BACK COVER
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FRONT COVER
Annual Report 2013
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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
Design by Hunter Design
Printed in England by Crystal
This report is printed on EBB Chromomat
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Our vision
for the future
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INSIDE FRONT
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INSIDE BACK
CONTENTS
Highlights
Financials
About this report
1 Who We Are and What We Do
2 Business Performance
3 Chairman’s Statement
4 Running a Sustainable Business
5 Managing Director’s Statement
86
Independent Auditors’ report on the
consolidated financial statements
87 Consolidated income statement
Consolidated statement of
comprehensive income
88 Consolidated statement of
Building Homes for Everyone
financial position
6 Building Homes for Everyone
Running a Sustainable Business
22 Running a Sustainable Business
Trading And Financial Review
41 Trading Review
47 Financial Review
52 Berkeley’s Principal Operating Risks
Governance
56 Board of Directors
58 Directors’ Report
61 Remuneration Report
78 Corporate Governance Report
89 Consolidated statement of changes
in equity
90 Consolidated cash flow statement
91 Notes to the consolidated financial
statements
110 Independent Auditors’ report on
the Company financial statements
111 Company balance sheet
112
Notes to the Company financial
statements
115 Five year summary
116
Financial diary, registered office
and advisors
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
report, we give an overview of Berkeley’s
performance this year in the Highlights
section followed by a showcase of our
portfolio of developments in London and
the South of England in Building Homes for
Everyone, before explaining how we operate
in Running a Sustainable Business and a
review of the year in our Trading and Financial
Review. Our Governance section and the
detailed Financials accompanied by a report
from the Group’s auditors, complete the
Annual Report.
This page: Fulham Reach, Hammersmith
Cover: Beaufort Park, Hendon
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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 history of
creating successful, sustainable places.
Berkeley builds homes and
neighbourhoods in its core markets of
London and the South of England where
its knowledge, expertise and proven track
record, with over thirty years of experience
in this market, gives it an unrivalled ability
to deliver new homes and communities.
Berkeley will continue to forward sell
its developments wherever possible,
maintaining a strong balance sheet and
keeping financial risk low in order 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.
Highlights
HIGHLIGHTS
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Proud to be a member of the Berkeley Group of Companies
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BERKELEY ANNUAL REPORT 2013
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HIGHLIGHTS
BUSINESS PERFORMANCE
This year’s performance is a direct result of
a period of sustained investment since early
2009 during which we have committed over
£1.0 billion to new land and £2.4 billion to
construction, delivering over 12,000 new
homes in London and the South of England.
Profit before tax
£270.7 million
Earnings per share
160.0 pence
2010
2011
2012
2013
£110.3m
£136.2m
£214.8m
£270.7m
60.0p
72.1p
2010
2011
2012
2013
121.0p
160.0p
Return on equity
22.4%
2010
2011
2012
2013
13.3%
15.3%
21.2%
22.4%
Net asset value per share
1,009 pence
2010
2011
2012
2013
637p
709p
839p
1,009p
Cash due on forward sales
£1,453 million
2010
2011
2012
2013
£648m
£814m
£1,056m
£1,453m
Land bank estimated future gross margin
£2,852 million
2010
2011
2012
2013
£2,038m
£2,304m
£2,580m
£2,852m
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CHAIRMAN’S STATEMENT
“I am delighted to report a strong set of results
which underline the benefit of a strategy aligned
with a cyclical market. A combination of 32% growth
in earnings in the year, an increase in cash due on
forward sales to over £1.4 billion and continued
growth of the land bank means that Berkeley
remains on track to meet the first £568 million
milestone payment by September 2015 under its
ten year plan to return £1.7 billion to shareholders.
In this context, I am pleased to report that the
Board has declared a further interim dividend of
59 pence per share, payable in September 2013,
which will count towards the first return and follows
the payment of an interim dividend of 15 pence
per share in April 2013.
The growth in earnings this year is a direct result
of a period of sustained investment since early
2009 during which Berkeley has committed
over £1 billion to new land and £2.4 billion to
construction and completed over 12,000 new
homes in London and the South of England. This
investment has enabled us to regenerate derelict
sites across the region, sustaining 16,000 jobs
through increased activity and committing some
£250 million towards crucial local infrastructure
improvements including schools, surgeries, parks
and playgrounds. An increasing supply of new and
affordable homes is crucial to supporting economic
recovery and needs inward investment to support
and finance this. London in particular must remain
competitive on a global scale because it can and
does attract investment from around the world and
it is this investment which finances the provision of
new homes of every tenure and in every price range.
Throughout this period of sustained growth,
Berkeley has remained aware that it needs to
balance its aims to be successful and sustainable
with a social purpose. The challenges of creating
exceptional places have given us a unique insight
into how a company can create economic value
in a way that also creates value for society. We
understand that the pursuit of a “shared value”
must be central to the way we operate, and we
have sought to build partnerships, create jobs and
engage better with local communities across all
of the business. In addition, through the Berkeley
Foundation, we have now committed nearly
£3 million to more than 40 charities since 2011 and
delivered new jobs and skills training, helping tackle
important issues such as homelessness. I want to
ensure that Berkeley embraces its role to build
trust and empathy with its stakeholders and the
wider community and helps create employment
opportunities for those who most need it.
I am delighted with the contribution of our
workforce to this year’s strong performance.
Berkeley’s success is a direct result of the passion
and dedication shown by all of our employees and
I would like to take this opportunity to thank them
for this. Their loyalty and hard work, across every
site and every discipline, is the driving force
behind the business and gives the company the
stability and expertise which makes it strong.
In terms of the Board, I am pleased to announce
that Adrian Li will join the Company as a
Non-executive Director with effect from the Annual
General Meeting. Adrian is currently the Deputy
Chief Executive of The Bank of East Asia Limited.
Alan Coppin has announced his intention to step
down as a Non-executive Director at the Annual
General Meeting on 2 September 2013, having
served on the Board since 2006. I would like to
thank Alan for his contribution to the Company
and welcome Adrian to the Board.
We have positioned Berkeley with a clear,
sustainable long-term plan. I am confident that
Berkeley can meet its objectives for delivering
returns to shareholders, but mindful of the risks
that geopolitical events, regulation, increases in
taxation alongside an uncertain future tax policy
and even anti-competitive rhetoric can have on
the business and the wider housing market.”
Tony Pidgley CBE
Chairman
“We have positioned Berkeley with
a clear, sustainable long-term plan”
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BERKELEY ANNUAL REPORT 2013
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HIGHLIGHTS
RUNNING A SUSTAINABLE BUSINESS
Berkeley’s business is run with long-term
sustainable success at its heart, from its corporate
strategy and commitments to shareholders, to the
framework and objectives set for its people across
every discipline of the business. An integrated
business strategy is essential to achieve this.
Running a sustainable business
Remaining one of the most successful and sustainable businesses in Britain
Operations
Homes
Places
Customers
Running our business
efficiently and considerately
and working with our
supply chain
Developing high
quality, well-designed
homes with low
environmental impact
Creating great places
where people enjoy a good
quality of life, now and
in the future
Providing exceptional service
to our customers throughout
the purchasing process
and after completion
Our people
Retaining a highly skilled and passionate workforce who work in a safe and
supportive environment and help us to contribute to wider society
Considerate
construction
35.9/40
(2012: 35.7)
Average Considerate
Constructors Scheme score
(May to December 2012)
Environmental
performance
100%
Percentage of new homes
to be certified to at least
Code for Sustainable
Homes Level 3
Contribution
to communities
£245m
S106 contributions over
the last five years
Customer
satisfaction
98%
(2012: 97%)
Percentage of customers
that would recommend
us to a friend
Safe working
2.99
Supporting training
115
Accident Incident Rate per 1,000 employees
and operatives (2012: 2.69)
Number of apprentices who
worked on our sites in 2012
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MANAGING DIRECTOR’S STATEMENT
Our aim is to run the business in a safe and
sustainable way, minimising financial risks where
we can and seeking to create homes and vibrant
neighbourhoods of exceptional quality in
partnership with local communities. Berkeley builds
homes for everyone, from first-time buyers to those
moving house, for people young and old, from
prime London locations to large scale regeneration
schemes and small communities near market towns,
whether new build or the restoration of heritage
buildings. In doing so we put our customers at the
heart of each and every decision and aim to create
amazing places that will stand the test of time.
Looking to the future, and with the land bank now
in place, the intention is to deliver strong and
consistent returns on equity whilst maintaining the
value in the land bank. This approach respects the
fact that the property market is cyclical and that
there are continuing barriers to accelerating the
delivery of new housing. By operating at a natural
size with a market-leading brand and adding value
in every area of the business, Berkeley can maintain
the flexibility to react to changes in the market,
invest opportunistically in the right locations at the
right time or return surplus cash to shareholders.”
Rob Perrins
Managing Director
“The growth in basic earnings per share by 32.2%
to 160.0 pence in the year is a direct result of
sustained investment in the Berkeley business
over several years. Pre-tax profits are up 26.0% to
£270.7 million and return on shareholders’ equity,
a core performance measure, is up from 21.2%
to 22.4%.
In a year of continued expansion, Berkeley
committed £315 million to acquire ten new sites
and, with 73 of its 87 sites now in construction, has
increased its net investment in work in progress,
after taking account of the delivery of projects in
the year, by some £289 million which underpins
the Group’s ability to generate future earnings.
Strong cash generation meant that, despite this
investment and paying £19.7 million of dividends to
shareholders in April 2013, Berkeley ended the year
ungeared with net cash of £44.7 million, having
started the year with net debt of £57.9 million. Cash
due on forward sales of over £1,452.8 million, an
increase of £397.1 million this year, supports our
continued investment and provides good visibility
over future performance.
Berkeley has agreed a long-term strategic plan
with shareholders to return £1.7 billion in cash by
meeting three milestone payments of £568 million
in 2015, and £567 million in 2018 and 2021. Key
to the Group’s ability to meet these milestones is
the underlying quality of the land bank. Having
increased the estimated gross margin in the land
bank by £272 million to £2,852 million this year,
Berkeley is currently on course to outperform its
short-term target to deliver the first milestone
payment of £568 million by 30 September 2015
from retained earnings. Additionally, planning
successes in the year mean that the land bank is
currently in place from which to meet both the
first and second milestones, some £1.14 billion
in cash in total.
“With the land bank now in place, the
intention is to deliver strong and consistent
returns on equity whilst maintaining value
in the land bank”
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BERKELEY ANNUAL REPORT 2013
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Edenbrook, Fleet
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BUILDING HOMES
FOR EVERYONE
Our developments range in size from
a few homes near market towns to
complex, mixed-use urban regeneration
schemes of over 4,000 homes including
multi-million pound restoration projects,
schools, community centres, student
accommodation and senior living homes,
all built with safety, sustainability and
quality at their heart.
Heritage
Regeneration
Family
First time homes
Luxury
Affordable
City living
New communities
Student
Senior living
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BERKELEY ANNUAL REPORT 2013
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BUILDING HOMES FOR EVERYONE
HERITAGE
Preserving Britain’s architectural heritage for future
generations is at the heart of placemaking today.
1 | Roehampton House at Queen Mary’s Place, Roehampton
The painstaking renovation of this elegant Grade 1 listed property, originally
designed in 1712, into 24 luxury apartments is now complete.
2 | 75 Leman Street, Aldgate
3 | Roman House, City of London
An elegant Edwardian building with high ceilings,
large arched windows and a grand central staircase
is being restored and converted into 59 prestigious
new residences.
A landmark building of 90 luxurious apartments in the
City of London, overlooking the St Alphage gardens
and the original piece of Roman Wall which is adjacent
to the development.
Image shown is computer generated and indicative only.
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REGENERATION
Successful regeneration brings jobs, investment
and a higher quality of life to the places created.
1 | Kidbrooke Village
Working in partnership with the Royal Borough of Greenwich, the Homes and Communities Agency and
Southern Housing Group, Kidbrooke Village is seeing the transformation of a 109 hectare brownfield site
into a vibrant new community providing over 4,000 new homes.
BUILDING HOMES FOR EVERYONE
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2 | Woodberry Park
3 | Riverlight, Nine Elms
One of the UK’s largest estate redevelopment
projects, 700 new homes have already been
delivered at Woodberry Park. Some 4,600 new
homes will eventually be developed alongside
a range of new community facilities.
This Rogers Stirk Harbour + Partners designed
scheme will provide some 800 new homes and
amenities, with over 60% of the scheme dedicated
to open space, in the first major development in the
Nine Elms regeneration area on London’s South Bank.
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BUILDING HOMES FOR EVERYONE
FAMILY
Creating appealing family homes with modern
designs in safe, vibrant neighbourhoods.
1 | Edenbrook, Fleet
A development of three, four and five bedroom family homes in a country
park setting opening up 84 acres of new parkland to the community.
2 | Thornchace, Guildford
3 | Lime Grove Mews, Hammersmith
A collection of seven new five bedroom family homes
close to Guildford and designed with Arts and Crafts
style architecture.
A terrace of 19 four and five bedroom family homes
and 50 apartments in the heart of West London.
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FIRST TIME HOMES
Giving a new generation the opportunity
to secure a high quality new home.
1 | Beaufort Park, Hendon
The regeneration of a 25 acre former RAF site in Hendon into a mixed-use
development of over 3,000 new homes at every affordability level.
BUILDING HOMES FOR EVERYONE
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2 | Chelsea Creek, Fulham
3 | Royal Arsenal Riverside,Woolwich
The creation of this dockside development of over
800 new homes has provided the opportunity for
first-time buyers living in the London Borough
of Hammersmith and Fulham to access high
specification apartments at affordable prices.
The regeneration and restoration of the historic Royal
Arsenal to provide over 4,000 new homes has provided
opportunities for people to enter the property market,
benefiting from the availability of Government FirstBuy
and NewBuy schemes.
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BERKELEY ANNUAL REPORT 2013
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BUILDING HOMES FOR EVERYONE
LUXURY
Berkeley is proud of its reputation for delivering
luxury homes to the top end of the market.
1 | Ebury Square, Belgravia
Designed by Squire & Partners, Ebury Square is a development of 71 exclusive
apartments overlooking a garden square in the heart of London’s Belgravia.
Image shown is computer generated and indicative only.
2 | The Tower, One St George Wharf
3 | 190 Strand
The Tower will be one of Europe’s tallest residential
towers at 50 storeys and will provide luxury living
and uninterrupted views across London.
190 Strand will be a luxurious development of
some 200 apartments and penthouses in the
heart of central London.
Image shown is computer generated and indicative only.
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AFFORDABLE
Berkeley provides good quality, contemporary
affordable housing of all tenures across London
and the South.
1 | Woodberry Park
At Woodberry Park, a large-scale redevelopment project of some 4,600 new homes overall, this year
Berkeley delivered 278 affordable homes.
BUILDING HOMES FOR EVERYONE
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2 | Battersea Reach
3 | Queens Acre, Beaconsfield
A riverside development of over 1,300 new homes
in the heart of Wandsworth, at which this year
St George completed 65 affordable homes.
This year we completed 17 affordable homes
in Beaconsfield.
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BERKELEY ANNUAL REPORT 2013
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BUILDING HOMES FOR EVERYONE
CITY LIVING
Aspirational homes in accessible locations are
needed to support a growing, world-class economy.
1 | Langham Square, Putney
A collection of 104 two and three bedroom apartments in vibrant Putney, adjacent to
the Underground station and with easy access to central London and to local amenities.
