Annual Report 2012
ABOUT THIS REPORT
Welcome to the Annual Report of The Berkeley Group Holdings plc
(“the Berkeley Group” or “Berkeley”), a publicly owned company,
listed on the London Stock Exchange within the FTSE 250.
In this year’s report, we start by highlighting Berkeley’s vision and
performance this year, followed by an explanation of our business,
our strategy and how we run our business, and then a trading and
financial review. Our Governance section and the detailed financial
statements accompanied by a report from the Group’s auditors,
complete the Annual Report.
HIGHLIGHTS
1 Who we are and what we do
2 Delivering Value
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7 Managing Director’s Statement
Chairman’s Statement
GOVERNANCE
86 Directors’ Report
89 Remuneration Committee Report
106 Corporate Governance Report
OUR BUSINESS
8 Our Business
14 Our Strategy
18 Our Land
RUNNING A SUSTAINABLE BUSINESS
44 Running a Sustainable Business
TRADING AND FINANCIAL REVIEW
64 Trading Review
74 Financial Review
80 Berkeley’s Principal Operating Risks
FINANCIALS
114 Independent Auditors’ Report on the Consolidated Financial Statements
115 Consolidated Income Statement
115 Consolidated Statement of Comprehensive Income
116 Consolidated Statement of Financial Position
117 Consolidated Statement of Changes in Equity
118 Consolidated Cash Flow Statement
119 Notes to the Consolidated Financial Statements
142 Independent Auditors’ Report on the Company Financial Statements
143 Company Balance Sheet
144 Notes to the Company Financial Statements
148 Five Year Summary
149 Financial Diary, Registered Office and Advisors
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Who We are
and What We do
The Berkeley Group Holdings plc (“Berkeley”) is a developer of
residential-led mixed-use schemes, with a passion for delivering
successful, sustainable places.
Berkeley’s focus is on its core markets of London and the South East
of England where its knowledge, experience and proven track
record, with over thirty years of experience in this market, give it a
competitive advantage in the planning and delivery of its schemes.
The business benefits from a strong balance sheet and good visibility
over performance in the near-term from cash due on forward sales of
over £1 billion. Berkeley will continue to forward sell its developments
wherever possible, keeping financial risk low to mitigate the operating
risks of delivery, and carefully allocating capital to the right projects at
the right time, matching supply to demand wherever it can.
Berkeley’s strategy is dedicated to delivering its long-term
corporate objectives:
To maximise shareholder value over
the long-term in a sustainable and
safe way, returning £13 per share to
shareholders by 2021, and to remain
one of the most successful and
sustainable businesses in Britain.
Proud to be a member of the Berkeley Group of Companies
Berkeley annual report 2012
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HighlightsHighlights
Delivering value
Berkeley is delighted to
report a set of results Which
demonstrate that it has
emBarked on its ten-year
frameWork to return £13 per
share to shareholders in the
right Way, delivering a solid
performance Whilst remaining
focused on the long-term
success of the Business.
proFit BeFore tax
earnings per share
2009
2010
2011
2012
£120.4m
£110.3m
£136.2m
2009
2010
2011
2012
£214.8m
71.3p
60.0p
72.1p
121.0p
return on equity
cash Due on ForwarD sales
2009
2010
2011
2012
16.2%
13.3%
15.3%
21.2%
2009
2010
2011
2012
£620m
£648m
£814m
£1,056m
net asset value per share
lanD Bank gross Margin
2009
2010
2011
2012
615p
637p
709p
839p
2009
2010
2011
2012
£2,014m
£2,038m
£2,304m
£2,580m
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Berkeley annual report 2012
Highlights
Berkeley’s results for the year ended 30 April 2012 demonstrate a strong
underlying operating performance which, along with further growth in forward
sales, a strong balance sheet and a solid land bank, leaves Berkeley well-positioned
to meet its previous target of doubling its profit before tax from £110 million to
£220 million by 30 April 2013, some two years earlier than originally planned,
and to embrace its new operational targets as it heads towards the first targeted
dividend repayment of £4.34 per share in September 2015.
The objective to make returns to shareholders in cash, by agreed milestone
dates, is aligned to ensuring that Berkeley operates at an optimal size in which
returns must be matched with a disciplined approach to risk management over
the long-term. To deliver consistent earnings from an efficient balance sheet,
whilst continuing to build the value of the business in the land bank, Berkeley’s
core performance targets of Return on Equity and Land Bank Growth will remain
a focus over the next twelve months.
Berkeley has maintained its balance sheet strength throughout the challenging
markets of recent years, and is committed to keeping flexibility at the heart of
its business plan. This approach is intended to ensure that Berkeley can remain
agile when faced with what it knows to be an inherently cyclical property market.
proFit BeFore tax
operating Margin
return on equity
Profit before tax up 57.7%
to £214.8 million
(2011: £136.2 million)
Operating margin before
exceptional item up 0.5% to 18.8%
(2011: 18.3%)
Pre-tax return on shareholders’
equity of 21.2%
(2011: 15.3%)
+57.7%
18.8%
21.2%
net DeBt
cash Due on ForwarD sales
lanD Bank
Net debt of £57.9 million
(April 2011: net cash of £42.0 million)
after £311 million of investment in new
land in the year.
Cash due on forward sales
of £1,055.7 million
(April 2011: £813.5 million)
26,021 plots in land bank
(April 2011: 27,026) and future anticipated gross
margin in land bank up 12.0% to £2,580 million
(April 2011: £2,304 million)
+29.8%
+12.0%
A strong underlying performance and
balance sheet and a solid land bank.
Berkeley annual report 2012 3
HighlightsHighlights
highlights
One Tower Bridge
One Tower Bridge, SE1
Area: 3.75 acres
Homes: c.400
Developed by: Berkeley
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Berkeley annual report 2012
highlights
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Berkeley annual report 2012
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The decision for businesses such as Berkeley to invest is finely
balanced despite the sound long-term fundamentals for
residential property in London and the South East of England.
Growth requires a stable political and economic environment
with well-considered policies that welcome inward investment
and give businesses the confidence to invest and grow; it is
essential that London’s competitiveness on a world stage is
preserved. Unnecessary bureaucracy, over-zealous regulation
and taxation policy, and a negative rhetoric that undermines
confidence, create barriers to the delivery of new housing
which will pose an unwelcome drag on growth. Indeed,
there are indications across the wider industry that the recent
upturn in construction levels is beginning to stagnate.
To remain a truly successful and sustainable business, we
must respect and impress our customers, investors, partners,
contractors and the communities within which we operate.
This can only be done with the right people working at the
heart of any business, and I continue to admire the passion,
dedication and hard work of all of our employees at Berkeley.
I, along with the rest of the Board, am grateful above all for
their loyalty, and the stability that this brings to the company.
The Board has positioned Berkeley to give it the best
chance to prosper and thrive with a truly sustainable
business model. With the right conditions, both
economically and politically, I am confident that Berkeley
will achieve this, but this confidence must inevitably be
tempered by the need to react to prevailing market
conditions, however they develop.”
Tony Pidgley
Chairman
chairMan’s stateMent
“I am delighted to report a strong performance again this
year. Basic earnings per share have increased by 67.8%,
our balance sheet remains strong and forward sales stand
at over £1 billion.
Last year Berkeley put in place a ten-year framework to
return £13 per share by September 2021 with the
overwhelming support of shareholders and has been laying
the foundations to ensure that we retain a strong, sustainable
business, which can endure well beyond this period. This
set of results demonstrates that we have embarked on this in
the right way, delivering solid performance whilst remaining
focused on the long-term success of the business.
Against a backdrop of a challenging economic outlook,
both in the UK and abroad, creating the conditions in which
businesses can stimulate growth has become a political
imperative. New housing is uniquely placed to deliver
growth; it is a sector that delivers employment both during
and after the development process and stimulates activity
throughout the supply chain in manufacturing and service
industries. Since repositioning its strategy in February 2009
following the collapse of Lehman Brothers and at the height
of the banking crisis, Berkeley has invested over £1 billion
in new land and a further £2 billion breathing new life into
disconnected communities and delivering new homes. Over
this same period, we have created over 6,000 new jobs in
delivering new housing across our sites; a contribution to
the economy which should not be overlooked.
We have achieved this over a period in which the industry has
seen unprecedented change, with the removal of the South
East Plan, the introduction of the National Planning Policy
Framework and the implementation of changes to the way in
which new housing contributes to local communities through
the introduction of the Mayoral Community Infrastructure Levy
alongside Section 106 contributions. Whilst I support the joint
objective of these initiatives to increase local engagement and
supply, the implementation of these new policies has created
numerous practical issues that have yet to be resolved. These
include the role that localism plays in development on a large
scale and how to ensure that the delivery of new housing is
commercially viable in an environment where planning
authorities and government place ever increasing financial
burdens on developers.
“Berkeley has been laying
the foundations to ensure
that we retain a strong,
sustainable business.”
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Berkeley annual report 2012
Highlights
Managing Director’s
stateMent
“It is pleasing to report a tremendous year of performance
and growth for Berkeley. Profit before tax increased 57.7%
to £214.8 million from £136.2 million the previous year and
basic earnings per share are up 67.8% to 121.0 pence per
share reflecting both underlying earnings growth and the
reduction in the rate of corporation tax. Pre-tax return on
shareholders’ equity, one of Berkeley’s two core performance
targets, was 21.2% up from 15.3% a year earlier on
shareholders’ equity that increased by £170.4 million to
£1,099.8 million in the period.
The second core annual performance target is growth in the
value of the Group’s land bank in line with our strategy to
invest in land. The further investment of some £311 million
in land acquisitions during the year contributed to growth
of the potential gross margin in the land bank by 12.0% to
£2,580 million and exceeds the targets set at the beginning
of the year. This investment has continued into the new
financial year with the acquisition of 15 acres in Zone 1
at Wapping for £150 million, payable in instalments, as
announced in May 2012.
Importantly, the results also demonstrate the continued
strengthening of the balance sheet and management of
key operating risks, above all through an increase in cash
due on forward sales to £1,056 million which underpins our
investment in future delivery; an enhancement in the quality
of our land bank in which some 84% is now fully consented;
and an increase in banking facilities to £525 million,
extended until April 2017, providing financial security
well beyond the first planned date of shareholder returns.
Looking forward, we have updated our operating guidance
which is aligned to returning some £568.5 million to
shareholders, equivalent to £4.34 per share, by September
2015, whilst maintaining our balance sheet at least at
the current level. The Group is currently well-positioned,
with the land bank and planning consents now in place,
to achieve this guidance assuming overall market
conditions remain resilient.
The Board also believes that there remain opportunities to
add further shareholder value over the long-term through
additional land investment at this point in the cycle and
has maintained its target for land bank growth in the next
financial year at 10%. We will also now aim to meet our
objective to grow the value in the land bank to £3 billion,
by April 2014, one year earlier than originally intended.
The objective to return some £568.5 million in cash to
shareholders by September 2015 places a responsibility
on the Board to maintain strong discipline in its investment
strategy. The challenge is to balance the return of £13 per
share in cash to existing shareholders over the remaining
nine years of the plan with our continued investment in land
and construction. It is forecast that we will continue to invest
retained profits into land and construction until 2014 before
generating the cash flow to pay the first dividends. The
Board is giving further consideration to ways in which share
buybacks can be integrated into this overall framework,
where it believes that this can create additional long-term
shareholder value.
This is an exciting stage in the cycle for Berkeley.
Our objectives are clear, and through the framework of
Vision2020 our stakeholders have specific, identifiable
commitments which focus every area of the business; these
commitments have been diligently and enthusiastically
embraced by all. I firmly believe that we have the right
strategy, and the right people to implement the operational
plan, to give the company, our shareholders and our wider
stakeholders confidence in Berkeley’s ability to deliver its
objectives over the long-term.
Our approach brings with it an appreciation that we are
positioned well to outperform, with an unrivalled land bank,
a strong balance sheet, a healthy forward sales position and
a stable, experienced management team, but we recognise
that we are operating in an uncertain market and must remain
sensitive to changes in the market and the wider economy.”
Rob Perrins
Managing Director
“This is an exciting stage in the
cycle for Berkeley. I firmly believe
that we have the right strategy
for Berkeley to deliver its
objectives over the long-term.”
Berkeley annual report 2012
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HighlightsHighlights
our Business
our Business
Berkeley is a residential-
led property developer
With a passion for
creating successful,
sustainaBle places.
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Berkeley annual report 2012
our Business
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Berkeley annual report 2012
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our Business
Prestigious schemes in the heart
of the Capital offering the very
best in luxury living.
1 The Tower,
One St. George Wharf, SW8
overlooking the river
thames and the houses
of parliament, the tower,
one st. george Wharf
will, at 50 storeys, be
one of europe’s tallest
residential towers.
2 Ebury Square, Belgravia, SW1
ebury square lies in the
heart of Belgravia, one of
london’s most distinguished
neighbourhoods.
3 190 Strand, WC2
a luxurious new development
situated in an historic
location, overlooking
sir christopher Wren’s grade i
listed st clement danes
church, and close to the
courtauld gallery and
somerset house.
1
10 Berkeley annual report 2012
All the above are computer generated images which are indicative only.
our Business
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All the above are computer generated images which are indicative only.
Berkeley annual report 2012
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our Business
our Business
Berkeley has a simple
Business model Which
plays to its strengths
and expertise.
The Group makes money for its shareholders by
developing and selling homes, whether city apartments
or detached family houses, student residences, Extra
Care accommodation or shops and restaurants, across
London and the South East of England.
Berkeley’s principal operating activities are to identify and buy
development sites, secure suitable viable planning consents,
and then construct and deliver homes for its customers.
Berkeley’s long-term corporate objectives are to maximise
shareholder value in a sustainable and safe way, returning
£13 per share to shareholders by 2021, and to retain a
successful and sustainable business thereafter.
12 Berkeley annual report 2012
Our Business
No.1 Street, Royal Arsenal Riverside, SE18
one of london’s largest
regeneration schemes
Berkeley believes that its focus
on creating not just homes, but
thriving, successful places is
what sets it apart from its peers.
LaND
PRODuCT
The Group employs experienced, committed staff whose
role is to identify potential new site acquisitions which
meet Berkeley’s challenging acquisition criteria. Berkeley
continues to operate in its core markets of London and the
South East of England, where it has a competitive advantage,
and acquires new sites opportunistically only in those
locations where market demand supports such investment.
Each new site acquisition is rigorously assessed to ensure
that the Group can give a wholehearted commitment to
invest in the planning and delivery of a scheme based on
its underlying financial viability and an understanding of
the significant operational risks of development.
PLaNNiNg
The priority on new land is to eliminate planning risk
quickly and effectively, to secure a viable, implementable
planning consent appropriate to the location, demand
and context of each site. This is carried out in a spirit of
engagement and dialogue with local communities and
stakeholders impacted by these schemes. The Group
also maintains a disciplined approach to optimisation,
and fosters a culture of improvement in which consented
schemes are continually reassessed to ensure that they
remain appropriate to the location and to the local market
and demand, which itself can evolve in terms of the mix
of homes or planning uses. More relevant on the Group’s
longer-term schemes, Berkeley considers it right to look
regularly at what is planned to be delivered, and to
continually challenge itself to improve this.
DeLiveRy
With a focus on sales early in the delivery process, Berkeley
aims to reduce financial risk before investing in the capital
intensive phase of construction. This is Berkeley’s way of
ensuring that supply meets demand, tailoring its product
and delivery to the demands of the market at prices which
it knows are supported in each location. The Group is
committed to a considerate and sustainable approach
to the design and construction of its schemes, with clear
direction from the Board, which champions, through
Vision2020, a framework of clear, modern and focused
sustainability practices.
Berkeley’s product is spread across a wide target market,
at a range of affordability levels. This includes its core
product of residential apartments and houses, as well as
diversified product such as student accommodation and
Extra Care accommodation. There is a commitment to
quality across its entire portfolio which Berkeley believes
will continue to underpin its brand and reputation, now and
in the future. Customer satisfaction is a key performance
measure; third party surveys are instructed by Berkeley
on all sales of new homes and results fed back to inform
Berkeley’s future product and approach.
PLaCeMakiNg
Across all phases of the development cycle, Berkeley
believes that its focus on creating not just homes, but
thriving, successful places is what sets it apart from its peers
and is at the heart of its success over recent years. From
Putney Wharf in London, to Gunwharf Quays in Portsmouth,
or the regeneration of the Royal Arsenal buildings and docks
at Woolwich, this has remained central to Berkeley’s priorities.
iNNOvaTiON aND agiLiTy
Outside of its core activities, Berkeley has found innovative
ways to enhance value in the business, whether delivering
schemes in partnership with the Prudential, the sale of
postgraduate accommodation constructed for Imperial
College London, or delivering and investing in rental
properties with the Housing and Communities Agency.
Berkeley remains alert to such opportunities as they arise;
an attribute which is integral to maintaining a flexible,
agile business, and has a business model which allows this,
with balance sheet strength, financial capacity and the
discipline of a programme of shareholder returns.
Berkeley’s experience and understanding is that the
property market is inherently cyclical, an understanding
which has been at the heart of its success in the past,
and is central to its strategy to meet its stated long-term
corporate objectives.
BRaNDs aND PeOPLe
Berkeley has autonomous management teams operating
under five core brands: Berkeley; St George; St James;
St Edward; and Berkeley First. These teams operate across
all the disciplines of the business, and comprise those
people charged with implementing the Group’s strategy
to deliver its long-term corporate objectives.
Berkeley annual report 2012
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Our BusinessOur Business
our strategy
The Tower, One St. George Wharf, SW8
view from the sky garden on 8th floor
Berkeley is a Business
focused on securing
and delivering
long-term value.
Berkeley’s strategy is dedicated to delivering its long-term
corporate objectives to ‘maximise shareholder value over
the long-term in a sustainable and safe way, delivering
£1.7 billion in cash to shareholders over the next 10 years’
and ‘by 2020, to remain one of the most successful and
sustainable businesses in Britain’.
Berkeley’s aim is to deliver the targeted shareholder returns
from earnings, and to invest opportunistically in new sites
and optimise existing sites to underpin the business
in the long-term.
To meet these objectives, the Group will continue to focus on
organic growth in its core markets of London and the South
East of England. This is where its knowledge, experience and
proven track record, with over thirty years of experience in this
market, give it a competitive advantage in the planning and
delivery of its schemes.
The business benefits from a strong balance sheet and good
visibility over performance in the near-term from cash due
on forward sales of over £1 billion. Berkeley will continue to
forward sell its developments wherever possible, keeping
financial risk low to mitigate the operating risks of delivery,
and carefully allocating capital to the right projects at the
right time, matching supply to demand wherever it can.
Berkeley believes that the requirement to make returns to
shareholders, in cash, by agreed milestone dates is aligned
to ensuring Berkeley operates at an optimal size in which
returns must be matched with a disciplined approach to
risk management over the long-term.
Dial Arch pub at Royal Arsenal Riverside, SE18
People enjoying a restaurant at Imperial Wharf, SW6
14 Berkeley annual report 2012
Our Business
our Business
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Flexibility in its business plan affords Berkeley the ability to
act quickly and decisively when faced with opportunities to
add value outside of the normal development cycle. This has
been evidenced over the last two years through the creation
of Berkeley’s rental fund, in partnership with the Homes and
Communities Agency, which promoted the delivery of a
number of schemes across Berkeley’s portfolio where rental
demand has been strong and which now benefit both Berkeley
and the Homes and Communities Agency through a portfolio
of properties generating solid market rental returns.
Operationally, to succeed in meeting its objectives, the
Group needs all of its employees to understand the long-term
Berkeley vision, and to give them the framework to embed the
concept of a ‘sustainable business’ in all of their dealings and
decisions. This is the role of Vision2020, which provides clear
guidelines and commitments within which all of our people
can operate at all levels of the business. This in turn sets
clear benchmarks, which Berkeley can report to its wider
stakeholders to demonstrate that Berkeley is the right
developer and partner for the long-term. Berkeley’s approach
to running a sustainable business is explained further in
a separate chapter of this report under that heading.
To implement this strategy, Berkeley relies on the
recruitment and retention of the best people. A clear
philosophy founded on integrity, a challenging and fulfilling
working environment and competitive remuneration is
key to achieving this. Berkeley’s people have embraced
Vision2020, and have been integral to the successful first
year of the Berkeley Foundation, which spearheads
Berkeley’s Corporate Social Responsibility programme.
Wholehearted engagement of Berkeley with its people,
and their engagement with Berkeley and its wider
stakeholders, is fundamental to its strategy to be one
of the best and most sustainable businesses in Britain.
The ultimate success of this strategy will be measured
through performance against the long-term corporate
objectives. Berkeley is a business focused on securing and
delivering long-term value. To deliver consistent earnings
from an efficient balance sheet, whilst continuing to build
the value of the business in the land bank, Berkeley’s core
performance targets of Return on Equity and Land Bank
Growth will remain a focus over the next twelve months.
This year, a return on equity of 21.2% (2011: 15.3%),
continuing growth in land bank margin of 12.0% to
£2,580 million (2011: £2,304 million) and a strong balance
sheet in which total equity now stands at £1,099.8 million
(2011: £929.4 million) are the solid foundations in 2012
which demonstrate that the business has embarked on the
route towards these long-term objectives in the right way.
Berkeley annual report 2012
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Our BusinessOur Business
our Business
Goodmans Fields and
75 Leman Street, Aldgate
Area: 7.2 acres
Homes: c.900
Developed by: Berkeley
16 Berkeley annual report 2012
our Business
GOODMANS FIELDS
& 75 LEMAN STREET
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our lanD
Berkeley’s schemes:
are centred on its core
markets of london...
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Our Business
1 375 Kensington High Street
40 Woodberry Park
Computer generated images are indicative only.
13 Fulham Reach, Hammersmith
Computer generated images are indicative only.
London
london under construction
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375 kensington high street
Battersea reach
Beaufort park, hendon
Blackheath road, deptford
camberwell grove
carmelite, finchley*
caspian Wharf, Bow
chelsea creek / imperial Wharf
costume store, acton
dickens yard, ealing
ebury square, Belgravia
emerald square, roehampton
fulham reach, hammersmith
goodmans fields, aldgate
griffon studios, clapham
grosvenor Waterside
napier, acton
kew Bridge road
kew Bridge West, Brentford
kidbrooke village
* sites purchased during the year
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langham square, putney
lime grove mews, hammersmith
marine Wharf, deptford
marryat place, Wimbledon*
onese8, deptford
one tower Bridge
parkwest, West drayton
Queen mary’s place, roehampton
riverlight, Battersea
roman house, city of london
royal arsenal riverside
saffron square, croydon
st catherine’s place, new cross
st James park mews, surbiton
stanmore place
terrace yard, richmond
the Boatyard, kingston
the tower, one st george Wharf
Wimbledon hill park
Woodberry park
london future sites
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190 strand, city of london
abell & cleland house, Westminster
carnwath road, fulham
city forum, city of london*
eastbury house, albert embankment*
hampton house, albert embankment*
nec house, acton*
one Blackfriars, southwark*
Queen’s rise, richmond*
section house, finchley*
sir alexander close, acton
twickenham sorting office*
Warwick road, kensington (telereal)
Warwick road, kensington (homebase)
Berkeley annual report 2012
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Our BusinessOur Business
our lanD
...and the south east
of england
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Canterbury
10 Esher
7 Cirencester
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South East
out of london under construction
out of london future sites
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23
24
25
26
27
high Wycombe
holborough
horsham
north Bersted
oxford (2 sites)
portsmouth
reading
Worcester
sevenoaks
st albans
Wantage
Woodstock
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Basingstoke
Beaconsfield
Billingshurst
cambridge
canterbury
cheltenham
cirencester
eastbourne
effingham
esher
farnham common
fleet (2 sites)
gillingham
gosport
guildford
* sites purchased during the year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
amersham*
ascot (2 sites)
Beaconsfield
caterham*
cheltenham*
claygate
cobham
gerrards cross (2 sites)*
maidenhead*
oxshott*
reigate
shalford*
tadworth (2 sites)*
tunbridge Wells*
Wantage
Berkeley annual report 2012
21
Our BusinessOur Business
190 Strand Lobby, WC2
Area: 1.2 acres
Homes: c.200
Developed by: St. Edward
22 Berkeley annual report 2012
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Berkeley annual report 2012
23
our lanD
DelivereD this year
during 2012, Berkeley delivered
3,565 neW homes across its
portfolio of developments
in london and the south east
of england.
The breadth of homes delivered stretches from modern new build apartment
schemes on prime stretches of the River Thames, to major regeneration schemes
in Greater London, along with new build and restoration family housing schemes
outside London.
Across Berkeley’s waterfront schemes in London, the first phase of homes
at Chelsea Creek was delivered in the year, along with a new spa and leisure
complex serving these apartments, as were the first new homes at Kew Riverside
and further sales in the latest phase at Battersea Reach. The apartments at
Chelsea Creek are the first of a total of some 900 homes to be constructed
in this new waterside location adjacent to Imperial Wharf.
There was a further phase of occupations at Berkeley’s major regeneration
schemes at Woodberry Park, Kidbrooke Village and Royal Arsenal Riverside
in the year, in addition to new sales at established schemes including Beaufort
Park in Hendon and Queen Mary’s Place in Roehampton. Outside London,
new housing delivered at Edenbrook in Fleet and Queens Acre in Beaconsfield
are on schemes designed to form vibrant new communities in harmony with
their surroundings.
This year, Berkeley also delivered the first phase of high-specification
postgraduate student accommodation for Imperial College at Griffon Studios
near Clapham Junction, first occupied by Imperial’s students in October 2011,
with the second phase due for delivery in September 2012. Student schemes
at the Costume Store in Acton and at Dorset House in Oxford are due for
delivery in the next financial year.
Queens Acre, Beaconsfield
area: 6.8 acres
homes: 50
developed by: st. James
24 Berkeley annual report 2012
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Berkeley annual report 2012
25
Our BusinessOur Business
our lanD
DelivereD this year
Chelsea Creek, SW6
area: 10 acres
homes: c.900
developed by: st george
26 Berkeley annual report 2012
The redevelopment of a former gas works and an historic dock basin and lock in
Fulham, the completed scheme will provide 889 homes over nine residential blocks
and an office building, with contemporary architecture based on dockside living
in Amsterdam and Copenhagen. Purchasers started taking occupation of the first
phase in early 2012. The site benefits from the amenities of Imperial Wharf and
Chelsea Harbour close by, the convenience of the new Imperial Wharf station
delivered by St George, and the on-site residents’ only health and fitness centre
with swimming pool, sauna, steam room and gymnasium.
Our Business
Edenbrook, Hampshire
area: 54 acres
homes: c.300
delivered by: Berkeley
A ground-breaking development in
Hampshire, new residential homes are
bordered by an 84 acre country park
developed by Berkeley, which includes
cycle paths, walkways, boardwalks,
brooks and meadowlands, having been
subject to extensive ecological study
and an approach to preserve and
encourage wildlife to evolve within the
park. Designed to integrate its
surroundings, and to take inspiration
from the Arts and Crafts movement,
each home has been carefully positioned
to maximise its aspect and views, and
benefits from Berkeley’s exceptional
specification and attention to detail.
With the first phases of homes now
delivered at Edenbrook, Berkeley has
created a truly unique place.
Griffon Studios, SW11
area: 1.6 acres
Beds: 566 studios
developed by: Berkeley first
Delivered in partnership with Imperial College London, Berkeley First completed
the first phase of 452 high quality postgraduate student studios at Griffon Studios
in September 2011. With easy access to Imperial’s West London campuses, Griffon
Studios provides individual studios with kitchens and en-suite shower rooms, and
additional facilities include a central common room, gym, laundry, 24/7 reception
and management suite. The remaining 114 studios are due for delivery to Imperial
in September 2012. Berkeley First and Imperial’s joint interest in the completed
scheme was sold in September 2012 to Legal and General, backed by a long
lease from Imperial.
Berkeley annual report 2012
27
Our BusinessOur Business
our lanD
MaJor proJects
there are seven maJor
proJects Which, in aggregate,
comprise approximately
22% of the value of Berkeley’s
current land Bank.
These are projects in prominent locations in Central London, which have detailed
planning consents and which are scheduled to commence completions over
the next five years.
The seven major projects are The Tower at St George Wharf in Vauxhall,
Riverlight in Nine Elms, Chelsea Creek, One Tower Bridge, 375 Kensington
High Street, Ebury Square in Belgravia and 190 Strand. The first completions
at Chelsea Creek were reported in the year, and first completions on the other
six schemes are anticipated over the course of the next five years.
Both 375 Kensington High Street and 190 Strand are schemes owned, and being
delivered by, St Edward, Berkeley’s joint venture with Prudential.
The complex nature and size of these schemes means that it is inherently difficult
to provide absolute certainty over the timing of delivery, which in some cases
is up to five years away, as construction can frequently be affected by factors
outside the direct control of management as well as the risk of any slowdown in
sales. Whilst delivery will be phased over several years, these projects may lead
to an uneven distribution of earnings and increased average selling price over
the medium-term depending on the exact date of delivery.
Riverlight, SW8
area: 5 acres
homes: c.750
developed by: st. James
Computer generated images are indicative only.
28 Berkeley annual report 2012
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Berkeley annual report 2012
29
Our Business
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MaJor proJects
Computer generated images are indicative only.
Adjacent to Tower Bridge, the GLA headquarters and More London, and opposite
the Tower of London, Berkeley’s development at One Tower Bridge comprises the
regeneration of a redundant site and retention and refurbishment of listed school
buildings on the site. Designed by Squire and Partners, and being delivered in
partnership with the London Borough of Southwark, the scheme will complete the
regeneration of More London, and provide a mix of residential, retail, convenience,
leisure and cultural uses within a truly sustainable community. The first phase is now
under construction.
One Tower Bridge, SE1
area: 3.75 acres
homes: c.400
developed by: Berkeley
Xxxxxxxxxxxxx
30 Berkeley annual report 2012
Our Business
Computer generated images are indicative only.
A scheme located in the prime Central London neighbourhood of Belgravia,
Ebury Square is the redevelopment of a vacant apartment building formerly
owned by the Metropolitan Police. The architectural design reflects the high
quality precedents of the surrounding Thomas Cubitt buildings in Belgravia.
The quality of specification will match this, and will include basement car parking,
a Health Suite, Business Centre, residents’ lounges, 24/7 concierge and security
service. A planning consent was secured in early 2012, demolition of the
existing buildings has since commenced.
Ebury Square, Belgravia, SW1
area: 1 acre
homes: 71
developed by: Berkeley
The Tower, One St George Wharf, SW8
area: 7.25 acres
homes: c.1,400
developed by: st george
The Tower is the final phase of the
20-year redevelopment of a redundant
cold storage depot and coach park by
Vauxhall Bridge. Designed by award-
winning architects Broadway Malyan,
at 50 storeys it will be one of the tallest
residential towers in Europe and will
benefit from the vibrant mixed-use
community already active at St George
Wharf. It is also well connected with
adjacent bus, underground and rail links
across London. Erection of the frame is
now nearing completion.
Computer generated images are indicative only.
Berkeley annual report 2012
31
Our BusinessOur Business
our lanD
scheMes in Delivery
of Berkeley’s land Bank of
101 sites, there Were 69 in
production at 30 april 2012.
During the course of the year, some 20 sites moved from land not under
development into production, following successful planning consents and
sales releases.
Production levels are at their highest in London (40 of the 69 sites in production).
Here, Berkeley’s investment in construction is concentrated on the seven
major schemes separately identified above. There has also been significant
investment in its major London regeneration schemes at Woodberry Park,
Kidbrooke Village and Royal Arsenal Riverside, along with other schemes
across Berkeley’s London portfolio.
Outside London, where the remaining 29 of Berkeley’s sites in production are
located and where the market relies more on traditional owner-occupiers who
tend to purchase closer to completion, Berkeley has continued to invest in the
right schemes, working carefully to try to match supply to demand and allocating
capital as efficiently as possible.
This year has also seen Berkeley invest in two significant heritage schemes,
including the restoration of the Grade I Listed 18th Century Roehampton House
in London and the Victorian period All Saints development in Eastbourne, both
in partnership with English Heritage. The additional financial and operational
investment in delivering such challenging schemes has again been carefully
considered in light of Berkeley’s approach to limit the financial risk on these
schemes and match supply to demand.
Roehampton House at
Queen Mary’s Place, Roehampton
area: 13.8 acres
homes: 447
developed by: st James
32 Berkeley annual report 2012
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Berkeley annual report 2012
33
Our BusinessOur Business
our lanD
scheMes in Delivery
All Saints, Eastbourne
area: 6 acres
homes: 104
developed by: Berkeley
34 Berkeley annual report 2012
Berkeley’s painstaking refurbishment of this Victorian hospital in Eastbourne
has restored the architectural detail of this building to its former glory, blending
authentic period features with modern interiors. The latest phase of homes has
been released and the external restoration, including landscaping across the
6 acres of grounds, is complete. Berkeley has worked closely with English Heritage
in delivering this project, to preserve the history and essence of the place.
