continues to work well.
I am confident that the Board has the right balance of skills, expertise and
professionalism to continue to deliver strong governance whilst allowing the
Executive Directors to implement and deliver the strategy (as set out on
page 13) within the strong culture that we have worked hard to establish.
Whilst I am also pleased with the Board’s activity and approach with regard
to corporate governance, we continually look for ways to learn and improve.
As ever, I very much look forward to meeting with shareholders at the Annual
General Meeting on 26 April 2018 and, as always, along with all of your
Directors (who will all be present at the AGM), remain available to answer
or respond to your questions, concerns and suggestions at any time.
Kevin Beeston
Chairman
taylorwimpey.co.uk
50
Corporate Governance continued
Role of the directors
Whilst all Directors share collective responsibility for the activities of the Board, some Directors’ roles have
been defined in more detail as Governance considerations have developed over time, as follows:
Chairman
– Ensuring high standards of corporate
governance and setting the cultural tone from
the top
– Encouraging constructive challenge and
facilitating effective communication
between Directors
– Building a well-balanced and highly
effective Board
– Ensuring the effectiveness of the Board and
enabling an annual review of its effectiveness
– Agreeing the Chief Executive’s
personal objectives
– Ensuring there is effective two-way
communication and debate with shareholders
– Maintaining an appropriate balance between
– Chairing Board meetings and setting
– Engaging individually with Directors
the interests of stakeholders
Board agendas
as required
– Promoting effective Board relationships
– Ensuring appropriate induction and
development programmes for
individual Directors
Chief Executive
– Developing and implementing Group strategy
– Recommending the strategic plan and related
annual budget
– Ensuring coherent leadership of the Group
– Managing the Group’s risk profile and
establishing effective internal controls
Group Finance Director
– Operational responsibility for managing the
Company’s financial affairs, including treasury
and tax matters
– Regularly reviewing the organisational
– Maintaining relationships with investors and
structure; developing the Executive Team;
and planning for succession
– Ensuring the Chairman and the Board are
kept advised and updated regarding
key matters
advising the Board accordingly
– Setting the culture at the top, particularly with
regard to compliance and sustainability
– Day to day running of the business
– Overseeing the commercial, information
technology and pension departments
– In conjunction with the Group Management
Team overseeing the Company’s risk profile
Group Legal Director and Company Secretary
– Advising the Board on matters of corporate
governance, compliance and on legal issues
– Responsible for all legal compliance matters
Exercutive Directors
– Ensuring effective support to the Board and
– Providing support to the Chairman and Non
– Keeping abreast of shareholders’ views
relating to the Group
its meetings and agendas to enable
efficient process
Non Executive Directors
– Providing effective and constructive challenge
to management
– Serving on Board committees
– Providing advice to management and sharing
– Keeping abreast of shareholders’ views
– Assisting in development and approval
their experience and wisdom
of strategy
Senior Independent Director
– Acting as a sounding-board for the Chairman
– Acting as an intermediary for other Directors,
– Leading the search for a new Chairman,
on Board-related matters
when necessary
when necessary
– Chairing meetings in the absence of
the Chairman
– Leading the evaluation of the
Chairman’s performance
– Being available to shareholders who wish to
discuss matters which cannot be
resolved otherwise
Read more about individual Directors’ skill sets on page 58.
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 51
Stakeholder engagement
We actively encourage engagement with our shareholders and other stakeholders.
As previously mentioned, the Directors are required by law to act in a
way that promotes the success of the Company for the benefit of
shareholders as a whole. In so doing the Company must also have
regard to wider expectations of responsible business behaviour, such as
having due regard to the interests of its employees and the impact of the
Company’s business on the community in which it operates, and also
the wider environment.
During the year, the Board specifically discussed this requirement on
several occasions and concluded that its existing processes and
decision making, properly take into account both the duty to
shareholders and the remaining considerations with regard to other
stakeholder related matters as referred to above.
Engagement with stakeholders during the year took place as
described below.
Engagement with our shareholders
The Board actively seeks and encourages engagement with shareholders
including its major institutional shareholders and shareholder bodies. The
Board fully supports the principles of the UK Corporate Governance Code
and also welcomes and acknowledges the Stewardship Code, both of
which aim to foster a more proactive governance role by major
shareholders. The Board has put in place arrangements designed to
facilitate contact with shareholders concerning business, governance,
remuneration and other relevant topics. This provides the opportunity for
meetings between shareholders and the Chairman, the independent Non
Executive Directors (including the Senior Independent Director) as well as
the Chief Executive, Group Finance Director, Group Legal Director and
Company Secretary and other executives as appropriate, 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. In addition, the Chairman meets with the Company’s institutional
shareholders from time to time, both proactively and upon request, in
order to discuss the Company and its performance, governance and
remuneration policies. As set out in the Remuneration Report, the
Remuneration Committee undertakes a consultation exercise each year
and as part of this exercise, the Committee Chairman also engages
directly with shareholders and their representative bodies. More details
are set out on pages 74 and 81.
The Company is, of course, also always very pleased to hear from and
engage with our private shareholders and has, for example, previously met
with the United Kingdom Shareholders Association to facilitate contact
with shareholders located in the North of England, which took place at a
regional office and included site visits.
What our shareholders have asked us this year
During 2017 the Company held 153 meetings with shareholders holding in
aggregate around 35% of the Company’s shares, taking the form of group
meetings; one to one meetings; conference telephone calls; site visits; the
AGM - before, during and after the meeting; at the announcement of the
Company’s full year and half year results. Key themes discussed included:
– Current trading, market demand and house price outlook.
– The Company’s medium term strategy and business model.
– The likely impact of Government policy.
– The land market, build costs and labour availability.
– The Company’s financial targets and dividend policy.
– The mortgage market.
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 also other means. This enables all
Directors to develop an understanding of the views of major shareholders
about the Company.
The Board encourages all shareholders to vote at the AGM, which is
attended by all Directors. The Notice of AGM, including details of all
resolutions to be proposed at the meeting, is set out on page 151.
Engagement with our employees
The Board was pleased to introduce during 2017 a National Employee
Forum (‘NEF’) with the purpose of giving employees a ‘voice’ with regard
to key matters that are being considered. The NEF builds on our existing
network of Employee Consultation Committees and consists of elected
employees from across the business and from a number of different office
and site based disciplines. Early meetings have included discussions on
customer service, the Modern Slavery Act and health and wellbeing which
have all generated a good level of healthy debate. The meetings are
attended by a member of the Group Management Team and so far have
been attended by either the Group Legal Director and Company Secretary
or by the Group Human Resources Director. Going forward, the meetings
will be attended by other senior executives and also by the Chairman and
the Chairman of the Remuneration Committee when topics such as
strategy, remuneration and other operational matters will be discussed.
The Board also receives at each Board Meeting detailed reports on
employee matters, at Group level and for each operating division.
More details are set out on pages 23, 48, 81 and 95.
Health and safety
The health and safety of our employees; customers; suppliers;
subcontractors; and all visitors to our businesses and development sites;
continues to be a non-negotiable top priority for the Company. The Board
receives reports on health, safety and environmental matters, at Group
level and for each operating division at each Board Meeting. The HSE
Director attends each Group Operational Team meeting and also attends
the Board on an annual basis to present on key HSE issues, initiatives,
trends and statistics. More details are set out on pages 6, 14, 21 and 28
to 29.
Engagement with our customers
Delivering high levels of customer satisfaction enhances the reputation of
our business and reduces the costs associated with rectifying poor quality
work. The Board and the Group Management Team regularly review
customer satisfaction scores as independently reported and consider
ways in which these can be improved. One such change during 2017 was
the introduction of an online Customer Portal, guiding customers through
the Customer Journey in purchasing their new home and providing a
forum for two-way communication as the building and sales processes are
progressed. The Board receives monthly reports on customer service
matters, at Group level and for each operating division. Following the
Company’s review into historic leasehold practices, during the year we
also established the Taylor Wimpey Ground Rent Review Assistance
Scheme in order to help our customers who have leases with ground rents
that double every ten years to the fiftieth anniversary before being capped,
to covert them to an RPI mechanism should they wish to participate in the
Scheme. We have apologised to these customers and recognise that the
implementation of these clauses fell short of the standards that we set for
ourselves. More details are set out on pages 7 and 32 to 33.
Engagement with our supply chain
We negotiate with subcontractors and suppliers, both on a national and a
local basis, to develop framework agreements and local commercial terms
which reflect the payment practices and performance on which we are
required to report in respect of the first half of 2018 by 31 July 2018. The
report will be available online from that date. More details are set out on
pages 21 and 28 to 29.
Engagement with local communities
We actively seek the views of local communities and develop a tailored
planning and community engagement strategy for each development site,
working closely with communities and other local stakeholders throughout
all aspects of the planning process. We also support communities, both
locally and nationally, through our charitable work, including financially and
giving time, energy and leadership to support local efforts. More details are
set out on pages 7, 15, 21, 27 and 96 to 97.
taylorwimpey.co.uk
52
Corporate Governance continued
Board members during 2017
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
Mike Hussey, Independent Non Executive Director
Angela Knight, Independent Non Executive Director
Humphrey Singer, Independent Non Executive Director
Number of
meetings
attended in
2017
8/8
8/8
8/8
8/8
8/8
8/8
7/8
8/8
8/8
The Board and its Committees
As at the date of this Report, the Board consists of ten Directors, namely: the
Chairman, three Executive Directors and six Independent Non Executive
Directors. Their names, responsibilities and other details appear on page 58.
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, details of which are set out in their
biographies on pages 46 to 47 and 58 and in the Board diversity analysis on
pages 46 to 47. They also provide a constructive challenge, monitoring the
overall direction and strategy of the Company; 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 executive and senior
management positions below Board level.
Board attendance
The Board met on eight occasions during 2017 and there was full
attendance at all meetings by all Directors except, as noted on the table
opposite, Mike Hussey missed one meeting due to being overseas on
business. The Board regularly considers the number of Board meetings that
take place each year and has concluded that eight meetings remain
appropriate but will keep the number under review. Additional Board
meetings would be convened as and when necessary and there are also
processes in place for approving transactions and other matters that may
require approval in between Board meetings.
Directors make every effort to attend all Board and applicable Committee
meetings, as strongly evidenced by the exceptionally strong attendance
records over many 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 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 table
opposite and on pages 62, 67 and 74.
Board responsibilities
The Board discharges its responsibilities by providing strategic and
entrepreneurial leadership of the Company, within a framework of strong
governance, effective controls and a strong culture emphasising openness
and transparency, which enables opportunities and risks to be assessed and
managed appropriately. In addition, the Board 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.
Company culture
A healthy culture is extremely important and the Board fully agrees with the
FRC that it both “protects and generates value” and that it should be the
subject of a continuous focus rather than wait for a crisis. The Board is
responsible for the Company’s culture and for defining and setting the
Company’s values and standards from the top. Culture is established by
leadership and by example but this also needs to be underpinned by clear
policies and codes of conduct which ensure that the Company’s obligations
to its shareholders and other stakeholders are clearly understood and met,
as described in more detail on page 51. The Board is led in these respects
by the Chairman, who ensures the Board operates correctly, setting its
culture and, by extension, that of the Company in its operations and its
dealings with all stakeholders.
During the course of 2017 and into 2018, the Board actively reviewed and
monitored several key areas that it considers are important indicators of
the Company culture, including health, safety, and environmental matters
(as set out on page 55), customer service, land and major projects, risk
strategy, and diversity and inclusivity. The Board will keep all of these
areas under regular review.
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 53
Appliance of the UK Corporate Governance Code
The UK Financial Reporting Council promotes high quality corporate governance and reporting through The UK Corporate Governance Code (the ‘Code’), with
which all companies with a premium listing on the UK Stock Exchange are required to either comply in full, or explain why, and to what extent, they do not so
comply. The Corporate Governance section of this Annual Report explains how the Code principles have been applied, as set out below:
Section A: Leadership
Every company should be headed by an effective board which is collectively
responsible for the long term success of the company. See page 50.
There should be a clear division of responsibilities at the head of the
company between the running of the board and the executive
responsibility for the running of the company’s business. No one individual
should have unfettered powers of decision. See page 58.
The chairman is responsible for leadership of the board and ensuring its
effectiveness in all aspects of its role. See page 50.
As part of their role as members of a unitary board, non executive directors
should constructively challenge and help develop proposals on strategy.
See page 50.
Section B: Effectiveness
The board and its committees should have the appropriate balance of
skills, experience, independence and knowledge of the company to enable
them to discharge their respective duties and responsibilities effectively.
See page 58.
There should be a formal, rigorous and transparent procedure for the
appointment of new directors to the board. See pages 68 to 69.
All directors should be able to allocate sufficient time to the company to
discharge their responsibilities effectively. See page 61.
All directors should receive induction on joining the board and should
regularly update and refresh their skills and knowledge. See page 69.
The board should be supplied in a timely manner with information in a form
and of a quality appropriate to enable it to discharge its duties. See page 69.
The board should undertake a formal and rigorous annual evaluation of
its own performance and that of its committees and individual directors.
See page 61.
All directors should be submitted for re-election at regular intervals, subject
to continued satisfactory performance. See page 59
Section C: Accountability
The board should present a fair, balanced and understandable
assessment of the company’s position and prospects. See page 66.
The board is responsible for determining the nature and extent of the
principal risks it is willing to take in achieving its strategic objectives. The
board should maintain sound risk management and internal control
systems. See pages 36 to 41 and 64.
The board should establish formal and transparent arrangements for
considering how they should apply the corporate reporting, risk
management and internal control principles and for maintaining an
appropriate relationship with the company’s auditors. See pages 64 and 65.
Section D: Remuneration
Executive directors’ remuneration should be designed to promote the
long-term success of the company. Performance-related elements should
be transparent, stretching and rigorously applied. See pages 74 to 92.
There should be a formal and transparent procedure for developing policy
on executive remuneration and for fixing the remuneration packages of
individual directors. No director should be involved in deciding his or her
own remuneration. See pages 74-92.
Section E: Relations with shareholders
There should be a dialogue with shareholders based on the mutual
understanding of objectives. The board as a whole has responsibility for
ensuring that a satisfactory dialogue with shareholders takes place. See
pages 51, 74 and 81.
The board should use general meetings to communicate with investors
and to encourage their participation. See page 51.
Statement of compliance
For the year ended 31 December 2017, the Company complied with all the provisions of the Code; the Financial Conduct Authority’s (FCA) Disclosure and
Transparency Rules sub-chapters 7.1 and 7.2 which set out certain mandatory disclosure requirements; the FCA’s Listing Rules 9.8.6R, 9.8.7R and
9.8.7AR which include the ‘comply or explain’ requirement; and the BEIS Directors’ Remuneration Reporting Regulations and Narrative Reporting
Regulations. These regulations are publicly available as follows:
– The Code can be found at www.frc.org.uk
– The FCA’s Disclosure and Transparency Rules as well as Listing Rules can be found at www.handbook.fca.org.uk
– The BEIS Directors’ Remuneration Reporting Regulations and Narrative Reporting Regulations can be found at www.gov.uk
– The FRC Guidance on Risk Management, Internal Control and Related Financial and Business Reporting can be found at www.frc.org.uk
taylorwimpey.co.uk
54
Corporate Governance continued
How we are governed
The Board
– Provides strategic and
entrepreneurial leadership
within a framework of
strong governance and
effective controls
– Is responsible for the
Company’s culture and for
defining and setting its
values and standards
– Establishes the Group’s
risk appetite and oversees
processes designed to
ensure compliance
therewith
– Defines which matters are
reserved for decision of
the Board including profit
expectations and
dividend policy
Audit Committee
– Reviews and advises the Board on
proposed full year and half year
reporting and announcements
connected therewith
– Undertakes a detailed half-yearly review
of the Group’s risk assessment and
mitigation processes and outcomes,
and advises the Board on its annual
risk review
– Oversees the relationship with the
external auditor
– Oversees the reporting of internal audit
investigations and reviews the
implementation of changes
resulting therefrom
– Reviews the whistleblowing policy and
any investigations
Chairman of the Audit Committee
Humphrey Singer
Read more about this Committee
on pages 62 to 66.
Nomination Committee
– Reviews the balance, diversity,
independence and effectiveness of
the Board
– Oversees the selection, interview and
appointment of new Directors to
the Board
– Reviews succession and contingency
planning across the Group’s senior
positions and related training,
development and talent management
– Reviews, sets targets for, and drives the
strategy and progress to further
improve diversity and inclusivity
throughout the Group
Chairman of the Nomination Committee
Kevin Beeston
Read more about this Committee
on pages 67 to 73.
Remuneration Committee
– Advises the Board on remuneration
policy at Board and executive level
– Ensures that remuneration is geared to
the enhancement of shareholder value
– Ensures that targets are appropriate
and are geared to delivering the
strategy whilst appropriately limiting
risk-taking
Chairman of the Remuneration
Committee
Kate Barker
– Ensures that rewards for achieving or
exceeding agreed targets are
not excessive
– Promotes the increasing alignment of
executive and wider employee interests
with those of shareholders by
encouraging appropriate share plan
participation and executive
shareholding guidelines
Read more about this Committee
on pages 74 to 92.
Board activities
This Report seeks to explain what your Board of Directors does and describes
how it is responsible for setting the culture and values of the Company,
ensuring that the Company is run in the best interests of its shareholders as
well as 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. In light of this, we therefore try and
avoid a simple ‘box ticking’ type approach to corporate governance,
preferring our own governance to be something that is properly embedded in
our people, processes and decision making at all levels and vested in the
personal values of all Directors and senior management.
As a Board we review health, safety and environmental performance at
every Board meeting and also regularly review: our business strategy; key
risks; the market; operational matters; customer service; diversity and
inclusivity; corporate responsibility; our financial position and performance;
governance, compliance and legal matters; and stakeholder-related matters
including the make up of our share register and investor relations
programme; community engagement; and human resources and wider
employee matters. This is done through the consideration and discussion of
regular reports submitted by the Executive Directors and through regular
reports and presentations from our senior management and external
advisers. The Board and individual Directors also undertake regular visits to
our regional businesses and their development sites, which has proved to
be both very useful and informative.
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 55
Board activities and priorities
Regular items at Board meetings include the review of Board Committee activities (Audit, Nomination and Remuneration Committees); detailed updates on
health, safety and environmental matters; reports from the Executive Directors covering progress towards the Company’s strategic objectives, its financial
position and prospects, legal and corporate governance matters, and compliance updates; progress reports on addressing past leasehold matters; human
resourcing; and stakeholder matters including customer services; wider employee matters; and an update from the Company’s stockbroker which details
movement in the share register.
Special matters considered during the year at Board meetings included the following:
Feb
Apr
May
Jun
Jul
– Reviewed the draft 2016 Annual
Report and Accounts and the
Sustainability Report
– Established and reviewed action
points arising from the 2016
Board evaluation
– Determined the amount of the
final ordinary dividend for 2016
and the special dividend for 2017
to be proposed to shareholders
for approval at the 2017 AGM
– Approved in principle the draft
Full Year Results Statement
– Conducted the annual risk review
– Agreed the first statement in
respect of the Modern Slavery
Act and reviewed the
underlying processes
– Agreed the processes to be put
in place to ensure that the
Employees’ Voice is taken into
account on strategic, business
and remuneration matters
– Received a strategy and business
update on the Central
London business
– Recieved an annual report
on litigation
– Reviewed the draft Trading
Statement to update
shareholders on progress for
the year to date
– Reviewed and agreed the
updated Pension Scheme
Trust Deed and
Scheme Rules
– Reviewed arrangements for
the 2017 Annual
General Meeting
– Received a strategy and
business update from the
North Division
– Approved the Taylor Wimpey
Ground Rent Review
Assistance Scheme and the
related provision
– Reviewed progress towards
GDPR and the actions to
improve the resilience of the
Group’s information
technology systems
– Undertook a longer-term risk
review in preparation for
future strategy reviews
– Received a strategy and
business update from the
London and South
East Division
– Received a strategy and
– Considered the Half Year
business update from the
Central and South
West Division
– Considered the findings of the
initial review into cladding
systems used on past and
present developments post
the Grenfell fire disaster
results for 2017
– Considered the Company’s
dividend policy going forward
– Determined the level of interim
dividend for 2017 and special
dividend proposed for 2018
– Considered the Half Year
risk review
– Reviewed the draft Half Year
Results Statement
– Received a strategy and
business update from the
Central London Division
Sep
Oct
Dec
– This meeting was held as part of
an away day and the Board
received updates on
the following:
– Customer service and
digital communications
– Production and procurement
– Land and Planning
– The culture of the
business; and
– A strategy update
– Reviewed the Group’s borrowing
facilities in relation to current
strategic forecasts
– Received the half-yearly update
on human resources including
progress on Diversity, Inclusivity
and Gender Pay
– Received strategy and business
updates from the North Division
and the Major
Developments business
– Presentation on the Group’s health, safety and
environmental performance during the year
– Detailed review of the year end risk
management report
– Reviewed the outcome of the Board evaluation
for 2017 and agreed action points
– Reviewed the 2017 year end projection and
budget for 2018-2020
– Received an economic overview from an
external expert
– Received a strategy and business update from
the London and South East Division
taylorwimpey.co.uk
56
Corporate Governance continued
Board action and objectives
Strategy and execution
Organisational capacity
2017 Board objectives
– To set the Company’s strategic objectives and agree the actions
for their achievement
– To review the Company’s performance, resourcing, and
achievements affecting its ability to deliver the strategy
– To review and, if necessary, revise the strategy or its objectives in
the light of wider economic, financial and market considerations
– To ensure the strategy is sufficiently resilient in different forward
looking scenarios
– To take all measures to ensure that health and safety remains the
Group’s top priority
2017 Performance
– The Board regularly reviewed performance to date towards
achieving its strategic objectives
– At each meeting, detailed reports from the Executive Team were
discussed, reviewing forward resourcing requirements in the areas
of capital, finance, people and land, and operating decisions taken
or proposed to address them
– The dividend policy was reviewed in relation to strategic
expectations going forward
2017 Board objectives
– To ensure that the Company has the necessary resources in terms
of finance, people, supply chain and Group structure to enable it to
deliver the strategy
– To ensure that its people are suitably trained and that sufficient
provision is being made for succession planning at all levels
2017 Performance
– The Board reviewed reports at each meeting on the financial
performance of the Company and the availability, currently and
forecast going forward, of financial, people and supply
chain resourcing
– The Board and the Nomination Committee formally reviewed on
two occasions the strategy for succession planning and related
training assessment and provision, both for the Board and the
executives immediately below Board level, and progress in
achieving it. The Board also reviews human resources related
matters at each Board meeting
2018 Board objectives
– To ensure that resourcing remains sufficient to achieve the strategy
together with wider diversity considerations
– The Group’s financing arrangements were reviewed in relation to
– To ensure that training and development plans support continuous
current strategic forecasts
– Health and safety progress and performance is the first main item
of business at each Board meeting
2018 Board objectives
– To ensure the Company’s strategy remains robust in the light of
any forecast market and wider economic changes
– To ensure the Company’s performance remains on schedule to
achieve the strategy
improvement in the team and contribute towards wider
diversity improvements
Risk management
2017 Board objectives
– To review and agree the Company’s risk appetite in seeking to
achieve its strategic objectives
– To take all measures to ensure that health and safety remains the
Group’s top priority and will remain an ongoing area of focus
– To regularly review the robustness of the Company’s systems of
risk reporting; assessment; and internal controls
2017 Performance
– The risk review was conducted twice during the year, at the Board’s
July (half year) and February (full year) meetings, and covered both the
systems used and the reported risks. At the February meeting the
position was subject to independent check with external auditor reports
on risk processes connected with the annual audit
– The Board’s annual risk review for 2017 was completed at the
February 2018 Board meeting following a process embracing all
levels of the Group’s businesses
– During the year, the Board and Audit Committee received updates
on the resilience of the Group’s systems to cyber attack and action
taken to maintain security
2018 Board objectives
– To ensure risk remains within the Company’s agreed risk appetite
and is adequately monitored and reviewed as appropriate to reflect
external and internal changes
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 57
Stakeholder engagement
Governance and values
2017 Board objectives
– To increase shareholder attendance and voting, including
registering proxies, at the AGM
– To keep employees engaged and informed on the Company’s
performance and prospects and to give them a ‘voice’ at Board
level on key matters including remuneration
– To assist prospective and actual purchasers of houses in making
and successfully concluding what is, for many, the largest value
and potentially most stressful transaction of their lives
– To maintain communication and a culture of continuous
improvement throughout the Company’s supply chain
2017 Performance
– Shareholder communication was conducted through encouraging
attendance at the AGM; encouraging and steadily increasing voting
on resolutions proposed thereat; briefings to analysts and the
press; and direct consultation on certain special matters
– The Board regularly reviewed its duties under s.172 of the
Companies Act 2006
– Employee involvement was promoted through regular briefing
material online and in hard copy; interactive online Q&As; strategy
updates around the businesses; and explanation of Company
performance around half year and full year reporting and trading
statements. The Board also introduced a National Employee
Forum, in response to the ‘employee voice’ proposal being put
forward by the Government, and the early meetings of the Forum
have generated useful and informed debate on a number of topics,
including remuneration
– Customer Service processes were embedded following a period of
change and enhancement during 2016 and reviews have led to
further improvements which were implemented subject to Board
monitoring throughout the year
– The supply chain received constant feedback from Group
businesses, suppliers and subcontractors, which fed into updated
arrangements and agreements. Processes and checks were
introduced to guard against instances of modern slavery
2018 Board objectives
– To actively encourage shareholder participation through clear
messaging and reporting and careful review of
shareholder feedback
– To monitor the planned further improvements in Customer Service
performance during 2018
– To ensure the Group works with subcontractors and suppliers to
constantly seek ways of further improving quality; sustainability;
and delivery in a safe working environment
– To monitor and further develop the employee voice through the
National Employee Forum
2017 Board objectives
– To ensure that there is continued full compliance with the UK
Corporate Governance Code (the ‘Code’) and with wider statutory
and regulatory requirements
– To ensure that remuneration is to remain implemented within the
Company’s Remuneration Policy
– To implement the improvements arising from the 2016
Board appraisal
– To conduct an externally-facilitated Board evaluation
– To monitor shareholder feedback and continue to actively promote
wider engagement
– To further embed Modern Slavery Act best practice
– To take account of shareholder guidance and consultation
2017 Performance
– The Company has fully complied with the requirements of the
revised Code in its 2017 reporting
– The Company’s Remuneration Policy was proposed to
shareholders for its first three year renewal at the Company’s 2017
AGM and was approved with a vote in excess of 98%
– The Board evaluation was externally-facilitated for 2017 as reported
on page 61 and as required in at least each third year
– In addition to the AGM, shareholder and institutional feedback was
sought when presenting the Company’s half year and full year
results and in notifying proposals for updating the Remuneration
Policy. The results of the feedback from shareholders was taken
into consideration by the Board together with advice from
its stockbrokers
– Modern Slavery Act 2015: The Company made its first statement in
March 2017 after reviewing its operations and its supply chain.
Detailed guidance has been issued around the business and key
personnel are required to undertake training in identifying;
assessing; and reporting any instances that might arise; with the
aim of reducing the risks of modern slavery and related practices
as far as possible. See pages 8 and 96 for further details
2018 Board objectives
– To ensure that there is continued full compliance with the Code
and with wider statutory and regulatory requirements
– To ensure that remuneration is to remain within the Company’s
Remuneration Policy and proportionately rewards achievement of
the strategy
– To implement the improvements identified on page 61 arising from
the externally-facilitated 2017 Board appraisal
– To conduct an effective Board evaluation
– To monitor shareholder feedback and continue to actively promote
wider engagement
– To further embed Modern Slavery Act best practice
taylorwimpey.co.uk
58
Corporate Governance continued
Relevant skills and expertise
It is a requirement of the Code that the Board and its Committees should
have the appropriate balance of skills, experience, independence and
knowledge of the Company to enable duties and responsibilities to be
discharged effectively. This was reviewed during the year and was utilised
in drawing up the recruitment framework, including the list of desired skills,
in the process used for the appointment of a new Independent Non
Executive Director in February 2018. The Board considers that each
Director brings relevant and complementary skills, experience and
background to the Board, details of which are set out below, and
additional information is also set out in the biographies on pages 46 to 47.
The Board also considers that each Director is able to allocate sufficient
time to the Company to discharge their responsibilities effectively and
makes this an important requirement of recruitment.
Kevin Beeston, Chairman, has a wealth of commercial, financial and high
level management experience including being a former CEO of a FTSE
100 company. Kevin also has significant experience of chairing boards of
both public and private companies and of being a non executive director
and sitting on audit, nomination and remuneration committees.
Pete Redfern, Chief Executive, has operational responsibility for delivering
the Company’s strategy in a profitable, safe and environmentally
responsible manner. Pete has significant financial, operational and
management experience, gained from his various roles in industry and
from his time at KPMG. In 2014 he joined the Board of Travis Perkins plc
as an independent non executive director and serves on their
remuneration and Stay Safe committees.
Ryan Mangold, Group Finance Director, has operational responsibility for
managing the Company’s finances and overseeing IT; commercial
department and pensions matters. Ryan has financial, treasury, risk and
financial control expertise including that gained from his time with Mondi
Group and Anglo American plc.
James Jordan, Group Legal Director and Company Secretary, is a
solicitor and oversees compliance with legal and regulatory obligations
and manages the Secretariat and Legal Departments. James has
significant legal, commercial, transactional and regulatory / governance
related experience and expertise.
Kate Barker, Independent Non Executive Director, is an industry-
recognised economist and has led policy reviews for the Government in
the areas of land use, planning and housing supply. Kate also brings a
wider economic insight gained through her various roles, including as a
Member of the Oversight Board of the Office for Budget Responsibility as
well as experience from her other non executive positions.
Gwyn Burr, Independent Non Executive Director, has over 25 years’
executive experience, principally in customer service in the retail sector,
which included the roles of Customer Director and Customer Service and
Colleague Director from 2005 to 2013 at Sainsbury plc. Gwyn also has
significant experience on several boards as a non executive director.
Mike Hussey, Independent Non Executive Director, has in-depth expertise
in land development and marketing, particularly in London, gained from his
previous roles as a director of Land Securities plc and as head of leasing
and marketing of the Canary Wharf Group plc. Mike is currently CEO of
Almacantar, a property development fund he founded in 2010.
Angela Knight, Independent Non Executive Director, has significant
high-level experience in both the public and private sectors. In the public
sector, she was a Member of Parliament from 1992 until 1997, including
two years as the Economic Secretary at HM Treasury, and is currently
Chairman of the Office of Tax Simplification in HM Treasury. In the private
sector, she has significant experience as a non executive director including
as the Senior Independent Director of quoted companies.
Rob Rowley, Independent Non Executive Director and Senior Independent
Director, has a wealth of financial, commercial and management expertise,
principally from his time as Finance Director of Reuters plc and Deputy
Chairman of Cable & Wireless plc. Rob has substantial experience as a
non executive director including the chairing of audit committees, and has
recent and relevant financial experience as required by the Code.
Humphrey Singer, Independent Non Executive Director, has a wealth of
financial experience, most recently in his role as the Group Finance Director
of Dixons Carphone plc. In addition, Humphrey also has expertise in the
areas of both digital solutions and customer services which has already
been useful to the Company. It has been announced that Humphrey has
been appointed as the Chief Finance Officer of Marks and Spencer Group
plc and will take up this role later in the year. He also has recent and
relevant financial experience as required by the Code.
Division of responsibilities
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 their respective capacities.
Health, safety and environment
As also set out in our 2017 Sustainability Report, which will shortly be available
online at www.taylorwimpey.co.uk/corporate/sustainability, the Board is fully
committed to providing a safe place in which our employees and
subcontractors can work, and that our customers can live. We also ensure
that all of our sites are developed to high standards of environmental
management. As the first substantive item at each Board meeting, the Board
receives detailed reports on health, safety and environmental matters in
respect of the Company’s operations in the UK and Spain. The Company’s
detailed carbon reporting, as required by BEIS, is set out on page 30.
Operational oversight
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 Group Legal
Director and Company Secretary, the three Divisional Chairmen and the
Group Operations Director, the Group HR Director, the Divisional Managing
Director of Central and East London and the Managing Director of the Major
Developments business. The GMT meets on a regular basis and also once
each month with the Divisional Managing Directors when it sits in the capacity
of the wider Group Operational Team.
The Board also receives regular reports and minutes from the Treasury
Committee, which meets under the chairmanship of the Group Finance
Director, and also comprises the Group Legal Director and Company
Secretary, one of the Divisional Chairmen (who rotate periodically) and the
Group Treasurer. The key responsibilities of the Treasury Committee are,
broadly, to monitor and keep under review the Group’s financial risks, financial
policies, financial facilities, covenant compliance and insurance programme in
the light of current and proposed strategic and operational requirements, and
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 59
to make recommendations to the Board or GMT, as appropriate, regarding
policy or operational changes in these areas.
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 and employees are required to
undertake their business – this includes, in line with the Bribery Act 2010,
an Anti-Corruption Policy which requires an annual sign-off by designated
senior management. All business units receive training each year from
external experts on legislative and regulatory matters.
The following documents relating to the Group’s management processes and
division of responsibility are available for review on the Company’s website at
www.taylorwimpey.co.uk/corporate/investor-relations/corporate-governance:
– Schedule of matters specifically reserved for the decision of the Board,
including full oversight of all decisions on profit expectations and
Dividend Policy.
– Terms of reference of the Board Committees: Audit, Nomination and
Remuneration, which outline their objectives and responsibilities
and define a programme of activities to support the discharge of
those responsibilities.
– Policies covering operational, compliance, corporate responsibility and
stakeholder matters, including those related to the Bribery Act 2010 and
Anti-Corruption referred to above, which are reviewed whenever
necessary to take account of developments in corporate governance,
changes in legislation and revised processes.
– The Company’s Articles of Association.
Relevant reporting against these is provided to the Audit Committee by the
Head of Internal Audit and the Secretary as appropriate.
Advice available to the Board
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 Eversheds Sutherland LLP in
developing processes and training modules designed to alert management to
any instances of Modern Slavery.
Advice was also received from Deloitte during the year via the Audit
Committee on the significant governance developments during the year.
The Board receives at each meeting a report from JPMorgan Cazenove
(Cazenove) on the sector and the relative performance of the
Company’s share price.
Board and Committee balance, diversity, independence
and effectiveness
A key role of the Board Chairman is to ensure that the Board is conducted so
as to allow the Independent Non Executive Directors to challenge the
Executive Directors constructively whilst, at the same time, also supporting
them to implement the strategy and run the business effectively. Another key
role is to ensure that it 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.
It is the Company’s policy, in line with the Code, that proposed appointments
to the Board, and succession planning, are based on merit, and judged
against objective criteria, whilst also having due regard to the benefits of
diversity and inclusiveness, including gender, age, disability, ethnicity, thought
and experience.
The Board also continues to recognise, welcome and take very seriously its
responsibility to comply with the recommendations of the Davies Report as
built on by the Hampton Alexander Review, encouraging increased
participation by women on boards, which is now targeted at 33% for all FTSE
350 companies by 2020; and which is also aimed at increasing the number of
women in leadership positions of FTSE 100 companies to 33%, namely
members of the Executive Committee and those senior leaders who are direct
reports to Executive Committee members. The proportion of women on the
Taylor Wimpey Board remained two out of nine (22%) throughout 2017. As at
the date of this Annual Report, following the appointment of Gwyn Burr on
1 February 2018, the proportion of women increased to 30% and will increase
to 33% following the conclusion of the 2018 Annual General Meeting (AGM),
when, as previously announced, Rob Rowley stands down from the Board.
The Board will keep its balance and composition under regular review and
when so doing will take into account the recommendations of the above
Reports encouraging an increased proportion of women, referred to above,
and also the Parker Review and its Report into the Ethnic Diversity of Boards.
The Board considers that there is an effective balance with three Executive
Directors and six (shortly to become five, with effect from 26 April 2018) Non
Executive Directors plus myself as Chairman, which ensures that each
viewpoint is properly represented around the Board table.
It also ensures that in line with the Code, there is an effective balance of
guidance, support and constructive challenge to the Executive. The Board
also considers that this will continue to be the case when Rob Rowley stands
down from the Board after the AGM, as referred to above.
The process followed in appointing a new director to the Board , which was
used in connection with the appointment of Gwyn Burr on 1 February 2018,
encompassing a comprehensive search, assessment and recruitment
process led by the Nomination Committee, is set out on page 68 to 69.
The Nomination Committee makes recommendations on appointments and
succession planning to the Board, and more details can be found in the
Nomination Committee Report on pages 67 to 73.
In accordance with the Code, all Directors will again be subject to election or
re-election as appropriate by shareholders at the AGM of the Company which
is being held on 26 April 2018 (other than Rob Rowley). Biographical details of
each Director can be found on pages 46 to 47 and also on page 58.
Annual re-election to the Board
The Code requires every Director to seek election or re-election, as
appropriate, at each year’s AGM. Accordingly, at the 2018 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
Rob Rowley).
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 151 to 157.
As part of the 2017 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 relationships
which could affect the Director’s judgement. For Gwyn Burr, who was
appointed on 1 February 2018, this evaluation took place as part of the
appointment process. In line with the Code, a rigorous evaluation took place
with regard to each of Kate Barker, Mike Hussey and Rob Rowley as they
will each have served seven, six and eight years respectively by the time of
the AGM in April 2018. Rob Rowley will, as announced on 10 January 2018,
stand down from the Board at the conclusion of the Company’s 2018 AGM
on 26 April 2018.
In addition, the Board re-evaluated each Director’s time commitments,
and was satisfied that, in line with the Code, they each continued to allocate
sufficient time to the Company in order to discharge their responsibilities
effectively, including not only attendance at Board and applicable Committee
meetings but also preparation time for meetings, visits to businesses (including
taylorwimpey.co.uk
participate in any discussions or decisions relating to the contract
or arrangement.
The Board undertakes a regular review of each Director’s interests, if any,
outside the Company. In addition, all new appointments and interests of
Directors are reported to the Board for consideration or noting as appropriate.
Following these reviews, the Board remains 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 and that
any current external appointments do not detract from the extent or quality of
time which the Director is able to devote to the Company. This is further borne
out by Directors’ attendance at Board and Committee meetings, which has
been at or very close to 100% over many years.
Anti-bribery and anti-corruption
In line with the Bribery Act 2010, the Company has written policies on
avoiding and not tolerating bribery or corruption. The policies apply across all
of the Company’s businesses and are available for review externally on the
Company’s website and by all employees on the Company’s extranet. The
risk to the Company of non-compliance would be reputational damage,
financial penalties and the possible exclusion from certain approved partner
arrangements. These risks are mitigated by training for senior managers and
by issuing an annual reminder to all businesses and key departments requiring
each managing director or departmental head to check that their teams have
complied with the policies during the reporting year; remain aware of the
policies’ requirements for the coming year; and to formally confirm in writing
that they have done so.
This 2017 Annual Report and Accounts
Your Directors have responsibility for preparing this 2017 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 position, performance, business
model and strategy.
The Board was able to reach this conclusion after receiving advice from the
Audit Committee. The processes of review and assessment followed by that
Committee in that respect are set out on page 66.
The Viability Statement, as required by the Code, appears on page 41.
60
Corporate Governance continued
the annual Board away day / visit) and other additional requirements that may
be required from time to time. For Gwyn Burr, who was appointed with effect
from 1 February 2018, this evaluation took place as part of the appointment
process. It has previously been announced that Gwyn Burr will stand down as
an independent non executive director of DFS plc during the Spring of 2018.
Recognising the importance of the time commitment of each Director to
shareholders, this will continue to be kept under review for all Directors during
2018, including as part of the annual Board evaluation process.
The Chairman, at the time of his appointment on 1 July 2010, met the
independence criteria as set out in the Code.
Management
Progress in achieving the Group Strategy is reviewed at each Board meeting
and is reported on page 13. The Chief Executive has responsibility for
preparing and reviewing strategic plans for the Group and the annual
budgetary process. These are subject to formal review and approval by
the Board.
Budgets are re-examined in comparison with business forecasts throughout
the year to ensure they are sufficiently robust in order 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 Board meeting, with specific
updates on any material developments or new matters presented by
the Secretary.
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 purchase or 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. The Operating Framework, within which delegated authorities,
responsibilities and related processes are explained in detail, is available for
review and guidance online by any employee through the Company’s intranet.
These activities are reinforced through process compliance and other audits
conducted by Internal Audit.
The annual employee performance appraisal process is competency-based,
with individual objectives cascaded down from the appropriate business
objectives. The process also identifies training needs to support achievement
of objectives.
During 2017 the Group’s control environment was further enhanced through
a robust risk assessment and review led by the Audit Committee, which
identified the key risks to be reviewed and assessed by Internal Audit as part
of its programme of work during the year.
Ensuring there is no conflict of interest
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
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 61
Board evaluation
A key requirement of good governance is
ensuring that the Board itself is operating
effectively. The carrying out of an annual
evaluation is a very important exercise and it is
one which the Board takes very seriously, whilst
also recognising the focus that our shareholders
place on it. In line with the Code, the Board
conducts its annual evaluation exercise via an
independent external facilitator once every three
years. Accordingly the evaluation for 2017 was
externally facilitated by Manchester Square
Partners (‘MSP’), which was chosen for its track
record in performing rigorous evaluations for a
number of FTSE100 companies and who have
no other connection to the Company.
The exercise considered the effectiveness of the
Board, each Board Committee and each
Director, and also focused on the Board’s
approach to key governance issues:
– Strategy
– Challenges and risks
– Values and culture
– Role
– Dynamics
– Engagement
– Structure
– Composition
– Succession
The 2017 evaluation process was conducted
between August and November 2017 and
consisted of the following:
– Briefing and planning meetings between the
Chairman, Secretary and MSP.
– A detailed and comprehensive bespoke
questionnaire which MSP sent individually to
all Directors for completion and return to them.
– An interview with each of the Directors.
– Meetings with key internal reports
immediately below Board level who have
experience of attending the Company’s
Board meetings and external advisers such
as the Audit partner and Broker.
– Attendance at a meeting of each of the
Board and the Nomination and
Remuneration Committees, to experience
the Board and its committees in action.
– Presentation of the key findings and
recommendations by MSP to the Board on
a non-attributable basis.
The overall outcome of the evaluation exercise
was that MSP considered that the Board was
functioning well and in line with first class
corporate governance principles, and is
providing effective leadership to the Group.
As part of the Board evaluation, the time
commitments of all Directors in line with the
requirements of the Code were reviewed in
detail. Following this review, the Board was
satisfied that each Director was able to allocate
sufficient time to discharge his or her
responsibilities to the Company effectively. This
included not only attendance at Board and
applicable Committee meetings (where
attendance was 100% during 2017 for all
Directors, save for Mike Hussey missing one
meeting of the Board and of the Audit
Committee as noted on page 52), but also
preparation time for meetings, visits to our
businesses and other additional requirements
that may be required from time to time.
On the one occasion when Mike Hussey missed
a meeting of the Board and of the Audit
Committee, he was comprehensively briefed by
the Secretary following the meeting on the main
matters arising.
Consistent with previous exercises, the 2017
evaluation proved to be very useful. It was
pleasing to note that MSP concluded that the
Board continues to function very well. However,
it also provided an opportunity to reflect on how
we operate and where we can improve. I can
confirm that the Board has already focused on
the areas identified for improvement and will
continue to do so during the course of 2018.
Details of this year’s evaluation; its outcome; the
actions planned by the Board during 2018 to
address the issues raised; and the actions taken
during 2017 to address the issues raised in the
last (internally facilitated) evaluation conducted in
2016 and reported in last year’s Annual Report,
are set out in the table below.
The outcome of the 2016 Board evaluation
(which was internally facilitated, in line with the
requirement of the Code that the exercise be
externally facilitated every three years) was
reported on in detail in last year’s Corporate
Governance Report. The main action points
arising from that exercise, and action taken in
respect of each, are set out in the table below.
2016 Evaluation – Recommendations included
Actions taken during the year
Additional reporting to take place on key areas such as financial analysis,
competitor comparisons, IT, and macro economic and market issues.
Additional reporting to the Board on these areas of the business took
place at Board meetings during 2017 and will continue, going forward.
There needs to be continued focus on cyber risk and further improving the
Company’s defences against the risk.
This has been the subject of detailed reviews by the Board and the Audit
Committee during 2017 and will continue, going forward.
Additional focus to take place on diversity and inclusivity including continued
monitoring and review.
This remained a key topic for the Board and the Nomination Committee
during 2017 and remains so during 2018. The Board’s Diversity Policy and
details of progress achieved, and plans for further progress during 2018, are
set out in the Nomination Committee Report on pages 71 to 73.
Each of these key areas remains firmly on the Board’s agenda during 2018
and an update will be provided in the 2018 Annual Report and Accounts.
2017 Evaluation – Recommendations included
Actions being or to be taken during 2018
Devote additional Board time to strategy.
Although significant time is already devoted to strategic matters this
recommendation is already being addressed with additional time
earmarked for discussion.
Devote additional time to risk including non-operational risk, and those which
are considered to be strategic and lower probability in nature.
Work commenced on this during 2017 and is planned to be developed
further during 2018.
Undertake additional focus on succession planning taking into account
forthcoming NED changes based on length of service.
This will be a topic for Nomination Committee consideration during 2018.
Each of these key areas remains firmly on the Board’s agenda during 2018
and an update will be provided in the 2018 Annual Report and Accounts.
taylorwimpey.co.uk
62
Audit Committee Report
Audit Committee
Audit
Committee
Humphrey Singer
Kevin Beeston
Chairman of the
Chairman
Audit Committee
Main objective
– To assist the Board in fulfilling its corporate governance
responsibilities relating to the Group’s risk management and
internal control framework; internal audit process; financial reporting
practices including the key accounting judgements; external audit
process; and whistleblowing procedures.
2017 performance
– Progressed the design and development of a Combined
Assurance Model to bring together all aspects of assurance across
the Group to further support strong controls and governance.
– Monitored planned initiatives to drive enhancements across those
core processes that involve both the Finance and Commercial
functions to further support operational activity.
– Monitored those significant IT initiatives that either directly protect,
support and enhance the current IT environment or that are key in
their contribution to business initiatives underway to enhance the
experience of customers, suppliers and employees.
– Received the Group Legislative and Regulatory Risk Assessment
and ensured that appropriate measures and controls are in place
and are robust.
2018 key areas of focus
– Oversee development of policies and processes, ensuring
compliance with the EU General Data Protection Regulation and
consistent implementation across all parts of the business, in
particular customer interfaces.
– Engage with management to ensure an effective risk management
and control framework continues to evolve to meet the changing
demands of the environment in which the business operates with
appropriate focus on sites with higher inherent complexity.
– Oversee both the Delivery and Commercial Excellence
Programmes to improve efficiency and effectiveness of the
operational teams.
– Engage with Management to gain assurance that the Sales and
Marketing processes; the related documentation; and the
communication with our customers support the Group’s Customer
Journey aspirations.
– Receive and review the Group Fraud Risk Assessment together
with the approach to ongoing organisational awareness.
Audit Committee
The Audit Committee is chaired by Humphrey Singer, who succeeded
Rob Rowley as its Chairman on 10 January 2018. Rob Rowley chaired
the Committee throughout 2017 and continues to be a member of the
Committee until he stands down from the Board at the conclusion of the
Company’s 2018 Annual General Meeting (AGM) on 26 April 2018. All
members of the Committee are Independent Non Executive Directors as
required by the Code. The Board has determined that Humphrey Singer,
and Rob Rowley (who currently chairs the audit committee at Greene
King plc and Camelot Group) each have recent and relevant financial
experience as required by the Code. In addition, and in line with the
Code, the Board considers that the Audit Committee when considered
as a whole, has the necessary competence relevant to the housebuilding
sector in which the Company operates.
Taylor Wimpey plc Annual Report and Accounts 2017
Committee members
Number of meetings attended
Humphrey Singer (Chairman) (a)
Kate Barker
Mike Hussey (b)
Angela Knight
Rob Rowley
3/3
3/3
2/3
3/3
3/3
(a) Humphrey Singer was appointed Chairman on 10 January 2018 as successor to Rob
Rowley, who chaired the Committee throughout 2017.
(b) Mike Hussey missed one meeting due to being overseas on business.
Dear Shareholder
I am pleased to be able to take my first opportunity since apointment as
Chairman of the Audit Committee to summarise below, and in the report which
follows, the ongoing responsibilities and objectives of the Committee; the work
that has been carried out during 2017; and the priorities established for 2018.
The Committee supports the Board in fulfilling its corporate governance
responsibilities, including the Group’s risk management and internal control
framework; internal audit process; financial reporting practices; the preparation
and compliance of the Company’s Annual Report and Accounts; external
audit process; and whistleblowing procedures.
The terms of reference of the Audit Committee are summarised opposite
and are available in full on the Company’s website. Following a review during
2017 it was determined that they remain appropriate and reflect the
Committee’s responsibilities under the UK Corporate Governance Code (the
Code) and related regulations, including the guidance note issued in March
2017 by the Institute of Chartered Secretaries and Administrators on terms
of reference for Audit Committees.
The Committee conducts an annual evaluation of its performance against its
key objectives. The evaluation for 2017 was recently formally assessed by the
Committee at its February 2018 meeting.
The key performance areas of the Committee during 2017 are set out
opposite and described in more detail in this report.
The Committee’s key areas of focus for 2018 are also set out opposite, with
the continuation of robust risk management and work to further reduce risk in
areas, such as cyber security, remaining key priorities for the year ahead.
The Committee holds meetings with the external auditor and the Head of
Internal Audit, independent of the Executive, and these assist in ensuring that
reporting, forecasting and risk management processes are subject to rigorous
review throughout the year.
I am pleased to confirm that throughout the year the Committee met the
Financial Reporting Council (‘FRC’) guidance on Audit Committees which was
issued in April 2016, and which was incorporated into the Code. The aim of
the guidance was to further improve good governance around the
Committee’s competence; induction for new members; audit rotation;
independent assessment of areas of judgement; and sufficiency of resourcing
for the Committee; all with the aim of ensuring that it was able to perform its
primary function of protecting shareholders’ interests in relation to the
Company’s financial reporting and internal control.
The Committee will continue to focus on ensuring that all relevant codes and
regulations are complied with to ensure that the business is operating in a
controlled and managed environment.
I should like to thank Rob, who stands down from the Board at the conclusion
of the Company’s 2018 AGM, on behalf of the Committee and the
shareholders, for his work as Chairman of the Committee since 2010, and to
wish him well for the future.
Humphrey Singer
Chairman of the Audit Committee
Directors’ Report: Governance 63
Committee purpose and responsibilities
The membership of the Audit Committee is set out in the table opposite. Committee meetings are also attended, by invitation, by the Executive Directors, Head
of Internal Audit, other senior executives and by Deloitte LLP (Deloitte), the external auditor. The Committee also meets privately with representatives from
Deloitte 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 auditor may wish to raise in confidence, with only the Secretary being present.
Committee activities during 2017
The Audit Committee met on three occasions during the year. The reports considered at the February 2018 meeting concluded the Committee’s activities with
regard to the Company’s 2017 reporting and have been included on page 66.
At those meetings, the Committee carried out its remit which primarily included the following:
Feb 2017
Jul 2017
Dec 2017
Feb 2018
– Reviewed the final draft 2016 Annual
Report and Accounts together with any
significant accounting and audit issues
thereon; considering issues of
materiality and the external auditor’s
report on the progress of the audit; and
conducting a formal compliance check.
– Reviewed the final draft Half Year
Statement for 2017 together with
details of any significant accounting
issues thereon; considering issues of
materiality and the external auditor’s
report on its review of that statement.
– Conducted the 2017 Half Year
– The disclosure of relevant audit
risk review.
information to the auditors and the
processes in place to underpin it.
– Reviewed the Group’s 2016 draft Full
Year Results Statement; and advising
the Board regarding the
appropriateness of the proposed final
dividend on ordinary shares for 2016
and special dividend for 2017.
– Concluded the prior year’s risk review.
– Reviewed the draft viability statement
to appear in the 2016 Annual Report
and Accounts.
– Reviewed the Committee’s
performance against its agreed
objectives for 2016 and setting its key
objectives and priorities for 2017.
– Held a private meeting with Deloitte.
– Held a private meeting with the Head of
Internal Audit.
– Agreed Internal Audit’s programme of
work for 2017.
– Received the Group fraud
risk assessment.
– Received a further detailed presentation
on progress to date on GDPR and
plans for further improving the Group’s
resilience to cyber attacks.
– Advised the Board regarding the
appropriateness of the proposed
interim ordinary dividend for 2017 and
special dividend for 2018.
– Reviewed Deloitte’s audit plan for the
audit of the Company’s 2017
accounts, and report on the progress
of the audit to date.
– Led the appraisal of Deloitte’s
performance during the audit of the
Company’s 2016 results.
– Reviewed and confirmed the
– Reviewed the final draft 2017 Annual
processes which allow the Committee
to ensure that the 2017 Annual Report
and Accounts meets the requirements
of Code provision C.1 that the Board
presents a fair, balanced and
understandable assessment of the
Company’s position and prospects.
– Reviewed and confirmed the
processes which allow the Committee
to assess the performance of Deloitte
during the audit of the Company’s
2017 full year reporting and the
effectiveness of the external audit
process; and in light of the findings, to
make a recommendation to the Board
as to Deloitte’s re-appointment at the
2018 AGM.
– Received a briefing on key accounting
judgements with regard to the
Company’s 2017 accounts.
– Oversaw the process leading to the
Board’s Viability Statement included in
its 2017 reporting.
– Concluded the 2017 year end
risk review.
– Received a detailed presentation on
progress to date and plans for further
improving the Group’s resilience to
cyber attacks and wider IT
security generally.
Report and Accounts together with any
significant accounting and audit issues
thereon; considering issues of
materiality and the external auditor’s
report on the progress of the audit;
conducting a formal compliance check.
– The disclosure of relevant audit
information to the auditors and the
process in place to underpin it.
– Reviewed the Group’s draft 2017
Full Year Results Statement; and
advised the Board regarding the
appropriateness of the proposed final
dividend on ordinary shares for 2017
and special dividend for 2018.
– Concluded the prior year’s risk review.
– Reviewed the draft viability statement
to appear in the 2017 Annual Report
and Accounts.
– Reviewed the Committee’s
performance against its agreed
objectives for 2017 and agreed its key
objectives and priorities for 2018.
– Held a private meeting with Deloitte.