Image shown is computer generated and indicative only.
2 | Caspian Wharf, Limehouse
3 | Cambridge Riverside
A waterside development of over 500 apartments
in Limehouse with easy access to Canary Wharf,
the City and the Olympic Park in Stratford, which is
now complete.
A riverside development of some 200 homes in the
heart of the university city of Cambridge, convenient
for the technology hub of the city and commutable
to London.
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NEW COMMUNITIES
Great places will establish new communities which
will enhance the quality of life of their residents.
1 | Holborough Lakes
A new community of over 1,000 new homes with New England and traditional craft
architecture, located in rural Kent and set around a series of tranquil lakes.
BUILDING HOMES FOR EVERYONE
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2 | Ryewood, Sevenoaks
3 | Highwood, Horsham
A brand new community of some 500 homes situated
adjacent to the Sevenoaks Wildlife Reserve, in close
proximity to the amenities of Sevenoaks in Kent,
including direct trains into London.
Berkeley is creating a classic English village with
tree-lined avenues, a square and a village pond
on the edge of the market town of Horsham in
West Sussex.
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BERKELEY ANNUAL REPORT 2013
15
BUILDING HOMES FOR EVERYONE
STUDENT
Britain’s world-class educational establishments demand
world-class accommodation for their students.
1 | Costume Store, Acton
A development of 730 bedrooms in North Acton for the undergraduate
students of University of the Arts London, which opened in September 2012.
2 | Griffon Studios, Clapham
3 | Goodman’s Fields, Aldgate
A development 566 studios for postgraduate students
of Imperial College London, the scheme was delivered
in phases, opened in September 2011 and completed
in September 2012.
A new landmark undergraduate scheme due for
completion in September 2013, this development
will provide 617 bedrooms for students in London.
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SENIOR LIVING
Berkeley’s developments provide high quality affordable
accommodation for people in all walks of life.
1 | Dickens Yard, Ealing
This mixed-use development in Ealing includes a pioneering new initiative to deliver homes for the
active elderly wishing to downsize, thereby tackling under occupation in existing family housing stock.
BUILDING HOMES FOR EVERYONE
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2 | Victory Pier, Gillingham
3 | Kingshill Meadow, Cirencester
Prospect Place at Victory Pier includes 60 specialist
apartments for the elderly with on-site facilities in
the wider setting of this mixed-use waterfront
development in Kent.
A development of two, three and four bedroom
homes in the heart of the Cotswolds, Kingshill
Meadow includes 61 specialist apartments
for the elderly with on-site staff and facilities.
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BERKELEY ANNUAL REPORT 2013
17
BUILDING HOMES FOR EVERYONE
OUR DEVELOPMENTS
Berkeley builds new homes and
neighbourhoods in the markets which
it knows and understands. With further
selective purchases this year, Berkeley’s
sites remain centred on its core markets
of London…
37
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6 38
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LONDON
29
10 36 19
21 20
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18 BERKELEY ANNUAL REPORT 2013
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BUILDING HOMES FOR EVERYONE
2 | 375 Kensington High Street
12 | Eastbury House, Albert Embankment
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15 | Fulham Reach, Hammersmith
London
London Under Construction
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190 Strand
375 Kensington High St
(including Homebase and Telereal)
Abell & Cleland House, Westminster
Battersea Reach
Beaufort Park, Hendon
Carmelite, Finchley
Caspian Wharf, Bow
Chambers Wharf, Southwark
Chelsea Creek / Imperial Wharf
Dickens Yard, Ealing
Durham Road, Wimbledon*
Eastbury House, Albert Embankment
Ebury Square, Belgravia
Emerald Square, Roehampton
Fulham Reach, Hammersmith
Goodmans Fields, Aldgate
Hampton House, Albert Embankment
Hurlingham Gate, Fulham
’
Images shown above are computer generated and indicative only.
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Napier, Acton
Kew Bridge Road
Kew Bridge West, Brentford
Kidbrooke Village
Langham Square, Putney
Lime Grove Mews, Hammersmith
Marine Wharf, Deptford
Marryat Place, Wimbledon
One Blackfriars, Southwark
One Tower Bridge
One Victoria Road, Acton
Parkwest, West Drayton
Queen Mary’s Place, Roehampton
Riverlight, Battersea
Roman House, City of London
Royal Arsenal Riverside
Saffron Square, Croydon
Sir Alexander Close, Acton
Stanmore Place
38
39
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41
The Avenue, Finchley
The Tower, One St George Wharf
Wimbledon Hill Park
Woodberry Park
London Future Sites
1
2
3
4
5
6
7
8
9
City Forum, City of London
High Road, Finchley*
Hogarth, Chiswick*
Latchmere House, Richmond*
London Dock, Wapping*
South Quay Plaza, Docklands*
Sovereign Court, Hammersmith*
St Josephs, Mill Hill*
Twickenham Sorting Office
’
* Sites purchased during the year
BERKELEY ANNUAL REPORT 2013
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BUILDING HOMES FOR EVERYONE
OUR DEVELOPMENTS
… and the South of England.
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MILTON
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BERKSHIRE
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WILTSHIRE
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LONDON
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SURREY
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KENT
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WEST SUSSEX
EAST SUSSEX
13
18
20 BERKELEY ANNUAL REPORT 2013
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1 | Amersham
18 | North Bersted
14 | High Wycombe
BUILDING HOMES FOR EVERYONE
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The South
South of England Under Construction
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Amersham
Ascot (2 sites)
Beaconsfield (2 sites)
Cambridge
Canterbury
Caterham
Cheltenham (2 sites)
Cirencester
Claygate
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Cobham
Fleet (2 sites)
Gillingham
Gosport
High Wycombe
Holborough
Horsham
Maidenhead
North Bersted
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Oxshott
Reading
Sevenoaks
Shalford
St Albans
Tadworth (2 sites)
Tunbridge Wells
Woodstock
Worcester
South of England Future Sites
1
2
3
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Beaconsfield*
Gerrards Cross (2 sites)
Maidenhead*
Reigate
* Sites purchased during the year
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BERKELEY ANNUAL REPORT 2013
21
Kidbrooke Village
22 BERKELEY ANNUAL REPORT 2013
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RUNNING A
SUSTAINABLE BUSINESS
Berkeley has an integrated business
strategy dedicated to securing long-term
sustainable success, operating in a way
that contributes positively to society.
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BERKELEY ANNUAL REPORT 2013
23
RUNNING A SUSTAINABLE BUSINESS
A SUSTAINABLE BUSINESS
Sustainability is at the heart of Berkeley. This
is as true in Berkeley’s corporate strategy and
commitments to shareholders as it is in the day
to-day running of a business in which our people
are driven, across every discipline, to deliver
long-term, sustainable success.
Berkeley is aware that it needs to balance its aim
to be successful with a will to operate sustainably
and with a social purpose. Creating exceptional
places that stand the test of time is at the forefront
of this, as is its role in creating new jobs, working
in partnership with local communities and
contributing to the communities in and around
each of its developments.
Berkeley is respectful of the inherently cyclical
nature of the property market and is protective
of the business’s capacity to operate safely,
sustainably and at an optimal size, now and
in the future.
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RUNNING A SUSTAINABLE BUSINESS
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Our vision
for the future
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Stanmore Place
What we do
The Group is focused on its core markets of
London and the South of England, markets
in which its knowledge, experience and proven
track record gives it an unrivalled ability to deliver
new homes and communities.
Berkeley’s initial focus is on identifying and
selectively acquiring the right land, and then
obtaining viable, implementable planning
consents appropriate to the location of each site.
The Group then works with leading architects,
engineers and designers to deliver quality homes
for its customers across the spectrum of size,
location and affordability in great places which it
creates for its customers and wider stakeholders.
Driving financial performance
Berkeley believes that it can operate most
effectively by maintaining a secure financial
base and ensuring a disciplined approach to
risk management over the long-term.
A strong balance sheet and good visibility over
performance in the near-term from forward
sales afford Berkeley a flexibility in its business
plan which enables it to react to changes in the
market and continue to deliver new homes.
Berkeley is ready and able to implement swiftly
the construction of new phases of its schemes,
or to adapt planning consents to meet changes
in market demand.
The two measures which best demonstrate
Berkeley’s focus on both performance and balance
sheet strength are Return on Equity, which has
risen from 21.2% to 22.4% this year, and estimated
future Land Bank Gross Margin, which has risen
to £2,852 million this year from £2,580 million last
year. Consistent, balanced achievement against
these two measures will demonstrate long-term
sustainable success.
Vision2020
Our Vision2020 framework has now been in place
for three years and continues to evolve. The
changes we have made this year to the structure
ensure the framework remains closely aligned with
the overall business strategy.
Ultimately we believe that an integrated business
strategy is fundamental to running a sustainable
business; sustainability should not be considered
as a separate entity. Importantly, we have not
removed any of the commitments set in 2012.
The five areas of focus are:
Operations: Running our business efficiently and
considerately and working with our supply chain
Homes: Developing high quality, well-designed
homes with low environmental impact
Places: Creating great places where people enjoy
a good quality of life, now and in the future
The Trading and Financial Reviews elsewhere in
this report provide an overview of the Group’s
performance in the year.
Customers: Providing exceptional service to our
customers throughout the purchasing process and
after completion
People: Retaining a highly skilled and passionate
workforce who work in a safe and supportive
environment and help us to contribute to wider society
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BERKELEY ANNUAL REPORT 2013
25
RUNNING A SUSTAINABLE BUSINESS
OPERATIONS
Running our business efficiently and considerately
and working with our supply chain.
First
major
housebuilder
to sign up to
the Prompt
Payment Code
35.9/40
(2012: 35.7)
average
Considerate
Constructors
Scheme score
(May to
December)
7%
reduction in
operational
carbon
emissions per
site operative
Our Vision for 2020
“Sustainability remains fully integrated into our business strategy
and operations. We have developed excellent partnerships with our
supply chain to ensure high quality materials and services are consistently
provided, and environmental, social and ethical impacts are minimised.
We will continue to conduct our operations in an environmentally
efficient manner and with consideration to our neighbours.”
Progress at a Glance: Against key two year commitments 2012-2014
Supply Chain
Integrate an assessment of the sustainability of products, suppliers and contractors
into the formal selection process
Community
Relations
Environmental
Management
Ensure that all wood purchased by Berkeley is certified by a timber certification scheme
Register all sites with the Considerate Constructors Scheme and achieve a minimum
of 35 points out of 50 in site audits (32 out of 40 prior to January 2013)
Reduce average site carbon dioxide emissions by 3% per site operative by May 2014
Reduce average site water consumption by 3% per site operative by May 2014
Re-use or recycle over 85% of construction, demolition and excavation waste
Key:
Currently on target to achieve Not currently on target to achieve
26 BERKELEY ANNUAL REPORT 2013
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RUNNING A SUSTAINABLE BUSINESS
i Learn more
about Operations at
berkeleygroup.co.uk/
vision2020/
operations
Developing our Approach
Our framework is focused on our day-to-day operations, from the inputs to the business to the running
of our sites. Some of the most significant impacts of our work occur indirectly as part of the wider supply
chain in the extraction, processing and transportation of materials and as a result of contractors
working on our sites. Running a sustainable business is dependent upon managing day-to-day
operations efficiently and with consideration for local people.
Supply Chain
We recognise that we use large quantities of
materials and that some of the most significant
environmental and social impacts of our
operations may arise in our supply chain.
Our Sustainable Procurement Policy requires
that we work in partnership with our suppliers
and contractors to minimise these impacts.
Contractors wishing to tender to work on a
Berkeley site must confirm they have appropriate
policies and systems in place to address social
and environmental issues, in addition to business
risks and health and safety.
We have pledged that all timber, temporary and
permanent, directly and indirectly sourced, must
be certified to either FSC or PEFC standards.
To give certainty to our suppliers, and particularly
small businesses, we registered for the Prompt
Payment Code in December 2012, committing
to pay contractors in a timely manner and on a
weekly basis where appropriate. We were the
first major housebuilder to do so.
Community Relations
We aim to conduct our operations with minimal
disruption to the communities in which we work
and to develop good relationships with local
people and local authorities. We want to ensure
that we build considerately from the outset.
In this way, we can improve our efficiency
by minimising regulatory involvement whilst
improving community relations. Each of our sites
aims to communicate and engage with their
local communities, from sending newsletters
to hosting school visits and open days.
All of our construction sites are registered under
the voluntary Considerate Constructors Scheme
(CCS) and its Code of Practice. Our audit scores
continued to increase to an average of 35.9/40
(2012:35.7). We score consistently above best
practice guidelines and industry averages.
Our commitment is regularly recognised by the
Scheme, with Berkeley receiving 20 awards at
the 2013 National Site Awards.
Environmental Management
All construction sites are regularly assessed on
compliance with legal requirements, planning
conditions and industry good practice to help
us to reduce the risk of regulatory involvement
and to maintain our record of zero environmental
prosecutions.
We monitor energy and water usage monthly
and set targets for reduction. During 2013 our
operational carbon emissions per person have
reduced by 7% to 2.2 tonnes CO2e per year
(2012: 2.4 tonnes CO2e). During the same period
our water usage per operative has increased by
20%; principally this was due to significant water
demands to ensure effective dust suppression
during an intensive demolition phase on one
particular site.
Our strategy for waste is not only to reduce
the volume produced, but to ensure that we re-use
and recycle as much as possible. This year 93%
of all waste generated on site was recycled.
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BERKELEY ANNUAL REPORT 2013
27
RUNNING A SUSTAINABLE BUSINESS
HOMES
Developing high quality, well-designed homes
with low environmental impact.
100%
percentage
of new homes
designed to the
principles of
Lifetime Homes
100%
percentage of
new homes to
be certified to
at least Code
Level 3
63%
(2012: 56%)
percentage
of completed
homes provided
with energy
from low carbon
or renewable
technology
Our Vision for 2020
“Our track record of delivering high quality, well-designed, comfortable
homes with low environmental impact makes them highly desirable
to customers. Homes built by Berkeley are recognised throughout the
industry as the very best examples of quality construction and sustainable
design. All our new developments are low or zero carbon.”
Progress at a Glance: Against key two year commitments 2012-2014
Design Quality
Develop minimum design standards on all Berkeley homes including standards for
sound insulation, space, storage and overheating
Carry out post-occupancy monitoring of electricity, water and gas/heat
consumption in order to measure the success of our designs and to influence
the design of future schemes
Environmental
Performance
Undertake R&D to understand the implications of the Government’s proposed zero
carbon standard on our future developments
Design all new homes to achieve at least Level 3 of the Code for Sustainable Homes
Key:
Currently on target to achieve Not currently on target to achieve
The Avenue, Farnham Common
28 BERKELEY ANNUAL REPORT 2013
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RUNNING A SUSTAINABLE BUSINESS
i Learn more
about Homes at
berkeleygroup.co.uk/
vision2020/homes
Developing our Approach
Over the past year we have enhanced this aspect of the Vision2020 framework to reflect our overall aim
for each home; it must be well-designed, be of a high quality and be environmentally sound. These three
elements are demanded by all of our stakeholders, from our customers to local and national Government.
Build Quality
Environmental Performance
All of our new homes are designed to achieve at
least Level 3 of the Code for Sustainable Homes
and are provided with efficient internal water
fittings and recycling facilities as standard.