Our Business
Roehampton House at
Queen Mary’s Place, Roehampton
area: 13.8 acres
homes: 447
developed by: st James
Xxxxxxxxxxxxx
The refurbishment of the ornate Grade 1 listed Roehampton House is the latest phase
of St James’ development at Queen Mary’s Place in Roehampton. The renowned
award-winning historic gardens, previously paved over to provide temporary parking
for the prior occupants, are being restored together with stunning new landscaped
areas. St James has worked closely with English Heritage throughout the restoration
process, to provide wonderful living spaces within a truly historic building. These
homes represent a landmark phase at Queen Mary’s Place.
Woodberry Park, N4
area: 60 acres
homes: c.4,600
developed by: Berkeley
At Woodberry Park, Berkeley has
taken forward placemaking in a way
that combines social, economic and
environmental sustainability
considerations in pursuit of the ‘total
living environment’ agreed with local
residents, and has worked closely with
key stakeholders to deliver a broad
range of new community facilities,
shops, open spaces, play facilities and
transport facilities early to support the
needs of existing and new residents.
Occupations of the first phases have
commenced, and Berkeley’s skill and
expertise in identifying and delivering
the right framework and approach to
this major regeneration project will
remain the key to its enduring success.
Berkeley annual report 2012
35
Our BusinessOur Business
our Business
new consents
With all neW land acQuired,
Berkeley’s initial focus
is on securing a viaBle,
implementaBle planning
consent appropriate to
the location, demand
and context of each site.
The Group has achieved some significant successes this year, and the quality
of Berkeley’s land bank was enhanced over the year by the resolution to grant
planning consent on 36 schemes.
Of Berkeley’s Central London schemes, the new consents included 489 additional
homes at Chelsea Creek, 275 homes at Abell and Cleland House in Westminster,
some 200 apartments at 190 Strand and 90 apartments at Roman House.
Across Greater London, consents were secured for some 750 new homes
at Fulham Reach in Hammersmith, 144 homes at Thameside in Kew,
some 150 apartments at Carnwath Road in Fulham, a housing and apartment
scheme in Wimbledon and an apartment scheme in Finchley. This is in addition
to consents on the next phases at Berkeley’s large-scale regeneration schemes
at Kidbrooke Village, Royal Arsenal Riverside and Woodberry Park.
Outside London, nine new consents were secured, including amongst others
a new housing scheme in Caterham and a selection of the Group’s boutique
schemes of less than ten homes.
At 30 April 2012, 84% of the sites in Berkeley’s land bank benefited from an
implementable planning consent (2011: 77%), a statistic which gives strong
visibility over the future viability of the land bank.
The improvement of any scheme, whether through an initial consent or
an optimised consent, is reliant on swift, helpful and proactive engagement
from all parties involved in the planning process. Berkeley’s approach is
characterised by a spirit of engagement and dialogue with local communities
and stakeholders impacted by its schemes, an approach which it believes is
the most effective to unlocking each of its sites, and the key to ensuring the
delivery of new housing in England.
Wimbledon Hill Park, SW20
area: 5.7 acres
homes: c.80
delivered by: Berkeley
Computer generated images are indicative only.
36 Berkeley annual report 2012
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Berkeley annual report 2012
37
Our BusinessOur Business
our Business
new consents
Roman House, City of London
area: 0.3 acres
homes: 90
delivered by: Berkeley
A consent was secured by Berkeley to refurbish this existing office block in the
City of London close to the Barbican, to provide 90 luxury apartments in the heart
of London’s financial district. The new consent retains the Portland stone façade of
the current building, and the interiors, designed by The Manser Practice, have been
inspired by the original piece of Roman Wall adjacent to the development.
38 Berkeley annual report 2012
Computer generated images are indicative only.
Our Business
Fulham Reach, W6
area: 7.4 acres
homes: 744
delivered by: st george
St George commenced construction during the year on the first phase of this
scheme on the River Thames close to Hammersmith. Having secured a consent for
some 744 new homes, based on designs by John Thompson & Partners, St George’s
plans in the first phase include a mix of Manhattan, one, two and three bedroom
apartments along with a spa, gymnasium, concierge, snooker room and private
cinema room for the use of residents, and have already refurbished and opened
the riverfront walkway.
Abell and Cleland House, SW1
area: 1.7 acres
homes: 275
delivered by: Berkeley
In the heart of Westminster, Berkeley
recently secured a planning consent
for the redevelopment of these former
government office buildings into a
residential scheme. Providing 275 new
homes, the scheme will provide a high
quality environment not just for the
scheme’s residents, but with sensitive,
contemporary architectural and
landscape design, will represent a
significant improvement for all of the
local community. Berkeley secured a
planning consent in early 2012, and
the existing buildings are currently
being readied for demolition.
Computer generated images are indicative only.
Berkeley annual report 2012
39
Our BusinessOur Business
our Business
new acquisitions
the priority for a successful
and sustainaBle development
Business is to Buy land Well,
and Berkeley has a strong
track record in this area.
At Berkeley, land opportunities are assessed with a rigour that relies on the
expertise and application of trusted land teams, as well as their understanding
of and support for Berkeley’s long-term vision. The commercial viability, above
all the demand assessment, and investment returns of each scheme are crucial;
but it is the vision for each scheme, tied in with the aspirations of the local
community and of local government, the quality of the place that we can create,
and Berkeley’s willingness to interact with stakeholders along the way, which
are the key to adding value throughout the development process.
This year, Berkeley secured 2,444 plots across 20 new sites, investing a further
£311 million, which equates to an average plot cost of £127,000. The average plot
cost reflects a concentration of land acquired in London, in line with the Group’s
strategy to invest in markets in which it has a competitive advantage and where
the planning, political and market environment supports investment.
In Central London, the sites included a commercial property in EC1, which is
currently tenanted until 2015 and has a planning consent for some 700 homes,
two schemes on the Albert Embankment (Eastbury House and Hampton House)
and a scheme at One Blackfriars which has an established consent for a
52-storey development.
In Greater London the sites included a former monastery in Finchley and a Royal
Mail sorting office in Twickenham amongst others.
Outside London, Berkeley has acquired a former hospital site in Tunbridge Wells,
a housing scheme in Caterham, and a selection of boutique housing schemes each
with fewer than 10 homes. Most of the sites were either acquired with a planning
consent or conditional on a planning consent being secured.
Berkeley’s land holdings at 30 April 2012 do not include the acquisition of Wapping
Village on which terms were agreed and the purchase completed in May 2012.
Berkeley prides itself on its track record of acquiring the right land selectively
and at the right point in the cycle, and with the acquisition of Wapping, has now
invested over £1 billion in new land since the Group repositioned its strategy in
February 2009 to invest in land.
City Forum, EC1V
area: 4.7 acres
delivered by: Berkeley
Computer generated images are indicative only.
40 Berkeley annual report 2012
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Berkeley annual report 2012
41
Our BusinessOur Business
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new acquisitions
HAMPTON HOUSE
EASTBURY HOUSE
Computer generated images are indicative only.
Eastbury House and Hampton House, on the Albert Embankment in Vauxhall and
overlooking the River Thames, were acquired during the year. An application for
a new 28 storey development, designed by Rogers Stirk Harbour + Partners, has
been submitted on Eastbury House, whilst Hampton House was acquired with
an existing consent for 242 homes, a 167 bedroom hotel and approximately
5,000 sq ft of commercial space.
Eastbury House and Hampton House, Vauxhall
area: 1.2 acres
delivered by: st James
Xxxxxxxxxxxxx
42 Berkeley annual report 2012
Our Business
Royal Tunbridge Wells
area: 11.6 acres
delivered by: Berkeley
A housing scheme in Royal Tunbridge Wells in Kent, this was the acquisition of the
former Kent and Sussex Hospital, in an area where Berkeley believes that there is
good infrastructure and there will be strong demand. Berkeley is working on an
application to demolish the existing redundant buildings and deliver a new housing
scheme appropriate to the market in this location.
ONE BLACKFRIARS
One Blackfriars, SE1
area: 1.6 acres
delivered by: st george
Acquired in December 2011, One
Blackfriars is a 1.6 acre cleared site to the
south of the River Thames in Blackfriars.
The site was purchased with an existing
consent for a combination of residential,
hotel and commercial uses within a
50-storey tower. Since the year end, and
having reviewed the existing consent,
St George has submitted an application
to revise this consent.
Computer generated images are indicative only.
Berkeley annual report 2012
43
Our BusinessOur Business
running a sustainable Business
running a
sustainaBle Business
our vision is to
remain one of the
most successful
and sustainaBle
Businesses in Britain.
44 Berkeley annual report 2012
Running a Sustainable Business
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Berkeley annual report 2012
45
running a sustainable Business
Berkeley is passionate about
quality-led placemaking.
From one of the UK’s largest
regeneration projects, to a high
profile civil engineering scheme,
to an 84 acre country park.
1 Kidbrooke Village
putting a ‘village’ back
into london and bringing
a renewed social and
community vibrancy into
everyday lives to enhance
the wider area.
2 Crossrail at Woolwich
Berkeley is delivering and
co-funding the crossrail
station box at Woolwich as
part of their regeneration
of royal arsenal riverside.
3 Edenbrook Country Park
encompassing 84 acres
of meadowlands, wetlands
and woodland areas, the
country park is connected
via a network of footpaths
and cycleways.
1
Before – ferrier estate
during – demolition
after – phase 1
46 Berkeley annual report 2012
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3
running a sustainable Business
Computer generated images are indicative only.
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Berkeley annual report 2012
47
running a sustainaBle Business
Berkeley’s oBJectives and
strategy have a clear focus
on the long-term.
We believe that a business in this sector cannot and should not operate with
only short-term targets, and that a sound understanding of the long-term cyclical
nature of the market in which we operate must be reflected in our approach.
Our targets to return £13 per share in cash to shareholders by 2021 and to
retain a strong sustainable business throughout this period and thereafter is
a clear statement of long-term intent, and requires us to run our business in
a sustainable and safe way. We manage the business on a day-to-day basis with
these long-term objectives in mind, and with a series of specific commitments
under the framework of Vision2020, which embed this approach within our
operating teams. We track and measure our performance towards the long-term
objectives through review of our financial performance and progress, and against
our commitments under each key area of Vision2020, which overall comprise
our key performance indicators. Our long-term financial strategy, in combination
with the fundamental principles of Vision2020, and the importance of recruiting
and retaining the best people to run the business sustainably and with integrity,
support Berkeley in its drive to be one of the most successful and sustainable
businesses in Britain.
Our vision
for the future
vision2020 provides Berkeley with the framework to meet this
ambition and focuses the business on four key impact areas:
the customer experience
Building greener homes
delivering sustainable communities
running a sustainable Business
48 Berkeley annual report 2012
Running a Sustainable Business
financial staBility
an assessment of financial performance and outlook is central to the annual
Report of every business, and this is no different for Berkeley. The Trading
and Financial Reviews elsewhere in this report provide a detailed analysis
of our performance in the year. This performance is underpinned by our
trading success, under which we have delivered Profit Before Tax of
£214.8 million (2011: £136.2 million) and an Operating Margin before
exceptional items of 18.8% (2011: 18.3%). However it is a Return of equity
of 21.2% (2011: 15.3%), one of our core performance targets, which best
measures our performance towards delivering sustainable success.
A return on equity at this level is central to our assertion that the Berkeley Group
business is being run at an optimal size which enables it to deliver exceptional
returns in an efficient way.
Careful control of the balance sheet is at the root of Berkeley’s ability to deliver
such returns. Despite a growth in capital employed from £891.7 million at
30 April 2011 to £1,157.7 million at 30 April 2012, we have carefully controlled
gearing levels at 5% from net debt of £57.9 million (2011: nil from net cash of
£42.0 million), reflecting our planned investment in high quality land assets and
in a demand-led investment in construction as we entered this phase of the
cycle. This investment in construction is supported by our strong forward sales
position which at £1,055.7 million (2011: £813.5 million) is at a level which gives
us the confidence to commit investment in construction to the sites to which
the sales relate. This balance sheet strength is reflected in Net Asset Value per
Share of 839.3 pence, up from 709.2 pence in 2011.
We have continued to invest in land in a controlled way, and have invested
£311 million over the course of the year. Together with our focus on securing the
right planning consents for our schemes, we have increased Gross Margin in the
land bank from £2,304 million at 30 April 2011 to £2,580 million at 30 April 2012,
our second core performance target. Where we invest in land is where we have
confidence in the fundamentals of that land in terms of location, planning and
demand. Once secured, land is the asset which fundamentally supports the
long-term earning potential of the business.
It is the combination of solid trading performance, balance sheet strength
and land bank potential which, together with the right approach to running
a business for the long-term, gives us the confidence in Berkeley’s ability to
continue to perform at this level in the long-term.
£214.8
million
(2011: £136.2 million)
profit Before tax
21.2%
(2011: 15.3%)
return on equity
18.8%
(2011: 18.3%)
operating Margin
before exceptional items
£1,055.7
million
(2011: £813.5 million)
Forward sales
£2,580
million
(2011: £2,304 million)
land Bank
Berkeley annual report 2012
49
Running a Sustainable BusinessRunning a Sustainable Business
running a sustainable Business
the customer experience
the customer at the
heart of our Business
The customer is at the heart of every decision that we make,
from the land that we buy, through development planning, to
the detailed design, specification and construction of our housing
and commercial space. Our vision for 2020 is that:
“We will consistently meet or exceed our customers’ expectations
by delivering well-designed, beautiful homes and communities
where they can live happy, healthy and environmentally-efficient
lifestyles. The service that we provide to our customers
throughout the purchasing process and after completion will
be exceptional. Customers will be positioned at the heart of our
business and will be central to the decisions that we make.”
Our vision
for the future
97%
(2011: 96%)
Percentage of customers
that would “Recommend
us to a friend”
53%
(2011: 45%)
Percentage of commercial space
completed which achieved
BREEAM Very Good
50 Berkeley annual report 2012
Running a Sustainable Business
running a sustainable Business
Edenbrook, Hampshire
Our customers include private purchasers, housing associations, universities,
student and Extra Care accommodation providers, commercial occupiers, hotel
operators and investors. We take our relationships with all our customers very
seriously, and challenge ourselves to meet or exceed their expectations in
everything we do.
We use customer satisfaction surveys undertaken by an independent external
agency to measure how well we are meeting our customers’ expectations. All of
our private purchasers are asked to complete a survey, and this year 97% of our
customers reported that they would recommend Berkeley to a friend, compared
to 96% in 2010/11. This is above our target of 90%, and represents further
reassurance that, through Vision2020, we are succeeding in embedding the
customer experience at the heart of our business.
Whilst we are primarily a residential developer, we also target high performance
standards on our commercial space on mixed-use developments and on our
student accommodation schemes. Our objective is to ensure that all commercial
space (including student accommodation) achieves BREEAM Very Good, or is
capable of achieving this if fitout is to be undertaken by the tenant. BREEAM
is an assessment which measures the environmental impact of the buildings that
we develop. During 2011/12, 100% of our commercial space submitted for
planning will meet these requirements and 53% of our completed commercial
space was certified to BREEAM Very Good.
The Customer Experience is central to Berkeley’s reputation, its ability to secure
sales and hence the viability of the future business. As such, it is a central focus
of management at all levels, and one in which we will continue to strive for
exceptional performance.
Driving perForMance through vision2020
(our leaDing coMMitMents up to 2014)
Over the last two years the commitments we have made in this area through
Vision2020 have concentrated on embedding the customer experience at
the heart of our business. We are now setting ourselves targets that will
deliver exceptional customer service on a par with the best performing
companies in Britain.
From now on, we are moving our “Recommend us to a friend” target up to 95%.
We will also:
– Provide every customer with a Customer Satisfaction Commitment. This is our
way of making sure our customers are completely satisfied with their purchase.
– Provide our customers with a dedicated point of contact at every stage of the
customer journey. We believe customers should have individually tailored
support to guide them through the purchasing process.
We take our relationships with all our
customers very seriously, and challenge
ourselves to meet or exceed their
expectations in everything we do.
Berkeley annual report 2012
51
Running a Sustainable BusinessRunning a Sustainable Business
running a sustainable Business
Building greener homes
environmental
sustainaBility
It is a reality of the world today that environmental sustainability
must be at the heart of any business that wishes to be successful.
Berkeley prides itself on having led the way in its commitments
to achieving environmental performance standards across its
portfolio, and believes that this is the right and responsible
approach to take in this industry. Our vision for 2020 is that:
“We will have completed our first zero carbon community and all
our new developments will be low or zero carbon. Our proven track
record of delivering high quality, well-designed, comfortable homes
with low environmental impact will make them highly desirable to
customers and will have expanded our market base. Homes built
by Berkeley will be recognised throughout the industry as the very
best examples of sustainable design and construction.”
Our vision
for the future
81%
(2011: 65%)
percentage of homes certified
using an environmental
performance methodology
89%
(2011: 92%)
percentage of development
on brownfield land
52 Berkeley annual report 2012
Holborough Lakes, Kent
Our continued focus is on developing
on brownfield land, with 89% of our
development this year on brownfield
rather than greenfield land.
The homes we build have an environmental impact not only during the
construction process, but also through their occupation. Designing homes to
meet environmental performance standards such as the Code for Sustainable
Homes helps minimise these impacts whilst giving us the ability to clearly
demonstrate their performance to our customers and other stakeholders. We
are also committed to integrating additional measures to reduce impact where
we believe that these add value or meet the demands of our stakeholders.
Our industry-leading commitment to certify all homes to Level 3 of the Code
for Sustainable Homes has been the driving force behind our achievement of
81% of homes built this year certified using an environmental performance
methodology (2011: 65%). We continue to investigate the feasibility of improving
environmental performance standards still further, and are pleased to confirm
that this year we will be designing several schemes to Level 4 of the Code for
Sustainable Homes. Delivering energy-efficient homes and improving water
efficiency is not only right for the environment, it is immediately reflected in
reduced utility bills for our customers.
Our continued focus is on developing on brownfield land, with 89% of our
development this year on brownfield rather than greenfield land (2011: 92%),
thereby bringing back to life often redundant or under-utilised land. The ecological
impact of our work has included the introduction of brown roofs, country parks,
and waterfront walks at certain of our schemes, providing a sensitive balance in
the places that we deliver.
As the wider movement is towards prioritising the environmental agenda, Berkeley
will continue to remain at the forefront in promoting this agenda, its importance
both internally and externally reflecting its rightful place at the heart of Berkeley’s
strategy to build and consolidate its business for the long-term.
Driving perForMance through vision2020
(our leaDing coMMitMents up to 2014)
In recent years our focus has been on reducing carbon emissions from the homes
we build. To address this, in 2007 we launched a Climate Change Policy which
committed all of our new homes to Level 3 of the Code for Sustainable Homes.
Climate change would pose risks to the built environment, primarily from higher
temperatures and changed rainfall patterns. In this context, our next challenge is
to make sure our homes provide high levels of comfort and simplicity and sit within
a landscape that can cope with more extreme weather conditions. From now on,
Berkeley will ensure our homes are not only low carbon – every place we create
will also be designed for adaptation to a future changed climate.
We will also:
– Put in place adaptation measures on all new developments by investing in the
space between buildings to create beautiful landscapes which help places adapt
to climate change.
– Harvest rainwater for use on all new developments.
– Provide ‘living roofs’ on every suitable apartment roof space.
Berkeley annual report 2012
53
Running a Sustainable BusinessRunning a Sustainable Business
running a sustainable Business
Computer generated images are indicative only.
delivering sustainaBle communities
creating places that Will
stand the test of time
Berkeley has an emphasis on creating a successful, sustainable
place from every site that we develop. Our vision for 2020 is that:
“We will create high quality, sustainable places where people
choose to live, work and spend their time. These will be places
that directly encourage the well-being of residents and offer them
a space and a base from which to lead safe and fulfilling lives.
Our ability to transform sites into thriving communities will be
considered the best in our industry. Through our ability both
to engage and to deliver, Berkeley will be the developer of
choice for local authorities and existing communities.”
For each of our schemes, we develop a specific solution, using bespoke design,
with the aim of delivering well-designed homes and communities. We do not have
standard product. Unlike most major housebuilders, we consistently use qualified
architects to design each scheme, whether it consists of 4 or 4,000 homes.
Our vision
for the future
44%
(2011: 29%)
percentage of homes
completed which met the
lifetime homes standard
14
(2011: 30)
number of new developments
achieving 14 or more of the
Building for life criteria
54 Berkeley annual report 2012
Running a Sustainable Business
running a sustainable Business
Chelsea Creek, SW6
Each place we create emerges through the management of a complex series
of relationships and processes. Together these deliver the right mix of housing,
transport, open space, retail and other facilities. We work very closely with the
community to achieve this; their needs and ideas inform the design. Ultimately,
they must take pride in the place and responsibility for its long-term success.
We have a culture in our business of talking directly to residents and delivering
what we promise.
Our strategy puts equal emphasis on each dimension of sustainability. This
means building a place which offers people access to employment and a
good quality of life, as well as the chance to live in a low carbon environment.
Berkeley invests in the social fabric of each community just as we invest in the
environmental performance of each home. Our ability to deliver this integrated
approach to making a place sustainable is a core part of what makes us different.
Our developments also have an important role to play in contributing to economic
growth and prosperity in the local community, at first through the investment
in construction and infrastructure during the delivery process, where we actively
work to promote job opportunities, and on the occupied scheme. Many of our
developments are a draw to new business, including the opportunities presented
by the new retail and commercial space that we deliver, and so help boost the
wider employment opportunities in the locations in which we operate.
When Vision2020 was launched in May 2010, we committed to assessing our
new developments using the Building for Life criteria and ensuring that they
achieve at least the Silver Standard (equivalent to scoring 14 out of the 20
criteria). Building for Life is a framework to encourage well-designed homes and
neighbourhoods, and is a measure that we use to demonstrate design quality in
the communities that we create. In 2012, we assessed 14 of our developments
using the criteria and 100% achieved a score of 14 or more. Since making this
commitment in May 2010, a total of 44 new developments have now been
assessed and scored 14 or more.
We have also committed to apply the Lifetime Homes principles on all new
developments. Lifetime Homes are designed to be adaptable to people’s changing
needs over their lifetime, thus preventing social exclusion, and so success under
this standard is indicative of the level of inclusivity of our developments. In 2012,
44% of our homes met the Lifetime Homes Standard (2011: 29%).
Our focus is on delivering well-designed, safe, sustainable places which will
endure as settled, vibrant communities long into the future. At Berkeley, we
believe that it is this long-term vision, to appreciate the needs of our customers
and wider stakeholders before, during and after the delivery of our schemes, that
is the right model for a truly successful and sustainable business in our sector.
Driving perForMance through vision2020
(our leaDing coMMitMents up to 2014)
Well-designed buildings and places are crucial in delivering sustainable
communities. This is why in May 2010 we made a commitment that all of our
new developments would achieve the Building for Life Silver Standard.
We also know that if you want a place to thrive, it is not enough just to provide
good physical infrastructure. You also need to focus on how people will relate to
each other and function as a community. We use the idea of social sustainability
to describe this. It captures the way in which a neighbourhood supports the
individual and collective well-being of the people who live there. We will now
develop a coherent way of routinely addressing the issues on our developments
that affect people’s well-being and quality of life.
We will also:
– Establish an understanding in our business and in government of what social
sustainability is, how you measure it and what you can do to support it.
We have a culture
in our business
of talking directly
to residents and
delivering what
we promise.
Berkeley annual report 2012
55
Running a Sustainable BusinessRunning a Sustainable Business
Running a Sustainable Business
running a sustainaBle Business
managing the economic,
social and environmental
impacts of our Business
Vision2020 is about how we run the business from day-to-day, to
take on board the principles of a long-term strategy, in a safe and
sustainable way. Our vision for 2020 is that:
“Sustainability will be fully integrated into our business strategy
and operations. Our environmental impact will be as low as
possible and our operational sites will be healthy and safe places
to work. We will retain a highly skilled and passionate workforce
and through the Berkeley Foundation we will have given help
to many young people, their families and communities. We will
maximise shareholder value over the long-term in a sustainable
and safe way, for an acceptable level of risk.”
Our vision
for the future
2.69
(2011: 3.63)
riDDor accident incident rate
1.53
tonnes CO2e
(2011: 1.67 tonnes c02e)*
total direct operational carbon
emissions per operative on site
*restated figure
56 Berkeley annual report 2012
Running a Sustainable Business
Running a Sustainable Business
Good Work Contractor Conference
organised by Berkeley
We have reported on our financial performance, and how this demonstrates our
approach to building a sustainable business both in terms of past performance
and indicators for the future. Operationally, we prioritise those areas which enable
us to manage the economic, social and environmental impacts of the business in a
way that promotes the Berkeley way as the right way to do business in this sector.
Health and Safety is an absolute priority. As production levels have increased
over recent years, it gives us confidence in our approach to report that the
RIDDOR accident incident rate (an indicator that measures the number of fatalities,
major incidents and over three day absences per 1,000 people working on our
construction sites) has reduced to 2.69 (2011: 3.63), a level which continues to
outperform the industry. This is an area that requires continued vigilance and hard
work from our teams, and receives a high level of management focus. We have
continued our Good Order and Good Work programmes across all of our sites
to continue to drive high Health and Safety standards on our sites, and this has
again been well received by our contractors, managers and operatives. Berkeley’s
stakeholders, and above all Berkeley’s workforce, should take comfort that
Berkeley will always keep Health and Safety a top priority.
Environmental efficiency in our operations is an environmental focus which also
has a clear cost benefit. Our focus on reducing emissions has meant that our direct
operational carbon emissions per operative on site has reduced by 9% in 2012
to 1.53 tonnes CO2e. We continue to focus on ways to further reduce our carbon
emissions and our water consumption and waste generation during the
construction process.
Driving perForMance through vision2020
(our leaDing coMMitMents up to 2014)
In the last two years we have had a particular focus on managing the social and
economic impacts of our business through the launch of the Berkeley Foundation.
We also set targets to reduce the environmental impacts of our business and
enhance Health and Safety performance.
Strong financial performance is essential for running a sustainable business.
This provides the foundation from which we can deliver all of our Vision2020
commitments. Our key focus moving forward will be to maximise shareholder value
over the long-term in a safe and sustainable way, for an acceptable level of risk.
To achieve this, we will also:
– Position the business so that Berkeley is well-placed to deliver returns
of £4.34 per share to shareholders by September 2015.
– Retain our balance sheet strength and continue investment in our land bank.
This approach will give us the financial and operational stability to properly
manage the social, economic and environmental impacts of our business across
all disciplines as we have done in the past, enabling us to keep Health and Safety
a top priority and continue to improve our environmental efficiency.
We continue to focus on ways to further
reduce our carbon emissions and our
water consumption and waste generation
during the construction process.
Berkeley annual report 2012
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Running a Sustainable BusinessRunning a Sustainable Business
58 Berkeley annual report 2012
Running a Sustainable Business R
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Berkeley annual report 2012
Berkeley annual report 2012
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59
Running a Sustainable Business
Street Elite
a sports-based training for work programme
Conor McGahon, Land Manager, Berkeley
at the summit of mount everest helping
raise money for the Berkeley foundation
60 Berkeley annual report 2012
the Berkeley foundation
The Berkeley Foundation was launched in 2011. It works to improve the lives of
young people and their communities in London and the South East.
The Berkeley Foundation embodies our approach to Corporate Social Responsibility,
and has engaged our employees both within the wider community and beyond.
The Foundation invests in three different ways: through a small group of major
strategic partnerships; by supporting individual charities which matter to our
local businesses; and by making one-off grants. Two strategic partnerships began
in 2011. The first was with the Lord’s Taverners, developing a sports-based
training for a work programme called Street Elite. The second was with Shelter,
supporting a complete range of housing advice services for young people.
The creation of apprenticeships across our developments, of which there have
been some 100 to date, is also in line with Berkeley’s aspiration to embed good
corporate citizenship into the business model itself, recognising the capacity that
a business with the skills and experience of the Berkeley workforce can give back
in training a highly skilled workforce for the future.
Berkeley’s intention is to make the Berkeley Foundation the most effective and
distinctive Corporate Social Responsibility programme in the housebuilding and
real estate sector. This will be built on a strategic approach to modelling new
ways of changing young people’s lives for the better, supported by the notion
that everyone in Berkeley, however they may choose to do it, does something
to support the Foundation every year.
Running a Sustainable Business
our people
The success of Berkeley as an organisation to date is a testament to the
knowledge, skill and hard work of our employees across every discipline of the
business. Implementing a long-term strategy needs the understanding, buy-in
and above all the passion of all of our employees to ensure that we deliver a
business that can be considered one of the best and most sustainable in Britain,
one of which all of our employees can be proud. Recruitment and retention of
our high calibre workforce is crucial to this, to ensure that Berkeley can remain
a market leader and implement Vision2020 across every discipline.
aWards
Whilst the business is not run in order to secure awards, perhaps that which
makes Berkeley most proud, of those received this year, is its recognition by
Management Today as Britain’s Most Admired Company in 2011, ranking ahead
of some of Britain’s most prestigious businesses from Diageo to Royal Dutch
Shell and Unilever. Other awards this year include 12 What House? Awards,
Homebuilder of the Year at the Daily Telegraph British Homes Awards and
Housebuilder of the Year at the 2011 Building Awards amongst others. The
focus that Berkeley places on Health and Safety has also again been recognised
through awards across its schemes from RoSPA, the NHBC and the Considerate
Constructors Scheme.
Awards of this nature support our assertion that Berkeley is on the right path.
We have again delivered a strong operating performance, whilst demonstrating
that we are running the business in the right way to build and consolidate
Berkeley as one of Britain’s leading businesses now and in the future. With the
right long-term strategy, the right operational targets, and the right framework
in Vision2020 to support our approach, we believe that Berkeley is entering the
year in excellent shape to continue to deliver on its promises.
Our Sustainability Report 2012, published under separate cover, provides a more
in-depth analysis of Berkeley’s approach to running a sustainable business under
the framework of Vision2020.
Berkeley’s intention is to make the Berkeley Foundation the
most effective and distinctive Corporate Social Responsibility
programme in the housebuilding and real estate sector.
Berkeley annual report 2012
61
Running a Sustainable BusinessRunning a Sustainable Business trading & Financial review
trading & financial revieW
the Berkeley vision is to
maximise shareholder
value over the long-term
in a sustainaBle and safe
Way, returning £13 per share
to shareholders By 2021.
62 Berkeley annual report 2012
trading & Financial review
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Berkeley annual report 2012
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traDing review
Stanmore Place, HA7
area: 7 acres
homes: 798
developed by: st edward
trading performance
Berkeley’s results for the year ended 30 April 2012 demonstrate a strong
underlying operating performance which, along with further growth in
forward sales, a strong balance sheet and a solid land bank, leaves Berkeley
well-positioned to meet its previous target of doubling its profit before tax
from £110 million to £220 million by 30 April 2013, some two years earlier
than originally planned and to embrace its new operational targets as it
heads towards the first targeted dividend repayment in September 2015.
The strong underlying operating performance has been balanced with controlled
investment in the future of the business. Shareholder equity has increased
by £170.4 million to £1,099.8 million, while capital employed increased by
£266.0 million to £1,157.7 million, some 29.8% higher than at the start of the year.
A full review of Berkeley’s trading performance and financial position is set out
in the Financial Review on pages 74 to 79.
housing market
Demand for residential property in good locations in London and the South East
remained strong throughout the year, attracting interest from both UK domestic
and international buyers, whether investors or owner-occupiers. This is consistent
with recent data from the Office of National Statistics which recorded that prices in
London rose by 4.9% in the year to April 2012 compared to 2.1% in the South East
and 1.4% nationally in the same period.
This demand undoubtedly rests on London’s pre-eminent position as one of the
world’s largest trading and financial centres and the benefits that this brings to the
wider economy in the South East of England in terms of jobs and employment.
Underlying domestic demand has remained resilient during the year, with visitor
numbers across our sites remaining stable compared to last year, as has the
ongoing demand for rental properties on our developments. For Berkeley’s
international customers, London continues to offer a unique combination of
stability, access to some of the world’s most prestigious addresses, including
shops, restaurants and cultural amenities, a number of world-class higher
education establishments and a competitive exchange rate. Together with what
has historically been a supportive taxation framework, these have made London
the preferred choice, when compared to the world’s other major cities, for major
inward investment.
Outside London, where the market relies more on traditional owner-occupiers,
forward selling is less prevalent as people tend to buy when product is completed
and available for occupation. Sales levels have been consistent with last year and
Berkeley has worked carefully to try to match supply to demand. Berkeley held
288 completed properties in stock at 30 April 2012 (30 April 2011: 238) which
are available for immediate sale and which is in line with historic levels.
Compounding this demand, there is a shortage of supply of new homes,
exacerbated by existing planning policy and restrictions on the availability of
development finance, which continues to place a scarcity value on homes in
good locations. In these conditions, Berkeley anticipates that demand will
remain strong for property in the best locations in London and the South East.
These market conditions are reflected in Berkeley’s sales reservations which
were some 27% ahead of last year, supported by the launch of 23 new sites to
the market. Cash due on forward sales stood at £1,055.7 million at 30 April 2012,
an increase of 29.8% from £813.5 million at 30 April 2011. Cancellation rates
which averaged 14.8% over the course of the year remained at levels consistent
with a strong underlying market.
64 Berkeley annual report 2012
Trading & Financial Review
trading & Financial review
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Berkeley annual report 2012
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Trading & Financial ReviewTrading & Financial Review
2,444
plots acquired
20
new sites
Government intervention to provide a solution to customer deposits and higher
loan-to-value mortgages through the NewBuy scheme has been welcome.