– Agreed Internal Audit’s programme of
work for 2018.
taylorwimpey.co.uk
64
Audit Committee Report continued
In addition, at each meeting, the Committee also reviewed its other areas of
responsibility, including:
– Financial reporting practices.
– The risk management and internal control framework.
– The internal audit process and the review of reports received and actions
arising therefrom.
– Checking for any incidences of fraud, actual, alleged or precautionary,
and ensuring proper controls and a response plan are in place.
– The adequacy of the Company’s whistleblowing procedures and the
status of any investigations.
In carrying out these activities, the Committee places reliance on regular reports
from Executive Management, Internal Audit and from Deloitte. In monitoring the
financial reporting practices, the Committee reviewed accounting policies, areas
of judgement highlighted by Executive Management and by the external auditor,
the going concern assumptions and compliance with accounting standards and
the requirements of the Code.
Committee competence
A key requirement of the FRC’s guidance on Audit Committees is that each
Committee member should have sufficient knowledge; training; and expertise;
to contribute effectively to the Committee’s deliberations.
As Committee Chairman, I have extensive experience in my role of Group
Finance Director of Dixons Carphone plc of the financial reporting
requirements of FTSE 100 companies; of financial reporting preparation and
compliance for public companies; of dealing with internal and external
auditors; and I also have experience of both attending Audit Committees and
of being a member of an Audit Committee. This experience has given me an
insight into key areas of shareholder concern and independent experience of
robustly challenging both the executive and the external and internal auditor.
I am assisted by four other Independent Non Executive Directors:
Rob Rowley is the Committee’s former Chairman, who I succeeded as
Chairman of the Committee on 10 January 2018 and who also has recent
and relevant financial experience through currently chairing the Audit
Committees at Greene King plc and Camelot Group. It has been announced
that Rob will stand down from the Board at the conclusion of the Company’s
2018 AGM. Kate Barker has wide experience of key areas in which the
Company operates day to day, having led Government policy reviews into
housing supply and land use planning. She also has experience of being a
non executive director with Man Group plc and previously with Yorkshire
Building Society. Mike Hussey has in-depth experience in land development
and marketing, and also has experience at senior level as an executive board
director of Land Securities plc and with Canary Wharf Group plc. Angela
Knight has wide experience of financial services and banking and has
extensive non executive director experience.
Between us, I am confident that the members of the Audit Committee have
the necessary competence relevant for the house building sector as
envisioned by the Code and that this will continue to be the case after Rob
Rowley stands down.
As described in the Nomination Committee Report on page 69, there is a formal
process of induction for new Directors and this includes specific reference to
assisting competence in relevant Committee areas through exposure to
appropriate areas of the Company’s operations and performance.
All the members of the Audit Committee are Independent Non Executive
Directors and both myself, as Chairman and Rob Rowley have recent and
relevant financial experience as required by the Code.
I am confident that the composition; balance; and expertise of the Audit
Committee can give shareholders confidence that the financial; reporting; risk;
and control processes of the Company are subjected to the appropriate level
of independent, robust and challenging oversight.
Taylor Wimpey plc Annual Report and Accounts 2017
Risk management and internal control
The Group has established an ongoing process of risk management and
internal control, applying Main Principle C.2 and its Supporting Provisions of
the Code which relates to determining the nature and extent of principal risks
and the maintenance of sound risk management and internal control systems.
The Board is responsible for the effectiveness of the system of internal control,
which has been designed to meet the requirements of the Group and the
risks it encounters, including taking account of environmental, social and
governance considerations. The systems cannot eliminate the risk of failure
but rather seek to manage both the likelihood of their occurrence and the
extent of their impact, and can only provide reasonable and not absolute
assurance against material misstatement or loss.
The Principal Risks facing the Company, as assessed by the Board, are set
out on pages 36 to 41, together with information on the action taken and / or
planned to mitigate each one, and a description on page 37 of the Group’s
appetite for risk.
The Board makes its assessment of risk half yearly, after overseeing a
bottom-up and top-down review of risk in all areas of the business. Action to
mitigate the effect of each one is led by the Chief Executive either directly or
indirectly in conjunction with the Group Management Team (GMT).
The Board’s assessments use a standard methodology which takes into
account environmental, social and governance considerations. In
compliance with the Code, the Board also 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.
Compliance with the Group’s system of internal control is primarily driven and
co-ordinated through compliance with an established Operating Framework
supported by detailed manuals covering the main disciplines. These include
clear levels of delegated authority, responsibility and accountability, and are
subject to periodic review to ensure they remain appropriate and
proportionate to the Group’s changing strategic and operating requirements.
Adherence to the Operating Framework is monitored by management and
assessed independently by Internal Audit. At its half year and year end
meetings, the Board reviews risk in relation to the Company’s strategic
objectives and its current plans to deliver them. It also reviews progress and
performance in action taken to mitigate the impact of those risks.
The Board is supported in this by more regular and detailed reviews, by the
Audit Committee, including the review of progress reports from Internal Audit,
and by risk reviews across the business, led by the GMT. These reviews
during 2017 resulted in a number of enhancements to internal controls,
designed to reduce or better manage risk across the business.
These included:
– A seamless interface between the Enterprise Resources Planning (ERP)
and the consolidation system and collection of non-financial data
automatically, together with an improved audit trail of submissions.
– Enhanced self-certification of business unit compliance with key controls
across all functional areas.
– Further standardisation of the approach to monitoring and control of
large-scale infrastructure projects.
The Committee oversees the actions being taken to monitor Information
Technology (IT) initiatives which aim to either directly protect against and reduce
the risk of cyber-related type attacks and fraud; support and enhance the
current IT environment including data protection; or that are crucial in their
contribution to key business initiatives aiming to enhance the experience of
customers, suppliers and employees.
At its meeting in February 2018, the Board, after conducting its own review
and after reviewing more detailed assessments from the Audit Committee,
remained satisfied that the system of internal control continued to be effective
in identifying, assessing, and ranking the various risks facing the Company;
and in monitoring and reporting progress in mitigating their potential impact on
the Company. The Board also approved the statement of the Principal Risks
and Uncertainties set out on pages 36 to 41 of this Annual Report.
Directors’ Report: Governance 65
Viability statement
The Committee reviewed the viability statement set out on page 41 together
with the methodology underpinning it; the period it covered; and the
robustness of the stress-testing undertaken. The outcome of that review was
that it recommended its approval to the Board
External auditor
Re-appointment
As noted earlier, Deloitte LLP is the Company’s external auditor. Their
performance is kept under regular review by the Board and the Audit
Committee and the Committee undertakes a formal assessment of the
external audit process each year including both current and ongoing suitability.
This review takes the form of a detailed checklist and questionnaire issued to
Directors; executives involved in the detailed stages of the audit process; and
a representative sample of employees in regional business units which were
subject to audit. The responses were augmented by external feedback on the
relative performance of auditors generally, and from regulatory sources.
The outcome of this review was that the Committee recommended to the
Board, which in turn is recommending to shareholders in Resolution 13 at
the 2018 AGM on page 151, that Deloitte LLP should continue as auditor to
the Company.
Tender
The Company last conducted a tender process for the external audit in
2007/2008. UK rules relating to the requirement for rotation of external
auditors by FTSE 350 companies permit transitional arrangements in line with
guidance issued by the FRC which, applied to the Company, allow the
present auditor, Deloitte, to continue in office up to and including the
conclusion of the audit of the Company’s 2020 accounts. This is considered
by the Committee to be in the interests of shareholders and other
stakeholders and it permits the present audit partner, Edward Hanson, to
conclude his five year audit partner rotation and allows sufficient time
thereafter for the Committee to prepare for the external audit to be the subject
of a competitive tender of alternative firms to Deloitte, during 2020. The
Company will of course keep the matter under regular review, taking into
account the annual performance review to be conducted by the Committee
as well as other relevant factors. There are no contractual restrictions on the
Company’s selection of its external auditor.
Statement of compliance
The Company has complied throughout the reporting year with the provisions
of The Statutory Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014.
Appointment of the auditor for non-audit services
The Audit Committee has a formal policy, reviewed annually, on whether the
Company’s external auditor should be employed to provide services other
than audit services. In line with the Code, the Committee has regard to the
relevant ethical guidance regarding the provision of non-audit
services by Deloitte.
As part of that policy, the Committee has determined that the following
assignments should not be undertaken by the auditors:
– Bookkeeping or other services related to the accounting records or
financial statements.
– Internal audit outsourcing services.
– The provision of advice on large Information Technology systems.
– Services connected with valuation, litigation support, legal, recruitment
or remuneration.
Where non-audit services have an initial or forecast face value in excess of
£100,000 there must be prior review and authorisation by the Group Finance
Director and the Committee.
The Committee has reviewed this policy in light of the new regulation set out in
the EU Audit Directive and Audit Regulation 2014 which applied to the
Company from 1 October 2017.
The Regulations substantially curtail those non-audit services which can be
provided by the auditor to the Group and in particular prohibits all tax-related
services, including compliance services as well as general advice, and all
consultancy and advisory services. The Regulations also require that Board
approval is required if eligible non-audit services, such as due diligence and
similar assurance services exceed 30% of the prior year Group audit fee. In
addition, fees for eligible non-audit services are not to exceed 70% of the
Group audit fee, calculated on a rolling three-year basis. The Board is satisfied
that, following the above-mentioned review and taking into account the new
regulation, this policy will be conducive to the maintenance of good
governance, best practice and auditor independence and objectivity.
Non-audit services in 2017 predominantly related to work undertaken as a
result of Deloitte’s role as auditors, in particular the assurance work carried out
in connection with the announcement of the Company’s half year results for
2017, which is of direct benefit to shareholders although it is not formally
regarded as ‘audit’ work for reporting purposes. Deloitte also performed
certain real estate work, for which they were selected as they were considered
to be the best supplier for that service. All independence considerations were
considered with regard to these services, in line with the above policy, and
were fully compliant with it.
The Audit Committee fully recognises and supports the importance of the
independence of auditors. Its review of the auditor’s performance during 2017
included non-audit services. The Committee is satisfied that the carrying out of
the above work did not, and will not going forward, impair the independence
of the external auditor. It also 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, the value of non-audit services
work was £0.1m in 2017 (2016: £0.1m) which represents just under 25% of
the audit fee as set out in Note 6 to the Accounts on page 116.
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. The annual Internal Audit plan, and the
individual audits conducted in line with the audit plan, are driven primarily by
the principal risks faced by the business. Following each review an Internal
Audit report is provided to both the management responsible for the area
reviewed and the 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.
The Company belongs to and participates in industry-wide forums and other
initiatives aimed at combating fraud within the construction industry.
Summaries of all key Internal Audit reviews and activity and resulting reports
are provided to the Audit Committee for review and discussion.
The Internal Audit function also formally reviews proposed related-party
transactions, such as purchases by employees from Group companies, to
ensure proper procedures are followed and that such procedures are
undertaken strictly in accordance with the formal policy in place and, where
applicable, company law.
The most recent independent formal evaluation of the Internal Audit function
was carried out in 2015 on behalf of the Audit Committee by PwC and its
finding was that Internal Audit continues to operate effectively. A number of
initiatives were progressed subsequently to ensure the Internal Audit function
continues to meet both current best practice and the evolving needs of the
Group. The next such evaluation will be carried out during 2019.
The Internal Audit Charter, which codifies the aims, processes and outputs of
Internal Audit, was reviewed by the Committee for ongoing appropriateness.
The Internal Audit function and its reporting lines enable it to be independent
of the executive and to exercise independent judgement.
The Head of Internal Audit has direct access at all times to the Chairman of
the Audit Committee, the Chairman of the Board and also to the Chief
Executive and the other Executive Directors.
taylorwimpey.co.uk
66
Audit Committee Report continued
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 behaviours in the work place. All whistleblowing cases are
formally investigated by the Head of Internal Audit, Group Director of Health,
Safety and Environment (where appropriate), Group Human Resources
Director and / or the Group Legal Director and Company Secretary depending
on the nature of the issue. The Chief Executive is apprised of all allegations
and conclusions of the review.
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. The policy itself is
periodically reviewed and includes the ability for workers to make protected
disclosures with regard to matters arising under the Modern Slavery Act 2015
with regard to our business and its supply chain. The Committee is satisfied
that the policy and its administration remain effective.
Going concern
The Group has prepared forecasts, including certain sensitivities, taking into
account the Principal Risks and Uncertainties identified on pages 36 to 41.
Having considered these forecasts, the Directors remain of the view that the
Group’s financing arrangements and capital structure provide both the
necessary facilities and covenant headroom to enable the Group to conduct
its business for at least the next 12 months. The Committee reviewed the
forecasts and the Directors’ expectations based thereon, and agreed that
they were reasonable. Accordingly, the consolidated financial statements have
been prepared on a going concern basis.
Viability Statement
The viability statement is designed to be a longer term view of the sustainability
of the Company’s strategy and business model and related resourcing, in the
light of projected wider economic and market developments. The Committee
reviewed the Directors’ expectations; the criteria upon which they were based;
and the sensitivities applied; and agreed that they were reasonable. The
statement appears on page 41 together with details of the processes,
assumptions, and testing which underpin it.
Annual Report and Accounts 2017
Code provision C.1
The Board has responsibility, under Provision C.1 of the Code and its
Supporting Principles and Code Provisions, for preparing the Company’s
Annual Report and Accounts; for ensuring that it presents a fair, balanced and
understandable assessment of the Company’s position and prospects; and
that it provides the information necessary for shareholders to assess the
Company’s performance, business model and strategy.
Process
The review of the Company’s Annual Report and Accounts took the form of a
detailed assessment of the collaborative process of drafting them, which
involves the Company’s Investor Relations; Company Secretariat; and Finance
Departments, with guidance and input from other relevant Departments and
external advisers. It ensured that there is a clear and unified link between this
Annual Report and Accounts and the Company’s other external reporting,
and between the three main sections of the Annual Report and Accounts
– the Strategic Report; the Governance Reports; and the
Financial Statements.
In particular, the Committee:
– Reviewed all material matters, as reported elsewhere in this
Annual Report.
– Ensured that it correctly reflected the Company’s performance in the
reporting year, as described in this Annual Report.
– Ensured that it presented a consistent message throughout.
– Ensured that it correctly reflected the Company’s business model, as
described on page 21.
– Ensured that it correctly described the Company’s strategy, as described
on pages 13 and 20.
– Considered whether it presented the information in a clear and concise
manner, illustrated by appropriate KPIs, to facilitate shareholders’ access
to relevant information.
Significant items
The items below are those that the Audit Committee have considered in
discharging their duties and in considering the financial reporting of the Group.
Cost allocation of inventory
The cost allocation framework used across the Group determines the profit
forecasted for each site and dictates the way in which inventory is costed and
allocated across each development. It also ensures that any costs incurred in
excess of the original forecast are recognised appropriately as the site progresses.
The Committee reviewed the work undertaken by Deloitte LLP as part of the
year-end audit which included testing of the Group-wide controls to monitor
cost allocation and substantive testing. This enabled the Committee to gain
assurance that the framework is used consistently and that areas of significant
judgement including future sales prices, build costs and the allocation of
shared infrastructure costs are being accurately represented in site forecasts.
Exceptional provision in relation to leasehold
At the July meeting, the Committee reviewed the assumptions used and the
calculation of the £130.0 million exceptional provision. An update was provided
to the Committee at the December meeting as some assumptions from the half
year had crystalised as the Group had signed agreements with freeholders
representing approximately 90% of identified leases. This review, combined with
reviewing the report provided by Deloitte LLP enabled the Committee to
conclude that the £130.0 million provision originally recognised remains the
most appropriate estimate.
Defined Benefit Pension valuations
During the year a Medically Underwritten Mortality Study (MUMS) was
undertaken as part of the 2016 pension triennial valuation. The results of this,
along with the market based assumptions (discount and inflation rates) used
in calculating the net pension liabilities were discussed and agreed by the
Committee to establish the net pension deficit recognised on the balance
sheet at 31 December 2017.
Viability statement and going concern
Although the viability statement and going concern are matters for the whole
Board, a review is made by the Committee of the appropriateness of the five-year
assessment period, the Group’s headroom under its covenants and undrawn
facilities in relation to the Group’s financial forecasts and sensitivity analysis.
Alternative Performance Measures (APMs)
The Committee reviewed the Group’s use of APMs and concurred with the
presentation and balance between APMs and statutory measures throughout
the annual report. They concluded that the APMs presented are appropriate
and meet the criteria set out in the ESMA guidance. They were able to
conclude this as they are widely used industry measures, form the basis of the
key strategic targets and are linked directly to executive remuneration.
Critical accounting judgements and key sources of
estimation uncertainty
The Committee has considered the matters of key judgement and key
sources of estimation uncertainty used in preparing the financial statements
and they concur with the disclosure made in Note 2 on pages 111 to 112.
Recommendation to the Board
A summary of the process and of the Committee’s findings was considered
by the Board at its meeting on 26 February 2018. The outcome of that
review was that the Committee confirmed to the Board that the 2017
Annual Report and Accounts met the requirements of Code provision C.1,
and the Board’s formal statement to that effect, to meet the requirements of
the Code, is set out on page 60.
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance Nomination Committee Report
Nomination Committee
67
Nomination
Committee
Kevin Beeston
Kevin Beeston
Chairman of the
Chairman
Nomination Committee
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 in conjunction with the Board to ensure
effective diversity improvements and succession planning
processes across the Group.
2017 performance
– Further progressed the diversity and inclusivity agenda across the
business, including partnering initiatives with selected third parties.
– Reviewed contingency and longer term succession planning for
all senior roles across the business.
Dear Shareholder
I am pleased to be able to take this opportunity as Chairman of the
Nomination Committee to summarise the important ongoing objectives and
responsibilities of the Committee; the work that has been carried out during
2017; and its plans for the coming year.
The Nomination Committee performs an extremely important role and this can
be demonstrated by the fact that in addition to myself, all of the Non Executive
Directors are also members of this Committee.
The primary objectives of the Committee are to support the Board in fulfilling
its responsibilities to ensure that there are firstly, formal, rigorous
and transparent processes in place for the appointment of new Directors both
to the Board and to senior management positions, and secondly, effective,
deliverable and well thought through succession planning and contingency
planning processes in place across the Group for all key positions.
With regard to Board appointments, following a detailed review by the
Committee of the Board’s composition and the requirements of the
Company’s strategy, it was announced on 10 January 2018 that a number of
changes would be made to refresh the Board and its Committees:
– Gwyn Burr joined the Board as an Independent Non Executive Director
on 1 February 2018, bringing considerable experience including in the key
area of customer service which will strengthen the Board’s expertise in
this area.
– Acted upon comments made in the Board Appraisal for 2016
– Rob Rowley will stand down at the conclusion of the Annual General
regarding improving certain skill sets.
– Led preparations for Board and Board Committee
succession planning.
2018 objectives
– To further progress the diversity and inclusivity agenda across the
business and ensure the progress made is embedded within
our business.
– To continue to review and enhance succession planning processes
across the Group.
Nomination Committee
The Committee is chaired by the Chairman of the Board and is
composed of a majority of Independent Non Executive Directors as
required by the Code. Its members are set out in the table below.
Committee members
Kevin Beeston (Chairman)
Kate Barker
Mike Hussey
Angela Knight
Rob Rowley
Humphrey Singer
Number of meetings attended
2/2
2/2
2/2
2/2
2/2
2/2
Gwyn Burr was appointed a Committee member on 1 February 2018.
Meeting on 26 April 2018 as an Independent Non Executive Director after
over eight years of distinguished service.
– Kate Barker will succeed Rob as the Board’s Senior Independent Director
with effect from 26 April 2018.
– Humphrey Singer succeeded Rob as Chairman of the Audit Committee
on 10 January 2018.
Kate’s and Humphrey’s respective appointments are a result of the Committee’s
medium term Board succession planning activities over recent years.
Guidance issued by the Financial Reporting Council (FRC) is that Nomination
Committees should generally look deeper into the Company to identify future
leaders for the business; adopt a wider outlook in identifying potential
Directors; and look further ahead than any immediate requirement to replace
an individual Director. The Committee has addressed this through the further
development of the Company’s Talent Management Boards to identify future
talent and ensure that associated training and development plans are in place,
to identify those executives with short and longer-term potential to be
Directors, and to encourage and assist their further development with this aim.
The Committee has also focused increasingly on the skills of individual
Directors, and of the Board as a whole, in assessing whether each has the
necessary skill sets and whether there are any particular skills gaps,
particularly in relation to the Company’s medium term and longer-term
strategic direction and the Board’s ability to drive it effectively. More details are
set out on page 58.
The Committee also welcomes the Hampton Alexander Review which is
seeking to improve Board and senior leadership diversity across FTSE350
companies by setting targets to:
– Increase the target for women’s representation on FTSE350 Boards to
33% by 2020.
– Set a new target for women’s representation on FTSE100 companies’
executive positions at Board level and those that directly report to the
executive committee members (including the Company’s GMT) to 33%
by 2020.
Following the appointment of Gwyn Burr noted above, the Company currently
has three women on its Board (30%) and six across the combined Board and
GMT (35%) and is therefore already compliant with the proposed revised
target for wider executive positions and moving closer to compliance with that
for the Board alone which is expected to be reached when Rob Rowley steps
down from the Board at the conclusion of the Company’s 2018 AGM.
taylorwimpey.co.uk
68
Nomination Committee Report continued
The Committee has also reviewed processes designed to meet the
requirement to publish on a Government website, during 2018, certain
statistics and commentary around the gender pay gap during the tax year
ended 5 April 2017. The Company strongly supports the Government’s
initiative on gender pay gap reporting and looks forward to publishing
its findings.
The Committee made good progress during 2017 and its achievements
made during 2017 and its plans for 2018 are set out in the left hand
column of page 67.
The key priorities of the Committee remain the following:
– To regularly review the Board’s composition, balance, diversity, skill sets,
and individual Directors’ time commitment.
– To regularly review our succession and contingency planning across
the business, and ensure that there is a clear link to individuals’ career
development and professional development.
– To drive the Company’s diversity and inclusivity agenda across all levels of
our business.
– To ensure the Group continues to have the necessary level of Board and
senior management skills and leadership to deliver the strategy.
In meeting its objectives, both the Committee and the Board take into account
diversity including gender. We fully support the various Government initiatives
in this key area, including the ‘Beyond One by 21’ report and
recommendations launched in 2016 by Sir John Parker, which seek
to increase ethnic diversity on UK boards.
I can confirm that diversity and inclusivity remains very much on the
Taylor Wimpey agenda with regular reporting now taking place including
a specific annual update and discussion. Whilst we continue to make
progress, we do of course recognise that there is still further work to be done
in order to achieve our wider diversity and inclusivity strategy.
The Committee’s objectives, the strategy for delivering them, progress made
towards them during 2017 and targets and plans for 2018 are described in
more detail in this Report.
The Committee will continue to focus on ensuring that the present and future
composition of the Board and the Group’s executive management
is appropriate for the delivery of the Group’s strategy and that all relevant UK
Corporate Governance Code (the Code) requirements continue to be met.
Kevin Beeston
Chairman of the Nomination Committee
Committee purpose and responsibilities
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. The Committee guides the Board in regularly assessing whether there
is an appropriate balance of expertise and skills on the Board and other
diversity considerations. The Committee notes and welcomes the 2011 report
from Lord Davies of Abersoch on Women on Boards (the Davies Report); the
2015 Report which raised the target from 25% to 33% by the end of 2020;
and the Hampton Alexander Review which extends the 33% target by 2020
to include the executives at Board level and those that report directly to the
executive committee members (for the Company this is the GMT).
The Committee oversees on behalf of the Board, and advises the Board on,
the identification, assessment and selection of candidates for appointment to
the Board. The Committee has a formal, rigorous and transparent process
against objective criteria. A description of how appointments are typically
made to the Board is set out below and this was followed in connection with
the recent appointment of Gwyn Burr to the Board as an Independent Non
Executive Director on 1 February 2018.
ENGAGE
The engagement of independent recruitment consultants (The
Zygos Partnership) who have no other connection to
the Company.
CONSIDER
The preparation of a ‘long list’ of potential candidates which took
into account the outcome of the Committee’s latest review of the
composition and skill sets of the Board.
SELECT
The selection of a ‘short list’ of suitable candidates meeting the
Committee’s criteria.
INTERVIEWS AND MEETINGS
Interviews and meetings with the Chairman, Chief Executive,
Group Finance Director, Group Legal Director and Company
Secretary and with each Non Executive Director.
SELECT CANDIDATE
TAKE UP REFERENCES
APPOINTMENT
INDUCTION
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance The Nomination Committee also guides the Board in assessing from time to
time 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 positions across the business. This considers not only the
immediate succession planning for Directors but also a deeper review into the
Company’s management structure to identify those with longer term potential
to develop into future successors in the medium to long term. The Committee
also reviews Board composition in light of the Company’s strategy, to ensure
as far as possible that new appointments help support the drive to achieve its
strategic objectives and required skill sets.
Committee activities during 2017
As noted on page 67, the Committee met on two occasions during 2017
and the activities at each meeting were:
May
Oct
– Reviewed succession and
– Oversaw the selection and
contingency planning progress and
further plans for:
appointment of Gwyn Burr as an
Independent Non Executive Director
– The Board;
– The Non Executive Directors;
– Board Committees; and
– The Executive levels immediately
below the Board.
– Reviewed progress and plans for
developing talent
– Reviewed progress and plans for
contingency planning
– Oversaw consequent changes in the
positions of Senior Independent
Director and Chairman of the
Audit Committee
– Received an update of progress
around Group succession planning
and related development plans
– Received an update on contingency
planning for key Executives below
Board level
– Reviewed the Board composition
– Recommended to the Board,
– Reviewed the process to gather data
for the Company’s Gender Pay
Gap reporting
following a rigorous review of the
individuals’ performance, that Kate
Barker; Mike Hussey and Rob
Rowley, who will each have served
for in excess of six years as an
Independent Non Executive Director
at the time of the Company’s 2018
AGM, should each continue in office
and, with the exception of Rob
Rowley who will stand down, be
recommended for re-appointment
at the AGM
– Received an update on diversity
and inclusivity
69
As highlighted in the Committee’s 2017 performance on page 67, a key focus
of the Committee’s work during the year was on progressive succession
planning at all senior levels of the Company with a view to identifying key
prospects and tailoring training and development plans to allow them to
demonstrate their potential for future progression. As part of this process,
management below Board level is provided with regular access to the Board,
including the opportunity to attend Board meetings and other Board-related
functions in order to give presentations on specialist topics, project work and
the performance of specific regional businesses and Divisions. This helps to
provide valuable exposure to the Board for up and coming management as
well as being extremely valuable for Board members in assessing the
Company’s strength in depth.
The Committee meets formally at least twice a year. During 2017, in addition
to overseeing the recruitment of Gwyn Burr as an Independent Non Executive
Director and planning succession to the positions of Senior Independent
Director and Chairman of the Audit Committee, the Committee’s principal
agenda items consisted of longer term succession planning, reviewing and
approving the contingency plan for key members of staff and considering
progress on diversity across the business. Wider succession planning and
diversity also remained on the Board agenda regularly throughout the year.
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.
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, strategy, operations
(including health and safety) and systems, the principles underlying the
discharge of their duties as Directors and wider issues relating to the housing
sector. The induction also includes meetings with key executives and function
heads from across the business, advisers and site visits.
The Board recognises the importance of induction and training. These
programs for Directors were reviewed during the year and are considered to
remain appropriate.
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 at least one
Board meeting per annum takes place either in, or at a nearby location with
representatives from, a regional business over three days. In 2017, the Board
visit, accompanied by the GMT, encompassed presentations on culture,
customer services, digital, production and procurement; a planning update;
and performance updates from designated businesses.
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 at least 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. All Board papers are circulated electronically and Board
meetings have been effectively ‘paperless’ for several years, which has
worked well and aided the overall efficiency of the wider Board process.
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, and are supplemented, as appropriate, by briefings from
independent advisers. The Board also receives regular briefings and updates
on environmental, social and governance (ESG) matters.
taylorwimpey.co.uk
Board succession
There were no changes in the composition of the Board during 2017 but a
number of changes, mentioned earlier in this Report, were announced early in
2018, some of which have already taken place and some which will follow
upon the conclusion of the 2018 AGM:
Gwyn Burr was appointed as an Independent Non Executive Director on
1 February 2018 and brings with her from her executive background and also
more latterly her various non executive positions considerable experience and
expertise, principally in the area of customer service, and will therefore
enhance the overall skill sets of the Board. On her appointment to the Board,
Gwyn joined the Nomination and Remuneration Committees, where her
experience of past and current service on plc boards and remuneration
committees will be of considerable benefit.
Rob Rowley stood down as Chairman of the Audit Committee on
10 January 2018 and was succeeded in this position by Humphrey Singer.
Rob will stand down as an Independent Non Executive Director at the
conclusion of the AGM on 26 April 2018 and will be succeeded as Senior
Independent Director on that date by Kate Barker.
The composition and performance of the Board and its Committees were
considered during the year and it was concluded that the Board and each
Committee will, in light of the changes outlined above, continue to
function effectively.
The Committee believes that the balance of the Board, consisting
of a Chairman, three Executive Directors and six Independent Non Executive
Directors, recently augmented by Gwyn Burr’s wide-ranging additional skill sets,
will continue to provide the right blend of experience, expertise and challenge in
order to take the Company forward in line with its strategy whilst ensuring and
maintaining good governance and best practice, and will continue to do so after
Rob Rowley stands down. This will, however, be kept under regular review in
line with the guidance set out in the Code.
At the AGM of the Company to be held on 26 April 2018, all Directors will
again be subject to re-election or, in the case of Gwyn Burr, to election, by
shareholders in accordance with the Code. Biographical details of each
Director can be found on page 58.
70
Nomination Committee Report continued
The ESG briefings allow the Board to assess the significant ESG risks to the
Company’s short and long term value and to identify any opportunities that
may arise to enhance value. Details of ESG risks and value-enhancement
pursuits appear in the Sustainability Report which will shortly be available on
our website at www.taylorwimpey.co.uk/corporate/sustainability
The Chairman, Chief Executive and 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. The agenda and minutes for the Audit, Nomination and
Remuneration Committee meetings are agreed by the Secretary with the
relevant Committee Chairman.
Composition of the Board
It is the Company’s policy, in line with the Code, that proposed appointments
to the Board, and succession planning, are based on merit, and judged
against objective criteria, whilst also having due regard to the benefits of
diversity and inclusiveness, including gender, age, ethnicity, thought and
experience. Following the appointment of Gwyn Burr as an Independent Non
Executive Director on 1 February 2018, the Board consists of ten Directors,
three of whom are women, representing 30% of the Board. That percentage
will become 33% when Rob Rowley stands down from the Board, as
previously announced, at the conclusion of the 2018 AGM. The Board is
therefore moving towards the increased target proposed by the Davies Report
of 33% female representation by 2020. The Board aspires to reach and
maintain that level of representation, whilst continuing to also have due regard
to other aspects of diversity as outlined above.
The Committee also reviews the time commitments of each Director both prior to
all appointments and periodically so as to ensure that all Directors can discharge
their responsibilities effectively in line with the requirements of the Code.
Succession and contingency planning
During the year, succession planning for people at all levels of the organisation
has continued to be a key area of focus for the Committee. As part of this,
both the Board and the Nomination Committee have visibility of a wide range
of employees with leadership potential together with their individual
development plans. Each Divisional Chairman of the housing business chairs
a divisional Talent Management Board (TMB) comprising senior executives of
the Division together with HR representatives.
Each TMB then makes recommendations to the Group Talent Board which is
chaired by the Chief Executive. These Boards regularly review succession
planning and related development and training requirements across the UK
Group. Further actions to support succession planning include the development
of career paths linked to experience, exposure and education; an assessment
and development centre; and the promotion of the Company’s mentoring
scheme. We are also focusing upon recruiting individuals from a wider range of
backgrounds, experience and industries at all levels.
Succession planning remains a key area of focus across all levels of the
organisation. During the year, the Committee considered in detail short and
long term succession planning for Directors and key executives, together with
appropriate development plans. The Group Management Team (GMT)
regularly reviews the Company’s succession plans and talent pipelines, with
further action to support these areas continuing. The Committee also
considered contingency and longer term succession planning for all senior
roles, linked to talent development and targeted training programmes.
Contingency planning concerns the Company’s and the Board’s
preparedness for, and responsiveness to, sudden and unexpected loss or
non-availability of a key Board member, or one or more key executives.
It involves the identification of suitable individuals within the Company who,
either singly or in concert with another, can quickly assume a key role and
provide effective support until the incumbent returns to work or, in appropriate
cases, a successor can be identified and appointed.
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 71
Employee diversity
Diversity and inclusion remained an area of clear focus throughout 2017 which
will continue into 2018 and beyond. A Working Party which includes a variety
of members from across the business has been overseeing progress towards
achieving the Company’s diversity and inclusion strategy and implementing
new initiatives so as to improve our performance in these key areas and
comply with the Company’s Diversity Policy as set out on pages 72 to 73. The
strategy focuses on the challenges faced in developing an inclusive and
diverse workforce with each regional business making commitment. This
includes working with specialist external bodies to maximise all
opportunities, including:
– 21st century leadership
– Ensuring that our leaders understand their role in developing a more
diverse and inclusive culture and have the relevant training and support
to achieve this
– Employer of choice
– Ensuring that our working environment, polices, procedures and
development and progression opportunities, support greater diversity
and inclusivity
– Expanding our reach
business-related issues that are important to them. As part of this forum, the
business has visited a number of universities and schools which included
the females into STEM and construction event and Glasgow Caledonian
Universities’ Think Ahead Project.
Gained exposure for the business and the work of the young persons’ forum
at the young panel session at The Herald and Gen Analytics Diversity
Conference in May.
The Group has progressed work with the Royal National Institute for the Blind
(‘RNIB’) to audit the Company’s website for ease of access for visually
impaired users and make any necessary changes.
During 2017 we have worked with an external partner to undertake a detailed
review of accessibility for disabled people, whether employees; customers; or
visitors; to our offices; sites; sales centres; and show homes around the UK.
The report will be analysed and any appropriate recommendations
implemented during 2018.
With regard to gender, as at 31 December 2017:
The Board consisted of nine Directors, two of whom are women (22%). At the
time of writing this report the Board consists of ten Directors, three of whom
are women (30%). Following the Company’s AGM on 26 April the Board will
once again consist of nine Directors, three of whom will be women (33%).
– Developing broader recruitment channels, understanding and
embracing the diversity of our customers and workplace, and
improving our engagement with them
The GMT, which is effectively the Executive Board of Taylor Wimpey UK
Limited, our main operating company, consisted of 10 Executives, three of
whom are women (30%).
Excluding one woman who held an interim Regional Managing Director
position, there is one woman out of 24 Regional Managing Directors (4%).
From 1 April 2018 this will increase to two women (8%) following the
appointment of the interim Regional Managing Director into a Regional
Managing Director role.
Women across the Group account for 32% (2016: 32%) of the workforce.
28% (2016: 31%) of new starters with the Company during 2017 are women.
While we are making reasonable progress, we of course recognise that we still
have more work to do in order to fulfil our overall diversity ambitions and, as
stated on page 69, it is a priority for 2018 to achieve further progress in this area.
The Board believes that by embracing diversity and inclusiveness the
Company will better understand how people’s differences and similarities can
be utilised for the benefit of not only the Company but most importantly also
for individuals, society as a whole, and our customers. It is the Board’s view
that having a diverse workforce will improve the Company’s ability to deliver its
strategy; the homes that it builds; and its services.
Diversity has continued to be a key item on the overall UK governance agenda
during 2017. Within Taylor Wimpey, diversity has remained a key priority for
the Board’s agenda and this will continue to be the case during 2018.
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 teams.
As noted opposite, the Company has put in place systems to measure and
monitor diversity around the Group more effectively.
The data becoming available from these improved systems has assisted in
designing and implementing a number of improvements to Group terms and
conditions which we believe should facilitate access to, and success at, work
for all, such as the following:
A review of Gender Pay. From April 2017 the government has introduced
gender pay gap reporting for all companies with more than 250 employees in
the UK and we have met those requirements and our data will shortly be
published. At Taylor Wimpey we are committed to creating a diverse and
inclusive place to work. Our fair and transparent approach to recruitment and
our people is one of the defining factors in Taylor Wimpey’s culture and future
workforce. Embracing diversity enables Taylor Wimpey to succeed in a
competitive market. We have implemented a Diversity and Inclusion Strategy
which focuses on gender equality as well as other key promoting workforce
policies that highlight positive approaches to employee diversity. Our action plan
that supports gender equality sets out measures to challenge the traditionally
male dominated culture of the construction and home building industries.
Implementing a flexible working policy in our Southern Counties regional
business. As a result of the initial trial a number of further businesses have
also introduced revised flexible working arrangements which have been
received positively.
Established a Young Persons Forum in our West Scotland regional business
in order to give young members of the business a forum to discuss
taylorwimpey.co.uk
72
Nomination Committee Report continued
Progress of our diversity policy
The Company’s plans and progress in implementing its diversity policy, benchmarked against appropriate targets, are set out below. Progress is measured and
monitored by the Nomination Committee and the Board. The Company is also committed to ensuring that our people are free from any direct or indirect
discrimination, harassment, bullying or any other form of victimisation. Our grievance and harassment policies ensure that any reported incidents are
investigated. In addition, our whistleblowing policy encourages employees to speak up, including through an independent ‘Safecall’ telephone facility, against
any inappropriate practices or behaviour and we regularly publicise the policy to all staff and workers on site.
Strategy
We will examine our
culture and practices
to determine what further
actions can be taken
to improve diversity
and inclusion within
Taylor Wimpey.
Diversity policy
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
innovative. Diversity covers many
aspects. We have defined diversity
to mean that we actively embrace
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,
disability and religion but also
diversity of thought, background
and experience.
Progress
A Working Party continues to drive delivery of our Diversity and Inclusion Strategy and
Action Plan. Significant progress continues to be made.
It has always been the intention to expand the Working Party to ensure that it continues
to reflect a diverse representation from across the Group. During 2017 we sent a request
for new members which attracted nearly 100 applicants.
As a consequence, the Working Party has been extended to a membership of nine
members and the decision taken to introduce a separate BAME working group of 10
members moving forward into 2018. This BAME working group will be focusing on how
we can extend our reach to ensure that we attract and develop employees from a wider
and more inclusive talent pool.
Building on the comprehensive training sessions delivered to the management teams of
our regional businesses and Head Office functions in 2016, as planned further sessions
were delivered in 2017 to newly-appointed Directors and Managing Directors.
We also launched our Diversity and Induction e-learning to all employees in 2017. These
two modules (one for all employees and one specifically for line managers) help users
understand in more detail our commitment to building a more diverse and inclusive
workforce as well as the roles and responsibilities they have in supporting our
commitments. These are now key modules of our induction programme for new starters.
To monitor progress we anticipate repeating unconscious bias testing across the
business in 2018 and comparing the results to 2016.
The Chairman of the Working Party and the Group HR Director continue to periodically
contact all our Managing Directors to ensure the commitment to diversity and inclusion
remains a key focus.
Managing diversity is about valuing
everyone as an individual – valuing
people as our employees,
customers and clients. People
have different needs, values and
beliefs. Our people management
practice demands that
employment propositions are both
consistently fair but also flexible
and inclusive in ways that assist
our people while supporting our
business needs and objectives.
We will identify people
management practices
that assist a diverse
workforce to achieve their
full potential.
We will use our
Community Engagement
Programme to heighten
awareness of personal
interaction and valuing
individuals.
We will increase the
opportunities for young
people to join the
Company and will
promote continuous
personal development.
We are proud of our involvement with the Leonard Cheshire Disability Change 100
programme which we are committed to continuing to support.
In 2017 we took five interns with a range of disabilities, both physical and mental, who
worked across a wide range of disciplines.
We have continued to promote our ‘Employer of Choice’ and diversity agenda through
numerous publications and recently participated in the Annual Diversity Awards that were
sponsored by The Bank of Scotland, Glasgow Herald, and Genalytics.
Our West Scotland regional business was nominated for the ‘Recruitment of Talent’
award and sponsored the ‘Best Community Project’ award.
Taylor Wimpey are also participating in The Hampton Alexander Review, an independent
review body which aims to increase the number of women on UK boards.
There has been a comprehensive review of our current dress code across the business.
As a consequence, we have developed a new range, with a wider range of sizing, and a
more modern feel and a commitment given to provide any item of clothing not available in
the range for personal reasons e.g. religious belief. During 2018 we are committed to
reviewing the provision of maternity wear, to ensure that it is fit for purpose and inclusive.
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 73
Diversity policy
We believe that everyone should
have the right to equal access to
employment and, when in our
employ, to equal pay and access
to training and career development.
Strategy
We will ensure that all
managers involved in
recruitment and selection
receive training that
incorporates the areas
of diversity and
promoting equality.
We will extend our
recruitment sources in
order to attract
a more diverse range
of applicants.
We are committed to ensuring that
our people are free from any direct
or indirect discrimination,
harassment or bullying.
We will not tolerate any behaviour
that detracts from this.
We acknowledge that we must
continue to promote diversity in
order to create an organisation that
attracts, supports and promotes
the broadest range of talent.
Establishing an organisational
culture with diversity as a core
value will enable individuals to
reach their full potential and provide
the best service to our customers.
We will encourage our
people to speak out and
report any direct or
indirect discrimination,
harassment or bullying.
We will act promptly in
addressing
any inappropriate
behaviour or practice.
Diversity will be promoted
from the highest level and
we will ensure that our
people understand the
benefits of having a
diverse and
inclusive workforce.
Progress
We recruited 190 apprentices (2016: 147), including 53 site management apprentices
(2016: 54), 28 management trainees (2016: 30) and 31 graduates (2016: 20).
We recruited an increased number of employees with disabilities. Working with key
partners we hope to increase more permanent and secondment opportunities for people
with disabilities.
The new HR Information System is better capturing data relating to all aspects of diversity
and inclusion.
During 2018, we intend to update the diversity and inclusion data we hold on our
employees in the system. This was always an activity planned 18 months into the delivery
of our Diversity and Inclusion action plan, as we continue to raise awareness, and embed
a more diverse and inclusive culture.
We continued to partner with a number of specific diversity partners in 2017 with
an objective to drive the attraction and development of a more diverse and
representative workforce.
We are continuing the diversity discussion group meetings with the Chief Executive,
Group HR Director and different sections of the workforce, to further embed diversity and
inclusiveness at all levels of the Company.
Diversity and Inclusion is also discussed as part of the bi-annual talent and succession
reviews by the three Divisional Chairmen with the Chief Executive and Group HR Director.
We are keen to ensure that our website is accessible to those with sight impairment and
in conjunction with the Royal National Institute for the Blind we are currently undertaking a
website accessibility audit.
A specific focus of the Company’s whistleblowing campaign is on diversity, encouraging
employees to speak up against any inappropriate practices or behaviour.
Our grievance policy ensures that any reports of harassment or bullying are investigated
and acted upon.
Diversity is a core message within our strategy; a main item at our Executive and Regional
Management meetings; and is a standing agenda item at GMT meetings.
In order to support each employee to maximise their performance and achieve their own
personal goals we have designed a Cultural Principles framework where we describe the
behaviours and attitudes we believe are required for effective performance in order to
deliver our vision, mission and values. Encouraging and embracing diversity is an integral
part of our philosophy.
The Careers section of our website includes a dedicated Diversity and Inclusion section
highlighting our focus on this area.
During 2017, we introduced a female talent forum. Feedback was incredibly positive in
terms of creating an environment where individuals could share personal challenges and
development areas. This will continue through 2018.
taylorwimpey.co.uk
74
Remuneration Committee Report
Remuneration Committee
Remuneration
Committee
Kate Barker
Kevin Beeston
Chairman of the
Chairman
Remuneration Committee
Main objective
To establish and maintain formal and transparent procedures for
developing policy on executive remuneration to deliver the Company’s
strategy and value for shareholders; and to agree, monitor and report
on the remuneration of individual Directors and senior executives.
2017 developments
– Finalised and implemented the Company’s new Remuneration
Policy which shareholders approved at the 2017 AGM.
– Following a formal process, appointed new advisers to the
Remuneration Committee.
– Considered the leasehold review from a remuneration perspective.
– Continued to increase alignment with shareholders through
increased participation in our all-employee share plans.
– In line with corporate governance developments, reviewed the
ways in which employee views will be taken into account in relation
to pay at Board level.
2018 objectives
– To continue to increase alignment with shareholders through
encouraging participation in our all-employee share plans.
– To continue to review and seek to improve ways in which
employee views are taken into account in relation to pay at Board
level and consider how the other recommendations from the FRC
review of the UK Corporate Governance Code should
be incorporated.
– To review gender pay analysis across the Company and to finalise
and publish the Company’s first gender pay reporting in April 2018.
Remuneration Committee
The Remuneration Committee is chaired by Kate Barker. All members
of the Committee are Independent Non Executive Directors as required
by the Code. Its members are set out in the table below.
Committee members
Kate Barker (Committee Chairman)
Kevin Beeston (Chairman)
Angela Knight
Rob Rowley
Number of meetings attended
4/4
4/4
4/4
4/4
Gwyn Burr was appointed a Committee member on 1 February 2018
Dear Shareholder
On behalf of the Board, I am pleased to present the Directors’ Remuneration
Report for 2017 for and on behalf of the Taylor Wimpey
Remuneration Committee.
I would like to emphasise that the Committee remains very mindful of the
understandable focus on executive pay and the increasing importance of
considering remuneration from both a broader employee and a wide societal
perspective. The Committee is regularly apprised on market practice and
corporate governance developments, including the proposals to strengthen
the employee, customer and wider stakeholder voice and a new UK
Corporate Governance Code to apply to reporting years beginning on or after
1 January 2019. As mentioned elsewhere in this Annual Report on pages 23,
51, 81 and 95, in this context, we are pleased to have established the Taylor
Wimpey National Employee Forum. Although it is still early days, I very much
look forward to working with this important new body.
The Committee has continued its much-valued and long-established
practice of engaging and consulting with its key institutional investors and
with shareholder representative bodies about Executive Director remuneration.
As in previous years, the Committee has taken account of all the feedback
which it has received and is, as ever, very grateful for the constructive
engagement that has taken place with regard to the 2017 outcomes and
remuneration proposals for 2018. Shareholders approved the Remuneration
Policy at the 2017 AGM, with a vote in favour of more than 98% and we are
privileged to have had a strong track record of shareholder support on the
Company’s remuneration matters. We will consider our Remuneration Policy
again in 2018 to ensure that it remains relevant to the business strategy
which will be refreshed in 2018, as outlined in the Chief Executive’s Statement
on page 13.
The Committee remains firmly committed to ensuring that the remuneration of
the Executive Directors and the senior management team supports and drives
the Taylor Wimpey strategy. Our remuneration is based on a framework which
both challenges and motivates the senior management team to deliver the
strategy and value for our shareholders and wider stakeholder interests.
The table below summarises the performance measures in our current
incentive plans and how these link to the Taylor Wimpey strategy and align the
interests of executives with shareholders:
Weighting Link to strategic objectives
Measures in our variable
pay plans
Executive Incentive
Scheme (Bonus – EIS)
EBIT
Operating profit
conversion into cashflow
ROCE
Customer service
Performance Share Plan
(Long term incentive plan
– PSP)
Total shareholder return
– FTSE 100 peer group
Total shareholder return
– housebuilder group
ROCE
PBIT margin
40%
20%
20%
20%
20%
30%
20%
15%
Increase profit sustainably for the long term to
support growth and dividend payments
Our long term strategic target is to earn top quartile
levels of margin. Currently we are focusing on
delivering a conversion ratio of circa 22%
Deliver at least 15% return through the housing
cycle and 30% over the period 2016-2018
Deliver exceptional customer service and strive to
improve our customer satisfaction scores
Deliver long term stock market returns to our
shareholders which are higher than can be earned
by investing in other listed housebuilders and
other FTSE 100 companies generally
Deliver at least 15% return through the housing
cycle and 30% over the period 2016-2018
The long term strategic target is to earn top
quartile levels of margin. Currently we are focusing
on delivering a conversion ratio of circa 22%
Ensure that levels of cash generation from our
profit supports the medium-term strategy of
delivering dividends to shareholders of £1.3 billion
over 2016-2018
Taylor Wimpey plc Annual Report and Accounts 2017
Operating profit
conversion into cashflow
15%
Directors’ Report: Governance 75
Executive Directors’ total remuneration
The chart below compares the 2017 single figure for total remuneration
for each of the Executive Directors with the equivalent figure for 2016.
Executive
Director
Pete Redfern
Chief Executive
Single total remuneration figure (£’000)
2017
29%
22%
49%
£3,809
2016
27%
24%
49%
£4,072
Ryan Mangold
Group Finance Director
2017
29% 23% 48%
£1,818
2016
27% 25% 48%
£1,937
James Jordan
Group Legal Director
and Company
Secretary
2017
30% 21% 49%
£1,800
2016
28% 24% 48%
£1,928
£0
£1,000
£2,000
3,000
£4,000
£5,000
£6,000
Fixed Pay
Bonus
LTIP
The Committee firmly believes in ensuring a strong alignment between its
Executive Directors and senior management with the interests of the
Company’s shareholders. Executive Directors’ interests continue to be aligned
with those of the Company’s shareholders in three principal ways:
– Through the share ownership requirements in Taylor Wimpey (which the
Committee keeps under regular review).
– Via the requirement to defer each year one third of their annual cash
bonus into shares, which are then required to be held in trust for three
years (described in more detail on pages 84 and 87).
– In line with current best practice, through the requirement to retain for two
years after vesting the net post-tax benefit deriving from any vesting of the
Performance Share Plan award, which will also continue to apply on any
vestings under this Plan going forward.
Performance in 2017: Executive Incentive Scheme (Bonus)
(EIS) and Performance Share Plan (PSP) outturn
The EIS and PSP operate with clearly defined performance measures
set out at the start of each financial year. To assess performance at an
underlying level, which is not distorted by one-off items in the financial
statements such as movements in the value of the land bank, the financial
measures for the EIS and PSP are calculated before any non-recurring items
which could affect the position - either positively or negatively. This has been
the Committee’s policy for many years and ensures a stronger and fairer link
between reward and underlying performance. In accordance with this
well-established policy, the profit-related performance measures for the 2017
EIS and 2015 PSP awards were therefore calculated before the cost of the
gross provision of circa £130 million (the provision), which the Company
announced in April 2017 following the outcome of the Company’s review
into historic leasehold structures.
On this basis, for the EIS, our trading performance for 2017 was again
excellent, with full achievement against the range of challenging targets set for
the Group EBIT measure (40% weighting ), Cash Conversion (20%) and
Return on Capital Employed (ROCE) (20%). The Company also partially met
the range of Customer Service targets (6% out of 20%) and this remains an
important area of ongoing focus. Based on the performance of the Company
against its targets, the EIS outturn for 2017 was 86% of the maximum bonus
potential for the Executive Directors of 150% of salary before the application of
Committee discretion as referred to below.
With regard to the PSP award granted in 2015, which measured performance
over the three years to the end of 2017, the level of our trading performance
delivered full vesting in relation to the 50% of the award based on ROCE and
Cash Conversion. For the remaining 50% of the award, which is based on
total shareholder return (TSR), our TSR over three years was 92%, which
resulted in full vesting against the peer group based on FTSE companies
ranked 51-150 (20% of the award) and partial vesting against the peer group
of other listed housebuilders (30% of the award). On this basis, the
performance across the four performance measures led to a vesting of
77.71% of the 2015 PSP award.
In judging the overall link between pay and performance, the Committee
carefully considered the impact of the provision as referred to above in our
2017 financial statements. The Committee has taken into account that the
Executive Directors:
– were not personally involved in the decision to introduce leases with
doubling ground rent clauses that gave rise to the need for this provision;
– have not benefited financially in relation to past years’ incentive plans from
this issue; and
– proactively dealt with this issue since it arose, in a positive, transparent
and equitable way that is in the long-term interest of shareholders as well
as relevant current and future customers.
Notwithstanding the above, in recognising the impact of this issue in 2017 for
our shareholders and on certain of our customers, the Committee decided to
use its discretion to scale back the level of the 2017 EIS for the
Executive Directors.
The level of scale back is equivalent to the maximum EIS opportunity relating
to the Customer Service element of the 2017 EIS, which equates to 20% of
the EIS (i.e. equivalent to 30% of each Director’s salary). While the provision
did not relate directly to the Customer Service performance conditions of the
EIS set at the start of the year, the leasehold review did however more broadly
relate to customer service. The Committee believes that the scale back is a
meaningful and proportionate approach to take, recognising not only the
impact on shareholders and certain customers, but also taking account of the
circumstances highlighted in the bullet points set out above. The impact of the
scale back for each Executive Director is set out in the table below:
Director
Pete Redfern
Ryan Mangold
James Jordan
EIS as originally
determined by the
performance criteria
£1,078,592
£542,110
£500,775
Scale back
£250,835
£126,072
£116,459
Resultant EIS
payable before
tax/NI and deferral
£827,757
£416,038
£384,316
The Committee was comfortable that the PSP award should vest ordinarily in
accordance with the performance criteria, recognising that the Executive
Directors are each significant shareholders and have significant interests in
both the PSP and deferred shares under the EIS. On this basis, the
Committee feels that they will have shared with our shareholders any impact
on the share price that may have arisen, both in terms of the value of their
holdings and the future vesting under the above-mentioned schemes.
Full details of the performance targets and the relative achievement against
each, are set out on page 87.
How we will apply the remuneration policy in 2018
The average annual salary increase being proposed throughout the Company
is 2.5% and this increase will also apply to the three Executive Directors. As in
previous years, salary increases for the year will take effect from 1 April.
The operation of the incentive arrangements for 2018 will be unchanged
structurally from the plans which operated in 2017, which have successfully
provided a broad assessment of performance against our strategic KPIs.