In 2013, 77% of completed homes were certified
using an environmental performance methodology
and increasingly our new developments are
targeting Code Level 4 where practical. 63% of our
completed homes were provided with energy from
renewable or low carbon technology in 2013, up
from 56% in 2012.
We continue to support the Government’s move
to zero carbon and we have commissioned
experts to conduct research into the implications
and practicalities of implementing this across
our business.
The quality which we demand in our new homes
requires a skilled workforce and attention to detail.
Many checks are undertaken both throughout the
build process and prior to handover to ensure a
high quality finish has been achieved.
Our specifications are designed to meet the varied
needs of all types of homebuyers, from luxurious
houses to top quality key worker apartments.
Design Quality
Each of our homes is bespoke and we use
qualified architects to design each scheme, whether
it consists of four or 4,000 homes. This tailored
approach ensures that we deliver homes and
communities that meet our customers’ needs.
Together with excellent external design of the
buildings and landscaping, we ensure that the
homes we build are comfortable places in which
to live, and we set standards for storage, sound
insulation, air quality and heating. We are also
committed to investigating indoor air quality;
this year, we installed air monitoring equipment
at one of our sites to obtain data on real-life
performance which we will then feed back into
the design process.
In 2013, all new homes were designed to the
principles of the Lifetime Homes standard for
adaptability and flexibility. To help stimulate
discussions and debate around excellent
design we opened five of our sites to the public
during the London Festival of Architecture.
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BERKELEY ANNUAL REPORT 2013
29
RUNNING A SUSTAINABLE BUSINESS
PLACES
Creating great places where people enjoy
a good quality of life, now and in the future.
5
sites already
assessed under
our new social
sustainability
framework
£245m
S106
contributions
over the last
five years
94%
live sites
provided with
cycle storage
Our Vision for 2020
“We create high quality, sustainable places where people choose to live,
work and spend their time. These are places that directly encourage
people’s well-being and quality of life and offer them a space and a base
from which to lead safe and fulfilling lives. Our ability to transform sites into
thriving communities is considered the best in our industry. Through
our ability both to collaborate and to deliver, Berkeley is the developer
of choice for local authorities and existing communities.”
Progress at a Glance: Against key two year commitments 2012-2014
Quality of Life
Work with experts to develop metrics to assess the social sustainability of our
developments and pilot the metrics on at least one completed development
Working in
Partnership
Conduct post-occupancy evaluation to assess the in-use success of community
facilities (e.g. sports facilities, public realm, open space, children’s activities)
Follow Berkeley’s Community Engagement Strategy on all planning applications we submit
Work with residents, commercial occupiers, local businesses and the local community
on at least one mixed-use development to promote local employment opportunities
Sustainable
Communities
Put in place adaptation measures on all developments to address future climate
change risks
Install living roofs (brown or green) on all suitable apartment roof spaces
Key:
Currently on target to achieve
Not currently on target to achieve
U C T U R E
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Linkswith
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F e e l i n g s o f s a f e t y
C o m m u n i t y f a c i l i t i e s
Social sustainability describes the
way a neighbourhood supports
individual and collective well-being.
It is about people’s quality of life.
For more details on our framework
for assessing social sustainability,
see Creating Strong Communities
berkeleygroup.co.uk/sustainability/
socialsustainability
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30 BERKELEY ANNUAL REPORT 2013
Willingness to act
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RUNNING A SUSTAINABLE BUSINESS
i Learn more
about Places at
berkeleygroup.co.uk/
vision2020/places
Developing our Approach
Delivering well-designed, safe and sustainable places which will endure as settled, vibrant communities
long into the future is vital to social and economic sustainability. We believe that appreciating the needs
of our customers and wider stakeholders before, during and after the delivery of our schemes and what
makes them thrive as a community, is the right model for a truly successful and sustainable business
in our sector.
Quality of Life
Sustainable Communities
In addition to each individual home being designed
to be environmentally sound, it is essential that the
wider development also adheres to these principles
and allows people to live a sustainable lifestyle.
Our approach begins with the selection of land
opportunities, with a focus on developing on
redundant or under-utilised land; 89% of our
development this year was on brownfield rather
than greenfield land. The selection of central sites
also means we continue to build in well-connected
locations; 93% of live sites are within 500m of a
public transport node (2012: 97%) and 94% will
provide cycle storage (2012: 95%).
Our commitments apply to every development we
build, regardless of location or scale. On every site,
potential flood risks are mitigated and ecologists
are consulted to protect and enhance biodiversity.
We also incorporate living roofs on all suitable
apartment roof spaces. Our commercial space,
student accommodation and Extra Care housing
achieve BREEAM Very Good.
Our new challenge is to ensure that every place
we create is also designed to provide high levels
of comfort and can cope with more extreme
weather conditions. We will continue our
research into climate change adaptation
and the additional measures which can be
incorporated into our developments.
Over the past two years, in partnership with Social
Life, we have developed a framework which we are
now using to measure the social sustainability of our
developments. The results will help us to improve
the places we build and to ensure that they
promote quality of life and well-being.
In 2013, five of our developments were assessed
against this framework and we plan to roll out
the assessment process across more of our
developments to ensure that our headline
successes to date; namely that Berkeley
residents feel they belong, regularly talk
to neighbours and plan to stay in their
community, will be consistently delivered.
We will also be conducting post-occupancy
evaluation of several aspects of our developments
to confirm how they function in relation to aspects
such as crime, security, design quality, travel plans
and community spaces, to inform our future
developments.
Working in Partnership
Our Community Engagement Strategy is used
on all developments. We collaborate with the
planning authority and other local stakeholders
to tackle the shortage of good quality homes
and provide an appropriate mix of types and
tenures. Over the last five years, we have signed
commitments to provide over 7,000 affordable
homes including social rent, shared equity, shared
ownership and Extra Care homes for the elderly.
We also work in partnership with educational
establishments to provide high quality student
accommodation.
We have funded a broad range of facilities
and services. Over the past five years, we
have contributed £245 million through S106
contributions, as outlined in the Economic
Impact Assessment of the Berkeley Group
(berkeleygroup.co.uk/sustainability/economic).
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BERKELEY ANNUAL REPORT 2013
31
RUNNING A SUSTAINABLE BUSINESS
CUSTOMERS
Providing exceptional service to our customers throughout
the purchasing process and after completion.
98%
(2012: 97%)
percentage
of customers
that would
recommend
us to a friend
81%
percentage of
customers who
are concerned
about
protecting the
environment
Our Vision for 2020
“We 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
aim to provide to our customers throughout the purchasing process and
after completion is exceptional. Customers are positioned at the heart
of our business and central to the decisions that we make.”
Progress at a Glance: Against key two year commitments 2012-2014
The Customer
Experience
Customer
Satisfaction
Sustainable
Living
Provide every customer with a Berkeley Customer Satisfaction Commitment
Provide user-friendly ‘quick start’ instructions and guides for running a home
Survey every customer to measure satisfaction and target that at least 95% of our
customers would recommend us to a friend
Train sales staff in sustainability so that they are able to sell the benefits to customers
Produce a Berkeley Sustainable Living Guide in conjunction with NGOs for use in
sales & marketing suites, at handover, as well as an interactive version of the Guide
for our website
Key:
Currently on target to achieve Not currently on target to achieve
32 BERKELEY ANNUAL REPORT 2013
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RUNNING A SUSTAINABLE BUSINESS
i Learn more
about Customers at
berkeleygroup.co.uk/
vision2020/customers
Developing our Approach
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 strategy is based on ensuring that customers remain as a central focus and
we continue to strive for exceptional performance. The experience of our customers is central to
Berkeley’s reputation, its ability to secure sales and hence the viability of the future business.
The Customer Experience
Sustainable Lifestyles
We have a role to play in promoting sustainable
lifestyles to residents and helping them to operate
their home efficiently and make the best use
of local facilities. We also believe that this is
something our customers want; in our 2012
Customer Sustainability Survey, 81% of customers
agreed or strongly agreed that they were
concerned about protecting the environment.
Helping Create a Better Future: Our Guide to
More Sustainable Living, was produced to
provide information to customers on sustainability
issues and give ideas on how to adopt a more
sustainable lifestyle. This is available within all
marketing suites and we will also be developing
an online version.
We aim to make the home buying process as
straightforward and enjoyable as possible for all our
customers, and to provide a professional, efficient,
business-like and helpful service at all times.
Our commitment to our customers is that:
“When you buy a new home from Berkeley you
can be safe in the knowledge that it is built to
very high standards of design and quality, has low
environmental impact and that you will enjoy an
exceptional customer experience.”
Customer Satisfaction
We support the Consumer Code for Homebuilders
which applies to all our buyers. This requires that
home buyers are treated fairly, know what service
levels to expect, are given reliable information
upon which to make their decision and know how
to access speedy, low-cost dispute-resolution
arrangements if they are dissatisfied.
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 98%
of our customers reported that they would
recommend Berkeley to a friend (2012: 97%).
This is above our target of 95%.
We also see the opportunity presented by
engaging with customers to inform better
design. We invite feedback from all of our
customers and use this to improve our homes.
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BERKELEY ANNUAL REPORT 2013
33
RUNNING A SUSTAINABLE BUSINESS
OUR PEOPLE
Retaining a highly skilled and passionate workforce
who work in a safe and supportive environment
and help us to contribute to wider society.
115
number of
apprentices who
worked on our
sites in 2012
2.99
per 1,000
employees
and operatives
(2012: 2.69)
Accident
Incident Rate
£2.8m
funds
committed to
good causes
through the
Berkeley
Foundation
Our Vision for 2020
“We retain a highly skilled and passionate workforce which enables us to
run a successful and sustainable business. Our staff are supported in their
roles and this is extended to our contractors’ operatives. Health and safety
remains a focus area, ensuring that our sites are healthy and safe places
to work. Through the Berkeley Foundation we continue to provide funding
and support for worthy causes and will have enabled many young people
to get into work.”
Progress at a Glance: Against key two year commitments 2012-2014
Support and
Training
Measure staff retention rates and workforce diversity and benchmark performance
Ensure that a minimum of 5% of our own staff and those working on our construction
sites are employed in an apprenticeship or training role
Health and Safety Continue to achieve a RIDDOR reportable Accident Incident Rate (AIR) of less than 3.5
incidents per 1,000 employees and subcontractors
Continue to achieve a RIDDOR reportable Accident Frequency Rate (AFR) of less than
0.175 per 100,000 hours worked
Further enhance the Group’s ‘Good Work’ programme through active engagement
with contractors’ operatives on all our projects
The Berkeley
Foundation
Capture and quantify our work with charities and local communities and
benchmark performance
Raise £250,000 annually for the Berkeley Foundation through employee
fundraising and donations
Key:
Currently on target to achieve Not currently on target to achieve
34 BERKELEY ANNUAL REPORT 2013
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RUNNING A SUSTAINABLE BUSINESS
i Learn more
about Our people at
berkeleygroup.co.uk/
vision2020/
our-people
Developing our Approach
Berkeley has autonomous management teams which operate under five core brands: Berkeley;
St George; St James; St Edward and Berkeley First. These teams represent the people charged with
implementing the Group’s strategy across all of its day-to-day operations. Recruiting and retaining a
high calibre workforce is crucial to our approach. We require all of our people to engage in the Group’s
philosophy, to show the passion for excelling in every area of the business with the Berkeley spirit of
entrepreneurial flair and to share in our aspiration for long-term sustainable success.
Support and Training
Health and Safety
As the business has grown over recent years our
headcount has more than doubled from some 700
in April 2009 to over 1,400 in April 2013. This growth
is coupled with a stability which has retained a
core pool of knowledge and experience within the
Group, demonstrated by an average service length
in excess of 10 years amongst senior management.
In recent years the Group has developed a
particular focus on helping young people into
work. Our graduate scheme has been running
since 2006 and 87 graduates are in the business
today. In 2013, the Berkeley Sales Academy
was formed to provide structured training for
sales consultants joining Berkeley from diverse
backgrounds.
In the last year, Berkeley directly or indirectly
supported approximately 16,000 jobs in the
UK, including 7,447 contractors’ employees.
On average, 4.5 new jobs are created for each
home built. This included over 115 full time
apprenticeships on our sites during the year
to help young people to gain experience and
develop core skills to help provide the workforce
of the future. Currently 7% of our own workforce
and those working on our construction sites are
employed in an apprenticeship or training role.
In June 2013, Berkeley announced a commitment
to give training and work to 250 unemployed
people through a major new job creation scheme
through Berkeley and its partners.
Our ‘Good Order’ and ‘Good Work’ programmes
continue to reinforce the importance and culture
of health and safety on our sites. Our Accident
Incident Rate (AIR) is 2.99 (2012: 2.69) and remains at
a level which continues to outperform the industry.
Our commitment to high health and safety
standards has been recognised by both the Royal
Society for Prevention of Accidents (RoSPA) and
the National House Building Council (NHBC). We
received two Silver Awards, nine Gold Awards and
five Gold Medal Awards from RoSPA this year, our
best performance to date. Four of our sites have
been shortlisted for the NHBC Health & Safety
Awards in the ‘Best Site Award’ category.
The Berkeley Foundation
The Berkeley Charitable Foundation, launched
in March 2011, has so far committed £2.8 million
to more than 40 charities and worthy causes.
These range from partnerships with major national
charities to small local charities chosen by our staff.
Our focus areas are tackling homelessness and
youth unemployment.
The money comes from two sources. Staff from the
Berkeley Group have raised £550,000 from friends,
family, colleagues and other companies. The rest is
given to the Foundation by the Berkeley Group itself
or generated through fundraising events. Alongside
the money they raise, staff donate through Give As
You Earn and offer their time and talent to support
individual causes. The Group match funds all the
cash raised by staff for the Foundation.
The Berkeley Foundation annual report contains
more details of how this money is disbursed through
a small set of strategic partnerships, through a series
of designated charities chosen by our local offices
and through grants and sponsorship.
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BERKELEY ANNUAL REPORT 2013
35
RUNNING A SUSTAINABLE BUSINESS
150 Berkeley employees successfully
completed the ascent of Tower 42
in London in aid of the Berkeley
Foundation this year.
36 BERKELEY ANNUAL REPORT 2013
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RUNNING A SUSTAINABLE BUSINESS
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BERKELEY ANNUAL REPORT 2013
37
Chelsea Creek, Fulham
38 BERKELEY ANNUAL REPORT 2013
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TRADING &
FINANCIAL REVIEW
Berkeley’s strong results this year are
a direct result of a period of sustained
investment in the Berkeley business
over several years.
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BERKELEY ANNUAL REPORT 2013
39
TRADING & FINANCIAL REVIEW
Abell and Cleland House,
Westminster
40 BERKELEY ANNUAL REPORT 2013
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TRADING & FINANCIAL REVIEW
TRADING REVIEW
Trading Performance
Berkeley is pleased to report a 26.0% increase
in profit before tax from £214.8 million in 2012 to
£270.7 million this year. This is an increase in basic
earnings per share from 121.0 pence to 160.0
pence in 2013 (a 32.2% rise). Net asset value per
share has risen from 839.3 pence at 30 April 2012
to 1,009.1 pence at 30 April 2013. This is reflected
in a pre-tax return of shareholders’ equity of 22.4%
(2012: 21.2%).
The Group has further invested in the business
this year, with inventories increasing from £1,851.7
million at the start of the year to £2,066.7 million
at 30 April 2013. The Group has nevertheless been
cash generative and ended the year ungeared,
converting net debt of £57.9 million at 30 April
2012 to net cash of £44.7 million at 30 April 2013,
thereby maintaining a strong, stable balance sheet.