Whilst not necessarily expected to form a significant proportion of Berkeley
sales, NewBuy is available on properties for sale under £500,000 and is a helpful
enabler for those looking to step onto the housing ladder without access to a
significant deposit.
The NewBuy scheme is expected to offer a more permanent replacement to
the existing FirstBuy scheme when it comes to an end in December 2012. Under
the government’s FirstBuy initiative, some 60 customers have been helped to
purchase their own Berkeley home during the year. Finding ways to continue
to help individuals secure financing is important to ensure momentum and
confidence in the housebuilding sector.
Across other areas of Berkeley’s portfolio, there has remained strong interest
in student accommodation, with a postgraduate scheme at Clapham Junction
delivered during the year and four undergraduate schemes in the pipeline,
underpinned by University and student demand in the locations identified.
This is very much demand led, and the attraction of students to the world-class
universities of London and the South East, who in turn demand world-class
accommodation, has supported this investment.
Despite the well-documented challenges in retailing in uncertain times, there
continues to be good interest in commercial tenancies on Berkeley’s mixed-use
schemes, with nine major supermarket pre-lets secured over the last eighteen
months and tenancies across other uses including restaurants, coffee shops and
crèches amongst others supporting the vibrancy of the places created.
neW land acQuisition
In the year, Berkeley secured 2,444 plots across 20 new sites, investing a further
£311 million, which equates to an average plot cost of £127,000. The average
plot cost reflects a concentration of land acquired in London, in line with the
Group’s strategy to invest in markets in which it has a competitive advantage
and where the planning, political and market environment supports investment.
In Central London, the sites include a commercial property in EC1 which is
currently tenanted until 2015 and has a planning consent for some 700 homes,
two schemes on the Albert Embankment (Eastbury House and Hampton House)
and a scheme at One Blackfriars which has an established consent for a 52-storey
development. In Greater London they include a former monastery in Finchley
and a Royal Mail sorting office in Twickenham. Outside London Berkeley has
acquired a former hospital site in Tunbridge Wells, a housing scheme in
Caterham, and a selection of boutique housing schemes each with fewer than
10 plots. Most of the sites were either acquired with a planning consent or
conditional on a planning consent being secured. Berkeley’s land holdings
at 30 April 2012 do not include the acquisition of Wapping Village on which
terms were agreed and the purchase completed in May 2012.
In the year Berkeley secured 2,444 plots across 20 new
sites, investing a further £311 million, which equates
to an average plot cost of £127,000.
66 Berkeley annual report 2012
Trading & Financial Review
planning and optimisation
The quality of Berkeley’s land bank was enhanced this year following resolution
to grant planning consent on some 36 schemes. These consents included some
750 new homes at Fulham Reach, 489 new homes at Chelsea Creek, 275 homes
at Abell and Cleland House in Westminster and 144 homes at Thameside in Kew.
At 30 April 2012, 84% of the 26,021 plots in Berkeley’s land bank benefited from
an implementable planning consent (2011: 77%), a statistic which gives strong
visibility over the future viability of the land bank.
Optimising the value of the land bank through planning has traditionally offered
Berkeley the opportunity to add value while maintaining an efficient balance
sheet and minimising risk. Equally important is that the revision of planning
consents often directly supports local communities by funding additional Section
106 and community benefits that would not otherwise have been delivered and
ensuring a sustainable use of land, a scarce resource, to build much needed
homes. Optimisation is invariably demand led, whether this is meeting the need
for more new homes, changing the mix of homes or changing planning uses to
meet market requirements which evolve over time. In the year, Berkeley added
approximately 6% of value to its opening land bank which is in line with historic
levels and contributed to the outperformance in the growth in the land bank
compared to its original target.
The planning outlook in London has been significantly aided by the London Plan
which governs planning policy in the Capital. Outside London, where there is no
common framework, planning remains more difficult due to a lack of certainty.
This year Berkeley, whilst securing some nine new consents outside London,
also had applications rejected on five sites acquired conditional on securing a
planning consent, a rate which is unsustainable if it continues at this level.
The National Planning Policy Framework, published in March of this year, is
a helpful step forward for the industry, providing a presumption in favour of
sustainable development when such development will improve and enhance
the places where people live. This is about developing in the right way, engaging
with and for the benefit of local people and communities, and is a sensible
platform from which the industry can work.
The engagement of developers with local communities is only part of the
equation. Planning needs to be an effective and positive process with active
engagement from all parties. Engagement with statutory consultees across a
range of disciplines, whether the Highways Agency, the Environment Agency,
English Heritage or Natural England to name but a few, needs to be swift and
proactive, and this is not currently the case. This is in the spirit of the National
Planning Policy Framework, and is key to satisfying continuing demand for new
housing in this country.
With the introduction over recent years of a wide variety of consultees on every
planning application, the positive input that this brings must be balanced with
the increasing cost of securing planning consents. Berkeley works hard to meet
the aspirations of all interested parties, but acknowledges that underlying
financial viability, above all on the part of the developer that uses its balance
sheet to support the delivery of each scheme, is the key to unlocking each of
its sites. Swift, helpful and proactive engagement from all parties is needed to
unlock successful development.
36
resolutions to grant
planning consent
Berkeley annual report 2012
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trading & Financial review
68 Berkeley annual report 2012
trading & Financial review
£2,580
million
estimated gross margin
in the land bank
land Bank
After taking account of homes completed in the year (including joint ventures and
student rooms at Clapham Junction), and the net addition of further plots through
replanning and optimisation, the Group (including joint ventures) controlled some
26,021 plots at 30 April 2012 with an estimated gross margin of £2,580 million.
This compared to 27,026 plots and £2,304 million at 30 April 2011. The average
selling price in the land bank increased from £301,000 to £345,000 over the year,
primarily reflecting the land acquired in London which has a higher average selling
price than the underlying land bank.
Berkeley also holds approximately 10,000 further plots in its longer-term pipeline,
including strategic land under option which requires promotion through the
planning system as well as long-term regeneration land which is under contract.
Delivery on this pipeline is constrained not just by planning, but other factors
including viability and vacant possession which require Berkeley’s expertise to
unlock value in these plots and bring them into the longer-term land bank.
Having added £276 million of potential gross margin in 2012 to £2,580 million,
Berkeley is advancing its target to increase the value of its land bank, after allowing
for completions over the period, to £3 billion by April 2014, against a previous
target of April 2015.
Owned
Contracted
Agreed
Plots *
Sales value
Average selling price
Average plot cost
Land cost
Gross margin
april 2012
25,755
246
20
26,021
£8,989m
£345k
£55k
16.0%
£2,580m
28.7%
Change
-1,110
+99
+6
-1,005
+£854m
+£44k
+£11k
+1.4%
+£276m
+0.4%
* Includes 1,658 plots within joint ventures at 30 April 2012 (30 April 2011: 1,548)
April 2011
26,865
147
14
27,026
£8,135m
£301k
£44k
14.6%
£2,304m
28.3%
The average selling price in the land bank increased
from £301,000 to £345,000 over the year.
No.1 Gunwharf Quays, Portsmouth
Berkeley annual report 2012
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Trading & Financial ReviewTrading & Financial Review
Royal Arsenal Riverside, SE18
delivery of maJor proJects
20 sites have moved from land not under development into production over
the course of the year following planning consents and successful sales releases.
These include St George’s scheme at Fulham Reach on the river in Hammersmith
and Berkeley’s scheme at Goodmans Fields, where the first phase comprising the
refurbishment of 75 Leman Street is underway.
The delivery of residential accommodation this year also included Griffon Studios,
a post-graduate student scheme at Clapham Junction, complementing the student
schemes in Acton and Aldgate in London and those in Oxford and Gillingham that
are due for delivery for the start of the academic years in September 2012 and
2013 respectively.
Production levels are at their highest in London, where demand most supports this
investment. Berkeley has delivered first occupations at Chelsea Creek this year in
line with previous guidance, with further occupations at our major regeneration
schemes at Woodberry Park, Kidbrooke Village and Royal Arsenal Riverside. At
Grosvenor Waterside, where the Group is contracted to sell 334 properties to
Project Red Limited, a company ultimately controlled by Qatari Diar, some 149 of
these properties had been completed at 30 April 2012, leaving a balance of 185
properties to complete at such time as the purchaser, at its discretion, requests
delivery. Payment has been received in full for all of these properties.
Berkeley has previously highlighted seven major projects which have planning
consents and which are scheduled to commence completions over the next five
years. These projects, in aggregate, comprise some 22% of the value of the
current land bank, and whilst delivery will be phased over several years, may lead
to an uneven distribution of earnings and increased average selling price over the
medium-term depending on the exact date of delivery.
The seven major projects are The Tower at St George Wharf, Riverlight, Chelsea
Creek, One Tower Bridge, 375 Kensington High Street, Ebury Square and 190
Strand. The complex nature and size of these schemes means that it is inherently
difficult to provide absolute certainty over the timing of delivery, which in some
cases is up to five years away, as construction can frequently be affected by factors
outside the direct control of management as well as the risk of any slowdown in
sales. Delivery of each of these projects is currently at or within the timescales
previously indicated and further updates will be made to the market in due course.
Outside London, construction has continued across Berkeley’s portfolio.
Apartments at Cambridge Riverside and Kingsbrook Park in Canterbury, as well as
family housing at Edenbrook in Fleet, Queen’s Acre in Beaconsfield and King’s Hill
in Cirencester, have been occupied in the current year and will benefit future years.
70 Berkeley annual report 2012
Trading & Financial Review
running a sustainaBle Business
Berkeley’s corporate plan is to deliver £13 per share to shareholders by 2021
and to be one of the most successful and sustainable businesses in Britain.
The challenge for Berkeley is to ensure that all of its stakeholders understand
and embrace the discipline of running a business for the long-term, making
the right choices to protect the Berkeley brand, reputation and operational
performance, and acting with application and integrity.
This is the role of Vision2020, a framework which sets out a series of specific
operational commitments across four key areas: The Customer Experience;
Delivering Sustainable Communities; Building Greener Homes and
encapsulated by Running a Sustainable Business.
Berkeley’s approach to Running a Sustainable Business, and what this means
to Berkeley, is set out in the accompanying section of the same name in this
Annual Report.
outlook
Berkeley is mindful that it continues to operate in an uncertain market, with
a double-dip recession in the UK and continuing uncertainty across Europe.
It is, however, a market which creates opportunities for the Group. Land is
scarce and there is a limited supply of new homes; the economy in London
and the South East is strong relative to other parts of the UK and less reliant
on government spending; the planning regime in London is proactive and
in a region where Berkeley has a competitive advantage.
In the long-term, restricted supply alongside an increasing demand from a
concentration of the UK’s population growth in London and the South East is
likely to ensure that the prospects for new housing in Berkeley’s core market
remain strong, and the purchase of a new home in the right location is still one
of the best long-term investments that an individual can make as well as being
a place in which to live.
The focus of the business is to return the first milestone of £4.34 per share in
cash to shareholders by 30 September 2015 and the Board is confident that,
subject only to the resilience of the wider market, this will be achieved. The
success of Berkeley now and in the future is reliant on keeping the business
agile and flexible to act and react quickly in what it knows to be a cyclical
property market.
Rob Perrins
Managing Director
Berkeley annual report 2012
71
Trading & Financial ReviewTrading & Financial Review trading & Financial review
Project team meeting at Grid
Architects to discuss 190 Strand
72 Berkeley annual report 2012
trading and Financial review
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Berkeley annual report 2012
73
Financial review
headline results
Revenue
Operating profit before exceptional item
Exceptional profit on disposal of subsidiary
Operating profit
Net finance costs
Share of joint ventures result
Profit before tax
Tax
Profit after tax
Basic earnings per share
Return on equity
Units sold
Average selling price
*unless otherwise stated
april 2012
£’million*
1,041.1
195.7
30.7
226.4
(9.4)
(2.2)
214.8
(56.7)
158.1
121.0p
21.2%
April 2011
£’million*
742.6
135.7
-
135.7
(1.5)
2.1
136.2
(41.8)
94.5
72.1p
15.3%
3,565 units
£280,000
2,544 units
£271,000
Change
£’million*
+298.5
+60.0
+30.7
+90.7
-7.9
-4.3
+78.6
-14.9
+63.6
+48.9p
+5.9%
Change
%
+40.2%
+44.2%
+66.8%
+57.7%
+67.3%
+67.8%
traDing analysis
The majority of the Group’s underlying revenue arises from sales of residential
homes across the Group’s mixed-use schemes. Revenue for the Group was
£1,041.1 million (2011: £742.6 million) comprising £1,021.7 million of residential
revenue (2011: £721.4 million), of which £2.1 million was from land sales
(2011: £13.8 million), and £19.4 million of commercial revenue (2011: £21.2 million).
Residential revenue, excluding land sales, arose principally from the sale of 3,565
homes (2011: 2,544) in the year at an average selling price of £280,000 (2011:
£271,000). During the year new homes were delivered across Berkeley’s portfolio
of developments including the major regeneration schemes at Woodberry Park,
Kidbrooke Village and Royal Arsenal Riverside, higher value riverside schemes at
Chelsea Creek, Battersea Reach and Kew Riverside, and housing schemes outside
London at Queen’s Acre in Beaconsfield, King’s Hill in Cirencester and Edenbrook in
Fleet amongst others. The increase in average selling price predominantly reflects
changes in the mix of homes delivered in the year compared to previous years.
Revenue from land sales comprises £2.1million (2011: £13.8 million) which
includes the disposal of one site in the year (2011: three).
£19.4 million (2011: £21.2 million) of revenue from commercial activities includes
the sale of 54,000 sq ft of commercial space across a number of the Group’s
mixed-use developments. The most significant of these were the development
and sale of a hotel at Blackheath, a storage facility at Royal Arsenal Riverside and
a Community Centre at Woodberry Park.
74 Berkeley annual report 2012
Trading & Financial Review
proFit BeFore tax
Profit before tax increased by £78.6 million (57.7%) to £214.8 million in the year.
This was due to a combination of five factors:
Profit before tax: 2010/11
Increase in gross margin
Increase in overheads
Exceptional profit on disposal of subsidiary
Increase in net finance costs
Reduction in result from joint ventures
Profit before tax: 2011/12
£’million
136.2
+86.3
-26.2
+30.7
-7.9
-4.3
214.8
Berkeley’s gross margin has increased by £86.3 million (41.2%) in the year in line
with the underlying revenue increase of 40.2% and a marginal increase in gross
margin percentage from 0.2% to 28.4% since last year based on the mix of
homes sold.
Overheads have increased by £26.2 million to £99.6 million, but reduced as
a percentage of revenue from 9.9% to 9.6%, and so are in line with the growth
of the business and also reflect the first year’s charge under the 2011 LTIP.
Pre-exceptional operating margin of 18.8% compares with 18.3% last year,
reflecting both the underlying increase in gross margin and the lower percentage
of operating costs expensed in the year. The operating margin is at the top
of the range of levels reported in recent periods.
On 30 September 2011 Berkeley sold its 51% equity interest in a company
co-owned with Imperial College. The company had developed the first phase
of 452 postgraduate student bedrooms at its scheme in Clapham Junction in
London, let to postgraduate students of Imperial College, and the second phase
of 114 rooms is expected to be delivered in September 2012. Berkeley’s share of
the proceeds of the sale of the company was £75.7 million and this resulted in an
exceptional profit on disposal of £30.7 million.
Berkeley’s share of the post-tax results of joint ventures was a loss of £2.2 million
(2011: profit of £2.1 million) which reflects a combination of the timing of
completions from St Edward’s first scheme at Stanmore Place alongside investment
in its delivery pipeline at 375 Kensington High Street and at 190 Strand.
Net finance costs have increased from £1.5 million to £9.4 million. The key
reason for this is the change from a net cash to a net debt position over the
course of the year as a result of the continued investment in the business.
earnings per share
Basic earnings per share increased in the year by 67.8% from 72.1 pence to
121.0 pence. This increase is due to a combination of the 57.7% increase in
profit before tax to £214.8 million, a decrease in the Group’s effective tax rate
from 31.1% to 26.1%, principally due to a reduction in the UK corporation tax
rate, and a marginal reduction in the weighted average number of shares from
131,962,000 to 131,042,000.
Berkeley annual report 2012
75
Trading & Financial ReviewTrading & Financial Review
£214.8
million
profit before tax
£1,157.7
million
capital employed
Financial position
Capital Employed
Investment properties
Other non-current assets
Inventories
Trade and other receivables
Trade and other payables
- Deposits and on account receipts
- Other trade payables
Current tax liabilities
Capital employed
april 2012
£’million
83.5
100.3
1,851.7
115.2
(422.9)
(470.2)
(99.9)
1,157.7
Change
£’million
+54.9
+15.0
+238.5
+18.5
+49.1
-104.1
-6.0
+265.9
April 2011
£’million
28.6
85.3
1,613.2
96.7
(472.0)
(366.1)
(93.9)
891.8
The strong underlying operating performance has been balanced with controlled
investment in the future of the business. Shareholder equity has increased by
£170.4 million to £1,099.8 million, while capital employed increased by
£265.9 million to £1,157.7 million, some 29.8% higher than at the start of the year.
Investment properties represent 612 properties developed by the Group (30 April
2011: 215) which are included in Berkeley’s private rental fund and have increased
by £54.9 million to £83.5 million (30 April 2011: £28.6 million) at historic cost. The
Homes and Communities Agency has committed £12.5 million, classified as debt,
to fund 358 of these properties (30 April 2011: £6.5 million on 100 properties).
The total number of properties expected to be held by the fund is 802, leaving
a further 190 to complete of which 176 will be subject to £4.9 million of further
funding from the Homes and Communities Agency, taking their total planned
investment to £17.4 million over 534 properties. Whilst it had originally been
intended for the Group to hold some 896 properties, 94 have been marketed
for sale opportunistically and so will no longer be held for investment.
Other non-current assets include £17.2 million of goodwill (30 April 2011:
£17.2 million) which arose on the acquisition of St James Group Ltd in November
2006, £11.6 million of property, plant and equipment (30 April 2011: £10.6 million),
£46.5 million investment in joint ventures (30 April 2011: £38.7 million) which has
increased through £7.8 million of net investment in the year, and £25.0 million
of deferred tax assets (30 April 2011: £18.9 million) which have increased by
£8.2 million in respect of timing difference offset by a £2.1 million reduction due
to the reduction in the UK corporation tax rate.
Change in inventory
30 april 2012
Change
30 April 2011
£’million
£’million
£’million
Land not under development
Work in progress: land cost
Work in progress: build cost
Completed units
360.5
723.8
1,084.3
698.8
68.6
1,851.7
+43.9
+91.9
+135.8
+83.1
+19.6
+238.5
316.6
631.9
948.5
615.7
49.0
1,613.2
76 Berkeley annual report 2012
Trading & Financial Review
cash Flow
Cash Flow and Net Assets
Profit before tax
Exceptional profit on disposal of subsidiary
Increase in inventory – land
Increase in inventory – build WIP and stock
Other working capital movements
Taxation
Proceeds on disposal of subsidiary
Other investing activities
Non-cash and other movements
Share purchases
Decrease in net cash
Opening net cash
Closing net (debt) / cash
Capital employed
Net assets
Non-controlling interest
Net assets attributable to shareholders
Net assets per share
*unless otherwise stated
april 2012
£’million
214.8
(30.7)
184.1
(135.8)
(102.7)
(76.4)
(314.9)
(53.7)
75.7
(12.3)
21.2
(99.9)
-
(99.9)
42.0
(57.9)
1,157.7
1,099.8
-
1,099.8
839.3p
April 2011
£’million
136.2
-
136.2
(207.4)
(151.7)
14.1
(345.0)
(32.6)
-
(11.0)
7.5
(244.9)
(30.0)
(274.9)
316.9
42.0
891.8
933.8
(4.4)
929.4
709.2p
Inventories have increased by £238.5 million to £1,851.7 million (30 April 2011:
£1,613.2 million) and comprise land not under development of £360.5 million
(30 April 2011: £316.6 million), work in progress of £1,422.6 million (30 April
2011: £1,247.6 million) and completed units of £68.6 million (30 April 2011:
£49.0 million).
During the year, the Group acquired 20 new sites in good locations across
London and the South East, and invested in the planning, optimisation and
delivery of current schemes as production levels have increased over the
course of the year.
Trade and other receivables have increased from £96.7 million to £115.2 million
due to a higher level of completions towards the end of the year.
Trade and other payables have increased by £54.9 million to £893.1 million
(£30.4 million non-current and £862.7 million current) similarly reflecting the
growth of the business. Included within trade creditors are £422.9 million of
on account receipts (30 April 2011: £472.0), which, together with cash due on
forward sales of £1,055.7 million at 30 April 2012 (30 April 2011: £813.5 million),
matches the majority of the increased investment in inventory and provides a
significant hedge against market risk.
A net cash outflow of £99.9 million in the year took the Group from a net cash
position of £42.0 million at 30 April 2011 to a net debt position of £57.9 million
at 30 April 2012.
Berkeley annual report 2012
77
Trading & Financial ReviewTrading & Financial Review
21.2%
return on equity
£525
million
new banking facilities
78 Berkeley annual report 2012
Key to this movement was the controlled investment in the business in the year
through a £314.9 million net investment in working capital (2011: £345.0 million).
This included a £135.8 million net investment in land (2011: £207.4 million) and
£102.7 million in construction (2011: £151.7 million) along with other working
capital increases of £76.4 million (2011: reduction of £14.1 million) which included
continued investment in the Group’s rental fund properties in the year and other
movements. This increased investment in the business should be viewed in
conjunction with a £242.2 million increase in cash due on forward sales which
underlines the way in which Berkeley manages balance sheet risk.
The cash flow reflects the proceeds of £75.7 million from the sale of Berkeley’s
51% equity interest in the company co-owned with Imperial College, which gave
rise to an exceptional profit on disposal of £30.7 million. Following the disposal
of this company, there is no longer a non-controlling interest at 30 April 2012.
At 30 April 2011, this represented Imperial College’s 49% share in this subsidiary.
The Group paid tax of £53.7 million, compared to £32.6 million in 2011,
which is in line with the growth of the business.
Non cash items and other movements, which principally relate to timing
differences on interest receipts and payments and the effects of share based
payments accounting, including the effect of the introduction of the 2011 LTIP
in the year, are £21.2 million compared to £7.5 million last year.
Cash flows from financing activities last year were an outflow of £30.0 million
arising from the acquisition of own shares during the course of the year.
There were no such purchases in 2012.
Combined with a £265.9 million increase in capital employed in the year, the
net cash outflow of £99.9 million has increased net assets from £933.8 million
to £1,099.8 million at 30 April 2012. This has led to an increase in net assets
per share from 709.2 pence last year to 839.3 pence at 30 April 2012.
return on equity
Return on equity, a core performance target for Berkeley, was 21.2% in 2012
(2011: 15.3%), reflecting the strong trading performance reported, in the context
of a controlled investment in balance sheet assets. This increase has arisen from
a 57.7% increase in profit before tax alongside a 13.5% increase in average
equity for the year.
taxation
The Group’s policy is to pay the amount of tax legally due and to observe all
applicable rules and regulations. At the same time we have an obligation to
maximise shareholder value and to manage financial and reputational risk. This
includes minimising and controlling our tax costs, as we look to do for all costs
of our business. Factors that may affect the Group’s tax charge include changes
in legislation, the impact of corporate activity (restructuring, acquisitions,
disposals, etc), the resolution of open tax issues from prior years and planning
opportunities. The Group makes provisions for potential tax liabilities that may
arise, however the amount ultimately paid may differ from the amount accrued.
Banking Facilities
The Group’s financial position today is further supported by the re-negotiation
of the Group’s banking facilities since the year end. On 24 May 2012, Berkeley
increased its committed corporate banking facilities from £450 million to
£525 million, of which £250 million expires in April 2017 and £275 million in
May 2017. With £200 million of the Group’s £450 million having been due to
expire in November 2013, the new facilities effectively provide clarity of financing
at £525 million for five years through to April 2017. In addition, Berkeley has a
further £60 million of banking facilities in St Edward Homes, of which £3 million
was utilised at the year end, if required, to finance the delivery of its schemes.
Trading & Financial Review
Joint ventures
St Edward Homes is Berkeley’s joint venture with Prudential, which is developing
Stanmore Place and 375 Kensington High Street, and which also now plans to
develop a scheme at 190 Strand in London. During the year, 188 homes were
sold at Stanmore Place at an average selling price of £170,000 (2011: 164 homes
at £251,000). Berkeley’s land bank includes some 1,658 plots in respect of St
Edward Homes’ schemes (2011: 1,548 plots), and Berkeley continues to work
with Prudential to identify further sites to which St Edward Homes can add value.
Investments accounted for using the equity method of £46.5 million (30 April
2011: £38.7 million) relate to Berkeley’s interest in these schemes.
Financial risk
The Group finances its operations by a combination of shareholders’ funds,
non-controlling interest, deposits and on account receipts and borrowings
where drawn.
As the Group’s operations are in sterling there is no direct significant currency
risk, and therefore the Group’s main financial risks are primarily:
– Liquidity risk - the risk that suitable funding for the Group’s activities may not
be available.
– Market credit risk - the risk that a counterparty will default on their contractual
obligations resulting in a loss to the Group. The Group’s exposure to credit risk
is comprised of the cash and cash equivalents and trade and other receivables
held within current assets on the consolidated balance sheet.
– Market interest rate risk - the risk that Group financing activities are adversely
affected by fluctuations in market interest rates.
The Board approves treasury policy and senior management control day-to-day
operations. Relationships with banks and cash management are co-ordinated
centrally. The objectives of the treasury policy are to maintain an appropriate
capital structure and in doing so manage the financial risks identified above.
The procedures for mitigation of the financial risks are set out in note 23 of the
consolidated financial statements.
operating risk
All businesses are exposed to risk. Indeed, alongside risk comes opportunity and it
is how such risks are managed that determines the success of the Group’s strategy
and, ultimately, its performance and results. Berkeley’s strategy allows management
to focus on creating sustainable long-term value for its shareholders, whilst taking
advantage of opportunities as they arise in the short and medium-term.
Risk management is embedded in the organisation at operating company,
divisional and Group levels, with different types of risk requiring different levels
and types of management response.
The principal operating risks of the Group which have been considered by the
Board include, but are not limited to, the risks as set out on pages 80 and 81.
The Internal Control section within the Corporate Governance report on pages
109 to 110 sets out the Group’s overall framework for internal control, setting the
context for the identification, control and monitoring of these and other risks
faced by the Group.
Nick simpkin
Finance Director
Berkeley annual report 2012
79
Trading & Financial ReviewTrading & Financial Review
Berkeley’s principal
operating risks
Risk Descriptions
Mitigation
econoMic conDitions
As a property developer Berkeley’s
business, in the context of the wider
Housing Market, is sensitive to changes
in interest rates, unemployment and
general consumer confidence.
Significant economic uncertainty exists in
the UK, Europe and worldwide and this
may lead to a reduction in demand for
housing which could impact on the Group’s
ability to deliver its corporate strategy.
regulation
Adverse changes to government policy
on areas such as taxation, housing and
environmental matters could restrict the
ability of the Group to deliver its strategy.
Failure to comply with laws and regulations
could expose the Group to penalties and
reputational damage.
planning
Delays or refusals in obtaining
commercially viable planning permissions
on the Group’s land holdings could result
in the Group being unable to develop
the land it has purchased.
This could have a direct impact on the
Group’s ability to deliver its product
and on its profitability.
people
An inability to attract, develop, motivate
and retain talented employees could have
an impact on the Group’s ability to deliver
its strategic priorities.
Failure to consider the retention and succession
of key management could result in a loss of
knowledge and competitive advantage.
sales
An inability to match supply to demand in
terms of product, location and price could
result in missed sales targets and / or
inefficient levels of completed stock which
in turn could impact on the Group’s ability
to deliver its corporate strategy.
Mortgage availaBility
Berkeley’s business strategy reflects the cyclical nature of property development.
Funds are carefully targeted at investing only in land which is underpinned by demand
fundamentals that support a solid viability case even when markets are uncertain.
Levels of committed expenditure are carefully monitored against sales secured and bank
facilities available, with the objective of keeping financial risk low to mitigate the
operating risks of delivery in uncertain markets.
The business is committed to operating at an optimal size, with a strong balance sheet,
to maintain the flexibility to react swiftly, when necessary, to changes in market conditions.
The effects of changes to government policies at all levels are closely monitored and
representations made where necessary.
Berkeley’s experienced teams are well-placed to interpret and implement new regulation
at the appropriate time through direct lines of communication across the Group.
Detailed policies and procedures are in place and these are communicated to all staff.
Full detailed planning and risk assessments are performed and monitored for each site
without planning permission, both before and after purchase.
The planning status of all sites is reviewed at monthly divisional Board meetings and
bi-monthly Main Board meetings.
The Group works closely with local communities in respect of planning proposals and
strong local relationships are maintained with local authorities and planning officers.
The Group is focused on the markets of London and the South East of England in
planning regimes which it understands and where it believes it therefore has a
competitive advantage.
Remuneration packages are constantly benchmarked against the industry to ensure they
remain competitive.
Succession planning is regularly reviewed at both divisional and Main Board level.
Close relationships and dialogue are maintained with key personnel.
Detailed market demand assessments of each site are undertaken before acquisition,
and regularly during delivery of each scheme, to ensure that supply is matched to
demand in each location.
Design, product type and product quality are all assessed on a site-by-site basis to
ensure that they meet the target market and customer aspirations in that location.
The Group has a diverse range of developments with homes available at a broad range
of property prices to appeal to a wide market.
Forward sales are used to take the risk out of the development cycle where possible,
thereby justifying the financial investment in each of the Group’s sites.
Completed stock levels are reviewed and debated at monthly divisional Board meetings
and bi-monthly Main Board meetings.
Mortgage providers have been negatively
impacted by the financial crisis and this has mortgage availability across its portfolio.
reduced their ability to provide mortgages
to potential purchasers.
The Group is participating in the government-backed mortgage indemnity scheme,
NewBuy, on a number of its schemes.
Berkeley has a broad product mix and customer base which reduces the reliance on
An inability of customers to secure sufficient
mortgage finance could have a direct impact
on the Group’s transaction levels.
Deposits are taken on all sales to mitigate the financial impact on the Group in the
event that sales do not complete due to a lack of mortgage availability.
80 Berkeley annual report 2012
Trading & Financial Review
Risk Descriptions
sustainaBility
Mitigation
Berkeley is hugely aware of the
environmental impact of the homes and
communities that it builds, both during the
construction phase and on occupation by
its customers.
Failure to address sustainability issues
could affect the Group’s ability to acquire
land, gain planning permission, manage
sites effectively and respond to increasing
customer demand for sustainable homes.
Vision2020 provides the framework under which the Group’s approach to
running a sustainable business is formalised. This provides a series of
over-arching areas of focus along with detailed commitments to be adopted
and embraced by all staff.
A Board level Sustainability and Health & Safety Governance Committee has
the responsibility of setting the Group’s direction in this area, to ensure that it
is aligned with the Group’s strategy.
Specific commitments to deliver sustainable communities, minimise the
impact of the homes that Berkeley builds and to manage the environmental
impacts of Berkeley’s business form the bedrock of this approach.
Sustainability assessments are built into land purchases and planning applications.
Sustainability commitments during delivery include the use of environmental
performance methodology, a focus on brownfield development and the
monitoring of carbon emissions, amongst others.
health anD saFety
Berkeley’s operations have a direct impact
on the Health and Safety of its people,
contractors and members of the public.
Berkeley considers this to be an area of
critical importance.
A lack of adequate procedures and systems
to reduce the dangers inherent in the
construction process increases the risk of
accidents or site related catastrophes,
including fire and flood, which could result
in serious injury or loss of life leading to
reputational damage, financial penalties
and disruption to operations.
A Board level Sustainability / Health and Safety Governance Committee has
the responsibility of setting the Group’s Health and Safety strategy.
Dedicated Health & Safety teams are in place in each division and at Head
Office. Procedures, training and reporting are all regularly reviewed to ensure
high standards are maintained, and comprehensive accident investigation
procedures are in place.
The Group has implemented a number of initiatives to improve Health and
Safety standards on site, with workshops held with contractors during the year.
Vision2020 incorporates commitments in the area of Health & Safety which
reinforce the Group’s focus on this.
Adequate insurance is held to cover the risks inherent in large-scale
construction projects.
lanD availaBility
An inability to source suitable land to
maintain the Group’s land bank at
appropriate margins in a highly competitive
market could impact on the Group’s
ability to deliver its corporate strategy.
Berkeley’s strategy is to acquire land opportunistically, where it meets its
internal criteria for purchase.
Land acquisition is focused on Berkeley’s core markets of London and the
South East, markets which it understands and where it believes that the
demand fundamentals are strong.
Each land acquisition is subject to formal internal appraisal and approval
processes both prior to the submission of a bid and again prior to exchange
of contracts.
The Group maintains a land bank to mitigate against significant impacts from
market changes or delayed build activity. Berkeley has experienced land
teams with strong market knowledge in its areas of focus.