The 2018 EIS will retain the same measures and weightings, namely, EBIT
(40%), ROCE (20%), Cash Conversion (20%) and Customer Service (20%)
with 10% based on the National House Building Council’s (NHBC) eight week
score and 10% based on the NHBC nine month survey. The financial
measures remain closely aligned to our strategy and will also assist in the
driving of other important financial measures.
taylorwimpey.co.uk
76
Remuneration Committee Report continued
Committee activities during 2017
February
July
October
December
– Reviewed feedback from major
– Initial consideration of the potential
– Further consideration of the
effect of the leasehold review
and provision on the variable pay
elements of the Executive Directors’
remuneration packages
effect on Executive Director
remuneration of the outcome of the
leasehold review announced during
2017 and the associated provision of
circa £130 million
– Undertook a competitive tender
process including meetings for the
Committee’s Remuneration Adviser
– Reviewed the outcome of the process
and appointed Korn Ferry with effect
from 20 July 2017
shareholders on the remuneration
consultation conducted in December
2016 around the Company’s
remuneration proposals for 2017 and
the Remuneration Policy which was
approved by shareholders at the
Company’s 2017 AGM
– Considered and approved the salary
review proposals for 2017 for the
Executive Directors and the wider
executive team in light of Company
proposals for the wider workforce
– Considered and approved the
outcome of the EIS for 2016 and of the
PSP vesting in 2017
– Considered and approved the wording
of the proposed new PSP Plan Rules
as approved by shareholders at the
Company’s 2017 AGM
– Reviewed the draft Remuneration
Report for the Company’s 2017
Annual Report
– Determined the effect of the leasehold
review and provision on the variable
pay elements of the Executive
Directors’ remuneration packages
– Agreed communication to major
shareholders around the Company’s
remuneration proposals for 2018
– Considered reports from Korn Ferry on
executive benchmarking
– Considered a general governance
update from Korn Ferry on
remuneration considerations
– Preliminary discussion on salary
proposals for 2018; projected
outcomes on 2017 EIS; and
PSP awards
– Considered the draft Remuneration
Report for inclusion in the Company’s
2017 Annual Report
– Discussion around strategy on the
Company’s defined contribution
pension scheme
We believe that the remuneration payable to the Executive Directors for 2017
is appropriate, linked to performance delivered and, as evidenced by our use
of discretion to reduce the EIS payments this year, has taken account of the
broader circumstances within which incentive payments should be made.
I very much hope that you will again be able to support the level of
remuneration paid with respect to 2017 and the way we will implement our
policy for 2018.
Kate Barker
Chairman of the Remuneration Committee
Awards made in 2018 under the PSP will also be unchanged from 2017,
based on PBIT Margin (15%), Operating Profit Cash Conversion (15%), ROCE
(20%), and relative Total Shareholder Return (TSR) against a Housebuilders
group (30%) and against the FTSE 100 (20%). Following our consultation with
shareholders, we will however be amending how we calculate the Company’s
TSR against the housebuilder’s group by reverting to a more conventional
median to upper quartile range. This will be no less challenging to achieve but
will make it more straightforward to calculate and, importantly, easier to
communicate it internally to participants. The change will also align the
method of calculation to the FTSE 100 TSR group measurement, which has
been in place for a number of years.
Remuneration adviser
During 2017 the Committee undertook a review of its independent adviser,
and after a competitive tender process, including the incumbent firm, Aon
Hewitt New Bridge Street, who had been in position since February 2009,
decided to appoint Korn Ferry as the Committee’s adviser with effect from
20 July 2017. Both advisers are members of the Remuneration Consultants
Group and signatories to its Code of Conduct.
Membership of the Committee
I should like to take this opportunity to thank Rob Rowley, who will stand
down from the Board at the conclusion of the Company’s 2018 AGM, for his
contribution to the Committee’s deliberations since 2010.
I should also like to welcome Gwyn Burr who joined the Committee on
1 February 2018 and brings wide experience of remuneration committee
related matters.
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 77
Introduction
This Report has been prepared to comply with the provisions of the
Companies Act 2006 and other applicable legislation, including the Large and
Medium-Sized Companies and Groups (Accounts and Reports) Regulations
2008 (as amended) (Regulations), and has also been prepared in line with the
recommendations of the UK Corporate Governance Code (the Code) and the
UK Listing Authority Listing Rules.
This Report has been prepared by the Remuneration Committee on
behalf of the Board.
The 2017 Remuneration Report includes disclosures which reflect in full the
Regulations on remuneration reporting, divided into two sections:
– Remuneration Policy Report: this sets out the Remuneration Policy
adopted by shareholders at the 2017 AGM, describing the framework
within which the Company remunerates its Directors. The Policy applies
for a period of three years from the date of the 2017 AGM or until a
revised Policy is approved by shareholders if sooner. The preceding Policy
applied during the year from 1 January 2017 until the date of the 2017
AGM, but was not materially different from the current Policy.
– Annual Report on Remuneration: this sets out how the Company’s
Remuneration Policy was applied during 2017 from the date of the 2017
AGM (and under the preceding Policy until that date) and how it is
proposed that it be applied during 2018. The Annual Report on
Remuneration will be subject to an advisory resolution at the AGM on
26 April 2018. Details of the resolution and its status as an advisory vote
are set out in the Notes to the Notice of Meeting on page 157.
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
have been properly prepared in accordance with the requirements. The
Remuneration Policy Report, which describes the Committee’s current
Remuneration Policy for Executive Directors and which has applied since its
approval by shareholders on 27 April 2017, contains unaudited information.
Some elements of the Annual Report on Remuneration, which describes how
the Committee has implemented its existing policy in 2017, contain
audited information.
Remuneration Policy Report
Unaudited information
The Company’s Remuneration Policy was subject to a binding shareholder
vote at the 2017 AGM of the Company and was approved by 98% of
shareholders who voted.
The Policy is designed to ensure that the remuneration framework will support
and drive the Taylor Wimpey strategy forward by both challenging and
motivating the Executive Directors and the senior management team to deliver
it and drive value for our shareholders. The Policy is set out on pages 78 to 80
and is also available to view on the Company’s website at www.taylorwimpey.
co.uk/corporate/investor-relations/corporate-governance
Policy overview
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. 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 long term interests of the Company’s shareholders. This alignment is
achieved through a combination of deferral into shares of a percentage of the
EIS; a two-year retention period for vested PSP awards; and share ownership
guidelines which require executives to build up holdings of Taylor Wimpey
shares, either directly or by retaining vested PSP share awards. These
guidelines, which the Committee regularly reviews and also seeks advice on,
require Executive Directors to put in place a plan to accumulate a holding in
the Company equivalent to their basic salary within five years of appointment,
followed by a holding equal to twice their basic salary within a specified period
to be agreed with the Chairman.
The Committee’s Remuneration Policy ensures that a significant percentage
of the overall remuneration package of Executive Directors and senior
management is subject to performance. With all packages for Executive
Directors substantially geared towards meeting challenging targets set
under the EIS and PSP, the Committee believes that the pay and benefits of
its Executive Directors and senior management adequately takes account of
reward versus risk.
In line with best practice 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.
taylorwimpey.co.uk
78
Remuneration Committee Report continued
Element
Salary
Purpose and link to strategy
Operation
Maximum
To recruit and reward
executives of a suitable
calibre for the role and duties
required.
Salaries are normally 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).There is no automatic
entitlement to an increase each year.
Takes into account the following:
The maximum annual salary increase will not
normally exceed the average increase which
applies across the wider workforce. However,
larger increases may be awarded in certain
circumstances including but not limited to:
– Increase in scope or responsibilities of
the role.
– To apply salary progression for a newly /
– The performance, role and responsibility of each
recently appointed Director.
individual Director.
– Where the Director’s salary has fallen
– The economic climate, general market conditions
significantly below the market positioning.
Performance targets
Company and individual
performance are factors
considered when
reviewing salaries.
Chairman
and Non
Executive
Director fees
The Chairman’s and
Non Executive Directors’ fees
should be in line with
recognised best practice and
be sufficient to attract and
retain high calibre
non executives.
Other
benefits,
including
benefits-
in-kind
Provides a competitive
package of benefits to assist
with recruitment and retention
of staff.
and the performance of the Company.
– The level of pay awards across the rest of the
business.
– Salary levels in comparably-sized companies and
other major housebuilders.
Fees consist of a single consolidated fee for the
Chairman plus the payment of a cash amount to
cover his office expenses1, an annual fee for the
other Non Executives and additional fees for the
Chairman of the Audit Committee and the
Remuneration Committee. An additional fee is also
paid to the Senior Independent Director in
recognition of the responsibilities of that role.
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 / or Remuneration Committee.
Reviewed periodically but generally annually and at
least every other year. Takes into account levels in
comparably-sized companies and other major
housebuilders.
Fees are paid monthly in cash.
Non Executive Directors do not participate in any
incentive, share scheme, benefits-in-kind or pension
arrangements. The Chairman is entitled to
participate in the Company’s private medical
insurance scheme.
Any reasonable business-related expenses
(including tax thereon) which are determined to be a
taxable benefit, can be reimbursed.
The main benefits offered include:
– Company-provided car or a cash allowance
in lieu.
– Provision of a fuel card.
– Life assurance.
– Private medical insurance.
– A 5% discount on the price of a new home
acquired from the Group in the UK or Spain.
Benefits-in-kind are not pensionable.
Aggregate annual limit of £1 million imposed by
the Articles of Association.
N/A
N/A
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. The cost of these benefits is not
predetermined.
The value of a company-provided car or a cash
allowance in lieu is of a level appropriate to the
individual’s role and is subject to review from
time to time. The fuel card covers the cost of all
fuel, for both business and personal use.
For home purchases, the price discount is
calculated at the plot release price less the
average discount to third party buyers for that
house type on that development, less a further
5% employee discount. No more than one
home per annum can be acquired at a discount
under the scheme.
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 79
Element
Purpose and link to strategy
Operation
Maximum
Performance targets
Annual
Bonus
Scheme
(EIS)
Rewards the achievement of
stretching objectives that
support the Company’s
annual and strategic goals.
Compulsory deferral in shares
is designed to further align the
interests of Directors with
shareholders.
Long Term
Incentive Plan
(PSP)
Pension
Annual grants of share-based
long term incentives assist
with retention and the
incentivisation and motivation
of senior executives to
achieve returns for
shareholders through the
inclusion of relative Total
Shareholder Return (TSR) as
a measure, driving further UK
operating margin progression
and improving return on net
operating assets through the
cycle. The use of shares and
a post-vesting shareholding
period helps align the
interests of senior executives
with those of the Company’s
shareholders.
The Company aims to
provide competitive
retirement benefits that
represent an appropriate level
of cost and risk for the
Group’s shareholders3.
EIS awards are determined by the Committee after
the year end, based on annual performance against
targets set at the beginning of each year.
One-third of any EIS payable is deferred into shares
for three years and held in trust. No further
performance conditions apply.
Dividends or other distributions will accrue in favour
of participants during the three year deferral period
and will be received with any shares that vest after
the applicable deferral period.
A malus and clawback mechanism applies to all
participants in the event of a material misstatement
of the Group’s accounts and also for other defined
reasons. The period of the clawback is three years
from the date of payment.
No element of the EIS is pensionable.
Executive Directors and other designated senior
executives can receive annual awards of PSP
shares.
Awards of PSP shares provide alignment with
shareholders as they deliver (subject to meeting
performance conditions) the full value of the shares,
which can increase and decrease over the three
year performance period.
Dividends or other distributions will accrue for
Directors during the performance and holding
periods and will be received with any shares that
vest in favour of participants after the applicable
performance period.
Performance measures are currently measured over
three financial years.
A malus and clawback mechanism applies to all
participants in the event of a material misstatement
of the Group’s accounts and also for other defined
reasons. The period of the clawback is three years
from the date of payment.
Pension benefits for Executive Directors are provided
through one or more of the following arrangements:
– Personal Choice Plan4;
– Taylor Wimpey Pension Scheme5;
– or as cash allowances.
The maximum EIS opportunity for
Executive Directors is set at 150% of
base salary. Target is set at 75% of
salary and threshold at 0%.
The maximum award (currently in
performance shares) is normally over
shares with a face value of 200%
of base salary. In exceptional
circumstances this can be increased
up to 300%.
The EIS measures are based on
a scorecard of designated key
annual financial, operational and
environmental measures and the
measures for 2017 are described
in the Annual Report on
Remuneration.
The Committee may vary the
metrics and weightings from year
to year according to strategy and
the market, however financial
measures will normally have the
most significant weighting.
The targets and weightings for
2018 are described in the Annual
Report on Remuneration.
The Committee may vary the
measures that are included in the
plan and the weightings between
the measures from year to year.
Any changes to the metrics
would be subject to prior
consultation with the Company’s
major shareholders.
Awards vest 20% for threshold
performance and 100% for
maximum performance with
straight line vesting in between.
Pete Redfern: cash allowances of
20% of salary up to a scheme specific
cap and 25% of salary above the cap.
N/A
James Jordan: cash allowances of
20% of salary up to a scheme specific
cap and 28% of salary above the cap.
Ryan Mangold: 20% of salary, split
between a cash allowance and
Company pension contribution.
Company contributions to any
pension scheme in respect of the
recruitment of a new Executive
Director will not exceed 20% of base
salary per annum, which is the
Company contribution rate for senior
management.
A Salary Exchange Arrangement is
available, allowing the sacrifice of a
portion of salary, to be paid into a
pension scheme as a Company
contribution.
taylorwimpey.co.uk
80
Remuneration Committee Report continued
Element
Purpose and link to strategy
Operation
Maximum
The Sharesave plan and SIP have standard terms
under which all UK employees with at least three
months’ service can participate.
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 tax-advantaged
Sharesave plan and a Share
Incentive Plan (SIP).
Shareholding
guidelines
Encourages greater levels
of shareholding and aligns
employees’ interests with
those of shareholders.
Executive Directors and senior executives are
expected to achieve and maintain a holding of the
Company’s shares at least equal to a significant
proportion of their respective salary.
Sharesave: Employees can elect for a
savings contract of either three or five
years, with a maximum monthly saving
set by legislation or by HMRC. Options
can be exercised during the six months
following the end of the contract.
SIP: Employees can elect to contribute
an amount per month or per tax year by
one or more lump sums.
The maximum saving or contribution level
is set by legislation or Government from
time to time and the Committee reserves
the right to increase contribution levels
to reflect any approved Government
legislative changes.
Executive Directors: 200% of salary
(100% within five years of appointment
and balance by agreement with the
Chairman)2.
Performance targets
N/A
N/A
1. The Company no longer makes a contribution to the Chairman’s office-related expenses.
2. In addition to the two-year holding period in respect of the PSP, until the 200% target is achieved, an Executive Director will be required to retain in shares at least 50% of the net of taxes gain
arising from any shares vesting or acquired pursuant to the PSP or other share based long term incentive plan.
3. Taylor Wimpey Pension Schemes – The Group has two principal UK pension schemes: Taylor Wimpey Personal Choice Plan and Taylor Wimpey Pension Scheme (TWPS). The latter was
created on 7 March 2013 and all members of the George Wimpey Staff Pension Scheme and the Taylor Woodrow Group Pension & Life Assurance Fund, the two legacy defined benefit
schemes, were transferred into the TWPS on 1 October 2013. Two Directors are members of the TWPS, which is closed to future accrual.
4. 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. All active members of the two legacy defined benefit arrangements were invited to join the PCP when those arrangements closed to future accrual.
5. Taylor Wimpey Pension Scheme (TWPS) – Pete Redfern and James Jordan are members of the Executive section of the TWPS. They have a Normal Retirement Age under the TWPS of 62.
Illustration of the Remuneration Policy for 2018
The charts below illustrate the level and mix of remuneration based on the Remuneration Policy depending on the achievement of below target, target and
maximum for the Executive Directors under the policy.
)
s
’
0
0
0
£
(
4500
4000
3500
3000
2500
2000
1500
1000
500
0
£1,110k
£2,087k
£4,068k
£535k
£1,026k
£2,021k
£541k
£995k
£1,915k
41%
32%
16%
31%
100%
53%
27%
42%
32%
26%
16%
32%
52%
100%
41%
31%
28%
16%
30%
54%
100%
Below Target
Target Maximum
Below Target
Target Maximum
Below Target Target Maximum
Pete Redfern
Chief Executive
Ryan Mangold
Group Finance Director
James Jordan
Group Legal Director and
Company Secretary
Fixed Pay
Bonus
LTIP
1. Salary is £857,020, £430,746 and £397,902 for Pete Redfern, Ryan Mangold and James Jordan, respectively with effect from 1 April 2018.
2. Benefits are £53,000, £21,000 and £48,000 for Pete Redfern, Ryan Mangold and James Jordan, respectively.
3. Pension is £204,991, £85,624 and £98,000 for Pete Redfern, Ryan Mangold and James Jordan, respectively.
4. For the EIS the target and maximum award is 75% and 150% of base salary, respectively.
5. For the PSP the target (assumed for these purposes to be at threshold performance) and maximum are 40% and 200% of base salary, respectively.
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance Committee discretion
The Committee fully recognises that the exercise of discretion must be
undertaken in a very careful and considered way and that it is an area that will
quite rightly come under scrutiny from shareholders and other stakeholders. It
is however also important for the Committee to retain some discretion to
make payments outside of its Remuneration Policy in exceptional
circumstances. The Committee confirms that any exercise of discretion in
such circumstances would be within the available discretions set out in this
Report and that the maximum levels available under any relevant plans would
not be exceeded.
As mentioned earlier in this Report, the Committee decided that it was
appropriate to exercise its discretion to scale back the EIS entitlement of
the three Executive Directors in respect of the 2017 outcome, by 20% of the
EIS (which equates to 30% of salary) to take into account the impact of the
circa £130 million provision which was made following the conclusion of the
review into historic leasehold practices.
With regard to both the EIS and the PSP, the Committee, consistent with
market practice, retains discretion over a number of areas relating to the
operation and administration of these plans but in all cases within the rules.
These include (but are not limited to) the following matters (with the maximum
level of award restricted as set out in the Policy table on pages 78 to 80):
– Who participates in the plans.
– The timing of grant of award and / or payment.
– The size of an award and / or a payment, subject to the limits of the rules.
– Discretion relating to the measurement of performance in the event of a
change of control or reconstruction.
– Determination of a good leaver (in addition to any specified categories) for
incentive plan purposes based on the rules of each plan and the
appropriate treatment chosen.
– Discretion to dis-apply time pro-rating in the event of a change of control
or good leaver circumstances.
– Adjustments required in certain circumstances (e.g. rights issues,
corporate restructuring, acquisition, divestment, change of control, special
dividend or a change in prevailing market conditions).
– The ability to adjust existing performance conditions for exceptional
events so that they can still fulfil their original purpose.
– Discretion to allow participants to sell, transfer, assign or dispose of some
or all of their shares in exceptional circumstances before the end of the
holding period, subject to such additional terms and conditions as the
Committee may specify.
How shareholder views are taken into account
The Remuneration Committee appreciates and considers very seriously all
shareholder feedback received in relation to remuneration each year and
guidance from shareholder representative bodies more generally. Shareholder
views are key inputs when shaping the Remuneration Policy and the
Committee welcomes any comment or feedback on any aspects of
remuneration and will always consider and respond.
The Committee regularly engages with its largest shareholders and
shareholder bodies, regarding the ongoing Remuneration Policy and
implementation, and will take into account any feedback when determining
any changes that might apply. The last such consultation took place in
December 2017 and included the proposed performance targets and
weightings of both the EIS and PSP, and also the salary proposals for 2018 of
2.5% to apply to all employees. The Committee also used the opportunity to
consult with shareholders on the use of its discretion to reduce the level of the
Executive Directors’ EIS as referred to above.
The Committee follows the principles of good governance relating to
Directors’ remuneration as set out in the Main Principles, Supporting Principles
and Code Provisions of the Code. The Committee reviews and takes into
account any governance related developments and guidance that arise, on an
ongoing basis.
81
How employees’ voice is taken into account
The Committee supports and welcomes the ‘employee voice’ proposals
currently under consideration by the Government, and in anticipation of this,
the Company has already put in place the Taylor Wimpey National Employee
Forum (the NEF) which will work with members of the Group Management
Team and build upon the existing regional Employee Consultative Committee
structure. Since it was established in late 2017 it has met on two occasions
and received updates and provided feedback and input into specific matters
such as certain remuneration related matters, customer service and other
important operational matters. It is intended that the Chairman and the
Remuneration Committee Chairman will attend the NEF from time to time and
also seek feedback on specific topics via the Group Legal Director and
Company Secretary, Group Human Resources Director or other Group
Management Team members as appropriate.
How performance measures were chosen
The performance metrics that are used for each of the short and long term
incentive plans have been selected to reflect the Group’s key strategic goals
and are designed to align the Directors’ interests with those of the
Company’s shareholders.
The EIS performance metrics include a mix of financial and non-financial
metrics reflecting the key annual priorities of the Group. The financial metrics
will generally determine at least 50% of the EIS and include earnings before
interest and tax as this reflects the Company’s strategic objective to increase
profit sustainably. The other financial metrics, selected on an annual basis, will
be measurable and will ensure that executives are motivated to deliver across
a scorecard of key objectives. The improvement of customer service remains
an area of ongoing focus and the Remuneration Committee has therefore
retained it as a challenging measure.
The performance conditions applicable to the PSP were selected by the
Committee as they are consistent with the overall longer term success of the
Company. TSR provides an external assessment of the Company’s
performance in two ways. Firstly, against its competitors via an industry peer
group and secondly, relative TSR measured against an appropriate sector of
the FTSE. The latter has progressed over recent years, in line with the
improvement in the Company’s share price and capitalisation, from the FTSE
250 for 2014 awards; through to the 50 companies ranked immediately
above and below the Company for 2015 awards; to the FTSE 100 for 2016
and subsequent awards. It also aligns the rewards received by executives with
the returns received by shareholders. The ROCE and Cash Conversion
targets ensure that returns to shareholders and the generation of cash to fund
them are the result of long term sustainable financial performance. PBIT
Margin is a key indicator for investors and for the Company’s strategy of
driving margin rather than volume.
The Committee will review the choice of performance measures and the
appropriateness of the performance targets each year. Targets are set based
on a sliding scale that takes account of internal planning and external market
expectations for the Company. Maximum rewards require substantial
out-performance of our challenging plans approved at the start of each year,
with a significantly lower level of rewards for delivering thresheld
performance levels.
taylorwimpey.co.uk
82
Remuneration Committee Report continued
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 Director),
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. Any such appointments would be the subject of a
public announcement to the London Stock Exchange.
Pete Redfern is an independent non executive director on the Board of
Travis Perkins plc where he also serves on its Remuneration Committee and
chairs its Stay Safe Committee. His current fees total £68,000 per annum
(2016: £57,000).
Remuneration Policy for the wider workforce
When setting the policy for Executive Directors, the Committee is made fully
aware of pay structures across the workforce. In addition, the Committee will
conduct a formal review of relevant elements of remuneration across the
Group and for all levels of employee every three years. The most recent such
review took place in 2017 and its findings, which included data in preparation
for the publication of gender pay gap information in April 2018, were that there
were no inherent issues or evidence of inequalities on base pay, bonus and
car benefits, or on pension arrangements which have been aligned.
Virtually all of the Company’s employees participate in incentive arrangements.
Many employees can elect to take their performance-related payment in
shares rather than cash, further enhancing the link and alignment between
shareholder value and employee reward throughout the Company, which
both the Company and the Committee consider important. For further details
see employee involvement on page 96.
The Company also offers both Sharesave and Share Incentive schemes to all
eligible UK employees with more than three months’ service.
Remuneration Policy on recruitment or promotion
Base salary levels will be set in accordance with the Remuneration Policy,
taking into account the experience and calibre of the individual. Where
appropriate, the Company may offer a below market salary initially with a view
to making above market and workforce increases over a number of years to
reach the desired salary positioning, subject to individual and Company
performance. Benefits and pension will be provided in line with those offered
to other Executive Directors, with relocation expenses provided for if
necessary. Tax equalisation may also be considered if an executive is
adversely affected by taxation due to their employment with the Company.
Legal fees and other costs incurred by the individual may also be paid by the
Company, if considered appropriate and reasonable to do so.
The variable pay elements that may be offered will be subject to the maximum
levels described in the policy table on pages 78 to 80. The Company may also
consider applying different performance measures if it feels these appropriately
meet the strategic objectives and aims of the Company whilst incentivising the
new appointee.
The above policy, which has not been used to date since its introduction,
would apply to both an internal promotion to the Taylor Wimpey plc Board or
an external hire.
In the case of an external hire, the Company may choose to buy-out any
incentive pay or benefit arrangements which would be forfeited on leaving the
previous employer. This will only occur where the Company feels that it is a
necessary requirement to aid the recruitment. The replacement value would
be provided for, taking into account the form (cash or shares), timing and
expected value (i.e. likelihood of meeting any existing performance criteria) of
the remuneration being forfeited. Replacement share awards, if used, will be
granted using Taylor Wimpey’s existing share plans wherever and to the
extent possible, although in exceptional circumstances awards may also be
granted outside of these schemes if necessary and as permitted under the
Listing Rules. To ensure alignment from the outset with shareholders, malus
and clawback provisions may also apply where appropriate and the
Taylor Wimpey plc Annual Report and Accounts 2017
Committee may require new directors to acquire Company shares up to a
pre-agreed level. Shareholders will be informed of any buy-out payments at
the time of appointment.
In the case of an internal hire including a promotion, as previously reported,
the Company will honour any commitments entered into prior to their
appointment to the Board even where it is not consistent with the Policy
prevailing at the time such commitment is fulfilled.
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. This
meets the requirements of the UK Corporate Governance Code. 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
Annual General Meeting on page 153.
Each of the Executive Directors’ service contracts provides for:
– The payment of a base salary (details of which are set out on page 84).
– An expensed company car or a cash allowance in lieu; a fuel allowance;
life assurance; and private medical insurance (details of which are set out
on page 78).
– Employer’s contribution to a pension scheme (details of which are set out
on page 79).
– A notice period by either side of 12 months.
– A provision requiring a Director to mitigate losses on termination.
The service contract for each of Pete Redfern and James Jordan additionally
provides for a pension allowance.
Each service contract contains the following performance-related provisions:
– Participation in the EIS.
– Participation in one or more long term incentive plan.
The Company has the right to terminate contracts by making a payment in
lieu of notice. Any such payment will typically reflect the individual’s salary,
bonus entitlement, benefits in kind and pension entitlements. The Company
will be mindful, on termination of an Executive Director’s employment, of the
need to mitigate costs and phase payments, which cease when the individual
obtains an alternative role. There are no change of control provisions that
apply in relation to the service contract of any Executive Director.
Other than in certain ‘good leaver’ circumstances (which could include by
way of example redundancy, ill-health or retirement), no payment would
usually be due under the EIS unless the individual remains employed and is
not under notice at the payment date. Any payment to a good leaver under
the EIS would be based on an assessment of their and the Company’s
performance over the applicable period and pro-rated for the proportion of
the EIS year worked.
Where an Executive Director is considered by the Remuneration Committee
to be a good leaver, deferred EIS awards (shares) would vest. In other
circumstances, awards would lapse.
With regard to long term incentive plan awards, the rules of the PSP provide
that, other than in certain good leaver circumstances, awards lapse on
cessation of employment. Where an individual is a good leaver, the Committee’s
normal policy is for the award to vest on cessation of employment following the
application of performance targets no later than the normal vesting date of the
award and a pro-rata reduction to take account of the proportion of the
applicable performance period outstanding post the cessation. The Committee
has discretion to deem an individual to be a good leaver. The Committee also
has discretion for both early vesting and reducing the impact of pro-rating. In
doing so, it will take account of the reason for the departure and the
performance of the individual through to the time of departure.
Directors’ Report: Governance 83
In situations where an Executive Director is dismissed, the Committee
reserves the right to make additional exit payments where such payments are
made in good faith:
– in discharge of an existing legal obligation (or by way of damages for
breach of such an obligation);
– by way of settlement or compromise of any claim arising in connection
with the termination of a Director’s office or employment; or
– to contribute towards the individual’s legal fees and fees for
outplacement services.
The terms of engagement of the Chairman and the Non Executive Directors are
regulated by letters of appointment over a term of three years, which are
reviewed annually. Both the Company and the aforementioned Directors have a
notice period of six months and the Directors are not entitled to compensation
on termination other than for the normal notice period if not worked out.
All Executive Directors are proposed for re-election at the 2018 AGM and
each will have at that date an unexpired service contract term of one year.
Service contracts and letters of appointment may be inspected at the
Company’s Registered Office during normal business hours and at the AGM.
Legacy arrangements
Any commitment made which is consistent with the approved Remuneration
Policy in force at the time that commitment was made will be honoured, even
where it is not consistent with the policy prevailing at the time such
commitment is fulfilled.
Annual Report on Remuneration
This Annual Report on Remuneration will be put to an advisory shareholder
vote at the 2018 AGM. The information in the Implementation of the
Remuneration Policy during 2017 section on pages 85 to 92 has
been audited.
Remuneration Committee
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 strategic business
priorities within a remuneration framework which is aligned with the interests
of our shareholders and thus designed to promote the long term success of
the Company.
The Remuneration Committee has clearly defined terms of reference which
are available on the Company’s website at www.taylorwimpey.co.uk/
corporate/investor-relations/corporate-governance. The Committee’s main
responsibilities are to:
– Establish and maintain formal and transparent procedures for developing
policy on executive remuneration and for determining the remuneration
packages of individual Directors, and to monitor and report on them.
– Determine the remuneration, including pension arrangements, of the
Executive Directors.
– Monitor and make recommendations in respect of remuneration for the
tier of Senior Management one level below that of the Board.
– Approve annual and long term incentive arrangements together with their
targets and levels of awards.
– Determine the level of fees for the Chairman of the Board.
– Select and appoint the external advisers to the Committee.
During 2017 the Committee comprised three Independent Non Executive
Directors and also the Chairman of the Board. Kate Barker is the Committee
Chairman and the other members of the Committee were Kevin Beeston,
Angela Knight and Rob Rowley. Membership of the Committee is, and was
throughout 2017, in line with the Code. Rob Rowley will stand down from
the Board immediately following the AGM on 26 April 2018. Gwyn Burr
became a member of the Committee following her appointment to the
Board on 1 February 2018.
Details of attendance at Remuneration Committee meetings held during 2017
appear on page 74.
No Director or other executive is involved in any decisions about his or 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 decided that the role of remuneration adviser, in which
capacity Aon Hewitt New Bridge Street, part of Aon PLC, had acted since
February 2009, should be the subject of a comprehensive review and
competitive tender process. The outcome of the review, which was held in
June 2017, was the appointment, from 20 July 2017, of Korn Ferry Hay
Group (‘Korn Ferry’), who will act as remuneration adviser to the Committee
going forward.
Both New Bridge Street and Korn Ferry are members of the Remuneration
Consultants Group and signatories to its Code of Conduct. Neither firm
provides any other services to the Company. Although the wider Aon PLC
group of companies provide insurance broking and, until 27 March 2017,
provided pension administration support services to the Company, the
Committee is entirely satisfied that the provision of such services did not
create any conflicts of interest. The Committee reviews the performance and
independence of its advisers on an annual basis and is satisfied that the
advice provided is objective and independent.
The Committee also receives legal advice from Slaughter and May, the
Company’s solicitors, as and when necessary. This generally relates to
technical advice on share schemes and also with regard to any senior
appointments and termination arrangements. The Committee is satisfied that
the advice provided by Slaughter and May is objective and independent.
The fees paid to the Committee’s advisers in 2017 were: New Bridge Street
£45,000 for the period to 19 July 2017 (2016: £99,470 for a full year) and to
Korn Ferry £38,000 for the period from 20 July 2017 (2016: Nil). No significant
amount of advice was sought from Slaughter and May during the year.
Pete Redfern (the Chief Executive), James Jordan (the Group Legal Director
and Company Secretary), and the Group Human Resources Director each
attend Committee meetings by invitation only but are not present for any
discussions that relate directly to their own remuneration.
taylorwimpey.co.uk
84
Remuneration Committee Report continued
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
Gwyn Burr
Mike Hussey
Angela Knight
Rob Rowley
Humphrey Singer
Date of appointment as a Director
1 July 2010
21 April 2011
1 February 2018
1 July 2011
1 November 2016
1 January 2010
9 December 2015
Term of appointment
3 years, reviewed annually
3 years, reviewed annually
3 years, reviewed annually
3 years, reviewed annually
3 years, reviewed annually
3 years, reviewed annually
3 years, reviewed annually
Notice period by
Company (months)
6
6
6
6
6
6
6
Notice period by
Director (months)
6
6
6
6
6
6
6
How the Remuneration Policy will be applied in 2018
Base Salary
The Committee reviewed the Executive Directors’ salaries in February 2018
and has decided to award increases of 2.5% for each Executive Director, with
effect from 1 April 2018, in line with the average increase made to
all employees.
TSR v Peer Group
TSR v FTSE100
The salaries of the Executive Directors effective from 1 April 2018 will
be as follows:
Name
Pete Redfern
Ryan Mangold
James Jordan
Salary at
1 April 2017
£836,118
£420,240
£388,198
Salary at
1 April 2018
£857,020
£430,746
£397,902
Increase
2.5%
2.5%
2.5%
ROCE in 2020
PBIT Margin for 2020
Conversion of operating
profit into operating cash
flow averaged over
2018-2020
Weighting
(% of total
award)
30%
Below threshold
Threshold
20%
(0% vesting)
Less than
median
Less than
median
20% Less than 26%
15% Less than 20%
15% Less than 65%
(20% vesting)
Median
Median
26%
20%
65%
Maximum
(100% vesting)
Upper
Quartile
Upper
Quartile
30%
22%
75%
Annual Bonus Scheme
The Executive Incentive Scheme (EIS) performance metrics and their
weightings for 2018 are shown in the table below. The precise details of the
targets themselves are deemed to be commercially sensitive as they relate to
the current financial year. However, detailed retrospective disclosure of
the targets and performance against them will be provided in next year’s
Remuneration Report in the usual way.
Measure
EBIT
Cash Conversion
ROCE
Customer service
Weighting
40%
20%
20%
20%
The above metrics and weightings are unchanged from the previous year
and reflect the Group’s continuing focus on the key performance areas of
earnings; cash generation; returns; and further improving customer services.
One third of any bonus will be deferred in shares for three years without any
matching element.
Long Term Incentive Plan
Taylor Wimpey Performance Share Plan (PSP)
In accordance with the Remuneration Policy, long term incentives comprise a
PSP award with a maximum award of 200% of base salary (face value of
shares at date of award). The annual awards granted to Executive Directors in
2018 will be subject to the following performance conditions:
Awards vest on a straight line basis between these points. The Direct Peer
Group Index of housebuilders is an unweighted index comprised of Barratt
Developments, Bellway, Berkeley Homes, Bovis Homes Group, Countryside
Properties, Crest Nicholson, Galliford Try, Persimmon and Redrow.
The targets for 2018 are unchanged from those established for the 2017
awards. This was considered in detail by the Committee and approved on the
basis that these targets were challenging when introduced and each remains
stretching and appropriate in the present market outlook for the medium term.
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. This will include inter alia the Company’s ROCE and
Margin performance.
The Committee also retains the right (as part of its overall discretion) to reduce
the vesting of the award if it considers that volumes (i.e. the number of homes
sold) have not been satisfactory during the relevant performance period.
Dividend equivalents and other distributions will accrue on vested awards and
continue to accrue to the extent awards remain unexercised post vesting.
PSP awards are subject to a two year post vesting holding period for 2018
and future vestings.
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance Non Executive Directors’ and Chairman’s fees
A summary of the current fees (which have remained unchanged since 1 July 2016 and will be reviewed during 2018) is set out below:
Chairman
Basic Non Executive Director fee
Senior Independent Director fee
Audit Committee Chairman fee
Remuneration Committee Chairman fee
85
Annual Fees as at
1 April 2018
£295,000
£60,000
£10,000
£15,000
£15,000
Payments to former Directors
There were no payments to former Directors or payments for loss of office to Directors during 2017.
Implementation of the Remuneration Policy during 2017
Performance graph
(unaudited)
The graph below shows by way of total shareholder return, the value by 31 December 2017 of £100 invested in Taylor Wimpey plc on 1 January 2009
compared with the value of £100 invested in the FTSE 350 and in the average of the housebuilder index introduced for the 2012 Performance Share Plan
awards onwards and as varied subsequently for the 2014 and 2016 awards. These benchmarks have been chosen as Taylor Wimpey is a consitutent of both.
Total shareholder return
3,000
2,500
2,000
1,500
)
d
e
s
a
b
e
r
(
)
£
(
1,000
l
e
u
a
V
500
0
1 Jan
2009
31 Dec
2009
31 Dec
2010
31 Dec
2011
31 Dec
2012
31 Dec
2013
31 Dec
2014
31 Dec
2015
31 Dec
2016
31 Dec
2017
Taylor Wimpey
Housebuilders Index
FTSE 350
taylorwimpey.co.uk
86
Remuneration Committee Report continued
Chief Executive historic remuneration (unaudited)
The table below shows the total remuneration figure for the Chief Executive over the same nine year period as is reflected in the TSR graph on page 85.
The total remuneration figure includes the EIS and PSP awards which vested based on performance in those years. The EIS and PSP percentages show the
payout for each year as a percentage of the maximum.
Total Remuneration (£’000)
EIS (%)
PSP vesting (%)
Audited information
Director emoluments
£’000
Executive
Pete Redfern
Ryan Mangold
James Jordan
Non Executive
Kevin Beeston
Kate Barker
Mike Hussey
Angela Knight (appointed 1 November 2016)
Rob Rowley
Humphrey Singer
Margaret Ford (resigned 1 November 2016)
Year ending 31 December
2009
£1,657
100%
0%
2010
£1,542
85%
0%
2011
£1,674
82%
0%
2012
£3,009
95%
40%
2013
£6,724
90%
85%
2014
£6,250
90%
94%
2015
£6,888
78%
100%
2016
£4,072
80%
81%
2017
£3,809
66%
78%
Year
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Fees &
Salary
832
814
418
409
386
378
295
295
75
66
60
58
60
10
85
83
60
58
–
54
2,271
2,225
Benefits(a)
EIS(b)
PSP(c)
Pension(d)
All employee
schemes(e)
Total
53
50
21
21
48
44
1
1
–
–
–
–
–
–
–
–
–
–
–
–
123
116
828
984
416
494
384
457
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,628
1,935
1,885
2,006
868
924
875
931
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,628
3,861
200
196
84
82
96
94
–
–
–
–
–
–
–
–
–
–
–
–
–
–
380
372
11
22
11
7
11
24
–
–
–
–
–
–
–
–
–
–
–
–
–
–
33
53
3,809
4,072
1,818
1,937
1,800
1,928
296
296
75
66
60
58
60
10
85
83
60
58
–
54
8,063
8,562
(a) Benefits comprise non-cash payments to Pete Redfern and James Jordan for private medical insurance, life insurance and company car provision and a cash fuel allowance, and for Ryan
Mangold, a non-cash payment for private medical insurance and a cash payment of a car allowance taken in lieu of a company car. Kevin Beeston’s benefit relates to the provision of private
medical insurance.
(b) These are the scaled back amounts for 2017 following the exercise of the Remuneration Committee’s discretion in relation to the provision as referred to on page 75.
(c) This column shows the vesting during 2017 and 2016 of LTIPs as set out below and in the table at the top of page 87 and includes the value of dividends accrued during the performance
period and payable on vesting. The 2016 totals have been restated to reflect the share price at vesting of 180 pence as stated in the PSP award 2014 table below.
(d) These figures represent the cash allowances payable as described in the Remuneration Policy ‘Pension’ section.
(e) These figures represent the value of the 20% discount on the Sharesave option price, matching shares under the Share Incentive Plan and the payment of Special Dividend accrued on
Sharesave Options exercised by Pete Redfern, Ryan Mangold and James Jordan during 2016 and 2017 and grossed-up for Income Tax and National Insurance.
PSP awards included in 2016 total remuneration figure
PSP award
2014 PSP(a)
Performance target
TSR FTSE
TSR Peer Group
ROCE
Margin
Weighting
20%
30%
25%
25%
% Vesting
(max 100%)
100%
36.5%
100%
100%
Shares
vesting
470,681
257,697
588,354
588,354
Date of end of
performance period
31/12/2016
31/12/2016
31/12/2016
31/12/2016
Date of vesting
28/02/2017
28/02/2017
28/02/2017
28/02/2017
(a) The share price shown is the closing middle market share price on the date of vesting – 28 February 2017.
Share price
at vesting
(pence)
180(a)
180(a)
180(a)
180(a)
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance
PSP awards included in 2017 total remuneration figure
PSP award
2015 PSP(a)(b)
Performance target
TSR FTSE
TSR Peer Group
ROCE
Cash Conversion
Weighting
20%
30%
25%
25%
% Vesting
(max 100%)
100.0%
25.7%
100%
100%
Shares vesting
398,781
153,729
498,475
498,475
Date of end of
performance period
31/12/2017
31/12/2017
31/12/2017
31/12/2017
Date of vesting
28/02/2018
28/02/2018
28/02/2018
28/02/2018
87
Share price
at vesting
(pence)
199.97(a)
199.97(a)
199.97(a)
199.97(a)
(a) The share price shown is the average of the share prices for the dealing days in the last three months (October to December 2017) and will be restated in next year’s Annual Report and
Accounts to reflect the actual share price on vesting on 28 February 2018.
(b) On exercise, an equivalent proportion of cash accrued in lieu of dividends paid during the performance period, will also be paid net of Income Tax and NI.
EIS in respect of 2017
For 2017, the Committee measured performance against each individual performance target, which is directly linked to the achievement of the Company’s
strategy, as described in more detail on page 74, as follows:
Measure
EBIT
Strategic objective
To increase aggregate profit
Weighting
40%
Summary of targets
Entry (10% vesting) £775m
Result % of maximum
40
£841m
% of salary paid
in cash
26.67
% of salary
deferred in
shares
13.33
Target (50% vesting) £796m
Stretch (100% vesting) £830m
Cash Conversion
Driving increased cash generation
and retention as a proportion of
PBIT
20%
Entry (10% vesting) 72%
88.8%
20
13.33
6.67
Target (50% vesting) 77%
Stretch (100% vesting) 82%
ROCE
Driving capital efficiency
20%
Entry (10% vesting) 29%
32.4%
20
13.33
6.67
Customer Service
Total
Improving and delivering
customer service based on key
National House-Building Council
performance standards
20%
100%
Target (50% vesting) 30%
Stretch (100% vesting) 31%
Entry (10% vesting) 72%
Target (50% vesting) 86%
Stretch (100% vesting) 89%
79%
6
4
2
86(a)
57.33(a)
28.67(a)
The amounts paid to Pete Redfern, Ryan Mangold and James Jordan in respect of 2017 are set out in the remuneration table on page 86.
(a) As stated on pages 75 and 81 the Committee used its discretion to scale back the bonus payments to Pete Redfern, Ryan Mangold and James Jordan for 2017 performance by an amount
equivalent in each case to 30% of annual salary in recognition of the leasehold provision created during the year. This reduced the total bonus payable from 86% to 66% of the maximum.
taylorwimpey.co.uk
88
Remuneration Committee Report continued
Vesting of PSP awards in 2017
The performance period for all elements of the 2015 PSP award ended on 31 December 2017 and the final measurement was undertaken based on this date,
with the performance outcome being independently calculated by Korn Ferry and as part of the overall audit process.
The outcomes were as follows:
Award
9 March 2015
Measure
TSR FTSE
Weighting
20%
TSR Peer
Group
ROCE
Cash
Conversion
30%
25%
25%
Total
100%
Vesting scale
No vesting below median, 20% vests at median, 100% vests at upper
quartile. Pro-rata vesting in between
No vesting below Index TSR, 20% vests at Index TSR, 100% vests at
Index TSR + 8% p.a. (multiplicative). Pro-rata vesting in between
No vesting below 16% ROCE, 20% vests at 16% ROCE, 100% vests
at 24% ROCE. Pro-rata vesting in between
No vesting below 65% Cash Conversion, 20% vests at 65%
conversion, 100% vests at 70% conversion. Pro-rata vesting in
between
Performance
achieved
Above upper
quartile (86th
percentile)
Index + 0.6% p.a.
(TW TSR of 92.4%
vs Index TSR of
88.9%)
32.5%
79.0%
% overall
award vesting
20%
7.7%
25%
25%
77.7%
In deciding whether, and to what extent, any vesting of awards should take place under any LTIP, the Committee also considers the overall financial
performance of the Company during the period. The Committee has determined that the overall financial performance of the Company has been strong in
respect of the performance periods of the above PSP award and therefore determined that the 2015 PSP awards should vest at 77.71% based on the
achievement of three performance measures in full and one measure (TSR Peer Group) in part, as set out in the table above.
Change in Company performance relative to change in remuneration
(unaudited)
Profit before tax, interest and exceptional items
Dividends paid per ordinary share
– interim 2017 / interim 2016 (2.3p / 0.53p)
– final 2017 / final 2016 (2.44p / 2.29p)
– special 2017 / special 2016 (9.2p / 9.2p)
Employee pay in aggregate
Employee pay average per employee
2017
£841.2m
13.94p
2016
£764.3m
12.02p
Change (%)
10.1
16.0
£244.1m
£48,018
£228.6m
£47,853
6.8%
0.3%
Change in Chief Executive pay compared to Taylor Wimpey employees (unaudited)
The table below shows the percentage year-on-year change in salary, benefits and annual bonus earned between 2016 and 2017 for the Chief Executive
compared to the average pay of Taylor Wimpey employees during the year.
Pete Redfern
Average pay of Taylor Wimpey employees
Salary
2.0%
2.0%
Benefits
6.0%
1.0%
Annual Bonus
Scheme
-16.0%(a)
7.5%
(a) As stated on pages 75 and 81 the Committee used its discretion to scale back the EIS (bonus) payments to Pete Redfern, Ryan Mangold and James Jordon for 2017 performance by an
amount equivalent in each case to 20% of the EIS (i.e. equivalent to 30% of each Director’s annual salary) in recognition of the leasehold provision created during the year.
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 89
Directors’ PSP awards granted during the year
Performance awards were made in the year as summarised below:
Pete Redfern
Award
PSP
Ryan Mangold
PSP
James Jordan
PSP
Type
Nil cost
options
Nil cost
options
Nil cost
options
Number of
shares
888,108
Face value
(% of salary)(a)
£1,639,448
Performance conditions
20% on ROCE;
Performance period
01/01/2017 – 31/12/2019
% vesting at
threshold
performance
20%
(200%)
15% on Cash Conversion;
15% on PBIT Margin;
20% on TSR v FTSE100;
30% on TSR v Peer Group index.
As above
As above
As above
As above
As above
As above
446,370
412,335
£824,000
(200%)
£761,172
(200%)
(a) Calculated using the share price of 184.6 pence being the average of the closing prices for 1-3 March 2017.
Details of options and conditional awards over shares held by Directors who served during the year are as follows:
Pete Redfern
Plan
Deferred Shares (EIS)(a)
Deferred Shares (EIS)(a)
Deferred Shares (EIS)(a)
Deferred Shares (EIS)(a)
Performance Share Plan(c)
Performance Share Plan(c)
Performance Share Plan(c)
Performance Share Plan(c)
Sharesave Plan(a)
Sharesave Plan(a)
Total
Ryan Mangold
Plan
Deferred Shares (EIS)(a)
Deferred Shares (EIS)(a)
Deferred Shares (EIS)(a)
Deferred Shares (EIS)(a)
Performance Share Plan(c)
Performance Share Plan(c)
Performance Share Plan(c)
Performance Share Plan(c)
Sharesave Plan(a)
Sharesave Plan(a)
Sharesave Plan(a)
Total
Outstanding
shares at
1 January 2017
337,760
249,782
175,146
–
1,222,746
1,035,958
888,720
–
10,000
–
Granted/
Awarded in
2017 (number)
–
–
–
168,321(b)
–
–
–
888,108(f)
–
18,863(g)
3,920,112 1,075,292
Dividend
re-investment
shares added
during 2017
(number)
–
18,045
12,749
12,399
–
–
–
–
–
–
Exercised/
vested
(number)
337,760
–
–
–
Lapsed
(number)
–
–
–
–
989,813 232,933
–
–
–
10,000
–
Outstanding
shares as at
31 December
Exercise
price
(pence)
–
–
–
–
–
–
–
–
90.00(h)
18,863 159.04(h)
2017
–
267,827
187,895
180,720
–
– 1,035,958(i)
888,720
–
888,108
–
–
–
–
43,193 1,337,573 232,933 3,468,091
Outstanding
shares at
1 January 2017
155,507
115,001
88,031
–
562,963
476,965
446,677
–
10,000
6,876
–
1,862,020
Granted/
Awarded in
2017 (number)
–
–
–
84,599(b)
–
–
–
446,370(f)
–
–
5,658(g)
536,627
Dividend
re-investment
shares added
during 2017
(number)
–
8,305
6,410
6,231
–
–
–
–
–
–
–
20,946
Exercised/
vested
(number)
155,507
–
–
–
Lapsed
(number)
–
–
–
–
455,718 107,245
–
–
–
–
–
–
–
–
–
10,000
–
–
Outstanding
shares as at
31 December
2017
–
123,306
94,441
90,830
–
476,965(i)
446,677
446,370
–
Exercise
price
(pence)
–
–
–
–
–
–
–
–
90.00(h)
6,876 130.88(h)
5,658 159.04(h)
621,225 107,245 1,691,123
Market price
on exercise
(pence) Date of grant
192.1 25.03.14
– 25.03.15
– 24.03.16
– 24.03.17
180.0 04.03.14
– 09.03.15
– 07.03.16
– 06.03.17
194.4 07.10.14
– 04.10.17
Date from
which
exercisable/
capable of
vesting
Expiry date
26.03.17 25.09.17
26.03.18 25.09.18
25.03.19 24.09.19
25.03.20 24.09.20
04.03.17(e) 03.09.17
09.03.18(d) 08.09.18
07.03.19(d) 06.09.19
06.03.20(d) 05.09.20
01.12.17 31.05.18
01.12.22 31.05.23
Market price
on exercise
(pence) Date of grant
192.1 25.03.14
– 25.03.15
– 24.03.16
– 24.03.17
180.0 04.03.14
– 09.03.15
– 07.03.16
– 06.03.17
194.4 07.10.14
– 05.10.16
– 04.10.17
Date from
which
exercisable/
capable of
vesting
Expiry date
26.03.17 25.09.17
26.03.18 25.09.18
25.03.19 24.09.19
25.03.20 24.09.20
04.03.17(e) 03.09.17
09.03.18(d) 08.09.18
07.03.19(d) 06.09.19
06.03.20(d) 05.09.20
01.12.17 31.05.18
01.12.19 31.05.20
01.12.22 31.05.23
taylorwimpey.co.uk
90
Remuneration Committee Report continued
James Jordan
Plan
Deferred Shares (EIS)(a)
Deferred Shares (EIS)(a)
Deferred Shares (EIS)(a)
Deferred Shares (EIS)(a)
Performance Share Plan(c)
Performance Share Plan(c)
Performance Share Plan(c)
Performance Share Plan(c)
Sharesave Plan(a)
Sharesave Plan(a)
Sharesave Plan(a)
Total
Outstanding
shares at
1 January 2017
156,817
115,971
81,317
–
567,703
480,980
412,619
–
10,000
6,876
–
1,832,283
Granted/
Awarded in
2017 (number)
–
–
–
78,148(b)
–
–
–
412,335(f)
–
–
5,658(g)
496,141
Dividend
re-investment
shares added
during 2017
(number)
–
8,378
5,920
5,756
–
–
–
–
–
–
–
20,054
Exercised/
vested
(number)
156,817
–
–
–
Lapsed
(number)
–
–
–
–
459,555 108,148
–
–
–
–
–
–
–
–
–
10,000
–
–
Outstanding
shares as at
31 December
2017
–
124,349
87,237
83,904
–
480,980(i)
412,619
412,335
–
Exercise
price
(pence)
–
–
–
–
–
–
–
–
90.00(h)
6,876 130.88(h)
5,658 159.04(h)
Market price
on exercise
(pence) Date of grant
192.1 25.03.14
– 25.03.15
– 24.03.16
– 24.03.17
180.0 04.03.14
– 09.03.15
– 07.03.16
– 06.03.17
194.4 07.10.14
– 05.10.16
– 04.10.17
Date from
which
exercisable/
capable of
vesting
Expiry date
26.03.17 25.09.17
26.03.18 25.09.18
25.03.19 24.09.19
25.03.20 24.09.20
04.03.17(e) 03.09.17
09.03.18(d) 08.09.18
07.03.19(d) 06.09.19
06.03.20(d) 05.09.20
01.12.17 31.05.18
01.12.19 31.05.20
01.12.22 31.05.23
626,372 108,148 1,613,958
Details of options over shares held by Directors who served during the year:
(a) Vesting is not dependent on any performance conditions.
(b) Market value per share on date of grant 24 March 2017 was 191.5 pence.
(c) Vesting is subject to the achievement of performance conditions.
(d) This is the earliest date, which may be deffered if the publication of the preliminary full year or half year results announcement on which the associated performance condition will be
calculated, is later for any reason.
(e) This is the earliest date, which may be deffered if the publication of the preliminary full year or half year results announcement on which the associated performance condition will be
calculated, is later for any reason.
(f) Market value per share on date of grant 6 March 2017 was 186.1 pence.
(g) Market value per share on date of grant 4 October 2017 was 198.6 pence.
(h) These prices represent a 20% discount to market price at the offer date.
(i) Following the vesting of 77.71% the remainging portion of the award (22.29%) will lapse, representing 230,915, 106,315 and 107,210 shares respectively for Pete Redfern, Ryan Mangold
and James Jordan.
There have been no variations to the terms and conditions or performance criteria for outstanding share awards during the financial year. The market price of
the ordinary shares on 31 December 2017 was 206.4 pence and the range during the year was 155.6 pence to 207.4 pence. Details of any share awards
made to Executive Directors during 2018 will be included in the 2018 Remuneration Report.
Directors’ interests in shares of the Company
Share ownership guidelines
The Taylor Wimpey share ownership guidelines are designed to encourage shareholding in Taylor Wimpey plc by executives at various levels within the
Company for the purpose of alignment with the Company’s shareholders which the Committee strongly believes is very important. The guidelines cover the
Executive Directors and those executives who participate in long term incentive plans with all participating executives required to build up shareholdings through
the retention of shares vesting under the Company’s share plans.
The level of required shareholding for Executive Directors to attain is two times base salary. Executive Directors are expected to achieve a holding equivalent to
one times base salary within five years of their appointment and although there will be no set time limit for achieving a two times salary holding, each Executive
Director is required to agree a personal plan with the Chairman on the target to be achieved within an agreed time frame. Executive Directors are also 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 Plans, until such
time as the guidelines have been met. Only beneficially owned shares count toward the guidelines, including the portion of the annual bonus (EIS) deferred into
shares. The Committee will keep the guidelines under regular review.
As mentioned earlier in this Report, any shares that vest under the 2015 and later PSP awards must, as a standard requirement, be retained by executives
for at least 24 months. 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.