Investment in the business has included a
commitment of over £315 million in ten new sites,
eight of which are in London including London
Dock in Wapping and South Quay Plaza in
Docklands, and continued funding of construction
across the Group’s sites in London and the South
of England. Alongside optimisation of some £150
million secured in the year, this investment has
increased the estimated gross margin in the
land bank by £272 million to £2,852 million.
Long-Term Strategic Plan
Under the long-term strategic plan agreed
with shareholders to return £1.7 billion by 30
September 2021, progress towards the three
milestones is as follows:
Returns to
Shareholders
£’million
Pence
per
share
First interim dividend
paid April 2013
Second interim dividend
payable September 2013
Balance to be paid by
30 September 2015 (first milestone)
By 30 September 2018
(second milestone)
By 30 September 2021
(third milestone)
20
77
15
59
472
360
567
433
567
433
1,703
1,300
The Board has considered the current financial
position of the Group and determined that it is
appropriate to propose a further interim dividend
of 59 pence per share, payable on 27 September
2013 to shareholders on the register on 30 August
2013. This payment is a further £77.3 million
towards the first milestone payment.
The Group will consider any future dividends
against the prevailing market conditions and the
financial position of the business, subject always
to meeting the milestones set out under the
long-term strategic plan.
Housing Market
The housing market in London and the South of
England has continued to be supported by strong
demand in good locations.
London has maintained its position as a major
global city and continued to attract more people
and inward investment. This position brings
with it an inherent demand for accommodation
which is not currently being met by supply and,
with the pressure on London to house a growing
population and an increased number of new
households more generally, this shortfall is likely
to be exacerbated as new homes are not being
built quickly enough to reduce it.
Outside London, visitor levels in the traditional,
predominantly owner-occupier markets in
which Berkeley operates have remained steady
compared to last year. They continue to run at
below the peak levels seen prior to 2008 before
the downturn, although a rise in visitors and
associated activity is expected to result across
the industry as the Government’s Help to Buy
scheme and then the Mortgage Indemnity
Guarantee begins to roll out across the sector.
Berkeley considers this a positive intervention as
it should help bring more people, whether trying
to get onto or move up the housing ladder, into
the market.
Cancellation rates for the year stood at broadly
11% which is at the lower end of the range of
historical levels and reflects a steady, underlying
market. House prices have been consistent with
the more general commentary in the wider market.
Berkeley held 140 completed residential
properties at 30 April 2013 (251 at 30 April 2012).
These provide the Group with a limited number
of homes available for immediate sale, principally
in those owner-occupier-led markets which require
available product.
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BERKELEY ANNUAL REPORT 2013
41
TRADING & FINANCIAL REVIEW
£315
million
committed to
new land
New Land Acquisition
This year Berkeley has invested a further £315
million in new land, acquiring ten sites with some
3,000 plots. Eight of the sites are in London, some
99% of the plots, and two outside London.
The unconditional purchase of the 15-acre former
News International printworks in Wapping, on the
fringes of the City of London, for £150 million at
the start of the year remains the most significant
transaction this year. Berkeley also recently
concluded the purchase of South Quay Plaza
in London’s Docklands, a 1.9 acre site adjacent
to Canary Wharf. Other purchases in Chiswick,
Hammersmith, Wimbledon, Mill Hill, Finchley and
Richmond have extended Berkeley’s holdings in
good locations across West and North London.
Planning and Optimisation
Berkeley has continued to focus on enhancing its
land bank by removing risk through the planning
process and improving and tailoring existing
consents to the evolving demands of the market.
Berkeley has achieved new consents on 17 sites in
the year. 10 of these were on the London schemes,
including consents at the 52-storey mixed-use
scheme at One Blackfriars, Hampton House on the
Albert Embankment, a student scheme in Acton
and sites in Finchley and Hammersmith. Outside
London seven new consents have been secured in
Maidenhead, Caterham, Cheltenham, Tunbridge
Wells, Ascot, Tadworth and Guildford. Over 85%
of Berkeley’s sites now have an implementable
planning consent, covering some 80% of the plots
in the land bank.
Review and optimisation of consents secured
remains core to Berkeley’s activities and recognises
that developing complex sites over the long-term
needs a constant reappraisal of what customers
desire from a new home and local communities
demand from the new places that Berkeley creates.
It is a means to protect and often enhance value
in Berkeley’s land bank whilst ensuring that its
approach to each site remains fresh and effective.
This year, Berkeley has added some 7% of value to
its land bank through optimisation, a figure which
reflects enhanced consents on sites which it owns
or controls. There have also been four planning
refusals this year on sites acquired on a subject-
to-planning basis. The applications on these sites
are currently being resubmitted or appealed,
highlighting the complexity in the planning
process which is ultimately holding back
delivery of much needed housing.
Land Bank
The combination of new land and optimisation
of existing land means that, at 30 April 2013,
Berkeley’s land bank stood at 25,684 plots (30
April 2012: 26,021) with an estimated gross margin
of £2,852 million (30 April 2012: £2,580 million).
The average selling price in the land bank has
also increased from £345,000 at 30 April 2012 to
£378,000 at 30 April 2013, a result of the increased
weighting towards schemes in London acquired
in the year.
There remain approximately 10,000 plots in
Berkeley’s longer-term land bank. This includes
land under option which requires promotion
through the planning system and long-term
regeneration land under contract. A 180-home
development at Chambers Wharf in Southwark
has been brought through from this strategic
land bank in the current year.
Berkeley remains on target to meet its previously
announced aspiration to increase the value of
the estimated gross margin in the land bank to
£3 billion by April 2014, one year earlier than
originally planned.
Owned
Contracted
Agreed
Plots
Sales value
Average selling price
Average plot cost
Land cost
Gross margin
April 2013
25,055
629
–
25,684
£9,707m
£378k
£62k
16.5%
£2,852m
29.4%
Change
-700
+383
-20
-337
+£718m
+£33k
+£7k
+0.5%
+£272m
+0.7%
April 2012
25,755
246
20
26,021
£8,989m
£345k
£55k
16.0%
£2,580m
28.7%
42 BERKELEY ANNUAL REPORT 2013
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TRADING & FINANCIAL REVIEW
Running a Sustainable Business
Berkeley aims to create great places where people
choose to live, work and spend their time; places
that directly encourage people’s well-being and
quality of life by transforming its sites into thriving
communities. This is at the heart of Berkeley’s
business model.
Berkeley’s corporate plan is to return £1.7 billion
to shareholders by 2021 and to remain one of
the most successful and sustainable businesses
in Britain.
This plan requires safe, sustainable performance
and has a strategy to deliver this, rewarding those
who invest in the company with a clear profile of
cash returns and giving them and Berkeley’s other
stakeholders confidence that a resilient underlying
business will be retained for the long-term.
Berkeley’s core performance measures of return
on equity and future gross margin in the land bank
best track progress against this dual objective, with
return on equity providing an ongoing earnings
measure and future gross margin in the land
supporting the value of the residual business.
The immediate priority for the Board is to meet
the first milestone of returning £568 million in
cash by 30 September 2015 and with this a focus
on delivering strong and consistent returns on
equity while aiming to achieve a land bank with
an estimated gross margin in excess of £3 billion
by the end of April 2014.
Berkeley is well-placed to achieve its targets but
is mindful of the risks that geopolitical events,
regulation, increases in taxation alongside
an uncertain future tax policy and even anti-
competitive rhetoric can have on the business
and the wider housing market.
AWARDS
Whilst the business is not run in order to secure
awards, we are proud to have received a number
of awards throughout the year.
For the second time, we have been recognised
by Management Today as one of Britain’s Most
Admired Companies. We were joined at the
top of the chart by some of the country’s most
successful and respected companies and were
the highest placed housebuilder. The Group
has also been ranked as one of the Top 10
companies across Europe for the Infosys Business
of the Year Award (t/o €150m+) category of the
2012/13 European Business Awards, picking
up a ‘Ruban d’Honneur’ award.
These awards celebrate the most innovative
businesses on the continent by promoting
success, innovation and ethics in the European
business community.
For the seventh year running we were ranked as
the top homebuilder in the 2012 NextGeneration
benchmarking initiative. The benchmark ranks
the UK’s 25 largest homebuilders according to
their sustainability strategy and performance.
Next Generation
Benchmark 2012
Britain’s Most Admired
Company 2012
European Business
Awards 2012
Ranked as the most
sustainable homebuilder for
the 7th successive year
Ranked second across
businesses from all sectors
Ranked as one of the Top 10
companies across Europe
through award of a Ruban
D’Honneur award
£2,852
million
estimated gross
margin in the
land bank
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BERKELEY ANNUAL REPORT 2013
43
TRADING & FINANCIAL REVIEW
75 Leman Street,
Aldgate
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TRADING & FINANCIAL REVIEW
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BERKELEY ANNUAL REPORT 2013
45
TRADING & FINANCIAL REVIEW
The Boatyard,
Kingston
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TRADING & FINANCIAL REVIEW
FINANCIAL REVIEW
Headline Results
Year ended 30 April
2013
£’million
2012
£’million
Change
£’million
Revenue
1,372.6
1,041.1
+331.5
Operating profit before exceptional item
280.1
Exceptional profit on disposal of subsidiary
-
Operating profit
Net finance costs
Share of joint ventures result
Profit before tax
Taxation
Profit after tax
EPS Basic
ROE
280.1
(8.1)
(1.3)
270.7
(61.0)
209.7
160.0p
22.4%
195.7
30.7
226.4
(9.4)
(2.2)
214.8
(56.7)
158.1
121.0p
21.2%
+84.4
-30.7
+53.7
+1.3
+0.9
+55.9
-4.3
+51.6
+39.0p
+1.2%
%
+31.8%
+43.1%
+23.7%
+26.0%
+32.6%
+32.2%
Units sold
Average selling price
3,712
£354,000
3,565
£280,000
Land sales of £8.3 million (2012: £2.1 million)
were from the opportunistic disposal of three
sites in the year.
Revenue from commercial activities of £26.4 million
included the sale of a site adjacent to One Tower
Bridge with a consent for the construction of a
hotel and 45,000 sq ft of commercial space across
a number of the Group’s mixed-use developments.
In 2012, £19.4 million of commercial revenue was
from the sale of 54,000 sq ft of space including
a hotel at Blackheath, a storage facility at Royal
Arsenal Riverside and a Community Centre at
Woodberry Park.
Trading Analysis
Group revenue was £1,372.6 million this year
(2012: £1,041.1 million) which comprised £1,337.9
million from the sale of residential homes
(2012: £1,019.6 million), £8.3 million from land
sales (2012: £2.1 million) and £26.4 million of
commercial sales (2012: £19.4 million).
The residential revenue of £1,337.9 million (2012:
£1,021.7 million) arose from the sale of 3,712 new
homes in the period (2012: 3,565) at an average
selling price of £354,000 (2012: £280,000). These
sales were from both private and affordable
homes as well as student accommodation across
Berkeley’s riverside, regeneration and housing
schemes across London and the South of England.
Changes in the mix of properties completed this
year compared to last are behind the increase
in average selling price (up 26.4%) with a rise in
volumes (up 4.1%), including the acceleration
of the delivery of 149 apartments at Grosvenor
Waterside, also contributing to the overall
increase. Looking forward, the mix of schemes
currently in construction is expected to become
increasingly weighted towards a lower volume
of higher value properties, entirely consistent
with sites acquired in London since 2009.
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BERKELEY ANNUAL REPORT 2013
47
TRADING & FINANCIAL REVIEW
£270.7
million
pre-tax profit
up 26.0%
Profit Before Tax
Financial Position
The 26.0% rise in profit before tax this year is from
a combination of five factors:
Profit before tax: 2012
Increase in gross margin
Increase in overheads
Exceptional profit on disposal of subsidiary (2012)
Decrease in net finance costs
Increase in result from joint ventures
Profit before tax: 2013
£’million
214.8
+108.1
-23.7
-30.7
+1.3
+0.9
270.7
The change of mix of the residential properties
sold is behind the increase in Berkeley’s gross
margin by 1.0% to 29.4% which is trending towards
the land bank gross margin. Overheads have
increased by £23.7 million to £123.3 million but
reduced as a percentage of revenue from 9.6% to
9.0%. This combination of factors has contributed
to the overall increase in the pre-exceptional
operating margin from 18.8% to 20.4%.
The results for 2012 included the exceptional
profit of £30.7 million on the disposal of a
student scheme at Clapham Junction in London.
The share of post-tax results of joint ventures was
a loss of £1.3 million (2012: loss of £2.2 million),
a combination of continuing investment in the
development pipeline on St Edward Homes’
schemes at 375 Kensington High Street and
190 Strand and the timing of the completion
of sales at Stanmore Place.
Net finance costs have decreased by £1.3 million
to £8.1 million, this decrease reflecting the Group’s
reduced average debt profile this year compared
to last culminating in a net cash position at
30 April 2013.
The result is an increase of 26.0% in profit before
tax from £214.8 million in 2012 to £270.7 million
in 2013. With the benefit of a reduction in the
UK corporation tax rate having mainly led to the
decrease in the Group’s effective tax rate from
26.4% to 22.5%, basic earnings per share have
risen by 32.2% from 121.0 pence to 160.0 pence.
Berkeley has continued to invest in the business
in a controlled way. Capital employed has risen
by £120.0 million to £1,277.7 million in the year
(30 April 2012: £1,157.7 million). This is supported
by an increase in cash due on forward sales to
£1,452.8 million (30 April 2012: £1,055.7 million)
which, together with deposits received of £426.1
million (30 April 2012: £422.9 million), provides
good visibility over future earnings.
This is reflected in an increase in inventories by
£215.0 million to £2,066.7 million (30 April 2012:
£1,851.7 million) which comprises £310.0 million
of land not under development (30 April 2012:
£360.5 million) which is generally land which does
not have an implementable planning consent,
£1,711.7 million of work in progress (30 April 2012:
£1,422.6 million), an increase which demonstrates
Berkeley’s continued investment in the delivery of
its schemes, and £45.0 million of completed stock
(30 April 2012: £68.6 million). Increases to build
costs are a risk to the business and one which is
becoming more prevalent as construction activity
in and around London increases.
Trade and other payables of £1,021.4 million
(30 April 2012: £893.1 million) include £426.1
million of on account receipts (30 April 2012:
£422.9 million) and land creditors of £180.9 million
(30 April 2012: £122.8 million). The increase in
land creditors is almost exclusively due to the
acquisition of a site in Wapping at the start of
the year for £150 million, payable in installments.
The Group also holds provisions of £29.0 million
which includes £23.6 million in respect of post
completion development obligations and £5.4
million of other provisions arising in the ordinary
course of business.
Despite the investment in new land and
construction across its sites, the Group ended
the year ungeared with net cash of £44.7 million,
compared to net debt of £57.9 million at the
start of the year. £291.8 million of cash was
generated from operations before working
capital movements (2012: £281.7 million including
£75.7 million from the proceeds on disposal of
a subsidiary), offset by a net investment in working
capital of £102.8 million (2012: £314.9 million)
and tax and other cash outflows of £86.4 million
(2012: £66.7 million).