BuilD cost anD prograMMe
Build costs are affected by the availability of
skilled labour and the price and availability
of materials. Changes to these prices and
availability could impact on the profitability
of each scheme.
proDuct quality
Berkeley has a reputation for the high
standards of quality of its product.
If the Group fails to deliver against
these standards, it could be exposed
to reputational damage, as well as
reduced sales and increased cost.
A procurement and programming strategy for each development is agreed
by the divisional Board before site acquisition.
A further assessment of procurement and programming is undertaken and
agreed by the divisional Board prior to the commencement of construction.
Build cost reconciliations and build programme dates are presented and
reviewed in detail at divisional cost review meetings each month.
Detailed reviews are undertaken of the product on each scheme both during
the acquisition of the site and throughout the build process to ensure that
the quality of the product is maintained.
Customer Satisfaction surveys are undertaken on the handover of all private
apartments, and feedback incorporated in shaping the specification and
quality of subsequent schemes.
Berkeley annual report 2012
81
Trading & Financial ReviewTrading & Financial Review
governance
governance
Berkeley’s strategy is
dedicated to delivering
its long-term
corporate oBJectives.
82 Berkeley annual report 2012
governance
g
o
v
e
r
n
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Berkeley annual report 2012
83
BoarD oF Directors
chairMan anD executive Directors
current coMMittee
coMposition
Nomination Committee
A W Pidgley (Chairman)
D Howell
J Armitt
V Wadley
Audit Committee
D Howell (Chairman)
A C Coppin
A Nimmo
Remuneration Committee
A C Coppin (Chairman)
J Armitt
G Barker
Company Secretary
A M Bradshaw
Honorary Life President
Jim Farrer MRICS, along
with Tony Pidgley a co-founder of
Berkeley, he was Group Chairman
until his retirement in 1992.
At that time he was appointed
Honorary Life President.
84 Berkeley annual report 2012
tony piDgley
roB perrins
Bsc (hons) aca
nick siMpkin
aca
Co-founder of the Company
in 1976 with Jim Farrer.
He was appointed Group
Chairman on 9 September
2009, having previously been
the Group Managing Director
since the formation of the
Group in 1976. He is Chairman
of the Nomination Committee.
Joined the Company in 1994
having qualified as a chartered
accountant with Ernst & Young
in 1991. He was appointed to
the Group Main Board on 1 May
2001 on becoming Managing
Director of Berkeley Homes plc.
He became Group Finance
Director on 2 November 2001,
moving to his current role as
Group Managing Director on
9 September 2009.
Joined Berkeley in 2002 and has
held a number of senior finance
positions including Finance
Director of St James and Head
of Finance for Berkeley Group.
He joined the Board and
became Group Finance Director
on 10 September 2009.
karl whiteMan
sean ellis
greg Fry aca
Joined Berkeley in 1996 as
a Construction Director and
currently leads the largest
Berkeley Homes division and
chairs the Group’s Sustainability
and Health & Safety Working
Groups. He joined the Board
on 10 September 2009 as a
Divisional Executive Director.
Joined Berkeley in 2004
with an expertise in land
and is currently Chairman
of St James Group. He joined
the Group Main Board on
9 September 2010 as a
Divisional Executive Director.
Joined the Group in 1982 and is
currently Chairman of St George
PLC, having been a Director
since its inception in 1986. He
was reappointed to the Group
Main Board on 5 September
2011 as a Divisional Executive
Director, having previously been
a member of the Group Main
Board from 1 May 1996 to 22
July 2010.
Governance
non-executive Directors
sir John arMitt
victoria Mitchell
DaviD howell
alan coppin
Appointed a Non-executive
Director on 1 October 2007.
He is currently Chairman of the
Olympic Delivery Authority and
was Chairman of the Engineering
and Physical Science Research
Council until 31 March 2012.
From 2001 to 2007 he was Chief
Executive of Network Rail and its
predecessor, Railtrack. Sir John is
the Senior Independent Director,
Chairman of the Group’s
Sustainability and Health &
Safety Committee and is a
member of the Remuneration
and Nomination Committees.
Appointed a Non-executive
Director on 1 May 2002 and
became Group Chairman on
1 August 2007, moving to her
current role as Deputy Chairman
on 9 September 2009. Currently
a Consultant Director of Savills
(L and P) Limited, she was
previously an Executive Director
of Savills plc. She is currently a
Non-executive Director of Pam
Golding International (Pty),
Development Securities plc,
Lennox Investment Management
LLP and London First. She will
stand down from the Board at
the AGM on 5 September 2012.
Appointed a Non-executive
Director and Chairman of the
Audit Committee on 25 February
2004. Previously a Main Board
Director of lastminute.com plc,
Group Finance Director of First
Choice Holidays plc, Executive
Chairman of Western and
Oriental plc, Chairman of EBTM
plc (Everything but the Music)
and a Non-executive Director
of Nestor Healthcare Group
plc, David is currently a
Non-executive Director of two
private companies. David is
also a member of the
Nomination Committee.
Appointed a Non-executive
Director on 1 September 2006.
He is currently a Non-executive
Director of Marshalls plc and
a member of both the Royal
Air Force Board Standing
Committee and Air Command
(formerly Strike Command).
Previously Hon. Chairman of
The Prince’s Foundation for
the Built Environment and
a Non-executive Director at
Capital and Regional plc and
Carillion plc, Alan is Chairman
of the Remuneration
Committee and a member
of the Audit Committee.
alison niMMo
veronica waDley
Appointed a Non-executive
Director on 5 September
2011. Alison is currently
Chief Executive of The Crown
Estate and she was previously
responsible for delivering many
of the London 2012 Olympic
and Paralympic venues as
Director of Regeneration and
Design at the Olympic Delivery
Authority. She is a member of
the Audit, Sustainability and
Health & Safety Committees.
Appointed a Non-executive
Director on 3 January 2012.
She is currently Chair of the
Arts Council, London and
a National Council member
of Arts Council England.
Previously Editor of The
Evening Standard, she is also
an Independent Director of
Times Newspapers Holdings.
She is a member of the
Nomination Committee.
glyn Barker Bsc
(hons) Fca
Appointed a Non-executive
Director on 3 January 2012
following a 35 year career with
PwC, most recently as its UK Vice
Chairman. He previously held
a number of senior posts within
PwC including Managing
Partner and Head of Assurance
and also established and
ran their Transactions Services
business. Glyn is a Non-executive
Director of Aviva plc and
Transocean Limited, Chairman
Designate of the Law Firm
Irwin Mitchell and a Director of
the English National Opera
Company. He is a member of
the Remuneration Committee.
Berkeley annual report 2012
85
GovernanceGovernance
The Directors submit their report together with the audited consolidated and company financial statements for the year ended
30 April 2012.
PrinciPal activities and review of the business
The Company is a UK listed holding company of a Group engaged in residential-led property development focusing on urban
regeneration and mixed-use developments. The Company is incorporated and domiciled in England and Wales and is quoted on the
London Stock Exchange.
The information that fulfils the requirements of the business review can be found in the Chairman’s statement on page 6, the Managing
Director’s statement on page 7, the Trading and Financial review on pages 64 to 79, which provides more detailed commentaries on the
business during the year together with the outlook for the future, and the section on Running a Sustainable Business on pages 48 to 61.
In addition, information in respect of the principal financial and operating risks of the business is set out in the Trading and Financial
review on page 79.
trading results and dividends
The Group’s consolidated profit after taxation for the financial year was £158,147,000 (2011: £94,456,000). The Group’s joint ventures
contributed a loss after taxation of £2,192,000 (2011: profit of £2,059,000).
No dividends were declared or paid in the financial year.
share caPital
The Company had 134,857,183 ordinary shares in issue at 30 April 2012 (2011: 134,857,183). The Company holds 3,577,506 of its own
shares in treasury (2011: 3,577,506).
Authority will be sought from shareholders at the forthcoming Annual General Meeting to renew the authority given at the 2011 Annual
General Meeting for a further year, permitting the Company to purchase its own shares in the market up to a limit of 10% of its issued
share capital.
Movements in the Company’s share capital are shown in note 18 to the consolidated financial statements.
Information on the Group’s share option schemes is set out in note 5 to the consolidated financial statements. Details of the Long-Term
Incentive Schemes and Long-Term Incentive Plans for key executives are set out in the Remuneration Committee report on pages 89 to 105.
articles of association
The Articles of Association set out the basic management and administrative structure of the Company. They regulate the internal affairs
of the Company and cover such matters as the issue and transfer of shares, Board and shareholder meetings, powers and duties of
Directors and borrowing powers. In accordance with the Articles of Association, Directors can be appointed or removed by shareholders
in a general meeting.
The Articles may only be amended by special resolution at a general meeting of shareholders. Copies are available by writing to the
Company Secretary and are also open to inspection at Companies House.
directors
The Directors of the Company and their profiles are detailed on pages 84 and 85. All of the Directors served throughout the year under
review with the exception of Greg Fry and Alison Nimmo, who were both appointed to the Board on 5 September 2011, and Glyn Barker
and Veronica Wadley, who were both appointed to the Board on 3 January 2012.
The Articles of Association of the Company require Directors to submit themselves for re-election every three years. In addition all
Directors are subject to re-election at the first opportunity after their appointment to the Board. However, in accordance with the UK
Corporate Governance Code all the Directors will offer themselves for re-election at the forthcoming Annual General Meeting, other than
Victoria Mitchell who is standing down from the Board.
The Directors’ interests in the share capital of the Company and its subsidiaries are shown in the Remuneration Committee report on page
105. At 30 April 2012 each of the Executive Directors were deemed to have a non-beneficial interest in 237,363 (2011: 237,363) ordinary
shares held by the Trustees of The Berkeley Group Employee Benefit Trust.
There were no contracts of significance during, or at the end of, the financial year in which a Director of the Company is, or was, materially
interested, other than those set out in note 24 to the consolidated financial statements, the contracts of employment of the Executive
Directors, which are terminable within one year, and the appointment terms of the Non-executive Directors, which are renewable annually
and terminable on one month’s notice.
86 Berkeley Annual Report 2012
GovernanceDIRECTORS’ REpORT
directors’ indemnities
The Company’s practice has always been to indemnify its Directors in accordance with the Company’s Articles of Association and to the
maximum extent permitted by law. As at the date of this report, indemnities are in force under which the Company has agreed to
indemnify the Directors, in accordance with the Company’s Articles of Association and to the maximum extent permitted by law, in respect
of all costs, charges, expenses, losses and liabilities, which they may incur in or about the execution of their duties to the Company, or any
entity which is an associated company (as defined in Section 256 of the Companies Act 2006), or as a result of duties performed by the
Directors on behalf of the Company or any such associated company.
substantial shareholders
The Company has been notified of the following interests, pursuant to Rule 5 of the Disclosure Rules and Transparency Rules amounting
to 3% or more of the issued capital of the Company, as at 19 July 2012:
Number of ordinary
shares held
% of issued capital(1)
Nature of holding
Lloyds Banking Group plc
First Eagle Investment Management, LLC
Mirabaud Investment Management Ltd
Anthony William Pidgley
Blackrock Inc
Standard Life Investments Ltd
(1) Net of shares held in treasury.
donations
17,043,398
14,451,198
6,543,445
6,456,838
6,159,637
5,005,879
12.98%
11.01%
4.98%
4.92%
4.69%
3.81%
Indirect
Indirect
Indirect
Direct
Indirect
Direct/Indirect
During the year, donations by the Group for charitable purposes in the United Kingdom, including through the Berkeley Foundation,
amounted to £789,000 (2011: £574,000). The Group made no political contributions (2011: £nil) during the year.
emPloyment Policy
The Group’s policy of operating through autonomous subsidiaries has ensured close consultation with employees on matters likely to
affect their interests. The Group is firmly committed to the continuation and strengthening of communication lines with all its employees.
An Equal Opportunities Policy was introduced in 2001. Following periodic reviews (the most recent in September 2010) the policy is now
an Equality and Diversity Policy with the aim of ensuring that all employees, potential employees and other individuals receive equal
treatment (including access to employment, training and opportunity for promotion) regardless of their age, disability, gender
reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief (including lack of belief), sex and sexual
orientation. It is the policy of the Group to support the employment of people with disabilities wherever practicable and to ensure, as far
as possible, the training, career development and promotion opportunities are available to all employees. This policy includes employees
who become disabled whilst employed by the Group.
sustainability
Each year Berkeley produces a Sustainability Report to provide its stakeholders with a full and transparent account of how its sustainability
strategy and policies are put into practice throughout the Group.
This year Berkeley has produced a Sustainability Report Executive Summary which provides an overview of the progress made against its
sustainability strategy for the period from May 2011 to April 2012. It contains a short explanation of Vision2020, key achievements in the
year and summary performance data against Key Performance Indicators. A number of short case studies are also provided to
demonstrate how Berkeley incorporates sustainability into its business operations.
More extensive information on sustainability performance is available on Berkeley’s website, including a full explanation of Vision2020,
detailed performance data and more case studies. Once again, Berkeley has applied the Global Reporting Initiative (GRI) Sustainability
Reporting Principles to its executive summary report and website in order to give a balanced and relevant account of its sustainability
performance.
For further information and to download a copy of the Sustainability Report Executive Summary, please refer to the sustainability section
of Berkeley’s website.
Berkeley Annual Report 2012
87
GovernanceGovernance
health and safety
The Group considers the effective management of health and safety to be an integral part of managing its business. Accordingly, the
Group Main Board continues to monitor the strategic development and audit the implementation by all divisions of their Occupational
Health & Safety Management Systems to ensure that, both at Group and divisional level, they remain compliant with recognised
established standards.
We remain committed to enhancing the Group’s high standards through continuous improvement. Our Health & Safety Governance
Committee is responsible for setting the strategic objectives of the Group, and the Health & Safety Working Group, comprising divisional
executives and managers, is responsible for delivering these objectives and reviewing progress against targets set for our established key
performance indicators, reporting this quarterly to the Group Main Board. For further information, please refer to the section on Running a
Sustainable Business on pages 48 to 61.
essential contracts
Berkeley has contractual and other arrangements with numerous third parties in support of its business activities. None of the
arrangements are individually considered to be essential to the business of Berkeley.
Payment of creditors
Each of the Group’s operating companies is responsible for agreeing the terms and conditions, including terms of payment, relating to
transactions with its suppliers. This is on an individual contract basis, rather than following a standard code. It is Group policy to abide by
the agreed terms of payment where the supplier has provided the goods and services in accordance with the relevant terms and
conditions of contract. At 30 April 2012, the Company did not have any trade creditors (2011: £nil).
takeover directive – agreements
Pursuant to the Companies Act 2006, the Company is required to disclose whether there are any significant agreements that take effect,
alter or terminate upon a change of control.
Change of control provisions are included as standard in many types of commercial agreement, notably bank facility agreements and joint
venture shareholder agreements, for the protection of both parties. Such standard terms are included in Berkeley’s bank facility agreement
which contains provisions that give the banks certain rights upon a change of control of the Company. Similarly, in certain circumstances, a
change of control may give Berkeley’s joint venture partner, Prudential Assurance Company Limited, the ability to exercise certain rights
under the shareholder agreement in relation to its St Edward Homes joint venture.
In addition, the Company’s share schemes contain provisions which take effect upon change of control. These do not entitle the
participants to a greater interest in the shares of the Company than that created by the initial grant of the award. The Company does not
have any arrangements with any Director that provide compensation for loss of office or employment resulting from a takeover.
The remaining information required to be disclosed under the Takeover Directive can be found within notes 5 and 18 to the consolidated
financial statements.
indePendent auditors and disclosure of information to auditors
Each of the persons who is a Director at the date of approval of this Annual Report confirms that:
• So far as the Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and
• The Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant
audit information and to establish that the Company’s auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.
A resolution to re-appoint PricewaterhouseCoopers LLP as auditors to the Company will be proposed at the Annual General Meeting.
annual general meeting
The Annual General Meeting of the Company is to be held at the Woodlands Park Hotel, Woodlands Lane, Stoke D’Abernon, Cobham,
Surrey KT11 3QB at 11.00am on 5 September 2012. The Notice of Meeting, which is contained in a separate letter from the Group
Chairman accompanying this report, includes a commentary on the business to be transacted at the Annual General Meeting.
By order of the Board
A M Bradshaw
Company Secretary
19 July 2012
88 Berkeley Annual Report 2012
GovernanceDIRECTORS’ REpORT
remuneratIon report
The Board of Directors presents its Remuneration Report for the year ended 30 April 2012, which has been prepared on the
recommendation of the Remuneration Committee (“the Committee”). An advisory resolution to approve this report will be proposed at
the Annual General Meeting of the Company at which the financial statements will be approved.
The report has been prepared in accordance with the requirements of the UK Corporate Governance Code, Schedule 8 of the Large &
Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008, and the Listing Rules of the Financial Services Authority.
IntroductIon
This year’s remuneration report is set against the strong operational performance of Berkeley in both an historical context and also relative
to the performance of its sector.
Berkeley’s strategy places an emphasis on achieving two operational measures that the Committee aims to align to the Executive’s
remuneration. The first is achieving sustainable pre-tax returns on shareholder equity (“ROE”). The second measure recognises that the ROE
performance should not be achieved at the expense of shrinking the business and that a sustainable model for shareholders relies on growth
in the value of the land bank at the same time. The combination of these two targets is designed to provide a balance between earnings in
the near term and creating a long term, sustainable business which the Board considers is the best way to create shareholder value.
In considering the level of the Executive’s Annual Bonus Plan the Committee has previously discussed the principles with major
shareholders and aims to set these at a level that is both challenging and sector leading. Comparing the Group’s ROE to its sector over
the last 5 years illustrates the relative performance of Berkeley and challenging targets set:
30%
20%
10%
0%
-10%
-20%
-30%
Berkeley ROE
Sector average ROE
2007/08
2008/09
2009/10
2010/11
2011/12
The Committee believes it is important to set annual targets that have a strong operational correlation with the performance of the
business and are targets that the Executive team are responsible for delivering. Whilst the Committee considers total shareholder return
(TSR) to be a helpful tool to measure performance over the long term, it believes that setting the right operational targets on an annual
basis and putting in place a long term share based remuneration policy aligned to creating shareholder value above a hurdle level of
return is the best way to deliver value for shareholders and to encourage, reward and retain the current Executives.
The absolute value delivered by Berkeley can be illustrated by the comparison of the TSR for Berkeley, expressed as the value of £100
invested in the company, both from 25 June 2004, being the date on which the previous Scheme of Arrangement was announced, and
from 1 May 2010, the date on which the current Annual Bonus Plan was introduced, to 30 April 2012:
Company
Berkeley
FTSE 250
FTSE 100
Sector average
Value of £100 invested on
25/06/2004
01/05/2010
£321
£234
£169
£84
£154
£117
£111
£111
Over these timeframes, Berkeley has out-performed the sector average and generated additional value for shareholders over a difficult
and challenging period.
At the 2011 AGM shareholders approved the Board’s strategy to return £13 per share to shareholders over the next 10 years, which has
the following key features:
• It strikes the right balance between maximising shareholder returns and an acceptable level of operating risk;
• It provides a long term framework which has embedded flexibility between investment and cash and takes into account the cyclical
nature of the property market;
• It allows Berkeley to operate at its natural size;
• The model provides a performance stretch relative to the sector but remains within the range of management’s capacity to deliver;
• It supports an added value model which the Board believes delivers best returns to shareholders over the long term; and
• Berkeley can generate the returns without introducing unnecessary financial risk in a cyclical market which is an important part of
Berkeley’s overall strategy.
Berkeley Annual Report 2012
89
GovernanceGovernance
Key elements of the remuneratIon polIcy
The objective of Berkeley’s remuneration policy is to encourage, reward and retain the current Executives. The core philosophies of the
policy are:
fixed remuneration
The Committee sets salaries for the Executive Directors based on their experience, role, individual and corporate performance. Salaries on
appointment to the Board are set at a lower quartile level which, based on appropriate levels of individual and corporate performance,
will be increased with experience gained over time.
annual performance related pay
The Committee believes that shareholders’ interests are best served by remuneration packages that have a large emphasis on
performance-related pay which encourage the Executives to focus on delivering the business strategy.
The chart below summarises the relative importance of the various components of annual remuneration for each Executive Director for
2011/12, illustrating that the majority of this remuneration is performance related:
0%
20%
40%
60%
80%
Fixed:
Salary
Benefits
Pensions
Performance related:
Annual Bonus Plan
A W Pidgley
R C Perrins
N G Simpkin
G J Fry
K Whiteman
S Ellis
100%
The Committee is responsible for determining the performance measures, annual performance targets and bonus awards under the
Annual Bonus Plan.
The specific performance measures under the Annual Bonus Plan, being a return based measure (Return on Equity) and a value based
measure (Land Bank Growth) ensure that there is a balance between incentivising the Executives to provide a sustainable ongoing level of
return to shareholders whilst ensuring the long-term sustainability of the Company, thereby creating long-term shareholder value.
The performance targets are set on an annual basis taking into account the above considerations and reflecting an appropriate level of
risk. It is not in the interests of any of the stakeholders in the Company to set targets that encourage a level of risk inconsistent with the
agreed risk profile for the Company.
long-term sustainable performance
The reward arrangements should be designed to incentivise and lock-in the Executive team to deliver the Company’s strategy and to
ensure that they are focused on generating long-term sustainable value for shareholders.
The long-term incentives which extend to 2021 have been designed to lock-in the Executive team for a far longer period than is typical in
most publicly listed companies. This has helped ensure that the Executive team are focused on generating long-term sustainable value for
shareholders rather than on meeting short term performance targets.
The chart below sets out the proportion of annual to long term remuneration of the Executive Directors, illustrating that the significant
element of total remuneration is aligned to the long-term performance of the Group:
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Annual
Long term
A W Pidgley
R C Perrins
N G Simpkin
G J Fry
K Whiteman
S Ellis
90 Berkeley Annual Report 2012
RemuneRation RepoRtGovernance
The Company’s long term incentive plans are designed to align the interests of shareholders and the Executive Directors over the long
term. They are summarised below:
2009 ltIp
This was approved by shareholders at an EGM in April 2009, and incorporates two parts:
a. Part A – replacing the balance of the shares originally awarded under the previous 2004(b) LTIP, exercisable on 31 January 2014 subject
to continued employment with the Company and an exercise price of £3 per share
b. Part B – requiring maintaining a minimum net asset per share of £5.94 over a six year period, vesting in two equal tranches on 15 April
2015 and 2016 with an exercise price of £8.40 per share
2011 ltIp
This is a ten year plan introduced in September 2011 to support the Company’s long term plan to return £13 per share (approximately
£1.7 billion), representing 183% of Net Assets at 30 April 2011, to shareholders by September 2021. This was approved by shareholders
at the 2011 Annual General Meeting.
The plan aims to maximise returns within a given level of risk, disciplining the business to make significant returns to shareholders in cash
over a sustained period and ensuring the Group remains at the right size and balances investment and returns to shareholders. This model
is aligned to Berkeley’s ability to add value and operate in a cyclical market.
These plans are set out in more detail later in this report.
risk adjustment
The Company’s reward arrangements should contain the following elements of risk adjustment, in line with best practice:
a. a focus on long-term sustainable performance – this is set out above.
b. the weighting of the reward package towards building substantial equity holdings which the Executive team are required to earn and
hold over long periods:
– The final shares from the previous 2004(b) LTIP will not vest and sale restrictions be fully removed until 31 January 2014, ten years
after awards were granted under the Plan.
– The 2009 LTIP provides longer than market standard vesting periods – for example options granted in 2009 under Part B of this Plan
will vest 50% on 15 April 2015 and the balance on 15 April 2016 subject to the Net Asset Value per share being a minimum of £5.94
at the first of these two dates.
c. the deferral of a significant proportion of annual incentive awards and clawback where there is a material deterioration in performance:
– The Annual Bonus Plan, whilst based on annual performance periods:
• defers 50% of a rolling balance each year in notional shares until the final payments are made at the end of a five year period; and
• ensures that 50% of these rolling balances are at material risk each year due to forfeiture if minimum threshold levels of performance
set in each year are not achieved.
d. no reward for failure:
– Under the 2011 LTIP all options lapse, no shares vest and the LTIP terminates on 1 October 2015 if £4.34 per share has not been paid
to shareholders by 30 September 2015.
substantial equity holdings
In order to align the interests of Executives and shareholders, the Committee believes that one of the most effective ways of doing this is
to design the reward strategy so that, provided performance is delivered, the Executive team become material (in relation to their overall
compensation) shareholders in the Company, which the Executive Directors are required to earn and hold over long periods.
The current shareholdings of the Executive Directors as a percentage of salary, based on the share price at 30 April 2012, are set out on
page 99 of this report.
remuneratIon revIew
The Committee reviews on an annual basis whether its remuneration policy remains appropriate for the relevant financial year. Factors
taken into account by the Committee include:
• market conditions affecting the Company;
• the recruitment market in the Company’s sector, other comparable companies and the FTSE 250;
• aligning remuneration to the corporate strategy and delivering value to shareholders by encouraging long-term sustainable
performance;
• changing market practice; and
• changing views of institutional shareholders and their representative bodies and Corporate Governance best practice.
There have been no changes to the policy following the review in the year, with the only changes to individual remuneration being in
respect of the recent Executive appointments to the Board, where the policy is to align their basic salaries with market rate over time in
line with increased experience on the Board. There are no salary changes proposed for the remaining Executive Directors on the Board.
Berkeley Annual Report 2012
91
GovernanceGovernance
remuneratIon commIttee
composition and role
At 30 April 2012, the Committee comprised of three Independent Non-executive Directors, Alan Coppin (Chairman), Sir John Armitt and
David Howell. David Howell was appointed to the Committee on 2 December 2011 and Victoria Mitchell retired from the Committee on
the same date.
During the year the Committee met on four occasions and there were no absences.
With effect from 13 June 2012 David Howell retired from the Committee and Glyn Barker was appointed to the Committee.
The members of the Committee have no personal financial interest other than as shareholders in matters to be decided, no potential
conflicts of interest arising from cross directorships and no day-to-day involvement in running the business.
The Committee is able to seek independent advice at the expense of the Company; no advice has been sought by the Committee during
the year under review.
In determining the Executive Directors’ remuneration for the year, the Committee consulted with the Group Chairman, Tony Pidgley, the
Group Managing Director, Rob Perrins and the Group Finance Director, Nick Simpkin. No Director played a part in any discussion about
his remuneration. In addition, the Committee had access to information on executive reward provided to the Board by
PricewaterhouseCoopers LLP, who acquired Halliwell Consulting, the previous advisers, in December 2008 and who have extensive
knowledge of the Group and its structure.
The Executive Directors hold no external appointments.
The key responsibilities of the Committee are to:
• determine and agree with the Board the broad policy for the remuneration of the Executive Directors. This includes salary, annual bonus
plans, share options, other share based incentives and pensions;
• determine the performance targets for the Annual Bonus Plan operated by the company and approve the total annual payments made
under this plan;
• determine all share incentive plans for approval by the Board and shareholders;
• take into account the views of shareholders when determining plans under the remuneration policy;
• ensure that the contractual terms on termination, and any payments made, are fair to the individual and the Company and that failure is
not rewarded; and
• note annually the remuneration trends and any major changes in employee benefit structures across the Company or Group.
The Committee has formal terms of reference which describes its full remit. This can be downloaded from the section dealing with
Investor Relations on the Berkeley website (www.berkeleygroup.co.uk).
remuneratIon polIcy for 2011/12 and 2012/13
The 2011/12 financial year started on 1 May 2011 and finished on 30 April 2012.
The 2012/13 financial year started on 1 May 2012 and finishes on 30 April 2013.
The policy is to set the main elements of the Executive Directors’ remuneration package against the following quartiles in the Company’s
comparator group:
Base salary
Annual bonus
Pension
Benefits in kind
Share incentives
Experience and Role
Upper decile
Lower quartile
Market practice
Upper decile
For the purposes of benchmarking remuneration the Committee used the following comparator group of companies in the year ended 30
April 2012:
Company name
Amec Plc
Bellway plc
Marshalls PLC
Taylor Wimpey plc
Balfour Beatty Plc
Bovis Homes Group PLC Persimmon Plc
Travis Perkins Plc
Barratt Developments PLC
Carillion Plc
Redrow plc
The Committee also considers the remuneration in the FTSE 250 as an additional benchmark to the main comparator group set out above
due to its relatively small number of constituent companies.
92 Berkeley Annual Report 2012
RemuneRation RepoRtGovernance
Balance Between fIxed and varIaBle performance Based pay
The charts below demonstrate the balance between fixed and variable performance based pay for each Executive for the 2011/12
financial year on an annualised basis.
A W Pidgley
Chairman
R C Perrins
Group Managing
Director
N G Simpkin
Group Finance
Director
G J Fry
Divisional Director
K Whiteman
Divisional Director
S Ellis
Divisional Director
10%
11%
15%
16%
19%
20%
90%
89%
85%
84%
81%
80%
KEY
FIXED PERFORMANCE
is calculated as:
– Salary
– Benefits (including pension
contribution/allowance)
VARIABLE PERFORMANCE
is calculated as:
– Bonus earned
– Fair value of LTIPs
(annualised)
elements of executIve dIrectors’ remuneratIon
BasIc salary
The Committee has historically set the salaries of some of the Executives at the upper decile against the Company’s comparator group
reflecting the Committee’s view that Berkeley has one of the most experienced and capable Executive teams within the sector and that
Executive Directors had been in their roles for a number of years.
The Committee believes that it is right to take account of the following factors in setting individual salary levels:
• the individual Executive Director’s experience and responsibilities;
• the levels of base salary for similar positions with comparable status, responsibility and skills in organisations of broadly similar size and
complexity, in particular those companies within the comparator group, other comparable companies and the FTSE 250;
• the performance of the individual Executive Director and the Group; and
• the pay and conditions throughout the Group.
In applying its policy on appointment to the Board and promotion, the Committee sets salaries at a lower quartile level which, based on
appropriate levels of individual and corporate performance, will be increased with experience gained over time.
The salaries for 2012/13 are set out below:
Executive
A W Pidgley
R C Perrins
G J Fry
N G Simpkin
K Whiteman
S Ellis
2011/12
Salary
£780,000
£470,000
£325,000
£270,000
£270,000
£270,000
2012/2013
Salary
£780,000
£470,000
£325,000
£312,000
£305,000
£305,000
% rise
0%
0%
0%
16%
13%
13%
Lower
Quartile
£371,000
£402,000
£246,000
£270,000
£246,000
£246,000
FTSE 250
Median
£478,000
£487,000
£310,500
£318,750
£310,500
£310,500
Upper
Quartile
£577,000
£577,000
£368,000
£360,000
£368,000
£368,000
The increases agreed by the Committee for Messrs Simpkin, Whiteman and Ellis reflect the Committee’s policy of increasing individual
Director’s salaries over time to reflect their experience, performance and the performance of the Group.
In respect of the other Executive Directors the Committee decided that, whilst there was a case for increasing their salaries due to their
individual performance and the performance of the Group, no increases would be proposed in the current market.
In reviewing the salaries of the Executive Directors, the Committee has also taken account of the employment conditions and salary
increases awarded to employees throughout the Group, which were on average 4.4% this year.
Berkeley Annual Report 2012
93
GovernanceGovernance
annual performance-related Bonus
the Berkeley Group holdings plc Bonus plan
overview of the Bonus plan
• At the beginning of the plan period of five financial years, participants will have a plan account to which Company contributions
will be made.
• No Company contribution will be made to a participant’s plan account unless the annual performance criteria are met.
• The Company contribution will be set annually as a percentage of salary for each Executive.
• There will be two types of performance condition, Group and Divisional. The Group performance condition will be a matrix of Return on
Equity (“ROE”) and Land Bank Growth. The Divisional performance condition will be based upon Divisional Profit before Tax (“PBT”).
• Having regard to the strategy of the Company, the Committee will set:
– the performance levels (including minimum performance thresholds) for the performance conditions for each plan year; and
– the maximum annual Company contribution for each participant for the plan year.
• These criteria will be disclosed in full in the relevant Committee report along with the annual contributions earned and deferred
balances for each participant.
• Where the minimum threshold performance criteria on both measures are not achieved, 50% of the deferred balance in a participant’s
plan account will be forfeited.
• Participants will be entitled to an annual payment of 50% of their plan account at the end of each financial year. All balances will be
deferred in shares or notional shares. At the end of the five year plan period 100% of the balance of participants’ accounts will be paid.
Key features of the Bonus plan
The Committee designed the Bonus Plan based on the following rationale:
Two targets – the Committee felt that the dynamic tension between operating a return based measure (“ROE”) and a value based
measure (“Land Bank Growth”) should ensure that there was a balance between incentivising the Executives to provide a sustainable
ongoing level of return to shareholders whilst ensuring the long-term sustainability of the Company. In the Committee’s opinion the
impact of these two measures over the five year plan period should incentivise the Executives to ensure the creation of long-term
shareholder value as follows:
• the Bonus Plan incentivises the delivery of increased profits in order to achieve ROE at the same time as growing the land bank. It
should be noted that the ROE will be set from a challenging base as the Company has not taken any land write downs as is the case
with the majority of its competitors;
• ROE is a compound measure and therefore if shareholder funds are reinvested and not paid as dividends, earnings growth will be
compounded to achieve the targets;
• the fact that the Bonus Plan targets also include growth in the land bank value, means that Executives are encouraged to acquire land in
the current market on favourable terms as well as maximise sustainable profit growth;
• the cash target in the previous bonus plan had the potential to restrict value creation. Longer term, ROE is aligned to shareholders’
interests and if the Company raises further equity in the future, the investment threshold is clearly set out; and
• ROE as a measure highlights the inefficiency of retaining surplus cash on the balance sheet. In order to deliver the targeted level of
returns, this will encourage the Company to invest or return cash to shareholders.