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 91
Share interests
expressed as
a percentage of salary
Value of shares (excluding
EIS deferred shares)
as at 31/12/17
414%
477%
357%
Directors’ interests in 1p ordinary shares held (fully paid) are as set out in the table below:
Director
Kevin Beeston
Pete Redfern
Ryan Mangold
James Jordan
Kate Barker
Mike Hussey
Angela Knight
Rob Rowley
Humphrey Singer
Beneficially owned
Outstanding interests in share plans
at 1/1/17
(ordinary
shares)(a)
1,155,562
1,740,528
966,388
1,110,213
60,000
150,000
0
200,000
25,000
at 31/12/17
(ordinary
shares)
1,155,562
1,678,456
971,496
672,395
60,000
100,000
5,000
200,000
25,000
EIS deferred shares(b)
–
337,314
163,545
156,609
–
–
–
–
–
PSP
–
2,812,786
1,370,012
1,305,934
–
–
–
–
–
Sharesave
–
18,863
12,534
12,534
–
–
–
–
–
(a) Or date of appointment.
(b) Only the net amount of shares has been included in this column.
The only changes to the Directors’ interests as set out above during the period between 31 December 2017 and 27 February 2018 were the regular monthly
purchases of shares and 1:1 matching by the Company under the Share Incentive Plan by Pete Redfern (300 shares) and James Jordan (300 shares).
Directors’ pension entitlements
Defined benefit schemes
The Taylor Wimpey Pension Scheme
Pete Redfern and James Jordan are members of the Taylor Wimpey Pension Scheme (TWPS). The following table sets out the transfer value of their accrued
benefits under the TWPS calculated in a manner consistent with The Occupational Pension Schemes (Transfer Values) Regulations 2008.
Director
Pete Redfern
James Jordan
Normal retirement Age
62
62
Accrued pension as at
31/12/16
14,669
27,135
Increase in accrued
pension from 31/12/16
to 31/12/17
140
260
Accrued pension as at
31/12/17(a)
14,809
27,395
Transfer value gross of
Director’s
contributions at
31/12/17(b)
321,906
730,136
Transfer value
gross of Director’s
contributions at
31/12/16(b)
291,057
670,417
Increase (decrease) in
transfer value from
31/12/16 to 31/12/17
less Director’s
contributions(c)
30,849
59,719
(a) The pension benefits are based on service up to 31 August 2010 when the George Wimpey Staff Pension Scheme (GWSPS) closed to future accrual. Members of the GWSPS were
transferred into the TWPS on 1 October 2013 and there was no change to members’ benefit entitlement. 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. The Company has only taken into account defined benefits accrued over the period to 31 August
2010 and has 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 transfer value includes the effect of fluctuations due to factors beyond the control of the Company and Directors, such as financial market movements.
Note: Pete Redfern and James Jordan received cash allowances of £200,340 (2016: £197,400) and £95,898 (2016: £94,500) respectively in lieu of Company pension contributions.
There was no change to benefits during the year and consequently no difference between the changes to any Director’s pension benefits in comparison with
those of other employees.
taylorwimpey.co.uk
92
Remuneration Committee Report continued
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
2017 (£)
10,000
2016 (£)
27,500
Notes: Ryan Mangold also received a pension allowance of £73,636 in 2017 (2016: £64,300) in lieu of Company pension contributions over the Tapered Annual Allowance limit introduced in April
2016. He also elected to have £0 (2016: £10,000) of the non-deferred portion of his Annual Bonus Scheme cash bonus, earned for 2016 performance and paid in 2017, paid as additional
pension contribution.
Statement of shareholder voting (unaudited)
At the 2017 AGM, the result of the shareholders’ vote on the Company’s Remuneration Report for 2016 was:
For
Against
Withheld
At the 2017 AGM, the result of the shareholders’ vote on the Company’s Remuneration Policy was:
For
Against
Withheld
2017 (Votes)
1.9 billion
(98%)
37 million
(2%)
1,415,251
2016 (Votes)
1.9 billion
(98%)
30 million
(1.5%)
2,643,687
2017 (Votes)
1.9 billion
(98%)
38 million
(2%)
1,502,137
Approval
This Remuneration Report was approved by the Board of Directors on 27 February 2018 and signed on its behalf by the Remuneration Committee Chairman:
Kate Barker
27 February 2018
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance Statutory, Regulatory and Other Information
93
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 which are required to be reported on appear in
other sections of this Annual Report and Accounts as detailed below:
Retirement and re-election
The Company has determined that in accordance with the UK Corporate
Governance Code (the Code), all Directors should seek election or re-election,
as appropriate, at this year’s AGM as explained in the Notes to the Notice of
Meeting and on page 59 of the Corporate Governance Report.
Matter
– An indication of likely future developments in the business
of the Company and its subsidiaries appears in the
Strategic Report
Page(s) in this
Annual Report
1 to 45
– The Group’s profit before taxation and the profit after
taxation and minority interests appear in the consolidated
income statement and in the Notes to the accounts
103 and 108
to 137
– The Company’s Viability Statement
– The Remuneration Report
– Details of the Company’s long-term incentive schemes
41
74 to 92
74 to 92
as required by LR 9.4.3 R are set out in the
Remuneration Report
– The reporting on the Company’s carbon footprint
– A list of the subsidiary and associated undertakings,
30
144 to 147
including branches outside the UK, principally affecting the
profits or net assets of the Group in the year
– Changes in asset values are set out in the consolidated
balance sheet and in the Notes to the accounts
– A detailed statement of the Group’s treasury
management and funding including information on the
exposure of the Company in relation to the use of
financial instruments
105 and 108
to 137
124 to 126
– Details of an arrangement under which a shareholder has
waived or agreed to waive any dividends, and where a
shareholder has agreed to waive future dividends, details
of such waiver together with those relating to dividends
which are payable during the period under review
– A statement that this Annual Report and Accounts meets
the requirements of Provision C.1 of the UK Corporate
Governance Code (the Code), is set out in the Corporate
Governance Report
94
60
All information required to be reported by Listing Rule 9.8.4 R and applicable to
the Company or Group for this reporting period is set out in the table above.
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, Independent Non Executive Director;
– Mike Hussey, Independent Non Executive Director;
– Angela Knight, Independent Non Executive Director;
– Rob Rowley(1), Independent Non Executive Director and the designated
Senior Independent Director; and
– Humphrey Singer, Independent Non Executive Director.
(1) As previously announced Rob Rowley will stand down at the conclusion of the Company’s
AGM on 26 April 2018.
In addition to the above, and subsequent to the year end, Gwyn Burr was
appointed an Independent Non Executive Director on 1 February 2018.
The Directors together with their biographical information are shown on
pages 46 to 47.
Each of the Directors proposed for election or re-election at the AGM is being
unanimously recommended by all of the other members of the Board. This
recommendation follows the completion of the annual Board evaluation
process, which was externally facilitated this year by Manchester Square
Partners. This included a detailed appraisal of the Board, its Committees and
also in respect of each Director, which in turn included a review of their
respective time commitments (save for Gwyn Burr as explained on page 156
as she was appointed on 1 February 2018). Further information relating to the
evaluation is set out in the Corporate Governance Report on page 61.
The Articles of Association of the Company further regulate the appointment
and removal of Directors, in addition to the Companies Act 2006 and related
legislation. The Company’s Articles of Association may be amended by
special resolution of the shareholders. The various powers and responsibilities
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, including the Trustee Directors of its Pension
Trustee Company, 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 its corporate lawyers, Slaughter and May.
Audit and auditor
Each Director has, at the date of approval of this Report, formally
confirmed that:
– To the best of his or her knowledge there is no relevant audit information
of which the Company’s auditor is unaware.
– He or she has 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 (Deloitte) have confirmed their willingness to continue in office as
auditor of the Company. Following a review by the Audit Committee of their
effectiveness, details of which are set out on page 65, a resolution to
re-appoint Deloitte will be proposed at the AGM.
It is the Company’s general policy that its auditor 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. In addition, and in
line with the Code, the Committee takes into account the relevant ethical and
auditing professional standards guidance regarding the provision of non-audit
services by the external auditor. The Company has reviewed the policy in light
of the new regulation set out on page 65 which applied to the Company from
1 October 2017. Any revision to current regulations or guidelines will be taken
into account in framing the Company’s policy going forward and reported on
in future Annual Reports as appropriate. Deloitte provided non-audit services
to the Group during the year within the policy framework as described in the
Audit Committee Report, details of which are set out in Note 6 on page 116.
taylorwimpey.co.uk
94
Statutory, Regulatory and Other Information continued
Annual General Meeting
The AGM will be held at 11:00 am on 26 April 2018 at The British Medical
Association, BMA House, Tavistock Square, London, WC1H 9JP.
Formal notice of the AGM including details of the special business being
proposed is set out in the Notice of Meeting on pages 151 to 157 and on the
Company’s website at www.taylorwimpey.co.uk/corporate. In line with recent
practice and good governance, voting on all resolutions at this year’s AGM will
again be conducted by way of a poll. The Board believes that this method of
voting gives as many shareholders as possible the opportunity to have their
votes counted as part of the process, 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:
– enables the Company to significantly reduce its printing and
postage costs;
– enables shareholders to access information faster, on the day documents
are published on the Company’s website; and
– reduces the amount of resources consumed, such as paper, and
therefore helps to reduce the impact of printing, mailing and related
activities on the environment.
Shareholder communications (including the 2017 Annual Report and
Accounts) are available electronically through the Company’s website.
Over 85% of the Company’s shareholders use either electronic or
web communication.
The Company will of course continue to provide hard copy documentation to
those shareholders who have requested this and is, of course, happy to do so.
Registrar
The Company’s registrar is Link Asset Services (formerly known as Capita
Asset Services). Their details, together with information on the services and
facilities available to shareholders, are set out in the Shareholder Facilities
section on pages 158 to 159.
Capital structure
Details of the Company’s issued share capital, together with information on
the movements in the Company’s issued share capital during the year, are
shown in Note 22 on page 132.
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.
The authority given by shareholders at the AGM held on 27 April 2017 for the
Company to purchase a maximum of 327,136,000 of its own shares
remained valid at 31 December 2017. The authority was not exercised during
2017 or prior to the date of this Report. The Company has no current intention
of exercising this authority but will nevertheless be seeking the usual renewal
of this authority at the AGM and the Board will continue to keep the position
under regular review. 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
agreement or agreements between holders of the Company’s shares that
may result in restrictions on the transfer of securities or on voting rights.
Details of employee share schemes are set out in the Remuneration Report
on pages 79 and 80. The Employee Share Ownership Trusts which hold
shares on trust for employees under various share schemes, generally abstain
from voting at shareholder general meetings 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 27 February 2018, 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 on page 91. The Board strongly believes in
the alignment of interests between senior management and the
Company’s shareholders.
Substantial interests in the Company’s shares were as follows:
As at
27 February 2018
As at 31 December 2017
Name
BlackRock, Inc.
Legal & General Group Plc
Standard Life Investments
Limited
Percentage of
issued voting
share capital
Number
of
shares
held
(millions)
5.58 182.5
98.5
3.02
Percentage
of issued
voting
share
capital
5.58
3.02
Number of
shares held
(millions)
182.5
98.5
96.4
3.02
96.4
3.02
Dividend
An interim ordinary dividend of 2.30 pence per ordinary share was paid on
3 November 2017 and the Directors recommend a final ordinary dividend of
2.44 pence per ordinary share which, together with the interim dividend,
increases the total ordinary dividend for the year to 4.74 pence (2016: 2.82
pence). Information relating to the recommended 2017 final ordinary dividend is
set out in the Chairman’s Statement on page 8 and in the notes to resolution 2
on page 155 in the Notes to the Notice of Annual General Meeting.
The Directors also recommend a special dividend for 2018 of 10.4 pence per
ordinary share (2017: 9.2 pence). Information relating to the recommended
2018 special dividend is set out in the Chairman’s Statement on page 8 and
in the notes to resolution 3 on page 155 in the Notes to the Notice of Annual
General Meeting.
The Company will be operating a Dividend Re-Investment Plan (DRIP), further
details of which are set out on page 158 of this Annual Report. The DRIP will
operate automatically in respect of the 2017 final ordinary dividend for those
shareholders who have previously registered a DRIP mandate (unless varied
by shareholders beforehand) and also in respect of all future dividends,
including special dividends, until such time as each participating shareholder
elects to withdraw from the DRIP, or the DRIP is suspended or terminated in
accordance with the Terms and Conditions of the plan. The Board will
continue to keep the availability of the DRIP under regular review.
Shareholders are again reminded to check their position with regard to any
dividend mandates that are in place, should they either wish to participate in
the DRIP or discontinue or vary any participation, as existing mandates will
apply to all dividend payments (including special dividends) unless or
until revoked.
The right to receive any dividend has been waived in part by the Trustee of the
Company’s Employee Share Ownership Trusts (ESOTs) over those Trusts’
combined holding of 13,052,331 shares. More details of these ESOTs are
contained in Note 25 on pages 133 to 134.
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 95
Research and development
Our Research and Development initiatives (‘Project 2020’) continued throughout
2017 with its focus on three key areas: a Design Competition, a pilot on Direct
Labour and a project looking at increasing the use of timber frame.
In 2016 we held an architectural competition with the Royal Institute of British
Architects, looking for exciting new ideas in home design. Through 2017 our
regional teams have been working with the competition winners Openstudio,
to develop their designs for use in three trial sites. Each of the three sites will
use a different construction method, traditional masonry, timber frame, or CLT
(cross laminated timber) allowing us to compare the production efficiency and
energy performance of differing construction methods as well as the design
opportunities given by the designs. The completed trials are due to be
delivered in 2018.
Openstudio Architects’ Infinite House is a set of contemporary housing
prototypes designed to offer maximum flexibility, customisation and cost
efficiency, and to maximise levels of natural light and the perception of space.
The Infinite House’s external envelope allows it to adapt to suit different
contexts without appearing to be a repeated house type, maintaining the
efficiency and cost-effectiveness of repetition and structural standardisation.
During 2017 we also instigated a Direct Labour pilot involving six business
units to determine the feasibility of increasing our direct labour workforce.
Through many industry wide reports and internal analysis it is evident that the
industry as a whole has a considerable challenge ahead regarding the
capacity and capability of key trades within our future workforce. We currently
have limited control over our subcontractor base in terms of their size, growth,
mobility, skills, training, recruitment and commitment. We have therefore taken
this opportunity to pilot growth in our direct labour pool which will allow Taylor
Wimpey to construct a sustainable work force which will be able to address
current and future market challenges in volume and quality.
The Project 2020 development initiatives in respect of our alternative build
methods were concluded in the early part of 2017. The build method that
excelled in the trials above all others was timber frame. This is a well-
established method of construction with a wealth of industry knowledge and
by coincidence is already extensively used by us in Scotland.
A strategy was developed and a target set to increase the usage of timber
frame to 20% of all completions by 2020. Throughout 2017 the strategy
progressed in the development of a set of standard timber frame house
designs complemented by a set of standard timber frame construction and
system details. These house designs and details will provide the foundation for
the future in setting one national standard. Timber frame sites and plot
completions have already been identified and are progressing in line with
the strategy milestones.
In 2017, we completed a further phase of development of our Carbon Futures
approach to quantify the carbon dioxide emissions for entire sites. This
approach takes into account the buildings but also the carbon absorption of
green and blue infrastructure throughout the site. In 2018 we plan to get the
Carbon Futures approach verified by the leading consultancy the Carbon
Trust. Also in 2017 we supported the Horizon Group at the Supply Chain
Sustainability School. The Horizon Group is a collaboration between the
construction industry and leading construction academics. Its vision is of a
supply chain with greater capability to deliver a sustainable built environment
through the development and implementation of collaborative research.
Employee involvement and communication
We are proud of how committed our employees are to Taylor Wimpey and
the long term success of our business. We strive to listen to and engage with
all staff and employees. During 2017 we completed a further Talkback Survey,
with the overall results continuing to be extremely positive. The response rate
significantly improved from 55% in 2015 to 72% with a particularly pleasing
increase from our weekly paid site based employees where we saw an
improvement from 18% in 2015 to 67% in 2017.
Whilst there was no change in the overall employee engagement which
remains at a strong 93%, further high scores in “willing to go the extra mile” –
97% and “proud to work for TW” – 95% were seen. It was also very pleasing
to see improved scores in areas such as customer service, flexible working,
training, benefits package and how employees feel that our cultural principles
make Taylor Wimpey a better place to work, which were clear areas of focus
following the 2015 survey.
Looking ahead, the areas of focus for the forthcoming period are: how we
can continue to improve our collaboration; how we can work together more
effectively; and how we ensure employees have the tools and resources they
need to do their job.
Building on our approach to communication, we produced a short video clip,
as well as a paper based report, for all employees summarising the 2017
results which was well received.
We continue to maintain our active employee consultation committees in our
regional business units and communicate with employees via our half yearly
Teamtalk employee magazine and regular Teamtalk Express email
newsletter. Our intranet includes a wide range of employee information from
human resources policies to advice for employees on sustainable living. It
also includes an ‘Open Door’ forum that puts employees directly in touch
with our Chief Executive.
During 2017 building on the ‘employee voice’ initiatives considered by the
Government we established a National Employee Forum (the NEF). Chaired
by Tim Betts, Divisional Managing Director, the first NEF meeting took place
in October 2017, with topics discussed including customer service and
business attire.
With a minimum of two meetings anticipated annually it remains the intention
that the Chairman and the Remuneration Committee Chairman will attend the
NEF from time to time and also seek feedback on specific topics via the
Group Legal Director and Company Secretary or other Group Management
Team members as appropriate.
The Company is committed to ensuring open and regular communication
throughout the Group on both business-related issues and items of general
interest. There is a formal Employee Consultation 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 email – including
regular communications from the Chief Executive – and via verbal briefings
and management presentations. The Company’s internal magazine provides
a further communication option.
We have also utilised social media to inform our employees of developments
around the Company and to invite their feedback on them. Our employees
have enthusiastically engaged with this new internal communication channel
and we have seen an increase in the sharing of best practice; employees
interacting in a wider business sense; and the spread of knowledge around
the Group. Around half of our employees now post and engage on a regular
basis and usage and membership is growing steadily.
During 2017, we also saw the launch of our first e-learning modules, which
can be accessed via any PC, laptop tablet or mobile phone. Forming part of
our induction process for new employees, the four modules provide useful
information in an engaging and interactive format in the following areas:
– Welcome to Taylor Wimpey – this e-learning module navigates users
around the company, tells them what our business is about and gives
an overview of the different functions. This is particularly useful for
employees who enter the business from a non-housebuilding
background.
– The role of a PLC – this module informs users about the different
elements of what it means to be a fully listed public limited company
(PLC), the rules and processes around this and the corporate governance
we must adhere to. It also provides an overview of shareholder and
board responsibilities.
– Diversity and Inclusivity – these two modules (one for all employees
and one specifically for line managers) help users understand in more
detail our commitment to building a more diverse and inclusive
workforce as well as the roles and responsibilities they have in
supporting our commitments.
taylorwimpey.co.uk
96
Statutory, Regulatory and Other Information continued
connections, age, membership or non-membership of a trade union, or
disability. We are committed to making reasonable adjustments wherever
possible. In exceptional circumstances, for example due to health and safety
considerations on construction sites, some adjustments are not possible.
Instruction on equal opportunities is part of the induction programme and we
have created two diversity e-learning educational modules which will help
employees to understand in more detail our commitment to building a more
diverse and inclusive workforce.
Our Diversity Policy can be found on the Company’s website at
www.taylorwimpey.co.uk/corporate/sustainability/our-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.
We have increased the number of employees with disabilities recruited.
Working with key partners, we hope to increase more permanent and
secondment opportunities for people with disabilities.
For example, we continue to engage with the Leonard Cheshire Disability
Change 100 Programme, a charity that provides talented disabled students
with the opportunity to participate in a 100 day summer internship and
professional development programme. Feedback from the students who
participated in the programme in 2017 has been very positive and we intend
to engage with the programme further during 2018.
Modern Slavery Act
The Company welcomes the aims and objectives of the Modern Slavery Act
2015 and continues to take its responsibilities under the Act with the
seriousness that it requires and deserves. A dedicated team meets regularly
to ensure that objectives continue to be met. The Company will shortly be
publishing its second statement under the Modern Slavery Act 2015. It will be
available on our website at www.taylorwimpey.co.uk
Charitable donations
We support charities and issues that are relevant to our business,
communities, partners and people. We aim to make a positive impact through
donations of time, money and materials and through encouraging our
employees to get involved. We focus on smaller national charities as well as
regional and local organisations where we can have a significant impact and
our employees can be active participants.
We want to understand the difference that we are making to our charity
partners and how we can increase our impact. We carried out a number of
site visits to our partners during the year and used their feedback to help
direct our future donations. For example, following a visit to St Mungo’s we
are now covering the cost of their employing a trainer to improve the skills and
expertise of their staff.
Our national charitable donations are overseen and prioritised by our Charity
Committee. The Charity Committee members include senior executives such
as our Group Legal Director and Company Secretary and Group Human
Resources Director, as well as a combination of employees from across the
business including mid-management and junior staff such as land managers,
personal assistants and graduate trainees. In addition to the national charities
we support, our regional businesses have a discretionary charity budget to
support a number of other local charities and initiatives.
– The Modern Slavery Act – the Modern Slavery Act aims to tackle slavery
in the UK and came into effect in March 2015. The module outlines Taylor
Wimpey’s commitment to tackling modern slavery and how all employees
can play their part. We are also raising awareness more generally around
Data Protection and the new GDPR regime.
Whilst they do form part of our induction for new employees, in view of the
useful content, we also made these available to existing employees.
In addition, as we continue to focus on retaining our employees during
increasing challenges across the Industry such as skill shortages, we embarked
on a series of business unit roadshows during 2017. The focus is to
communicate and raise awareness of benefits offered as part of our total
reward offer. Where necessary we have tailored the presentations to suit
local requirements and audiences.
Continuous development of our career site’s look and feel, as well as its
performance, is key to how we appeal to and engage with potential
candidates. Throughout the year we have looked to add more content, links
and videos to increase engagement and application conversions. This year we
saw an overall increase in visits and a real spike in activity during the graduate
recruitment drive.
We have added video content to ensure prospective candidates from outside
of our sector are clear on what our technical functions are responsible for
delivering. The videos also promote diversity, career development and culture
– three areas that are integral to developing and maintaining a strong
employment brand.
Externally we have driven more content on career partner sites such as
LinkedIn and Glassdoor which has resulted in increased page views for our
company profiles and more followers. This culminated in being rated 15th in
the Glassdoor 2018 Best Places to Work survey.
The Company promotes employee share ownership as widely as possible
across the business. In addition to the various share-related reward plans
described in the Remuneration Report on pages 79 to 80, the Company also
offers a scheme whereby employees who do not participate in the Annual
Bonus Scheme (cash bonus scheme) are offered the opportunity each year to
exchange any cash bonus awarded for exceptional performance, into shares
of the Company, offering a 20% enhancement to the value if taken entirely in
shares and retained for a designated period. The scheme has operated since
2012 and in 2017 resulted in 349,835 shares (2016: 333,307) being acquired
by 289 employees (2016: 281).
In addition to the above, the Company also maintains two all-employee share
plans, namely, the Save As You Earn share option plan and the Share
Incentive Plan (SIP), which are offered as widely as possible across the Group.
The proportion of our eligible employees who either participate in one or both
plans or who are already shareholders of the Company has risen to 57%.
Equal opportunities
We strive to treat our employees fairly and with respect at all times. We have
policies and processes in place to ensure that we act in accordance with our
vision, mission and values which encompass equal opportunities, anti-
harassment and bullying, anti-corruption and whistleblowing. We encourage
our employees and subcontractors to speak up about concerns over any
wrongdoing at work and provide access to an independent reporting
hotline service.
We remain committed to the belief that embracing diversity and inclusion will
enable Taylor Wimpey to succeed through a workforce that is creative and
innovative. We continue to actively embrace the local communities in which
we operate and will strive to reflect their richness and character, including
such aspects as gender, race and religion but also diversity of thought,
background and experience.
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
Taylor Wimpey plc Annual Report and Accounts 2017
Directors’ Report: Governance 97
We focus on charitable initiatives that support:
– Aspiration and education: Projects which promote aspiration and
education in disadvantaged areas
– Tackling homelessness: Intervening and improving homeless situations for
In preparing the Parent Company financial statements, the Directors are
required to:
– Select suitable accounting policies and then apply them consistently.
– Make judgements and accounting estimates that are reasonable
seriously economically disadvantaged groups in the UK
and prudent.
– Local projects: Initiatives that have a direct link with our regional
– State whether applicable UK Accounting Standards have been followed,
businesses and developments
During the year, Group companies donated £816,000 (2016: £763,000) to
various charities, the majority of which were in the UK. We recognise that
volunteering can be beneficial for the charities we support, the communities in
which we work and for our employees’ development and self-awareness.
Following the introduction of our Volunteering Policy in 2016, whereby
employees are entitled to take up to four half-days (or two full days) paid leave
per year, many employees at all levels around the country gave up their work
and free time to participate in fundraising events for charitable causes
including St. Mungo’s; The Youth Adventure Trust; CRASH; Crisis UK and
CentrePoint, which raised a further £295,000 (2016: £270,000).
Further information on the Group’s donations, activities and initiatives can be
found in ‘Optimising and enhancing value’ on page 35 and in the Sustainability
Report 2017 which will shortly be available on the Company’s website: www.
taylorwimpey.co.uk/corporate/sustainability
Political donations
The Company has a policy of not making donations to political parties, and
has not made any this year and neither does it intend to make any going
forward. The Company does support certain industry-wide and trade
organisations which directly assist the house building industry such as the
Home Builders Federation and the Confederation of British Industry. Whilst we
do not regard this support as political in nature in any way, the Companies Act
2006 definition of ‘political organisations’ and related terms is very wide and in
certain circumstances a donation, subscription or membership fee paid to
such organisations or to a charity could retrospectively be categorised as a
political donation from a strict legal perspective. Accordingly, as a matter of
prudent corporate governance, the Company will therefore be seeking the
usual annual dispensation from its shareholders at the 2018 AGM, so as to be
able to continue with the above memberships and make charitable donations
up to defined levels, without inadvertently breaching the applicable legislation.
Agreements
The Company’s borrowing and bank facilities contain the usual change of
control provisions which could potentially lead to prepayment and cancellation
by the other party upon a change of control of the Company. There are no
other significant contracts or agreements which take effect, alter or terminate
upon a change of control of the Company.
Branches
A subsidiary has a branch in Spain, the former activities of which were taken
over some years ago by our Spanish subsidiary Taylor Wimpey de España
S.A.U. whose details appear on page 159.
Important events since the year end
There have been no important events affecting the Company or any of its
subsidiary undertakings since 31 December 2017.
Directors’ responsibilities statement
The Directors are responsible for preparing the Annual Report and Accounts
in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Accordingly, 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 FRS 101 (United Kingdom Accounting
Standards and applicable law). In accordance with 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.
subject to any material departures disclosed and explained in the
financial statements.
– Prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
In preparing the Group financial statements, International Accounting
Standard 1 requires that Directors:
– Properly select and apply accounting policies.
– Present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information.
– Provide additional disclosures when compliance with the specific
requirements in IFRSs are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the
entity’s financial position and financial performance.
– Make an assessment of the Company’s ability to continue as a
going concern.
The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the Company’s transactions and disclose
with reasonable accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
In accordance with Provision C.1 of the Code, the Directors are required, inter
alia, to ensure that the Annual Report and Accounts provides the information
necessary for shareholders to assess the Company’s performance, business
model and strategy. Details of how this was addressed are set out in the Audit
Committee Report on page 66.
Responsibility statement
The Directors confirm that to the best of their knowledge:
The financial statements, prepared in accordance with the relevant financial
reporting framework, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the undertakings included in
the consolidation taken as a whole.
The Strategic 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.
The Annual Report and Accounts, taken as a whole, are fair, balanced and
understandable and provide the information necessary for shareholders to
assess the Company’s performance, business model and strategy.
This Report of the Directors was approved by the Board of Directors on
27 February 2018.
James Jordan
Group Legal Director and Company Secretary, Taylor Wimpey plc
27 February 2018
taylorwimpey.co.uk
98
98
Financial Statements
Independent Auditor’s Report
Opinion on financial statements of Taylor Wimpey plc
In our opinion:
– the financial statements give a true and fair view of the state of the
Group’s and of the Parent Company’s affairs as at 31 December 2017
and of the Group’s profit for the year then ended;
– the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and IFRSs as issued by the
International Accounting Standards Board (IASB);
– the Parent Company financial statements have been properly prepared
in accordance with United Kingdom Generally Accepted Accounting
Practice including Financial Reporting Standard 101 “Reduced
Disclosure Framework”; and
– the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements of Taylor Wimpey plc
(the ‘Parent Company’) and its subsidiaries (the ‘Group’) which comprise:
– the Consolidated Income Statement;
– the Consolidated Statement of Comprehensive Income;
– the Consolidated and Parent Company Balance Sheets;
– the Consolidated and Parent Company Statements of Changes
in Equity;
– the Consolidated Cash Flow Statement; and
– the related Notes 1 to 32 of the Consolidated Financial Statements and
Notes 1 to 15 of the Parent Company Financial Statements.
The financial reporting framework that has been applied in the preparation
of the Group Financial Statements is applicable law and IFRSs as adopted
by the European Union. The financial reporting framework that has been
applied in the preparation of the Parent Company Financial Statements
is applicable law and United Kingdom Accounting Standards, including
FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally
Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the auditor’s responsibilities for
the audit of the financial statements section of our report.
We are independent of the Group and the Parent Company in accordance
with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to
listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We confirm
that the non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Group or the parent company.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Summary of our audit approach
Key Audit
Matters
Materiality
Scoping
inventory costing and margin recognition;
The key audit matters that we identified in the current year were:
–
– defined benefit pension scheme accounting; and
–
Within this report, any new key audit matters are identified with
and any key audit matters which are the same as the prior
accounting for the leasehold provision
year identified with
.
The materiality that we used for the Group Financial Statements
was £40.0 million which was determined on the basis of 5% of
pre-tax profit for the year, excluding exceptional items.
Based on our scoping assessment, our Group audit is
focused on the UK Housing division (excluding joint ventures)
which represents the principal segment within the Group and
accounts for 98% of the Group’s net operating assets, 98%
of the Group’s revenue and 97% of the Group’s pre-tax
profit before exceptional income.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
Significant
changes in
our approach
In relation to the key audit matters, we have added the
accounting for the leasehold provision due to the material
nature of this provision and the judgement required in
estimating the liability.
We no longer include the net realisable value of inventory as a
key audit matter. Over recent years the provision has reduced
significantly, both in value and in the number of sites it relates
to. Furthermore, the improvement in the macro-economic
environment since the financial crisis and the strength of the
housing market have reduced the risk of this balance being
materiality misstated.
There have been no significant changes in our approach
to scoping the audit and in determining materiality.
Conclusions relating to principal risks, going concern and
viability statement
We have reviewed the Directors’ statement regarding the appropriateness
of the going concern basis of accounting contained within Note 1 to the
financial statements and the Directors’ statement on the longer-term
viability of the Group contained within the strategic report, on page 41.
We are required to state whether we have anything material to add or
draw attention to in relation to:
– the disclosures on pages 36-41 that describe the principal risks and
explain how they are being managed or mitigated;
– the Directors’ confirmation on pages 41 and 66 that they have carried
out a robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future
performance, solvency or liquidity;
– the Directors’ statement in Note 1 to the financial statements about
whether they considered it appropriate to adopt the going concern basis
of accounting in preparing them and their identification of any material
uncertainties to the Group and the Parent Company’s ability
to continue to do so over a period of at least twelve months from the
date of approval of the financial statements;
– the Directors’ explanation on page 41 as to how they have assessed the
prospects of the Group, over what period they have done so and why
they consider that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due over the
period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions; or
– whether the Directors’ statements relating to going concern and the
prospects of the Company required in accordance with Listing Rule
9.8.6R(3) are materially inconsistent with our knowledge obtained in
the audit.
We confirm that we have nothing material to add or draw attention to in
respect of these matters.
We agreed with the Directors’ adoption of the going concern basis
of accounting and we did not identify any such material uncertainties.
However, because not all future events or conditions can be predicted,
this statement is not a guarantee as to the Group’s ability to continue
as a going concern.
Key audit matters
Key audit matters are those matters that, in our professional judgement,
were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit and directing the efforts of the
engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
For each key audit matter we perform procedures to assess the design and
implementation of key controls in mitigating the risk that the associated
balances are misstated.
98
Financial Statements
Independent Auditor’s Report
Opinion on financial statements of Taylor Wimpey plc
In our opinion:
– the financial statements give a true and fair view of the state of the
Group’s and of the Parent Company’s affairs as at 31 December 2017
and of the Group’s profit for the year then ended;
– the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and IFRSs as issued by the
International Accounting Standards Board (IASB);
– the Parent Company financial statements have been properly prepared
in accordance with United Kingdom Generally Accepted Accounting
Practice including Financial Reporting Standard 101 “Reduced
Disclosure Framework”; and
– the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements of Taylor Wimpey plc
(the ‘Parent Company’) and its subsidiaries (the ‘Group’) which comprise:
– the Consolidated Income Statement;
– the Consolidated Statement of Comprehensive Income;
– the Consolidated and Parent Company Balance Sheets;
– the Consolidated and Parent Company Statements of Changes
in Equity;
– the Consolidated Cash Flow Statement; and
– the related Notes 1 to 32 of the Consolidated Financial Statements and
Notes 1 to 15 of the Parent Company Financial Statements.
The financial reporting framework that has been applied in the preparation
of the Group Financial Statements is applicable law and IFRSs as adopted
by the European Union. The financial reporting framework that has been
applied in the preparation of the Parent Company Financial Statements
is applicable law and United Kingdom Accounting Standards, including
FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally
Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the auditor’s responsibilities for
the audit of the financial statements section of our report.
We are independent of the Group and the Parent Company in accordance
with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to
listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We confirm
that the non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Group or the parent company.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Summary of our audit approach
Key Audit
Matters
The key audit matters that we identified in the current year were:
inventory costing and margin recognition;
– defined benefit pension scheme accounting; and
accounting for the leasehold provision
–
–
Within this report, any new key audit matters are identified with
and any key audit matters which are the same as the prior
year identified with
.
Materiality
The materiality that we used for the Group Financial Statements
was £40.0 million which was determined on the basis of 5% of
pre-tax profit for the year, excluding exceptional items.
focused on the UK Housing division (excluding joint ventures)
which represents the principal segment within the Group and
accounts for 98% of the Group’s net operating assets, 98%
of the Group’s revenue and 97% of the Group’s pre-tax
profit before exceptional income.
Taylor Wimpey plc Annual Report and Accounts 2017
Significant
changes in
our approach
In relation to the key audit matters, we have added the
accounting for the leasehold provision due to the material
nature of this provision and the judgement required in
estimating the liability.
We no longer include the net realisable value of inventory as a
key audit matter. Over recent years the provision has reduced
significantly, both in value and in the number of sites it relates
to. Furthermore, the improvement in the macro-economic
environment since the financial crisis and the strength of the
housing market have reduced the risk of this balance being
materiality misstated.
There have been no significant changes in our approach
to scoping the audit and in determining materiality.
Conclusions relating to principal risks, going concern and
viability statement
We have reviewed the Directors’ statement regarding the appropriateness
of the going concern basis of accounting contained within Note 1 to the
financial statements and the Directors’ statement on the longer-term
viability of the Group contained within the strategic report, on page 41.
We are required to state whether we have anything material to add or
draw attention to in relation to:
– the disclosures on pages 36-41 that describe the principal risks and
explain how they are being managed or mitigated;
– the Directors’ confirmation on pages 41 and 66 that they have carried
out a robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future
performance, solvency or liquidity;
– the Directors’ statement in Note 1 to the financial statements about
whether they considered it appropriate to adopt the going concern basis
of accounting in preparing them and their identification of any material
uncertainties to the Group and the Parent Company’s ability
to continue to do so over a period of at least twelve months from the
date of approval of the financial statements;
– the Directors’ explanation on page 41 as to how they have assessed the
prospects of the Group, over what period they have done so and why
they consider that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due over the
period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions; or
– whether the Directors’ statements relating to going concern and the
prospects of the Company required in accordance with Listing Rule
9.8.6R(3) are materially inconsistent with our knowledge obtained in
the audit.
We confirm that we have nothing material to add or draw attention to in
respect of these matters.
We agreed with the Directors’ adoption of the going concern basis
of accounting and we did not identify any such material uncertainties.
However, because not all future events or conditions can be predicted,
this statement is not a guarantee as to the Group’s ability to continue
as a going concern.
Key audit matters
Key audit matters are those matters that, in our professional judgement,
were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit and directing the efforts of the
engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
For each key audit matter we perform procedures to assess the design and
implementation of key controls in mitigating the risk that the associated
balances are misstated.
Scoping
Based on our scoping assessment, our Group audit is
provide a separate opinion on these matters.
99
99
Inventory costing and margin recognition
Refer to page 66 (Audit Committee Report) page 111 (Critical accounting judgements and key sources of estimation uncertainty) and page 122
(Financial statements disclosures).
Key audit
matter
description
The value for inventory as at 31 December 2017 is £4,075.7 million (2016: £3,984.0 million) and as such is the most significant asset on the
Balance Sheet (page 105). Inventory comprises land and work in progress (‘WIP’); WIP is made up of the construction cost of developing a site,
and is transferred to cost of sales as each legal completion takes place.
The Group’s cost allocation framework determines the profit forecasted for each site, and acts as a method of allocating land and build cost of a
development to each individual plot, ensuring the forecast margin to be achieved on each individual plot is equal across the development. This
cost allocation framework drives the recognition of costs as each plot is sold. We consider the appropriate margin recognition across the life of
the site to be a key audit matter.
There is significant judgement and a risk of potential fraud in the following areas:
– estimating the selling price and build costs included within the initial site budget. This is due to the inherent judgement relating
to external factors such as future selling prices, the availability of mortgages and build cost inflation;
– appropriately allocating costs such as shared infrastructure costs relating to a development so that the gross profit margin
(in % terms) budgeted on each individual plot is equal; and
– recording the variation when a deviation from the initial budget occurs and ensuring such variations are appropriately spread across the
remainder of the development.
These judgements impact the carrying value of inventory in the balance sheet and therefore the profit recognised on each plot sold.
How the
scope of
our audit
responded
to the key
audit matter
We visited a number of the Group’s business units (as described on page 101). As part of these visits we assessed the design and
implementation, and tested the operating effectiveness of controls in relation to:
–
–
the preparation, approval and monitoring of site budgets;
the regular review meetings where Management reviews actual costs against detailed site budgets; and
the approval of journal transfers to allocate costs across sites or phases of a site’s development.
–
We have also performed substantive testing as noted below:
For a sample of sites we have analysed completions in the period and compared the achieved margin to the initial margin determined when the
original site budget was approved. Where differences fell outside of an acceptable threshold, we performed corroborative inquiries with
Management and obtained evidence supporting the variance.
For a further sample of sites tested, we have reviewed the total excesses and savings balance identified for each given site, and through
recalculation of the expected income statement impact (based on the number of legal completions in the year), we have determined that the
excesses and savings have been appropriately allocated and recognised.
Through the use of IT interrogation techniques, we have analysed journal postings being made to the inventory balances to highlight any items
which potentially should have been recorded as an expense. Additionally, we have tested WIP additions to the inventory balance to determine
whether the costs have been appropriately capitalised, by tracing these through to supporting invoices.
We have analysed cost per square foot of plots sold at a regional business unit level for the current year and compared this to cost per square
foot in previous years, to analyse for any unusual trends which required corroboration from Management.
We performed a review of sites where the initial site budget was created a number of years ago, which may indicate the use of an outdated
budget. Given the age of these sites, we challenged Management where savings from the budget had been made or additional costs have not
been recognised.
Key
observations
Based on the procedures performed, we concluded that the Group’s cost allocation framework appears reasonable for the intended purpose of
recognising appropriate margins on plot completion. The accounting for cost allocation, both at the inception of a site and on an ongoing basis
is in line with this framework.
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
100
100
Financial Statements
Independent Auditor’s Report continued
Defined benefit pension scheme accounting
Refer to page 66 (Audit Committee Report) page 111 (Critical accounting judgements and key sources of estimation uncertainty) and page 126 to 131
(Financial statement disclosures).
Key audit
matter
description
The total value of the defined benefit pension scheme at the balance sheet date is a net deficit of £63.7 million (2016: £233.0 million). The
liabilities specifically are valued at £2,239.6 million (2016: £2,368.8 million).
Accounting for a defined benefit pension scheme and the value of liabilities is dependent on significant assumptions, including an assessment of
the discount rate, price inflation and key demographic figures including life expectancy and mortality rates. A change in any of these
assumptions could cause a material change in the value of the liabilities overall and the net pension liability on the Group’s balance sheet.
These accounting judgements are inherently complex, require a high level of Management judgement and specialist actuarial input.
The Group is obligated to pay contributions into the pension scheme to reduce the size of the total net deficit. There is judgement in assessing
the nature and quantum of certain future contributions that may need to be made and, at the end of the scheme, whether the Group is entitled
to any surplus that remains. These judgements directly impact the size of the future funding contributions and the size of the adjustment to
recognise the future liabilities the Group has to the pension scheme (as shown in Note 20).
How the
scope of
our audit
responded
to the key
audit matter
We assessed the competence and objectivity of the qualified actuary engaged by the Group to value the scheme’s defined benefits pension
position under IAS 19 “Employee benefits”.
We engaged our internal actuarial specialists to assess the appropriateness of the assumptions used to account for the defined benefit scheme.
This included comparison of key data with market benchmarks and to challenge the methodology used by the scheme actuary. We considered
whether each of the key assumptions was reasonable in isolation and collectively in determining the pension liability at the balance sheet date.
Furthermore, we have performed a sensitivity analysis on the key assumptions determined by the Directors.
We reviewed the pension scheme documentation to determine the size and nature of the future funding contributions and to assess the
treatment of any remaining surplus that may arise at the end of the scheme. We performed procedures to assess the adjustment made in
respect of future funding obligations. In doing so we reviewed the schedule of payments the Group is obligated to provide and checked
whether the calculation was arithmetically correct.
Key
observations
Based on the procedures performed, we concluded that the methodology and assumptions used in valuing the pension scheme liabilities are
considered to be within an acceptable range.
We concurred with the treatment and calculation of the future funding contributions of the Group.
Accounting for the leasehold provision
Refer to page 66 (Audit Committee Report) page 111 (Critical accounting judgements and key sources of estimation uncertainty) and page 115
(Financial statements disclosures).
Key audit
matter
description
As described in Note 6 at the AGM in April 2017 the Group completed their review in relation to certain historical lease structures. As a result of
this review the Group provided £130.0 million in the first half of the year-ended 31 December 2017 for future costs in order to alter the terms of
the current lease. The provision at 31 December 2017 stands at £127.6 million, the small reduction relating to costs incurred and payments
made in the six month period.
During the year, the Group has completed negotiations with the majority of freeholders and has agreed the framework under which payments
can be made to change the current lease structures.
Accounting for these provisions is complex and involves Management making a number of forward-looking estimates. The key judgements
related to this key audit matter lie in estimating the final settlements with the stakeholders impacted by the historical lease structures.
This provision has multiple components that relate to discussions with a number of parties including freeholders and individual customers.
Within the provision are additional costs relating to the implementation of the measures that have been identified.
There are a number of risks associated with this provision:
– Costs could be provided that the Group is not yet committed to incur, or obligated to pay, thereby inflating the provision.
– For costs that are provided there is a risk that these are inaccurately estimated or valued.
How the
scope of
our audit
responded
to the key
audit matter
In addressing this risk, we have obtained Management’s estimation of the total costs. For each component of the provision we have performed
procedures to assess, based on current facts and circumstances, whether the estimates made by Management are reasonable.
We have held discussions with legal counsel to ascertain whether Management’s model reflects the progress of negotiations that have been
held with freeholders.
The largest component of this calculation is the payments to be made to freeholders in order to alter the terms of the leases. In order to verify
these amounts we have reviewed the status of negotiations with freeholders and, where these negotiations have been completed, obtained the
agreements and recalculated the specific amounts that have been provided for.
We have performed procedures to assess the completeness of the customers affected through an analysis of applications and verification to the
underlying lease agreements.
Key
observations
Based on the procedures performed, we considered the provision calculated by Management to be prudent. However, our estimate of any
potential overstatement in the provision is below materiality and, if adjusted would not have increased the post-tax profit of the Group by a
material amount at 31 December 2017.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
100
Financial Statements
Independent Auditor’s Report continued
Defined benefit pension scheme accounting
(Financial statement disclosures).
Key audit
matter
description
Refer to page 66 (Audit Committee Report) page 111 (Critical accounting judgements and key sources of estimation uncertainty) and page 126 to 131
The total value of the defined benefit pension scheme at the balance sheet date is a net deficit of £63.7 million (2016: £233.0 million). The
liabilities specifically are valued at £2,239.6 million (2016: £2,368.8 million).
Accounting for a defined benefit pension scheme and the value of liabilities is dependent on significant assumptions, including an assessment of
the discount rate, price inflation and key demographic figures including life expectancy and mortality rates. A change in any of these
assumptions could cause a material change in the value of the liabilities overall and the net pension liability on the Group’s balance sheet.
These accounting judgements are inherently complex, require a high level of Management judgement and specialist actuarial input.
The Group is obligated to pay contributions into the pension scheme to reduce the size of the total net deficit. There is judgement in assessing
the nature and quantum of certain future contributions that may need to be made and, at the end of the scheme, whether the Group is entitled
to any surplus that remains. These judgements directly impact the size of the future funding contributions and the size of the adjustment to
recognise the future liabilities the Group has to the pension scheme (as shown in Note 20).
How the
scope of
our audit
responded
to the key
audit matter
We assessed the competence and objectivity of the qualified actuary engaged by the Group to value the scheme’s defined benefits pension
position under IAS 19 “Employee benefits”.
We engaged our internal actuarial specialists to assess the appropriateness of the assumptions used to account for the defined benefit scheme.
This included comparison of key data with market benchmarks and to challenge the methodology used by the scheme actuary. We considered
whether each of the key assumptions was reasonable in isolation and collectively in determining the pension liability at the balance sheet date.
Furthermore, we have performed a sensitivity analysis on the key assumptions determined by the Directors.
We reviewed the pension scheme documentation to determine the size and nature of the future funding contributions and to assess the
treatment of any remaining surplus that may arise at the end of the scheme. We performed procedures to assess the adjustment made in
respect of future funding obligations. In doing so we reviewed the schedule of payments the Group is obligated to provide and checked
whether the calculation was arithmetically correct.
Key
Based on the procedures performed, we concluded that the methodology and assumptions used in valuing the pension scheme liabilities are
observations
considered to be within an acceptable range.
We concurred with the treatment and calculation of the future funding contributions of the Group.
Accounting for the leasehold provision
(Financial statements disclosures).
Refer to page 66 (Audit Committee Report) page 111 (Critical accounting judgements and key sources of estimation uncertainty) and page 115
Key audit
matter
description
As described in Note 6 at the AGM in April 2017 the Group completed their review in relation to certain historical lease structures. As a result of
this review the Group provided £130.0 million in the first half of the year-ended 31 December 2017 for future costs in order to alter the terms of
the current lease. The provision at 31 December 2017 stands at £127.6 million, the small reduction relating to costs incurred and payments
made in the six month period.
During the year, the Group has completed negotiations with the majority of freeholders and has agreed the framework under which payments
can be made to change the current lease structures.
Accounting for these provisions is complex and involves Management making a number of forward-looking estimates. The key judgements
related to this key audit matter lie in estimating the final settlements with the stakeholders impacted by the historical lease structures.
This provision has multiple components that relate to discussions with a number of parties including freeholders and individual customers.
Within the provision are additional costs relating to the implementation of the measures that have been identified.
There are a number of risks associated with this provision:
– Costs could be provided that the Group is not yet committed to incur, or obligated to pay, thereby inflating the provision.
– For costs that are provided there is a risk that these are inaccurately estimated or valued.
How the
scope of
our audit
responded
to the key
audit matter
In addressing this risk, we have obtained Management’s estimation of the total costs. For each component of the provision we have performed
procedures to assess, based on current facts and circumstances, whether the estimates made by Management are reasonable.
We have held discussions with legal counsel to ascertain whether Management’s model reflects the progress of negotiations that have been
held with freeholders.
The largest component of this calculation is the payments to be made to freeholders in order to alter the terms of the leases. In order to verify
these amounts we have reviewed the status of negotiations with freeholders and, where these negotiations have been completed, obtained the
agreements and recalculated the specific amounts that have been provided for.
We have performed procedures to assess the completeness of the customers affected through an analysis of applications and verification to the
underlying lease agreements.
Key
observations
Based on the procedures performed, we considered the provision calculated by Management to be prudent. However, our estimate of any
potential overstatement in the provision is below materiality and, if adjusted would not have increased the post-tax profit of the Group by a
material amount at 31 December 2017.
101
101
Our application of materiality
We define materiality as the magnitude of misstatement in the financial
statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced.
We use materiality both in planning the scope of our audit work and
in evaluating the results of our work.
Based on our professional judgement, we determined materiality for
the financial statements as a whole as follows:
Group materiality
Basis for
determining
materiality
Rationale for
the benchmark
applied
Parent Company
materiality
Basis for
determining
materiality
Rationale for
the benchmark
applied
£40.0 million (2016: £36.0 million)
5% (2016: 5%) of pre-tax profit for the year,
excluding exceptional items, of £812.0 million
(2016: £733.4 million) as described on page 103.
The increase in materiality is directly attributable to
the increase in pre-tax profit for the Group.
Pre-tax profit, excluding exceptional items, has
been chosen for the basis for materiality as this is
the measure by which stakeholders and the
market assess the wider performance of the entity.
The exceptional items are excluded as they do not
represent part of the underlying trading
performance of the business.
£38.0 million (2016: £34.2 million)
Approximately 1% (2016: approximately 1%) of net
assets of £3,862.7 million (2016: £3,757.1 million).
This is capped at 95% (2016: 95%) of Group
materiality which we considered appropriate for the
consolidation of this set of financial statements to
the Group’s results. The increase in materiality is
driven by the increase in Group materiality.
Net assets is used as the benchmark as this entity
is a Parent Company and not a trading entity.
We use performance materiality to detect misstatements at a lower level of
precision; for the current year this is set at £28.0 million (2016: £25.2 million)
for the Group and £26.6 million (2016: £25.1 million) for the Parent
Company. This is lower than materiality and is used to determine the size of
the samples that are selected for audit work and in forming the conclusions
that we make during the course of our procedures.
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of £1.5 million (2016: £1.0 million)
for the Group and £1.5 million (2016: £1.0 million) for the Parent Company,
as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds. This increase in threshold is the result of an
increase in the Group’s pre-tax profit during the year. We also report to the
Audit Committee on disclosure matters that we identified when assessing
the overall presentation of the financial statements.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group
and its environment, including Group-wide controls, and assessing the risks
of material misstatement at the Group level. Based on that assessment, we
focused our Group audit scope primarily on the UK Housing division
(excluding joint ventures) which represents the principal segment within the
Group and accounts for 98% (2016: 98%) of the Group’s net operating
assets, 98% (2016: 97%) of the Group’s revenue and 97% (2016: 98%) of
the Group’s pre-tax profit before exceptional income. Our audit work
on the principal segment was executed at a lower level of materiality
£38.0 million (2016: £34.2 million).
We audit a number of the Group’s UK subsidiaries which are subject to
audit at statutory materiality level, which in most cases is substantially lower
than Group materiality. The statutory audits are finalised subsequent to the
audit of the Group accounts.
For the Spanish operations and material joint ventures desktop review
procedures are conducted by the UK team.
At the parent entity level we also tested the consolidation process and
carried out analytical procedures to confirm our conclusion that there were
no significant risks of material misstatement of the aggregated financial
information of the remaining components not subject to audit or audit of
specified account balances.
The audit is performed centrally and includes all of the 24 regional business
units within the Group’s UK housing division. We choose to visit a sample
of these business units selected on a rotational basis and with reference to
size and complexity among other factors. The purpose of these visits is to
conduct procedures over selected controls that are in place at each
business unit and also to perform substantive testing of certain balances.
In the current year we performed regional visits to four (2016: four)
locations. In addition we also visit other business units throughout the entity
which are chosen on a random basis. During these visits we assess the
commonality of the controls in line with the Group-wide controls identified,
as well as performing substantive testing. This was performed at four
(2016: five) locations.
The Parent Company is located in the UK and audited directly by the
Group audit team.
Other information
The Directors are responsible for the other information. The other
information comprises the information included in the annual report other
than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated.
If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact.
In this context, matters that we are specifically required to report to you as
uncorrected material misstatements of the other information include where
we conclude that:
Fair, balanced and understandable – the statement given by the Directors
that they consider the annual report and financial statements taken as a
whole is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s performance, business
model and strategy, is materially inconsistent with our knowledge obtained
in the audit; or
Audit Committee reporting – the section describing the work of the Audit
Committee does not appropriately address matters communicated by us
to the Audit Committee; or
Directors’ statement of compliance with the UK Corporate Governance
Code – the parts of the Directors’ statement required under the Listing
Rules relating to the Company’s compliance with the UK Corporate
Governance Code containing provisions specified for review by the auditor
in accordance with Listing Rule 9.8.10R(2) do not properly disclose a
departure from a relevant provision of the UK Corporate Governance Code.
We have nothing to report in respect of these matters.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the
Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether
due to fraud or error.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
102
102
Financial Statements
Independent Auditor’s Report continued
In preparing the financial statements, the Directors are responsible for
assessing the Group’s and the Parent Company’s ability to continue as a
going concern, disclosing as applicable, matters related to going concern
and using the going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor’s report.
Use of our report
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.
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies
Act 2006
In our opinion the part of the Directors’ remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
– the information given in the strategic report and the Directors’ report
for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
– the strategic report and the Directors’ report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and of the
Parent Company and their environment obtained in the course of the audit,
we have not identified any material misstatements in the strategic report or
the Directors’ report.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
– we have not received all the information and explanations we require
for our audit; or
– adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
– the Parent Company financial statements are not in agreement with
the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our
opinion certain disclosures of Directors’ remuneration have not been made
or the part of the Directors’ remuneration report to be audited is not in
agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
Other matters
Auditor tenure
Following the recommendation of the Audit Committee, we were appointed
by the shareholders of Taylor Wimpey plc on 27 April 2017 to audit the
financial statements for the year ending 31 December 2017 and
subsequent financial periods.