48 BERKELEY ANNUAL REPORT 2013
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TRADING & FINANCIAL REVIEW
Analysis of capital employed
Investment properties
Assets held for resale
Other non-current assets
Inventories
Trade and other receivables
Trade and other payables
- Deposits and on account receipts
- Land creditors
- Other trade payables
Current tax liabilities
Provisions
Capital employed
Analysis of inventories
Land not under development
Work in progress: land cost
Work in progress: build cost
Completed units
Cash flow
Profit before tax
Increase in inventories
Other working capital movements
Tax paid
Other movements
Cash inflow/(outflow) before dividends
Dividends
Increase/(decrease) in net (debt)/cash
Opening net (debt)/cash
Closing net cash/(debt)
April 2013
£’million
Change
£’million
April 2012
£’million
26.5
75.8
134.3
2,066.7
126.8
(426.1)
(180.9)
(414.4)
(102.0)
(29.0)
1,277.7
-57.0
+75.8
+34.0
+215.0
+11.6
-3.2
-58.1
-66.9
-2.2
-29.0
83.5
-
100.3
1,851.7
115.2
(422.9)
(122.8)
(347.5)
(99.8)
-
+120.0
1,157.7
April 2013
£’million
Change
£’million
April 2012
£’million
310.0
860.7
1,170.7
851.0
45.0
2,066.7
-50.5
+136.9
+86.4
+152.2
-23.6
+215.0
360.5
723.8
1,084.3
698.8
68.6
1,851.7
2013
£’million
2012
£’million
270.7
(215.0)
112.2
(69.2)
23.6
122.3
(19.7)
102.6
(57.9)
44.7
214.8
(238.5)
(76.4)
(53.7)
53.9
(99.9)
-
(99.9)
42.0
(57.9)
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TRADING & FINANCIAL REVIEW
Joint Ventures
Taxation
There are three schemes under construction in
St Edward Homes, Berkeley’s joint venture with
Prudential. These include Stanmore Place, 375
Kensington High Street and also 190 Strand at
which construction commenced in the second
half of the year to 30 April 2013. During the year,
66 homes were sold at Stanmore Place at an
average selling price of £277,000 (2012: 188
homes at £170,000).
The focus in St Edward this year has been on
progressing construction at 375 Kensington High
Street and the start of development at 190 Strand.
At 30 April 2013, investments accounted for using
the equity method of £44.1 million (30 April 2012:
£46.5 million) relate almost exclusively to Berkeley’s
interest in St Edward’s schemes.
The St Edward Homes business is partly funded
by bank debt and the remainder by Berkeley and
Prudential. There is £60 million of banking facilities
in St Edward Homes of which £34 million was
utilised at the year end (30 April 2012: £3 million).
Berkeley’s land bank includes 1,592 plots
(30 April 2012: 1,658 plots) in respect of St Edward
Homes’ schemes.
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 provision for potential tax liabilities
that may arise, however the amount ultimately
paid may differ from the amount accrued.
Banking Facilities
The Group has maintained substantial headroom
within its business plan and committed corporate
banking facilities remain at £525 million, of which
£250 million matures in April 2018 (a one year
extension having been agreed on 8 April 2013)
and £275 million in May 2018 (a one year extension
having been agreed on 24 May 2013). These
facilities provide further clarity of financing to
support the Group’s business plan for five years
through to 2018.
Berkeley and Prudential continue to work together
to identify further opportunities to secure sites to
which St Edward Homes can add value.
Financial Risk
Rental Fund
Berkeley’s private rental fund was set up in August
2010 and held 729 properties at 30 April 2013
(612 at 30 April 2012). These investment properties
are held at historic cost and have increased from
£83.5 million at 30 April 2012 to £102.3 million at
30 April 2013. The Homes and Communities
Agency (HCA) committed £17.4 million, classified
as debt, to fund the acquisition of 534 of these
properties. The remaining 195 properties held at
30 April 2013 for investment are wholly funded by
Berkeley and follow the disposal of 71 properties
in the year where market conditions have
supported their divestment.
The core aim of the fund was to build and run a
portfolio of private rental properties that would be
attractive to institutional investors. During the year,
Berkeley exchanged contracts to sell the 534 HCA
funded residential properties for £105.4 million
to M&G Investments. The net proceeds of sale
will be £75.2 million after repayment of the HCA’s
funding and the transaction, which completed
on 5 June 2013, will be reported in the results
for the year ending 30 April 2014. The proceeds
are net of a £10 million minority investment in
the fund. The properties subject to the sale are
disclosed as ‘Non-current assets classified as held
for sale’ within current assets at £75.8 million. The
remaining 195 properties are held at £26.5 million
in investment properties in non-current assets.
The Group finances its operations by a combination
of shareholders’ funds, 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 counterparties
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.
50 BERKELEY ANNUAL REPORT 2013
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TRADING & FINANCIAL REVIEW
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
52 and 53.
The Internal Control section within the Corporate
Governance report on page 81 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.
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Image shown is computer generated and indicative only.
Chelsea Creek
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BERKELEY’S PRINCIPAL OPERATING RISKS
Risk Description
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. Some of its customers are also
sensitive to changes in the sterling exchange rate.
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.
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.
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
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 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 Berkeley has a broad product mix and customer base which reduces the reliance on
by the financial crisis and this has reduced their
ability to provide mortgages to potential purchasers.
mortgage availability across its portfolio.
The Group is participating in the Government backed mortgage indemnity scheme,
NewBuy, on a number of its schemes and on the Government’s new Help to Buy scheme.
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.
An inability of customers to secure sufficient
mortgage finance could have a direct impact on
the Group’s transaction levels.
52 BERKELEY ANNUAL REPORT 2013
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TRADING & FINANCIAL REVIEW
Risk Description
SUSTAINABILITY
Mitigation
Berkeley is hugely aware of the environmental
and social 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 framework under which detailed
commitments are set out 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 and social impacts of
Berkeley’s business form the bedrock of this approach. Environmental and Social
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 & Safety Governance Committee has the
responsibility of setting the Group’s Health & 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 & 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.
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.
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 of
England, 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.
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.
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BERKELEY ANNUAL REPORT 2013
53
View of One Tower Bridge
under construction
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BERKELEY ANNUAL REPORT 2013
55
GOVERNANCE
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 Nimmo
G Barker
V Wadley
Remuneration Committee
G Barker (Chairman)
J Armitt
A C Coppin
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.
56 BERKELEY ANNUAL REPORT 2013
TONY PIDGLEY CBE
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.
ROB PERRINS ACA
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.
NICK SIMPKIN ACA
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
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.
SEAN ELLIS
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.
GREG FRY ACA
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
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Non-executive Directors
SIR JOHN ARMITT
Appointed a Non-executive
Director on 1 October 2007 and
became Deputy Chairman on
5 September 2012. He is currently
Chairman of the Olympic Delivery
Authority, Chairman of National
Express Group PLC, Chairman of
City and Guilds and is a member
of the Transport for London Board.
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.
DAVID HOWELL FCA
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 four private companies.
David is also a member of the
Nomination Committee.
ALAN COPPIN
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 a
member of the Remuneration
Committee. He will stand down
from the Board at the AGM on
2 September 2013.
ALISON NIMMO CBE
Appointed a Non-executive
Director on 5 September 2011.
Alison was appointed Chief
Executive of The Crown Estate
on 1 January 2012. Prior to that
she led the design and delivery
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.
VERONICA WADLEY
Appointed a Non-executive
Director on 3 January 2012. She
is currently Chair of the Arts
Council London, a Senior Adviser
to the Mayor of 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 Ltd. She is a member
of the Nomination and
Audit Committees.
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 Ltd,
Chairman of the Law Firm Irwin
Mitchell LLP and a Director of
the English National Opera. He
is Chairman of the Remuneration
Committee and a member of the
Audit Committee.
BERKELEY ANNUAL REPORT 2013
57
GOVERNANCE
DIRECTORS’ REPORT
The Directors submit their report together with the audited consolidated and company financial statements for the year ended 30 April 2013.
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 3, the Managing Director’s
Statement on page 5, the Trading and Financial Reviews on pages 41 to 51, which provide 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 24 to 35.
In addition, information in respect of the principal financial and operating risks of the business is set out in the Financial Review on pages 50
and 51.
TRADING RESULTS AND DIVIDENDS
The Group’s consolidated profit after taxation for the financial year was £209.7m (2012: £158.1m). The Group’s joint ventures contributed a loss
after taxation of £1.3m (2012: loss of £2.2m).
An interim dividend of 15p per share was paid to shareholders on 19 April 2013. A further interim dividend of 59p per share is proposed, payable
on 27 September 2013 to shareholders on the register on 30 August 2013.
POST BALANCE SHEET EVENT
During the year, the Company reached agreement to sell 534 HCA funded residential properties within its rental fund for £105.4 million. The
properties are reported as £75.8 million of non-current assets held for resale at 30 April 2013. The transaction, which completed on 5 June 2013,
will be reported in the results for the year ending 30 April 2014.
SHARE CAPITAL
The Company had 134,857,183 ordinary shares in issue at 30 April 2013 (2012: 134,857,183). The Company holds 3,577,506 of its own shares in
treasury (2012: 3,577,506).
Authority will be sought from shareholders at the forthcoming Annual General Meeting to renew the authority given at the 2012 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 20 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 Report on pages 61 to 77.
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 56 and 57. All of these Directors served throughout the year under review.
Victoria Mitchell stood down from the Board on 5 September 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 Alan Coppin, 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 Report on page 77. At 30 April
2013 each of the Executive Directors were deemed to have a non-beneficial interest in 237,363 (2012: 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 27 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.
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. Qualifying third party indemnities, under which the Company has agreed to indemnify the Directors, were in force during
the financial year and at the date of approval of the financial statements, 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.
58 BERKELEY ANNUAL REPORT 2013
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GOVERNANCE
SUBSTANTIAL SHAREHOLDERS
The Company has been notified of the following interests, pursuant to Rule 5 of the Disclosure Rules and Transparency Rules, as at 16 July 2013:
First Eagle Investment Management, LLC
BlackRock Inc.
Standard Life Investments Ltd
William Blair
Lloyds Banking Group plc
Anthony William Pidgley
(1) Net of shares held in treasury.
DONATIONS
Number of ordinary
shares held
13,092,232
6,699,472
6,599,895
6,553,042
6,212,059
5,602,350
% of issued capital (1)
Nature of holding
9.97%
5.10%
5.03%
4.99%
4.73%
4.27%
Indirect
Indirect
Indirect/Direct
Direct
Indirect
Direct
During the year, donations by the Group for charitable purposes in the United Kingdom, including through the Berkeley Foundation, amounted
to £0.9m (2012: £0.8m). The Group made no political contributions (2012: £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
The Group considers its approach to sustainability, defined as the effective management of environmental, social and economic risks and
opportunities facing the company, to be an integral part of managing its business. Our framework for the business, Vision2020, sets out our
integrated approach to managing sustainability within the context of the wider aims for the business. This approach is outlined within the Running
a Sustainable Business section of this report and more extensive information is available on Berkeley’s website. This is the first year where we have
provided integrated reporting on performance, with no stand alone sustainability report. We believe that this approach demonstrates how
sustainability is embedded within the day-to-day operations of our business.
We remain committed to enhancing the Group’s high standards through continuous improvement. Our Sustainability Governance Committee is
responsible for setting the strategic objectives and the Main Board continues to monitor strategic development and progress against
commitments and Key Performance Indicators. The Sustainability Working Group, comprising divisional executives and managers, is responsible
for delivering these objectives and reviewing progress against targets.
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 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.
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 2013, the Company did not have any trade creditors (2012: £nil).
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BERKELEY ANNUAL REPORT 2013
59
GOVERNANCE
DIRECTORS’ REPORT
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 20 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 2 September 2013. 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
16 July 2013
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GOVERNANCE
REMUNERATION REPORT
The Board of Directors presents its Remuneration Report for the year ended 30 April 2013, 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 Conduct Authority.
INTRODUCTION
Berkeley’s strategy places an emphasis on achieving two operational measures with which the Committee aims to align to the Executive’s
remuneration. The first is achieving superior and sustainable pre-tax returns on shareholder equity (“ROE”). The second is enhancing the value of
the land bank. 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.
In considering the level of the Executive’s Annual Bonus Plan the Committee has discussed the principles with major shareholders and aims to set
these at a level that is both challenging and sector leading. The Group’s ROE compared with the sector over the last six years illustrates the
relative performance of Berkeley:
Company
Berkeley
Sector highest
Sector lowest
Sector average (excluding Berkeley)
Return on Equity
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
26.6%
26.6%
(0.7%)
18.2%
16.2%
16.2%
(73.4%)
(26.0%)
13.3%
13.3%
(44.2%)
(18.1%)
15.3%
15.3%
(6.2%)
1.0%
21.2%
21.2%
(0.4%)
4.8%
22.4%
22.4%
3.4%
8.5%
The Committee sets annual targets that have a strong operational correlation with the performance of the business. 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 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 and consequential returns of surplus capital to shareholders was announced, and from 1 May 2010, the date on which
the current Annual Bonus Plan was introduced, to 30 April 2013 is as follows:
Company
Berkeley
FTSE 250
FTSE 100
Barratt
Bellway
Bovis
Persimmon
Redrow
Taylor Wimpey
Sector average (excluding Berkeley)
Value of £100 invested on
25/06/2004
01/05/2010
£526
£298
£197
£101
£230
£183
£245
£97
£63
£153
£252
£150
£129
£250
£189
£186
£252
£143
£233
£209
Berkeley has consistently 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 £1.7 billion (£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;
• 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.
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BERKELEY ANNUAL REPORT 2013
61
GOVERNANCE
REMUNERATION REPORT
KEY ELEMENTS OF THE REMUNERATION POLICY
The objective of Berkeley’s remuneration policy is to encourage, reward and retain the current Executives and ensure their actions are aligned with
the Company’s strategy. 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 of the comparator group 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 2012/13,
illustrating that the majority of this remuneration is performance related:
A W Pidgley
R C Perrins
N G Simpkin
G J Fry
K Whiteman
S Ellis
70%
80%
90%
100%
0%
10%
20%
30%
Fixed:
Salary
Benefits
Pensions
40%
50%
Performance related:
Annual Bonus Plan
60%
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.
Long-term sustainable performance
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 helps to ensure that the Executive team are focused on generating long-term sustainable value for shareholders,
not just on meeting short term performance targets.
The chart below sets out the proportion of annual to long term remuneration of the Executive Directors:
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
62 BERKELEY ANNUAL REPORT 2013
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GOVERNANCE
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 over 85% of 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 £2.85 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 £8.25 per share
2011 LTIP
This is a ten year plan introduced in September 2011, and amended at the 2012 Annual General Meeting, to support the Company’s long term
plan to return £1.7 billion to shareholders, representing 183% of the Net Assets per Share at 30 April 2011 (£7.09/share), through a combination of
dividends (£13 per share) and share buybacks, by September 2021. This plan was approved by over 91% of shareholders at the 2011 Annual
General Meeting and the amendment approved by over 92% of shareholders at the 2012 Annual General Meeting.
The plan aims to make significant returns to shareholders in cash over a sustained period, ensuring the Group remains at the right size and
balances investment and returns to shareholders.
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 £568.7 million has not been distributed to
shareholders by 30 September 2015.
Substantial equity holdings
In order to align the interests of Executives and shareholders, the reward strategy is designed so that, provided performance is delivered, the
Executive team become material (in relation to their overall compensation) shareholders in the Company.
The current shareholdings of the Executive Directors as a percentage of salary, based on the share price at 30 April 2013, are set out on page 71 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.