Level of targets – the Committee wishes to incentivise the Executives to achieve a good level of returns to shareholders whilst ensuring
the long-term sustainability of the Company. Therefore the targets set have to take into account an appropriate level of risk. It is not in the
interests of any of the stakeholders in the Company to set targets that encourage a level of risk inconsistent with the agreed risk profile for
the Company. The Bonus Plan allows a close tailoring by the Committee of the performance conditions to the budget and performance of
the Company for each financial year.
At the outset of the Plan, the Committee set the annual performance requirements targeting an average ROE of 12.5% p.a. and average
Land Bank Growth of 10% p.a. over the full five years of the plan, which were considered challenging and stretching targets at that time.
Over the course of the Plan there is likely to be annual variability in the performance requirements actually set to reflect the environment
at the time the requirements are set (see performance targets for 2011/12 and 2012/13 operation of the plan set out below), and these
will be reviewed each year by the Committee to ensure that they are appropriate to the current market conditions and position of the
Company, so that they continue to remain challenging and fully aligned to the strategy of the Group.
Level of awards – the proposed maximum award bonus potential is 300% of salary; however, because 50% of the balance on the plan
account is deferred, the actual annual payment profile, based on, for these illustrative purposes, maximum awards each year and 100%
satisfaction of both performance conditions, would be:
Year 1
150%
Year 2
225%
Year 3
262.5%
Year 4
281%
Year 5
581%
94 Berkeley Annual Report 2012
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Risk adjustment – there is a risk adjustment mechanism built into the operation of the Bonus Plan with a claw back of contributions if the
threshold levels of ROE and Land Bank Growth are not met for any financial year during the five years of operation of the Bonus Plan. This
adjustment mechanism ensures:
• performance must be maintained over the five years of operation of the Bonus Plan or the value in the participant’s plan account will not
increase; and
• if there is a material deterioration in performance there is a claw back of 50% of the balance of the participant’s account.
Alignment of interests – there is a real alignment of participants’ interests with shareholders:
• shareholders receive a minimum level of performance prior to any incentive payments to Executives;
• Executives are encouraged to maximise consistent levels of performance (or lose through the risk adjustment mechanism); and
• there is a long-term alignment with the interests of shareholders as the deferred elements of the Bonus Plan are in shares or notional
shares.
operation of the Bonus plan for the year ended 30 april 2012
The bonus payable to each of the Group Chairman, Group Managing Director and Group Finance Director is determined by reference to
the Group performance condition. For the Divisional Directors, 50% of the potential bonus payable is determined by reference to the
Group performance condition and 50% by reference to the Divisional PBT performance condition.
The maximum bonus potential for the year ended 30 April 2012 is set out in the table below:
Information
A W Pidgley
R C Perrins
N G Simpkin
G J Fry
K Whiteman
S Ellis
Maximum Potential (% age of Salary)
300%
300%
220%
154%
175%
175%
The following tables set out:
• the performance conditions for the Bonus Plan for the year ended 30 April 2012;
• the level of satisfaction of those performance conditions.
Group performance condition (year ended 30 april 2012)
Performance Requirement Matrix
Land Bank Growth
Target
<11.5%
Target
Factor
<0%
0.0%
0% Bonus Plan
Deduction
0%
2%
4%
6%
8%
50.0%
62.5%
75.0%
87.5%
100.0%
0%
0%
0%
0%
0%
11.5%
12.5%
13.5%
14.5%
15.5%
16.5%
50%
60%
70%
80%
90%
100%
0%
0%
0%
0%
0%
0%
25%
30%
35%
40%
45%
50%
31%
38%
44%
50%
56%
63%
38%
45%
53%
60%
68%
75%
44%
53%
61%
70%
79%
88%
50%
60%
70%
80%
90%
100%
y
t
i
u
q
E
n
o
n
r
u
t
e
R
Notes:
1 The matrix shows the percentage of each of the performance requirements for a given level of performance and the corresponding percentage of the
targeted maximum annual bonus potential earned for 2011/12.
2 There will be straight line bonus vesting between points.
3 The matrix demonstrates the dynamic tension between the two performance conditions. One cannot be met at the expense of the other. If the minimum
threshold levels for either are not met, no contribution is made to the Bonus Plan account. If the minimum threshold levels of performance are not met for
both performance conditions, 50% of the participant’s plan account will be forfeited. Structuring the performance conditions in this way will ensure consist
ent levels of ROE at the same time as the Group invests and adds value to the land bank.
4 ROE is defined as profit before tax divided by average shareholders’ funds.
5 Land Bank Growth is defined as the annual percentage increase in the development margin in the land bank. This is the anticipated future gross margin
to be earned from plots controlled and included in the Group’s land bank. To be included in the land bank, management must have reasonable certainty
that the plots will come forward for development, either benefiting from a planning consent or being on land zoned for development. For the avoidance of
doubt, the land bank excludes plots subject to strategic land options. Calculated plot by plot, the development margin is measured on a consistent basis
according to prevailing sales prices for revenue, historic cost for costs already incurred and prevailing prices for costs still to be incurred. It is separately dis
closed within the annual report and the presentations to analysts. Each year the land bank gross margin is reduced naturally by the amount of gross margin
sold in the year. Therefore, zero % growth in the land bank means that replacement matches usage.
Berkeley Annual Report 2012
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GovernanceGovernance
divisional pBt performance condition (year ended 30 april 2012)
The Divisional PBT targets are set at the beginning of the financial year at a level which is challenging taking into account the potential
level of bonus payments, the market, development availability and other relevant issues.
level of satisfaction of performance conditions (year ended 30 april 2012)
Group
0.0%
8.0%
12.0%
LAND BANK GROWTH
11.5%
16.5%
21.2% ROE
Threshold
Maximum
Out performance
divisional
The level of Divisional PBT performance for 2011/12 against target is as follows:
Division
St George
Berkeley Homes Urban Renaissance
St James Group
Level of actual performance
as a percentage of target
Percentage of bonus
element earned
100%
100%
100%
100%
100%
100%
level of bonus earned in respect of the year ended 30 april 2012
The Group performance conditions and Divisional performance conditions were met in full; therefore the maximum bonus potentials set
out above were earned. It should be noted that under the Bonus Plan only 50% of the cumulative balance of a participant’s account is
paid at the end of the relevant year with the balance deferred in shares. See page 103 of the audited section of the Report for details of
the Plan accounts for each Executive Director.
operation of the Bonus plan for year ending 30 april 2013
The bonus payable to each of the Group Chairman, Group Managing Director and Group Finance Director is determined by reference to
the Group performance condition. For the Divisional Directors, 50% of the potential bonus payable is determined by reference to the
Group performance condition and 50% by reference to the Divisional PBT performance condition.
The maximum bonus potential for the year ended 30 April 2013 is set out in the table below:
Information
A W Pidgley
R C Perrins
N G Simpkin
G J Fry
K Whiteman
S Ellis
Maximum Potential (% age of Salary)
300%
300%
220%
175%
175%
175%
The performance conditions for the Bonus Plan for the year ending 30 April 2013 are set out below.
Group performance condition (year ended 30 april 2013)
Performance Requirement Matrix
Land Bank Growth
Target
<13.5%
Target
Factor
0%
0.0%
0% Bonus Plan
Deduction
2%
4%
6%
8%
10%
50.0%
62.5%
75.0%
87.5%
100.0%
0%
0%
0%
0%
0%
13.5%
14.5%
15.5%
16.5%
17.5%
18.5%
50%
60%
70%
80%
90%
100%
0%
0%
0%
0%
0%
0%
25%
30%
35%
40%
45%
50%
31%
38%
44%
50%
56%
63%
38%
45%
53%
60%
68%
75%
44%
53%
61%
70%
79%
88%
50%
60%
70%
80%
90%
100%
y
t
i
u
q
E
n
o
n
r
u
t
e
R
divisional pBt performance condition (year ended 30 april 2013)
The Divisional PBT targets are set at the beginning of the financial year at a level which is challenging taking into account the potential
level of bonus payments, the market, development availability and other relevant issues.
96 Berkeley Annual Report 2012
RemuneRation RepoRtGovernance
BenefIts In KInd
In line with market practice, the Company’s policy is to provide Executive Directors with the following additional benefits:
• a fully expensed company car or cash allowance alternative; and
• medical insurance.
pensIon
Messrs Pidgley, Perrins and Whiteman receive payments in lieu of pension at 17%, 17% and 15% of base salary respectively. Messrs
Simpkin, Fry and Ellis receive a 15% pension contribution.
All payments in lieu of pension are subject to income tax and national insurance. These payments are not included in salary figures for the
purposes of determining any other benefit entitlement.
Full details of pension costs for Executive Directors are set out in the audited section of the report on page 103.
lonG term remuneratIon
This section of the report sets out the share incentives for the year ended 30 April 2012.
On 15 April 2009, at an Extraordinary General Meeting of the Company, shareholders approved the introduction of The Berkeley Group
Holdings plc 2009 Long-Term Incentive Plan, which incorporated and replaced Element 2 of The Berkeley Group Holdings plc 2004(b)
Long-Term Incentive Plan (the “2004(b) LTIP”) and the previously approved 2007 LTIP, as set out below.
2009 ltIp part a
The balance of the shares originally awarded under the 2004(b) LTIP (i.e. 3/12 of the shares), totalling 5,330,340 shares, were replaced by
options with an exercise price of £3 per share granted under the 2009 LTIP. This new option is identified as Part A of the 2009 LTIP. These
options were awarded on 29 June 2009, at which time the Element 2 awards under the 2004 (b) LTIP were surrendered.
Options will become exercisable on 31 January 2014 subject to the relevant Executive’s continued employment with the Company.
888,390 options have subsequently been cancelled, as set out below.
2009 ltIp part B
Following shareholder approval on 15 April 2009, a maximum of 7,100,000 shares were capable of being granted under Part B of the
2009 LTIP. The grants under Part B of the 2009 LTIP are market priced options which will vest subject to:
• continued employment to the relevant vesting date; and
• the satisfaction of the underpin condition that Net Assets Per Share are at least £5.94 at 15 April 2015.
• Vesting of these options will be in two tranches:
– 50% on 15 April 2015; and
– 50% on 15 April 2016.
A total of 6,830,000 options were granted, of which 500,000 have subsequently been cancelled, as set out below.
Shareholder approval was received at the 2011 AGM to amend the rules of the 2009 LTIP so that the terms of existing options granted
can be adjusted in the event of the payment of a cash dividend or dividend in specie. This provides that where such a dividend is paid the
adjustment will be a reduction in the exercise price of an option by the amount or value of the dividend provided that the exercise price
can never be less than zero and a reduction will only be made to the exercise price of an option that is not then capable of exercise.
888,390 options under Part A and 500,000 options under Part B of the 2009 LTIP have been cancelled following the settlement agreed
between the Company and Tony Carey, as follows:
Plan
2009 LTIP Part A
2009 LTIP Part B Tranche 1
2009 LTIP Part B Tranche 2
Number of shares cancelled
Exercise price
Date first exercisable
888,390
250,000
250,000
£3.00
£8.40
£8.40
31 January 2014
15 April 2015
15 April 2016
2011 ltIp
The Company announced in June 2011 as part of a strategic review of the business a long term plan to return £13 per share
(approximately £1.7 billion) to shareholders over the next 10 years payable on or before the following milestones:
30 September 2015
30 September 2018
30 September 2021
Per share
£4.34
£4.33
£4.33
£13.00
Berkeley Annual Report 2012
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GovernanceGovernance
A new long term remuneration plan was proposed to support this strategy, the 2011 Long Term Incentive Plan (“2011 LTIP”), which was
approved by shareholders at the Annual General Meeting in September 2011.
The key features of the 2011 LTIP are:
• if the Company returns £13/share to shareholders over a ten year period via a series of dividend payments by the milestone dates
referred to above, participants will be entitled to exercise options and receive a number of ordinary shares in the capital of the
Company at the end of the ten year period.
• the maximum number of shares capable of being earned by all participants are 19,616,503 shares, being 13% of the fully diluted share
capital of the Company at the date of approval of the plan. These are set out by participant in the table below:
Participant
A W Pidgley
R C Perrins
N G Simpkin
S Ellis
K Whiteman
G J Fry
Total
Position
Chairman
Group Managing Director
Group Finance Director
Divisional Director
Divisional Director
Divisional Director
Number of shares subject to award
5,000,000
5,000,000
3,250,000
2,250,000
2,250,000
1,866,503
19,616,503
• the exercise price of options granted under the 2011 LTIP will be £13 per share less an amount equal to the value of all dividends paid
between the date of approval of the 2011 LTIP and 30 September 2021, provided the exercise price cannot be less than zero.
The following table sets out the cumulative dividend amounts, the relevant dates and the consequences of failing to deliver these
amounts by these relevant dates:
Required date
Cumulative
dividend
(on or before
required date)
Consequences of failing to make the cumulative dividend payments on or before the
required date
30 September 2015
£4.34
Options lapse, no shares vest and 2011 LTIP terminates on 1 October 2015.
30 September 2018
£8.67
Where the cumulative dividend paid on or before 30 September 2018 is less than £8.67, the
following process determines the number of shares vesting:
1 The number of shares capable of vesting is calculated on the level of dividend paid and
capable of being paid as at 30 September 2018.
2 The exercise price of the shares capable of vesting is set by reducing the original exercise
price of £13 by the level of cumulative dividend actually paid on or before 30 September
2021.
3 No shares will vest until the end of the 2011 LTIP period on 30 September 2021 subject to
the participant’s continued employment at this date.
For example:
A participant is granted an award over 3 million shares
On 30 September 2018 it is determined that an additional £3 per share is capable of being paid as well as
the actual payments made on or before 30 September 2015 of £4.34; giving a total of £7.34.
Therefore the number of shares capable of vesting on 30 September 2021 is as follows:
3 million shares x £7.34 = 1,693,846 shares
£13
with an exercise price initially per share of £8.66 (£13 - £4.34).
If, however, the actual dividend payments made on or before 30 September 2021 exceed £4.34 the exercise
price will be reduced to £13 minus the actual level of dividends paid. For example if the actual dividend
paid was £10 the exercise price would reduce to £3 (£13 - £10). The number of shares capable of vesting
would, however, remain unchanged with the balance incapable of vesting having lapsed on 1 October 2018.
30 September 2021
£13.00
The process is the same as above with the relevant date being 30 September 2021.
£13 paid in full prior £13.00
to 30 September
2021
In circumstances where £13 per share of dividend is paid prior to 30 September 2021 awards
shall vest in full.
Participants will be able to exercise their awards of options from the date the cumulative
payment of dividend equals £13 a share and may also sell any shares necessary to pay their
tax liability on exercise.
In respect of the balance of their shares participants shall only be able to sell a maximum of
10% p.a. of this balance until 30 September 2021 at which date the sale restrictions shall
lapse.
98 Berkeley Annual Report 2012
RemuneRation RepoRtGovernance
other senIor employees of the company
The Company’s business comprises of a number of operating Divisions. The Committee in conjunction with the Board has, therefore,
implemented both annual and longer term cash based compensation arrangements for these other senior employees of the Company
linked to the performance of the relevant Division for which they work. Some elements of the cash bonus plans are annual while other
elements are deferred to ensure long-term consistent delivery by each Division. The Committee, in line with best practice, continually
reviews with the Board the policy behind the compensation plans at this level in the Company to ensure they remain appropriate to the
market and the Company’s current circumstances. It is the view of both the Committee and the Board as a whole that these arrangements
are very effective at ensuring the delivery of Divisional performance for which these senior employees are responsible. Both the
Committee and the Board believe that having senior employees focused on the delivery of Divisional results is an excellent way of driving
shareholder value.
A number of senior employees of the Company have also been granted awards under the 2009 LTIP Part B.
shareholdInG requIrement
The Company has a shareholding requirement for both Executive and Non-executive Directors and these requirements and the actual
shareholdings of the Executive and Non-executive Directors as at 30 April 2012 are set out in the following tables:
Shareholder requirements
as a % age of salary to be met within
5 years of appointment
Current shareholding
as a % age of salary
(based on 30 April 2012 share price)
A W Pidgley
R C Perrins N G Simpkin
G J Fry K Whiteman
S Ellis
400%
200%
200%
200%
200%
200%
10,604%
4,093%
128%
3,900%
170%
47%
V M Mitchell
J Armitt
D Howell A C Coppin
A Nimmo
G Barker
V Wadley
Shareholder requirements as a %
age of net fees to be met within
3 years of appointment
Current shareholding
as a % age of net fees
(based on 30 April 2012 share price)
dIlutIon
100%
100%
100%
100%
100%
100%
100%
419%
252%
131%
131%
88%
345%
–
The 2009 LTIP and 2011 LTIP were special arrangements, approved by shareholders at the EGM in April 2009 and AGM in September
2011 respectively.
In considering dilution under the 2011 LTIP the Committee took account of the long term nature of the plan which extends beyond the
length of normal incentive plans.
In addition, the Committee took into account the significant priority returns of £13 per share (representing 183% of Net Assets at 30 April
2011) that shareholders will receive from the plan over this 10 year period, with the actual value of the awards to the Executive Directors
based on the ongoing value of the Group following this significant realisation of current value to the existing shareholders.
Historically the Company has operated all its share plans within the ABI dilution limits. There has been no dilution other than under these
special arrangements for the purposes of the ABI dilution limits in the year ended 30 April 2012.
Berkeley Annual Report 2012
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GovernanceGovernance
other remuneratIon matters
all employee share plans
The Company has regularly consulted widely with the management and individuals in its operating Divisions on whether it was
appropriate to introduce all employee share plans. The consensus view remains that employees preferred the opportunity of receiving
annual cash bonuses based on the performance of their respective Divisions rather than participate in a Group based all employee share
plan. The Board, therefore, does not believe it is in shareholders’ interests to incur the income statement and dilutive cost of share
arrangements which would not have the desired effect on employees. Accordingly the Company will continue to operate appropriate
annual bonus arrangements in all of its Divisions.
non-executive directors’ fees
All Non-executive Directors have specific terms of engagement and their remuneration is determined by the Board within the limits set by
the Articles of Association. The following table sets out the fee rates for the Non-executive Directors in the year ended 30 April 2012 and
those rates which will apply in the year ending 30 April 2013:
V M Mitchell
J Armitt
D Howell A C Coppin
A Nimmo
G Barker
V Wadley
Total Fee Rates 2012/13
£100,000
£80,000
£67,500
£67,500
£55,000
£55,000
£55,000
Total Fee Rates 2011/12
£100,000
£80,000 (1)
£67,500
£67,500
£50,000 (1)
£50,000 (1)
£50,000 (1)
% Increase
0%
0%
0%
0%
10%
10%
10%
Breakdown of 2012/13 Fee
Basic Fee
£100,000 (2)
£67,500 (3)
£55,000
£55,000
£55,000
£55,000
£55,000
Chair of Committee Fee
–
£12,500
£12,500
£12,500
Committee Chair
– Sustainability
and Health
& Safety
Audit Remuneration
–
–
–
–
–
–
(1) Where Directors joined during the year or assumed additional responsibilities, fees have been annualised to allow a direct comparison
(2) Victoria Mitchell’s basic fee reflects her role as Deputy Chairman of the Board. She has announced her intention to stand down from the Board at
the AGM on 5 September 2012
(3) Sir John Armitt’s basic fee reflects his role as Senior Independent Director. Subject to re-election at the 2012 AGM, he will become Deputy Chairman
of the Board from that date and his total fees will increase accordingly to £100,000 per annum
The Board reviews the fees of the Non-executive Directors annually taking into account the following factors:
• the workload and level of responsibility of the Non-executive Directors under the changing corporate governance expectations of
shareholders and their representative bodies; and
• the current market rate for fees for Non-executive Directors.
The basic fee for the new Non-executive Directors for 2012/13 has been increased to the basic fee level for the existing
Non-executive Directors.
Non-executive Directors cannot participate in any of the Company’s share incentive plans or performance based plans and are not
eligible to join the Company’s pension scheme.
executIve dIrectors’ contracts
The policy on termination is that the Company does not make payments beyond its contractual obligations. The only event on the
occurrence of which the Company is potentially liable to make a payment to any of the Executive Directors is on cessation of
employment; with the maximum payment being 12 months salary. No payment is due on either a Company takeover or in the event of
liquidation. In addition, Executive Directors will be expected to mitigate their loss. Further, the Committee ensures that there have been
no unjustified payments for failure. None of the Executive Directors’ contracts provides for liquidated damages. There are no special
provisions contained in any of the Executive Directors’ contracts which provide for longer periods of notice on a change of control of the
Company. Further, there are no special provisions providing for additional compensation on an Executive Director’s cessation of
employment with the Company.
The Company settled the litigation brought by Tony Carey against The Berkeley Group plc, St George PLC and other parties for age
discrimination and unfair dismissal for £5 million prior to the year end and shortly before the commencement of a three week hearing in
the Employment Tribunal. The Board’s decision to settle was unanimous having regard to legal advice, the size of the claim and the
inevitable diversion of resources to run the action. Following the settlement, option rights over 1,388,390 shares, being 888,390 options
under Part A and 500,000 options under Part B of the 2009 LTIP, have been cancelled.
100 Berkeley Annual Report 2012
RemuneRation RepoRtGovernance
non-executIve dIrectors’ aGreements
All Non-executive appointments are subject to a notice period of one month and are subject to the provisions of the Articles of
Association dealing with appointment and rotation every three years, however in accordance with the UK Corporate Governance Code
are subject to annual re-election. All letters of appointment for Non-executive Directors are renewable annually on 1 May.
Further details of all Directors’ contracts are summarised below:
Notice
period by
Unexpired Company or
Director
term
Potential
termination
payment
Date of
contract
Potential
payment
upon
Company
takeover
Potential
payment in
event of
liquidation
24 June 1994 1 Year Rolling
12 months
12 months
15 July 2002 1 Year Rolling
12 months
12 months
11 September 2002 1 Year Rolling
12 months
12 months
27 June 1996 1 Year Rolling
12 months
12 months
15 January 1996 1 Year Rolling
12 months
12 months
5 May 2004 1 Year Rolling
12 months
12 months
1 May 2002
24 February 2004
1 September 2006
1 October 2007
5 September 2011
3 January 2012
3 January 2012
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1 month
1 month
1 month
1 month
1 month
1 month
1 month
1 month
1 month
1 month
1 month
1 month
1 month
1 month
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Directors
Executive Directors
A W Pidgley
R C Perrins
N G Simpkin
G J Fry
K Whiteman
S Ellis
Non-executive Directors
V M Mitchell
D Howell
A C Coppin
J Armitt
A Nimmo
G Barker
V Wadley
performance Graph
As required by the Large and Medium-sized Companies and Groups (Account and Reports) Regulations 2008, the graph below shows the
Company’s performance, measured by total shareholder return (“TSR”), compared with the performance of the FTSE250, the FTSE All
Share and the Company’s remuneration comparator group (as set out on page 92). The Company considers these the most relevant
indices for total shareholder return disclosure required under these Regulations.
total shareholder return from april 30 2007 (%)
20
10
0
-10
-20
-30
-40
-50
-60
Berkeley Group
Holdings plc
FTSE 250 index
FTSE all share index
Comparator group
2007
2008
2009
2010
2011
2012
(1) Total shareholder return (“TSR”) is a measure showing the return on investing in one share of the Company over the measurement period (the return is the
value of the capital gain and reinvested dividends). This calculation is then carried out for the relevant Indices and constituents of the comparator group.
Berkeley Annual Report 2012
101
GovernanceGovernance
The following tables and accompanying notes constitute the auditable part of the Remuneration Report as defined in Part 3, Schedule 8
of the Companies Act 2006.
dIrectors’ remuneratIon
The remuneration of the Directors of the Company for the year is as follows:
Chairman
A W Pidgley
Executive Directors
R C Perrins
N G Simpkin
K Whiteman
S Ellis (1)
G J Fry (2)
Non-executive Directors
V M Mitchell
J A Armitt
A Coppin
D Howell
A Nimmo (3)
G Barker (4)
V Wadley (4)
Former Directors
A Carey (5)
Salary/fees
£
Earned Payment in lieu
of pension (7)
bonus (6)
£
£
Benefits
in kind (8)
£
2012
Total
£
2011
Total
£
780,000
2,340,000
132,600
37,128
3,289,728
3,157,639
470,000
1,410,000
79,900
29,160
1,989,060
1,901,419
270,000
270,000
270,000
212,227
100,000
72,708
67,500
67,500
33,013
16,667
16,667
–
594,000
472,500
472,500
326,503
–
–
–
–
–
–
–
–
–
40,500
–
–
–
–
–
–
–
–
–
–
20,519
22,103
25,155
19,679
884,519
805,103
767,655
558,409
827,631
745,815
453,540
114,486
–
–
–
–
–
–
–
–
100,000
100,000
72,708
67,500
67,500
33,013
16,667
16,667
65,000
65,000
65,000
–
–
–
–
663,582
2,646,282
5,615,503
253,000
153,744
8,668,529
8,159,112
(1) Appointed to the Board on 8 September 2010.
(2) Resigned from the Board on 8 September 2010, reappointed to the Board on 5 September 2011.
(3) Appointed to the Board on 5 September 2011.
(4) Appointed to the Board on 3 January 2012.
(5) Left the Board on 16 September 2010. The Company settled the litigation with Tony Carey during the year, as set out on page 100.
(6) The earned bonus for the year is added to each individual Director’s plan account. 50% of the balance on the plan account at the end of the financial year
is released and 50% deferred. The plan is set out in the table below. Before its award Rob Perrins, Nick Simpkin and Sean Ellis each sacrificed part of the
released element of their bonus entitlement. Pension contributions equal to the amounts given up were made into pension plans for the benefit of their
dependants. The amount shown in the bonus column reflects the full 2011/12 award.
(7) Having regard to the Lifetime Allowance introduced under the pension simplification legislation which came into force from 6 April 2006, Executive
Directors may, as an alternative to receiving a company contribution into a pension arrangement, receive a cash payment in lieu of such pension
contributions. Tony Pidgley, Rob Perrins and Karl Whiteman have chosen this alternative in respect of their total pension entitlement from the Company.
During the year Tony Pidgley and Rob Perrins received payments in lieu of pension at 17% of base salary and Karl Whiteman at 15% of base salary.
(8) Benefits in kind for the current Chairman and Executive Directors relate principally to the provision of a fully expensed motor vehicle or cash allowance
alternative and private healthcare.
Where Directors were appointed, or resigned, during the year, the figures in the table relate only to the time when the relevant Director
was a Main Board Director.
102 Berkeley Annual Report 2012
RemuneRation RepoRtGovernance
Bonus earned but deferred under the Bonus Banking plan
Under the Bonus Plan, the earned bonus for the year is added to each individual Director’s plan account. 50% of the balance on the plan
account at the end of the financial year is released and 50% deferred.
The deferred balances on each Director’s plan account are set out below:
Plan account
brought forward
Shares
Plan account
brought forward (1)
£
Contribution into
plan account for
the financial year
2011/12
£
Plan account
balance at
30 April 2012
£
Amount
released as of
30 April 2012
£
Plan account
Plan account
carried forward carried forward (1)
Shares
£
A W Pidgley
106,132
1,359,551
2,340,000
3,699,551
(1,849,775)
1,849,775
144,401
R C Perrins
N G Simpkin
K Whiteman
S Ellis
G J Fry
63,679
25,943
20,637
20,637 (2)
23,585 (3)
815,728
332,330
264,360
264,360
302,124
1,410,000
2,225,728
(1,112,864)
1,112,864
594,000
472,500
472,500
926,330
736,860
736,860
500,000 (4)
802,124
(463,165)
(368,430)
(368,430)
(401,062)
463,165
368,430
368,430
401,062
86,875
36,157
28,761
28,761
31,309
260,613
3,338,453
5,789,000
9,127,453
(4,563,726)
4,563,726
356,264
(1) Based on the share price of £12.81 at 30 April 2012
(2) Includes 7,350 shares representing deferred bonus earned prior to joining the Main Board on 8 September 2010
(3) Shares represent deferred bonus earned for prior year
(4) Bonus earned for full year including pro rata element earned prior to joining the Main Board on 5 September 2011
pensIons
payments in lieu of pension
Tony Pidgley, Rob Perrins and Karl Whiteman received payments in lieu of a pension contribution from the Company during the year and
this is set out in the Directors’ remuneration table above.
No amounts were paid into pension arrangements in respect of Tony Pidgley, Rob Perrins and Karl Whiteman during the year ended 30
April 2012.
defined contribution plan
In respect of Nick Simpkin, Sean Ellis and Greg Fry the following contributions were made to defined contribution plans:
Executive Directors
N G Simpkin (1)
S Ellis (2)
G J Fry (3)
Former Directors
A Carey (4)
Company
contributions
2012
£
Company
contributions
2011
£
40,500
40,500
31,834
–
112,834
30,000
17,770
15,612
23,135
86,517
Age
42
43
55
64
Where Directors were appointed, or resigned, during the year, the figures in the table relate only to the time when the relevant Director
was a Main Board Director.
(1) In 2011 Nick Simpkin received 3% of base salary as a cash payment in lieu, in addition to pension contributions of 12%.
(2) Appointed to the Board on 8 September 2010.
(3) Resigned from the Board on 8 September 2010, reappointed to the Board on 5 September 2011.
(4) Left the Board on 16 September 2010.
Berkeley Annual Report 2012
103
GovernanceGovernance
share IncentIve plans
The entitlements under share incentive plans for Directors serving on the Main Board at 30 April 2012 are set out below:
At 1 May
2011
Options (1)
2,842,848
1,500,000
–
1,066,068
750,000
–
250,000
–
250,000
–
175,000
–
533,034
500,000
–
4,441,950
3,425,000
–
Options
vested
in year
Options
granted
in year (2)
At 30 April
2012
Options
Value
released
£
–
–
–
–
–
–
–
–
–
–
–
–
–
–
-
–
–
–
–
–
5,000,000
–
–
2,842,848
1,500,000
5,000,000
–
1,066,068
750,000
5,000,000
5,000,000
–
–
250,000
3,250,000
3,250,000
–
–
250,000
2,250,000
2,250,000
–
–
175,000
2,250,000
2,250,000
–
533,034
500,000
–
–
1,866,503
1,866,503
–
4,441,950
3,425,000
–
–
–
–
–
–
–
–
-
-
-
-
-
-
-
-
-
-
-
19,616,503
19,616,503
–
A W Pidgley
2009 LTIP Part A (3)
2009 LTIP Part B (4)
2011 LTIP (5)
R C Perrins
2009 LTIP Part A (3)
2009 LTIP Part B (4)
2011 LTIP (5)
N G Simpkin
2009 LTIP Part B (4)
2011 LTIP (5)
K Whiteman
2009 LTIP Part B (4)
2011 LTIP (5)
S Ellis
2009 LTIP Part B (4)
2011 LTIP (5)
G J Fry (6)
2009 LTIP Part A (3)
2009 LTIP Part B (4)
2011 LTIP (5)
Total
2009 LTIP Part A (3)
2009 LTIP Part B (4)
2011 LTIP (5)
(1) Or date of joining the Board if later.
(2) On 5 September 2011.
(3) Exercise price of £3.00 per share.
(4) Exercise price of £8.40 per share.
(5) Exercise price of £13.00 per share.
(6) Appointed to the Board on 5 September 2011.
Further details are set out on pages 97 and 98 of this report.
The mid-market share price of the Company at 5 September 2011, when the LTIP awards were made, was 1236p.
The mid-market share price of the Company was 1091p as at 3 May 2011 and was 1281p at 30 April 2012. The mid-market high and low
share prices of the Company were 1414p and 1025p respectively in the year.
104 Berkeley Annual Report 2012
RemuneRation RepoRtGovernance
dIrectors’ Interests In shares
The beneficial interests (unless indicated otherwise) of the Directors in office at the end of the year in the ordinary share capital of the
Company were as shown below.
Name
A W Pidgley
A W Pidgley Non-beneficial
R C Perrins
N G Simpkin
G J Fry (1)
K Whiteman
S Ellis
V M Mitchell
J Armitt
D Howell
A C Coppin
A Nimmo (1)
G Barker (2)
V Wadley (2)
1 May
2011
30 April
2012
6,756,838
6,456,838
19,183
19,183
1,688,346
1,501,596
27,000
27,000
943,171
989,454
31,126
5,000
16,274
4,090
4,000
4,000
–
–
–
35,815
10,000
18,974
9,112
4,000
4,000
2,000
7,800
–
(1) On appointment to the Board on 5 September 2011.
(2) On appointment to the Board on 3 January 2012.