Following the merger of Taylor Woodrow and George Wimpey, we were
appointed as auditor of the merged group for subsequent financial periods.
Prior to that we were the auditor of Taylor Woodrow.
As explained on page 65, our final year of association with the Group will be
the year ending 31 December 2020. After this year-end we are required to
mandatorily rotate from our role as auditor.
Consistency of the audit report with the additional report to the
audit committee
Our audit opinion is consistent with the additional report to the Audit
Committee we are required to provide in accordance with ISAs (UK).
Edward Hanson (Senior statutory auditor)
for and on behalf of Deloitte LLP Statutory Auditor,
London, United Kingdom
27 February 2018
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
102
Financial Statements
Independent Auditor’s Report continued
103
Financial Statements
Consolidated Income Statement for the year to 31 December 2017
In preparing the financial statements, the Directors are responsible for
assessing the Group’s and the Parent Company’s ability to continue as a
going concern, disclosing as applicable, matters related to going concern
and using the going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
for our audit; or
– we have not received all the information and explanations we require
– adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
– the Parent Company financial statements are not in agreement with
the accounting records and returns.
guarantee that an audit conducted in accordance with ISAs (UK) will always
We have nothing to report in respect of these matters.
detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our
opinion certain disclosures of Directors’ remuneration have not been made
or the part of the Directors’ remuneration report to be audited is not in
agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
our auditor’s report.
Use of our report
Other matters
Auditor tenure
This report is made solely to the Company’s members, as a body, in
Following the recommendation of the Audit Committee, we were appointed
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
by the shareholders of Taylor Wimpey plc on 27 April 2017 to audit the
audit work has been undertaken so that we might state to the Company’s
financial statements for the year ending 31 December 2017 and
members those matters we are required to state to them in an auditor’s
subsequent financial periods.
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.
Report on other legal and regulatory requirements
Following the merger of Taylor Woodrow and George Wimpey, we were
appointed as auditor of the merged group for subsequent financial periods.
Prior to that we were the auditor of Taylor Woodrow.
As explained on page 65, our final year of association with the Group will be
the year ending 31 December 2020. After this year-end we are required to
Opinions on other matters prescribed by the Companies
mandatorily rotate from our role as auditor.
Act 2006
Consistency of the audit report with the additional report to the
In our opinion the part of the Directors’ remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
audit committee
Our audit opinion is consistent with the additional report to the Audit
Committee we are required to provide in accordance with ISAs (UK).
In our opinion, based on the work undertaken in the course of the audit:
– the information given in the strategic report and the Directors’ report
for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
– the strategic report and the Directors’ report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and of the
Parent Company and their environment obtained in the course of the audit,
we have not identified any material misstatements in the strategic report or
27 February 2018
the Directors’ report.
Edward Hanson (Senior statutory auditor)
for and on behalf of Deloitte LLP Statutory Auditor,
London, United Kingdom
£ million
Continuing operations
Revenue
Cost of sales
Gross profit before positive contribution
Positive contribution from written down inventory
Gross profit
Net operating expenses
Profit on ordinary activities before finance costs
Interest receivable
Finance costs
Share of results of joint ventures
Profit on ordinary activities before taxation
Taxation (charge)/credit
Profit for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
Note
4
6
8
8
13
9
Note
10
10
10
10
Before
exceptional
items
2017
Exceptional
items
2017
(Note 6
and 9)
Before
exceptional
items
2016
Total
2017
Exceptional
items
2016
(Note 6,
9 and 15)
3,965.2
(2,932.2)
1,015.6
17.4
1,033.0
(199.4)
833.6
0.8
(30.0)
7.6
812.0
(151.7)
660.3
–
–
–
–
–
(130.0)
(130.0)
–
–
–
(130.0)
25.0
(105.0)
3,676.2
(2,735.8)
927.3
13.1
940.4
(177.3)
763.1
0.7
(31.6)
1.2
733.4
(143.7)
589.7
–
(0.5)
(0.5)
–
(0.5)
–
(0.5)
–
–
–
(0.5)
0.1
(0.4)
3,965.2
(2,932.2)
1,015.6
17.4
1,033.0
(329.4)
703.6
0.8
(30.0)
7.6
682.0
(126.7)
555.3
555.3
–
555.3
2017
17.0p
16.9p
20.2p
20.1p
103
Total
2016
3,676.2
(2,736.3)
926.8
13.1
939.9
(177.3)
762.6
0.7
(31.6)
1.2
732.9
(143.6)
589.3
589.3
–
589.3
2016
18.1p
17.9p
18.1p
18.0p
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
104
104
Financial Statements
Consolidated Statement of Comprehensive Income for the year to 31 December 2017
£ million
Note
2017
2016
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Movement in fair value of hedging derivatives and loans
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain/(loss) on defined benefit pension schemes
Tax (charge)/credit on items taken directly to other comprehensive income
Other comprehensive income/(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
24
24
20
14
2.2
(1.2)
154.8
(26.5)
129.3
555.3
684.6
684.6
–
684.6
6.3
(5.0)
(69.3)
10.7
(57.3)
589.3
532.0
532.0
–
532.0
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
104
Financial Statements
£ million
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Movement in fair value of hedging derivatives and loans
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain/(loss) on defined benefit pension schemes
Tax (charge)/credit on items taken directly to other comprehensive income
Other comprehensive income/(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
2017
2016
24
24
20
14
2.2
(1.2)
154.8
(26.5)
129.3
555.3
684.6
684.6
–
684.6
6.3
(5.0)
(69.3)
10.7
(57.3)
589.3
532.0
532.0
–
532.0
Consolidated Statement of Comprehensive Income for the year to 31 December 2017
Financial Statements
Consolidated Balance Sheet at 31 December 2017
£ million
Non-current assets
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
Provisions
Net current assets
Non-current liabilities
Trade and other payables
Bank and other loans
Retirement benefit obligations
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
105
105
Note
2017
2016
11
12
13
16
14
15
16
16
18
21
18
17
20
21
22
23
25
24
24
3.9
22.8
50.9
60.1
29.3
3.5
21.0
50.3
87.2
57.4
167.0
219.4
4,075.7
122.2
0.7
600.5
4,799.1
4,966.1
(1,024.5)
(58.6)
(87.3)
(1,170.4)
3,628.7
(430.6)
(88.7)
(64.8)
(74.3)
(658.4)
3,984.0
91.4
0.2
450.2
4,525.8
4,745.2
(988.1)
(61.6)
(28.0)
(1,077.7)
3,448.1
(442.5)
(85.5)
(234.1)
(5.1)
(767.2)
(1,828.8)
(1,844.9)
3,137.3
2,900.3
288.5
762.9
(21.3)
44.2
2,063.0
3,137.3
–
3,137.3
288.4
762.9
(12.2)
43.2
1,817.3
2,899.6
0.7
2,900.3
The financial statements of Taylor Wimpey plc (registered number: 296805) were approved by the Board of Directors and authorised for issue on
27 February 2018. They were signed on its behalf by:
P Redfern
Director
R Mangold
Director
Taylor Wimpey plc Annual Report and Accounts 2017
105
taylorwimpey.co.uk
106
106
Financial Statements
Consolidated Statement of Changes in Equity for the year to 31 December 2017
For the year to 31 December 2017
£ million
Balance as at 1 January 2017
Share
capital
288.4
Share
premium
762.9
Own
shares
(12.2)
Other
reserves
Retained
earnings
Total
43.2
1,817.3
2,899.6
Exchange differences on translation of foreign operations
Movement in fair value of hedging derivatives and loans
Actuarial gain on defined benefit pension schemes
Tax charge on items taken directly to other comprehensive income
Other comprehensive income 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
Cash cost of satisfying share options
Share-based payment credit
Tax credit on items taken directly to statement of changes in equity
Dividends approved and paid
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
288.5
762.9
–
–
–
–
–
–
–
–
(13.3)
4.2
–
–
–
–
(21.3)
2.2
(1.2)
–
–
1.0
–
1.0
–
–
–
–
–
–
–
–
–
154.8
(26.5)
128.3
555.3
683.6
–
–
–
(0.7)
11.5
1.8
(450.5)
44.2
2,063.0
Equity attributable to parent
Non-controlling interests
Total equity
For the year to 31 December 2016
£ million
Balance as at 1 January 2016
Share
capital
288.3
Share
premium
762.9
Own
shares
(3.2)
Other
reserves
41.9
Retained
earnings
1,632.7
Exchange differences on translation of foreign operations
Movement in fair value of hedging derivatives and loans
Actuarial loss on defined benefit pension schemes
Tax credit on items taken directly to other comprehensive income
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
Cash cost of satisfying share options
Share-based payment credit
Tax charge on items taken directly to statement of changes in equity
Dividends approved and paid
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Equity attributable to parent
Non-controlling interests
Total equity
288.4
762.9
–
–
–
–
–
–
–
–
(10.6)
1.6
–
–
–
–
(12.2)
6.3
(5.0)
–
–
1.3
–
1.3
–
–
–
–
–
–
–
–
–
(69.3)
10.7
(58.6)
589.3
530.7
–
–
–
0.7
9.8
(0.7)
(355.9)
43.2
1,817.3
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
2.2
(1.2)
154.8
(26.5)
129.3
555.3
684.6
0.1
(13.3)
4.2
(0.7)
11.5
1.8
(450.5)
3,137.3
–
3,137.3
Total
2,722.6
6.3
(5.0)
(69.3)
10.7
(57.3)
589.3
532.0
0.1
(10.6)
1.6
0.7
9.8
(0.7)
(355.9)
2,899.6
0.7
2,900.3
106
Financial Statements
Consolidated Statement of Changes in Equity for the year to 31 December 2017
Financial Statements
Consolidated Cash Flow Statement for the year to 31 December 2017
Share
capital
288.4
Share
premium
762.9
Own
shares
(12.2)
Retained
earnings
1,817.3
Total
2,899.6
Tax credit on items taken directly to statement of changes in equity
288.5
762.9
(21.3)
44.2
2,063.0
For the year to 31 December 2017
£ million
Balance as at 1 January 2017
Exchange differences on translation of foreign operations
Movement in fair value of hedging derivatives and loans
Actuarial gain on defined benefit pension schemes
Other comprehensive income for the year net of tax
Profit for the year
Total comprehensive income for the year
Tax charge on items taken directly to other comprehensive income
–
New share capital subscribed
Own shares acquired
Utilisation of own shares
Cash cost of satisfying share options
Share-based payment credit
Dividends approved and paid
Equity attributable to parent
Non-controlling interests
Total equity
For the year to 31 December 2016
£ million
Balance as at 1 January 2016
Exchange differences on translation of foreign operations
Movement in fair value of hedging derivatives and loans
Actuarial loss on defined benefit pension schemes
Tax credit on items taken directly to other comprehensive income
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
Cash cost of satisfying share options
Share-based payment credit
Dividends approved and paid
Equity attributable to parent
Non-controlling interests
Total equity
Tax charge on items taken directly to statement of changes in equity
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
0.1
Other
reserves
43.2
2.2
(1.2)
1.0
1.0
–
–
–
–
–
–
–
–
–
–
1.3
1.3
–
–
–
–
–
–
–
–
–
–
Other
reserves
41.9
6.3
(5.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(13.3)
4.2
(10.6)
1.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
154.8
(26.5)
128.3
555.3
683.6
(0.7)
11.5
1.8
(450.5)
(69.3)
10.7
(58.6)
589.3
530.7
0.7
9.8
(0.7)
(355.9)
2.2
(1.2)
154.8
(26.5)
129.3
555.3
684.6
0.1
(13.3)
4.2
(0.7)
11.5
1.8
(450.5)
3,137.3
–
3,137.3
6.3
(5.0)
(69.3)
10.7
(57.3)
589.3
532.0
0.1
(10.6)
1.6
0.7
9.8
(0.7)
(355.9)
0.7
2,900.3
Share
capital
288.3
Share
premium
762.9
Own
shares
(3.2)
Retained
earnings
1,632.7
Total
2,722.6
288.4
762.9
(12.2)
43.2
1,817.3
2,899.6
£ million
Net cash from operating activities
Investing activities
Interest received
Dividends received from joint ventures
Proceeds on disposal of property, plant and equipment
Purchases of property, plant and equipment
Purchases of software
Amounts repaid by/(invested in) joint ventures
Proceeds from sale of interest in subsidiary
Net cash generated from/(used in) investing activities
Financing activities
Repayment of bank loans
Proceeds from loan notes issued
Proceeds from the issue of own shares
Cash received on exercise of share options
Purchase of own shares
Dividends paid
Net cash used in financing activities
Net increase 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
107
107
Note
26
2017
604.1
2016
537.7
0.8
0.7
–
(4.2)
(1.5)
6.1
2.7
4.6
–
–
0.1
3.5
(13.3)
(450.5)
(460.2)
148.5
450.2
1.8
600.5
0.7
–
0.3
(3.1)
(2.0)
(22.0)
–
(26.1)
(100.0)
83.0
0.1
2.3
(10.6)
(355.9)
(381.1)
130.5
323.3
(3.6)
450.2
12
11
26
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
108
108
Financial Statements
Notes to the Consolidated Financial Statements
1. Significant accounting policies
Basis of preparation
The consolidated financial statements have been prepared on a going
concern basis and under the historical cost convention except as otherwise
stated below.
The principal accounting policies adopted, which have been applied
consistently, except as otherwise stated, are set out below.
Going concern
The Group has prepared forecasts, including certain sensitivities taking into
account the principal risks identified on pages 36 to 41. Having considered
these forecasts, the Directors remain of the view that the Group’s financing
arrangements and capital structure provide both the necessary facilities and
covenant headroom to enable the Group to conduct its business for at least
the next 12 months.
Accordingly, the consolidated financial statements have been prepared on
a going concern basis.
Basis of accounting
The consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS). The financial
statements have also been prepared in accordance with IFRS as endorsed
by the European Union and therefore the Group financial statements
comply with Article 4 of the EU IAS Regulation.
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 over the investee;
– is exposed, or has rights, to variable return from its involvement with
the investee; and
– has the ability to use its power to affect its returns.
On acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair value at the date of acquisition. Any
excess of the cost of acquisition over the fair value of the identifiable net
assets acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below the fair value 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 non-controlling shareholders is stated
at the non-controlling interest’s proportion of the fair value of the assets and
liabilities recognised. Subsequently, all comprehensive income is attributed
to the owners and the non-controlling interests, which 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 of the rights and assets of the undertaking 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.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
Joint operations arise where the Group has joint control of an operation,
but has rights to only its own assets and obligations related to the
operation. These assets and obligations, and the Group’s share of
revenues and costs, are included in the Group’s results.
Joint ventures and joint operations are entered into to develop specific
sites. Each arrangement is site or project specific and once the
development or project is complete the arrangement is wound down.
Segmental reporting
The Group operates in two countries, being the United Kingdom and Spain.
The United Kingdom is split into three geographical operating segments,
each managed by a Divisional Chairman who sits on the Group
Management Team. In addition, there is an operating segment covering
the Corporate functions, Major Developments and Strategic Land.
As such the segmental reporting for 2017 is:
– Housing United Kingdom:
− North
− Central and South West
− London and South East (including Central London)
− Corporate
– Housing Spain
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, whether under the
Government’s Help to Buy Scheme or not, 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. The fair value is established by independent
surveyors, reduced for costs to sell. Net proceeds generated from the
subsequent sale of part exchange properties are recorded as a reduction
to cost of sales. The original sale is recorded in the normal way, with the
fair value of the exchanged property replacing cash receipts.
(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 partnership housing contracts
Where the outcome of a long term 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 long term contract cannot be estimated reliably,
contract revenue that is probable will be recovered is recognised to the
extent of contract costs incurred. 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.
108
Financial Statements
Notes to the Consolidated Financial Statements
1. Significant accounting policies
Basis of preparation
The consolidated financial statements have been prepared on a going
concern basis and under the historical cost convention except as otherwise
The principal accounting policies adopted, which have been applied
consistently, except as otherwise stated, are set out below.
stated below.
Going concern
The Group has prepared forecasts, including certain sensitivities taking into
account the principal risks identified on pages 36 to 41. Having considered
these forecasts, the Directors remain of the view that the Group’s financing
arrangements and capital structure provide both the necessary facilities and
covenant headroom to enable the Group to conduct its business for at least
Joint operations arise where the Group has joint control of an operation,
but has rights to only its own assets and obligations related to the
operation. These assets and obligations, and the Group’s share of
revenues and costs, are included in the Group’s results.
Joint ventures and joint operations are entered into to develop specific
sites. Each arrangement is site or project specific and once the
development or project is complete the arrangement is wound down.
Segmental reporting
The Group operates in two countries, being the United Kingdom and Spain.
The United Kingdom is split into three geographical operating segments,
each managed by a Divisional Chairman who sits on the Group
Management Team. In addition, there is an operating segment covering
the Corporate functions, Major Developments and Strategic Land.
As such the segmental reporting for 2017 is:
Accordingly, the consolidated financial statements have been prepared on
– Housing United Kingdom:
the next 12 months.
a going concern basis.
Basis of accounting
− North
− Central and South West
− London and South East (including Central London)
The consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS). The financial
statements have also been prepared in accordance with IFRS as endorsed
by the European Union and therefore the Group financial statements
comply with Article 4 of the EU IAS Regulation.
− Corporate
– Housing Spain
Revenue
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
as follows:
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
liabilities recognised. Subsequently, all comprehensive income is attributed
(c) Cash incentives
Company:
– has the power over the investee;
– is exposed, or has rights, to variable return from its involvement with
the investee; and
– has the ability to use its power to affect its returns.
On acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair value at the date of acquisition. Any
excess of the cost of acquisition over the fair value of the identifiable net
assets acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below the fair value 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 non-controlling shareholders is stated
at the non-controlling interest’s proportion of the fair value of the assets and
to the owners and the non-controlling interests, which 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 of the rights and assets of the undertaking 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.
(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, whether under the
Government’s Help to Buy Scheme or not, 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. The fair value is established by independent
surveyors, reduced for costs to sell. Net proceeds generated from the
subsequent sale of part exchange properties are recorded as a reduction
to cost of sales. The original sale is recorded in the normal way, with the
fair value of the exchanged property replacing cash receipts.
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 partnership housing contracts
Where the outcome of a long term 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 long term contract cannot be estimated reliably,
contract revenue that is probable will be recovered is recognised to the
extent of contract costs incurred. 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.
109
109
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 uses foreign currency borrowings to hedge its net
investment exposure to certain overseas subsidiaries (see page 110 for details
of the Group’s accounting policies in respect of such financial instruments).
Operating leases
Rentals payable under operating leases are charged to the income
statement 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.
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 acquisition or 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. Other assets are depreciated using the
straight-line method, on the following bases:
– Plant and equipment 20-25% per annum
– Computer equipment 33% per annum
– Leasehold improvements over the term of the lease
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
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.
1. Significant accounting policies continued
Cost of sales
The Group determines the value of inventory charged to cost of sales based
on the total budgeted cost of developing a site. Once the total expected
costs of development are established they are allocated to individual plots
to achieve a standard build cost per plot.
To the extent that additional costs or savings are identified as the site
progresses, these are recognised over the remaining plots unless they
are specific to a particular plot, in which case they are recognised in the
income statement at the point of sale.
Positive contribution
The positive contribution presented on the face of the income statement
represents the net amount of previous impairments allocated to inventory
on a plot that has subsequently resulted in a gross profit on completion.
This is due to the combination of selling prices and costs, or product mix
improvements exceeding our market assumptions in the previous net
realisable value (NRV) exercise. These amounts are stated before the
allocation of overheads which are excluded from the Group’s NRV exercise.
Exceptional items
Exceptional items are defined as items of income or expenditure which,
in the opinion of the Directors, are material or 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’.
Should these items be reversed disclosure of this would also be as
exceptional items.
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.
Borrowing costs
Borrowing costs are recognised on an accruals basis and are payable
on the Group’s borrowings. Also included in borrowing costs is the
amortisation of fees associated with the arrangement of the financing.
Finance charges, including premiums payable on settlement or redemption,
and direct issue costs, are accounted for on an accruals basis in 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.
Capitalised finance costs are held in other receivables and amortised over
the period of the facility.
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 at 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 the 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 at the balance sheet
date. Income and expense items are translated at an appropriate average
rate for the year. Exchange differences arising are recognised within other
comprehensive income and transferred to the Group’s translation reserve.
Such translation differences are recognised as income or expenses in the
income statement in the period in which the operation is disposed of.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
110
110
Financial Statements
Notes to the Consolidated Financial Statements continued
Borrowings
Interest-bearing bank loans and overdrafts are recorded as the proceeds
are received, net of direct issue costs.
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 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.
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 other comprehensive income and the ineffective portion, if any, is
recognised immediately in the income statement.
For an effective hedge of an exposure to changes in 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 re-measuring 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 other comprehensive income is retained in
accumulated other comprehensive income until the forecasted transaction
occurs. If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in accumulated other comprehensive
income is transferred to the income statement for the period. If a derivative
financial instrument does not meet the specific criteria of IAS 39 ‘Financial
instruments’ for hedge accounting 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.
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.
1. Significant accounting policies continued
Impairment of tangible and intangible assets continued
The recoverable amount is the higher of fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value, using a pre-tax discount rate that
reflects current market assessments of the time value of money and the
risks specific to the asset for which the estimates of future cash flows
have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its
carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. If the recoverable amount of a cash-generating
unit is estimated to be less than its carrying amount, impairment losses
are allocated first to the intangible assets in the cash-generating unit.
If the full impairment of intangible assets is not sufficient to reduce the
carrying value of the cash-generating unit to its recoverable amount,
tangible fixed assets must then be impaired. 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.
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.
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
Mortgage receivables relate to sales incentives including shared equity
loans. The receivable is recorded at amortised cost.
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 and the embedded derivative is measured at fair value through profit
or loss with any subsequent impairment charged through profit and loss.
The fair value of the derivative is based on a national house price index.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and
short term bank deposits with an original maturity of three months or less
from inception and are subject to an insignificant risk of changes in value.
Cash and cash equivalents are classified as ‘loans and receivables’.
Further disclosures relating to financial assets are set out in Note 19.
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 Parent Company are recorded as the proceeds are received, net
of direct issue costs.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
110
Financial Statements
Notes to the Consolidated Financial Statements continued
1. Significant accounting policies continued
Borrowings
Impairment of tangible and intangible assets continued
The recoverable amount is the higher of fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value, using a pre-tax discount rate that
reflects current market assessments of the time value of money and the
risks specific to the asset for which the estimates of future cash flows
have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its
carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. If the recoverable amount of a cash-generating
Interest-bearing bank loans and overdrafts are recorded as the proceeds
are received, net of direct issue costs.
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 foreign currency borrowings and derivatives to hedge its
unit is estimated to be less than its carrying amount, impairment losses
net investment exposure to movements in exchange rates on translation of
are allocated first to the intangible assets in the cash-generating unit.
certain individual financial statements denominated in foreign currencies
If the full impairment of intangible assets is not sufficient to reduce the
carrying value of the cash-generating unit to its recoverable amount,
other than Sterling which is the functional currency of the Parent Company.
Derivative financial instruments are measured at fair value. Changes in the
tangible fixed assets must then be impaired. If the recoverable amount of
fair value of derivative financial instruments that are designated and effective
tangible fixed assets exceeds their carrying value, no further impairment is
as hedges of net investments in foreign operations are recognised directly
required. An impairment loss is recognised as an expense immediately.
in other comprehensive income and the ineffective portion, if any, is
Where an impairment loss subsequently reverses, the carrying amount
recognised immediately in the income statement.
of the asset or cash-generating unit is increased to the revised estimate
For an effective hedge of an exposure to changes in fair value, the hedged
of its recoverable amount, but so that the increased carrying amount
item is adjusted for changes in fair value attributable to the risk being
does not exceed the carrying amount that would have been determined
hedged with the corresponding entry in the consolidated income statement.
had no impairment loss been recognised for the asset or cash-generating
Gains or losses from re-measuring the derivative, or for non-derivatives the
unit in prior years. A reversal of an impairment loss is recognised as
foreign currency component of its carrying amount, are also recognised in
income immediately.
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s
balance sheet when the Group becomes a party to the contractual
they arise.
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
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 other comprehensive income is retained in
accumulated other comprehensive income until the forecasted transaction
occurs. If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in accumulated other comprehensive
income is transferred to the income statement for the period. If a derivative
financial instrument does not meet the specific criteria of IAS 39 ‘Financial
instruments’ for hedge accounting it is presented as a held for trading asset
or liability.
Customer deposits
legal completion.
Provisions
Customer deposits are recorded as a liability within ‘other payables’
on receipt and released to the income statement as revenue upon
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.
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
Mortgage receivables relate to sales incentives including shared equity
loans. The receivable is recorded at amortised cost.
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 and the embedded derivative is measured at fair value through profit
or loss with any subsequent impairment charged through profit and loss.
The fair value of the derivative is based on a national house price index.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and
short term bank deposits with an original maturity of three months or less
from inception and are subject to an insignificant risk of changes in value.
Cash and cash equivalents are classified as ‘loans and receivables’.
Further disclosures relating to financial assets are set out in Note 19.
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 Parent Company are recorded as the proceeds are received, net
of direct issue costs.
111
111
1. Significant accounting policies continued
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 and those overheads that
have been incurred in bringing the inventories to their present location and
condition. Net realisable value represents the estimated selling price less all
estimated costs of completion and costs to be incurred in marketing, selling
and distribution. Land is recognised in inventory when the significant risks
and rewards of ownership have been transferred to the Group.
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 the option 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 profit before tax 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 tax 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 to the income statement,
except when it relates to items charged or credited directly to other
comprehensive income or equity, in which case the deferred tax is also
dealt with in other comprehensive income or equity.
Employee benefits
The Group accounts for pensions and similar benefits under IAS 19
‘Employee benefits’ (amended 2014). In respect of defined benefit plans,
a finance charge is determined on the net defined benefit pension liability.
The operating and financing costs of such plans are recognised separately
in the income statement; service costs are spread systematically over the
service period of employees, past service costs are recognised as an
expense at the earlier of when the plan is amended or curtailment occurs,
at the same time as which the entity will recognise related restructuring
costs or termination benefits. Certain liability management costs 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.
The retirement benefit obligation recognised in the consolidated statement
of financial position represents either the net liability (deficit) position of the
scheme or, should the scheme be in an IAS 19 accounting surplus,
the IFRIC 14 liability equal to the present value of future committed
cash contributions.
Payments to defined contribution schemes are charged as an expense
as they fall due.
2. Critical accounting judgements and key sources of
estimation uncertainty
Critical accounting judgements
Management have not made any individual critical accounting judgements
that are material to the Group, apart from those estimations which are set
out below.
Key sources of estimation uncertainty
Key sources of estimation uncertainty are those which present a significant
risk of potential material misstatement to carrying amounts of assets or
liabilities within the next financial year.
Employee benefits
The value of the defined benefit plan liabilities is determined by using various
long term actuarial assumptions, including future rates of inflation, growth,
yields, returns on investments and mortality rates. As actual changes in
inflation, growth, yields and investment returns may differ from those
assumed, this is a key source of estimation uncertainty within the financial
statements. Changes in these assumptions over time and differences to the
actual outcome will be reflected in the statement of comprehensive income.
Note 20 details the main assumptions in accounting for the Group’s defined
benefit pension scheme along with sensitivities of the liabilities to changes in
these assumptions.
Other sources of estimation uncertainty
Provision for Leasehold
The value of this provision has been established using information
available to management at 31 December 2017, together with a range
of assumptions including the number of units which have been sold by
the original Taylor Wimpey customer and as such are not eligible for the
scheme, and the final deed of variation valuations for those freeholders
with whom the Group has not yet agreed a settlement.
Cost allocation
Share-based payments
The Group has applied the requirements of IFRS 2 ‘Share-based
payment’. 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.
In order to determine the profit that the Group is able to recognise on
its developments in a specific period, the Group has to allocate site-wide
development costs between units built in the current year and in future
years. It also has to estimate costs to complete on such developments,
and make estimates relating to future sales price margins on those
developments and units. In making these assessments there is a degree of
inherent uncertainty. The Group has developed internal controls to assess
and review carrying values and the appropriateness of estimates made.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
112
112
Financial Statements
Notes to the Consolidated Financial Statements continued
2. Critical accounting judgements and key sources of
estimation uncertainty continued
Adoption of new and revised standards of interpretation
In the current year, the Group has applied a number of amendments to
IFRSs issued by the International Accounting Standards Board (IASB)
that are mandatorily effective for an accounting period that begins on or
after 1 January 2017. Their adoption has not had any material impact on
the disclosures or on the amounts reported in these financial statements.
The standard will require presentational changes to the consolidated
income statement to show part exchange income and expenses
separately below gross margin rather than on a net basis within cost
of sales. Part exchange is not a significant element of the Group’s
operations so as such, this impact will be negligible on gross profit
margin and have no impact on operating profit margin.
Introductory fees are currently deducted from revenue but under the
new standard will be recognised in cost of sales. These fees are
immaterial to the Group and will not impact operating profit margin.
– IAS 7 ‘Statement of Cash flows’ (amendments) – Disclosure Initiative
The above items will have no effect on the Group’s cash flows.
– IFRS 16 ‘Leases’ was issued in January 2016, and although it is not
mandatory to adopt until 1 January 2019, the Group has elected to
adopt early, so will apply from 1 January 2018.
The standard specifies how leases are recognised, presented, measured
and disclosed.
On the consolidated statement of financial position, a right of use asset
and a corresponding lease liability must be recognised for both
operating and finance leases. In the income statement, the existing
operating lease charge which is currently recognised within operating
profit, will be replaced by a depreciation charge in respect of the right of
use asset, and an interest cost in relation to the lease liability.
The Group’s lease commitments will be brought onto the consolidated
statement of financial position, as a liability with a corresponding asset
valued using a Right of Use method. The value of lease commitments is
immaterial in relation to the net assets of the Group. This will impact the
timing of the recognition of lease costs within the income statement
although it will not affect the Group’s cash flows. Based on an analysis
of lease commitments held by the Group at 31 December 2017, and
utilising estimated discount rates, the approximate net impact on profit in
the year is expected to be immaterial to the Group.
The composition of the Group’s lease commitments will change over
time and the discount rates applied are required to be updated to reflect
the prevailing economic environment.
3. 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 159. The nature of the Group’s operations and its principal activities
are set out in the Strategic Report on pages 1 to 45.
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 109.
– Annual Improvements to IFRSs 2014 – 2016 Cycle
New and revised IFRSs in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not
applied the following new and revised IFRSs that have been issued but are
not yet effective and in some cases had not yet been adopted by the EU:
– IFRS 9 ‘Financial Instruments’
– IFRS 15 ‘Revenue from Contracts with Customers’
– IFRS 16 ‘Leases’
– IFRS 2 ‘Share-based Payment’ (amendments) – classification and
measurement of share-based payment transactions
– IFRS 10 ‘Consolidated Financial Statements’ and IAS 28 ‘Investments
in Associates’ (amendments) – sale or contribution of assets between
an investor and its associate or joint venture
– Annual Improvements to IFRSs 2014 – 2016 Cycle
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. Whilst not material the impact of standards being adopted from
1 January 2018 is noted below:
– IFRS 9 ‘Financial Instruments’ was issued in final form incorporating the
impairment, classification and measurement requirements in July 2014
and is scheduled to replace IAS 39 ‘Financial Instruments: Recognition
and Measurement’ from 1 January 2018.
IFRS 9 will impact the classification, measurement, impairment and
de-recognition of financial instruments as well as introducing a new
hedge accounting model. The main impact will be the reclassification
of the shared equity portfolio, currently recognised as a debtor with a
non-closely related embedded derivative.
Under IFRS 9 the shared equity portfolio will be treated as Fair Value
through Profit and Loss. On restatement of 31 December 2017 results,
this change will improve the Group’s operating profit margin by 10bps,
representing the notional interest previously unwound through finance
costs, which under IFRS 9 will be incorporated into the fair value
adjustment and so recognised through other income/expense.
The impairment requirements of the standard require the Group to
consider the expected lifetime losses on all financial assets. The Group
does not have significant financial assets other than the shared equity
portfolio and as such the impact of IFRS 9 on other financial assets
is immaterial.
The requirements of the new hedge accounting model have been
reflected in the Group’s hedging strategy, policies and documentation
from 1 January 2018.
– IFRS 15 ‘Revenue from Contracts with Customers’ was issued in
May 2014 and amended in September 2015. This standard will be
applicable to the Group from 1 January 2018. The standard sets out
requirements for revenue recognition from contracts with customers.
The standard uses a five-step model to apportion revenue to the
individual promises, or performance obligations, within a contract.
The timing of revenue recognition and therefore number of units, on
some long-term contracts may be brought forward. The effect of these
changes on operating profit margin will be immaterial as the timing of
revenue recognition for most of the Group’s long-term contracts will
not change on adoption of IFRS 15.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
112
Financial Statements
Notes to the Consolidated Financial Statements continued
2. Critical accounting judgements and key sources of
estimation uncertainty continued
Adoption of new and revised standards of interpretation
In the current year, the Group has applied a number of amendments to
IFRSs issued by the International Accounting Standards Board (IASB)
that are mandatorily effective for an accounting period that begins on or
after 1 January 2017. Their adoption has not had any material impact on
the disclosures or on the amounts reported in these financial statements.
The standard will require presentational changes to the consolidated
income statement to show part exchange income and expenses
separately below gross margin rather than on a net basis within cost
of sales. Part exchange is not a significant element of the Group’s
operations so as such, this impact will be negligible on gross profit
margin and have no impact on operating profit margin.
Introductory fees are currently deducted from revenue but under the
new standard will be recognised in cost of sales. These fees are
immaterial to the Group and will not impact operating profit margin.
– IAS 7 ‘Statement of Cash flows’ (amendments) – Disclosure Initiative
The above items will have no effect on the Group’s cash flows.
– Annual Improvements to IFRSs 2014 – 2016 Cycle
New and revised IFRSs in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not
applied the following new and revised IFRSs that have been issued but are
not yet effective and in some cases had not yet been adopted by the EU:
– IFRS 16 ‘Leases’ was issued in January 2016, and although it is not
mandatory to adopt until 1 January 2019, the Group has elected to
adopt early, so will apply from 1 January 2018.
The standard specifies how leases are recognised, presented, measured
and disclosed.
On the consolidated statement of financial position, a right of use asset
and a corresponding lease liability must be recognised for both
operating and finance leases. In the income statement, the existing
operating lease charge which is currently recognised within operating
profit, will be replaced by a depreciation charge in respect of the right of
use asset, and an interest cost in relation to the lease liability.
The Group’s lease commitments will be brought onto the consolidated
statement of financial position, as a liability with a corresponding asset
valued using a Right of Use method. The value of lease commitments is
immaterial in relation to the net assets of the Group. This will impact the
timing of the recognition of lease costs within the income statement
although it will not affect the Group’s cash flows. Based on an analysis
of lease commitments held by the Group at 31 December 2017, and
utilising estimated discount rates, the approximate net impact on profit in
the year is expected to be immaterial to the Group.
The composition of the Group’s lease commitments will change over
time and the discount rates applied are required to be updated to reflect
the prevailing economic environment.
3. 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 159. The nature of the Group’s operations and its principal activities
are set out in the Strategic Report on pages 1 to 45.
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 109.
– IFRS 9 ‘Financial Instruments’
– IFRS 15 ‘Revenue from Contracts with Customers’
– IFRS 16 ‘Leases’
– IFRS 2 ‘Share-based Payment’ (amendments) – classification and
measurement of share-based payment transactions
– IFRS 10 ‘Consolidated Financial Statements’ and IAS 28 ‘Investments
in Associates’ (amendments) – sale or contribution of assets between
an investor and its associate or joint venture
– Annual Improvements to IFRSs 2014 – 2016 Cycle
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. Whilst not material the impact of standards being adopted from
1 January 2018 is noted below:
– IFRS 9 ‘Financial Instruments’ was issued in final form incorporating the
impairment, classification and measurement requirements in July 2014
and is scheduled to replace IAS 39 ‘Financial Instruments: Recognition
and Measurement’ from 1 January 2018.
IFRS 9 will impact the classification, measurement, impairment and
de-recognition of financial instruments as well as introducing a new
hedge accounting model. The main impact will be the reclassification
of the shared equity portfolio, currently recognised as a debtor with a
non-closely related embedded derivative.
Under IFRS 9 the shared equity portfolio will be treated as Fair Value
through Profit and Loss. On restatement of 31 December 2017 results,
this change will improve the Group’s operating profit margin by 10bps,
representing the notional interest previously unwound through finance
costs, which under IFRS 9 will be incorporated into the fair value
adjustment and so recognised through other income/expense.
The impairment requirements of the standard require the Group to
consider the expected lifetime losses on all financial assets. The Group
does not have significant financial assets other than the shared equity
portfolio and as such the impact of IFRS 9 on other financial assets
is immaterial.
The requirements of the new hedge accounting model have been
reflected in the Group’s hedging strategy, policies and documentation
from 1 January 2018.
– IFRS 15 ‘Revenue from Contracts with Customers’ was issued in
May 2014 and amended in September 2015. This standard will be
applicable to the Group from 1 January 2018. The standard sets out
requirements for revenue recognition from contracts with customers.
The standard uses a five-step model to apportion revenue to the
individual promises, or performance obligations, within a contract.
The timing of revenue recognition and therefore number of units, on
some long-term contracts may be brought forward. The effect of these
changes on operating profit margin will be immaterial as the timing of
revenue recognition for most of the Group’s long-term contracts will
not change on adoption of IFRS 15.
4. Revenue
An analysis of the Group’s continuing revenue is as follows:
£ million
Housing:
Private sales
Partnership housing*
Other
Total housing
Land sales
Revenue for the year
113
113
2017
2016
3,532.2
365.6
27.9
3,925.7
39.5
3,965.2
3,283.9
329.2
15.0
3,628.1
48.1
3,676.2
* Partnership housing includes £288.8 million (2016: £245.3 million) recognised under IAS 11 ‘Construction Contracts’.
Housing revenue includes £239.5 million (2016: £216.4 million) generated where the sale has been achieved using part-exchange incentives. Other
revenue includes income from the sale of commercial properties developed as part of larger residential developments and the sale of leasehold properties.
5. Operating segments
The Group operates in two countries, being the United Kingdom and Spain.
The United Kingdom is split into three geographical operating segments, each managed by a Divisional Chairman who sits on the Group Management
Team. In addition, there is an operating segment covering the Corporate functions, Major Developments and Strategic Land.
The accounting policies of the reportable segments are the same as the Groups accounting policies described in Note 1. Segment profit represents
the profit earned by each segment without allocation of central administration costs including directors’ salaries and interest cost expense.
Segment information about these businesses is presented below:
For the year to 31 December 2017
£ million
Revenue
External sales
Result
Profit/(loss) on ordinary activities before joint ventures, finance costs and exceptional items
Share of results of joint ventures
Profit/(loss) on ordinary activities before finance costs, exceptional items and after share
of results of joint ventures
Exceptional items (Note 6)
Profit/(loss) on ordinary activities before finance costs, after share of results of joint ventures
and exceptional items
Net finance costs
Profit on ordinary activities before taxation
Taxation (including exceptional tax)
Profit for the year
As at 31 December 2017
£ million
Assets and liabilities
Segment operating assets
Joint ventures
Segment operating liabilities
Group net operating assets
Net current taxation
Net deferred taxation
Net cash
Net assets
Central
& South
West
Division
North
Division
London
& South
East
Division Corporate
Spain
Total
1,334.5 1,291.2 1,236.3
9.0
94.2
3,965.2
295.4
(0.5)
318.0
–
294.9
–
318.0
–
263.1
8.3
271.4
–
(69.7)
(0.2)
(69.9)
(130.0)
26.8
–
26.8
–
294.9
318.0
271.4
(199.9)
26.8
833.6
7.6
841.2
(130.0)
711.2
(29.2)
682.0
(126.7)
555.3
Central
& South
West
Division
North
Division
London
& South
East
Division Corporate
Spain
Total
1,192.5
2.1
(353.9)
1,233.2 1,501.3
42.3
(486.9)
3.5
(486.9)
840.7
749.8 1,056.7
212.7
3.0
(264.2)
(48.5)
145.0
–
(89.6)
55.4
4,284.7
50.9
(1,681.5)
2,654.1
(57.9)
29.3
511.8
3,137.3
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
114
114
Financial Statements
Notes to the Consolidated Financial Statements continued
5. Operating segments continued
For the year to 31 December 2017
£ million
Other information
Property, plant and equipment additions
Software development additions
Property, plant and equipment depreciation
Software amortisation
For the year to 31 December 2016
£ million
Revenue
External sales
Result
Profit/(loss) on ordinary activities before joint ventures, finance costs and exceptional items
Share of results of joint ventures
Profit/(loss) on ordinary activities before finance costs, exceptional items and after share
of results of joint ventures
Exceptional items (Note 6)
Profit/(loss) on ordinary activities before finance costs, after share of results of joint
ventures and exceptional items
Net finance costs
Profit on ordinary activities before taxation
Taxation (including exceptional tax)
Profit for the year
As at 31 December 2016
£ million
Assets and liabilities
Segment operating assets
Joint ventures
Segment operating liabilities
Group net operating assets
Net current taxation
Net deferred taxation
Net cash
Net assets
For the year to 31 December 2016
£ million
Other information
Property, plant and equipment additions
Software development additions
Property, plant and equipment depreciation
Software amortisation
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
Central
& South
West
Division
North
Division
London
& South
East
Division Corporate
Spain
Total
0.7
–
(0.1)
–
0.7
–
(0.9)
–
0.9
–
(0.4)
–
1.9
1.5
(0.9)
(1.1)
–
–
–
–
4.2
1.5
(2.3)
(1.1)
Central
& South
West
Division
North
Division
London
& South
East
Division Corporate
Spain
Total
1,239.4
1,204.5
1,137.0
1.7
93.6
3,676.2
279.9
0.1
280.0
–
280.7
–
280.7
2.2
249.3
1.1
250.4
–
(67.4)
–
(67.4)
–
20.6
–
20.6
(2.7)
280.0
282.9
250.4
(67.4)
17.9
763.1
1.2
764.3
(0.5)
763.8
(30.9)
732.9
(143.6)
589.3
Central
& South
West
Division
North
Division
London
& South
East
Division Corporate
Spain
Total
1,155.1
2.6
(341.7)
1,241.0
3.3
(514.4)
1,451.9
43.2
(459.9)
816.0
729.9
1,035.2
215.4
1.2
(304.9)
(88.3)
123.7
–
(76.9)
46.8
4,187.1
50.3
(1,697.8)
2,539.6
(61.4)
57.4
364.7
2,900.3
Central
& South
West
Division
North
Division
London
& South
East
Division Corporate
Spain
Total
0.9
–
(0.3)
–
0.9
–
(0.7)
–
1.0
–
(0.2)
–
0.3
2.0
(0.9)
(1.2)
–
–
–
–
3.1
2.0
(2.1)
(1.2)
114
Financial Statements
Notes to the Consolidated Financial Statements continued
Profit/(loss) on ordinary activities before joint ventures, finance costs and exceptional items
279.9
280.7
249.3
(67.4)
20.6
763.1
Share of results of joint ventures
0.1
–
1.1
–
1.2
Profit/(loss) on ordinary activities before finance costs, exceptional items and after share
Profit/(loss) on ordinary activities before finance costs, after share of results of joint
5. Operating segments continued
For the year to 31 December 2017
£ million
Other information
Property, plant and equipment additions
Software development additions
Property, plant and equipment depreciation
Software amortisation
For the year to 31 December 2016
£ million
Revenue
External sales
Result
of results of joint ventures
Exceptional items (Note 6)
ventures and exceptional items
Net finance costs
Profit on ordinary activities before taxation
Taxation (including exceptional tax)
Profit for the year
As at 31 December 2016
£ million
Assets and liabilities
Segment operating assets
Joint ventures
Segment operating liabilities
Group net operating assets
Net current taxation
Net deferred taxation
Net cash
Net assets
For the year to 31 December 2016
£ million
Other information
Property, plant and equipment additions
Software development additions
Property, plant and equipment depreciation
Software amortisation
Central
& South
West
Division
London
& South
East
North
Division
Division Corporate
Spain
Total
0.7
0.7
0.9
(0.1)
(0.9)
(0.4)
–
–
–
–
–
–
1.9
1.5
(0.9)
(1.1)
–
–
–
–
4.2
1.5
(2.3)
(1.1)
Central
& South
West
Division
London
& South
East
North
Division
Division Corporate
Spain
Total
1,239.4
1,204.5
1,137.0
1.7
93.6
3,676.2
–
–
280.0
280.7
250.4
(67.4)
–
2.2
–
20.6
(2.7)
764.3
(0.5)
280.0
282.9
250.4
(67.4)
17.9
Central
& South
West
Division
London
& South
East
North
Division
Division Corporate
Spain
Total
1,155.1
1,241.0
1,451.9
215.4
123.7
4,187.1
2.6
3.3
43.2
1.2
–
50.3
(341.7)
(514.4)
(459.9)
(304.9)
(76.9)
(1,697.8)
816.0
729.9
1,035.2
(88.3)
46.8
2,539.6
763.8
(30.9)
732.9
(143.6)
589.3
(61.4)
57.4
364.7
2,900.3
Central
& South
West
Division
London
& South
East
North
Division
Division Corporate
Spain
Total
0.9
0.9
1.0
(0.3)
(0.7)
(0.2)
–
–
–
–
–
–
0.3
2.0
(0.9)
(1.2)
–
–
–
–
3.1
2.0
(2.1)
(1.2)
6. Net operating expenses and profit on ordinary activities before finance costs
Profit on ordinary activities before financing costs for continuing operations has been arrived at after charging/(crediting):
£ million
Administration expenses
Other expense
Other income
Exceptional items
2017
201.9
8.7
(11.2)
130.0
Other income includes profits on the sale of property, plant and equipment and the revaluation of certain shared equity mortgage receivables.
Exceptional items:
£ million
Net addition to inventory impairments (Note 15)
Exceptional item recognised in relation to leasehold
Exceptional items
2017
–
130.0
130.0
115
115
2016
189.2
9.5
(21.4)
0.5
2016
0.5
–
0.5
Leasehold provision
As announced at the AGM on 27 April 2017, we are taking measures which we believe will address our customers’ concerns regarding historical lease
structures in an appropriate and fair manner. Our review has focused on a specific lease structure which provides that the ground rent doubles every
10 years until the 50th year, at which point the rent is capped. This lease structure was introduced by Taylor Wimpey in good faith in 2007 and was one
of a variety of lease types used on new developments during that period until late 2011, when we stopped using them on new developments commenced
after that date.
The doubling clauses are considered to be entirely legal and are clearly set out in the relevant lease documentation. In addition, when buying their
Taylor Wimpey property, all customers received independent legal advice as part of the standard conveyancing process. In line with normal practice
the relevant freehold reversions have been sold to a number of third parties over several years.
We have made good progress in securing agreements with freeholders covering approximately 90% of the properties affected by the doubling ground
rent clauses. These agreements enable our customers with a ten-year doubling ground rent lease to convert to an RPI-based structure, should they elect
to participate in our assistance scheme. The provision will be utilised as customer applications progress through the scheme.
The exceptional provision of £130.0 million recognised at June 2017 was calculated using a range of assumptions including the total number of properties
still owned by the original purchaser and an average valuation per leasehold unit. Following negotiations with freeholders, the valuation on the majority of
units has been determined, but the total number of properties and several other assumptions, could still vary over time. However, given the information
available at 31 December 2017 it is considered that the original provision recognised of £130.0 million remains appropriate.
We expect the cash outflow to be spread over a number of years; this will be determined by the timing of applications from customers.
Inventory impairment
The markets in our core geographies, which are the primary drivers of our business, continue to trade positively. However, we are alert to the potential risk
of a change in customer confidence given the on-going Brexit negotiations.
At 31 December 2017, the Group completed a net realisable value assessment of inventory with these factors in mind. This review did not result in any net
change to the total provision (2016: £8.2 million addition and £7.7 million release) but resulted in a reallocation of £2.4 million of historically booked provision
between two sites which continue to hold a provision due to poor site location and complex site requirements. There was no further change to the
provision because the majority of the remaining impairment provision is on sites which have suffered from adverse planning decisions, or are impacted
by other site-specific factors, rather than wider market factors.
The Group undertakes a detailed review on a site by site basis of the net realisable value of its land and work in progress. The results from this review are
sensitive to the assumptions used. Therefore, we also consider when the inventory is likely to be realised, and whether there has been a sustained change
in market conditions and the wider economic environment existing at the balance sheet date.
At the balance sheet date, the Group held land and work in progress in the UK that had been written down to net realisable value of £69.9 million
(2016: £119.6 million) with associated impairments of £46.9 million (2016: £96.8 million). As at 31 December 2017, 2% (31 December 2016: 3%) of
our UK short term owned and controlled land is impaired. In the year 5% (2016: 5%) of the Group’s UK completions were from pre-2009 impaired sites.
There has been continued improvement in the Spanish housing market during the year. However, this improvement has been on newer sites which
have been acquired in better locations. Sales rates and prices on sites which have been previously impaired remain low. In the year, 35 plots (2016: 65)
were completed in Spain that had previously been impaired. At 31 December 2017 Spain had land and work in progress that had been written down to
net realisable value of £17.7 million (2016: £18.7 million) with associated impairments of £46.4 million (2016: £50.2 million).
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
116
116
Financial Statements
Notes to the Consolidated Financial Statements continued
6. Net operating expenses and profit on ordinary activities before finance costs continued
Profit on ordinary activities before financing costs for continuing operations has been arrived at after charging/(crediting):
£ million
Cost of inventories recognised as expense in cost of sales, before write-downs of inventories
Reversal of inventory impairment provisions
Impairment of inventories
Property, plant and equipment depreciation
Net foreign exchange charge/(credit)
Loss/(gain) on disposal of property, plant and equipment
Amortisation of intangible assets
Payments under operating leases
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 its 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
Other services
Total non-audit fees
Total fees
2017
2,794.6
–
–
2.3
0.1
0.1
1.1
6.4
2016
2,633.3
(7.7)
8.2
2.1
(1.6)
(0.3)
1.2
6.6
2017
2016
0.1
0.3
0.4
0.1
–
0.1
0.5
0.1
0.3
0.4
0.1
–
0.1
0.5
Non-audit services in 2017 and 2016 predominantly relate to work undertaken as a result of Deloitte LLP’s role as auditor, or work resulting from
knowledge and experience gained as part of the role. Other services relate to advisory services relating to real estate advisory work. The work was
either the subject of a competitive tender or was best performed by the Group’s auditor because of its knowledge of the Group.
7. Staff costs
Average number employed
United Kingdom
Spain
£ million
Remuneration
Wages and salaries
Redundancy costs
Social security costs
Other pension costs
2017
Number
2016
Number
4,893
102
4,995
4,585
88
4,673
2017
2016
235.2
–
25.8
10.4
271.4
190.0
0.2
26.0
10.6
226.8
The information relating to Director and Senior Management remuneration required by the Companies Act 2006 and the Listing Rules of the Financial
Conduct Authority is contained in Note 30 and pages 74 to 92 in the Directors’ Remuneration Report.
8. Finance costs and interest receivable
£ million
External interest receivable
Finance costs are analysed as follows:
£ million
Interest on overdrafts, bank and other loans
Foreign exchange movements
Unwinding of discount on land creditors and other items
Net notional interest on pension liability (Note 20)
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
2017
0.8
2017
6.0
0.1
6.1
18.0
5.9
30.0
2016
0.7
2016
10.9
(1.6)
9.3
16.2
6.1
31.6
116
Financial Statements
Notes to the Consolidated Financial Statements continued
6. Net operating expenses and profit on ordinary activities before finance costs continued
Profit on ordinary activities before financing costs for continuing operations has been arrived at after charging/(crediting):
£ million
Cost of inventories recognised as expense in cost of sales, before write-downs of inventories
2017
2016
2,794.6
2,633.3
Reversal of inventory impairment provisions
Impairment of inventories
Property, plant and equipment depreciation
Net foreign exchange charge/(credit)
Loss/(gain) on disposal of property, plant and equipment
Amortisation of intangible assets
Payments under operating leases
The remuneration paid to Deloitte LLP, the Group’s external auditor, is as follows:
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts and consolidated
Fees payable to the Company’s auditor and its associates for other services to the Group:
The audit of the Company’s subsidiaries pursuant to legislation
£ million
financial statements
Total audit fees
Other services pursuant to legislation
Other services
Total non-audit fees
Total fees
Non-audit services in 2017 and 2016 predominantly relate to work undertaken as a result of Deloitte LLP’s role as auditor, or work resulting from
knowledge and experience gained as part of the role. Other services relate to advisory services relating to real estate advisory work. The work was
either the subject of a competitive tender or was best performed by the Group’s auditor because of its knowledge of the Group.
The information relating to Director and Senior Management remuneration required by the Companies Act 2006 and the Listing Rules of the Financial
Conduct Authority is contained in Note 30 and pages 74 to 92 in the Directors’ Remuneration Report.
7. Staff costs
Average number employed
United Kingdom
Spain
£ million
Remuneration
Wages and salaries
Redundancy costs
Social security costs
Other pension costs
8. Finance costs and interest receivable
£ million
External interest receivable
Finance costs are analysed as follows:
£ million
Interest on overdrafts, bank and other loans
Foreign exchange movements
Unwinding of discount on land creditors and other items
Net notional interest on pension liability (Note 20)
Taylor Wimpey plc Annual Report and Accounts 2017
2017
2016
2017
Number
2016
Number
2017
2016
(7.7)
8.2
2.1
(1.6)
(0.3)
1.2
6.6
0.1
0.3
0.4
0.1
–
0.1
0.5
4,585
88
4,673
190.0
0.2
26.0
10.6
226.8
2016
0.7
2016
10.9
(1.6)
9.3
16.2
6.1
31.6
–
–
2.3
0.1
0.1
1.1
6.4
0.1
0.3
0.4
0.1
–
0.1
0.5
4,893
102
4,995
235.2
–
25.8
10.4
271.4
2017
0.8
2017
6.0
0.1
6.1
18.0
5.9
30.0
9. Taxation
Tax (charged)/credited in the income statement is analysed as follows:
£ million
Current tax:
UK corporation tax:
Foreign tax:
Deferred tax:
UK:
Foreign tax:
Current year
Adjustment in respect of prior years
Current year
Current year
Adjustment in respect of prior years
Current year
117
117
2017
2016
(122.6)
1.5
(3.3)
(124.4)
(2.8)
–
0.5
(2.3)
(136.5)
2.5
(2.3)
(136.3)
(5.7)
(0.4)
(1.2)
(7.3)
(126.7)
(143.6)
Corporation tax is calculated at 19.25% (2016: 20.00%) 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 effective tax rate is 18.6% (2016:19.6%).