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BERKELEY ANNUAL REPORT 2013
63
GOVERNANCE
REMUNERATION REPORT
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
salaries as set below.
REMUNERATION COMMITTEE
Composition and role
At 30 April 2013, the Committee comprised of three Independent Non-executive Directors, Alan Coppin (Chairman), Sir John Armitt and Glyn
Barker. Glyn Barker was appointed to the Committee on 13 June 2012 and David Howell retired from the Committee on the same date. Glyn
Barker became Chairman of the Committee on 14 June 2013.
During the year the Committee met on two occasions and there were no absences.
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 own
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 2012/13 AND 2013/14
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
Experience and Role
Annual bonus
Upper decile
Pension
Benefits in kind
Share incentives
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
2013:
Company name
Amec PLC
Balfour Beatty PLC
Bellway PLC
Marshalls PLC
Taylor Wimpey 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.
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GOVERNANCE
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 2012/13 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%
16%
16%
22%
21%
90%
89%
84%
84%
78%
79%
FIXED PERFORMANCE
– Salary
– Benefits (including pension
VARIABLE PERFORMANCE
– Bonus earned
– Fair value of LTIPs
contribution/allowance)
(annualised)
ELEMENTS OF EXECUTIVE DIRECTORS’ REMUNERATION
BASIC SALARY
The Committee has historically set the salary of the Chairman, Tony Pidgley, at the upper decile against the Company’s comparator group
reflecting the Committee’s view that he is one of the most experienced individuals within the sector and that he possesses unique experience
within the industry.
The Committee has taken 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.
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 2013/14 are set out below:
Executive
A W Pidgley
R C Perrins
N G Simpkin
G J Fry
K Whiteman
S Ellis
2012/13
Salary
£780,000
£470,000
£312,000
£325,000
£305,000
£305,000
2013/14
Salary
£800,000
£484,000
£321,000
£334,000
£314,000
£314,000
% rise
2.6%
3.0%
2.9%
2.8%
3.0%
3.0%
Lower
Quartile
£401,000
£408,000
£270,000
£247,000
£247,000
£247,000
FTSE 250
Median
£489,000
£491,000
£324,000
£307,000
£307,000
£307,000
Upper
Quartile
£585,000
£584,000
£386,000
£372,000
£372,000
£372,000
The increases agreed by the Committee for the Executive Directors reflects the Committee’s policy of increasing individual Director salaries over
time to reflect their experience, performance and the performance of the Group.
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 5.3% this year.
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BERKELEY ANNUAL REPORT 2013
65
GOVERNANCE
REMUNERATION REPORT
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 balance between operating a return based measure (“ROE”) and a value based measure (“Land Bank Growth”) should ensure
that the Executives are incentivised to provide a sustainable ongoing level of return to shareholders whilst ensuring the long-term sustainability of
the Company, 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 needed to take 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; 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 incentivises 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. 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, effectively
doubling pre tax profits and growing the land bank gross margin to £3 billion over this period.
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 (see performance targets for 2012/13 and 2013/14 operation of the plan set out later in this report). These are 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.
The maximum performance targets set and actual performance over the first three years of the plan are set out below:
2010/11
2011/12
2012/13
Return on Equity
Land Bank growth
Target
13.5%
16.5%
18.5%
Actual
15.3%
21.2%
22.4%
Target
10.0%
8.0%
10.0%
Actual
13.1%
12.0%
10.5%
In respect of the Return on Equity target, if Berkeley had performed at the median of its competitors for these years, then no bonuses would have
been awarded to the Executive Directors.
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GOVERNANCE
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, 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%
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.
Operation of the Bonus Plan for the year ended 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:
Maximum Potential (% age of Salary)
300%
300%
220%
A W Pidgley
R C Perrins
N G Simpkin
G J Fry
175%
K Whiteman
175%
S Ellis
175%
The following tables set out:
• the performance conditions for the Bonus Plan for the year ended 30 April 2013;
• the level of satisfaction of those performance conditions.
Group performance condition (year ended 30 April 2013)
Performance Requirement Matrix
Land Bank Growth
Target
Target
Factor
<13.5%
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%
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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 2012/13.
2 There will be straight line bonus vesting between points.
3 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
consistent 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 disclosed within the
annual report. 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.
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BERKELEY ANNUAL REPORT 2013
67
GOVERNANCE
REMUNERATION REPORT
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.
Level of satisfaction of performance conditions (year ended 30 April 2013)
Group
0.0%
10.0%
10.5% Land bank growth
13.5%
18.5%
22.4% ROE
Threshold
Maximum
Out performance
The Group performance conditions are therefore met in full.
Divisional
The level of Divisional PBT performance for 2012/13 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%
50%
100%
100%
50%
100%
Level of bonus earned in respect of the year ended 30 April 2013
The bonus earned for the year ended 30 April 2013, as a result of performance against the Group and Divisional performance conditions, is set
out in the table below:
Bonus earned (% age of Salary)
300%
300%
220%
A W Pidgley
R C Perrins
N G Simpkin
G J Fry
175%
K Whiteman
131.25%
S Ellis
175%
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 75 of the Report for details of the Plan accounts for each Executive Director.
Operation of the Bonus Plan for year ending 30 April 2014
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 ending 30 April 2014 is set out in the table below:
Maximum Potential (% age of Salary)
300%
300%
220%
A W Pidgley
R C Perrins
N G Simpkin
G J Fry
175%
K Whiteman
175%
S Ellis
175%
68 BERKELEY ANNUAL REPORT 2013
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GOVERNANCE
The performance conditions for the Bonus Plan for the year ending 30 April 2014 are set out below.
Group performance condition (year ending 30 April 2014)
Performance Requirement Matrix
Land Bank Growth
Target
Target
Factor
<15.0%
0%
<1%
0.0%
Bonus Plan
Deduction
1%
2%
3%
4%
5%
50.0%
62.5%
75.0%
87.5%
100.0%
0%
0%
0%
0%
0%
15.0%
16.0%
17.0%
18.0%
19.0%
20.0%
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
The ROE maximum performance target for the year ending 30 April 2014 has been increased from 18.5% to 20.0%, with a corresponding
reduction in the maximum performance target for land bank growth from 10.0% to 5.0%, reflecting the balance between a sustainable ongoing
level of return to shareholders and long term sustainability of the Company.
Divisional PBT performance condition (year ending 30 April 2014)
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.
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 75.
LONG TERM REMUNERATION
This section of the report sets out the share incentives for the year ended 30 April 2013.
On 15 April 2009, at an Extraordinary General Meeting of the Company, over 85% of 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.
4,441,950 options are currently outstanding, which will become exercisable on 31 January 2014 subject to the relevant Executive’s continued
employment with the Company.
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BERKELEY ANNUAL REPORT 2013
69
GOVERNANCE
REMUNERATION REPORT
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 6,120,000 options are outstanding.
Shareholder approval was received at the 2011 AGM to amend the rules of the 2009 LTIP (covering both Part A and Part B) 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.
2011 LTIP
The Company announced in June 2011 as part of a strategic review of the business a long term plan to return approximately £1.7 billion to
shareholders over the next 10 years. A new long term remuneration plan was proposed to support this strategy, the 2011 Long Term Incentive
Plan (“2011 LTIP”), which was approved by over 91% of shareholders at the Annual General Meeting in September 2011.
The rules of the plan were subsequently amended, and approved by over 92% of shareholders at the 2012 Annual General Meeting, to allow the
returns to be made through a combination of dividends (£13 per share) and share buy backs (“distributions”). The cumulative distributions
required by the plan on or before the relative milestone dates are set out below:
30 September 2015
30 September 2018
30 September 2021
The key features of the 2011 LTIP are:
Cumulative Distributions
£568.7m
£1,136.1m
£1,703.6m
• if the Company returns £1.7 billion to shareholders over a ten year period via a series of dividend payments (£13 per share) and share buy backs
by the 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
G J Fry
K Whiteman
S Ellis
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
1,866,503
2,250,000
2,250,000
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.
70 BERKELEY ANNUAL REPORT 2013
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GOVERNANCE
The following table sets out the cumulative distributions, the relevant dates and the consequences of failing to deliver these distributions 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
£568.7m
Options lapse, no shares vest and 2011 LTIP terminates on 1 October 2015.
30 September 2018
£1,136.1m
Where the cumulative distributions on or before 30 September 2018 is less than £1,136.1m, 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
£1,703.6m
The process is the same as above with the relevant date being 30 September 2021.
£1,703.6m paid in
full prior to 30
September 2021
(including £13/share
in dividends)
£1,703.6m
In circumstances where £1,703.6m of cumulative distributions (including £13/share in
dividends) are made prior to 30 September 2021 awards shall vest in full.
Participants will be able to exercise their awards of options from the date this cumulative
target is met 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.
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 2013 are set out in the following tables:
A W Pidgley
R C Perrins
N G Simpkin
G J Fry
K Whiteman
S Ellis
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 2013 share price)
400%
200%
200%
200%
200%
200%
14,976%
5,330%
180%
6,348%
245%
68%
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BERKELEY ANNUAL REPORT 2013
71
GOVERNANCE
REMUNERATION REPORT
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 2013 share price)
DILUTION
J Armitt
D Howell
A C Coppin
A Nimmo
G Barker
V Wadley
100%
100%
100%
100%
100%
100%
328%
396%
213%
131%
510%
144%
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 £1.7 billion (£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 2013.
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 2013 and those rates
which will apply in the year ending 30 April 2014:
Total Fee Rates 2013/14
Total Fee Rates 2012/13
% Increase of basic fee
Breakdown of 2013/14 Fee
Basic Fee
Chair of Committee Fee
Committee Chair
J Armitt
D Howell
A C Coppin
A Nimmo
G Barker
V Wadley
£103,000
£100,000 (1)
3.0%
£69,000
£67,500
2.7%
£56,500
£67,500
2.7%
£56,500
£55,000
2.7%
£69,000
£55,000
2.7%
£56,500
£55,000
2.7%
£103,000 (2)
–
Sustainability and
Health & Safety
£56,500
£12,500
Audit
£56,500
£56,500
–
–
£56,500
£12,500
–
– Remuneration
£56,500
–
–
(1) Where Directors assumed additional responsibilities during the year, fees have been annualised to allow a direct comparison
(2) Sir John Armitt’s basic fee reflects his role as Deputy Chairman, Senior Independent Director and Chair of the Sustainability and Health & Safety Committee.
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.
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.
72 BERKELEY ANNUAL REPORT 2013
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GOVERNANCE
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 October 2007
24 February 2004
1 September 2006
5 September 2011
3 January 2012
3 January 2012
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
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
J Armitt
D Howell
A C Coppin
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 64). The Company considers these the most relevant indices for total
shareholder return disclosure required under these Regulations.
Total shareholder return from 30 April 2008 (%)
140
120
100
80
60
40
20
0
-20
-40
The Berkeley Group
Holdings plc
FTSE 250 index
FTSE all share index
Comparator group
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2008
2009
2010
2011
2012
2013
(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.
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BERKELEY ANNUAL REPORT 2013
73
GOVERNANCE
REMUNERATION REPORT
The following tables and accompanying notes constitute the auditable part of the Remuneration Report, as defined in Schedule 8 to SI 2008/410.
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
G J Fry (1)
K Whiteman
S Ellis
Non-executive Directors
J A Armitt
D Howell
A Coppin
A Nimmo (1)
G Barker (2)
V Wadley (2)
V M Mitchell (3)
Salary/fees
£
Earned bonus (4)
£
Payment in lieu
of pension (5)
£
Benefits
in kind (6)
£
2013
Total
£
2012
Total
£
780,000
2,340,000
132,600
38,654
3,291,254
3,289,728
470,000
312,000
325,000
305,000
305,000
93,180
67,500
67,500
55,000
55,000
55,000
34,487
1,410,000
79,900
686,400
568,750
400,313
533,750
–
–
–
–
–
–
–
–
–
45,750
–
–
–
–
–
–
–
–
31,295
21,527
31,367
20,926
26,416
1,991,195
1,019,927
925,117
771,989
865,166
–
–
–
–
–
–
–
93,180
67,500
67,500
55,000
55,000
55,000
34,487
1,989,060
884,519
558,409
805,103
767,655
72,708
67,500
67,500
33,013
16,667
16,667
100,000
2,924,667
5,939,213
258,250
170,185
9,292,315
8,668,529
(1) Appointed to the Board on 5 September 2011.
(2) Appointed to the Board on 3 January 2012.
(3) Resigned from the Board on 5 September 2012.
(4) 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 2012/13 award.
(5) 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.
(6) 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.
74 BERKELEY ANNUAL REPORT 2013
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GOVERNANCE
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
2012/13
£
Plan account
balance at
30 April 2013
£
Amount
released as of
30 April 2013
£
Plan account
Plan account
carried forward carried forward (2)
Shares
£
A W Pidgley
R C Perrins
N G Simpkin
G J Fry
K Whiteman
S Ellis
144,401
86,875
36,157
31,309
28,761
28,761
3,032,421
1,824,375
759,297
657,489
603,981
603,981
2,340,000
5,372,421
(2,686,211)
2,686,211
128,835
1,410,000
3,234,375
(1,617,188)
1,617,188
686,400
568,750
400,313
533,750
1,445,697
1,226,239
1,004,294
1,137,731
(722,849)
(613,120)
(502,147)
(568,866)
722,849
613,120
502,147
568,866
77,563
34,669
29,406
24,084
27,284
356,264
7,481,544
5,939,213
13,420,757
(6,710,378)
6,710,378
321,841
(1) Converted at share price of £20.85 at 30 April 2013 plus £0.15 dividend paid 19 April 2013.
(2) Converted at share price of £20.85 at 30 April 2013.
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 (2012: £132,600, £79,900 and £40,500 respectively).
No amounts were paid into pension arrangements in respect of Tony Pidgley, Rob Perrins and Karl Whiteman during the year ended 30 April
2013.
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
G J Fry (1)
S Ellis
Company
contributions
2013
£
Company
contributions
2012
£
46,800
48,750
45,750
40,500
31,834
40,500
141,300
112,834
Age
43
56
44
(1) Appointed to the Board on 5 September 2011.
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.
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BERKELEY ANNUAL REPORT 2013
75
GOVERNANCE
REMUNERATION REPORT
SHARE INCENTIVE PLANS
The entitlements under share incentive plans for Directors serving on the Main Board at 30 April 2013 are set out below:
At 1 May 2012
Options
Options vested
in year
Options granted
in year
At 30 April 2013
Options
Value released
£
A W Pidgley
2009 LTIP Part A (1)
2009 LTIP Part B (2)
2011 LTIP (3)
R C Perrins
2009 LTIP Part A (1)
2009 LTIP Part B (2)
2011 LTIP (3)
N G Simpkin
2009 LTIP Part B (2)
2011 LTIP (3)
G J Fry
2009 LTIP Part A (1)
2009 LTIP Part B (2)
2011 LTIP (3)
K Whiteman
2009 LTIP Part B (2)
2011 LTIP (3)
S Ellis
2009 LTIP Part B (2)
2011 LTIP (3)
Total
2009 LTIP Part A (1)
2009 LTIP Part B (2)
2011 LTIP (3)
2,842,848
1,500,000
5,000,000
1,066,068
750,000
5,000,000
250,000
3,250,000
533,034
500,000
1,866,503
250,000
2,250,000
175,000
2,250,000
4,441,950
3,425,000
19,616,503
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,842,848
1,500,000
5,000,000
1,066,068
750,000
5,000,000
250,000
3,250,000
533,034
500,000
1,866,503
250,000
2,250,000
175,000
2,250,000
4,441,950
3,425,000
19,616,503
–
–
–
–
–
–
–
–
–
–
–
–
–-
–
–
–
–
–
(1) Exercise price of £2.85 per share *
(2) Exercise price of £8.25 per share *
(3) Exercise price of £12.85 per share *
*Original exercise price reduced by dividend of £0.15 per share paid April 2013.