In respect of shares previously released under Element 1 of the 2004 (b) LTIP, the restriction on the ability of the Executive Directors to sell
a maximum of 10% of the net award of shares released each financial year continues until 31 January 2014 at which point the sale
restrictions lapse.
a c coppin
chairman, remuneration committee
19 July 2012
Berkeley Annual Report 2012
105
GovernanceGovernance
corporate Governance
The Company is committed to maintaining a high standard of corporate governance in respect of leadership, effectiveness, accountability,
remuneration and relationships with our shareholders as identified by the UK Corporate Governance Code 2010 (the Code).
This section and the Remuneration Report detail how the Company has applied the principles and provisions of the Code. The Company’s
business model is explained on pages 12 to 15 of the Annual Report.
It is the Board’s view that it has been fully compliant with the Code throughout the 2011/12 financial year.
A copy of the Code is available on the Financial Reporting Council’s website www.frc.org.uk.
the Board
role
The Board has a collective responsibility for promoting the long term success of the Company in a safe and sustainable manner in order to
create shareholder value. The Board provides leadership and sets the Company’s strategic long-term objectives.
Its duties are set out in a formal schedule of matters specifically reserved for decision by the Board, which include:
– Overall management of the Group, its strategy and long-term objectives;
– Approval of corporate plans;
– Approval of all corporate transactions;
– Changes to the Group’s capital structure;
– Approval of the Group’s treasury policy;
– Approval of the Group’s interim and annual results, dividend policy and shareholder distributions;
– Reviewing the Group’s risks and system of internal control;
– Changes to the Board and other senior executive roles;
– Corporate Governance arrangements and the Board evaluation; and
– Approval of policies in key areas including Sustainability, Health & Safety and Business Ethics.
composition and Independence
At the date of this report the Board comprises thirteen Directors; the Chairman, five Executive Directors and seven independent
Non-executive Directors. Their biographies are set out on pages 84 and 85.
The Board has evolved over recent years to put in place the succession planning that all successful organisations require and the further
appointments made to the Board during this year, including three new independent Non-executive Directors, has further broadened the
overall composition of the Board.
The Board considers that all of the current Non-executive Directors were independent throughout the year. In recognising that Victoria
Mitchell was appointed to the Board on 1 May 2002 and as a result has served on the Board for over nine years, she announced in
December 2011 her intention to step down from the Board at the Annual General Meeting on 5 September 2012.
The Non-executive Directors, led by the Senior Independent Director Sir John Armitt have the skills, experience, independence and
knowledge of the Company to enable them to discharge their respective duties and responsibilities effectively.
The Group Executive Directors do not hold any Non-executive Director appointments or commitments required to be disclosed under
the Code.
chairman and managing director
The roles of Group Chairman and Group Managing Director are separately held and there are clear written guidelines to support the
division of responsibility between them. The Group Chairman is responsible for the effective conduct of the Board and shareholder
meetings and for ensuring that each Director contributes to effective decision-making. The Group Managing Director has day-to-day
executive responsibility for the running of the Group’s businesses. His role is to develop and deliver the strategy to enable the Group to
meet its objectives.
meetings
The Board met seven times during 2011/12, including the April 2011 meeting which was deferred until the first week of May due to the
unusually high number of public holidays in April 2011. There were no absences from any of the meetings.
In addition to the formal meetings of the whole Board, the Non-executive Directors meet with the Group Chairman. The Group Managing
Director and Group Finance Director are invited to attend these meetings in part, to provide an update on the business activities of the Group.
The Non-executive Directors meet at least annually without the Group Chairman present, chaired by the Senior Independent Director.
Board papers and agendas are sent out in the week prior to each meeting, thus allowing sufficient time for detailed review and consideration
of the documents beforehand. In addition, the Board is supplied with comprehensive management information on a regular basis.
election and re-election of directors
The Articles of Association of the Company include the requirement for Directors to submit themselves to shareholders for re-election
every three years. In addition, all Directors are subject to re-election by shareholders at the first opportunity after their appointment and
thereafter at intervals of no more than three years.
106 Berkeley Annual Report 2012
Governance
However, in accordance with the requirements of the new Code, all the Directors will offer themselves for re-election at the forthcoming
Annual General Meeting, other than Victoria Mitchell who is standing down from the Board.
Induction and development
On appointment, Non-executive Directors are provided with a detailed induction programme. This covers an overview of the Group’s
operations and its policies, corporate responsibility and corporate affairs issues, legal matters, and the opportunity to meet with Directors
and key staff and to visit the Group’s sites.
No training needs were identified this year, although ongoing training is available to all Directors to meet their individual needs. Board
members also receive guidance on regulatory matters and the corporate governance framework that the Group operates under. In
particular during the year the Board received training on the Bribery Act 2010 in advance of its implementation on 1 July 2011.
Members of the Audit and Remuneration Committees received briefings from our auditors and remuneration advisers respectively to
ensure they remain up to date with current regulations and developments.
All Directors have access to advice from the Company Secretary and independent professional advisers, at the Company’s expense, where
specific expertise is required in the course of their duties.
Board evaluation
The Board undertakes an annual formal evaluation of its own performance and that of its Committees and individual Directors.
This year the process was led by the Chairman and covered:
• strategic matters
• Board structure, committees and their operation
• succession planning
• induction and development
• assessment of the performance of individual committees and the Chairman
• shareholder communication
The overall conclusion was that individual Board members are satisfied that the Board works well and operates efficiently. They are also
satisfied with the contribution made by their colleagues and that the Board committees operate properly and efficiently.
In line with the best practice recommendations of the Code, which recommends that an externally facilitated evaluation should be
conducted at least every three years, the Board has agreed that an external evaluation will be conducted for 2012/13.
conflicts of Interest
In accordance with the Companies Act 2006, the Company’s Articles of Association allow the Board to authorise potential conflicts of
interest that may arise and to impose such limits or conditions as it thinks fit. The decision to authorise a conflict of interest can only be
made by non-conflicted Directors (those who have no interest in the matter being considered) and in making such a decision the Directors
must act in a way they consider in good faith will be most likely to promote the Company’s success.
The Company has established a procedure whereby actual and potential conflicts of interest of current and proposed roles to be
undertaken by the Board with other organisations are regularly reviewed in respect of both the nature of those roles, and their time
commitment, and for proper authorisation to be sought prior to the appointment of any new Director. The Board consider these
procedures to be working effectively.
Insurance
The Company has in place an appropriate policy which insures Directors against certain liabilities, including legal costs, which they may
incur in carrying out their duties.
Board commIttees
The Board has delegated certain matters to individual Executives and to specific committees of the Board. The responsibilities of the key
Board committees are described below.
executive committee
The Executive Committee meets monthly and reviews the financial and operating performance of all Group divisions and companies. The
Group Managing Director, Rob Perrins, chairs this Committee and other members comprise, Tony Pidgley, Nick Simpkin, Karl Whiteman,
Sean Ellis and Greg Fry.
The following three Board committees operate within clearly defined Terms of Reference pursuant to the provisions of the Code. The Terms
of Reference can be downloaded from the section dealing with Investor Relations on the Berkeley website (www.berkeleygroup.co.uk).
Copies are also available to shareholders on application to the Company Secretary.
audit committee
The Audit Committee comprises three independent Non-executive Directors. The Committee is chaired by David Howell, FCA, and the
other members at 30 April 2012 were Alan Coppin and Alison Nimmo.
During the year Alison Nimmo was appointed to the Committee on her appointment as a Non-executive Director on 5 September 2011
and Victoria Mitchell retired from the Committee on 2 December 2011.
Berkeley Annual Report 2012
107
GovernanceGovernance
corporate Governance
David Howell, who qualified as a chartered accountant in 1971 and was the Chief Financial Officer and a Main Board Director of
lastminute.com plc until March 2005, is considered by the Board to have recent and relevant financial experience. David Howell was also
Chairman of the Audit Committee of Nestor Healthcare Group plc from 2000 to 2003.
The Committee met formally on three occasions during the year to 30 April 2012 with no absences.
The Group Finance Director and representatives of the external and internal auditors also attend the Committee’s meetings by invitation.
The Committee has formal Terms of Reference which set out its role and the authority delegated to it by the Board. The key
responsibilities of the Committee are set out below:
• monitoring the integrity of the financial reporting of the Company and reviewing significant financial reporting issues and
accounting policies;
• reviewing the adequacy and effectiveness of the Group’s internal control and risk management systems and monitoring the
effectiveness of the Group’s internal audit function; and
• overseeing the relationship with the external auditor, including appointment, removal and fees, and ensuring the auditor’s
independence and the effectiveness of the audit process.
The Committee met its responsibilities in the year by:
• reviewing the financial disclosures in the Group’s Annual Report and Accounts and half-year financial report prior to their publication.
This included reviewing the accounting policies and financial reporting judgements. It also reviewed the contents of interim
management statements issued by the Company during the year;
• undertaking an annual assessment of the Group’s system of risk management and internal control, including:
– considering the key risks facing the Group
– considering the key elements of the Group’s control processes
– receiving reports from both external and internal audit during the course of the year
– reviewing the operations and effectiveness of internal audit
– assessing the adequacy of disclosure in the Annual Report
• reviewing the development and implementation of the Group’s policies and procedures in relation to the Bribery Act, and monitoring
ongoing compliance;
• reviewing the external auditors audit plan, their performance, effectiveness, independence and fees; and
• approving the non-audit fees policy.
The Committee has a policy on the use of the auditors for non-audit services in order to safeguard auditor independence, which was
reviewed during the year and the Committee has agreed to undertake actions, such as extending the use of other advisors who have the
necessary skills and expertise, to target an equal ratio of audit to non-audit fees going forwards. At the same time, the Committee
recognises that, for businesses such as Berkeley, the impact of one-off transactions can have a material effect on this ratio depending on
the nature of such activity.
Any departure from this ratio will only be as a consequence of transactional work, where the Committee considers it is right for the
auditors to undertake such work where the reasons for doing so are compelling, such as where
i) it is proprietary to them;
ii) they have pre-existing knowledge and experience that precludes the use of alternative firms;
iii)the nature of the transaction is that the Group’s auditors are the only practical solution.
Non-audit work carried out by all firms, including the auditors, is formally reported to the Audit Committee at each meeting.
The auditors have open recourse to the Non-executive Directors, should they consider it necessary, and there is open dialogue between
the auditors and the Chairman of the Audit Committee before each Audit Committee meeting and, after the meeting, the opportunity to
meet without the Executive Directors present.
remuneration committee
The Remuneration Committee is responsible for determining the Company’s policy for Executive remuneration and the precise terms of
employment and remuneration of the Executive Directors. The principles and details of Directors’ remuneration are contained in the
Remuneration Report on pages 89 to 105.
The Committee is chaired by Alan Coppin and the other members at 30 April 2012 were Sir John Armitt and David Howell, who are all
independent Non-executive Directors.
During the year David Howell was appointed to the Committee on 2 December 2011 and Victoria Mitchell retired from the Committee on
the same date.
With effect from 13 June 2012, David Howell retired from the Committee and Glyn Barker was appointed to the Committee.
The Committee met formally on four occasions during the year to April 2012 with no absences.
No Director is involved in deciding his or her remuneration. The Executive Directors decide the remuneration of the Non-executive
Directors and the Committee takes into consideration the recommendations of the Group Managing Director and Group Finance Director
regarding the remuneration of their Executive colleagues.
108 Berkeley Annual Report 2012
Governance
nomination committee
The Nomination Committee ensures that the membership and composition of the Board, including the balance of skills, is appropriate, as
well as giving full consideration to succession planning on a regular basis.
The Committee is chaired by the Group Chairman, Tony Pidgley and the Independent Non-executive members at 30 April 2012 were
David Howell and Sir John Armitt. Victoria Mitchell retired from the Committee on 2 December 2011.
With effect from 13 June 2012, Veronica Wadley was appointed to the Committee.
The Committee met formally on two occasions during the year to 30 April 2012 with no absences.
During the year, the activities of the Committee included:
• identifying three new independent Non-executive Directors (Alison Nimmo, Veronica Wadley and Glyn Barker) and recommending their
appointment to the Board;
• considering and making recommendations to the Board regarding the membership of the Board committees; and
• reviewing succession plans for the Executive team.
Appointments to the Board are made based on merit and the specific skills and expertise required for the role. The Committee has chosen
not to set specific representation targets for women at Board level at this time. However, it recognises that the benefits of diversity,
including gender diversity, will continue to be an active consideration when further changes to the Board’s composition are considered.
The process for identifying and recommending new appointments includes a combination of discussions and consultations, in addition to
formal interviews, utilising the services of independent recruitment specialists, as appropriate.
Key rIsKs and Internal control
The Board acknowledges that it has overall responsibility for the Group’s system of internal control and for reviewing its effectiveness, at
least annually.
Internal control procedures are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only
provide reasonable and not absolute assurance against material misstatement or loss.
There are ongoing processes and procedures for identifying, evaluating and managing the significant risks faced by the Group. These
processes and procedures were in place from the start of the financial year to the date on which the 2012 Annual Report and Accounts
were approved and accord with the Turnbull guidance issued in 2005.
The processes are regularly reviewed by the Board and include an annual review by the Directors of the operation and effectiveness of the
system of internal control as part of its year end procedures. The key features of the system of internal control include:
clear organisational structure
The Group operates through autonomous divisions and operating companies, each with its own board. Operating company boards meet
on a weekly basis and divisional boards on a monthly basis, and comprehensive information is prepared for such meetings on a
standardised basis to cover all aspects of the business. Formal reporting lines and delegated levels of authority exist within this structure
and the review of risk and performance occurs at multiple levels throughout the operating companies, divisions and at Group.
risk assessment
Risk reporting is embedded within ongoing management reporting throughout the Group. At operating company and divisional level,
Board meeting agendas and packs are structured around the key risks facing the Group. These risks include health and safety, sales,
production (build cost and programme), land and planning, economic, regulatory and site specific matters.
In addition, there is a formalised process whereby each division produces quarterly risks and control reports that identify significant risks,
the potential impact and the actions being taken to mitigate the risks. These risk reports are reviewed and updated regularly.
A Group Risk Management Report is presented at each Group Main Board Meeting, setting out the current factors affecting the risk
profile of the Group, the mitigation of these risks and the key changes to this risk profile since the last report.
financial reporting
A comprehensive budgeting and real-time forecasting system, covering both profit and cash, operates within the Group. This enables
executive management to view key financial and operating data on a daily basis. On a weekly and monthly basis more formal reporting up
to the Group Executives and the Board is prepared. The results of all operating units are reported monthly and compared to budget and
forecast.
There is a consolidation process in place which ensures that there is an audit trail between the Group’s financial reporting system and the
Group’s statutory financial statements.
Investment and contracting controls
The Group has clearly defined guidelines for the purchase and sale of land within the Group, which include detailed environmental,
planning and financial appraisal and are subject to executive authorisation. Rigorous procedures are also followed for the selection of
consultants and contractors. The review and monitoring of all build programmes and budgets are a fundamental element of the
Company’s financial reporting cycle.
Berkeley Annual Report 2012
109
GovernanceGovernance
corporate Governance
policies and procedures
Policies and procedures, including operating and financial controls, are detailed in policies and procedures manuals that are refreshed and
improved as appropriate. Training to staff is given where necessary.
central functions
Strong central functions, including Legal, Health & Safety and Company Secretarial, provide support and consistency to the rest of the
Group. In addition, the principal treasury-related risks, decisions and control processes are managed by the Group Finance function, under
the direction of the Group Finance Director.
Internal audit
Internal auditors are in place in each division and at Group to provide assurance on the operation of the Group’s control framework.
whistleblowing
The Group has a whistleblowing policy which has been communicated to all staff, where Directors, management and staff can report in
confidence any concerns they may have of malpractice, financial irregularity, breaches of any Group procedures, or other matters. The
arrangements in place are reviewed by the Audit Committee.
Bribery act
In advance of the implementation of the Bribery Act on 1 July 2011, the Group undertook a thorough review of the requirements of the
Act to ensure that it had adequate policies and procedures in place to prevent bribery. This included providing training to staff and
implementing an Anti Bribery and Corruption policy, which was communicated to all staff.
The Finance Director has the executive responsibility for implementing the Group’s policy and reporting to the Audit Committee, who are
charged with overseeing the development and implementation of the Group’s policies and procedures and monitoring ongoing
compliance.
relatIons wIth shareholders
The Company encourages active dialogue with its current and prospective shareholders through ongoing meetings with institutional
investors. Major shareholders have the opportunity to meet all Directors after the Annual General Meeting in addition to individual
meetings with the Company.
Shareholders are also kept up to date with the Company’s activities through the Annual and Interim Reports. In addition, the corporate
website gives information on the Group and latest news, including regulatory announcements. The presentations made after the
announcement of the preliminary and interim results are also available on the website.
The Board is kept informed of the views of the shareholders through periodic reports from the Company’s broker UBS. Additionally, the
Non-executive Directors have the opportunity to attend the bi-annual analyst presentations.
The Senior Independent Director is available to shareholders if they have concerns where contact through the normal channels has failed
or when such contact is inappropriate.
annual General meetInG
All shareholders are invited to participate in the Annual General Meeting (“AGM”) where the Group Chairman, the Group Managing
Director and the Chairmen of the Audit, Remuneration and Nomination Committees will be available to answer questions and will also be
available for discussions with shareholders both prior to and after the meeting.
The Company arranges for the Annual Report and Accounts and related papers to be posted to shareholders so as to allow at least 20
working days for consideration prior to the AGM.
The Company complies with the provisions of the Code relating to the disclosure of proxy votes, which, including abstentions, are
declared at the AGM after each resolution has been dealt with on a show of hands and are announced to the Stock Exchange shortly after
the close of the meeting. The Company also complies with the requirements of the Code with the separation of resolutions and the
attendance of the Chairmen of the Board Committees.
The terms and conditions of appointment for the Non-executive Directors, which set out their expected time commitment, in addition to
the service contracts for the Executive Directors, are available for inspection at the AGM and during normal business hours at the
Company’s registered office.
GoInG concern
The Group’s business activities together with the factors likely to affect its future development performance and position are set out in the
Business Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are all described in the
Trading and Financial review on pages 64 to 79.
The Group has significant financial resources and the Directors have assessed the future funding requirements of the Group and compared
this to the level of committed loan facilities and cash resources over the medium term. In making this assessment consideration has been
given to the uncertainty inherent in future financial forecasts and where applicable reasonable sensitivities have been applied to the key
factors affecting the financial performance of the Group.
110 Berkeley Annual Report 2012
UNCOATED PAPER FROM THIS PAGE ONWARDS
Governance
The Directors have a reasonable expectation that the Company has adequate resources to continue its operational existence
for the foreseeable future. For this reason they continue to adopt the going concern basis of accounting in preparing the annual
financial statements.
share capItal structure
The Company is compliant with DTR 7.2.6. and the information relating to the Company’s share capital structure is included in the
Directors’ Report on page 86.
statement of dIrectors’ responsIBIlItIes In respect of the annual report
and the fInancIal statements
The Directors are responsible for preparing the Annual Report, the Remuneration Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European
Union, and have prepared the Parent Company Financial Statements in accordance with United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice) and applicable law.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether IFRS as adopted by the European Union and applicable UK accounting standards have been followed, subject to any
material departures disclosed and explained in the Group and Parent Company Financial Statements respectively; and
• prepare financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
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 the Group and to enable them to ensure that
the financial statements and the Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group 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 Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
dIrectors’ responsIBIlIty statement
Each of the Directors, whose names and functions are listed in the Directors’ Report confirm that, to the best of each person’s knowledge:
a the Group financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and
fair view of the assets, liabilities, financial position and profit or loss of the Group; and
b the management report, which is incorporated into the Directors’ report, includes a fair review of the development and performance of
the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
By order of the Board
A M Bradshaw
Company Secretary
19 July 2012
UNCOATED PAPER FROM THIS PAGE ONWARDS
Berkeley Annual Report 2012
111
GovernanceGovernance
financials
FINANCIAlS
BASIC EARNINGS PER SHARE
HAvE INCREASED By 67.8%,
OUR BAlANCE SHEET REMAINS
STRONG AND FORWARD SAlES
STAND AT OvER £1 BIllION.
112 Berkeley annual report 2012
financials
i
F
n
a
n
c
i
a
l
s
Berkeley annual report 2012
113
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF THE BERKELEY GROUP HOLDINGS PLC
We have audited the Consolidated Financial Statements of The Berkeley Group Holdings plc for the year ended 30 April 2012 which
comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of
Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement and the related notes. The
financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As explained more fully in the Directors’ Responsibilities Statement set out on page 111, the Directors are responsible for the preparation
of the Consolidated Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and
express an opinion on the Consolidated Financial Statements in accordance with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by
our prior consent in writing.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial
statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies
with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the
implications for our report.
OPINION ON FINANCIAL STATEMENTS
In our opinion the Consolidated Financial Statements:
• give a true and fair view of the state of the Group’s affairs as at 30 April 2012 and of its profit and cash flows for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the lAS Regulation.
OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion:
• the information given in the Directors’ Report for the financial year for which the Consolidated Financial Statements are prepared is
consistent with the Consolidated Financial Statements; and
• the information given in the Corporate Governance Statement set out on pages 106 to 111 with respect to internal control and risk
management systems and about share capital structures is consistent with the Consolidated Financial Statements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a corporate governance statement has not been prepared by the Parent Company.
Under the Listing Rules we are required to review:
• the Directors’ statement, set out on pages 110 to 111, in relation to going concern;
• the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the UK Corporate
Governance Code specified for our review; and
• certain elements of the report to shareholders by the Board on Directors’ remuneration.
OTHER MATTER
We have reported separately on the Parent Company Financial Statements of The Berkeley Group Holdings plc for the year ended
30 April 2012 and on the information in the Directors’ Remuneration Report that is described as having been audited.
Mark Gill (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
19 July 2012
114 Berkeley Annual Report 2012
Financials
CONSOLIDATED INCOME STATEMENT
For the year ended 30 April
Revenue
Cost of sales
Gross profit
Net operating expenses
Operating profit before exceptional item
Exceptional profit on disposal of subsidiary
Operating profit
Finance income
Finance costs
Share of post tax results of joint ventures using the equity method
Profit before taxation for the year
Income tax expense
Profit after taxation for the year
Profit attributable to:
Shareholders
Non-controlling interest
Earnings per ordinary share attributable to shareholders:
Basic
Diluted
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
For the year ended 30 April
Profit after taxation for the year
Other comprehensive (expense)/income:
Actuarial loss recognised in the pension scheme
Deferred tax on actuarial loss recognised in the pension scheme
Other comprehensive expense for the year
Total comprehensive income for the year
Attributable to:
Shareholders
Non-controlling interest
Notes
2012
£’000
2011
£’000
8
3
3
11
2, 4
6
1,041,069
742,612
(745,773)
(533,542)
295,296
209,070
(99,566)
(73,420)
195,730
209,070
30,695
–
226,425
135,650
2,369
(11,781)
(2,192)
10,056
(11,520)
2,059
214,821
136,245
(56,674)
158,147
(41,789)
94,456
158,513
(366)
158,147
95,109
(653)
94,456
7
7
121.0p
112.8p
72.1p
70.3p
Notes
5
6
2012
£’000
158,147
(628)
151
(477)
2011
£’000
94,456
(653)
170
(483)
157,670
93,973
158,036
(366)
158,670
94,626
(653)
93,973
Berkeley Annual Report 2012
115
FinancialsFinancials
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 April
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment properties
Investments accounted for using the equity method
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Borrowings
Trade and other payables
Current liabilities
Borrowings
Trade and other payables
Current tax liabilities
Total liabilities
Total net assets
Equity
Shareholders’ equity
Share capital
Share premium
Capital redemption reserve
Other reserve
Revaluation reserve
Retained earnings
Non-controlling interest
Total equity
Notes
2012
£’000
2011
£’000
9
10
10
11
17
12
13
14
15
16
15
16
18
18
19
19
19
19
17,159
11,559
83,522
46,481
25,040
17,159
10,620
28,558
38,675
18,881
183,761
113,893
1,851,715
1,613,192
115,210
2,747
96,725
266,307
1,969,672
1,976,224
2,153,433
2,090,117
(12,498)
(30,391)
(42,889)
(24,233)
(51,009)
(75,242)
(48,130)
(862,707)
(99,873)
(200,029)
(787,204)
(93,864)
(1,010,710)
(1,081,097)
(1,053,599)
(1,156,339)
1,099,834
933,778
6,743
49,315
24,516
6,743
49,315
24,516
(961,299)
(961,299)
3,375
3,435
1,977,184
1,806,704
1,099,834
929,414
–
4,364
1,099,834
933,778
The financial statements on pages 115 to 141 were approved by the board of directors on 19 July 2012 and were signed on its behalf by:
N G Simpkin
Finance Director
116 Berkeley Annual Report 2012
Financials
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to shareholders
Share
capital
£’000
Capital
Share redemption
reserve
£’000
premium
£’000
Other Revaluation
reserve
£’000
reserve
£’000
Retained
earnings
£’000
Non-
controlling
interest
£’000
Total
£’000
Total
equity
£’000
At 1 May 2011
6,743
49,315
24,516
(961,299)
3,435 1,806,704 929,414
4,364
933,778
Profit/(loss) after taxation
for the year
Other comprehensive
expense for the year
Funding from non-controlling
interest in subsidiary
undertaking
Disposal of investment
in subsidiary
Reserves transfer from
revaluation reserve (note 19)
Transactions with shareholders:
Credit in respect of employee
share schemes (note 5)
Deferred tax in respect of
employee share schemes
(note 6)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
158,513 158,513
(366)
158,147
(477)
(477)
–
(477)
–
–
–
–
–
65
65
(4,063)
(4,063)
–
–
(60)
60
–
–
–
–
8,212
8,212
–
8,212
At 30 April 2012
6,743
49,315
24,516
(961,299)
3,375
1,977,184 1,099,834
–
4,172
4,172
–
4,172
– 1,099,834
Attributable to shareholders
Share
capital
£’000
Capital
Share redemption
reserve
£’000
premium
£’000
Other Revaluation
reserve
£’000
reserve
£’000
Retained
earnings
£’000
Non-
controlling
interest
£’000
Total
£’000
Total
equity
£’000
At 1 May 2010
6,743
49,315
24,516
(961,299)
3,489 1,735,832 858,596
3,720
862,316
Profit/(loss) after taxation
for the year
Other comprehensive
expense for the year
Funding from non-controlling
interest in subsidiary
undertaking
Reserves transfer from
revaluation reserve (note 19)
Transactions with shareholders:
Purchase of own shares
(note 19)
Credit in respect of employee
share schemes (note 5)
Deferred tax in respect of
employee share schemes
(note 6)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(54)
–
–
95,109
95,109
(653)
94,456
(483)
(483)
–
(483)
–
54
–
–
1,297
1,297
–
–
(30,002)
(30,002)
–
(30,002)
4,146
4,146
–
4,146
–
2,048
2,048
–
2,048
At 30 April 2011
6,743
49,315
24,516
(961,299)
3,435 1,806,704 929,414
4,364
933,778
Berkeley Annual Report 2012
117
FinancialsFinancials
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 April
Cash flows from operating activities
Cash outflow from operations
Interest received
Interest paid
Income tax paid
Net cash flow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Sale of property, plant and equipment
Funding of non-controlling interest in subsidiary undertaking
Disposal of subsidiary undertaking
Cash balance in subsidiary undertaking disposed
Purchase of shares in joint ventures
Movements in loans with joint ventures
Net cash flow from investing activities
Cash flows from financing activities
Purchase of own shares
Expenses related to the disposal of the subsidiary undertaking
Repayment of loan stock
Proceeds from borrowings
Net cash flow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents, including bank overdraft, at the start of the financial year
Notes
2012
£’000
2011
£’000
22
(108,936)
(204,266)
5,463
(5,412)
9,416
(5,490)
(53,673)
(32,631)
(162,558)
(232,971)
10
(2,280)
200
65
8
75,668
(207)
–
(9,998)
63,448
(2,008)
267
1,297
–
–
440
(11,038)
(11,042)
11
11
19
8
–
(816)
(20)
(30,002)
–
(19)
(163,614)
(164,450)
191,222
161,201
(263,560)
266,307
(82,812)
349,119
Cash and cash equivalents, including bank overdraft, at the end of the financial year
14
2,747
266,307
118 Berkeley Annual Report 2012
Financials
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
1 ACCOUNTING POLICIES
General Information
The Berkeley Group Holdings plc (the “Company”) is a public limited company incorporated and domiciled in the United Kingdom. The
address of its registered office is Berkeley House, 19 Portsmouth Road, Cobham, Surrey, KT11 1JG. The Company and its subsidiaries
(together the “Group”) are engaged in residential-led, mixed-use property development. Further information about the nature of the
Group’s operations and its principal activities are set out in the Directors’ Report on page 86.
Basis of preparation
These Consolidated Financial Statements have been prepared in accordance with European Union endorsed International Financial
Reporting Standards (“IFRSs”), IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting
under IFRS. The Consolidated Financial Statements have been prepared under the historical cost convention and on the going concern
basis. Historical cost is generally based on the fair value of the consideration given in exchange for the assets.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements, are
disclosed on page 122.
There were no new standards, amendments or interpretations that were adopted by the Group and effective for the first time for the
financial year beginning 1 May 2011 that were material to the Group. Furthermore, there are no standards, amendments or interpretations
that are not yet effective that would be expected to have a material impact on the Group.
Basis of consolidation
(a) Subsidiaries
The Consolidated Financial Statements comprise the financial statements of the Parent Company and all its subsidiary undertakings. The
accounting date for subsidiary undertakings is 30 April.
Subsidiary undertakings are entities that are directly or indirectly controlled by the Group. Control exists where the Group has the power
to govern the financial and operating policies of the entity so as to obtain the benefits from its activities.
The purchase method of accounting is used to account for the acquisition of subsidiary undertakings by the Group. The cost of an
acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in
a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling
interest. The excess of cost of acquisition over the fair value of the Group’s share of identifiable net assets acquired is recorded as
goodwill. If the cost of the acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised
directly in the income statement.
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.
(b) Non-controlling interests
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein.
Non-controlling interests consist of the amount of those interests at the date of the original business combination and those interests’
share of changes in the equity since the date of the combination.
(c) Joint ventures
Entities which are jointly controlled with another party or parties (“joint ventures”) are accounted for using the equity method of
accounting. The results attributable to the Group’s holding in joint ventures are shown separately in the consolidated income statement.
The amount included in the consolidated statement of financial position is the Group’s share of the net assets of the joint ventures plus net
loans receivable. Goodwill arising on the acquisition of joint ventures is accounted for in accordance with the policy set out above. The
carrying value of goodwill is included in the carrying value of the investment in joint ventures. On transfer of land and/or work in progress
to joint ventures, the Group recognises only its share of any profits or losses, namely that proportion sold outside the Group.
Segmental reporting
Operating segments are identified in a manner consistent with the internal reporting provided to the chief operating decision-maker. The
Group determines its reportable segments having regard to permitted aggregation criteria with the principal condition being that the
operating segments should have similar economic characteristics.
The Group is predominantly engaged in residential-led, mixed-use property development, comprising residential revenue, revenue from
land sales and commercial revenue.
Berkeley Annual Report 2012
119
Notes to the Consolidated Financial StatementsFinancials 1 ACCOUNTING POLICIES CONTINUED
For the purposes of determining its operating segments, the chief operating decision-maker has been identified as the Executive
Committee of the Board. This committee approves investment decisions, allocates the Group’s resources and reviews the internal
reporting in order to assess performance.
The Group has determined that its operating segments are the management teams that report into the Executive Committee of the
Board. These management teams are all engaged in residential-led, mixed-use development in the United Kingdom and, having regard
to the aggregation criteria in IFRS 8, the Group has one reportable operating segment.
In addition to its development activities, the Group holds certain residential properties for investment purposes. These investment
activities represent a separate segment which is included within “Other activities”, as it does not meet the size thresholds to be disclosed
as a separate reportable segment.
Revenue
Revenue represents the amounts receivable from the sale of properties during the year and other income directly associated with property
development. Properties are treated as sold and profits are recognised when contracts are exchanged and the building work is physically
complete.
Rental income is recognised in the income statement on a straight line basis over the life of the lease. Any lease incentives are recognised
as an integral part of the total rental income.
Expenditure
Expenditure recorded in inventory is expensed through cost of sales at the time of the related property sale. Net operating expenditure is
recognised in respect of goods and services received when supplied in accordance with contractual terms. Provision is made when an
obligation exists for a future liability in respect of a past event and where the amount of the obligation can be reliably estimated.
Taxation
The taxation expense represents the sum of the current tax payable and deferred tax. Current tax, including UK corporation tax, is
provided at the amounts expected to be paid (or received) using the tax rules and laws that have been enacted, or substantively enacted,
by the balance sheet date.
Deferred taxation is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in
the financial statements and 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 on all taxable temporary differences. 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
(except in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting
profit, or from differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the
foreseeable future.
Deferred taxation is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised
based on tax laws and rates that have been enacted at the balance sheet date. The carrying value 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 against
which taxable temporary differences can be utilised. Deferred taxation is charged or credited to the income statement, except when it
relates to items charged or credited directly to reserves, in which case the deferred taxation is also dealt with in reserves.