The tax charge for the year includes a credit of £25.0 million (2016: £nil) in respect of the exceptional charge relating to the leasehold review and £nil
(2016: £0.1 million) in respect of movements in the exceptional impairment provision.
The 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 19.25% (2016: 20.00%)
Net over provision in respect of prior years
Tax effect of expenses that are not deductible in determining taxable profit
Recognition of deferred tax asset relating to Spanish business
Other rate impacting adjustments
Tax charge for the year
10. Earnings per share
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
2017
682.0
(131.3)
1.5
0.2
3.9
(1.0)
(126.7)
2017
17.0p
16.9p
20.2p
20.1p
2016
732.9
(146.6)
2.1
0.2
1.1
(0.4)
(143.6)
2016
18.1p
17.9p
18.1p
18.0p
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
3,264.0
3,280.4
3,259.7
3,283.2
Adjusted basic and adjusted diluted earnings per share, which exclude the impact of exceptional items and any associated net tax charges, are presented
to provide a better measure of 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 for basic and diluted earnings per share
Adjust for exceptional items (Note 6)
Adjust for tax on exceptional items (Note 6)
Earnings for adjusted basic and adjusted diluted earnings per share
Million
Weighted average number of shares for basic earnings per share
Long term incentive share options
SAYE options
Weighted average number of shares for diluted earnings per share
2017
555.3
130.0
(25.0)
660.3
2017
3,264.0
9.2
7.2
3,280.4
2016
589.3
0.5
(0.1)
589.7
2016
3,259.7
12.3
11.2
3,283.2
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
118
118
Financial Statements
Notes to the Consolidated Financial Statements continued
11. Intangible assets
£ million
Cost
At 1 January 2016
Additions
At 31 December 2016
Additions
At 31 December 2017
Amortisation/impairment
At 1 January 2016
Charge for the year
At 31 December 2016
Charge for the year
At 31 December 2017
Carrying amount
31 December 2017
31 December 2016
Software
development
costs
Brands
140.2
–
140.2
–
140.2
(140.2)
–
(140.2)
–
(140.2)
–
–
8.0
2.0
10.0
1.5
11.5
(5.3)
(1.2)
(6.5)
(1.1)
(7.6)
3.9
3.5
Total
148.2
2.0
150.2
1.5
151.7
(145.5)
(1.2)
(146.7)
(1.1)
(147.8)
3.9
3.5
The Group has assessed its brands and their associated values and has concluded that given the majority of the legacy brands are currently not used,
it would not be appropriate to reverse any of the previously recognised impairment charges.
The amortisation of software development costs is recognised within administration expenses in the income statement.
12. Property, plant and equipment
£ million
Cost
At 1 January 2016
Additions
Disposals
At 31 December 2016
Additions
Disposals
At 31 December 2017
Accumulated depreciation
At 1 January 2016
Disposals
Charge for the year
At 31 December 2016
Disposals
Charge for the year
At 31 December 2017
Carrying amount
At 31 December 2017
At 31 December 2016
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
Freehold land
and buildings
Plant,
equipment
and leasehold
improvements
14.8
0.2
–
15.0
1.4
–
16.4
(0.7)
–
(0.5)
(1.2)
–
(0.5)
(1.7)
14.7
13.8
15.4
2.9
(1.1)
17.2
2.8
(1.0)
19.0
(9.5)
1.1
(1.6)
(10.0)
0.9
(1.8)
(10.9)
8.1
7.2
Total
30.2
3.1
(1.1)
32.2
4.2
(1.0)
35.4
(10.2)
1.1
(2.1)
(11.2)
0.9
(2.3)
(12.6)
22.8
21.0
Notes to the Consolidated Financial Statements continued
Software
development
Brands
costs
Total
13. Interests in joint ventures
£ million
Aggregated amounts relating to share of joint ventures:
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Carrying amount
Loans to joint ventures
Total interests in joint ventures
£ million
Group share of:
Revenue
Cost of sales
Gross profit
Net operating expenses
The Group has assessed its brands and their associated values and has concluded that given the majority of the legacy brands are currently not used,
it would not be appropriate to reverse any of the previously recognised impairment charges.
The amortisation of software development costs is recognised within administration expenses in the income statement.
12. Property, plant and equipment
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
119
119
2017
2016
6.7
79.5
86.2
(16.6)
(49.3)
(65.9)
20.3
30.6
50.9
–
66.5
66.5
(12.3)
(44.3)
(56.6)
9.9
40.4
50.3
2017
2016
90.7
(79.6)
11.1
(1.0)
10.1
(0.4)
9.7
(2.1)
7.6
29.1
(26.5)
2.6
(0.7)
1.9
(0.4)
1.5
(0.3)
1.2
The Group has five material (2016: two) joint ventures whose principal activity is residential housebuilding or development. The Group considers a joint
venture to be material when it is financially important to the Group. During the year the Group established two new joint venture entities. Winstanley & York
Road Regeneration LLP was set up with Wandsworth Council to undertake a significant regeneration project expected to deliver 2,200 homes.
The second, Whitehill & Bordon Development Company, Phase 1a Ltd, was set up with Dorchester Living Limited to develop part of the Ministry of
Defence’s site in Bordon, Hampshire. Whitehill & Bordon Regeneration Company Limited was incorporated in 2015 but only became material to the
Group during 2017.
The particulars of the material joint ventures for 2017 are as follows:
Country of incorporation
Name of joint venture equity accounted in the consolidated accounts
Taylor Wimpey plc interest in the
issued ordinary share capital
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
(a) Interest held by subsidiary undertakings.
Greenwich Millennium Village Limited(a)
Chobham Manor Limited Liability Partnership(a)
Winstanley and York Road Regeneration LLP(a)
Whitehill & Bordon Development Company Phase 1a Limited(a)
Whitehill & Bordon Regeneration Company Limited(a)
50%
50%
50%
50%
50%
Plant,
equipment
Freehold land
and leasehold
and buildings
improvements
140.2
140.2
140.2
(140.2)
(140.2)
(140.2)
–
–
–
–
–
–
14.8
0.2
–
15.0
1.4
–
16.4
(0.7)
–
(0.5)
(1.2)
–
(0.5)
(1.7)
14.7
13.8
8.0
2.0
10.0
1.5
11.5
(5.3)
(1.2)
(6.5)
(1.1)
(7.6)
3.9
3.5
15.4
2.9
(1.1)
17.2
2.8
(1.0)
19.0
(9.5)
1.1
(1.6)
(10.0)
0.9
(1.8)
(10.9)
8.1
7.2
148.2
2.0
150.2
1.5
151.7
(145.5)
(1.2)
(146.7)
(1.1)
(147.8)
3.9
3.5
Total
30.2
3.1
(1.1)
32.2
4.2
(1.0)
35.4
(10.2)
1.1
(2.1)
(11.2)
0.9
(2.3)
(12.6)
22.8
21.0
118
Financial Statements
11. Intangible assets
£ million
Cost
At 1 January 2016
Additions
At 31 December 2016
Additions
At 31 December 2017
Amortisation/impairment
At 1 January 2016
Charge for the year
At 31 December 2016
Charge for the year
At 31 December 2017
Carrying amount
31 December 2017
31 December 2016
At 1 January 2016
£ million
Cost
Additions
Disposals
Additions
Disposals
At 31 December 2016
At 31 December 2017
Accumulated depreciation
At 1 January 2016
Disposals
Charge for the year
At 31 December 2016
Disposals
Charge for the year
At 31 December 2017
Carrying amount
At 31 December 2017
At 31 December 2016
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
120
120
Financial Statements
Notes to the Consolidated Financial Statements continued
13. Interests in joint ventures continued
The following two tables show summary financial information for the material joint ventures. Unless specifically indicated, this information represents 100%
of the joint venture before intercompany eliminations.
£ million
Percentage ownership interest
Non-current assets
Current assets
Cash and cash equivalents
Current financial liabilities
Current other liabilities
Non-current financial liabilities*
Net assets/(liabilities) (100%)
Group share of net assets/(liabilities)
Loans to joint ventures
Total interest in joint ventures
Revenue
Interest expense
Income tax expense
Profit/(loss) for the year
Group share of profit/(loss) for the year
* Non-current financial liabilities include amounts owed to JV partners
Greenwich
Millennium
Village
2017
Chobham
Manor
2017
Winstanley
and York
Road
Regeneration
2017
Whitehill &
Bordon
Development
Company
Phase 1a
2017
Whitehill &
Bordon
Regeneration
Company
2017
50%
1.0
37.9
5.5
(2.1)
(2.2)
(6.1)
34.0
17.0
–
17.0
69.6
(0.2)
(2.9)
12.4
6.2
50%
–
29.8
14.3
(13.0)
–
(34.7)
(3.6)
(1.8)
16.8
15.0
94.9
–
–
5.1
2.6
50%
–
17.4
0.7
(0.7)
–
(18.0)
(0.6)
(0.3)
4.7
4.4
–
(0.3)
–
(0.5)
(0.3)
50%
–
14.4
5.9
(7.0)
–
(13.7)
(0.4)
(0.2)
3.8
3.6
–
(0.2)
–
(0.5)
(0.2)
50%
9.9
16.8
1.3
(7.2)
–
(20.0)
0.8
0.4
2.6
3.0
17.0
(0.2)
–
(0.4)
(0.2)
During the year, no entity charged depreciation or amortisation. No entity had discontinued operations or items of other comprehensive income.
£ million
Percentage ownership interest
Current assets
Cash and cash equivalents
Current financial liabilities
Current other liabilities
Non-current financial liabilities*
Net assets/(liabilities) (100%)
Group share of net assets/(liabilities)
Loans to joint ventures
Total interest in joint ventures
Revenue
Interest expense
Income tax expense
Profit/(loss) for the year
Group share of profit/(loss) for the year
* Non-current financial liabilities include amounts owed to JV partners.
Greenwich
Millennium
Village
2016
Chobham
Manor
2016
50%
53.9
1.7
(3.8)
(0.9)
(30.2)
20.7
10.3
12.0
22.3
29.3
(0.6)
(0.5)
4.5
2.3
50%
47.5
11.0
(17.2)
–
(50.0)
(8.7)
(4.3)
23.2
18.9
27.0
–
–
(2.5)
(1.3)
During the year, no entity charged depreciation or amortisation. No entity had discontinued operations or items of other comprehensive income.
Total
2017
10.9
116.3
27.7
(30.0)
(2.2)
(92.5)
30.2
15.1
27.9
43.0
181.5
(0.9)
(2.9)
16.1
8.1
Total
2016
101.4
12.7
(21.0)
(0.9)
(80.2)
12.0
6.0
35.2
41.2
56.3
(0.6)
(0.5)
2.0
1.0
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
The following two tables show summary financial information for the material joint ventures. Unless specifically indicated, this information represents 100%
£ million
2017
2016
13. Interests in joint ventures continued
121
121
Aggregated amounts relating to share of individually immaterial joint ventures
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Carrying amount
Loans to individually immaterial joint ventures
Total interests in individually immaterial joint ventures
£ million
Group share of:
Revenue
Cost of sales
Gross profit
Net operating expense
Profit on ordinary activities before finance costs
Finance costs
(Loss)/profit on ordinary activities before tax
Taxation
Share of individually immaterial joint ventures results for the year
1.2
7.5
8.7
(0.5)
(3.0)
(3.5)
5.2
2.7
7.9
–
9.4
9.4
(1.3)
(4.2)
(5.5)
3.9
5.2
9.1
2017
2016
–
–
–
–
–
(0.1)
(0.1)
(0.4)
(0.5)
1.0
(0.7)
0.3
(0.1)
0.2
–
0.2
–
0.2
14. Deferred tax
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior reporting year.
£ million
At 1 January 2016
Credit/(charge) to income
Credit to other comprehensive income
Charge to statement of changes in equity
Foreign exchange
At 31 December 2016
(Charge)/credit to income
Charge to other comprehensive income
Credit to statement of changes in equity
Foreign exchange
At 31 December 2017
Share-
based
payments
Capital
allowances
7.2
0.6
–
(3.0)
–
4.8
(0.2)
–
0.4
–
5.0
4.0
(0.6)
–
–
–
3.4
(0.3)
–
–
–
3.1
Losses
11.4
(3.9)
–
–
1.3
8.8
0.3
–
–
0.3
9.4
Retirement
benefit
obligations
Other
temporary
differences
32.0
(2.7)
10.7
–
–
40.0
(2.8)
(26.5)
–
–
10.7
1.1
(0.7)
–
–
–
0.4
0.7
–
–
–
1.1
Total
55.7
(7.3)
10.7
(3.0)
1.3
57.4
(2.3)
(26.5)
0.4
0.3
29.3
Closing deferred tax on UK temporary differences has been calculated at the tax rates that are expected to apply for the period when the asset is realised
or the liability is settled. Accordingly, the temporary differences have been calculated at rates between 19% and 17% (2016: 20% and 17%).
120
Financial Statements
Notes to the Consolidated Financial Statements continued
13. Interests in joint ventures continued
of the joint venture before intercompany eliminations.
£ million
Percentage ownership interest
Non-current assets
Current assets
Cash and cash equivalents
Current financial liabilities
Current other liabilities
Non-current financial liabilities*
Net assets/(liabilities) (100%)
Group share of net assets/(liabilities)
Loans to joint ventures
Total interest in joint ventures
Revenue
Interest expense
Income tax expense
Profit/(loss) for the year
£ million
Percentage ownership interest
Current assets
Cash and cash equivalents
Current financial liabilities
Current other liabilities
Non-current financial liabilities*
Net assets/(liabilities) (100%)
Group share of net assets/(liabilities)
Loans to joint ventures
Total interest in joint ventures
Revenue
Interest expense
Income tax expense
Profit/(loss) for the year
Winstanley
and York
Development
Whitehill &
Bordon
Whitehill &
Bordon
Chobham
Road
Manor
Regeneration
Company
Phase 1a
Regeneration
Company
Greenwich
Millennium
Village
2017
50%
1.0
37.9
5.5
(2.1)
(2.2)
(6.1)
34.0
17.0
–
17.0
69.6
(0.2)
(2.9)
12.4
6.2
2017
50%
–
29.8
14.3
(13.0)
–
(34.7)
(3.6)
(1.8)
16.8
15.0
94.9
–
–
5.1
2.6
2017
50%
–
17.4
0.7
(0.7)
–
(18.0)
(0.6)
(0.3)
4.7
4.4
–
–
(0.3)
(0.5)
(0.3)
2017
50%
–
14.4
5.9
(7.0)
–
(13.7)
(0.4)
(0.2)
3.8
3.6
(0.2)
–
–
(0.5)
(0.2)
Village
2016
50%
53.9
1.7
(3.8)
(0.9)
(30.2)
20.7
10.3
12.0
22.3
29.3
(0.6)
(0.5)
4.5
2.3
2017
50%
9.9
16.8
1.3
(7.2)
–
(20.0)
0.8
0.4
2.6
3.0
17.0
(0.2)
–
(0.4)
(0.2)
50%
47.5
11.0
(17.2)
–
(50.0)
(8.7)
(4.3)
23.2
18.9
27.0
–
–
(2.5)
(1.3)
Total
2017
10.9
116.3
27.7
(30.0)
(2.2)
(92.5)
30.2
15.1
27.9
43.0
181.5
(0.9)
(2.9)
16.1
8.1
Total
2016
101.4
12.7
(21.0)
(0.9)
(80.2)
12.0
6.0
35.2
41.2
56.3
(0.6)
(0.5)
2.0
1.0
Greenwich
Millennium
Chobham
Manor
2016
Group share of profit/(loss) for the year
* Non-current financial liabilities include amounts owed to JV partners
During the year, no entity charged depreciation or amortisation. No entity had discontinued operations or items of other comprehensive income.
Group share of profit/(loss) for the year
* Non-current financial liabilities include amounts owed to JV partners.
During the year, no entity charged depreciation or amortisation. No entity had discontinued operations or items of other comprehensive income.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
122
122
Financial Statements
Notes to the Consolidated Financial Statements continued
14. Deferred tax continued
The net deferred tax balance is analysed into assets and liabilities as follows:
£ million
Deferred tax assets
Deferred tax liabilities
2017
30.9
(1.6)
29.3
2016
58.7
(1.3)
57.4
The Group has not recognised temporary differences relating to tax losses carried forward and other temporary differences amounting to £2.8 million
(2016: £3.0 million) in the UK and £58.0 million (2016: £70.0 million) in Spain. The UK temporary differences have not been recognised as they are
predominantly non-trading in nature and insufficient certainty exists as to their future utilisation. The temporary differences in Spain have not been
recognised due to uncertainty of sufficient taxable profits in the future against which to utilise these amounts.
At the balance sheet date, the Group has unused UK capital losses of £269.6 million (2016: £269.5 million). No deferred tax asset has been recognised
in respect of the capital losses at 31 December 2017 because the Group does not believe that it is probable that these capital losses will be utilised in the
foreseeable future.
15. 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.
2017
1.9
24.0
2,682.6
1,360.0
7.2
4,075.7
2016
1.6
20.9
2,650.9
1,307.8
2.8
3,984.0
During the year contract costs of £212.2 million (2016: £187.7 million) have been recognised within Cost of Sales in respect of IAS 11 ‘construction
contracts’.
The markets in our core geographies, which are the primary drivers of our business, continue to trade positively. However, we are alert to the potential risk
of a change in customer confidence given the on-going Brexit negotiations. At 31 December, the Group completed a net realisable value assessment of
inventory with these factors in mind. This review did not result in any net change to the total provision (2016: £8.2 million addition and £7.7 million release)
but in a reallocation of £2.4 million of historically booked provision between two sites which continue to hold a provision due to the poor site location and
complex site requirements. There was no further change as the majority of the impairment provision remaining is on sites which have suffered from adverse
planning decisions or are impacted by other site-specific factors rather than wider market factors.
The table below details the movements on the write-downs on impaired inventory recorded in the year.
Inventory write-downs
£ million
1 January
Utilised
Net addition
Foreign exchange
31 December
16. Other financial assets
Trade and other receivables
£ million
Trade receivables
Other receivables
2017
147.0
(52.9)
–
(0.8)
93.3
2016
167.7
(28.3)
0.5
7.1
147.0
Current
2017
76.9
45.3
122.2
2016
65.4
26.0
91.4
Non-current
2017
56.4
3.7
60.1
2016
79.0
8.2
87.2
An allowance has been made for estimated irrecoverable amounts from trade receivables of £1.1 million (2016: £0.4 million). This allowance has been
determined by reference to past default experience.
Included within trade receivables are mortgage receivables of £63.1 million (2016: £78.0 million) including shared equity loans. Shared equity loans are
provided to certain customers to facilitate their house purchase. They are accounted for as a host contract representing a loan receivable and a non-closely
related embedded derivative asset, as allowed under IAS 39 ‘Financial instruments’. The loan is measured at amortised cost and the embedded derivative
is measured at fair value through profit or loss.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
Notes to the Consolidated Financial Statements continued
14. Deferred tax continued
The net deferred tax balance is analysed into assets and liabilities as follows:
122
Financial Statements
£ million
Deferred tax assets
Deferred tax liabilities
The Group has not recognised temporary differences relating to tax losses carried forward and other temporary differences amounting to £2.8 million
(2016: £3.0 million) in the UK and £58.0 million (2016: £70.0 million) in Spain. The UK temporary differences have not been recognised as they are
predominantly non-trading in nature and insufficient certainty exists as to their future utilisation. The temporary differences in Spain have not been
recognised due to uncertainty of sufficient taxable profits in the future against which to utilise these amounts.
At the balance sheet date, the Group has unused UK capital losses of £269.6 million (2016: £269.5 million). No deferred tax asset has been recognised
in respect of the capital losses at 31 December 2017 because the Group does not believe that it is probable that these capital losses will be utilised in the
During the year contract costs of £212.2 million (2016: £187.7 million) have been recognised within Cost of Sales in respect of IAS 11 ‘construction
The markets in our core geographies, which are the primary drivers of our business, continue to trade positively. However, we are alert to the potential risk
of a change in customer confidence given the on-going Brexit negotiations. At 31 December, the Group completed a net realisable value assessment of
inventory with these factors in mind. This review did not result in any net change to the total provision (2016: £8.2 million addition and £7.7 million release)
but in a reallocation of £2.4 million of historically booked provision between two sites which continue to hold a provision due to the poor site location and
complex site requirements. There was no further change as the majority of the impairment provision remaining is on sites which have suffered from adverse
planning decisions or are impacted by other site-specific factors rather than wider market factors.
The table below details the movements on the write-downs on impaired inventory recorded in the year.
2017
30.9
(1.6)
29.3
2016
58.7
(1.3)
57.4
2017
1.9
24.0
2016
1.6
20.9
2,682.6
1,360.0
7.2
2,650.9
1,307.8
2.8
4,075.7
3,984.0
2017
147.0
(52.9)
–
(0.8)
93.3
2016
167.7
(28.3)
0.5
7.1
147.0
2016
79.0
8.2
87.2
Current
Non-current
2017
76.9
45.3
122.2
2016
65.4
26.0
91.4
2017
56.4
3.7
60.1
foreseeable future.
15. Inventories
£ million
Raw materials and consumables
Finished goods and goods for resale
Residential developments:
Land(a)
Development and construction costs
(a) Details of land creditors are in Note 18.
contracts’.
Commercial, industrial and mixed development properties
Inventory write-downs
£ million
1 January
Utilised
Net addition
Foreign exchange
31 December
16. Other financial assets
Trade and other receivables
£ million
Trade receivables
Other receivables
An allowance has been made for estimated irrecoverable amounts from trade receivables of £1.1 million (2016: £0.4 million). This allowance has been
determined by reference to past default experience.
Included within trade receivables are mortgage receivables of £63.1 million (2016: £78.0 million) including shared equity loans. Shared equity loans are
provided to certain customers to facilitate their house purchase. They are accounted for as a host contract representing a loan receivable and a non-closely
related embedded derivative asset, as allowed under IAS 39 ‘Financial instruments’. The loan is measured at amortised cost and the embedded derivative
is measured at fair value through profit or loss.
16. Other financial assets continued
The embedded derivative fair value movement is established by reference to a published national house price index. The fair value of the derivative is
£(1.8) million (2016: £2.4 million) and is included in the amount above.
Included within trade receivables is £1.3 million (2016: £9.6 million) of retentions in relation to partnership housing contracts.
123
123
Cash and cash equivalents
£ million
Cash and cash equivalents (see Note 19)
17. Bank and other loans
£ million
Bank loans
Other loans
Other loans relate to €100.0 million 2.02% Senior Loan Notes due to expire in 2023.
£ million
Amount due for settlement after one year
Total borrowings
£ million
Analysis of borrowings by currency:
Sterling
Euros
18. Trade and other payables
£ million
Trade payables
Customer deposits
Completed site accruals
Other payables
Other payables includes £48.0 million (2016: £61.4 million) of repayable grants.
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
2017
600.5
2016
450.2
2017
–
88.7
88.7
2017
88.7
88.7
2016
–
85.5
85.5
2016
85.5
85.5
2017
2016
–
88.7
88.7
Current
Non-current
2017
750.7
75.8
128.6
69.4
1,024.5
2016
481.3
88.7
120.1
298.0
988.1
2017
324.6
10.6
46.3
49.1
430.6
2017
319.5
319.6
639.1
2017
618.3
20.8
639.1
–
85.5
85.5
2016
337.5
9.8
57.0
38.2
442.5
2016
266.3
333.5
599.8
2016
577.4
22.4
599.8
Land creditors of £489.6 million (2016: £276.2 million) are secured against land acquired for development, or supported by bond or guarantee.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
124
124
Financial Statements
Notes to the Consolidated Financial Statements continued
19. Financial instruments and fair value disclosures
Capital management
The Group’s policy is to maintain a strong credit rating for the business and to have an appropriate funding structure. Shareholders’ equity and long-term
debt are used to finance property, plant and equipment and the medium to long term inventories. Revolving credit facilities are used to fund net current
assets including development and construction costs. The Group’s financing facilities contain the usual financial covenants including minimum interest
cover and maximum gearing. The Group met these requirements throughout the year.
Financial assets and financial liabilities
Categories of financial assets and financial liabilities are as follows:
Financial assets
£ million
Cash and cash equivalents
Land receivables
Trade and other receivables
Mortgage receivables
Fair value
hierarchy
Carrying value
31 December
2017
Fair value
31 December
2016
31 December
2017
31 December
2016
b
b
b
a
600.5
13.8
67.2
63.1
744.6
450.2
24.1
44.6
78.0
596.9
600.5
13.8
67.2
63.1
744.6
450.2
24.1
44.6
78.0
596.9
(a) Mortgage receivables relate to sales incentives including shared equity loans which are separated into a loan receivable and a non-closely related embedded derivative asset.
The embedded derivative is measured at fair value through profit and loss. The fair value of the derivative is established based on a publicly available national house price index,
being significant other observable inputs (level 2).
(b) The Directors consider the carrying amounts of financial assets and financial liabilities recorded at amortised costs in the consolidated financial statements approximate their fair value.
No financial assets are past due and as such have not been impaired. An allowance is made for the mortgage receivables as described in Note 16.
Land receivables and trade and other receivables are included in the balance sheet as trade and other receivables for current and non-current amounts.
Current and non-current trade and other receivables, as disclosed in Note 16, include £38.2 million (2016: £31.9 million) of non-financial assets.
Financial liabilities
£ million
Overdrafts, bank and other loans
Land creditors
Trade and other payables
Fair value
hierarchy
Carrying value
31 December
2017
Fair value
31 December
2016
31 December
2017
31 December
2016
a
b
b
88.7
639.1
690.7
85.5
599.8
677.9
87.8
639.1
690.7
85.5
599.8
677.9
1,418.5
1,363.2
1,417.6
1,363.2
(a) The fair value of the €100 million fixed rate loan notes has been determined by reference to external interest rates and the Directors’ assessment of the margin for credit risk (level 2).
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 £125.3 million (2016: £152.9 million) of non-financial liabilities.
The Group has designated the carrying value of €54.0 million of foreign currency borrowings (2016: €54.0 million foreign currency borrowings) as a net
investment hedge.
The Group has no other financial instruments with fair values that are determined by reference to significant unobservable inputs (level 3), nor have there
been any transfers of assets or liabilities between levels of the fair value hierarchy. There are no non-recurring fair value measurements.
Forward contracts have been entered into to hedge transaction risks on intra-Group loans to buy/(sell) against Sterling: €65.0 million and C$ nil million
(2016: €47.5 million and C$(0.4) million). The fair value of the forward contracts is not materially different to their book value as they were entered into
on or near 31 December in each year and mature less than one month later, hence the value of the derivative is negligible.
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 using fixed or variable rate borrowings, foreign currency borrowings and derivative financial instruments.
(a) Interest rate risk management
The Group can be exposed to interest rate risk as the Group borrows funds, when required, at variable interest rates. The exposure to variable rate
borrowings can fluctuate 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. This policy has not changed during the year.
To measure the risk, variable rate borrowings and the expected interest cost for the year are forecast monthly 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.
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.
The Group does not currently have any outstanding interest rate derivatives. The 0.25% change represents a reasonably possible change in interest rates
over the next financial period.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
124
Financial Statements
Notes to the Consolidated Financial Statements continued
19. Financial instruments and fair value disclosures
Capital management
The Group’s policy is to maintain a strong credit rating for the business and to have an appropriate funding structure. Shareholders’ equity and long-term
debt are used to finance property, plant and equipment and the medium to long term inventories. Revolving credit facilities are used to fund net current
assets including development and construction costs. The Group’s financing facilities contain the usual financial covenants including minimum interest
cover and maximum gearing. The Group met these requirements throughout the year.
Financial assets and financial liabilities
Categories of financial assets and financial liabilities are as follows:
Financial assets
£ million
Cash and cash equivalents
Land receivables
Trade and other receivables
Mortgage receivables
Financial liabilities
£ million
Overdrafts, bank and other loans
Land creditors
Trade and other payables
(a) Mortgage receivables relate to sales incentives including shared equity loans which are separated into a loan receivable and a non-closely related embedded derivative asset.
The embedded derivative is measured at fair value through profit and loss. The fair value of the derivative is established based on a publicly available national house price index,
being significant other observable inputs (level 2).
(b) The Directors consider the carrying amounts of financial assets and financial liabilities recorded at amortised costs in the consolidated financial statements approximate their fair value.
No financial assets are past due and as such have not been impaired. An allowance is made for the mortgage receivables as described in Note 16.
Land receivables and trade and other receivables are included in the balance sheet as trade and other receivables for current and non-current amounts.
Current and non-current trade and other receivables, as disclosed in Note 16, include £38.2 million (2016: £31.9 million) of non-financial assets.
Carrying value
Fair value
Fair value
31 December
31 December
31 December
31 December
hierarchy
2017
600.5
13.8
67.2
63.1
2016
450.2
24.1
44.6
78.0
744.6
596.9
2017
600.5
13.8
67.2
63.1
744.6
2016
450.2
24.1
44.6
78.0
596.9
Carrying value
Fair value
Fair value
31 December
31 December
31 December
31 December
hierarchy
2017
88.7
639.1
690.7
2016
85.5
599.8
677.9
2017
87.8
639.1
690.7
2016
85.5
599.8
677.9
1,418.5
1,363.2
1,417.6
1,363.2
b
b
b
a
a
b
b
(a) The fair value of the €100 million fixed rate loan notes has been determined by reference to external interest rates and the Directors’ assessment of the margin for credit risk (level 2).
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 £125.3 million (2016: £152.9 million) of non-financial liabilities.
The Group has designated the carrying value of €54.0 million of foreign currency borrowings (2016: €54.0 million foreign currency borrowings) as a net
investment hedge.
The Group has no other financial instruments with fair values that are determined by reference to significant unobservable inputs (level 3), nor have there
been any transfers of assets or liabilities between levels of the fair value hierarchy. There are no non-recurring fair value measurements.
Forward contracts have been entered into to hedge transaction risks on intra-Group loans to buy/(sell) against Sterling: €65.0 million and C$ nil million
(2016: €47.5 million and C$(0.4) million). The fair value of the forward contracts is not materially different to their book value as they were entered into
on or near 31 December in each year and mature less than one month later, hence the value of the derivative is negligible.
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 using fixed or variable rate borrowings, foreign currency borrowings and derivative financial instruments.
Market risk
(a) Interest rate risk management
The Group can be exposed to interest rate risk as the Group borrows funds, when required, at variable interest rates. The exposure to variable rate
borrowings can fluctuate 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. This policy has not changed during the year.
To measure the risk, variable rate borrowings and the expected interest cost for the year are forecast monthly 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 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.
The Group does not currently have any outstanding interest rate derivatives. The 0.25% change represents a reasonably possible change in interest rates
the year.
Interest rate sensitivity
over the next financial period.
Taylor Wimpey plc Annual Report and Accounts 2017
19. Financial instruments and fair value disclosures continued
The table assumes all other variables remain constant in accordance with IFRS 7.
0.25% increase in interest rates
£ million
Derivatives
Non-derivatives
0.25% decrease in interest rates
£ million
Derivatives
Non-derivatives
125
125
Sensitivity
income
2017
Sensitivity
equity
2017
Sensitivity
income
2016
Sensitivity
equity
2016
–
1.5
1.5
–
1.5
1.5
–
1.1
1.1
–
1.1
1.1
Sensitivity
income
2017
Sensitivity
equity
2017
Sensitivity
income
2016
Sensitivity
equity
2016
–
(1.5)
(1.5)
–
(1.5)
(1.5)
–
(1.1)
(1.1)
–
(1.1)
(1.1)
(b) Foreign currency risk management
The Group’s overseas activities expose it to the financial risks of changes in foreign currency exchange rates. Its Spanish subsidiary is the only foreign
operation of the Group.
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 from accounting for both the income and the net investment held in a functional currency other than
Sterling. The net investment risk may be hedged using foreign currency borrowings and derivatives. Assets and liabilities denominated in non-functional
currencies are retranslated each month using the latest exchange rates. 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 and has not changed during the year.
Hedge accounting
Hedging activities are evaluated periodically to ensure that they are in line with Group policy. During 2016 foreign currency borrowings replaced forward
contracts as the designated financial instrument to hedge the net investment risk in the Spanish operations.
The Group has designated the carrying value of €54.0 million of foreign currency borrowings (2016: €54.0 million borrowings) held at the balance sheet
date 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 Statement of Other Comprehensive Income.
Foreign currency sensitivity
The Group is 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 following a 15% change in the currency’s value against Sterling, and in accordance with IFRS 7, all other variables remaining constant.
The 15% change represents a reasonably possible change in the specified Euro exchange rates in relation to Sterling.
£ million
Euro weakens against Sterling
Euro strengthens against Sterling
Income
sensitivity
2017
Equity
sensitivity
2017
Income
sensitivity
2016
Equity
sensitivity
2016
(1.3)
1.8
4.9
(6.6)
(1.0)
1.3
5.1
(6.8)
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
or money market funds based on a minimum credit rating and maximum exposure. There is no significant concentration of risk to any single counterparty.
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 house builders. Management consider
that the credit quality of the various receivables is good in respect of the amounts outstanding and therefore credit risk is considered to be low. There is
no significant concentration of risk.
Mortgage receivables, including shared equity loans, are in connection with the various historical promotion schemes to support sales on a selective basis.
The mortgages are secured by a second charge over the property and are held at amortised cost. The non-closely related embedded derivative related to
shared equity is held at fair 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.
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
126
126
Financial Statements
Notes to the Consolidated Financial Statements continued
19. Financial instruments and fair value disclosures continued
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 cash and cash equivalents, borrowings, overdrafts and committed revolving credit facilities with a minimum of 12 months to 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’s borrowings and facilities have a range of maturities with an average life of 2.6 years (2016: 3.6 years). In February 2018, the Group
agreed with its banks, to amend the terms of its £550 million facility on more favourable terms and to extend the maturity date to February 2023.
The Group’s borrowings and facilities now have an average life of 5.2 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 (2016: £550.0 million) and cash and cash equivalents were £600.5 million (2016: £450.2 million).
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 2017
* 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 2016
* Excludes land creditors.
Lease commitments are disclosed in Note 28.
Overdrafts,
bank and
other loans
Land
creditors
Trade and
other
payables*
Currency
forward
contracts
–
1.8
1.8
5.4
89.6
98.6
–
326.6
201.6
107.0
35.7
670.9
–
589.1
61.8
37.7
2.1
690.7
–
–
–
–
–
–
Overdrafts,
bank and
other loans
Land
creditors
Trade and
other
payables*
Currency
forward
contracts
–
1.7
1.7
5.2
88.0
96.6
–
286.4
178.7
143.0
21.3
629.4
–
577.1
45.8
43.9
10.8
677.6
–
0.3
–
–
–
0.3
Total
–
917.5
265.2
150.1
127.4
1,460.2
Total
–
865.5
226.2
192.1
120.1
1,403.9
20. Retirement benefit obligations
Retirement benefit obligations comprise a defined benefit pension liability of £63.7 million (2016: £232.7 million) and a post-retirement healthcare liability
of £1.1 million (2016: £1.4 million).
The Group operates the Taylor Wimpey Pension Scheme (TWPS), a defined benefit pension scheme, which is closed to both new members and to
future accrual. The Group also operates defined contribution pension arrangements in the UK, which are available to new and existing UK employees.
Defined contribution pension plan
A defined contribution plan is a pension plan under which the Group pays contributions to an independently administered fund – such contributions
are based upon a fixed percentage of employees’ pay. The Group has no legal or constructive obligations to pay further contributions to the fund once
the contributions have been paid. Members’ benefits are determined by the amount of contributions paid by the Group and the member, together with
investment returns earned on the contributions arising from the performance of each individual’s chosen investments and the type of pension the member
chooses to buy at retirement. As a result, actuarial risk (that benefits will be lower than expected) and investment risk (that assets invested in will not
perform in line with expectations) fall on the employee.
The contributions are recognised as an employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent
that a cash refund or a reduction in the future payments is available.
The Group’s defined contribution plan, the Taylor Wimpey Personal Choice Plan (TWPCP), is offered to all new and existing monthly paid employees.
The People’s Pension is used for auto enrolment purposes for weekly and monthly paid employees not participating in the TWPCP. The People’s Pension
is provided by B&CE, one of the UK’s largest providers of financial benefits to construction industry employers and individuals.
The Group made contributions to its defined contribution arrangements of £10.4 million in 2017 (2016: £10.6 million), which is included in the income
statement charge. The Group expects to make contributions of around £10.6 million in 2018.
Defined benefit pension schemes
The Group’s defined benefit pension scheme in the UK is the TWPS. The TWPS is a funded defined benefit pension scheme which provides benefits to
beneficiaries in the form of a guaranteed level of pension payable for life. The level of benefits provided depends on members’ length of service and their
salary in the final years leading up to retirement or date of ceasing active accrual if earlier. Pension payments are generally increased in line with inflation.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
126
Financial Statements
Notes to the Consolidated Financial Statements continued
19. Financial instruments and fair value disclosures continued
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 cash and cash equivalents, borrowings, overdrafts and committed revolving credit facilities with a minimum of 12 months to 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’s borrowings and facilities have a range of maturities with an average life of 2.6 years (2016: 3.6 years). In February 2018, the Group
agreed with its banks, to amend the terms of its £550 million facility on more favourable terms and to extend the maturity date to February 2023.
The Group’s borrowings and facilities now have an average life of 5.2 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 (2016: £550.0 million) and cash and cash equivalents were £600.5 million (2016: £450.2 million).
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:
More than one year and less than two years
More than two years and less than five years
Financial liabilities
£ million
On demand
Within one year
In more than five years
31 December 2017
* Excludes land creditors.
Financial liabilities
£ million
On demand
Within one year
In more than five years
31 December 2016
* Excludes land creditors.
More than one year and less than two years
More than two years and less than five years
Lease commitments are disclosed in Note 28.
20. Retirement benefit obligations
of £1.1 million (2016: £1.4 million).
Overdrafts,
bank and
other loans
Land
Trade and
other
creditors
payables*
Currency
forward
contracts
–
1.8
1.8
5.4
89.6
98.6
–
1.7
1.7
5.2
88.0
96.6
–
326.6
201.6
107.0
35.7
670.9
–
286.4
178.7
143.0
21.3
629.4
–
589.1
61.8
37.7
2.1
690.7
–
577.1
45.8
43.9
10.8
677.6
Overdrafts,
bank and
other loans
Land
creditors
Trade and
other
payables*
Currency
forward
contracts
Total
–
917.5
265.2
150.1
127.4
1,460.2
Total
–
865.5
226.2
192.1
120.1
–
–
–
–
–
–
–
–
–
–
0.3
0.3
1,403.9
Retirement benefit obligations comprise a defined benefit pension liability of £63.7 million (2016: £232.7 million) and a post-retirement healthcare liability
The Group operates the Taylor Wimpey Pension Scheme (TWPS), a defined benefit pension scheme, which is closed to both new members and to
future accrual. The Group also operates defined contribution pension arrangements in the UK, which are available to new and existing UK employees.
Defined contribution pension plan
A defined contribution plan is a pension plan under which the Group pays contributions to an independently administered fund – such contributions
are based upon a fixed percentage of employees’ pay. The Group has no legal or constructive obligations to pay further contributions to the fund once
the contributions have been paid. Members’ benefits are determined by the amount of contributions paid by the Group and the member, together with
investment returns earned on the contributions arising from the performance of each individual’s chosen investments and the type of pension the member
chooses to buy at retirement. As a result, actuarial risk (that benefits will be lower than expected) and investment risk (that assets invested in will not
perform in line with expectations) fall on the employee.
The contributions are recognised as an employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent
that a cash refund or a reduction in the future payments is available.
The Group’s defined contribution plan, the Taylor Wimpey Personal Choice Plan (TWPCP), is offered to all new and existing monthly paid employees.
The People’s Pension is used for auto enrolment purposes for weekly and monthly paid employees not participating in the TWPCP. The People’s Pension
is provided by B&CE, one of the UK’s largest providers of financial benefits to construction industry employers and individuals.
The Group made contributions to its defined contribution arrangements of £10.4 million in 2017 (2016: £10.6 million), which is included in the income
statement charge. The Group expects to make contributions of around £10.6 million in 2018.
Defined benefit pension schemes
The Group’s defined benefit pension scheme in the UK is the TWPS. The TWPS is a funded defined benefit pension scheme which provides benefits to
beneficiaries in the form of a guaranteed level of pension payable for life. The level of benefits provided depends on members’ length of service and their
salary in the final years leading up to retirement or date of ceasing active accrual if earlier. Pension payments are generally increased in line with inflation.
127
127
20. Retirement benefit obligations continued
The Scheme was formed by the merger of the Taylor Woodrow Group Pension and Life Assurance Fund and the George Wimpey Staff Pension Scheme
in 2013. The Scheme is closed to new members and future accrual.
The Group operates the TWPS under the UK regulatory framework. Benefits are paid to members from a Trustee-administered fund and the Trustee is
responsible for ensuring that the Scheme is sufficiently funded to meet current and future benefit payments. Scheme assets are held in trust.
The TWPS Trustee’s other duties include managing the investment of scheme assets, administration of scheme benefits and exercising of discretionary
powers. The Group works closely with the Trustee to manage the TWPS. The Trustee of the TWPS owes fiduciary duties to the TWPS’ beneficiaries.
The appointment of the Directors to the Trustee Board is determined by the TWPS trust documentation.
During 2017 we engaged with the Pension Trustee on the triennial valuation of the pension scheme with a reference date of 31 December 2016. The table
below sets out the key assumptions agreed as part of this valuation.
Assumptions
Discount rate (pre-retirement)
Discount rate (post-retirement)
RPI inflation
CPI inflation
Mortality
4.20%
2.35%
3.50%
2.70%
100% of S2PXA tables, CMI_2016 improvements with 1.50% trend rate and a smoothing
factor of 7.5
The result of this valuation is a Technical Provisions deficit at 31 December 2016 of £222.0 million. Strong investment returns on the Scheme’s assets over
2017 have reduced this deficit to approximately £30.0 million at 31 December 2017.
A revised funding plan, based on the results of the triennial valuation, has been agreed since the Balance Sheet date. This plan commits the Group to cash
contributions of £47.1 million per annum for four years, including £5.1 million per annum from the Pension Funding Partnership (as described below) and
£2.0 million per annum to cover scheme expenses. However, £40 million per annum of cash contributions are only required whilst the Scheme remains in
a Technical Provisions deficit position. Should the Scheme become fully funded, then these cash contributions will be suspended until such time that the
Scheme’s Technical Provision funding level falls to below 96%.
During 2017, as part of the triennial valuation, each of the assumptions were reviewed, with a focus on demographic assumptions. In order to review the
mortality base table assumption for the Scheme, three different investigations were carried out. Firstly, the Scheme Actuary of the TWPS analysed actual
mortality experience for the Scheme over the period from 2014 to 2016 inclusive. Secondly the Company commissioned a postcode mortality analysis of
the Scheme population from an independent actuary. Finally, the Company, in collaboration with the Trustee, commissioned a review to assess the current
health of existing scheme members through questionnaires and telephone interviews. This approach, referred to as a Medically Underwritten Mortality
Study (“MUMS”), allowed for more detailed investigation of the health profile of the Scheme, and has been adopted for other pension schemes in recent
years. The Company and Trustee wrote to approximately 3,200 members aged between 55 and 80 who together covered 45% of overall scheme liabilities.
Of these members, approximately 60% responded to the survey. The responses were then analysed by experienced medical underwriters to translate
them into loadings to be applied to standard mortality base tables. The results of the MUMS investigation, the postcode analysis and the scheme specific
experience analysis were then ‘blended’ to form an overall mortality assumption. This blending applied different weightings to each study for each
sub-Group of scheme members, reflecting the perceived relevance of each study to each sub-Group.
This resulted in an overall loading to be applied to the S2P base tables of 107% for the IAS 19 accounting valuation, and resulted in a reduction in life
expectancy of around 0.5 years to 1 year relative to the mortality base table assumption adopted in the previous year.
The revised, scheme specific, mortality assumption resulted in a reduction in the deficit (before IFRIC 14 adjustment) of approximately £60 million which,
combined with asset outperformance has resulted in an IAS 19 accounting surplus of £23.9 million. The terms of the Scheme are such that the Group
does not have an unconditional right to a refund of surplus. As a result, the Group has recognised an adjustment to this surplus of £87.6 million, resulting in
an IFRIC 14 deficit of £63.7 million, which represents the present value of future contributions under the current 2013 funding plan.
In 2013, the Group introduced a £100.0 million Pension Funding Partnership utilising show homes, as well as seven offices which are owned, in a sale
and leaseback structure. This provides an additional £5.1 million of annual funding for the TWPS. The assets held within this scheme do not affect the
IAS 19 figures as they remain assets of the Group, and are not assets of the TWPS. As at 31 December 2017, there was £101.5 million of property and
£9.5 million of cash held within the structure (2016: £101.4 million of property and £9.6 million of cash). The terms of this Funding Partnership are such
that, should the Scheme be in a Technical Provisions deficit at 2028, then a bullet payment will be due equal to the lower of £100.0 million or the Technical
Provisions deficit. The IFRIC 14 deficit at 31 December 2017 does not include any value in respect of this bullet payment as modelling undertaken by an
independent actuary indicates that the Scheme is expected to be fully funded by 2028 and therefore no bullet payment is expected to be required.
The Group continues to work closely with the Trustee in managing pension risks, including management of interest rate, inflation and longevity risks.
The Scheme assets are approximately 80% hedged against changes in both interest rates and inflation expectations on the Scheme’s long-term,
‘self-sufficiency’ basis. The Scheme also benefits from a bulk annuity contract which covers some of the largest liabilities in the Scheme, providing
protection against interest rate, inflation and longevity risk.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
128
128
Financial Statements
Notes to the Consolidated Financial Statements continued
20. Retirement benefit obligations continued
The table below sets out the details of the funding valuations for the TWPS, carried out in September 2014, with reference to the position at
31 December 2013.
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
Deficit repair contributions (per annum)
Period of payment
TWPS
3.40%
6.05%/4.05%
n/a
0.00%
TWPS
£1,921m
£2,112m
91%
£16.0m
Until November 2018
The defined benefit obligation is measured using the projected unit actuarial cost method.
The duration, or average term to payment for the benefits due, weighted by liability, is approximately 16 years for the TWPS.
Accounting assumptions
The assumptions used in calculating the accounting costs and obligations of the TWPS, as detailed below, are set by the Directors after consultation with
independent, professionally qualified actuaries. The basis for these assumptions is prescribed by IAS 19 and they do not reflect the assumptions that may
be used in future funding valuations of the TWPS.
The discount rate used to determine the present value of the obligations is set by reference to market yields on high-quality corporate bonds with regard
for the duration of the TWPS. The assumption for RPI inflation is set by reference to the Bank of England’s implied inflation curve with regard for the
duration of the TWPS, with appropriate adjustments to reflect distortions due to supply and demand for inflation-linked securities. CPI inflation is set
by reference to RPI inflation as no CPI-linked bonds exist to render implied CPI inflation directly observable.
The life expectancies have been derived using mortality assumptions that were based on the results of a Medically Underwritten Mortality Study conducted
by the Group during 2017, combined with experience data. Using the results from this study the mortality assumption is based on 107% of S2PXA tables,
CMI_2016 improvements with a 1.25% trend rate and smoothing factor of 7.5. The base tables used in 2016 were the S2NXA tables with CMI_2015
improvements and 1.25% trend rate, including actual 2013 to 2015 death data.
Accounting valuation assumptions
As at 31 December:
Discount rate for scheme liabilities
General pay inflation
Deferred pension increases
Pension increases*
* Pension increases depend on the section of the scheme each member is a part of.
The current life expectancies (in years) underlying the value of the accrued liabilities for the TWPS are:
Life expectancy
Member currently aged 65
Member currently aged 45
TWPS
2017
2016
2.55%
n/a
2.20%
2.70%
n/a
2.25%
2.10%-3.65% 2.15%-3.70%
2017
Male
Female
87
88
88
90
2016
Male
87
89
Female
89
91
The pension liability is the difference between the scheme assets and liabilities. The liability is sensitive to the assumptions used. The table below shows
the impact to the liability of movement in key assumptions, measured using the same method as the defined benefit scheme.
Assumption
Discount rate
Rate of inflation*
Life expectancy
Change in assumption
Impact on defined benefit obligation
Impact on defined benefit obligation (%)
Decrease by 0.1% p.a.
Increase by 0.1% p.a.
Members live 1 year longer
Increase by £34m
Increase by £20m
Increase by £89m
1.5
0.9
3.8
* Assumed to affect deferred revaluation and pensioner increases in payment.
The sensitivity of increasing life expectancy has been reduced by a medically underwritten buy-in. See the section on additional areas of risk management
at the end of this Note.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
128
Financial Statements
Notes to the Consolidated Financial Statements continued
20. Retirement benefit obligations continued
The table below sets out the details of the funding valuations for the TWPS, carried out in September 2014, with reference to the position at
20. Retirement benefit obligations continued
The fair value of the assets of the TWPS is set out below:
At 31 December 2017
Assets:
Equities(b)
Corporate bonds(b)
Fixed-index Government bonds(b)
Index-linked Government bonds(b)
Hedge funds
Property
Other(a)
Cash
Insurance policies in respect of certain members
At 31 December 2016
Assets:
Equities(b)
Corporate bonds(b)
Fixed-index Government bonds(b)
Index-linked Government bonds(b)
Hedge funds
Property
Other(a)
Cash
Insurance policies in respect of certain members
129
129
Percentage of
total scheme
assets held
£ million
199.8
578.8
701.7
1,236.3
528.0
42.2
(1,264.7)
27.5
213.9
2,263.5
188.0
583.5
778.3
1,108.7
289.0
53.8
(1,280.0)
163.1
251.7
2,136.1
8.8%
25.6%
31.0%
54.6%
23.3%
1.9%
(55.9)%
1.2%
9.5%
100.0%
8.8%
27.3%
36.4%
51.9%
13.5%
2.5%
(59.9)%
7.7%
11.8%
100.0%
(a) Consists of repurchase agreements of £1,150.1 million (2016: £1,147.7 million) and other financial derivatives (swaps, futures and forwards on equities and bonds) of
£114.6 million (2016: £132.3 million). These are used to hedge against movements in scheme assets to reduce the volatility of the scheme deficit.
(b) Fair values available
The value of the annuities held by the Scheme are set equal to the value of the liabilities which these annuities match. All other fair values are provided
by the fund managers and collated by Northern Trust as custodian, who independently price the securities from their preferred vendor sources where
the data is publicly available and rely on investment manager data where this information is not available. Where available, the fair values are quoted prices
(e.g. listed equity). Unlisted investments (e.g. private equity) are included at values provided by the fund manager in accordance with relevant guidance.
Other significant assets are valued based on observable inputs.
There are no investments in respect of the Group’s own securities.
6.05%/4.05%
TWPS
3.40%
n/a
0.00%
TWPS
£1,921m
£2,112m
91%
£16.0m
Until November 2018
31 December 2013.
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
Deficit repair contributions (per annum)
Period of payment
Accounting valuation assumptions
As at 31 December:
Discount rate for scheme liabilities
General pay inflation
Deferred pension increases
Pension increases*
Life expectancy
Member currently aged 65
Member currently aged 45
Assumption
Discount rate
Rate of inflation*
Life expectancy
at the end of this Note.
The defined benefit obligation is measured using the projected unit actuarial cost method.
The duration, or average term to payment for the benefits due, weighted by liability, is approximately 16 years for the TWPS.
Accounting assumptions
The assumptions used in calculating the accounting costs and obligations of the TWPS, as detailed below, are set by the Directors after consultation with
independent, professionally qualified actuaries. The basis for these assumptions is prescribed by IAS 19 and they do not reflect the assumptions that may
be used in future funding valuations of the TWPS.
The discount rate used to determine the present value of the obligations is set by reference to market yields on high-quality corporate bonds with regard
for the duration of the TWPS. The assumption for RPI inflation is set by reference to the Bank of England’s implied inflation curve with regard for the
duration of the TWPS, with appropriate adjustments to reflect distortions due to supply and demand for inflation-linked securities. CPI inflation is set
by reference to RPI inflation as no CPI-linked bonds exist to render implied CPI inflation directly observable.
The life expectancies have been derived using mortality assumptions that were based on the results of a Medically Underwritten Mortality Study conducted
by the Group during 2017, combined with experience data. Using the results from this study the mortality assumption is based on 107% of S2PXA tables,
CMI_2016 improvements with a 1.25% trend rate and smoothing factor of 7.5. The base tables used in 2016 were the S2NXA tables with CMI_2015
improvements and 1.25% trend rate, including actual 2013 to 2015 death data.
TWPS
2017
2.55%
n/a
2.20%
2016
2.70%
n/a
2.25%
2.10%-3.65% 2.15%-3.70%
2017
87
88
Male
Female
88
90
2016
Male
87
89
Female
89
91
* Pension increases depend on the section of the scheme each member is a part of.
The current life expectancies (in years) underlying the value of the accrued liabilities for the TWPS are:
The pension liability is the difference between the scheme assets and liabilities. The liability is sensitive to the assumptions used. The table below shows
the impact to the liability of movement in key assumptions, measured using the same method as the defined benefit scheme.
Change in assumption
Impact on defined benefit obligation
Impact on defined benefit obligation (%)
Decrease by 0.1% p.a.
Increase by 0.1% p.a.
Members live 1 year longer
Increase by £34m
Increase by £20m
Increase by £89m
1.5
0.9
3.8
* Assumed to affect deferred revaluation and pensioner increases in payment.
The sensitivity of increasing life expectancy has been reduced by a medically underwritten buy-in. See the section on additional areas of risk management
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
130
130
Financial Statements
Notes to the Consolidated Financial Statements continued
20. Retirement benefit obligations continued
The table below details the movements in the TWPS pension liability and assets recorded through the income statement and other comprehensive income.