Further details are set out on pages 69 to 71 of this report.
The mid-market share price of the Company was £12.95 as at 1 May 2012 and was £20.85 at 30 April 2013. The mid-market high and low share
prices of the Company were £21.40 and £11.77 respectively in the year.
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GOVERNANCE
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
K Whiteman
S Ellis
J Armitt
D Howell
A C Coppin
A Nimmo
G Barker
V Wadley
A C Coppin
Chairman, Remuneration Committee
16 July 2013
30 April
2013
5,602,350
19,183
1,201,596
27,000
989,454
35,815
10,000
9,112
7,431
4,000
2,000
7,800
2,200
1 May
2012
6,456,838
19,183
1,501,596
27,000
989,454
35,815
10,000
9,112
4,000
4,000
2,000
7,800
–
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BERKELEY ANNUAL REPORT 2013
77
GOVERNANCE
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 24 to 51 of the Annual Report.
It is the Board’s view that it has been fully compliant with the Code throughout the 2012/13 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 twelve Directors; the Chairman, five Executive Directors and six independent Non-executive
Directors. Their biographies are set out on pages 56 and 57.
During the year, Victoria Mitchell stepped down from the Board at the Annual General Meeting on 5 September 2012 and Sir John Armitt
succeeded Victoria Mitchell as Deputy Chairman from that date.
The Board has evolved over recent years to put in place the succession planning that all successful organisations require and the composition of
the Board continues to be reviewed on a regular basis to ensure that an appropriate balance of skills is maintained.
The Board considers that all of the current Non-executive Directors were independent throughout the year. David Howell joined the Board in
February 2004 and has now served more than nine years on the Board. The Board considers David Howell to be independent in both character
and judgement, notwithstanding his long service on the Board.
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 six times during 2012/13 and there were no absences, other than Sean Ellis was unable to attend the meeting on 13 June 2012
and Alan Coppin was unable to attend the meetings on 13 June 2012 and 10 October 2012.
In addition to the above 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.
However, in accordance with the requirements of the Code, all Directors offered themselves for re-election at the Annual General Meeting on
2 September 2013, other than Alan Coppin, who is standing down from the Board.
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GOVERNANCE
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.
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. This year, in accordance with Code
provision B.6.2., the Board undertook an externally facilitated board evaluation conducted by Clare Howard Consultants, who have no other
connection with the Company.
The unanimous view of the review was that the Board works very well and that all the Directors are passionate about the business, and that they
enjoy their role on the Board.
The Board has a pivotal role in preserving the organisation’s culture and ultimately its success. In line with all successful organisations, succession
planning is seen as a key focus for the Company and the Board continues to evolve to address this issue. The autonomous structure of the Group
also provides strength in depth which further mitigates this risk.
An action plan has been agreed by the Board to address the recommendations made from the review.
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 four independent Non-executive Directors. The Committee is chaired by David Howell and the other members
at 30 April 2013 were Alison Nimmo, Glyn Barker and Veronica Wadley.
During the year Glyn Barker and Veronica Wadley were appointed to the Committee on 5 September 2012 and Alan Coppin retired from the
Committee on the same date.
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 2013 with no absences.
The Group Finance Director and representatives of the external and internal auditors also attend the Committee’s meetings by invitation.
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BERKELEY ANNUAL REPORT 2013
79
GOVERNANCE
CORPORATE GOVERNANCE
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 auditors during the course of the year
– reviewing the operations and effectiveness of internal audit
– assessing the adequacy of disclosure in the Annual Report
• monitoring ongoing compliance in relation to the Bribery Act;
• reviewing the external auditor’s audit plan, their performance, effectiveness, independence and fees; and
• reviewing 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 and the ratio of audit
fees (including the fees for the Interim Review) to non-audit fees should be no greater than 1:1. The ratio for the year ended 30 April 2013 was
within the limits of this ratio. Audit and non-audit fee disclosures are set out in Note 4.
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 accounting firms, including the auditors, is formally reported to the Audit Committee at each meeting.
The external 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 61 to 77.
At 30 April 2013, the Committee was chaired by Alan Coppin and the other members were Sir John Armitt and Glyn Barker, who are all
independent Non-executive Directors. Glyn Barker was appointed to the Committee on 13 June 2012 and David Howell retired from the
Committee on the same date. With effect from 14 June 2013, Glyn Barker became Chairman of the Committee.
The Committee met formally on two occasions during the year to April 2013 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.
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 2013 were David
Howell, Sir John Armitt and Veronica Wadley. Veronica Wadley was appointed to the Committee on 13 June 2012.
The Committee met formally on two occasions during the year to 30 April 2013 with no absences.
During the year, the activities of the Committee included considering and making recommendations to the Board regarding the membership of
the Board committees and reviewing succession plans for the Executive team.
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GOVERNANCE
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 2013 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.
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
The Group’s 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.
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BERKELEY ANNUAL REPORT 2013
81
GOVERNANCE
CORPORATE GOVERNANCE
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 Reviews on pages 41 to 51.
The Group has significant financial resources and the Directors have assessed the future funding requirements of the Group, including the
repayment of £1.7 billion to shareholders by 2021, 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.
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.
2013 ANNUAL REPORT AND ACCOUNTS
Having taken all matters considered by the Board and brought to the attention of the Board during the year into account, the Board is satisfied
that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable. The Board believes that the disclosures set out in
the Annual Report provide the information necessary for shareholders to assess the Company’s performance, business model and strategy.
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 58.
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 Group
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.
82 BERKELEY ANNUAL REPORT 2013
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GOVERNANCE
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’s as adopted by the European Union, give a true and fair
view of the assets, liabilities, financial position and profit 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
16 July 2013
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BERKELEY ANNUAL REPORT 2013
83
Kew Bridge Road
84 BERKELEY ANNUAL REPORT 2013
9597_001_RA_2013_Front_AW.indd 84
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BERKELEY ANNUAL REPORT 2013
85
FINANCIALS
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 2013 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 Statement of Directors’ Responsibilities set out on pages 82 and 83, 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 2013 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 78 to 83 with respect to internal control and risk management
systems and about share capital structures is consistent with the 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 page 82, in relation to going concern;
• the part of the Corporate Governance Statement relating to the company’s compliance with the nine provisions of 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 2013
and on the information in the Directors’ Remuneration Report that is described as having been audited.
John Waters (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
16 July 2013
86 BERKELEY ANNUAL REPORT 2013
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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
Income tax expense
Profit after taxation
Profit attributable to:
Owners of the parent
Non-controlling interest
FINANCIALS
Notes
2013
£m
2012
£m
1,372.6
1,041.1
8
3
3
11
2, 4
6
(969.2)
403.4
(123.3)
280.1
–
280.1
1.5
(9.6)
(1.3)
270.7
(61.0)
209.7
209.7
–
209.7
(745.8)
295.3
(99.6)
195.7
30.7
226.4
2.4
(11.8)
(2.2)
214.8
(56.7)
158.1
158.5
(0.4)
158.1
Earnings per ordinary share attributable to owners of the parent:
Basic
Diluted
7
7
160.0p
140.3p
121.0p
112.8p
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:
Owners of the parent
Non-controlling interest
Notes
2013
£m
2012
£m
5
6
209.7
158.1
(0.8)
0.2
(0.6)
(0.6)
0.1
(0.5)
209.1
157.6
209.1
–
209.1
158.0
(0.4)
157.6
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BERKELEY ANNUAL REPORT 2013
87
FINANCIALS
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
Non-current assets classified as held for sale
Total assets
Liabilities
Non-current liabilities
Borrowings
Trade and other payables
Provisions for other liabilities and charges
Current liabilities
Borrowings
Trade and other payables
Current tax liabilities
Provisions for other liabilities and charges
Total liabilities
Total net assets
Equity attributable to owners of the parent
Share capital
Share premium
Capital redemption reserve
Other reserve
Revaluation reserve
Retained earnings
Total equity
Notes
2013
£m
2012
£m
9
10
10
11
19
12
13
14, 25
15
16
17
18
16
17
18
20
20
21
21
21
21
17.2
16.3
26.5
44.1
56.7
160.8
17.2
11.6
83.5
46.5
25.0
183.8
2,066.7
1,851.7
126.8
66.8
2,260.3
75.8
2,336.1
2,496.9
–
(115.5)
(27.9)
(143.4)
(22.1)
(905.9)
(102.0)
(1.1)
(1,031.1)
(1,174.5)
1,322.4
6.7
49.3
24.5
(961.3)
4.0
2,199.2
1,322.4
115.2
2.7
1,969.6
–
1,969.6
2,153.4
(12.5)
(30.4)
–
(42.9)
(48.1)
(862.7)
(99.9)
–
(1,010.7)
(1,053.6)
1,099.8
6.7
49.3
24.5
(961.3)
3.4
1,977.2
1,099.8
The financial statements on pages 87 to 109 were approved by the board of directors on 16 July 2013 and were signed on its behalf by:
N G Simpkin
Finance Director
88 BERKELEY ANNUAL REPORT 2013
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the parent
Share
capital
£m
Capital
Share redemption
reserve
£m
premium
£m
Other Revaluation
reserve
£m
reserve
£m
Retained
earnings
£m
controlling
interest
£m
Total
£m
Non-
At 1 May 2012
Profit after taxation
for the year
Other comprehensive
expense for the year
Total comprehensive
income for the year
Reserves transfer from
revaluation reserve (note 21)
Transactions with shareholders:
Credit in respect of employee
share schemes (note 5)
Deferred tax in respect of
employee share schemes
(note 6)
Dividends to equity holders of
the Company (note 22)
6.7
49.3
24.5
(961.3)
3.4
1,977.2
1,099.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
209.7
209.7
(0.6)
(0.6)
209.1
209.1
0.6
(0.6)
–
–
–
–
11.8
11.8
21.4
21.4
(19.7)
(19.7)
At 30 April 2013
6.7
49.3
24.5
(961.3)
4.0
2,199.2
1,322.4
–
–
–
–
–
–
–
–
–
FINANCIALS
Total
equity
£m
1,099.8
209.7
(0.6)
209.1
–
11.8
21.4
(19.7)
1,322.4
Attributable to owners of the parent
Share
capital
£m
Capital
Share redemption
reserve
£m
premium
£m
Other Revaluation
reserve
£m
reserve
£m
Retained
earnings
£m
controlling
interest
£m
Total
£m
Total
equity
£m
Non-
At 1 May 2011
6.7
49.3
24.5
(961.3)
3.4
1,806.8
929.4
4.4
933.8
Profit/(loss) after taxation
for the year
Other comprehensive
expense for the year
Total comprehensive
income/(expense) for the year
Funding from non-controlling
interest in subsidiary
undertaking
Disposal of investment
in subsidiary
Transactions with shareholders:
Credit in respect of employee
share schemes (note 5)
Deferred tax in respect of
employee share schemes
(note 6)
At 30 April 2012
–
–
–
–
–
–
–
6.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
49.3
24.5
(961.3)
–
–
–
–
–
–
158.5
158.5
(0.4)
158.1
(0.5)
(0.5)
–
(0.5)
158.0
158.0
(0.4)
157.6
–
–
–
–
0.1
0.1
(4.1)
(4.1)
8.2
8.2
–
3.4
4.2
4.2
1,977.2 1,099.8
–
–
–
8.2
4.2
1,099.8
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BERKELEY ANNUAL REPORT 2013
89
FINANCIALS
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 April
Cash flows from operating activities
Cash generated from/(used in) 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
Proceeds from sale of property, plant and equipment
Proceeds from sale of investment properties
Funding from non-controlling Interest in subsidiary undertaking
Disposal of subsidiary undertaking
Cash balance in subsidiary undertaking disposed
Movements in loans with joint ventures
Net cash flow from investing activities
Cash flows from financing activities
Expenses related to the disposal of the subsidiary undertaking
Repayment of borrowings
Dividends paid to Company’s shareholders
Net cash flow from financing activities
Notes
25
10
8
11
8
22
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents, including bank overdraft, at the start of the financial year
Cash and cash equivalents, including bank overdraft, at the end of the financial year
14, 25
2013
£m
2012
£m
189.0
1.2
(5.9)
(69.2)
115.1
(6.6)
0.1
12.6
–
–
–
1.1
7.2
–
(38.5)
(19.7)
(58.2)
64.1
2.7
66.8
(108.9)
5.5
(5.4)
(53.7)
(162.5)
(2.3)
0.2
–
0.1
75.7
(0.2)
(10.0)
63.5
(0.9)
(163.7)
–
(164.6)
(263.6)
266.3
2.7
90 BERKELEY ANNUAL REPORT 2013
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 58.
Basis of preparation
These Consolidated Financial Statements have been prepared in accordance with European Union endorsed International Financial Reporting Standards (“IFRSs”),
IFRS-IC 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 93.
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 2012 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.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
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. Acquisition-related costs are expensed as incurred.
(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.
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.
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91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES CONTINUED
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 reporting 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 or substantively 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 accumulated 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 %
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.
Non-current assets held for sale
Non-current assets are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly
probable. They are stated at the lower of carrying amount and fair value less costs to sell.
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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources
will be required to settle that obligation, and the amount has been reliably estimated.
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. 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 and receipts under operating lease agreements are charged or credited 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) 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.
(c) 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.
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93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 SEGMENTAL DISCLOSURE
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.
Segment results
Profit before tax
Residential-led mixed-use development
Other activities
2013
£m
269.7
1.0
270.7
2012
£m
215.1
(0.3)
214.8
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
2013
£m
2,394.6
102.3
2,496.9
2012
£m
2,069.9
83.5
2,153.4
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
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.
2013
£m
1.5
(4.8)
(0.9)
(3.9)
(9.6)
(8.1)
2012
£m
2.4
(4.7)
(2.5)
(4.6)
(11.8)
(9.4)
94 BERKELEY ANNUAL REPORT 2013
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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)
Profit on sale of investment properties
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 of the Company’s subsidiaries
– Audit related assurance services
– Taxation compliance services
– Taxation advisory services
– All other non-audit services
2013
£m
138.2
1.8
(3.6)
(8.1)
4.8
1.9
0.2
0.1
0.1
0.1
–
0.2
2012
£m
112.8
1.1
–
(4.0)
2.8
1.7
0.1
0.1
0.1
0.2
0.2
0.7
The value of inventories expensed and included in the cost of sales is £895.3m (2012: £687.1m).
Remuneration paid to the auditors in respect of audit related assurance services relates to the interim review.
Remuneration paid to the auditors in respect of taxation advisory services was incurred primarily in connection with corporate activity in the year.
All other non-audit services include remuneration advisory services. In 2011/12 £0.6m of these costs 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.
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 £7,200 (2012: £7,000).
5 DIRECTORS AND EMPLOYEES
Staff costs
Wages and salaries
Social security costs
Share-based payments
Pension costs
2013
£m
97.4
26.0
11.8
3.0
138.2
2012
£m
88.7
13.2
8.2
2.7
112.8
The average monthly number of persons employed by the Group during the year was 1,326 (2012: 1,139).