Deferred taxation assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred taxation assets and liabilities relate to income taxes levied by the same taxation authority on either the
taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Intangible assets
Where the cost of acquiring new and additional interests in subsidiaries, joint ventures and businesses exceeds the fair value of the net
assets acquired, the resulting premium on acquisition (goodwill) is capitalised and its subsequent measurement is based on annual
impairment reviews and impairment reviews performed where an impairment indicator exists, with any impairment losses recognised
immediately in the income statement. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation
is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in
which the goodwill arose.
Property, plant and equipment
Property, plant and equipment is carried at historic purchase cost less depreciation. Cost includes the original purchase price of the asset
and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided to write off the cost
of the assets on a straight line basis to their residual value over their estimated useful lives at the following annual rates:
Freehold buildings
Motor vehicles
2%
25%
Fixtures and fittings
Computer equipment
15% / 20%
33 1/3 %
120 Berkeley Annual Report 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial Statements
Freehold property disclosed in note 10 to the consolidated financial statements consists of both freehold land and freehold buildings. No
depreciation is provided on freehold land. Computer equipment is included within fixtures and fittings. The assets’ residual values,
carrying values and useful lives are reviewed on an annual basis and adjusted if appropriate at each balance sheet date. Where an
impairment is identified, the recoverable amount of the asset is identified and an impairment loss, where appropriate, is recognised in the
income statement.
Subsequent costs are included in the assets’ carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The
carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the
financial period in which they are incurred.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within net
operating expenses in the income statement.
Investment properties
Investment properties, which are properties held to earn rental income, are recognised using the “cost model” and are carried in the
statement of financial position at historic cost less accumulated depreciation.
Depreciation is provided to write off the element of the cost of the assets that relates to buildings at 2% per annum on a straight line
basis. No depreciation is charged on the element of the cost of the assets that relates to land.
Inventories
Property in the course of development and completed units are valued at the lower of cost and net realisable value. Direct cost comprises
the cost of land, raw materials and development costs but excludes indirect overheads. Provision is made, where appropriate, to reduce
the value of inventories and work in progress to their net realisable value.
Land purchased for development, including land in the course of development, is initially recorded at fair value. Where such land is
purchased on deferred settlement terms, and the fair value differs from the amount that will subsequently be paid in settling the liability,
this difference is charged as a finance cost in the income statement over the period to settlement.
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method,
less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the
Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the
difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective
interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is
recognised in the income statement within net operating expenses. When a trade receivable is uncollectible, it is written off against the
allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against net operating
expense in the income statement.
Cash and cash equivalents
Cash and cash equivalents comprises cash balances in hand and at the bank, including bank overdrafts repayable on demand which form
part of the Group’s cash management, for which offset arrangements across Group businesses have been applied where appropriate.
Share capital
Ordinary shares and redeemable preference shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the
proceeds.
Where any Group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly
attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders until the shares
are cancelled, sold or reissued. Where such shares are subsequently sold or reissued, any consideration received, net of any directly
attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity
holders.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Trade and other payables
Trade and other payables on normal terms are not interest bearing and are stated at their nominal value which is considered to be their
fair value. Trade payables on extended terms 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.
Berkeley Annual Report 2012
121
Notes to the Consolidated Financial StatementsFinancials
1 ACCOUNTING POLICIES CONTINUED
Deposits
New property deposits and on account contract receipts are held within current trade and other payables.
Employee benefits
(a) Pensions
The Group accounts for pensions under IAS 19 “Employee benefits”. The Group has both defined benefit and defined contribution plans.
The defined benefit plan was closed to future accrual with effect from 1 April 2007.
For the defined benefit scheme, the obligations are measured using the projected unit method. The calculation of the net obligation is
performed by a qualified actuary. The operating and financing costs of these plans are recognised separately in the income statement;
service costs are set annually on the basis of actuarial valuations of the scheme and financing costs are recognised in the period in which
they arise. Actuarial gains and losses are recognised immediately in the statement of comprehensive income and expense. In accordance
with IAS 19 the Group does not recognise on the statement of financial position any surplus in the scheme.
Pension contributions under defined contribution schemes are charged to the income statement as they fall due.
(b) Share-based payments
Where the Company operates equity-settled, share-based compensation plans, the fair value of the employee services received in
exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is
determined by reference to the fair value of the options granted. At each balance sheet date, the Group revises its estimates of the
number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement,
with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium
when the options are exercised.
Leasing agreements
Payments under operating lease agreements are charged against profit on a straight line basis over the life of the lease.
Accounting estimates and judgements
Management applies the Group’s accounting policies as described above when making critical accounting judgements, of which no
individual judgement is deemed to have a significant impact upon the financial statements, apart from those involving estimations, which
are detailed below.
(a) Carrying value of land and work in progress and estimation of costs to complete
The Group holds inventories stated at the lower of cost and net realisable value. Such inventories include land, work in progress and
completed units. As residential development is largely speculative by nature, not all inventories are covered by forward sales contracts.
Furthermore due to the nature of the Group’s activity and, in particular the scale of its developments and the length of the development
cycle, the Group has to allocate site-wide development costs between units being built and/or completed in the current year and those
for future years. It also has to forecast the costs to complete on such developments.
In making such assessments and allocations, there is a degree of inherent estimation uncertainty. The Group has established internal controls
designed to effectively assess and centrally review inventory carrying values and ensure the appropriateness of the estimates made.
(b) Pensions
Pension assumptions are set out within note 5 and are as advised by the Group’s actuary. The assumptions include the expected long-term
rate of return on assets, the discount rate used and the mortality rates. Such estimations are based on assumed rates and, should these
differ from what actually transpires, the pension asset of the Group would change.
(c) Goodwill impairment
In determining whether or not goodwill is impaired requires an estimation of value in use of the cash-generating units to which goodwill
has been allocated. The value in use calculation requires an estimate of the future cash flows expected to arise from the cash-generating
unit, the future growth rate of revenue and costs, and a suitable discount rate.
(d) Deferred tax
Assumptions are made as to the recoverability of deferred tax assets, especially as to whether there will be sufficient future profits to fully
utilise these in future years.
(e) Share-based payments
Assumptions are made in determining the fair value of employee services received in exchange for the grant of options under share-based
payment awards at the date of grant.
122 Berkeley Annual Report 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial Statements
2 SEGMENTAL DISCLOSURE
The Group is engaged in residential-led, mixed-use property development, comprising residential revenue, revenue from land sales and
commercial revenue.
For the purposes of determining its operating segments, the chief operating decision-maker has been identified as the Executive
Committee of the Board. This committee approves investment decisions, allocates the Group’s resources and reviews the internal
reporting in order to assess performance.
The Group has determined that its operating segments are the management teams that report into the Executive Committee of the
Board. These management teams are all engaged in residential-led, mixed-use development in the United Kingdom and, having regard
to the aggregation criteria in IFRS 8, the Group has one reportable operating segment.
In addition to its development activities, the Group holds certain residential properties for investment purposes. These investment
activities represent a separate segment which is included within other activities, as it does not meet the size thresholds to be disclosed as
separate reportable segments.
Segment results
Profit before tax
Residential-led mixed-use development
Other activities
2012
£’000
2011
£’000
215,156
136,512
(335)
(267)
214,821
136,245
Segment profit before tax represents the profit before tax allocated to each segment. This is the measure reported to the Executive
Committee of the Board for the purpose of resource allocation and assessment of segment performance.
Segment assets
Assets
Residential-led mixed-use development
Other activities
2012
£’000
2011
£’000
2,069,911
2,061,559
83,522
28,558
2,153,433
2,090,117
For the purpose of monitoring segment performance and allocating resources between segments all assets are considered to be
attributable to residential-led mixed-use development with the exception of investment properties which are held for the Group’s
investing activities and have therefore been allocated to other activities.
3 NET FINANCE COSTS
Finance income
Finance costs
Interest payable on bank loans and non-utilisation fees
Amortisation of facility fees
Other finance costs
Net finance costs
2012
£’000
2,369
(4,702)
(2,459)
(4,620)
(11,781)
(9,412)
2011
£’000
10,056
(4,130)
(2,084)
(5,306)
(11,520)
(1,464)
Finance income predominantly represents interest earned on cash deposits.
Other finance costs represent imputed interest on taxation and on land purchased on deferred settlement terms.
Berkeley Annual Report 2012
123
Notes to the Consolidated Financial StatementsFinancials
4 PROFIT BEFORE TAXATION
Profit before taxation is stated after charging/(crediting) the following amounts:
Staff costs (note 5)
Depreciation of property, plant and equipment (note 10)
Loss/(profit) on sale of property, plant and equipment
Rental income from investment properties
Direct operating expense in relation to investment properties including depreciation
Operating lease costs
Fees paid and payable to the Company’s auditor for the audit of the Parent Company
and consolidated financial statements
Fees paid and payable to the Company’s auditors for other services:
– Audit fee for the financial statements of the Company’s subsidiaries pursuant to legislation
– Services relating to taxation
– Services relating to the 2011/12 corporate strategic review and return of £13 per share to shareholders
– Remuneration consultancy services
– Other services supplied pursuant to legislation
2012
£’000
112,795
1,127
14
(4,029)
2,786
1,679
130
145
449
625
50
50
2011
£’000
85,722
858
(50)
(535)
725
1,515
120
125
623
–
50
50
The value of inventories expensed and included in the cost of sales is £687,102,000 (2011: £489,779,000).
Remuneration paid to the auditors in respect of taxation services was incurred primarily in connection with compliance matters and
corporate activity in the year.
Remuneration paid in respect of services provided for the 2011/12 corporate strategic review were one-off in nature, comprising taxation
and remuneration services towards the implementation of the Group’s strategy to return £13 per share to shareholders over the next 10
years and the associated 2011 LTIP.
Remuneration paid to the auditors in respect of other services supplied pursuant to legislation of £50,000 relates to the interim review
(2011: £50,000).
In addition to the above services, the Group’s auditor acted as auditor to The Berkeley Final Salary Plan. The appointment of auditors to
the Group’s pension scheme and the fees paid in respect of the audit are agreed by the trustees of the scheme, who act independently of
the management of the Group. The fees paid to the Group’s auditors for audit services to the pension scheme during the year were
£7,000 (2011: £7,000).
5 DIRECTORS AND EMPLOYEES
Staff costs
Wages and salaries
Social security costs
Share-based payments
Pension costs
2012
£’000
2011
£’000
88,707
13,168
8,212
2,708
112,795
68,229
10,922
4,146
2,425
85,722
The average number of persons employed by the Group during the year was 1,139 (2011: 935).
Key management compensation
Key management comprises the Main Board, as the Directors are considered to have the authority and responsibility for planning,
directing and controlling the activities of the Group. Details of Directors’ emoluments are set out in the Remuneration Committee report
on pages 89 to 105.
Share-based payments
The Group operates three equity-settled share based payments schemes. The charge to the income statement in respect of share-based
payments in the year relating to grants of share options awarded under the 2009 Long-Term Incentive Plan, the 2011 Long-Term Incentive
Plan and deferred shares or notional shares under the Bonus Plan, was £8,212,000 (2011: £4,146,000). The charge to the income
statement attributable to key management is £7,121,000 (2011: £3,099,000).
124 Berkeley Annual Report 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial Statements
2009 Long-Term Incentive Plan
Part A
On 29 June 2009 the balance of the shares originally awarded under the 2004(b) Long-Term Incentive Plan, totalling 5,330,340 shares,
were replaced by options under Part A of the 2009 Long-Term Incentive Scheme, with an exercise price of £3.00 per share, in accordance
with the shareholder approval obtained at the Extraordinary General Meeting on 15 April 2009. These will become exercisable by the
relevant Executive Directors on 31 January 2014, subject to continued employment at that date. During the year, 880,390 options lapsed
on the departure of a Director, leaving 4,441,950 outstanding.
Part B
Part B of the 2009 Long-Term Incentive Plan covers 6,830,000 share options with an exercise price of £8.40. Vesting of the options is in
two tranches: 50% on 15 April 2015 and 50% on 15 April 2016. The options are conditional on continued employment at the relevant
vesting date and the satisfaction of the underpin condition that Net Assets per Share are at least £5.94 at 15 April 2015. During the year,
530,000 options lapsed on the departure of employees, leaving 6,300,000 options outstanding.
Bonus Plan
Under the terms of the Bonus Plan set out in the Remuneration Report participants to the plan are entitled to 50% of the balance of their
plan account at the end of each financial year. The remaining balance is deferred in shares or notional shares.
2011 Long-Term Incentive Plan
The Company announced in June 2011 as part of a strategic review of the business a long term plan to return £13 per share
(approximately £1.7 billion) to shareholders over the next 10 years payable on or before the following milestones:
30 September 2015 (p)
30 September 2018 (p)
30 September 2021 (p)
Dividend
434
433
433
A new long term remuneration plan was proposed to support this strategy, the 2011 Long Term Incentive Plan (“2011 LTIP”), which was
approved by shareholders at the Annual General Meeting on 5 September 2011. The key features of the 2011 LTIP are:
– if the Company returns £13 per share to shareholders over a ten year period via a series of dividend payments by the milestone dates
referred to above, participants will be entitled to exercise options and receive a number of ordinary shares in the capital of the
Company at the end of the ten year period.
– the maximum number of shares capable of being earned by all participants are 19,616,503 shares, being 13% of the fully diluted share
capital of the company at the date of approval of the plan.
– the exercise price of options granted under the 2011 LTIP will be £13 per share less an amount equal to the value of all dividends paid
between the date of approval of the 2011 LTIP and 30 September 2021, provided the exercise price cannot be less than zero.
The fair value of the options granted during the year, determined using the current market pricing model was £3.17 for options which vest
on 30 September 2021. The inputs into the current market option pricing model were:
Grant date
Vesting date
Share price at grant gate (p)
Exercise price (p)
Discount rate
Inputs
5 September 2011
30 September 2021
1,236
nil
6.3%
The discount rate was determined by calculating the Group’s expected cost of capital over the vesting period at the grant date.
Pensions
During the year, two principal pension schemes were in place for employees. The Berkeley Group plc Group Personal Pension Plan and
the St George PLC Group Personal Pension Plan are defined contribution schemes. The assets of these schemes were held in separate
trustee administered funds.
The Berkeley Final Salary Plan is a defined benefit scheme which was closed to future accrual with effect from 1 April 2007.
Defined contribution plan
Contributions amounting to £2,415,000 (2011: £2,155,000) were paid into the defined contribution schemes during the year.
Berkeley Annual Report 2012
125
Notes to the Consolidated Financial StatementsFinancials
5 DIRECTORS AND EMPLOYEES CONTINUED
Defined benefit plan
The Berkeley Final Salary Plan is subject to an independent actuarial valuation at least every three years. The most recently finalised
valuation was carried out as at 1 May 2010 and was finalised in March 2011. The method adopted in the 2010 valuation was the projected
unit method, which assumed a return on investment both prior to and after retirement of 5.75% per annum and pension increases of
3.25% per annum. The market value of the Berkeley Final Salary Plan assets at 1 May 2010 was £11,692,000 and was sufficient to cover
100% of the scheme’s liabilities. Following the finalisation of the 2007 valuation, with effect from 1 July 2008, employer’s required regular
contributions were reduced to zero. Following the finalisation of the 2011 valuation this position remains unchanged. Notwithstanding this
the Company made additional voluntary contributions of £575,000 during the year (2011: £600,000).
For the purposes of IAS 19, the 2010 valuation was updated for 30 April 2012.
The major assumptions used by the actuary were:
Valuation at:
Rate of increase in salaries
Discount rate
Inflation assumption (RPI)
Inflation assumption (CPI)
Rate of increase in pensions in payment post-97 (Pre-97 receive 3% p.a. increases)
30 April
2012
–
4.80%
3.25%
2.50%
3.25%
30 April
2011
–
5.40%
3.40%
N/A
3.40%
The mortality assumptions are the standard S1PA CMI_2009_X [1.0%] (2011: S1PA CMI_2009_X [1.0%]) base table for males and females,
both adjusted for each individual’s year of birth to allow for future improvements in mortality rates. The life expectancy of male and female
pensioners (now aged 65) retiring at age 65 on the balance sheet date is 22.1 years and 24.1 years respectively (2011: 22.0 and 24.0). The
life expectancy of male and female deferred pensioners (now aged 50) retiring at age 65 after the balance sheet date is 23.1 years and
25.3 years respectively (2011: 23.0 and 25.2).
The fair value of the assets and the expected rates of return on the assets were as follows:
Equities
Government Bonds (over 15 years)
Government Bonds (5 to 15 years)
Corporate Bonds
Cash
Fair value of plan assets
30 April 2012
30 April 2011
Long-term
rate of
return
6.95 %
3.30%
2.70%
4.70%
0.50%
Long-term
rate of
return
7.00%
4.00%
0%
5.20%
0.50%
Value
£’000
6,374
1,627
1,575
4,077
370
14,023
Value
£’000
5,260
3,694
N/A
3,707
191
12,852
The overall expected rate of return on scheme assets is a weighted average of the individual expected rates of return on each asset class.
The amounts recognised in the statement of financial position are determined as follows:
Present value of defined benefit obligations
Fair value of plan assets
Net surplus
Unrecognised asset in accordance with IAS 19
Net amount recognised on the statement of financial position
The amounts recognised in the income statement are as follows:
Current service cost
Past service cost
Interest on pension scheme liabilities
Expected return on plan assets
Total included within finance income
126 Berkeley Annual Report 2012
2012
£’000
(13,267)
14,023
756
(756)
–
2012
£’000
–
–
661
(714)
(53)
2011
£’000
(12,402)
12,852
450
(450)
–
2011
£’000
–
–
621
(674)
(53)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial Statements
Changes in the present value of the defined benefit obligation:
Present value of defined benefit obligations at 1 May
Current service cost
Interest on pension scheme liabilities
Contributions by plan participants
Actuarial loss on scheme liabilities recognised in the statement of comprehensive income
Net benefits paid out
2012
£’000
12,402
–
661
–
527
(323)
2011
£’000
11,445
–
621
–
638
(302)
Present value of defined benefit obligations at 30 April
13,267
12,402
Changes in the fair value of plan assets:
Fair value of plan assets at 1 May
Expected return on plan assets
Actuarial gains on plan assets recognised in the statement of comprehensive income
Contributions by the employer
Contributions by plan participants
Net benefits paid out
Fair value of plan assets at 30 April
Cumulative actuarial gains and losses recognised in equity:
Cumulative amounts of losses recognised in the statement of comprehensive income at 1 May
Net actuarial losses recognised in the year
Change in irrecoverable surplus in accordance with IAS 19
2012
£’000
12,852
714
205
575
–
(323)
2011
£’000
11,487
674
393
600
–
(302)
14,023
12,852
2012
£’000
(2,953)
(322)
(306)
2011
£’000
(2,300)
(245)
(408)
Cumulative amounts of losses recognised in the statement of comprehensive income at 30 April
(3,581)
(2,953)
Actual gain on plan assets:
Expected gain on scheme assets
Actuarial gain on scheme assets
Actual gain on scheme assets
History of asset values, defined benefit obligations, and experience gains and losses:
2012
£’000
714
205
919
30 April
2009
£’000
9,412
(8,275)
1,137
2011
£’000
674
393
1,067
30 April
2008
£’000
9,850
(9,214)
636
30 April
2011
£’000
12,852
30 April
2010
£’000
11,487
(12,402)
(11,445)
450
42
30 April
2012
£’000
14,023
(13,267)
756
30 April
2012
30 April
2011
30 April
2010
30 April
2009
30 April
2008
205
1.46%
393
3.06%
1,189
(1,282)
(1,124)
10.35%
(13.62%)
(11.41%)
–
–
62
(49)
67
90
(0.50%)
0.43%
(0.81%)
(0.98%)
Berkeley Annual Report 2012
127
Fair value of scheme assets
Present value of scheme liabilities
Net surplus in the plan
Experience adjustments arising on scheme assets:
Amount (£’000)
% of scheme assets
Experience adjustments arising on scheme liabilities:
Amount (£’000)
% of the present value of scheme liabilities
Notes to the Consolidated Financial StatementsFinancials
6 TAXATION
The tax charge for the year is as follows:
Current tax
UK corporation tax payable
Adjustments in respect of previous periods
Deferred tax at 26% (note 17) (2011: 28%)
Adjustment in respect of change of tax rate from 26% to 24% (note 17) (2011: 28% to 26%)
Tax on items recognised directly in other comprehensive income is as follows:
Deferred tax on actuarial loss recognised in the pension scheme (note 17)
Tax on items recognised directly in equity is as follows:
Deferred tax in respect of employee share schemes
2012
£’000
2011
£’000
(65,481)
6,005
(59,476)
4,086
(1,284)
(44,767)
1,285
(43,482)
2,724
(1,031)
(56,674)
(41,789)
2012
£’000
151
2012
£’000
4,172
2011
£’000
170
2011
£’000
2,048
The tax charge assessed for the year differs from the standard rate of UK corporation tax of 25.83% (2011: 27.84%). The differences are
explained below:
Profit before tax
Tax on profit at standard UK corporation tax rate
Effects of:
Expenses not deductible for tax purposes
Tax effect of share of results of joint ventures
Adjustments in respect of previous periods – current tax
Adjustments in respect of deferred tax change of rate from 26% to 24% (2011: 28% to 26%)
Other
Tax charge
2012
£’000
214,821
55,488
587
566
(6,005)
1,284
4,754
56,674
2011
£’000
136,245
37,931
664
(573)
(1,285)
1,031
4,021
41,789
The statutory tax rate in 2012 was at 25.83% (11 months at 26%, 1 month at 24%)
The adjustments in respect of previous periods includes items such as contaminated land relief, research and development relief and
other timing differences that are not individually significant and have not therefore been separately disclosed.
The other adjustment predominantly relates to the tax effect of transferring the ownership of certain properties during the year to
subsidiaries incorporated in overseas tax jurisdictions with different rates to the UK.
128 Berkeley Annual Report 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial Statements
7 EARNINGS PER ORDINARY SHARE
Basic earnings per ordinary share is calculated as profit for the financial year attributable to shareholders of the Group divided by the
weighted average number of shares in issue during the year.
Profit attributable to shareholders (£’000’s)
Weighted average number of shares (000’s)
Basic earnings per ordinary share (p)
2012
158,513
131,042
121.0
2011
95,109
131,962
72.1
For diluted earnings per ordinary share, the weighted average number of shares in issue is adjusted to assume the conversion of all
potentially dilutive ordinary shares. At 30 April 2012, the Group had four categories of potentially dilutive ordinary shares: 4.4 million
£3.00 share options under the 2009 LTIP Part A, 6.3 million £8.40 share options under the 2009 LTIP Part B; 19.6 million £nil share options
under the 2011 LTIP; and 0.5 million shares under the Bonus Plan.
A calculation is done to determine the number of shares that could have been acquired at fair value based on the aggregate of the
exercise price of each share option and the fair value of future services to be supplied to the Group which is the unamortised share-based
payments charge. The difference between the number of shares that could have been acquired at fair value and the total number of
options is used in the diluted earnings per share calculation.
Profit used to determine diluted EPS (£’000’s)
Weighted average number of shares (000’s)
Adjustments for:
Share options – 2009 LTIP Part A (000’s)
Share options – 2009 LTIP Part B (000’s)
Share options – 2011 LTIP (000’s)
Bonus plan shares (000’s)
Shares used to determine diluted EPS (000’s)
Diluted earnings per ordinary share (p)
8 PROFIT ON DISPOSAL OF SUBSIDIARY
2012
158,513
131,042
2011
95,109
131,962
3,252
1,371
4,613
275
3,209
–
–
46
140,553
135,217
112.8
70.3
On 30 September 2011, Berkeley disposed of its 51% shareholding in Winstanley 1 Limited, a company which was established in 2009 to
develop a postgraduate student scheme at Clapham Junction to be let to students from Imperial College London, who owned the
remaining 49% of the company. Berkeley’s share of the proceeds of the sale of the company was £75.7 million and this resulted in an
exceptional profit on disposal of £30.7 million, calculated as follows:
Non current assets
Current assets
Current liabilities
Non controlling interest
Net assets disposed
Expenses related to disposal
Profit on disposal
Consideration
2012
£’000
1,172
47,052
(4)
(4,063)
44,157
816
30,695
75,668
Berkeley Annual Report 2012
129
Notes to the Consolidated Financial StatementsFinancials
9 INTANGIBLE ASSETS
Cost
At 1 May 2011 and 30 April 2012
Accumulated amortisation
At 1 May 2011 and at 30 April 2012
Net book value
At 1 May 2011 and at 30 April 2012
Cost
At 1 May 2010 and 30 April 2011
Accumulated amortisation
At 1 May 2010 and at 30 April 2011
Net book value
At 1 May 2010 and at 30 April 2011
Goodwill
£’000
17,159
–
17,159
17,159
–
17,159
The goodwill balance relates solely to the acquisition of the 50% of the ordinary share capital of St James Group Limited, completed on
7 November 2006, that was not already owned by the Group. The goodwill balance is tested annually for impairment. The recoverable
amount has been determined on the basis of the value in use of the business using the current five year pre-tax forecasts. Key
assumptions are as follows:
(i) Cash flows beyond a five year period are not extrapolated;
(ii) A pre-tax discount rate of 8.28% (2011: 8.71%) based on the Group’s weighted average cost of capital.
The Directors have identified no reasonably possible change in a key assumption which would give rise to an impairment charge.
130 Berkeley Annual Report 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial Statements
10 PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTY
Property, plant and equipment
Cost
At 1 May 2011
Additions
Disposals
At 30 April 2012
Accumulated Depreciation
At 1 May 2011
Charge for the year
Disposals
At 30 April 2012
Net book value
At 1 May 2011
At 30 April 2012
Cost
At 1 May 2010
Additions
Disposals
At 30 April 2011
Accumulated Depreciation
At 1 May 2010
Charge for the year
Disposals
At 30 April 2011
Net book value
At 1 May 2010
At 30 April 2011
Freehold
property
£’000
Fixtures
and
fittings
£’000
8,006
–
–
8,006
217
133
–
350
7,789
7,656
6,031
1,445
(728)
6,748
4,955
561
(728)
4,788
1,076
1,960
Motor
vehicles
£’000
2,816
835
(709)
Total
£’000
16,853
2,280
(1,437)
Investment
property
£’000
28,685
55,889
–
2,942
17,696
84,574
1,061
433
(495)
999
6,233
1,127
(1,223)
6,137
127
925
–
1,052
1,755
1,943
10,620
11,559
28,558
83,522
8,006
5,123
–
–
944
(36)
8,006
6,031
93
124
–
217
7,913
7,789
4,638
345
(28)
4,955
485
1,076
2,535
1,064
(783)
2,816
1,246
389
(574)
1,061
1,289
1,755
15,664
2,008
(819)
–
28,685
–
16,853
28,685
5,977
858
(602)
6,233
–
127
–
127
9,687
10,620
–
28,558
Additions to investment property represent the value at cost of completed properties transferred from the Group’s inventory, which are to
be held for rental purposes. The market value of these properties is £114,500,000 as determined by the Directors taking into account all
relevant factors including their nature and location.
£49,700,000 of the investment properties, at cost (2011: £13,700,000), are subject to an agreement with the Homes and Communities
Agency which requires these properties to be available for rent until at least 31 March 2015, although Berkeley is able to dispose of its
investment properties prior to this date.
Berkeley Annual Report 2012
131
Notes to the Consolidated Financial StatementsFinancials
11 INVESTMENTS
Unlisted shares at cost
Loans
Share of post-acquisition reserves
Elimination of profit on transfer of inventory to joint ventures
Details of the principal joint ventures are provided in note 25.
The movement on the investment in joint ventures during the year is as follows:
At 1 May
(Loss)/profit after tax for the year
Net increase in loans to joint ventures
Other movements
At 30 April
2012
£’000
15,437
34,556
(2,860)
(652)
2011
£’000
15,687
24,538
(668)
(882)
46,481
38,675
2012
£’000
38,675
(2,192)
10,018
(20)
46,481
2011
£’000
26,018
2,059
11,038
(440)
38,675
Other movements include the reduction in the elimination of profit on transfer of inventory to joint ventures and the acquisition of shares
in joint ventures.
The Group’s share of joint ventures’ net assets, income and expenses is made up as follows:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Revenue
Costs
Operating (loss)/profit
Interest charges
(Loss)/profit before taxation
Tax charge
Share of post tax (loss)/profit of joint ventures
12 INVENTORIES
Land not under development
Work in progress
Completed units
132 Berkeley Annual Report 2012
2012
£’000
–
2011
£’000
–
131,776
146,155
(41,215)
(44,080)
46,481
16,235
(16,603)
(368)
(1,750)
(2,118)
(74)
(2,192)
(46,837)
(60,643)
38,675
20,594
(17,923)
2,671
(543)
2,128
(69)
2,059
2012
£’000
2011
£’000
360,453
316,591
1,422,676
1,247,553
68,586
49,048
1,851,715
1,613,192
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial Statements
13 TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments and accrued income
Further disclosures relating to trade receivables are set out in note 23.
14 CASH AND CASH EQUIVALENTS
Cash and cash equivalents
15 BORROWINGS
Current
Loan stock
Bank loans
Non-current
Bank loans
Other loans
Total borrowings
2012
£’000
105,250
6,434
3,526
115,210
2011
£’000
79,422
8,530
8,773
96,725
2012
£’000
2,747
2011
£’000
266,307
2012
£’000
2011
£’000
(9)
(29)
(48,121)
(48,130)
(200,000)
(200,029)
–
(12,498)
(60,628)
(17,720)
(6,513)
(224,262)
Loan stock is unsecured and is repayable on three months notice being given to the Company, with interest rates linked to LIBOR.
Non-current bank loans include amounts drawn under site specific bank facilities. The loans are secured by a fixed charge over the specific
assets. Other non-current loans relate to funding provided by the Homes and Communities Agency, subject to an agreement in respect of
the Group’s rental properties. Further disclosures relating to current and non-current loans are set out in note 23.
16 TRADE AND OTHER PAYABLES
Current
Trade payables
Deposits and on account contract receipts
Loans from joint ventures
Other taxes and social security
Accruals and deferred income
Non-current
Trade payables
Total trade and other payables
2012
£’000
2011
£’000
(369,669)
(264,963)
(422,884)
(471,967)
(96)
(13,333)
(56,725)
(96)
(8,950)
(41,228)
(862,707)
(787,204)
(30,391)
(51,009)
(893,098)
(838,213)
All amounts included above are unsecured. The total of £13,333,000 (2011: £8,950,000) for other taxes and social security includes
£8,052,000 (2011: £4,552,000) for Employer’s National Insurance provision in respect of share-based payments.
Further disclosures relating to current trade and non-current trade payables are set out in note 23.
Berkeley Annual Report 2012
133
Notes to the Consolidated Financial StatementsFinancials
17 DEFERRED TAX
The movement on the deferred tax account is as follows:
At 1 May 2011
Transfer from corporation tax receivable
Charged to the income statement at 26%
Adjustment in respect of change of tax rate from 26% to 24% (note 6)
Charged to the income statement in year
Debited to equity at 26%
Adjustment in respect of change of tax rate from 26% to 24%
Charged to equity in year
Deferred tax transferred on disposal of subsidiary undertaking
At 30 April 2012
At 1 May 2010
Transfer from corporation tax receivable
Charged to the income statement at 28%
Adjustment in respect of change of tax rate from 28% to 26% (note 6)
Charged to the income statement in year
Debited to equity at 28%
Adjustment in respect of change of tax rate from 28% to 26%
Charged to equity in year
At 30 April 2011
Accelerated
capital
allowances
£’000
Retirement
benefit
obligation
£’000
Other
short-term
timing
differences
£’000
Total
£’000
525
–
(150)
(29)
(179)
–
–
–
–
346
746
–
(181)
(40)
(221)
–
–
–
525
–
–
(163)
12
(151)
163
(12)
151
–
–
–
–
(183)
13
(170)
183
(13)
170
–
18,356
18,881
206
4,399
(1,267)
3,132
4,956
(784)
4,172
(1,172)
206
4,086
(1,284)
2,802
5,119
(796)
4,323
(1,172)
24,694
25,040
14,111
14,857
113
3,088
(1,004)
2,084
2,451
(403)
2,048
18,356
113
2,724
(1,031)
1,693
2,634
(416)
2,218
18,881
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 24.0% (2011: 26.0%). There is no
unprovided deferred tax.
All of the deferred tax assets were available for offset against deferred tax liabilities and hence the net deferred tax asset at 30 April 2012
was £25,040,000 (2011: £18,881,000).
Deferred tax assets of £23,069,000 (2011: £15,398,000) are expected to be recovered after more than one year.
The Finance (No.4) Bill 2012 which became substantively enacted on the 3 July 2012 includes legislation to reduce the main rate of
corporation tax from 24% to 23% from April 2013. This change had not been substantively enacted at 30 April 2012 and therefore is not
reflected in these financial statements.
The effect of the change substantively enacted on 3 July 2012 would be to reduce the value of the deferred tax asset at April 2012 by
£961,000.