Present value
of obligation
Fair value
of scheme
assets
Asset/(liability)
recognised on
balance sheet
(2,368.8)
–
–
(62.0)
(62.0)
–
78.9
(44.1)
13.9
(87.6)
(38.9)
–
–
142.5
2,136.1
–
(3.0)
56.1
53.1
193.7
–
–
–
–
193.7
23.1
–
(142.5)
(2,327.2)
2,263.5
(232.7)
–
(3.0)
(5.9)
(8.9)
193.7
78.9
(44.1)
13.9
(87.6)
154.8
23.1
–
–
(63.7)
Present value
of obligation
Fair value
of scheme
assets
Asset/(liability)
recognised on
balance sheet
(2,066.2)
–
–
(74.4)
(74.4)
–
71.2
(431.4)
19.2
(341.0)
–
–
112.8
1,889.1
–
(3.3)
68.3
65.0
271.7
–
–
–
271.7
23.1
–
(112.8)
(177.1)
–
(3.3)
(6.1)
(9.4)
271.7
71.2
(431.4)
19.2
(69.3)
23.1
–
–
(2,368.8)
2,136.1
(232.7)
2017
2,263.5
(2,239.6)
23.9
(87.6)
(63.7)
2016
2,136.1
(2,368.8)
(232.7)
–
(232.7)
£ million
At 1 January 2017
Current service cost
Administration expenses
Interest (expense)/income
Total amount recognised in income statement
Return on scheme assets not included in income statement
Change in demographic assumptions
Change in financial assumptions
Experience gains
Adjustment to liabilities for IFRIC 14
Total remeasurements in other comprehensive income
Employer contributions
Employee contributions
Benefit payments
At 31 December 2017
£ million
At 1 January 2016
Current service cost
Administration expenses
Interest (expense)/income
Total amount recognised in income statement
Return on scheme assets not included in income statement
Change in demographic assumptions
Change in financial assumptions
Experience gains
Total remeasurements in other comprehensive income
Employer contributions
Employee contributions
Benefit payments
At 31 December 2016
Accounting valuation
£ million
Fair value of scheme assets
Present value of scheme obligations
IAS 19 surplus/(deficit) before IFRIC 14 adjustment
IFRIC 14 adjustment
IAS 19 deficit after IFRIC 14 adjustment
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
20. Retirement benefit obligations continued
20. Retirement benefit obligations continued
131
131
Risks and risk management
The TWPS, in common with the majority of such defined benefit pension schemes in the UK, has a number of areas of risk. These areas of risk, and the
ways in which the Group has sought to manage them, are set out in the table below.
The risks are considered from both a funding perspective, which drives the cash commitments of the Group, and from an accounting perspective,
i.e. the extent to which such risks affect the amounts recorded in the Group’s financial statements.
Although investment decisions in the UK are the responsibility of the Trustees, the Group takes an active interest to ensure that the pension scheme
risks are managed efficiently. The Group has regular meetings with the Trustees to discuss investment performance, regulatory changes and proposals
to actively manage the position of the Scheme.
Risk
Description
Asset volatility Building on the implementation of the Scheme’s Strategic Asset Allocation review in 2016, the Trustee agreed to two new allocations
in 2017. The first, a new allocation of US$145 million (c. £110 million) was approved in October 2017 to the KKR Private Credit
Opportunities Partners ll fund, an illiquid credit mandate. The allocation will provide a high return with sufficient liquidity remaining across
the rest of the portfolio given that existing illiquid allocations are expected to fall in the near future as the mangers (Ares, M&G and
Highbridge) return more capital. As this fund is a drawdown-type structure, the Scheme will be investing over time, the first capital call
occurred in February 2018. The investment will be funded from excess collateral within the liability-hedging portfolio and the Scheme’s
remaining holdings in investment grade corporate bonds.
In November 2017, the Trustee agreed to diversify their Diversified Risk Premia (“DRP”) allocation between two managers, disinvesting
half of the current DRP allocation with AQR, and allocating this to the Bridgewater Optimal fund. This transition occurred on
1 February 2018 and will lead to greater diversification and reduced manager concentration risk.
In addition to the investments outlined above, the Scheme’s strategy is well diversified through its exposure to a range of asset classes,
including protected equities, commercial real estate debt, direct loans, hedge funds, government bonds and a broad spectrum of
corporate bonds and other fixed income exposures.
The Scheme does not target a specific asset allocation but instead bases its strategic asset allocation on the return objectives and risk
constraints agreed upon by the Trustees.
Falling bond yields tend to increase the funding and accounting liabilities. However, the investment in bond and liability-matching
derivatives offers a degree of matching, i.e. the movement in assets arising from changes in bond yields partially matches the movement
in the funding or accounting liabilities. In this way, the exposure to movements in bond yields is reduced.
In order to maintain appropriate diversification of investments within the Scheme’s assets and to take advantage of overseas investment
returns, a proportion of the underlying investment portfolio is invested overseas. To balance the risk of investing in foreign currencies
while having an obligation to settle benefits in Sterling, a currency hedging programme, using forward foreign exchange contracts,
has been put in place to reduce the currency exposure of these overseas investments to the targeted level.
In order to manage the Scheme’s economic exposure to interest rates and inflation rates, a liability-hedging programme has been put
in place. Derivatives are being used to hedge changes in the Scheme’s funding level from changes in its liabilities in an unfunded way,
substantially reducing asset/liability mismatch risk.
Insurance policies, real estate and illiquid debt (which include commercial real estate debt and direct lending bonds) make up
£366 million (16%) of the asset portfolio of the Scheme. Excluding these amounts, approximately 76% of assets are managed either in
segregated accounts or daily/weekly dealt pooled funds and can therefore be realised within a few business days under normal market
conditions. Of the remaining investments, a further 19% are in pooled funds with monthly redemption dates. The remainder of 5% could
be redeemed within approximately three months of notification in normal market conditions.
Changes in
bond yields
Investing
in foreign
currency
Asset/liability
mismatch
Illiquidity
Life expectancy The majority of the TWPS’ obligations are to provide a pension for the life of the member on retirement, so increases in life expectancy
will result in an increase in the TWPS’ liabilities. The inflation-linked nature of the majority of benefit payments from the TWPS increases
the sensitivity of the liabilities to changes in life expectancy. During 2014, the Group reached agreement with Partnership Life Assurance
Company Limited to insure the benefits of 10% of members with the greatest anticipated liabilities through a medically underwritten
buy-in. By insuring these members, the Group has removed more than 10% of risk from the scheme by significantly reducing the
longevity of a large proportion of the liabilities.
130
Financial Statements
Notes to the Consolidated Financial Statements continued
The table below details the movements in the TWPS pension liability and assets recorded through the income statement and other comprehensive income.
£ million
At 1 January 2017
Current service cost
Administration expenses
Interest (expense)/income
Total amount recognised in income statement
Return on scheme assets not included in income statement
Change in demographic assumptions
Change in financial assumptions
Experience gains
Adjustment to liabilities for IFRIC 14
Total remeasurements in other comprehensive income
Employer contributions
Employee contributions
Benefit payments
At 31 December 2017
£ million
At 1 January 2016
Current service cost
Administration expenses
Interest (expense)/income
Total amount recognised in income statement
Return on scheme assets not included in income statement
Change in demographic assumptions
Change in financial assumptions
Experience gains
Total remeasurements in other comprehensive income
Employer contributions
Employee contributions
Benefit payments
At 31 December 2016
Accounting valuation
£ million
Fair value of scheme assets
Present value of scheme obligations
IAS 19 surplus/(deficit) before IFRIC 14 adjustment
IFRIC 14 adjustment
IAS 19 deficit after IFRIC 14 adjustment
Present value
of obligation
Fair value
of scheme
assets
Asset/(liability)
recognised on
balance sheet
(2,368.8)
2,136.1
(232.7)
142.5
(142.5)
(2,327.2)
2,263.5
(63.7)
Present value
of obligation
Fair value
of scheme
assets
Asset/(liability)
recognised on
balance sheet
(2,066.2)
1,889.1
(177.1)
–
–
–
(62.0)
(62.0)
78.9
(44.1)
13.9
(87.6)
(38.9)
–
–
–
–
(74.4)
(74.4)
–
71.2
(431.4)
19.2
(341.0)
–
–
–
(3.0)
56.1
53.1
193.7
193.7
23.1
–
(3.3)
68.3
65.0
271.7
271.7
23.1
–
–
–
–
–
–
–
–
–
–
(3.0)
(5.9)
(8.9)
193.7
78.9
(44.1)
13.9
(87.6)
154.8
23.1
–
–
–
(3.3)
(6.1)
(9.4)
271.7
71.2
(431.4)
19.2
(69.3)
23.1
–
–
112.8
(112.8)
(2,368.8)
2,136.1
(232.7)
2017
2,263.5
(2,239.6)
23.9
(87.6)
(63.7)
2016
2,136.1
(2,368.8)
(232.7)
–
(232.7)
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
132
132
Financial Statements
Notes to the Consolidated Financial Statements continued
21. Provisions
£ million
At 1 January 2016
Additional provision in the year
Utilisation of provision
Released
At 31 December 2016
Additional provision in the year
Utilisation of provision
Released
At 31 December 2017
£ million
Current
Non-current
31 December
Leasehold
provision
(Note 6)
North America
disposal
–
–
–
–
–
130.0
(2.4)
–
127.6
11.8
–
(1.3)
–
10.5
–
(0.8)
–
9.7
Other
22.2
10.3
(5.9)
(4.0)
22.6
11.9
(5.7)
(4.5)
24.3
2017
87.3
74.3
161.6
Total
34.0
10.3
(7.2)
(4.0)
33.1
141.9
(8.9)
(4.5)
161.6
2016
28.0
5.1
33.1
Other provisions consist of a remedial work provision covering various obligations on a limited number of sites across the Group. Other provisions also
includes provisions for legal claims, onerous leases and other 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; however, there is some uncertainty regarding the timing of these outflows due to the nature
of the claims and the length of time it can take to reach settlement. Onerous leases and vacant property costs included in this provision are expected to be
utilised within approximately five years.
22. Share capital
£ million
Authorised:
22,200,819,176 (2016: 22,200,819,176) ordinary shares of 1p each
1,158,299,201 (2016: 1,158,299,201) deferred ordinary shares of 24p each
Issued and fully paid:
31 December 2016
Ordinary shares issued in the year
31 December 2017
2017
2016
222.0
278.0
500.0
222.0
278.0
500.0
Number of shares
£ million
3,270,272,102
5,146,228
3,275,418,330
288.4
0.1
288.5
During the year the Company issued an additional 5.1 million (2016: 11.6 million) ordinary shares in order to satisfy option exercises.
During the year, options were exercised over 9,298,098 ordinary shares (2016: 12,813,881) the majority of which were met from new issues of
share capital with the balance being met from our holding of shares in our Employee Share Ownership Trusts (ESOTs) at varying prices from nil pence
to 159.12 pence per share. Under the Group’s performance share plan, employees held conditional awards at 31 December 2017 in respect of up to
18,568,767 shares, subject to achievement of performance tests (2016: 17,088,352) at nil pence per share nominally exercisable up to September 2020.
Under the Group’s savings-related share option schemes, employees held options at 31 December 2017 to purchase 17,149,237 shares
(2016: 19,235,549) at prices between 46.04 pence and 159.12 pence per share exercisable up to May 2023. Under the Group’s share incentive plan,
employees held conditional awards at 31 December 2017 in respect of 5,086,637 shares (2016: 5,571,219) at nil pence per share.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
Notes to the Consolidated Financial Statements continued
132
Financial Statements
21. Provisions
£ million
At 1 January 2016
Additional provision in the year
Utilisation of provision
Released
At 31 December 2016
Additional provision in the year
Utilisation of provision
Released
At 31 December 2017
£ million
Current
Non-current
31 December
Leasehold
provision
North America
(Note 6)
disposal
–
–
–
–
–
–
130.0
(2.4)
11.8
(1.3)
10.5
(0.8)
–
–
–
–
127.6
9.7
Other
22.2
10.3
(5.9)
(4.0)
22.6
11.9
(5.7)
(4.5)
24.3
2017
87.3
74.3
161.6
222.0
278.0
500.0
Total
34.0
10.3
(7.2)
(4.0)
33.1
141.9
(8.9)
(4.5)
161.6
2016
28.0
5.1
33.1
222.0
278.0
500.0
288.4
0.1
288.5
2017
2016
Number of shares
£ million
3,270,272,102
5,146,228
3,275,418,330
Other provisions consist of a remedial work provision covering various obligations on a limited number of sites across the Group. Other provisions also
includes provisions for legal claims, onerous leases and other 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; however, there is some uncertainty regarding the timing of these outflows due to the nature
of the claims and the length of time it can take to reach settlement. Onerous leases and vacant property costs included in this provision are expected to be
utilised within approximately five years.
22. Share capital
£ million
Authorised:
22,200,819,176 (2016: 22,200,819,176) ordinary shares of 1p each
1,158,299,201 (2016: 1,158,299,201) deferred ordinary shares of 24p each
Issued and fully paid:
31 December 2016
Ordinary shares issued in the year
31 December 2017
During the year the Company issued an additional 5.1 million (2016: 11.6 million) ordinary shares in order to satisfy option exercises.
During the year, options were exercised over 9,298,098 ordinary shares (2016: 12,813,881) the majority of which were met from new issues of
share capital with the balance being met from our holding of shares in our Employee Share Ownership Trusts (ESOTs) at varying prices from nil pence
to 159.12 pence per share. Under the Group’s performance share plan, employees held conditional awards at 31 December 2017 in respect of up to
18,568,767 shares, subject to achievement of performance tests (2016: 17,088,352) at nil pence per share nominally exercisable up to September 2020.
Under the Group’s savings-related share option schemes, employees held options at 31 December 2017 to purchase 17,149,237 shares
(2016: 19,235,549) at prices between 46.04 pence and 159.12 pence per share exercisable up to May 2023. Under the Group’s share incentive plan,
employees held conditional awards at 31 December 2017 in respect of 5,086,637 shares (2016: 5,571,219) at nil pence per share.
23. Share premium account
£ million
At 1 January and 31 December
24. Reserves
£ million
Balance at 1 January 2016
Exchange differences on translation of foreign operations
Movement in fair value of hedging derivatives and loans
Actuarial loss on defined benefit pension schemes
Deferred tax credit on defined benefit movement
Cash cost of satisfying share options
Share-based payment credit
Tax charge on items taken directly to statement of changes in equity
Dividends approved and paid
Profit for the year
Balance at 31 December 2016
Exchange differences on translation of foreign operations
Movement in fair value of hedging loans
Actuarial gain on defined benefit pension schemes
Deferred tax charge on defined benefit movement
Cash cost of satisfying share options
Share-based payment credit
Tax credit on items taken directly to statement of changes in equity
Dividends approved and paid
Profit for the year
Balance at 31 December 2017
133
133
2017
762.9
2016
762.9
Retained
earnings
Capital
redemption
reserve
Translation
reserve
Other
Total other
reserves
1,632.7
–
–
(69.3)
10.7
0.7
9.8
(0.7)
(355.9)
589.3
1,817.3
–
–
154.8
(26.5)
(0.7)
11.5
1.8
(450.5)
555.3
2,063.0
31.5
–
–
–
–
–
–
–
–
–
31.5
–
–
–
–
–
–
–
–
–
31.5
5.5
6.3
(5.0)
–
–
–
–
–
–
–
6.8
2.2
(1.2)
–
–
–
–
–
–
–
7.8
4.9
–
–
–
–
–
–
–
–
–
4.9
–
–
–
–
–
–
–
–
–
4.9
41.9
6.3
(5.0)
–
–
–
–
–
–
–
43.2
2.2
(1.2)
–
–
–
–
–
–
–
44.2
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.
Other reserve
The Group issued 57.9 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.
25. Own shares
£ million
Balance at 1 January 2016
Shares acquired
Disposed of on exercise of options
Balance at 31 December 2016
Shares acquired
Disposed of on exercise of options
Balance at 31 December 2017
3.2
10.6
(1.6)
12.2
13.3
(4.2)
21.3
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
134
134
Financial Statements
Notes to the Consolidated Financial Statements continued
25. Own shares continued
The own shares reserve represents the cost of shares in Taylor Wimpey plc purchased in the market, those held as treasury shares and those held by
the Taylor Wimpey Employee Share Ownership Trusts to satisfy options and conditional share awards under the Group’s share plans.
Ordinary shares held in trust for bonus, option and performance award plans
2017
Number
13.1
2016
Number
10.2m
Employee Share Ownership Trusts (ESOTs) are used to hold the Company’s 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 Incentive Plan.
During the year, Taylor Wimpey plc purchased £13.3 million of its own shares which are held in the ESOTs (2016: £10.6 million).
The ESOTs’ entire holding of shares at 31 December 2017, aggregating 13.1 million shares (2016: 10.2 million), was covered by outstanding options and
conditional awards over shares at that date.
26. Notes to the cash flow statement
£ million
Profit on ordinary activities before finance costs
Adjustments for:
Depreciation of buildings, plant and equipment
Net addition of inventory write-downs
Amortisation of software development
Pension contributions in excess of charge to the income statement
Share-based payment charge
Loss/(gain) on disposal of property, plant and equipment
Increase/(decrease) in provisions
Operating cash flows before movements in working capital
Increase in inventories
(Increase)/decrease in receivables
Decrease in payables
Cash generated by operations
Income taxes paid
Interest paid
Net cash from operating activities
2017
703.6
2.3
–
1.1
(20.1)
11.5
0.1
128.5
827.0
(61.7)
(12.9)
(16.5)
735.9
(126.7)
(5.1)
604.1
2016
762.6
2.1
0.5
1.2
(20.1)
9.8
(0.3)
(0.9)
754.9
(113.3)
42.3
(61.7)
622.2
(71.0)
(13.5)
537.7
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 cash/(debt)
£ million
Balance 1 January 2016
Net cash flow
Foreign exchange
Balance 31 December 2016
Net cash flow
Foreign exchange
Balance 31 December 2017
Cash and
cash
equivalents
Overdrafts,
banks and
other loans
Total net
cash/(debt)
323.3
130.5
(3.6)
450.2
148.5
1.8
600.5
(100.0)
17.0
(2.5)
(85.5)
–
(3.2)
(88.7)
223.3
147.5
(6.1)
364.7
148.5
(1.4)
511.8
Changes in liabilities arising from financing activities
There have been no changes in liabilities due to financing activity in the year. The movement of £3.2 million on the bank loan is due to changes in the Euro
exchange rate during the year and is shown in the net cash/(debt) reconciliation above.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
Notes to the Consolidated Financial Statements continued
134
Financial Statements
25. Own shares continued
The own shares reserve represents the cost of shares in Taylor Wimpey plc purchased in the market, those held as treasury shares and those held by
the Taylor Wimpey Employee Share Ownership Trusts to satisfy options and conditional share awards under the Group’s share plans.
Ordinary shares held in trust for bonus, option and performance award plans
Employee Share Ownership Trusts (ESOTs) are used to hold the Company’s 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 Incentive Plan.
During the year, Taylor Wimpey plc purchased £13.3 million of its own shares which are held in the ESOTs (2016: £10.6 million).
The ESOTs’ entire holding of shares at 31 December 2017, aggregating 13.1 million shares (2016: 10.2 million), was covered by outstanding options and
2017
Number
13.1
2016
Number
10.2m
conditional awards over shares at that date.
26. Notes to the cash flow statement
Profit on ordinary activities before finance costs
£ million
Adjustments for:
Depreciation of buildings, plant and equipment
Net addition of inventory write-downs
Amortisation of software development
Pension contributions in excess of charge to the income statement
Share-based payment charge
Loss/(gain) on disposal of property, plant and equipment
Increase/(decrease) in provisions
Operating cash flows before movements in working capital
Increase in inventories
(Increase)/decrease in receivables
Decrease in payables
Cash generated by operations
Income taxes paid
Interest paid
Net cash from operating activities
Movement in net cash/(debt)
£ million
Balance 1 January 2016
Net cash flow
Foreign exchange
Balance 31 December 2016
Net cash flow
Foreign exchange
Balance 31 December 2017
2017
703.6
2.3
–
1.1
(20.1)
11.5
0.1
128.5
827.0
(61.7)
(12.9)
(16.5)
735.9
(126.7)
(5.1)
604.1
2016
762.6
2.1
0.5
1.2
(20.1)
9.8
(0.3)
(0.9)
754.9
(113.3)
42.3
(61.7)
622.2
(71.0)
(13.5)
537.7
223.3
147.5
(6.1)
364.7
148.5
(1.4)
511.8
Cash and
cash
equivalents
Overdrafts,
banks and
other loans
Total net
cash/(debt)
323.3
130.5
(3.6)
450.2
148.5
1.8
600.5
(100.0)
17.0
(2.5)
(85.5)
–
(3.2)
(88.7)
135
135
27. 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.
The Group has no material capital commitments as at 31 December 2017 (2016: none).
28. 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 for offices
and equipment, which fall due as follows:
£ million
Within one year
In more than one year but not more than five years
After five years
29. Share-based payments
2017
8.7
15.8
0.7
25.2
2016
6.1
14.5
2.6
23.2
Equity-settled share option plan
Details of all equity-settled share-based payment arrangements in existence during the year are set out in the Remuneration Report on page 74 to 92.
Schemes requiring consideration from participants:
Outstanding at beginning of year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at the end of the year
Exercisable at the end of the year
2017
2016
Weighted
average
exercise price
(in £)
0.84
1.59
1.21
0.71
1.33
0.84
Weighted
average
exercise price
(in £)
0.76
1.31
1.30
0.45
0.84
0.17
Options
28,573,712
6,891,621
(2,387,382)
(8,163,074)
24,914,877
5,335,117
Options
24,914,877
6,186,031
(2,641,339)
(6,223,695)
22,235,874
4,063,350
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.
The table above includes shares which are granted to employees on a matching basis. When the employee joins the scheme, purchased shares are
matched on a 1:1 basis. 5,086,637 of these awards, which do not expire, were in issue at 31 December 2017 (2016: 5,571,219). The remaining options
outstanding at 31 December 2017 had a range of exercise prices from £0.46 to £1.59 (2016: £0.24 to £1.59) and a weighted average remaining
contractual life of 2.57 years (2016: 2.44 years).
Changes in liabilities arising from financing activities
There have been no changes in liabilities due to financing activity in the year. The movement of £3.2 million on the bank loan is due to changes in the Euro
exchange rate during the year and is shown in the net cash/(debt) reconciliation above.
These conditional awards outstanding at 31 December 2017 had a weighted average remaining contractual life of 1.69 years (2016: 1.79 years).
The average share price at the date of exercise across all options exercised during the period was £1.88 (2016: £1.70).
Schemes not requiring consideration from participants:
Outstanding at beginning of year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at the end of the year
Exercisable at the end of the year
2017
2016
Weighted
average
exercise price
(in £)
–
–
–
–
–
–
Weighted
average
exercise price
(in £)
–
–
–
–
–
–
Options
17,119,676
6,780,661
(2,161,178)
(4,650,807)
17,088,352
–
Options
17,088,352
6,443,624
(1,888,806)
(3,074,403)
18,568,767
–
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
136
136
Financial Statements
Notes to the Consolidated Financial Statements continued
29. Share-based payments continued
For share plans with no market conditions granted during the current and preceding year, the fair value of the awards at the 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
2017
2016
£1.94
£0.98
36%
3/5 years
0.6%
2.02%
£1.63
£0.83
38%
3/5 years
0.1%
1.81%
The weighted average fair value of share awards granted during the year is £1.10 (2016: £0.95).
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
2017
2016
£1.86
Nil
38%
0.8/3 years
0.1%
0.0%
£1.76
Nil
31%
0.8/3 years
0.4%
0.0%
The weighted average fair value of share options granted during the year is £1.21 (2016: £0.92).
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 a total expense of £11.5 million related to equity-settled share-based payment transactions in 2017 (2016: £9.8 million).
30. 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. The pension schemes of the Group are related parties. Arrangements between the Group and its pension schemes are disclosed in Note 20.
Transactions between the Group and its joint ventures are disclosed below. The Group has loans with joint ventures that are detailed in Note 13.
The following transactions are all with Taylor Wimpey UK Ltd:
On 1 November 2014, the Chief Executive was appointed as a non executive director of Travis Perkins plc. During the year, the Group directly purchased
from Travis Perkins plc goods to the value of £20.2 million (2016: £18.4 million). In addition, indirect purchases through sub-contractors amounted to
£27.8 million (2016: £18.1 million). Any residual purchases made at a local level are not material to either party. All transactions were completed on an
arms-length basis.
Trading transactions
During the year, Group purchases from joint ventures totalled £6.8 million (2016: £nil), and sales to joint ventures totalled £2.1 million (2016: £2.3 million).
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
136
Financial Statements
Notes to the Consolidated Financial Statements continued
For share plans with no market conditions granted during the current and preceding year, the fair value of the awards at the grant date was determined
using the Binomial model. The inputs into that model were as follows:
The weighted average fair value of share awards granted during the year is £1.10 (2016: £0.95).
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
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividend yield
3/5 years
3/5 years
2017
£1.94
£0.98
36%
0.6%
2.02%
2017
£1.86
Nil
38%
0.1%
0.0%
2016
£1.63
£0.83
38%
0.1%
1.81%
2016
£1.76
Nil
31%
0.4%
0.0%
0.8/3 years
0.8/3 years
The weighted average fair value of share options granted during the year is £1.21 (2016: £0.92).
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
The Group recognised a total expense of £11.5 million related to equity-settled share-based payment transactions in 2017 (2016: £9.8 million).
model is based on historical exercise patterns.
30. 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. The pension schemes of the Group are related parties. Arrangements between the Group and its pension schemes are disclosed in Note 20.
Transactions between the Group and its joint ventures are disclosed below. The Group has loans with joint ventures that are detailed in Note 13.
The following transactions are all with Taylor Wimpey UK Ltd:
On 1 November 2014, the Chief Executive was appointed as a non executive director of Travis Perkins plc. During the year, the Group directly purchased
from Travis Perkins plc goods to the value of £20.2 million (2016: £18.4 million). In addition, indirect purchases through sub-contractors amounted to
£27.8 million (2016: £18.1 million). Any residual purchases made at a local level are not material to either party. All transactions were completed on an
arms-length basis.
Trading transactions
During the year, Group purchases from joint ventures totalled £6.8 million (2016: £nil), and sales to joint ventures totalled £2.1 million (2016: £2.3 million).
29. Share-based payments continued
30. Related party transactions continued
137
137
Remuneration of key management personnel
The key management personnel of the Group are the members of the Group Management Team (GMT) as presented on page 17. The remuneration
information for the three Executive Directors is set out in the Remuneration Report on page 86. The aggregate compensation for the other seven (2016:
eight) members of the GMT is as follows:
£000
Short term employee benefits
Post-employment benefits
Total (excluding share-based payments charge)
2017
4,040
311
4,351
2016
4,867
326
5,193
In addition to the amounts above, a share-based payment charge of £1,494,673 (2016: £1,033,340) related to share options held by members of the
GMT.
31. Dividends
£ million
Proposed
Interim dividend 2017: 2.30p (2016: 0.53p) per ordinary share of 1p each
Final dividend 2017: 2.44p (2016: 2.29p) per ordinary share of 1p each
Amounts recognised as distributions to equity holders
Paid
Final dividend 2016: 2.29p (2015: 1.18p) per ordinary share of 1p each
Interim dividend 2017: 2.30p (2016: 0.53p) per ordinary share of 1p each
Special dividend 2017: 9.20p (2016: 9.20p) per ordinary share of 1p each
2017
2016
75.2
80.0
155.2
74.8
75.2
300.5
450.5
17.3
74.9
92.2
38.5
17.3
300.1
355.9
The Directors recommend a final dividend for the year ended 31 December 2017 of 2.44 pence per share (2016: 2.29 pence per share) subject to
shareholder approval at the Annual General Meeting, with an equivalent final dividend charge of c.£80.0 million (2016: £74.9 million). The final dividend will
be paid on 18 May 2018 to all shareholders registered at the close of business on 6 April 2018.
The Directors additionally recommend a special dividend of c.£340.0 million (2016: c.£300.0 million) subject to shareholder approval at the Annual General
Meeting. The special dividend will be paid on 13 July 2018 to all shareholders registered at the close of business on 1 June 2018.
In accordance with IAS 10 ‘Events after the balance sheet date’ the proposed final or special dividends have not been accrued as a liability as at
31 December 2017.
32. Post balance sheet events
Since the Balance Sheet date, the pensions 2016 triennial valuation has been completed and a new funding plan agreed. The triennial valuation (technical)
deficit was £222 million at the reference date of 31 December 2016, although this deficit reduced to c.£30 million by 31 December 2017. This plan
commits the Group to cash contributions of £47.1 million per annum (2016: £23.1 million per annum), including £5.1 million per annum from the Pension
Funding Partnership and £2.0 million per annum to cover scheme expenses. However, £40.0 million per annum of cash contributions are only required
whilst the scheme remains in a Technical Provisions deficit which will be tested quarterly. Once the scheme is fully funded, these cash contributions will be
suspended until such time that the Scheme’s Technical Provision funding level falls to below 96%.
In February 2018, the Group agreed with its banks, to amend the terms of its £550 million facility on more favourable terms and to extend the maturity date
to February 2023.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
138
138
Financial Statements
Company Balance Sheet at 31 December 2017
£ million
Non-current assets
Investments in Group undertakings
Trade and other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Net current assets
Total assets less current liabilities
Non-current liabilities
Trade and other payables
Bank and other loans
Provisions
Net assets
Equity
Share capital
Share premium account
Own shares
Other reserves
Retained earnings
Total equity
Note
2017
2016
4
5
5
6
6
7
8
9
10
11
12
2,405.8
1.7
2,407.5
2,589.3
583.5
3,172.8
(1,627.0)
(1,627.0)
1,545.8
3,953.3
(1.3)
(88.7)
(0.6)
2,394.3
3.1
2,397.4
2,590.1
466.1
3,056.2
(1,610.4)
(1,610.4)
1,445.8
3,843.2
–
(85.5)
(0.6)
3,862.7
3,757.1
288.5
762.9
(21.3)
36.0
2,796.6
3,862.7
288.4
762.9
(12.2)
36.0
2,682.0
3,757.1
As permitted by Section 408 of the Companies Act 2006, Taylor Wimpey plc has not presented its own income statement. The profit of the Company for
the financial year was £553.3 million (2016: £514.8 million).
The financial statements were approved by the Board of Directors and authorised for issue on 27 February 2018. They were signed on its behalf by:
P Redfern
Director
R Mangold
Director
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
138
Financial Statements
Company Balance Sheet at 31 December 2017
Financial Statements
Company Statement of Changes in Equity for the year to 31 December 2017
£ million
Non-current assets
Investments in Group undertakings
Trade and other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Net current assets
Total assets less current liabilities
Non-current liabilities
Trade and other payables
Bank and other loans
Provisions
Net assets
Equity
Share capital
Share premium account
Own shares
Other reserves
Retained earnings
Total equity
Note
2017
2016
2,405.8
2,394.3
1.7
3.1
2,407.5
2,397.4
4
5
5
6
6
7
8
9
10
11
12
2,589.3
583.5
3,172.8
(1,627.0)
(1,627.0)
1,545.8
3,953.3
(1.3)
(88.7)
(0.6)
288.5
762.9
(21.3)
36.0
2,796.6
3,862.7
2,590.1
466.1
3,056.2
(1,610.4)
(1,610.4)
1,445.8
3,843.2
–
(85.5)
(0.6)
288.4
762.9
(12.2)
36.0
2,682.0
3,757.1
3,862.7
3,757.1
For the year to 31 December 2017
£ million
Balance as at 1 January 2017
Profit for the year
Total comprehensive income for the year
New share capital subscribed
Own shares acquired
Utilisation of own shares
Cash cost of satisfying share options
Capital contribution on share-based payments
Dividends approved and paid
Total equity
For the year to 31 December 2016
£ million
Balance as at 1 January 2016
Profit for the year
Total comprehensive income for the year
New share capital subscribed
Own shares acquired
Utilisation of own shares
Cash cost of satisfying share options
Capital contribution on share-based payments
Dividends approved and paid
Total equity
Share
capital
288.4
Share
premium
762.9
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
288.5
762.9
Share
capital
288.3
Share
premium
762.9
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
288.4
762.9
Own
shares
(12.2)
–
–
–
(13.3)
4.2
–
–
–
(21.3)
Own
shares
(3.2)
–
–
–
(10.6)
1.6
–
–
–
(12.2)
139
139
Total
3,757.1
553.3
553.3
0.1
(13.3)
4.2
0.3
11.5
(450.5)
Other
reserves
36.0
Retained
earnings
2,682.0
–
–
–
–
–
–
–
–
553.3
553.3
–
–
–
0.3
11.5
(450.5)
36.0
2,796.6
3,862.7
Other
reserves
36.0
Retained
earnings
2,511.3
–
–
–
–
–
–
–
–
514.8
514.8
–
–
–
2.0
9.8
(355.9)
Total
3,595.3
514.8
514.8
0.1
(10.6)
1.6
2.0
9.8
(355.9)
36.0
2,682.0
3,757.1
As permitted by Section 408 of the Companies Act 2006, Taylor Wimpey plc has not presented its own income statement. The profit of the Company for
the financial year was £553.3 million (2016: £514.8 million).
The financial statements were approved by the Board of Directors and authorised for issue on 27 February 2018. They were signed on its behalf by:
P Redfern
Director
R Mangold
Director
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
140
140
Financial Statements
Notes to the Company Financial Statements for the year to 31 December 2017
1. Significant accounting policies
The following accounting policies have been used consistently, unless
otherwise stated, in dealing with items which are considered material.
Basis of preparation
The Company meets the definition of a qualifying entity under FRS 101
(Financial Reporting Standard 101) issued by the Financial Reporting
Council. Accordingly, these financial statements were prepared in
accordance with FRS 101 ‘Reduced Disclosure Framework’ as issued
by the Financial Reporting Council.
As permitted by FRS 101, the Company has taken advantage of the
disclosure exemptions available under that standard in relation to
share-based payments, financial instruments, capital management,
presentation of comparative information in respect of certain assets,
presentation of a cash flow statement, standards not yet effective,
impairment of assets and related party transactions.
The principal accounting policies adopted are set out below.
Going concern
The Group has prepared forecasts, including certain sensitivities taking into
account the principal risks identified on pages 36 to 41. Having considered
these forecasts, the Directors remain of the view that the Group’s financing
arrangements and capital structure provide both the necessary facilities and
covenant headroom to enable the Group to conduct its business for at least
the next 12 months.
Accordingly, the Company financial statements have been prepared on a
going concern basis.
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 expensed
immediately; 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.
The Company values its investments in subsidiary holding companies
based on a comparison between the net assets recoverable by
the subsidiary company and the investment held. Where the net
assets are lower than the investment an impairment is recorded.
For trading subsidiaries, the investment carrying value in the Company
is assessed against the net present value of the discounted cash flows
from the subsidiary.
Borrowing costs
Capitalised finance costs are held in other receivables and amortised
over the period of the facility.
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 temporary 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.
Deferred tax assets are recognised to the extent that it is regarded as more
likely than not that they will be recovered.
Deferred tax is measured on a non-discounted basis using the tax rates
and laws that have been enacted or substantively enacted at the balance
sheet date.
Foreign 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 after the date of
the transaction is included as an exchange gain or loss in profit and loss.
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 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 other comprehensive income
and the ineffective portion, if any, is recognised immediately in the income
statement. The hedged items are adjusted for changes in exchange rates,
with gains or losses from re-measuring the carrying amount being
recognised directly in other comprehensive income.
Share-based payments
The Company issues equity-settled share-based payments to certain
employees of its subsidiaries. Equity-settled share-based payments are
measured at fair value at the grant date. 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 is borne by the employing
company, without recharge. As such the Company’s investment in the
subsidiary is increased by an equivalent amount.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
140
Financial Statements
Notes to the Company Financial Statements for the year to 31 December 2017
1. Significant accounting policies
The following accounting policies have been used consistently, unless
otherwise stated, in dealing with items which are considered material.
Basis of preparation
The Company meets the definition of a qualifying entity under FRS 101
(Financial Reporting Standard 101) issued by the Financial Reporting
Council. Accordingly, these financial statements were prepared in
accordance with FRS 101 ‘Reduced Disclosure Framework’ as issued
by the Financial Reporting Council.
As permitted by FRS 101, the Company has taken advantage of the
disclosure exemptions available under that standard in relation to
share-based payments, financial instruments, capital management,
presentation of comparative information in respect of certain assets,
presentation of a cash flow statement, standards not yet effective,
impairment of assets and related party transactions.
The principal accounting policies adopted are set out below.
Going concern
The Group has prepared forecasts, including certain sensitivities taking into
account the principal risks identified on pages 36 to 41. Having considered
these forecasts, the Directors remain of the view that the Group’s financing
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 expensed
immediately; 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.
The Company values its investments in subsidiary holding companies
based on a comparison between the net assets recoverable by
the subsidiary company and the investment held. Where the net
assets are lower than the investment an impairment is recorded.
For trading subsidiaries, the investment carrying value in the Company
is assessed against the net present value of the discounted cash flows
from the subsidiary.
Borrowing costs
Capitalised finance costs are held in other receivables and amortised
over the period of the facility.
The tax charge represents the sum of the tax currently payable and
Taxation
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 temporary 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.
Deferred tax assets are recognised to the extent that it is regarded as more
Deferred tax is measured on a non-discounted basis using the tax rates
and laws that have been enacted or substantively enacted at the balance
Foreign 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 after the date of
the transaction is included as an exchange gain or loss in profit and loss.
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 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 other comprehensive income
and the ineffective portion, if any, is recognised immediately in the income
statement. The hedged items are adjusted for changes in exchange rates,
with gains or losses from re-measuring the carrying amount being
recognised directly in other comprehensive income.
Share-based payments
The Company issues equity-settled share-based payments to certain
employees of its subsidiaries. Equity-settled share-based payments are
measured at fair value at the grant date. 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 is borne by the employing
company, without recharge. As such the Company’s investment in the
subsidiary is increased by an equivalent amount.
141
141
1. Significant accounting policies continued
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’ equity.
Dividends paid
Dividends are charged to the Company’s retained earnings 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.
2. Particulars of employees
Directors
2017
Number
3
2016
Number
3
The Executive Directors received all of their remuneration, as disclosed in the Remuneration Report on pages 74 to 92 from Taylor Wimpey UK Limited.
This remuneration is reflective of the Directors’ service to the Company and all its subsidiaries.
arrangements and capital structure provide both the necessary facilities and
likely than not that they will be recovered.
covenant headroom to enable the Group to conduct its business for at least
the next 12 months.
going concern basis.
Accordingly, the Company financial statements have been prepared on a
sheet date.
3. Auditor’s remuneration
£ million
Total audit fees
Non-audit fees
Total
A description of other services is included in Note 6 on page 116 to the Group financial statements.
4. Investments in Group undertakings
£ million
Cost
1 January 2017
Capital contribution relating to share-based payments
31 December 2017
Provision for impairment
1 January 2017
Charge for the year
31 December 2017
Carrying amount
31 December 2017
31 December 2016
2017
0.1
–
0.1
2016
0.1
–
0.1
Shares
Loans
Total
5,268.5
11.5
5,280.0
2,874.2
–
2,874.2
2,405.8
2,394.3
–
–
–
–
–
–
–
–
5,268.5
11.5
5,280.0
2,874.2
–
2,874.2
2,405.8
2,394.3
All investments are unlisted and information about all subsidiaries is listed on pages 144 to 147.
5. Trade and other receivables
£ million
Due from Group undertakings
Other receivables
Current
Non-current
2017
2,587.0
2.3
2,589.3
2016
2,588.5
1.6
2,590.1
2017
–
1.7
1.7
2016
–
3.1
3.1
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
142
142
Financial Statements
Notes to the Company Financial Statements continued
6. Trade and other payables
£ million
Due to Group undertakings
Other payables
Corporation tax creditor
7. Bank and other loans
£ million
Other loans
Other loans are repayable as follows:
Amounts due for settlement after one year
At 31 December 2017, other loans relate to €100.0 million 2.02% Senior Loan Notes.
8. Share capital
£ million
Authorised:
22,200,819,176 (2016: 22,200,819,176) ordinary shares of 1p each
1,158,299,201 (2016: 1,158,299,201) deferred ordinary shares of 24p each
Issued and fully paid:
31 December 2016
Ordinary shares issued in the year
31 December 2017
Current
Non-current
2017
1,623.7
2.3
1.0
1,627.0
2016
2017
2016
1,606.4
3.6
0.4
1,610.4
–
1.3
–
1.3
2017
88.7
88.7
–
–
–
–
2016
85.5
85.5
2017
2016
222.0
278.0
500.0
222.0
278.0
500.0
Number of shares
£ million
3,270,272,102
5,146,228
3,275,418,330
288.4
0.1
288.5
During the year the Company issued an additional 5.1 million (2016: 11.6 million) ordinary shares in order to satisfy option exercises.
During the year, options were exercised over 9,298,098 ordinary shares (2016: 12,813,881) the majority of which were met from new issues of
share capital with the balance being met from our holding of shares in our Employee Share Ownership Trusts (ESOTs) at varying prices from nil pence
to 159.12 pence per share. Under the Group’s performance share plan, employees held conditional awards at 31 December 2017 in respect of up to
18,568,767 shares, subject to achievement of performance tests (2016: 17,088,352) at nil pence per share nominally exercisable up to September 2020.
Under the Group’s savings-related share option schemes, employees held options at 31 December 2017 to purchase 17,149,237 shares
(2016: 19,235,549) at prices between 46.04 pence and 159.12 pence per share exercisable up to May 2023. Under the Group’s share purchase plan,
employees held conditional awards at 31 December 2017 in respect of 5,086,637 shares (2016: 5,571,219) at nil pence per share.
9. Share premium account
£ million
At 1 January and 31 December
10. Own shares
£ million
Own shares
These comprise ordinary shares of the Company:
Shares held in trust for bonus, options and performance award plans
2017
762.9
2016
762.9
2017
21.3
2016
12.2
Number
13.1m
Number
10.2m
The market value of the shares at 31 December 2017 was £27.0 million (2016: £15.7 million) and their nominal value was £0.1 million (2016: £0.1million).
Dividends on these shares have been waived except for 0.01p per share in respect of the shares held in trust.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
Notes to the Company Financial Statements continued
At 31 December 2017, other loans relate to €100.0 million 2.02% Senior Loan Notes.
8. Share capital
£ million
Authorised:
22,200,819,176 (2016: 22,200,819,176) ordinary shares of 1p each
1,158,299,201 (2016: 1,158,299,201) deferred ordinary shares of 24p each
142
Financial Statements
6. Trade and other payables
£ million
Due to Group undertakings
Other payables
Corporation tax creditor
7. Bank and other loans
£ million
Other loans
Other loans are repayable as follows:
Amounts due for settlement after one year
Issued and fully paid:
31 December 2016
Ordinary shares issued in the year
31 December 2017
9. Share premium account
£ million
At 1 January and 31 December
10. Own shares
£ million
Own shares
Current
Non-current
2017
2016
2017
2016
1,623.7
1,606.4
2.3
1.0
3.6
0.4
1,627.0
1,610.4
1.3
–
–
1.3
2017
88.7
88.7
222.0
278.0
500.0
–
–
–
–
2016
85.5
85.5
222.0
278.0
500.0
288.4
0.1
288.5
2017
2016
Number of shares
£ million
3,270,272,102
5,146,228
3,275,418,330
2017
762.9
2016
762.9
2017
21.3
2016
12.2
Number
13.1m
Number
10.2m
During the year the Company issued an additional 5.1 million (2016: 11.6 million) ordinary shares in order to satisfy option exercises.
During the year, options were exercised over 9,298,098 ordinary shares (2016: 12,813,881) the majority of which were met from new issues of
share capital with the balance being met from our holding of shares in our Employee Share Ownership Trusts (ESOTs) at varying prices from nil pence
to 159.12 pence per share. Under the Group’s performance share plan, employees held conditional awards at 31 December 2017 in respect of up to
18,568,767 shares, subject to achievement of performance tests (2016: 17,088,352) at nil pence per share nominally exercisable up to September 2020.
Under the Group’s savings-related share option schemes, employees held options at 31 December 2017 to purchase 17,149,237 shares
(2016: 19,235,549) at prices between 46.04 pence and 159.12 pence per share exercisable up to May 2023. Under the Group’s share purchase plan,
employees held conditional awards at 31 December 2017 in respect of 5,086,637 shares (2016: 5,571,219) at nil pence per share.
These comprise ordinary shares of the Company:
Shares held in trust for bonus, options and performance award plans
The market value of the shares at 31 December 2017 was £27.0 million (2016: £15.7 million) and their nominal value was £0.1 million (2016: £0.1million).
Dividends on these shares have been waived except for 0.01p per share in respect of the shares held in trust.
143
143
10. Own shares continued
Employee Share Ownership Trusts (ESOTs) are used to hold the Company’s 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 Incentive Plan.
During the year, Taylor Wimpey plc purchased £13.3 million of its own shares which are held in the ESOTs (2016: £10.6 million).
The ESOTs’ entire holding of shares at 31 December 2017, aggregating 13.1 million shares (2016: 10.2 million), was covered by outstanding options and
conditional awards over shares at that date.
11. Other reserves
£ million
At 31 December
2017
36.0
2016
36.0
Other reserves includes £31.5 million (2016: £31.5 million) in respect of the historical redemption of Parent Company shares which is non distributable.
12. Retained earnings
Retained earnings of £2,796.6 million (2016: £2,682.0 million) includes profit for the year and dividends received from subsidiaries of £500.0 million
(2016: £490.4 million). Included in retained earnings is £668.1 million (2016: £625.1 million) which is not distributable.
13. 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 29 to the Group financial statements. The Company did not recognise any expense related to equity-settled share-based payment
transactions in the current or preceding year.
14. 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.
The Company issued a guarantee in respect of the TWPS, which had a deficit under IAS 19 of £63.7 million at 31 December 2017 (2016: £232.7 million).
The guarantee commits the Company to ensure that the participating subsidiaries make deficit repair contributions in accordance with a schedule agreed
with the Trustee of £18.0 million per annum including reimbursement of administrative costs. Since the year end a new funding plan has been agreed
(Note 32 of the Group accounts).
15. Dividend
£ million
Proposed
Interim dividend 2017: 2.30p (2016: 0.539p) per ordinary share of 1p each
Final dividend 2017: 2.44p (2016: 2.29p) per ordinary share of 1p each
Amounts recognised as distributions to equity holders
Paid
Final dividend 2016: 2.29p (2015: 1.18p) per ordinary share of 1p each
Interim dividend 2017: 2.30p (2016: 0.53p) per ordinary share of 1p each
Special dividend 2017: 9.20p (2016: 9.20p) per ordinary share of 1p each
2017
2016
75.2
80.0
155.2
74.8
75.2
300.5
450.5
17.3
74.9
92.2
38.5
17.3
300.1
355.9
The Directors recommend a final dividend for the year ended 31 December 2017 of 2.44 pence per share (2016: 2.29 pence per share) subject to
shareholder approval at the Annual General Meeting, with an equivalent final dividend charge of c.£80.0million (2016: £74.9 million). The final dividend will
be paid on 18 May 2018 to all shareholders registered at the close of business on 6 April 2018.
The Directors additionally recommend a special dividend of c.£340.0 million (2016: c.£300.0 million) subject to shareholder approval at the
Annual General Meeting. The special dividend will be paid on 13 July 2018 to all shareholders registered at the close of business on 1 June 2018.
In accordance with IAS 10 ‘Events after the balance sheet date’ the proposed final or special dividends have not been accrued as a liability as at
31 December 2017.
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
144
144
Financial Statements
Particulars of Subsidiaries, Associates and Joint Ventures
Country of
incorporation and
principal operations
Taylor Wimpey plc interest is 100% in the issued
ordinary share capital of these undertakings
included in the consolidated accounts
Activity
United Kingdom
Taylor Wimpey Holdings Limited
Holding company
United Kingdom
George Wimpey Limited
Holding company
Registered office
Gate House, Turnpike Road, High Wycombe,
Buckinghamshire, HP12 3NR
Gate House, Turnpike Road, High Wycombe,
Buckinghamshire, HP12 3NR
United Kingdom
Taylor Wimpey UK Limited(a)
United Kingdom housebuilder Gate House, Turnpike Road, High Wycombe,
United Kingdom
Taylor Wimpey Developments Limited(a)
Holding company
Spain
Taylor Wimpey de España S.A.U.(a)(b)
Spanish housebuilder
(a) Interests held by subsidiary undertakings.
(b) 9% cumulative, redeemable preference shares are additionally held.
Buckinghamshire, HP12 3NR
Gate House, Turnpike Road, High Wycombe,
Buckinghamshire, HP12 3NR
C/Aragó, 223 223A, 07008, Palma de Mallorca,
Baleares, Spain
The entries listed below are companies incorporated in the United Kingdom and registered in England & Wales and the registered office is Gate House,
Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR. All of the below are 100% subsidiaries of Group companies and only have ordinary share
capital unless otherwise stated.
Admiral Developments Limited
Admiral Homes (Eastern) Limited
Admiral Homes Limited
Ashton Park Limited
BGS (Pentian Green) Holdings Limited
Broadleaf Park LLP
Bryad Developments Limited
Bryant Country Homes Limited
Bryant Group Services Limited
Bryant Homes Central Limited
Bryant Homes East Midlands Limited
Bryant Homes Limited
Bryant Homes North East Limited
Bryant Homes Northern Limited
Bryant Homes South West Limited
Bryant Homes Southern Limited
Bryant Properties Developments Limited
Bryant Properties Limited
Canberra (Southern) Limited
Canberra Investment Co. Limited
Candlemakers (TW) Limited
Clipper Investments Limited
Compine Developments (Wootton) Limited
Dormant Nominees One Limited
Dormant Nominees Two Limited
Egerton Contracts Limited
Farrods Water Engineers Limited
Flyover House Limited
Foray Properties Limited
George Wimpey Bristol Limited
George Wimpey City 2 Limited
George Wimpey City Limited
George Wimpey East Anglia Limited
George Wimpey East London Limited
George Wimpey East Midlands Limited
George Wimpey Manchester Limited
George Wimpey Midland Limited
George Wimpey North East Limited
George Wimpey North London Limited
George Wimpey North Midlands Limited
George Wimpey North West Limited
George Wimpey North Yorkshire Limited
George Wimpey Pension Trustees Limited
George Wimpey South East Limited
George Wimpey South Midlands Limited
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
George Wimpey South West Limited
George Wimpey South Yorkshire Limited
George Wimpey Southern Counties Limited
George Wimpey West London Limited
George Wimpey West Midlands Limited
George Wimpey West Yorkshire Limited
Globe Road Limited
Gotheridge & Sanders Limited
Grand Union Vision Limited
Groveside Homes Limited
Hamme Construction Limited
Hanger Lane Holdings Limited
Harrock Limited
Hassall Homes (Cheshire) Limited
Hassall Homes (Mercia) Limited
Hassall Homes (Southern) Limited
Hassall Homes (Wessex) Limited
Jim 1 Limited
Jim 2 Limited
Jim 3 Limited
Jim 4 Limited
Jim 5 Limited
L. & A. Freeman Limited
Laing Homes Limited
Laing Land Limited
Land Trust Developments Limited
Leawood (Management) Company Limited
Linton Fuels Limited
MCA Developments Limited
MCA East Limited
MCA Holdings Limited
MCA Land Limited
MCA Leicester Limited
MCA London Limited
MCA North East Limited
MCA Northumbria Limited
MCA Partnership Housing Limited
MCA South West Limited
MCA West Midlands Limited
MCA Yorkshire Limited
McLean Homes Bristol & West Limited
McLean Homes Southern Limited
Melbourne Investments Limited
Pangbourne Developments Limited
Pennant Investments Limited
Prestoplan Limited
River Farm Developments Limited
South Bristol (Ashton Park) Limited
Spinks & Denning Limited
St. Katharine By The Tower Limited
St. Katharine Haven Limited
Tawnywood Developments Limited
Taylor Wimpey 2007 Limited
Taylor Wimpey Capital Developments Limited
Taylor Wimpey Commercial Properties Limited
Taylor Wimpey Europe
Taylor Wimpey Garage Nominees No 1 Limited
Taylor Wimpey Garage Nominees No 2 Limited
Taylor Wimpey International Limited
Taylor Wimpey IP (Holdings) 2005 Limited
Taylor Wimpey Property Company Limited
Taylor Wimpey Property Management Limited
Taylor Wimpey SH Capital Limited
Thameswey Homes Limited
The Garden Village Partnership Limited
The Lifebuilding Company Limited
The Wilson Connolly Employee Benefit Trust
Limited
This is G2 Limited
Thomas Lowe and Sons, Limited
Thomas Lowe Homes Limited
TW NCA Limited
Wain Estates Limited
Wainhomes (Chester) Limited
Wainhomes (Northern) Limited
Wainhomes (Southern) Limited
Wainhomes (Yorkshire) Limited
Wainhomes Group Limited
Wainhomes Holdings Limited
Wainhomes Limited
Whelmar (Chester) Limited
Whelmar (Lancashire) Limited
Whelmar (North Wales) Limited
Whelmar Developments Limited
White House Land Limited
Wilcon Construction Limited
Wilcon Homes Anglia Limited
Wilcon Homes Eastern Limited
145
145
Wilcon Homes Midlands Limited
Wilcon Homes Northern Limited
Wilcon Homes Southern Limited
Wilcon Homes Western Limited
Wilcon Lifestyle Homes Limited
Wilfrid Homes Limited
Wilson Connolly Holdings Limited
Wilson Connolly Investments Limited
Wilson Connolly Limited
Wilson Connolly Logistics Limited
Wilson Connolly Properties Limited
Wilson Connolly Quest Limited
Wimgrove Developments Limited
Wimgrove Property Trading Limited
Wimpey Construction Developments Limited
Wimpey Construction Iran Limited
Wimpey Corporate Services Limited
Wimpey Dormant Investments Limited
Wimpey Geotech Limited
Wimpey Group Services Limited
Wimpey Gulf Holdings Limited
Wimpey Overseas Holdings Limited
The entries listed below are companies incorporated in the United Kingdom and registered in England & Wales and the registered office is Two Snowhill,
Birmingham, B4 6GA. All of the below are 100% subsidiaries of Group companies and only have ordinary share capital unless otherwise stated.