The deferred tax credited/(charged) to equity during the year was as follows:
Deferred tax on actuarial loss recognised in the pension scheme
Deferred tax in respect of employee share schemes
Movement in the year
Cumulative deferred tax credited to equity at 1 May
Cumulative deferred tax credited to equity at 30 April
134 Berkeley Annual Report 2012
2012
£’000
151
4,172
4,323
6,793
11,116
2011
£’000
170
2,048
2,218
4,575
6,793
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial Statements
18 SHARE CAPITAL AND SHARE PREMIUM
The movements on allotted, called-up and fully paid share capital for the Company in the year were as follows:
At 1 May 2010 and 30 April 2011
At 30 April 2012
At 1 May 2010 and 30 April 2011
At 30 April 2012
Ordinary
shares
No. ’000
134,857
134,857
Share
premium
£’000
49,315
49,315
Share
capital
£’000
6,743
6,743
Each ordinary share of 5p is a voting share in the capital of the Company, is entitled to participate in the profits of the Company and on a
winding-up is entitled to participate in the assets of the Company.
At 30 April 2012 there were 3,577,506 shares held as ‘treasury shares’ (2011: 3,577,506). The company has the right to re-issue these
shares at a later date.
At 30 April 2012 there were 237,363 shares held in trust (2011: 237,363). The market value of these shares at 30 April 2012 was
£3,040,620 (2011: £2,516,048 ).
19 RESERVES
The movement in reserves is set out in the Consolidated Statement of Changes in Equity on page 117.
Other reserve
The Other reserve of negative £961,299,000 (2011: negative £961,299,000) arose from the application of merger accounting principles to
the financial statements on implementation of the capital reorganisation of the Group, incorporating a Scheme of Arrangement, in the
year ended 30 April 2005.
Revaluation reserve
The revaluation reserve consists of balances in relation to two separate transactions.
The first element arose following the acquisition on 7 November 2006 of the 50% of the ordinary share capital of St James Group Limited
not already owned. A revaluation reserve of £20,297,000 was originally created in accordance with IFRS 3 through fair value adjustments
to the 50% of the net assets of St James Group Limited owned by the Group prior to 7 November 2006. Transfers of £nil in the year (2011:
£35,000) to distributable reserves were recognised as the associated fair value adjustments were charged to the income statement. At
30 April 2012 the balance in the revaluation reserve relating to the acquisition of St James Group Limited is £2,894,000 (2011:
£2,894,000).
The second element arose in 2010 following the acquisition on 23 July 2009 of the shares owned by Saad Investments Company Limited
and the outstanding shareholder loans in five joint ventures which became fully owned subsidiaries from this date. A revaluation reserve of
£560,000 was created in accordance with IFRS 3 through fair value adjustments to the 50% of the net assets of the joint ventures owned
by the Group prior to 23 July 2009. Transfers of £60,000 in the year (2011: £19,000) to distributable reserves were recognised as the
associated fair value adjustments were charged to the income statement. At 30 April 2012 the balance in the revaluation reserve relating
to the acquisition of the five entities that were previously joint ventures with Saad Investments Company Limited is £481,000 (2011:
£541,000).
Capital redemption reserve fund
The capital redemption reserve fund was created to maintain the capital of the Company following the redemption of the B Shares
associated with the Scheme of Arrangement created in 2004 which completed on 10 September 2009 with the re-designation of the
unissued B shares as ordinary shares.
Retained earnings
The Company acquired none (2011: 3,577,506) of its own shares through purchases on the London Stock Exchange in the year. The total
amount to acquire the shares was £nil (2011: £28,210,179) and has been deducted from retained earnings within shareholders’ equity.
These shares are held as ‘treasury shares’.
The Company’s Employee Benefit Trust acquired no shares through purchases on the London Stock Exchange in the year (2011: 233,802). The
total amount paid to acquire the shares, including expenses, was £nil (2011: £1,791,662) and has been deducted from retained earnings.
Berkeley Annual Report 2012
135
Notes to the Consolidated Financial StatementsFinancials
20 CONTINGENT LIABILITIES
The Group has guaranteed road and performance agreements in the ordinary course of business of £14,521,000 (2011: £16,244,000).
21 OPERATING LEASES – MINIMUM LEASE PAYMENTS
The total future minimum lease payments of the Group under non-cancellable operating leases is set out below:
2012
£’000
94
1,754
8,080
9,928
2012
£’000
158,147
56,674
2,052
14
(30,695)
(2,369)
11,781
2,192
8,212
2011
£’000
157
1,684
8,946
10,787
2011
£’000
94,456
41,789
985
(50)
–
(10,056)
11,520
(2,059)
4,146
(341,256)
(387,745)
(23,423)
50,310
(575)
(38,418)
81,766
(600)
(108,936)
(204,266)
2012
£’000
2011
£’000
(263,560)
(82,812)
20
19
163,614
(192,030)
(99,926)
(274,823)
42,045
(57,881)
316,868
42,045
Operating leases which expire:
Within one year
Between one and five years
After five years
22 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
Reconciliation of profit after taxation for the year to cash generated from operations:
Profit after taxation for the year
Adjustments for:
– Taxation
– Depreciation
– Loss/(profit) on sale of property, plant and equipment
– Profit on sale of subsidiary
– Finance income
– Finance costs
– Share of post tax results of joint ventures
– Non-cash charge in respect of share-based payments
Changes in working capital:
– Increase in inventories
– Increase in trade and other receivables
– Increase in trade and other payables
– Decrease in employee benefit obligations
Cash outflow from operations
Reconciliation of net cash flow to net (debt)/cash:
Net decrease in cash and cash equivalents, including bank overdraft
Net cash outflow from repayment of loan stock
Net cash inflow/(outflow) from increase in borrowings
Movement in net cash in the year
Opening net cash
Closing net (debt)/cash
136 Berkeley Annual Report 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial Statements
Net (debt)/cash:
As at 30 April
Cash and cash equivalents
Non-current borrowings
Current borrowings
Net (debt)/cash
2012
£’000
2,747
2011
£’000
266,307
(12,498)
(24,233)
(48,130)
(200,029)
(57,881)
42,045
23 CAPITAL MANAGEMENT, FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
The Group finances its operations by a combination of shareholders’ funds, non-controlling interest, working capital and, where
appropriate, borrowings. The Group’s objective when managing capital is to maintain an appropriate capital structure in the business to
allow management to focus on creating sustainable long-term value for its shareholders, with flexibility to take advantage of opportunities
as they arise in the short and medium term. This allows the Group to take advantage of prevailing market conditions by investing in land
and work in progress at the right point in the cycle or delivering returns to shareholders through dividends or share buy backs. Last year
the Group put in place a long-term strategic plan to see £13 per share returned to shareholders over the next 10 years. This plan ensures
there is sufficient working capital retained in the business to continue investing selectively in new land opportunities as they arise.
The Group monitors capital levels principally by monitoring net cash/debt levels, cash flow forecasts and return on average capital
employed. The Group considers capital employed to be net assets adjusted for net cash/debt. Capital employed at 30 April 2012 was
£1,157,725,000 (2011: £891,733,000). The increase in capital employed in the year of £265,992,000 reflects significant investment in land
and work in progress during the year.
The Group’s financial instruments comprise financial assets being: trade receivables and cash and cash equivalents and financial liabilities
being: loan stock, bank loans, trade payables, deposits and on account receipts, loans from joint ventures and accruals. Cash and cash
equivalents and borrowing are the principal financial instruments used to finance the business. The other financial instruments highlighted
arise in the ordinary course of business.
As all of the operations carried out by the Group are in sterling there is no direct currency risk, and therefore the Group’s main financial
risks are primarily:
– liquidity risk – the risk that suitable funding for the Group’s activities may not be available;
– market interest rate risk – the risk that Group financing activities are adversely affected by fluctuation in market interest rates; and
– credit risk – the risk that a counterparty will default on their contractual obligations resulting in a loss to the Group.
Financial instruments: Financial assets
The Group’s financial assets can be summarised as follows:
Current
Trade receivables
Cash and cash equivalents
2012
£’000
2011
£’000
105,250
2,747
107,997
79,422
266,307
345,729
Trade receivables are non-interest bearing.
Cash and cash equivalents are short-term deposits held at either floating rates linked to LIBOR or fixed rates.
Berkeley Annual Report 2012
137
Notes to the Consolidated Financial StatementsFinancials
23 CAPITAL MANAGEMENT, FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
Financial instruments: Financial liabilities
The Group’s financial liabilities can be summarised as follows:
Current
Loan stock
Bank loans
Trade payables
Deposits and on account contract receipts
Loans from joint ventures
Accruals and deferred income
Non-current
Trade payables
Bank loans
Other loans
Total financial liabilities
2012
£’000
2011
£’000
(9)
(29)
(48,121)
(200,000)
(369,669)
(264,963)
(422,884)
(471,967)
(96)
(96)
(56,725)
(41,228)
(897,504)
(978,283)
(30,391)
–
(12,498)
(42,889)
(51,009)
(17,720)
(6,513)
(75,242)
(940,393)
(1,053,525)
All amounts included above are unsecured, except for the site specific bank loans in 2011 which were secured by a fixed charge over the
specific assets to which they related.
Loan stock is repayable on three months notice being given to the Company, with floating interest rates linked to LIBOR. Current bank
loans have term expiry dates within twelve months of the balance sheet date and are held at floating interest rates linked to LIBOR. Trade
payables and other current liabilities are non-interest bearing.
Non-current bank loans have term expiry dates after twelve months from the balance sheet date and are held at floating interest rates
linked to LIBOR.
Non current other loans represent a loan from the Homes and Communities Agency on which interest is payable based on a proportionate
share of the net rental income arising from the properties to which the loan relates.
The maturity profile of the Group’s non-current financial liabilities, all of which are held at amortised cost, is as follows:
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
2012
£’000
(20,709)
(22,180)
–
(42,889)
2011
£’000
(31,929)
(16,336)
(26,977)
(75,242)
The carrying amounts of the Group’s financial assets and financial liabilities approximate to fair value.
Current trade receivables and current trade and other payables approximate to their fair value as the transactions which give rise to these
balances arise in the normal course of trade and, where relevant, with industry standard payment terms and have a short period to
maturity (less than one year). The loan stock is repayable at book value on three months notice being given to the Company.
Non-current trade payables comprise long-term land creditors, which are held at their discounted present value (calculated by discounting
expected future cash flows at prevailing interest rates and yields as appropriate). The discount rate applied reflects the nominal, risk-free
pre-tax rate at the balance sheet date, applied to the maturity profile of the individual land creditors within the total. At 30 April 2012 a
rate of 0.74% was applied (2011: 1.44%). Non-current loans approximate to fair value as they are held at variable market interest rates
linked to LIBOR.
Liquidity risk
This is the risk that suitable funding for the Group’s activities may not be available. Group management addresses this risk through review
of rolling cash flow forecasts throughout the year to assess and monitor the current and forecast availability of funding, and to ensure
sufficient headroom against facility limits and compliance with banking covenants. The committed borrowing facilities are set out below.
138 Berkeley Annual Report 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial Statements
The contractual undiscounted maturity profile of the Group’s financial liabilities, included at their carrying value in the preceding tables, is
as follows:
In less than one year
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
2012
£’000
2011
£’000
(897,504)
(978,283)
(20,983)
(22,498)
–
(32,600)
(16,633)
(27,720)
(940,985)
(1,055,236)
Market interest rate risk
The Group’s cash and cash equivalents and bank loans expose the Group to cash flow interest rate risk.
The Group’s rolling cash flow forecasts incorporate appropriate interest assumptions, and management carefully assesses expected activity
levels and associated funding requirements in the prevailing and forecast interest rate environment to ensure that this risk is managed.
From time to time the Group uses derivative instruments, when commercially appropriate, to manage interest rate risk by altering the
interest rates on investments and funding so that the resulting exposure gives greater certainty of future costs. During the year and at the
year end the Group held no such instruments (2011: nil).
If interest rates on the Group’s cash/debt balances had been 50 basis points higher throughout the year ended 30 April 2012, profit after
tax for the year would have been £14,000 lower (2011: £124,000 lower). This calculation is based on the monthly closing net cash/debt
balance throughout the year excluding fixed rate deposits where the deposits were in place prior to 1 May 2011. A 50 basis point increase
in interest rate represents management’s assessment of a reasonably possible change for the year ended 30 April 2012. The Group’s loan
stock amounts to £9,000 (2011: £29,000) and so no sensitivity analysis has been prepared against this interest bearing financial liability as
any impact would not be material.
Credit risk
The Group’s exposure to credit risk encompasses the financial assets being: trade receivables and cash and cash equivalents.
Trade receivables are spread across a wide number of customers, with no significant concentration of credit risk in one area. There has
been no impairment of trade receivables during the year (2011: £nil), nor are there any provisions held against trade receivables (2011:
£nil), and no trade receivables are past their due date (2011: £nil).
The credit risk on cash and cash equivalents is limited because counterparties are leading international banks with long-term
A credit-ratings assigned by international credit agencies.
Committed borrowing facilities
The Group has committed borrowing facilities as follows:
Available
£’000
Drawn Undrawn Termination
date
£’000
£’000
Available
£’000
Drawn
£’000
Undrawn
£’000
Termination
date
2012
2011
Revolving credit facility 1
200,000
10,000
190,000
Nov-13
200,000
100,000
100,000
Revolving credit facility 2
250,000
25,000
225,000
Apr-16
250,000
100,000
150,000
Site specific facility
–
–
–
–
68,000
17,504
50,496
Nov-13
Apr-16
Sep-20
450,000
35,000
415,000
518,000
217,504
300,496
The drawn facilities of £35,000,000 do not include unamortised issue costs which are netted off the drawn funds for the purpose of
disclosing borrowings as set out in note 15.
At 30 April 2012 the total drawn down balance across both facilities was £35 million. In addition, at 30 April 2012 there were bank bonds
in issue of £4,696,000 (2011: £10,844,000).
The Group completed the refinancing of its main banking facilities on 24 May 2012, increasing available facilities from £450 million to
£525 million, with maturity dates extended to April 2017 in the case of revolving credit facility one and May 2017 in the case of revolving
credit facility two, a level that is commensurate with the capital structure and requirements of the Group. The revolving credit facilities are
secured by debentures provided by certain Group holding companies over their assets. The facility agreement contains financial
covenants, which is normal for such agreements, all of which the Group is in compliance with.
In the year to 30 April 2012, the Group terminated the site specific facility that it had in place for the development of a student scheme
at Clapham Junction with Imperial College, as part of the disposal of the Group’s 51% shareholding in Winstanley 1 Limited as referred
to in Note 8.
Berkeley Annual Report 2012
139
Notes to the Consolidated Financial StatementsFinancials
24 RELATED PARTY TRANSACTIONS
The Group has entered into the following related party transactions:
Transactions with Directors
i) During the financial year, Mr A W Pidgley and Mr S Ellis paid £47,771 and £143,442 respectively to Berkeley Homes plc for works
carried out at their homes under the Group’s own build scheme (2011: £452,458 and £nil respectively). This is a scheme whereby
eligible employees may enter into an arrangement, at commercial rates, with the Group for the construction or renovation of their own
home. There were no balances outstanding at the year end.
ii) Mr A W Pidgley, a Director of the Company, contracted to purchase an apartment, including one parking space, at Ebury Square,
London, SW1 on 20 March 2012 for £6,050,000 from Berkeley Homes (PCL) Limited, a wholly owned subsidiary of the Company.
Mr Pidgley is also a Director of Berkeley Homes (PCL) Limited.
Mr G J Fry, a Director of the Company, contracted to purchase an apartment, including a right to park a single motor car, at Dockside
House, Chelsea Creek, London, SW6 for £725,000 on 18 May 2012 from St George West London Limited, a wholly owned subsidiary
of the Company. Mr Fry is also a Director of St George West London Limited.
As both transactions are in excess of £100,000, they each constitute a substantial property transaction with a Director of the Company
under sections 190 and 191 of the Companies Act 2006 and are therefore conditional on the approval of shareholders, which will be
sought at the forthcoming Annual General Meeting on 5 September 2012.
Both the agreement between Berkeley Homes (PCL) Limited and Mr Pidgley and the agreement between St George West London
Limited and Mr Fry are a standard form sale and purchase agreement used by the respective companies on the respective
developments, save that they are conditional upon the agreement of shareholders. In accordance with the terms of the agreements,
Mr Pidgley and Mr Fry each paid a ten per cent. deposit on exchange of contracts which will only be returned to them in the event that
shareholders do not approve the transaction.
Transactions with Joint Ventures
During the financial year there were no transactions with joint ventures. In 2009 inventory was sold to St Edward Homes Limited for
£17,411,000 being the share of the transaction attributable to the other venturer in the joint venture. At 30 April 2012 an amount of
£24,631,000 was outstanding and included within trade receivables (2011: £25,717,000). Loans with joint ventures are disclosed in note 11.
140 Berkeley Annual Report 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial Statements
25 SUBSIDIARIES AND JOINT VENTURES
(a) Subsidiaries
At 30 April 2012 the Company had the following principal subsidiary undertakings which have all been consolidated, are registered and
operate in England and Wales, are all 100% owned and for which 100% of voting rights are held except where stated:
Residential led mixed-use development
Berkeley Commercial Developments Limited
Berkeley First Limited (1)
Berkeley Homes (Capital) plc (1)
Berkeley Homes (Carmelite) Limited (4)
Berkeley Homes (Carnwath Road) Limited (Isle of Man)
Berkeley Homes (Central London) Limited (1))
Berkeley Homes (East Thames) Limited (1)
Berkeley Homes (Eastern Counties) (1)
Berkeley Homes (Eastern) Limited (1)
Berkeley Homes (Fleet) Limited
Berkeley Homes (Hampshire) Limited (1)
Berkeley Homes (North East London) Limited (1)
Berkeley Homes (Oxford & Chiltern) Limited (1)
Berkeley Homes (PCL) Limited
Berkeley Homes (South East London) Limited (1)
Berkeley Homes (Southern) Limited (1)
Berkeley Homes (Three Valleys) Limited (1)
Berkeley Homes (Urban Renaissance) Limited (1)
(1) Agency companies of Berkeley Homes plc
(2) Agency companies of St George PLC
Berkeley Homes (West London) Limited (1)
Berkeley Homes plc
Berkeley Partnership Homes Limited (1)
Berkeley Ryewood Limited
Berkeley Strategic Land Limited
BH (City Forum) Limited (4)
St George Battersea Reach Limited (Jersey)
St George Central London Limited (2)
St George North London Limited (2)
St George PLC
St George South London Limited (2)
St George West London Limited (2)
St James (Grosvenor Dock) Limited
St James Group Limited
St James Homes Limited
The Berkeley Group plc (3)
The Tower, One St George Wharf Limited
(3) The Berkeley Group plc is the only direct subsidiary of the Parent Company
(4) The substance of the acquisition of these companies was the purchase of land for development and not of a business, and as such, fair value accounting
and the calculation of goodwill is not required.
Other activities
BRP Investments No.1 Limited (Jersey)
BRP Investments No.2 Limited (Jersey)
(b) Joint Ventures
At 30 April 2012 the Group had an interest in the following joint ventures which have been equity accounted to 30 April and are
registered and operate in England and Wales and which are 50% owned:
St Edward Homes Limited
St Edward Homes Partnership
The St Edward (Strand) Partnership
Accounting date
Principal activity
30 April
30 April
30 April
Residential-led mixed-use development
Residential-led mixed-use development
Residential-led mixed-use development
Berkeley Annual Report 2012
141
Notes to the Consolidated Financial StatementsFinancials
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF THE BERKELEY GROUP HOLDINGS PLC
We have audited the Parent Company Financial Statements of The Berkeley Group Holdings plc for the year ended 30 April 2012 which
comprise the Parent Company Balance Sheet and the related notes. The financial reporting framework that has been applied in their
preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As explained more fully in the Directors’ Responsibilities Statement set out on page 111, the Directors are responsible for the preparation
of the Parent Company Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and
express an opinion on the Parent Company Financial Statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by
our prior consent in writing.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
whether the accounting policies are appropriate to the Parent Company’s circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the
financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material
inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we
consider the implications for our report.
OPINION ON FINANCIAL STATEMENTS
In our opinion the Parent Company Financial Statements:
• give a true and fair view of the state of the Parent Company’s affairs as at 30 April 2012;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
OPINION 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; and
• the information given in the Directors’ Report for the financial year for which the Parent Company Financial Statements are prepared is
consistent with the Parent Company Financial Statements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our
opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the Parent Company Financial Statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
OTHER MATTER
We have reported separately on the Consolidated Financial Statements of The Berkeley Group Holdings plc for the year ended 30 April 2012.
Mark Gill (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
19 July 2012
142 Berkeley Annual Report 2012
Financials
COMPANY BALANCE SHEET
As at 30 April
Fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Current liabilities
Creditors (amounts falling due within one year)
Net current liabilities
Total assets less current liabilities and net assets
Capital and reserves
Called-up share capital
Share premium
Capital redemption reserve
Profit and loss account
Total shareholders’ funds
Notes
2012
£’000
2011
£’000
C5
1,391,276
1,389,101
1,391,276
1,389,101
C6
4,461
945
5,406
2,590
945
3,535
C7
(625,296)
(597,997)
(619,890)
(594,462)
771,386
794,639
C8
C9
C9
C9
C10
6,743
49,315
24,516
690,812
771,386
6,743
49,315
24,516
714,065
794,639
The financial statements on pages 143 to 147 were approved by the board of directors on 19 July 2012 and were signed on its behalf by:
N G Simpkin
Finance Director
Berkeley Annual Report 2012
143
FinancialsFinancials
NOTES TO THE COMPANY FINANCIAL STATEMENTS
C1 ACCOUNTING POLICIES
Basis of preparation
These financial statements have been prepared under the historical cost convention and in accordance with the Companies Act 2006,
where applicable, and applicable accounting standards in the United Kingdom (United Kingdom Generally Accepted Accounting Practice)
and on the going concern basis. The principal accounting policies are set out below and have been applied consistently throughout the
year.
The principal activity of The Berkeley Group Holdings plc (“the Company”) is to act as a holding company.
The Company has not presented its own profit and loss account as permitted by Section 408 of the Companies Act 2006.
The Company has not presented its own statement of recognised gains and losses for the year as there are no separate gains or losses
arising in the year.
The Berkeley Group Holdings plc has presented a Consolidated Cash Flow Statement in its Consolidated Financial Statements for the year
ended 30 April 2012, therefore as permitted by the Financial Reporting Standard 1 “Cash flow statements” the Directors have not
prepared a cash flow statement for the Company.
Expenditure
Expenditure is recognised in respect of goods and services received when supplied in accordance with contractual terms. Provision is
made when an obligation exists for a future liability in respect of a past event and where the amount of the obligation can be reliably
estimated.
Pensions
Pension contributions under defined contribution schemes are charged to the income statement as they fall due.
Investments
Investments in subsidiary undertakings are included in the balance sheet at cost less provision for any impairment.
Deferred taxation
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where
transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the
balance sheet date.
A net deferred tax asset is recognised as recoverable and therefore recognised only when, on the basis of all available evidence, it can be
regarded as more likely than not that there will be suitable taxable profits against which to recover carried forward tax losses and from
which the future reversal of underlying timing differences can be deducted.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected
to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is
measured on an undiscounted basis.
Share-based payments
The Company operates three equity-settled, share-based compensation plans. The fair value of the employee services received in
exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is
determined by reference to the fair value of the options granted. At each balance sheet date, the Company revises its estimates of the
number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the profit and loss
account, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium
when the options are exercised.
C2 LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION
Loss on ordinary activities before taxation is stated after charging the following amounts:
Auditors’ remuneration – audit fees
2012
£’000
12
2011
£’000
12
No disclosure of other non-audit services has been made as this is included within note 4 of the consolidated financial statements.
144 Berkeley Annual Report 2012
Financials
C3 DIRECTORS AND EMPLOYEES
Staff costs
Wages and salaries
Social security costs
Share-based payments
Pension costs – defined contribution
2012
£’000
4,309
3,152
6,037
41
13,539
2011
£’000
4,049
2,007
2,324
30
8,410
The average number of persons employed by the company during the year was 8, all of whom are Directors (2011: 7).
Directors
Details of Directors’ emoluments are set out in the Remuneration Committee report on pages 89 to 105.
Pensions
During the year, the Company participated in one of the Group’s pension schemes, The Berkeley Group plc Group Personal Pension Plan.
Further details on this scheme are set out in note 5 of the Consolidated Financial Statements. Contributions amounting to £41,000 (2011:
£30,000) were paid into the defined contribution scheme during the year.
Share-based payments
The charge to the income statement in respect of share-based payments in the year, relating to grants of shares; share options and
notional shares awarded under the 2009 Long-Term Incentive Plan, the 2011 Long-Term Incentive Plan and the Bonus Plan was £6,037,000
(2011: £2,324,000). Further information on the Company’s share incentive schemes are included in the Remuneration Committee Report
on pages 89 to 105 as well as note 5 to the Consolidated Financial Statements.
C4 THE BERKELEY GROUP HOLDINGS PLC PROFIT AND LOSS ACCOUNT
The loss for the year in the Company is £31,465,000 (2011: loss of £24,169,000).
C5 INVESTMENTS
Investments in shares of subsidiary undertaking at cost at 1 May
Additions
Investment in shares of subsidiary undertaking at cost at 30 April
Details of principal subsidiaries are given within note 25 of the Consolidated Financial Statements.
C6 DEBTORS
Current
Deferred tax
The movements on the deferred tax asset are as follows:
At 1 May
Realisation of deferred tax asset on vesting of employee share scheme
Deferred tax in respect of employee share schemes credited to equity
At 30 April
2012
£’000
2011
£’000
1,389,101
1,387,279
2,175
1,822
1,391,276
1,389,101
2012
£’000
2011
£’000
4,461
2,590
2012
£’000
2,590
–
1,871
4,461
2011
£’000
1,745
–
845
2,590
Berkeley Annual Report 2012
145
FinancialsFinancials
NOTES TO THE COMPANY FINANCIAL STATEMENTS
C7 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Other taxes and social security
Amounts owed to subsidiary undertakings
2012
£’000
(5,349)
2011
£’000
(3,082 )
(619,947)
(594,915)
(625,296)
(597,997)
All amounts included above are unsecured. The interest rate on £577,745,000 of the balance owed to subsidiary undertakings is 4.0%. At
30 April 2012 all other amounts owed to subsidiary undertakings are at floating rates linked to LIBOR and have no fixed repayment date.
C8 CALLED-UP SHARE CAPITAL
The authorised share capital of the Company in the year was as follows:
At 30 April
Ordinary share capital
Redeemable preference shares of £1 each
2012
No. ’000
2011
No. ’000
925,000
925,000
50
50
Each ordinary share of 5p is a voting share in the capital of the Company, is entitled to participate in the profits of the Company and on a
winding-up is entitled to participate in the assets of the Company.
The movements on allotted, called-up and fully paid share capital for the Company in the year were as follows:
At 1 May 2010 and 30 April 2011
At 30 April 2012
At 1 May 2010 and 30 April 2011
At 30 April 2012
Ordinary
shares
No. ’000
134,857
134,857
Share
premium
£’000
49,315
49,315
Share
capital
£’000
6,743
6,743
At 30 April 2012 there 3,577,506 shares held as ‘treasury shares’ (2011: were 3,577,506). The Company has the right to re-issue these
shares at a later date.
At 30 April 2012 there were 237,363 shares held in trust (2011: 237,363). The market value of these shares at 30 April 2012 was
£3,040,620 (2011: £2,516,048).
The movements in the year are disclosed in note 18 of the Consolidated Financial Statements.
C9 RESERVES
At 1 May 2011
Loss for the financial year
Credit in respect of employee share schemes
At 30 April 2012
146 Berkeley Annual Report 2012
Share
premium
£’000
Capital
redemption
reserve
£’000
Profit and
loss account
£’000
Total
£’000
49,315
24,516
714,065
787,896
–
–
–
–
(31,465)
(31,465)
8,212
8,212
49,315
24,516
690,812
764,643
Financials
C10 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
Loss for the financial year
Purchase of own shares
Credit in respect of employee share scheme
Opening equity shareholders’ funds
Closing equity shareholders’ funds
C11 RELATED PARTY TRANSACTIONS
2012
£’000
(31,465)
–
8,212
2011
£’000
(24,169)
(30,002)
4,146
(23,253)
(50,025)
794,639
771,386
844,664
794,639
The Company is exempt under the terms of Financial Reporting Standard 8 “Related party disclosures” from disclosing related party
transactions with entities that are part of The Berkeley Group Holdings plc or investees of The Berkeley Group Holdings plc. Disclosures in
respect of transactions with Directors of the Company are set out in note 24 of the Consolidated Financial Statements.
Berkeley Annual Report 2012
147
FinancialsFinancials
Five year summary
FIVE YEAR SUMMARY
Years ended 30 april
Income statement
Revenue
2012
£’000
2011
£’000
2010
£’000
2009
£’000
2008
£’000
1,041,069
742,612
615,303
702,192
991,465
Operating profit
226,425
135,650
106,219
124,842
206,018
Share of post tax results of joint ventures
Net finance (costs)/income
Profit before taxation
Taxation
Profit after taxation
Profit attributable to:
Shareholders
Non-controlling interest
Basic earnings per ordinary share
Statement of financial position
Capital employed
Net (debt)/cash
Net assets
Non-controlling interest
Shareholders’ funds
(2,192)
(9,412)
214,821
(56,674)
158,147
2,059
(1,464)
136,245
(41,789)
94,456
158,513
95,109
(366)
(653)
158,147
121.0p
94,456
72.1p
(261)
4,383
110,341
(30,816)
79,525
79,674
(149)
79,525
60.0p
(902)
(3,558)
120,382
(34,255)
86,127
(2,416)
(9,294)
194,308
(56,481)
137,827
86,127
137,827
–
–
86,127
137,827
71.3p
114.2p
1,157,715
(57,881)
1,099,834
891,733
42,045
933,778
–
(4,364)
545,448
316,868
862,316
(3,720)
516,520
284,776
801,296
–
685,956
(4,549)
681,407
–
1,099,834
929,414
858,596
801,296
681,407
Net assets per share attributable to shareholders (1)
839p
709p
637p
615p
564p
Ratios and statistics
Return on capital employed (2)
Return on shareholders’ funds after tax (3)
Return on shareholders’ funds before tax (4)
Units sold (5)
21.9%
15.6%
21.2%
3,565
19.2%
10.6%
15.3%
2,544
20.1%
9.6%
13.3%
2,201
20.6%
11.6%
16.2%
1,501
29.3%
18.8%
26.6%
3,167
(1) Net assets attributable to shareholders divided by the number of shares in issue excluding shares held in treasury and shares held by the employee
benefit trust.
(2) Calculated as profit before interest and taxation (including joint venture (loss)/profit before tax) divided by the average net assets adjusted for (debt)/cash.
(3) Calculated as profit after taxation attributable to shareholders as a percentage of the average of opening and closing shareholders’ funds.
(4) Calculated as profit before taxation attributable to shareholders as a percentage of the average of opening and closing shareholders’ funds.
(5) The number of units legally completed and taken to sales in the year excluding joint ventures.
148 Berkeley Annual Report 2012
FINANCIAL DIARY
Financial Diary
Annual General Meeting and Interim Management Statement
Half Year End
Interim Results Announcement for the six months ending 31 October 2012
Interim Management Statement
Year End
Preliminary Announcement of Results for the year ending 30 April 2013
Publication of 2012/13 Annual Report
5 September 2012
31 October 2012
7 December 2012
March 2013
30 April 2013
June 2013
July 2013
REGISTERED OFFICE AND ADVISORS
REGISTERED OFFICE AND pRINCIpAL pLACE OF buSINESS
Berkeley House
19 Portsmouth Road
Cobham
Surrey KT11 1JG
Registered number: 5172586
REGISTRARS
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Tel: 0871 664 0300
CORpORATE bROkER AND FINANCIAL ADVISOR
UBS Investment Bank
ShARE pRICE INFORmATION
The Company’s share capital is listed on the London Stock Exchange.
The latest share price is available via the Company’s website at
www.berkeleygroup.co.uk
SOLICITORS
Ashurst LLP
Skadden, Arps, Slate Meager & Flom (UK) LLP
bANkERS
Barclays Bank PLC
Lloyds TSB Bank plc
Santander UK plc
Svenska Handelsbanken AB (Publ)
The Royal Bank of Scotland Plc
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berkeley Annual Report 2012
149
FINANCIAL DIARY
REGISTERED OFFICE AND ADVISORS
REGISTERED OFFICE AND pRINCIpAL pLACE OF buSINESS
Berkeley House
19 Portsmouth Road
Cobham
Surrey KT11 1JG
Registered number: 5172586
REGISTRARS
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Tel: 0871 664 0300
CORpORATE bROkER AND FINANCIAL ADVISOR
UBS Investment Bank
ShARE pRICE INFORmATION
The Company’s share capital is listed on the London Stock Exchange.
The latest share price is available via the Company’s website at
www.berkeleygroup.co.uk
Skadden, Arps, Slate Meager & Flom (UK) LLP
SOLICITORS
Ashurst LLP
bANkERS
Barclays Bank PLC
Lloyds TSB Bank plc
Santander UK plc
Svenska Handelsbanken AB (Publ)
The Royal Bank of Scotland Plc
The Berkeley Group Holdings plc
Berkeley House
19 Portsmouth Road
Cobham
Surrey KT11 1JG
UK
T +44 (0)1932 868555
F +44 (0)1932 868 667
www.berkeleygroup.co.uk
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