Ashfield Investments Limited
Banorgrove Limited
Bracken Homes Limited
Corney Reach Limited
Cross Point Land Limited
Egerton Construction Co. Limited
Ettingshall Developments Limited
IVA (Midlands) Limited
MCA Thames Valley Limited
MCA West Limited
McLean Homes Holdings Limited
McLean Homes Limited
Showpine Limited
St Anne’s Village Limited
Taylor Insurance Brokers Limited
Wimpey Finance plc
Woranes Investments Limited
Laing Retirement Homes Limited
Wimpey Engineering Limited
144
Financial Statements
Particulars of Subsidiaries, Associates and Joint Ventures
Country of
Taylor Wimpey plc interest is 100% in the issued
incorporation and
principal operations
ordinary share capital of these undertakings
included in the consolidated accounts
Activity
United Kingdom
Taylor Wimpey Holdings Limited
Holding company
Gate House, Turnpike Road, High Wycombe,
United Kingdom
George Wimpey Limited
Holding company
Gate House, Turnpike Road, High Wycombe,
United Kingdom
Taylor Wimpey UK Limited(a)
United Kingdom housebuilder Gate House, Turnpike Road, High Wycombe,
United Kingdom
Taylor Wimpey Developments Limited(a)
Holding company
Gate House, Turnpike Road, High Wycombe,
Spain
Taylor Wimpey de España S.A.U.(a)(b)
Spanish housebuilder
C/Aragó, 223 223A, 07008, Palma de Mallorca,
Registered office
Buckinghamshire, HP12 3NR
Buckinghamshire, HP12 3NR
Buckinghamshire, HP12 3NR
Buckinghamshire, HP12 3NR
Baleares, Spain
(a) Interests held by subsidiary undertakings.
(b) 9% cumulative, redeemable preference shares are additionally held.
The entries listed below are companies incorporated in the United Kingdom and registered in England & Wales and the registered office is Gate House,
Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR. All of the below are 100% subsidiaries of Group companies and only have ordinary share
George Wimpey South West Limited
Prestoplan Limited
George Wimpey South Yorkshire Limited
River Farm Developments Limited
George Wimpey Southern Counties Limited
South Bristol (Ashton Park) Limited
capital unless otherwise stated.
Admiral Developments Limited
Admiral Homes (Eastern) Limited
Admiral Homes Limited
Ashton Park Limited
BGS (Pentian Green) Holdings Limited
Broadleaf Park LLP
Bryad Developments Limited
Bryant Country Homes Limited
Bryant Group Services Limited
Bryant Homes Central Limited
Bryant Homes East Midlands Limited
Bryant Homes Limited
Bryant Homes North East Limited
Bryant Homes Northern Limited
Bryant Homes South West Limited
Bryant Homes Southern Limited
Bryant Properties Developments Limited
Bryant Properties Limited
Canberra (Southern) Limited
Canberra Investment Co. Limited
Candlemakers (TW) Limited
Clipper Investments Limited
Dormant Nominees One Limited
Dormant Nominees Two Limited
Egerton Contracts Limited
Farrods Water Engineers Limited
Flyover House Limited
Foray Properties Limited
George Wimpey Bristol Limited
George Wimpey City 2 Limited
George Wimpey City Limited
George Wimpey East Anglia Limited
George Wimpey East London Limited
George Wimpey East Midlands Limited
George Wimpey Manchester Limited
George Wimpey Midland Limited
George Wimpey North East Limited
George Wimpey North London Limited
George Wimpey West London Limited
George Wimpey West Midlands Limited
George Wimpey West Yorkshire Limited
Globe Road Limited
Gotheridge & Sanders Limited
Grand Union Vision Limited
Groveside Homes Limited
Hamme Construction Limited
Hanger Lane Holdings Limited
Harrock Limited
Hassall Homes (Cheshire) Limited
Hassall Homes (Mercia) Limited
Hassall Homes (Southern) Limited
Hassall Homes (Wessex) Limited
Jim 1 Limited
Jim 2 Limited
Jim 3 Limited
Jim 4 Limited
Jim 5 Limited
Laing Homes Limited
Laing Land Limited
Land Trust Developments Limited
Leawood (Management) Company Limited
Linton Fuels Limited
MCA Developments Limited
MCA East Limited
MCA Holdings Limited
MCA Land Limited
MCA Leicester Limited
MCA London Limited
MCA North East Limited
MCA Northumbria Limited
MCA Partnership Housing Limited
MCA South West Limited
MCA West Midlands Limited
Spinks & Denning Limited
St. Katharine By The Tower Limited
St. Katharine Haven Limited
Tawnywood Developments Limited
Taylor Wimpey 2007 Limited
Taylor Wimpey Capital Developments Limited
Taylor Wimpey Commercial Properties Limited
Taylor Wimpey Europe
Taylor Wimpey Garage Nominees No 1 Limited
Taylor Wimpey Garage Nominees No 2 Limited
Taylor Wimpey International Limited
Taylor Wimpey IP (Holdings) 2005 Limited
Taylor Wimpey Property Company Limited
Taylor Wimpey Property Management Limited
Taylor Wimpey SH Capital Limited
Thameswey Homes Limited
The Garden Village Partnership Limited
The Lifebuilding Company Limited
The Wilson Connolly Employee Benefit Trust
Limited
This is G2 Limited
Thomas Lowe and Sons, Limited
Thomas Lowe Homes Limited
TW NCA Limited
Wain Estates Limited
Wainhomes (Chester) Limited
Wainhomes (Northern) Limited
Wainhomes (Southern) Limited
Wainhomes (Yorkshire) Limited
Wainhomes Group Limited
Wainhomes Holdings Limited
Wainhomes Limited
Whelmar (Chester) Limited
Whelmar (Lancashire) Limited
Whelmar (North Wales) Limited
Whelmar Developments Limited
White House Land Limited
Wilcon Construction Limited
Wilcon Homes Anglia Limited
Wilcon Homes Eastern Limited
George Wimpey North Midlands Limited
MCA Yorkshire Limited
George Wimpey North West Limited
McLean Homes Bristol & West Limited
George Wimpey North Yorkshire Limited
McLean Homes Southern Limited
George Wimpey Pension Trustees Limited
Melbourne Investments Limited
George Wimpey South East Limited
Pangbourne Developments Limited
George Wimpey South Midlands Limited
Pennant Investments Limited
Compine Developments (Wootton) Limited
L. & A. Freeman Limited
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
146
146
Financial Statements
Particulars of Subsidiaries, Associates and Joint Ventures continued
Company Name
Academy Central LLP
Bishops Park Limited
Bishop’s Stortford North Consortium
Limited
Bromley Park (Holdings) Limited
Bromley Park Limited
% Owned
Registered Office
62% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
50% The Manor House, North Ash Road, New Ash Green, Longfield, Kent, DA3 8HQ, United Kingdom
33.33% The Manor House, North Ash Road, New Ash Green, Longfield, Kent, DA3 8HQ, United Kingdom
50% Kent House, 14-17 Market Place, London, W1W 8AJ, United Kingdom
50% Kent House, 14-17 Market Place, London, W1W 8AJ, United Kingdom
Bryant Homes Scotland Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Capital Court Property Management
Limited
Chobham Manor LLP
Compine Developments (Mundford)
Limited
Compine Developments Limited
Countryside 27 Limited
DFE TW Residential Limited
Paisley, PA3 2SJ, United Kingdom
17.17% 4 Capital Court, Bittern Road, Sowton Industrial Estate, Exeter, Devon, EX2 7FW, United Kingdom
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
50% Two Snowhill, Birmingham, B4 6GA, United Kingdom
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
50% Countryside House, The Drive Great Warley, Brentwood, Essex, CM13 3AT, United Kingdom
50% 7 Whiteladies Road, Clifton, Bristol, BS8 1NN, United Kingdom
Emersons Green Urban Village Limited
54.44% 135 Aztec West, Almondsbury, Bristol, Avon, BS32 4UB, United Kingdom
Falcon Wharf Limited
Gallagher Bathgate Limited
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
George Wimpey East Scotland Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Paisley, PA3 2SJ, United Kingdom
George Wimpey West Scotland Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Paisley, PA3 2SJ, United Kingdom
GN Tower Limited
Greenwich Millennium Village Limited
GW City Ventures Limited
GWNW City Developments Limited
Haydon Development Company Limited
Laing Wimpey Alireza Limited
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
50% Countryside House, The Drive Great Warley, Brentwood, Essex, CM13 3AT, United Kingdom
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
19.27% 6 Drakes Meadow, Penny Lane, Swindon, Wiltshire, SN3 3LL, United Kingdom
33.33% PO Box 2059, Jeddah, CR9483, Saudi Arabia
London and Clydeside Estates Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Paisley, PA3 2SJ, United Kingdom
London and Clydeside Holdings Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Paisley, PA3 2SJ, United Kingdom
Lynmouth Management Company Limited
20% 2 Hills Road, Cambridge, Cambridgeshire, CB2 1JP, United Kingdom
MacKenzie Developments (Linlithgow)
Limited
Morrison Land Development Inc
North Swindon Development Company
Limited
Padyear Limited
Paycause Limited
Phoenix Birmingham Latitude Limited
Quedgeley Urban Village Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Paisley, PA3 2SJ, United Kingdom
100% 9366, 49St NW, Edmonton, AB T6B 2L7, Canada
16.79% 6 Drakes Meadow, Penny Lane, Swindon, Wiltshire, SN3 3LL, United Kingdom
50% Hanson House, 14 Castle Hill, Maidenhead, SL6 4JJ, United Kingdom
66.67% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
50% 135 Aztec West, Almondsbury, Bristol, Avon, BS32 4UB, United Kingdom
Rockhold Land Limited
100% Two Snowhill, Birmingham, B4 6GA, United Kingdom
St George Little Britain (No.1) Limited
St George Little Britain (No.2) Limited
Strada Developments Limited
50% Berkeley House, 19 Portsmouth Road, Cobham, Surrey, KT11 1JG, United Kingdom
50% Berkeley House, 19 Portsmouth Road, Cobham, Surrey, KT11 1JG, United Kingdom
50% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Paisley, PA3 2SJ, United Kingdom
Taylor Wimpey (General Partner) Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Paisley, PA3 2SJ, United Kingdom
Taylor Wimpey (Initial LP) Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Paisley, PA3 2SJ, United Kingdom
Taylor Wimpey Pension Trustees Limited
99% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
Taylor Wimpey Scottish Limited
Partnership
Taylor Woodrow (Gibraltar) Holdings 2004
Limited
Taylor Woodrow (Gibraltar) Limited
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Paisley, PA3 2SJ, United Kingdom
100% 10 / 8 International Commercial Centre, Casemates Square, Gibraltar, United Kingdom
100% 17 Bayside Road, Gibraltar, United Kingdom
147
147
Company Name
Triumphdeal Limited
TW Cavendish Holdings Limited
Vantage West Limited
Weaver Developments
(Woodfield Plantation) Limited
Whatco England Limited
Whitehill & Bordon Regeneration
Company Limited
Whitehill & Bordon Development
Company phase 1a Limited
Wilcon Homes Scotland Limited
Wimpey Engineering Limited
Wimpey Laing Iran Limited
Wimpey Laing Limited
Wimpey Saudi Company Limited
Winstanley & York Road Regeneration LLP
% Owned
Registered Office
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
100% Two Snowhill, Birmingham, B4 6GA, United Kingdom
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Paisley, PA3 2SJ, United Kingdom
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Paisley, PA3 2SJ, United Kingdom
100% Two Snowhill, Birmingham, B4 6GA, United Kingdom
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
75% PO Box 90, Alkhobar, 31952, Saudi Arabia
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
146
Financial Statements
Company Name
Academy Central LLP
Bishops Park Limited
Limited
Limited
Chobham Manor LLP
Limited
Particulars of Subsidiaries, Associates and Joint Ventures continued
Bishop’s Stortford North Consortium
33.33% The Manor House, North Ash Road, New Ash Green, Longfield, Kent, DA3 8HQ, United Kingdom
% Owned
Registered Office
62% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
50% The Manor House, North Ash Road, New Ash Green, Longfield, Kent, DA3 8HQ, United Kingdom
Bromley Park (Holdings) Limited
50% Kent House, 14-17 Market Place, London, W1W 8AJ, United Kingdom
Bromley Park Limited
50% Kent House, 14-17 Market Place, London, W1W 8AJ, United Kingdom
Bryant Homes Scotland Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Paisley, PA3 2SJ, United Kingdom
Capital Court Property Management
17.17% 4 Capital Court, Bittern Road, Sowton Industrial Estate, Exeter, Devon, EX2 7FW, United Kingdom
Compine Developments (Mundford)
50% Two Snowhill, Birmingham, B4 6GA, United Kingdom
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
Compine Developments Limited
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
Countryside 27 Limited
DFE TW Residential Limited
50% Countryside House, The Drive Great Warley, Brentwood, Essex, CM13 3AT, United Kingdom
50% 7 Whiteladies Road, Clifton, Bristol, BS8 1NN, United Kingdom
Emersons Green Urban Village Limited
54.44% 135 Aztec West, Almondsbury, Bristol, Avon, BS32 4UB, United Kingdom
Falcon Wharf Limited
Gallagher Bathgate Limited
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
George Wimpey East Scotland Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Paisley, PA3 2SJ, United Kingdom
Paisley, PA3 2SJ, United Kingdom
George Wimpey West Scotland Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
GN Tower Limited
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
Greenwich Millennium Village Limited
50% Countryside House, The Drive Great Warley, Brentwood, Essex, CM13 3AT, United Kingdom
GW City Ventures Limited
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
GWNW City Developments Limited
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
Haydon Development Company Limited
19.27% 6 Drakes Meadow, Penny Lane, Swindon, Wiltshire, SN3 3LL, United Kingdom
Laing Wimpey Alireza Limited
33.33% PO Box 2059, Jeddah, CR9483, Saudi Arabia
London and Clydeside Estates Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
London and Clydeside Holdings Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Paisley, PA3 2SJ, United Kingdom
Paisley, PA3 2SJ, United Kingdom
Lynmouth Management Company Limited
20% 2 Hills Road, Cambridge, Cambridgeshire, CB2 1JP, United Kingdom
MacKenzie Developments (Linlithgow)
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Limited
Paisley, PA3 2SJ, United Kingdom
Morrison Land Development Inc
100% 9366, 49St NW, Edmonton, AB T6B 2L7, Canada
North Swindon Development Company
16.79% 6 Drakes Meadow, Penny Lane, Swindon, Wiltshire, SN3 3LL, United Kingdom
Limited
Padyear Limited
Paycause Limited
50% Hanson House, 14 Castle Hill, Maidenhead, SL6 4JJ, United Kingdom
66.67% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
Phoenix Birmingham Latitude Limited
50% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
Quedgeley Urban Village Limited
50% 135 Aztec West, Almondsbury, Bristol, Avon, BS32 4UB, United Kingdom
Rockhold Land Limited
100% Two Snowhill, Birmingham, B4 6GA, United Kingdom
St George Little Britain (No.1) Limited
50% Berkeley House, 19 Portsmouth Road, Cobham, Surrey, KT11 1JG, United Kingdom
St George Little Britain (No.2) Limited
50% Berkeley House, 19 Portsmouth Road, Cobham, Surrey, KT11 1JG, United Kingdom
Strada Developments Limited
50% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Taylor Wimpey (General Partner) Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Taylor Wimpey (Initial LP) Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Taylor Wimpey Pension Trustees Limited
99% Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR, United Kingdom
Taylor Wimpey Scottish Limited
100% Unit C, Ground Floor, Cirrus Glasgow Airport Business Park, Marchburn Drive, Abbotsinch,
Taylor Woodrow (Gibraltar) Holdings 2004
100% 10 / 8 International Commercial Centre, Casemates Square, Gibraltar, United Kingdom
Partnership
Limited
Taylor Woodrow (Gibraltar) Limited
100% 17 Bayside Road, Gibraltar, United Kingdom
Paisley, PA3 2SJ, United Kingdom
Paisley, PA3 2SJ, United Kingdom
Paisley, PA3 2SJ, United Kingdom
Paisley, PA3 2SJ, United Kingdom
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
148
148
Financial Statements
Five Year Review and Alternative Performance Measures
The Group uses a number of Alternative Performance Measures (APMs) which are not defined within IFRS. The Directors use these measures in order
to assess the underlying operational performance of the Group and, as such, these measures should be considered alongside the IFRS measures.
Reconciliations from Statutory Performance Measures to the APMs are shown following the five-year review.
£ million
Revenue – continuing operations
Profit on ordinary activities before finance costs and tax
Adjust for: Share of results of joint ventures
Adjust for: Exceptional items
Operating profit*
Net finance costs excluding exceptional items
Profit for the financial year before taxation and exceptional items*
Adjust for: Exceptional items
Taxation charge including taxation on exceptional items
Profit for the year from discontinued operations
Profit for the financial year
Balance sheet
Intangible assets
Property, plant and equipment
Interests in joint ventures
Non-current trade and other receivables
Non-current assets (excluding tax)
Inventories
Other current assets (excluding tax and cash)
Trade and other payables excluding land creditors
Land creditors
Provisions
Net current assets (excluding tax and cash)
Trade and other payables excluding land creditors
Land creditors
Retirement benefit obligations
Provisions
Non-current liabilities (excluding debt)
Cash and cash equivalents
Bank and other loans
Taxation balances
Basic net assets
Statistics
Basic earnings per share – continuing operations
Adjusted basic earnings per share* – continuing operations
Tangible net assets per share
Dividends paid (pence per share)
Number of shares in issue at the year end (millions)
UK short term landbank (plots)
UK average selling price £’000
UK completions (homes including JVs)
* Denotes APMs which have been referred to throughout the Annual Report and Accounts.
2017
2016
2015
2014
2013
3,965.2
3,676.2
3,139.8
2,686.1
2,295.5
703.6
7.6
130.0
841.2
(29.2)
812.0
(130.0)
(126.7)
–
555.3
3.9
22.8
50.9
60.1
137.7
4,075.7
122.2
(705.0)
(319.5)
(87.3)
3,086.1
(111.0)
(319.6)
(64.8)
(74.3)
(569.7)
600.5
(88.7)
(28.6)
762.6
1.2
0.5
764.3
(30.9)
733.4
(0.5)
(143.6)
–
589.3
3.5
21.0
50.3
87.2
162.0
3,984.0
91.4
(721.8)
(266.3)
(28.0)
3,059.3
(109.0)
(333.5)
(234.1)
(5.1)
(681.7)
450.2
(85.5)
(4.0)
631.5
4.9
0.6
637.0
(33.2)
603.8
(0.6)
(113.4)
–
489.8
2.7
20.0
27.1
95.4
145.2
3,891.2
114.0
(750.7)
(342.7)
(31.1)
2,880.7
(114.9)
(287.1)
(178.4)
(2.9)
(583.3)
323.3
(100.0)
57.4
496.8
2.6
(18.7)
480.7
(30.6)
450.1
18.7
(94.4)
–
374.4
2.5
16.8
38.6
111.1
169.0
3,490.1
102.6
(681.6)
(228.4)
(40.4)
2,642.3
(102.2)
(259.3)
(183.8)
(1.0)
(546.3)
212.8
(100.0)
157.5
355.3
3.2
(45.6)
312.9
(44.5)
268.4
37.8
(66.4)
31.3
271.1
4.2
8.3
34.7
110.8
158.0
2,928.8
118.5
(584.6)
(209.3)
(28.3)
2,225.1
(54.0)
(139.7)
(183.8)
(6.0)
(383.5)
105.4
(100.0)
246.8
3,137.3
2,900.3
2,723.3
2,535.3
2,251.8
17.0p
20.2p
95.7p
13.79
3,275.4
74,849
264
14,541
18.1p
18.1p
88.6p
10.91
3,270.3
76,234
255
13,881
15.1p
14.9p
83.5p
9.49
3,258.6
75,710
230
13,341
11.6p
11.2p
77.9p
2.25
3,253.5
75,136
213
12,454
7.5p
6.7p
69.6p
0.65
3,237.0
70,628
191
11,696
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
148
Financial Statements
Five Year Review and Alternative Performance Measures
The Group uses a number of Alternative Performance Measures (APMs) which are not defined within IFRS. The Directors use these measures in order
to assess the underlying operational performance of the Group and, as such, these measures should be considered alongside the IFRS measures.
Reconciliations from Statutory Performance Measures to the APMs are shown following the five-year review.
£ million
Revenue – continuing operations
Profit on ordinary activities before finance costs and tax
Adjust for: Share of results of joint ventures
Adjust for: Exceptional items
Operating profit*
Net finance costs excluding exceptional items
Profit for the financial year before taxation and exceptional items*
Adjust for: Exceptional items
Taxation charge including taxation on exceptional items
Profit for the year from discontinued operations
Profit for the financial year
Balance sheet
Intangible assets
Property, plant and equipment
Interests in joint ventures
Non-current trade and other receivables
Non-current assets (excluding tax)
Inventories
Other current assets (excluding tax and cash)
Trade and other payables excluding land creditors
Land creditors
Provisions
Net current assets (excluding tax and cash)
Trade and other payables excluding land creditors
Land creditors
Retirement benefit obligations
Provisions
Non-current liabilities (excluding debt)
Cash and cash equivalents
Bank and other loans
Taxation balances
Basic net assets
Statistics
Basic earnings per share – continuing operations
Adjusted basic earnings per share* – continuing operations
Tangible net assets per share
Dividends paid (pence per share)
Number of shares in issue at the year end (millions)
UK short term landbank (plots)
UK average selling price £’000
UK completions (homes including JVs)
* Denotes APMs which have been referred to throughout the Annual Report and Accounts.
2017
2016
2015
2014
2013
3,965.2
3,676.2
3,139.8
2,686.1
2,295.5
762.6
631.5
703.6
7.6
130.0
841.2
(29.2)
812.0
(130.0)
(126.7)
–
555.3
3.9
22.8
50.9
60.1
137.7
4,075.7
122.2
(705.0)
(319.5)
(87.3)
(111.0)
(319.6)
(64.8)
(74.3)
(569.7)
600.5
(88.7)
(28.6)
17.0p
20.2p
95.7p
13.79
3,275.4
74,849
264
14,541
589.3
489.8
1.2
0.5
764.3
(30.9)
733.4
(0.5)
(143.6)
–
3.5
21.0
50.3
87.2
91.4
(721.8)
(266.3)
(28.0)
(109.0)
(333.5)
(234.1)
(5.1)
(681.7)
450.2
(85.5)
(4.0)
4.9
0.6
637.0
(33.2)
603.8
(0.6)
(113.4)
–
2.7
20.0
27.1
95.4
114.0
(750.7)
(342.7)
(31.1)
(114.9)
(287.1)
(178.4)
(2.9)
(583.3)
323.3
(100.0)
57.4
496.8
2.6
(18.7)
480.7
(30.6)
450.1
18.7
(94.4)
–
374.4
2.5
16.8
38.6
111.1
169.0
102.6
(681.6)
(228.4)
(40.4)
(102.2)
(259.3)
(183.8)
(1.0)
(546.3)
212.8
(100.0)
157.5
355.3
3.2
(45.6)
312.9
(44.5)
268.4
37.8
(66.4)
31.3
271.1
4.2
8.3
34.7
110.8
158.0
118.5
(584.6)
(209.3)
(28.3)
(54.0)
(139.7)
(183.8)
(6.0)
(383.5)
105.4
(100.0)
246.8
162.0
145.2
3,984.0
3,891.2
3,490.1
2,928.8
18.1p
18.1p
88.6p
10.91
3,270.3
76,234
255
15.1p
14.9p
83.5p
9.49
3,258.6
75,710
230
11.6p
11.2p
77.9p
2.25
3,253.5
75,136
213
13,881
13,341
12,454
7.5p
6.7p
69.6p
0.65
3,237.0
70,628
191
11,696
3,137.3
2,900.3
2,723.3
2,535.3
2,251.8
3,086.1
3,059.3
2,880.7
2,642.3
2,225.1
Taylor Wimpey plc Annual Report and Accounts 2017
149
149
Profit before taxation and exceptional items and profit for the period before exceptional items
The Directors consider the removal of exceptional items from the reported results provides more clarity on the performance of the Group.
They are reconciled to profit before tax and profit for the period respectively, on the face of the Consolidated Income Statement.
Operating profit and operating profit margin
Throughout the Annual Reports and Accounts operating profit is used as one of the main measures of performance, with operating profit margin
being a Key Performance Indicator (KPI). Operating profit is defined as profit on ordinary activities before net finance costs, exceptional items and tax,
after share of results of joint ventures. The Directors consider this to be an important measure of underlying performance of the Group. Operating
profit margin is calculated as operating profit divided by total Group revenue. The Directors consider this to be a metric which reflects the underlying
performance of the business.
Operating profit to profit before interest and tax reconciliation
Profit before interest and tax
Adjusted for:
Share of results of joint ventures
Exceptional items
Operating profit
Profit
£m
703.6
7.6
130.0
841.2
2017
Revenue
£m
3,965.2
–
–
3,965.2
Margin
%
17.7
0.2
3.3
21.2
Profit
£m
762.6
1.2
0.5
2016
Revenue
£m
3,676.2
–
–
764.3
3,676.2
Margin
%
20.7
0.1
–
20.8
Net operating assets and return on net operating assets
Net operating assets is defined as basic net assets less net cash, excluding net taxation balances and accrued dividends. Return on net operating
assets, another KPI, is defined as 12-month operating profit divided by the average of the opening and closing net operating assets. The Directors
consider this to be an important measure of the underlying operating efficiency and performance of the Group.
Net operating assets
£million
Basic net assets
Average basic net assets
Adjusted for:
Cash
Borrowings
Net taxation
Accrued dividends
Net operating assets
Average net operating assets
Return on net operating assets
Average basic net assets
Adjusted for:
Average cash
Average borrowings
Average taxation
Share of results of joint ventures
Exceptional items
Average net operating assets
2017
3,137.3
3,018.8
(600.5)
88.7
28.6
–
2,654.1
2,596.9
2016
2,900.3
2,811.8
(450.2)
85.5
4.0
–
2,539.6
2,491.1
2015
2,723.3
(323.3)
100.0
(57.4)
–
2,442.6
Net assets
£m
3,018.8
(525.4)
87.1
16.4
–
–
2,596.9
2017
2016
Profit
£m
Return on net
assets %
Net assets
£m
Profit
£m
Return on net
assets %
703.6
23.3
2,811.8
762.6
27.1
–
–
–
7.6
130.0
841.2
4.7
(0.8)
(0.1)
0.3
5.0
(386.8)
92.8
(26.7)
–
–
–
–
–
1.2
0.5
32.4
2,491.1
764.3
4.3
(1.0)
0.3
-
-
30.7
Tangible net assets per share
This is calculated as net assets before any accrued dividends excluding goodwill and intangible assets divided by the number of ordinary shares in
issue at the end of the period. The Directors consider this to be a good measure of the value intrinsic within each ordinary share.
Tangible net assets per share
Basic net assets
Adjusted for:
Intangible assets
Tangible net assets
2017
Ordinary
shares in
issue
3,275.4
Net
assets per
share
pence
Net assets
£m
95.8
2,900.3
2016
Ordinary
shares in
issue
3,270.3
Net
assets per
share
pence
88.7
Net assets
£m
3,137.3
(3.9)
–
3,133.4
3,275.4
(0.1)
95.7
(3.5)
–
2,896.8
3,270.3
(0.1)
88.6
Taylor Wimpey plc Annual Report and Accounts 2017
taylorwimpey.co.uk
150
150
Financial Statements
Five Year Review and Alternative Performance Measures continued
Adjusted basic earnings per share
This is calculated as earnings attributed to the shareholders, excluding exceptional items and tax on exceptional items, divided by the weighted
average number of shares. The Directors consider this provides an important measure of the underlying earnings capacity of the Group. Note 10
shows a reconciliation from basic earnings per share to adjusted basic earnings per share.
Net operating asset turn
This is defined as total Group revenue divided by the average of opening and closing net operating assets. The Directors consider this to be a good
indicator of how efficiently the Group is utilising its assets to generate value for the shareholders.
Net operating asset turn
Average basic net assets
Adjusted for:
Average cash
Average borrowings
Average taxation
Net assets
£m
2017
Revenue
£m
3,018.8
3,965.2
Net asset
turn
1.31
Net assets
£m
2,811.8
2016
Revenue
£m
3,676.2
(525.4)
87.1
16.4
–
–
–
0.27
(0.04)
(0.01)
1.53
(386.8)
92.8
(26.7)
–
–
–
2,491.1
3,676.2
Net asset
turn
1.31
0.21
(0.05)
0.01
1.48
Average net operating assets
2,596.9
3,965.2
Net cash
Net cash is defined as total cash less total financing. This is considered by the Directors to be the best indicator of the financing position of the
Group. This is reconciled in Note 26.
Cash conversion
This is defined as cash generated from operations divided by operating profit. The Directors consider this measure to be a good indication of how
efficiently the Group is turning profit into cash.
Cash conversion
Profit before interest and tax
Adjusted for:
Share of results of joint ventures
Exceptional items
Operating profit
2017
Cash
generated
from
operations
£m
735.9
–
–
735.9
Profit
£m
703.6
7.6
130.0
841.2
Cash
conversion
%
104.6
(0.9)
(16.2)
87.5
2016
Cash
generated
from
operations
£m
622.2
–
–
Profit
£m
762.6
1.2
0.5
764.3
622.2
Cash
conversion
%
81.6
(0.1)
(0.1)
81.4
Adjusted gearing
This is defined as adjusted net debt divided by basic net assets. The Directors consider this to be a more representative measure of the Group’s
gearing levels. Adjusted net debt is defined as net cash less land creditors.
Adjusted gearing
Cash
Private placement loan notes
Net cash
Land creditors
Adjusted net debt
Basic net assets
Adjusted gearing
Taylor Wimpey plc Annual Report and Accounts 2017
Taylor Wimpey plc Annual Report and Accounts 2017
2017
£m
600.5
(88.7)
511.8
(639.1)
(127.3)
2016
£m
450.2
(85.5)
364.7
(599.8)
(235.1)
3,137.3
4.1%
2,900.3
8.1%
Shareholder Information
Notice of Annual General Meeting
151
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 eighty third Annual General Meeting of the
Company to be held on 26 April 2018 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 Directors’ Report, Directors’ Remuneration Report,
Strategic Report, Auditor’s Report and Financial Statements
for the year ended 31 December 2017.
2. To declare due and payable on 18 May 2018 a final dividend of
2.44 pence per ordinary share of the Company for the year ended
31 December 2017 to shareholders on the register at close of business
on 6 April 2018.
3. To declare due and payable on 13 July 2018 a special dividend
of 10.4 pence per ordinary share of the Company to shareholders on the
register at close of business on 1 June 2018.
4. To re-elect as a Director, Kevin Beeston.
5. To re-elect as a Director, Pete Redfern.
6. To re-elect as a Director, Ryan Mangold.
7. To re-elect as a Director, James Jordan.
8. To re-elect as a Director, Kate Barker DBE.
9. To re-elect as a Director, Mike Hussey.
10. To re-elect as a Director, Angela Knight CBE.
11. To re-elect as a Director, Humphrey Singer.
12. To elect as a Director, Gwyn Burr.
13. To re-appoint Deloitte LLP as auditor of the Company, to hold office until
the conclusion of the next general meeting at which accounts are laid
before the Company.
14. Subject to the passing of resolution 13, to authorise the Audit Committee
to determine the remuneration of the auditor on behalf of the Board.
15. 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 £10,920,922 (such amount to be reduced
by any allotments or grants made under paragraph (B) below, in
excess of £10,920,922); and
(B) comprising equity securities (as defined in the Companies Act 2006)
up to a nominal amount of £21,841,845 (such amount to be reduced
by any allotments or grants made 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 2019 (or, if earlier, until the close of business
on 25 July 2019) 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:
16. That if resolution 15 is passed, the Board be given 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 as if section 561 of the
Companies Act 2006 did not apply to any such allotment or sale, such
power to be limited:
(A) to the allotment of equity securities and sale of treasury shares
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 15, 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
matters; and
(B) in the case of the authority granted under paragraph (A) of resolution
15 and / or in the case of any sale of treasury shares, to the allotment
of equity securities or sale of treasury shares (otherwise than under
paragraph (A) above) up to a nominal amount of £1,638,138.
Such power to apply until the end of the next Annual General Meeting of
the Company (or, if earlier, until the close of business on 25 July 2019)
but, in each case, 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.
taylorwimpey.co.uk
152
Shareholder Information
Notice of Annual General Meeting continued
17. That if resolution 15 is passed, the Board be given the power in addition
to any power granted under resolution 16 to allot equity securities (as
defined in the Companies Act 2006) for cash under the authority granted
under paragraph (A) of resolution 15 and / or to sell ordinary shares held
by the Company as treasury shares for cash as if section 561 of the
Companies Act 2006 did not apply to any such allotment or sale, such
power to be:
(A) limited to the allotment of equity securities or sale of treasury shares
up to a nominal amount of £1,638,138; and
(B) used only for the purposes of financing a transaction which the Board
determines to be an acquisition or other capital investment of a kind
contemplated by the Statement of Principles on Disapplying
Pre-Emption Rights most recently published by the Pre-Emption
Group prior to the date of this Notice or for the purposes of
refinancing such a transaction within six months of its taking place.
Such power to apply until the end of the next Annual General Meeting of
the Company (or, if earlier, until the close of business on 25 July 2019)
but, in each case, 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.
18. 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
1 pence each of the Company (ordinary shares), provided that:
(A) the maximum number of ordinary shares hereby authorised
to be purchased shall be 327,627,600;
(B) the minimum price (exclusive of expenses) which may be paid
for ordinary shares is 1 pence 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 2018
and 25 October 2019 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:
19. That the Directors’ Remuneration Report for the year ended 31 December
2017, as set out on pages 74 to 92 of the Report and Accounts for the
financial year ended 31 December 2017, be approved in accordance with
section 439 of the Companies Act 2006.
20. 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 the conclusion of the Annual General Meeting of the Company in
2019.
For the purposes of this resolution the terms ‘political donations’, ‘political
parties’, ‘independent election candidates’, ‘political organisations’ and
‘political expenditure’ have the meanings given by Sections 363 to 365 of
the Companies Act 2006.
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 155 to 157.
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. It will help to
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 and in the interests of security, by attending the
Meeting, upon request, you hereby agree to be searched together with any
bags and other possessions. 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, where required, 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.
Taylor Wimpey plc Annual Report and Accounts 2017
If you would like to vote on the resolutions but cannot come to the Annual
General Meeting, please complete the proxy form sent to you with this notice
and return it to our registrar as soon as possible. In order for it to count, the
registrar must receive it by no later than 11:00 am on 24 April 2018. If you
prefer, you can submit your proxy electronically either via the internet at
www.signalshares.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 all of his or her own
beneficial shareholding.
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:
3.
– copies of the Executive Directors’ service contracts;
– copies of the letters of appointment of the Chairman and the Independent
Non Executive Directors; and
– a copy of the full Annual Report and Financial Statements of the Company
for the year ended 31 December 2017, including the Directors’
Remuneration Report referred to in resolution 19. This document is also
available on our website at www.taylorwimpey.co.uk/corporate
By Order of the Board
153
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 by 6:00pm on 24 April 2018 (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 5 March 2018 (being the latest practicable date prior to the
publication of this notice) the Company’s issued share capital consisted
of 3,276,276,755 ordinary shares, carrying one vote each. Therefore,
the total voting rights in the Company as at 5 March 2018 were
3,276,276,755.
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 Link Asset
Services as soon as possible on +44 (0) 871 664 0300 (calls cost 12p per
minute plus your phone company’s access charge); from overseas +44
(0)371 664 0300 (calls outside the United Kingdom will be charged at the
applicable international rate). Link Asset Services is open between 9.00
am – 5.30 pm, Monday to Friday excluding public holidays in England and
Wales. In the case of joint holders, where more than one of the joint
holders purports to appoint a proxy, only the appointment submitted by
the most senior holder will be accepted. Seniority is determined by the
order in which the names of the joint holders appear in the Company’s
Register of Members in respect of the joint holdings (the first-named being
the most senior).
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)
8 March 2018
4. To be valid, any proxy form or other instrument appointing a proxy must be
received by Link Asset Services at PXS 1, 34 Beckenham Road,
Beckenham, Kent, BR3 4ZF, or, if you want to use an envelope the address
to use is FREEPOST PXS, 34 Beckenham Road, BR3 9ZA or, if you prefer,
electronically via the internet at www.signalshares.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 24 April 2018. Please note that 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.
taylorwimpey.co.uk
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 website 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
website 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 website 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 website. 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 website.
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
website in the form of an answer to a question; or (iii) it is undesirable in
the interests of the Company or the good order of the Meeting that the
question be answered.
15. A copy of this Notice, and other information required by Section 311A of
the Companies Act 2006, can be found at www.taylorwimpey.co.uk/
corporate
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 Information Service
and made available at www.taylorwimpey.co.uk/corporate as soon as
practicable after the Annual General Meeting.
154
Notice of Annual General Meeting continued
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
9.
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.
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 24 April 2018. 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 / her CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where
applicable, their CREST sponsors or voting system providers are referred,
in particular, to those sections of the CREST Manual concerning practical
limitations of the CREST system and timings.
11. The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
12. Any corporation which is a member can appoint one or more corporate
representatives who may exercise on its behalf all of its powers as a
member provided that they do not do so in relation to the same shares.
Taylor Wimpey plc Annual Report and Accounts 2017
Shareholder Information Shareholder Information
Notes to the Notice of Annual General Meeting
155
Explanatory notes to the resolutions
Ordinary Business
Ordinary Resolutions
Ordinary resolutions require more than half of the votes cast to be in favour.
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 2017 and the reports of the
Directors, namely the Strategic Report, Directors’ Report, Directors’
Remuneration Report, and Auditor’s Report; before a general meeting
of the Company (the Annual Report).
Resolution 2: To declare a final dividend
The Directors recommend the payment of a final dividend of 2.44 pence per
share in respect of the year ended 31 December 2017. If approved at the
Annual General Meeting, the dividend will be paid on 18 May 2018 to
shareholders who are on the Register of Members at the close of business
on 6 April 2018.
Resolution 3: To declare a special dividend
The Company has announced its intention to return cash to its shareholders,
through the payment of annual special dividends, always subject to market
and performance fluctuations. Due to the size of these special dividends, the
Company believes it is appropriate to seek prior shareholder approval for its
payment, as it has done at the last four Annual General Meetings for
such dividends.
Further details on the rationale for paying special dividends and the link to the
Company’s current strategy, can be found on page 8.
The aggregate cost of the special dividend for 2018 will be around
£340 million and will be met from profits and surplus cash generated during
2017. If approved, it will be paid on 13 July 2018 to shareholders on the
register at the close of business on 1 June 2018.
Dividend Re-Investment Plan
Subject to shareholders approving either or both of the dividends as set out in
Resolutions 2 and 3 at the Annual General Meeting scheduled for 26 April 2018,
the Company will be offering a Dividend Re-Investment Plan (DRIP) on each
one. The DRIP is provided and administered by the DRIP plan administrator,
Link Market Services Trustees Limited, which is authorised and regulated by the
Financial Conduct Authority (FCA). The DRIP offers 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.
The DRIP will operate automatically in respect of the Final Dividend for 2017
(unless varied beforehand by shareholders) and all future dividends, including
special dividends, until such time as you withdraw from the DRIP or the DRIP
is suspended or terminated in accordance with the Terms and Conditions.
Shareholders are again reminded to check the position with regard to any
dividend mandates that are in place, should you either wish to participate in
the DRIP or discontinue or vary any participation, as existing mandates will
apply to all dividend payments (including special dividends) unless
or until revoked.
CREST
For shares held in uncertificated form (CREST), please note that elections
continue to apply only to one dividend and a fresh election must be made, via
CREST, for each dividend.
Full details of the terms and conditions of the DRIP and the actions required to
make or revoke an election, both in respect of maintenance dividends (i.e. in
this case, the 2017 final dividend) and any special dividends, are available at
www.signalshares.com or on request from the Registrar, Link Asset Services,
The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, email:
shares@linkgroup.co.uk or call +44 (0)371 664 0381. Calls are charged at the
standard geographic rate and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international rate. The Registrar is
open between 9:00 am and 5:30 pm, Monday to Friday excluding public
holidays in England and Wales.
Resolution 4-12: Election of Directors
In accordance with the UK Corporate Governance Code (the ‘Code’) which
states that all directors of FTSE 350 companies should be subject to annual
election by shareholders, the Board has resolved that all Directors of the
Company will retire and, being eligible, offer themselves for re-election or
election, as appropriate, by shareholders at the Annual General Meeting.
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 74 to 92 of the Report and
Accounts. Full biographical information concerning each Director can be
found on pages 46 to 47 of the Report and Accounts.
The following summary information is given in support of the Board’s proposal
for the re-election or election, as appropriate, 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 he will be able to allocate
sufficient time to the Company to discharge his responsibilities. His biography
appears on page 46 and there is additional information on page 58.
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 46
and there is additional information on page 58.
Ryan Mangold – offers himself for re-election.
Ryan has been Group Finance Director since November 2010. His biography
appears on page 46 and there is additional information on page 58.
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. Prior to 2007 he held
the same role, pre-merger, with George Wimpey Plc. His biography appears
on page 46 and there is additional information on page 58.
Kate Barker DBE – offers herself for re-election.
Kate has been an Independent Non Executive Director since April 2011 and
will become the Company’s Senior Independent Director with effect from the
conclusion of the 2018 AGM. 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 Remuneration Committee (which she Chairs) and the
Audit and Nomination Committees, and will do so going forward as Senior
Independent Director, and that she will be able to allocate sufficient time to the
Company to discharge her responsibilities. Her biography appears on page
46 and there is additional information on page 58.
taylorwimpey.co.uk
156
Notes to the Notice of Annual General Meeting continued
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 in
applying his expertise at meetings of the Board and of the Audit and
Nomination Committees, and that he will be able to allocate sufficient time to
the Company to discharge his responsibilities effectively. His biography
appears on page 47 and there is additional information on page 58.
Angela Knight CBE – offers herself for re-election.
Angela has been an Independent Non Executive Director since November
2016. The Board is satisfied that she is independent in character and
judgement in applying her expertise at meetings of the Board and of the Audit,
Nomination and Remuneration Committees, and that she will be able to
allocate sufficient time to the Company to discharge her responsibilities
effectively. Her biography appears on page 47 and there is additional
information on page 58
Humphrey Singer – offers himself for re-election.
Humphrey has been an Independent Non Executive Director since December
2015. The Board is satisfied that he is 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 Committee, and that he will
be able to allocate sufficient time to the Company to discharge his
responsibilities effectively. His biography appears on page 47 and there is
additional information on page 58.
Gwyn Burr – offers herself for election.
Gwyn has been an Independent Non Executive Director since
1 February 2018, having been appointed by the Board since the last AGM.
The Board is satisfied that she is independent in character and judgement in
applying her expertise at meetings of the Board and of the Nomination and
Remuneration Committees, and that she will be able to allocate sufficient time
to the Company to discharge her responsibilities effectively. Her biography
appears on page 47 and there is additional information on page 58.
The Board confirms that each of the above Directors (other than Gwyn Burr
due to her appointment on 1 February 2018 and as explained on page 59)
has recently been subject to formal performance evaluation, details of which
are set out in the Corporate Governance Report in the Report and Accounts
on page 61, and that each continues to demonstrate commitment and to be
an effective member of the Board.
In compliance with provision B.7.2 of the Code, the Chairman hereby confirms
that, following the formal performance evaluation referred to above, the
performance of each of the Non Executive Directors continues to be effective
and that each continues to demonstrate commitment to the role.
Resolution 13: Re-appointment of Deloitte LLP (Deloitte) as auditor
of the Company
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 auditor is appointed from the conclusion of the 2018 Annual General
Meeting until the conclusion of the next general meeting at which accounts
are laid before shareholders. Following an annual review of Deloitte’s
performance, details of which are set out on page 65, and following
consideration of the guidance on the timing of the rotation of the external
auditor, details of which are set out on page 65, the Board recommends the
re-appointment of Deloitte as the Company’s auditor.
Resolution 14: Authorisation of the Audit Committee to agree on
behalf of the Board the remuneration of Deloitte as auditor
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 2017 are given
in Note 6 on page 116 of the Report and Accounts.
Resolution 15: Authority to allot shares
The 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 27 April 2017 and is due to expire at the conclusion of this
Annual General Meeting. Accordingly, Paragraph (A) of resolution 15 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 £10,920,922 (representing 1,092,092,200 ordinary
shares). This amount represents approximately one-third of the issued
ordinary share capital of the Company as at 5 March 2018, the latest
practicable date prior to publication of this Notice of Meeting.
In line with guidance issued by The Investment Association (formerly the
Association of British Insurers) (TIA), paragraph (B) of resolution 15 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 £21,841,845 (representing 2,184,184,500 ordinary shares), as reduced by
the nominal amount of any shares issued under paragraph (A) of resolution
15. This amount (before any reduction) represents approximately two-thirds of
the issued ordinary share capital of the Company as at 5 March 2018, the
latest practicable date prior to publication of this Notice of Meeting.
The Company does not hold any shares in treasury.
The authorities sought under paragraphs (A) and (B) of resolution 15 will expire
at the earlier of 25 July 2019 and the conclusion of the Annual General
Meeting of the Company to be held in 2019.
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 TIA recommendations concerning their use
(including as regards the Directors standing for re-election in certain cases).
Special Resolutions
Special resolutions require at least a 75% majority of votes cast
to be cast in favour.
Resolutions 16 and 17: Authority to dis-apply pre-emption rights
Resolutions 16 and 17 will be proposed as special resolutions, each of which
requires a 75% majority of the votes to be cast in favour. They would give the
Directors the power to allot ordinary shares (or sell any ordinary shares which
the Company holds in treasury) for cash without first offering them to existing
shareholders in proportion to their existing shareholdings.
The power set out in resolution 16 would be, similar to previous years, limited
to: (a) 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 (b) otherwise up to an aggregate
nominal amount of £1,638,138 (representing 163,813,800 ordinary shares).
This aggregate nominal amount represents approximately 5% of the issued
ordinary share capital of the Company (excluding treasury shares) as at
5 March 2018, the latest practicable date prior to publication of this Notice.
Taylor Wimpey plc Annual Report and Accounts 2017
Shareholder Information 157
In respect of the power under resolution 16 (B), 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 3-year
period where the Principles provide that usage in excess of 7.5% of the issued
ordinary share capital of the Company (excluding treasury shares) should not
take place without prior consultation with shareholders.
Resolution 17 is intended to give the Company flexibility to make non
pre-emptive issues of ordinary shares in connection with acquisitions and
other capital investments as contemplated by the Pre-emption Group’s
Statement of Principles. The power under resolution 17 is in addition to that
proposed by resolution 16 and would be limited to allotments or sales of up to
an aggregate nominal amount of £1,638,138 (representing 163,813,800
ordinary shares) in addition to the power set out in resolution 16. This
aggregate nominal amount represents an additional 5% of the issued ordinary
share capital of the Company (excluding treasury shares) as at 5 March 2018,
the latest practicable date prior to publication of this Notice.
The powers under resolutions 16 and 17 will expire at the earlier of
25 July 2019 and the conclusion of the Annual General Meeting of the
Company held in 2019.
Resolution 18: Authority to make market purchases of shares
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 5 March 2018.
The minimum price (exclusive of expenses) which may be paid for an ordinary
share is 1 pence per ordinary share. 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 and conditional share awards to subscribe for
ordinary shares outstanding as at the close of business on 5 March 2018 was
37,779,438, representing approximately 1.2% of the issued ordinary share
capital of the Company as at that date and approximately 1.3% of the
Company’s issued ordinary share capital following any exercise in full of this
authority to make market purchases.
This authority will last until the earlier of 25 October 2019 and the conclusion
of the Company’s Annual General Meeting in 2019.
Special Business
Ordinary Resolutions
Resolution 19
The Remuneration Committee of the Board (the ‘Committee’) is seeking
shareholders’ approval of the Directors’ Remuneration Report (the ‘Directors’
Remuneration Report’) in Resolution 19, which will be proposed as an
ordinary resolution.
The Directors are required to prepare the Directors’ Remuneration Report,
comprising an annual report detailing the remuneration of the Directors
and a statement by the Chairman of the Remuneration Committee. The
Company is required to seek shareholders’ approval in respect of the
contents of this report on an annual basis (excluding the part containing the
Directors’ Remuneration Policy, which was approved by shareholders at the
Company’s 2017 Annual General Meeting when it was proposed for its latest
three-yearly vote). The vote on the Directors’ Remuneration Report is an
advisory one.
Resolution 20: 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 20 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
20) 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 20 extends approval to
all of the Company’s subsidiaries.
This authority will expire at the conclusion of the Annual General Meeting
of the Company in 2019, unless renewal is sought at that meeting.
The Company and the Group do not make any donations to political parties
or organisations and do not intend to going forward, but do support certain
industry-wide bodies such as the Home Builders Federation in the UK. Whilst
the Board does not regard this as political in nature, in certain circumstances
such support together with 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 pages 96 to 97 of the Report and Accounts.
Special Resolution
Resolution 21: Notice of general meetings
Special resolutions require at least a 75% majority of votes cast to be cast in
favour.
This resolution will be proposed as a special resolution and therefore requires
a 75% majority of votes to be cast in favour. The Companies (Shareholders’
Rights) Regulations 2009 have increased the notice period required for
general meetings of the Company to 21 clear days unless shareholders agree
to a shorter notice period, which cannot be less than 14 clear days. At the
2017 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 2019, 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.
taylorwimpey.co.uk
158
Shareholder Facilities
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 website, 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:
– Enables the Company to reduce printing and postage costs.
– Allows faster access to information and enables shareholders to access
documents on the day they are published on the Company’s website.
– 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 website is www.taylorwimpey.co.uk and shareholder
documentation made available electronically is generally accessible at
www.taylorwimpey.co.uk/corporate/shareholder-information
Electronic communications
The Company also encourages shareholders to elect to receive notification
of the availability of Company documentation by means of an email.
Shareholders can sign up for this facility by logging onto our website at
www.taylorwimpey.co.uk/corporate/shareholder-information/
electronic-communications
Online facilities for shareholders
You can access our Annual and Interim Reports and copies of recent
shareholder communications online at: www.taylorwimpey.co.uk/corporate/
investor-relations/reporting-centre
To register for online access, go to www.taylorwimpey.co.uk/corporate/
shareholder-information and click on the service you require. To access some
of these services you will first be required to apply online.
Once you have registered for access, you can make online 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, including any special dividend,
in purchasing Taylor Wimpey shares on the market under the terms of the
Dividend Re-Investment Plan (‘DRIP’). For further information on the Plan and
how to join, contact Link Asset Services.
Shareholders are again reminded to check the position with regard to any
dividend mandates that are in place, should you either wish to participate in the
DRIP or discontinue or vary any participation, as existing mandates will apply to
all dividend payments (including special dividends) unless or until revoked.
CREST
The Company offers shareholders who hold their Taylor Wimpey shares
in CREST a facility for the receipt of dividends through the CREST system.
For shares held in uncertificated form (CREST), please note that elections
continue to apply only to one dividend and a fresh election must be made, via
CREST, for each dividend.
Full details of the terms and conditions of the DRIP and the actions required to
make or revoke an election, both in respect of maintenance dividends (i.e. in
this case, the 2017 final dividend) and any special dividends, are available at
www.signalshares.com or on request from the Registrar, Link Asset Services,
The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, email:
shares@linkgroup.co.uk tel: +44 (0)371 664 0381. Calls are charged at the
Taylor Wimpey plc Annual Report and Accounts 2017
standard geographic rate and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international rate. Lines are open
between 9:00 am and 5:30 pm Monday to Friday excluding public holidays
in England and Wales.
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 Link Asset Services.
Duplicate share register accounts
If you are receiving more than one copy of our Report and Accounts, 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 Link Asset Services who will be pleased to carry out your
instructions in this regard.
Share dealing services
We have arranged both telephone and online share dealing services. Link
Share Dealing Services allows you to buy and sell shares in a large number of
companies that have Link as their registrar. The services are operated by Link
Asset Services. To use the services either visit www.linksharedeal.com or
telephone +44 (0)371 664 0445. Calls are charged at the standard
geographic rate and will vary by provider. Calls outside the United Kingdom
will be charged at the applicable international rate. Lines are open between
8:00 am and 5:30 pm Monday to Friday excluding public holidays in England
and Wales. 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 website at www.taylorwimpey.co.uk/corporate.
It appears on BBC Text and other digital television interactive services.
It may also be obtained by telephoning the FT Cityline service on 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 in 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 Link Asset Services or approach
ShareGift directly on www.sharegift.org or telephone them on +44 (0)20
7930 3737.
Shareholder Information Shareholder Facilities
159
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
Website: www.taylorwimpey.co.uk
Registered in England
and Wales number 296805
Details of all our operating locations are available on our website
www.taylorwimpey.co.uk
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: +34 971 706972
Fax: +34 971 706565
Unsolicited approaches to shareholders
and ‘Boiler Room’ scams
We receive reports from time to time from Taylor Wimpey shareholders who
have each received what appear to be fraudulent approaches from third
parties 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 Conduct Authority (FCA). More information is available on
our website www.taylorwimpey.co.uk/corporate/shareholder-information/
boiler-room-scams and you can check whether an enquirer is properly
authorised and report scam approaches by contacting the FCA
on www.fca.org.uk/consumers or by calling +44 (0)800 111 6768.
Annual General Meeting
11:00 am on 26 April 2018 at:
The British Medical Association, BMA House,
Tavistock Square, London, WC1H 9JP.
Latest date for receipt of proxy instructions for the 2018 Annual
General Meeting: 11:00 am on 24 April 2018.
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:
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
E-mail: enquiries@linkgroup.co.uk
Tel: 0871 664 0300 (UK)
Tel: +44 (0) 371 664 0300 (from overseas)
Calls cost 12p per minute plus your phone company’s access charge. Calls
outside the United Kingdom will be charged at the applicable international
rate. Lines are open between 9:00 am and 5:30 pm Monday to Friday,
excluding public holidays in England and Wales.
Auditors
Deloitte LLP
Solicitors
Slaughter and May
Stockbrokers
J.P. Morgan Cazenove
Jefferies Hoare Govett
taylorwimpey.co.uk
160
Shareholder Information
More Information Online
e
n
i
l
n
o
e
r
o
m
KPI
View our Annual Report and Accounts online:
www.taylorwimpey.co.uk/corporate
KPI
Further information about our sustainability activities and
policies can be found within our dedicated Sustainability
Report on our website. www.taylorwimpey.co.uk/corporate
Taylor Wimpey plc Annual Report and Accounts 2017
This document is printed on UPM Finesse Silk and UPM Fine Offset;
both papers containing virgin fibre sourced from well managed, responsible,
FSC® certified forests.
This is a certified CarbonNeutral® publication.
Designed and produced by Black Sun Plc www.blacksunplc.com
Printed by Park Communications on FSC® certified paper.
www.taylorwimpey.co.uk