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 Report on pages 61 to 77.
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 £11.8m (2012: £8.2m). The charge to the income statement attributable to key management is £10.9m (2012: £7.1m).
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 £2.85 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, no options lapsed (2012: 880,390, 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 £8.25. 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, 180,000 options lapsed on the departure of employees (2012: 530,000)
leaving 6,120,000 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.
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95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 DIRECTORS AND EMPLOYEES CONTINUED
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 approximately £1.7 billion to shareholders over
the next 10 years. The rules were subsequently amended and approved at the 2012 Annual General Meeting to allow the returns to be made through a
combination of dividends (£13 per share) and share buy backs (‘distributions’). The cumulative distributions required by the plan on or before the relative
milestone dates are set out below:
30 September 2015
30 September 2018
30 September 2021
Cumulative distributions
£568.7m
£1,136.1m
£1,703.6m
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 and the amendment at the Annual General Meeting on 5 September 2012. The key
features of the 2011 LTIP are:
– if the Company returns £1.7 billion to shareholders over a ten year period via a series of dividend payments (£13 per share) and share buy backs 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 that 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 date (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 £2.7m (2012: £2.4m) were paid into the defined contribution schemes during the year.
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
30 April 2013. The method adopted in the 2013 valuation was the projected unit method, which assumed a return on investment both prior to and after retirement
of 5.70% per annum and pension increases of 3.25% per annum. The market value of the Berkeley Final Salary Plan assets at 30 April 2013 was £16.0m 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 2010 valuation this position remained unchanged. Notwithstanding this the Group made
additional voluntary contributions of £0.6m during the year (2012: £0.6m).
The major assumptions used by the actuary for the 30 April 2013 valuation 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
2013
–
4.30%
3.25%
2.50%
3.25%
30 April
2012
–
4.80%
3.25%
2.50%
3.25%
The mortality assumptions are the standard S1PA CMI_2009_X [1.0%] (2012: 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 22.0 years and 24.0 years respectively (2012: 22.1 and 24.1). The life expectancy of male and female deferred pensioners (now aged 50)
retiring at age 65 after the balance sheet date is 23.0 years and 25.2 years respectively (2012: 23.1 and 25.3).
96 BERKELEY ANNUAL REPORT 2013
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the assets and the expected rates of return on the assets were as follows:
30 April 2013
30 April 2012
UK Equities
Global Equities
Emerging Market Equities
Emerging Market Debt
High Yield Bonds
Diversified Growth Fund
Property
Government Bonds (over 15 years)
Government Bonds (5 to 15 years)
Corporate Bonds
Cash
Fair value of plan assets
Long-term
rate of
return
6.80%
7.10%
8.10%
7.10%
7.10%
6.60%
5.30%
3.30%
2.70%
4.70%
0.50%
Value
£m
1.2
2.9
1.2
1.6
0.8
2.9
1.3
0.8
0.8
2.4
0.1
16.0
Long-term
rate of
return
6.95%
–
–
–
–
–
–
3.30%
2.70%
4.70%
0.50%
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
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
Present value of defined benefit obligations at 30 April
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
2013
£m
(14.6)
16.0
1.4
(1.4)
–
2013
£m
–
–
0.6
(0.8)
(0.2)
2013
£m
13.3
–
0.6
–
1.1
(0.4)
14.6
2013
£m
14.0
0.8
1.0
0.6
–
(0.4)
16.0
Value
£m
6.4
–
–
–
–
–
–
1.6
1.6
4.0
0.4
14.0
2012
£m
(13.3)
14.0
0.7
(0.7)
–
2012
£m
–
–
0.7
(0.7)
–
2012
£m
12.4
–
0.7
–
0.5
(0.3)
13.3
2012
£m
12.8
0.7
0.2
0.6
–
(0.3)
14.0
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BERKELEY ANNUAL REPORT 2013
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 DIRECTORS AND EMPLOYEES CONTINUED
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
Cumulative amounts of losses recognised in the statement of comprehensive income at 30 April
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:
30 April
2012
£m
14.0
(13.3)
0.7
30 April
2012
0.2
1.46%
–
–
30 April
2011
£m
12.8
(12.4)
0.4
30 April
2011
0.4
3.06%
0.1
(0.50%)
Fair value of scheme assets
Present value of scheme liabilities
Net surplus in the plan
Experience adjustments arising
on scheme assets:
Amount (£m)
% of scheme assets
Experience adjustments arising
on scheme liabilities:
Amount (£m)
% of the present value
of scheme liabilities
30 April
2013
£m
16.0
(14.6)
1.4
30 April
2013
1.0
6.22%
–
–
6 TAXATION
The tax charge for the year is as follows:
Current tax
UK corporation tax payable
Adjustments in respect of previous years
Deferred tax at 24% (note 19) (2012: 26%)
Adjustment in respect of change of tax rate from 24% to 23% (note 19) (2012: 26% to 24%)
Tax on items recognised directly in other comprehensive income is as follows:
Deferred tax on actuarial loss recognised in the pension scheme (note 19)
Tax on items recognised directly in equity is as follows:
Deferred tax in respect of employee share schemes (note 19)
98 BERKELEY ANNUAL REPORT 2013
2013
£m
(3.6)
(0.1)
(0.7)
(4.4)
2013
£m
0.8
1.0
1.8
30 April
2010
£m
11.5
(11.4)
0.1
30 April
2010
1.2
10.35%
(0.1)
0.43%
2013
£m
(77.7)
7.0
(70.7)
10.8
(1.1)
(61.0)
2013
£m
0.2
2013
£m
21.4
2012
£m
(3.0)
(0.3)
(0.3)
(3.6)
2012
£m
0.7
0.2
0.9
30 April
2009
£m
9.4
(8.3)
1.1
30 April
2009
(1.2)
(13.62%)
0.1
(0.81%)
2012
£m
(65.5)
6.0
(59.5)
4.1
(1.3)
(56.7)
2012
£m
0.1
2012
£m
4.2
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The tax charge assessed for the year differs from the standard rate of UK corporation tax of 23.92% (2012: 25.83%). 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 24% to 23% (2012: 26% to 24%)
Other
Tax charge
2013
£m
270.7
64.7
0.9
0.4
(7.0)
1.1
0.9
61.0
2012
£m
214.8
55.5
0.6
0.6
(6.0)
1.3
4.7
56.7
The statutory tax rate in 2013 was at 23.92% (11 months at 24%, 1 month at 23%)
The adjustments in respect of previous years 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 deferred 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.
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 (£m)
Weighted average number of shares (m)
Basic earnings per ordinary share (p)
2013
209.7
131.0
160.0
2012
158.5
131.0
121.0
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 2013, the Group had four categories of potentially dilutive ordinary shares: 4.4 million £2.85 share options under the 2009 LTIP Part A, 6.1 million
£8.25 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 (£m)
Weighted average number of shares (m)
Adjustments for:
Share options – 2009 LTIP Part A (m)
Share options – 2009 LTIP Part B (m)
Share options – 2011 LTIP (m)
Bonus plan shares (m)
Shares used to determine diluted EPS (m)
Diluted earnings per ordinary share (p)
2013
209.7
131.0
3.6
2.6
11.9
0.3
149.4
140.3
2012
158.5
131.0
3.3
1.4
4.6
0.3
140.6
112.8
8 PROFIT ON DISPOSAL OF SUBSIDIARY
In the comparative year, 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
Non controlling interest
Net assets disposed
Expenses related to disposal
Profit on disposal
Consideration
2012
1.2
47.0
(4.1)
44.1
0.9
30.7
75.7
BERKELEY ANNUAL REPORT 2013
99
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9 INTANGIBLE ASSETS
Cost
At 1 May 2012 and 30 April 2013
Accumulated impairment
At 1 May 2012 and at 30 April 2013
Net book value
At 1 May 2012 and at 30 April 2013
Cost
At 1 May 2011 and 30 April 2012
Accumulated impairment
At 1 May 2011 and at 30 April 2012
Net book value
At 1 May 2011 and at 30 April 2012
Goodwill
£m
17.2
–
17.2
17.2
–
17.2
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 11.62% (2012: 11.19%) 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.
10 PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTY
Property, plant and equipment
Freehold
property
£m
Fixtures and
fittings
£m
Motor
vehicles
£m
Cost
At 1 May 2012
Additions
Disposals
Transfer to held for sale (Note 15)
At 30 April 2013
Accumulated Depreciation
At 1 May 2012
Charge for the year
Disposals
Transfer to held for sale (Note 15)
At 30 April 2013
Net book value
At 1 May 2012
At 30 April 2013
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
8.0
3.1
–
–
11.1
0.3
0.2
–
–
0.5
7.7
10.6
8.0
–
–
8.0
0.2
0.1
–
0.3
7.8
7.7
6.8
2.6
(0.6)
–
8.8
4.8
1.1
(0.6)
–
5.3
2.0
3.5
6.0
1.5
(0.7)
6.8
4.9
0.6
(0.7)
4.8
1.1
2.0
2.9
0.9
(0.3)
–
3.5
1.0
0.5
(0.2)
–
1.3
1.9
2.2
2.8
0.8
(0.7)
2.9
1.1
0.4
(0.5)
1.0
1.7
1.9
Total
£m
17.7
6.6
(0.9)
–
23.4
6.1
1.8
(0.8)
–
7.1
11.6
16.3
16.8
2.3
(1.4)
17.7
6.2
1.1
(1.2)
6.1
10.6
11.6
Investment
properties
£m
84.6
29.5
(9.2)
(77.5)
27.4
1.1
1.7
(0.2)
(1.7)
0.9
83.5
26.5
28.7
55.9
–
84.6
0.1
1.0
–
1.1
28.6
83.5
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 the properties held at 30 April 2013 is £43.9m (30 April 2012: £114.5m) as determined by the Directors taking into account all
relevant factors including their nature and location. No independent valuation was undertaken.
100 BERKELEY ANNUAL REPORT 2013
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2013
£m
13.7
35.1
(4.2)
(0.5)
44.1
2013
£m
46.5
(1.3)
(1.1)
44.1
2013
£m
–
161.9
(86.4)
(31.4)
44.1
9.4
(8.7)
0.7
(1.9)
(1.2)
(0.1)
(1.3)
2013
£m
310.0
1,711.7
45.0
2,066.7
2013
£m
105.9
11.8
9.1
126.8
2012
£m
15.4
34.6
(2.8)
(0.7)
46.5
2012
£m
38.7
(2.2)
10.0
46.5
2012
£m
–
131.8
(41.2)
(44.1)
46.5
16.2
(16.6)
(0.4)
(1.7)
(2.1)
(0.1)
(2.2)
2012
£m
360.5
1,422.6
68.6
1,851.7
2012
£m
105.3
6.4
3.5
115.2
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 28.
The movement on the investment in joint ventures during the year is as follows:
At 1 May
Loss after tax for the year
Net (decrease)/increase in loans to joint ventures
At 30 April
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 before taxation
Tax charge
Share of post tax loss of joint ventures
12 INVENTORIES
Land not under development
Work in progress
Completed units
13 TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments and accrued income
Further disclosures relating to trade receivables are set out in note 26.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14 CASH AND CASH EQUIVALENTS
Cash and cash equivalents
2013
£m
66.8
2012
£m
2.7
15 NON-CURRENT ASSETS HELD FOR SALE
During the year, Berkeley reached agreement to sell 534 HCA funded residential properties within its rental fund for £105.4 million. The transaction, which
completed on 5 June 2013, will be reported in the results for the year ending 30 April 2014 at which time the sale became unconditional.
16 BORROWINGS
Current
Bank loans
Other loans
Non-current
Other loans
Total borrowings
2013
£m
(4.7)
(17.4)
(22.1)
–
(22.1)
2012
£m
(48.1)
–
(48.1)
(12.5)
(60.6)
Other 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 26.
17 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
2013
£m
(381.1)
(426.1)
(0.1)
(26.6)
(72.0)
(905.9)
(115.5)
(1,021.4)
2012
£m
(369.7)
(422.9)
(0.1)
(13.3)
(56.7)
(862.7)
(30.4)
(893.1)
All amounts included above are unsecured. The total of £26.6m (2012: £13.3m) for other taxes and social security includes £22.0m (2012: £8.1m) 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 26.
102 BERKELEY ANNUAL REPORT 2013
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18 PROVISIONS FOR OTHER LIABILITIES AND CHARGES
At 1 May 2012
Reclassified from accruals
Utilised
Released
Charged to the income statement
At 30 April 2013
Construction
liabilities
£m
–
(16.5)
–
6.6
(13.7)
(23.6)
Other
£m
–
(7.3)
0.7
1.2
–
(5.4)
Total
£m
–
(23.8)
0.7
7.8
(13.7)
(29.0)
Of the total provisions at 30 April 2013, £27.9m are non-current and £1.1m are current.
a) Construction liabilities
The Group holds provisions for a best estimate of certain post-completion development obligations in respect of the construction of its portfolio of complex
mixed-use developments which are expected to be incurred in the ordinary course of business, but which are uncertain in terms of timing and quantum.
b) Other
Other provisions include onerous lease provisions for properties leased by the Group and provisions for the Group’s exposure to specific estate liabilities on
historic sites developed by the Group.
19 DEFERRED TAX
The movement on the deferred tax account is as follows:
At 1 May 2012
Transfer from corporation tax receivable
(Charged)/credited to the income statement at 24% (note 6)
Accelerated
capital
allowances
£m
0.4
–
(0.1)
Adjustment in respect of change of tax rate from 24% to 23% (note 6)
–
(Charged)/credited to the income statement in year
Credited to equity at 24%
Adjustment in respect of change of tax rate from 24% to 23%
Credited to equity in year (note 6)
At 30 April 2013
At 1 May 2011
Transfer from corporation tax receivable
(Charged)/credited to the income statement at 26% (note 6)
(0.1)
–
–
–
0.3
0.5
–
(0.1)
Adjustment in respect of change of tax rate from 26% to 24% (note 6)
–
(Charged)/credited to the income statement in year
Credited to equity at 26%
Adjustment in respect of change of tax rate from 26% to 24%
Credited to equity in year (note 6)
Deferred tax transferred on disposal of subsidiary undertaking
At 30 April 2012
(0.1)
–
–
–
–
0.4
Retirement
benefit
obligation
£m
Other
short-term
timing
differences
£m
–
–
(0.2)
–
(0.2)
0.2
–
0.2
–
–
–
(0.1)
–
(0.1)
0.1
–
0.1
–
–
24.6
0.4
11.1
(1.1)
10.0
22.7
(1.3)
21.4
56.4
18.4
0.2
4.3
(1.3)
3.0
5.0
(0.8)
4.2
(1.2)
24.6
Total
£m
25.0
0.4
10.8
(1.1)
9.7
22.9
(1.3)
21.6
56.7
18.9
0.2
4.1
(1.3)
2.8
5.1
(0.8)
4.3
(1.2)
25.0
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 23% (2012: 24.0%). 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 2013 was £56.7m (2012: £25.0m).
Deferred tax assets of £33.9m (2012: £23.1m) are expected to be recovered after more than one year.
The Autumn Statement (December 2012) and the draft Finance (No.2) Bill 2013 included legislation to reduce the main rate of corporation tax to 21% for the
financial year commencing 1 April 2014 and 20% for the financial year commencing 1 April 2015. The changes had not been substantively enacted at the balance
sheet date and, therefore, are not reflected in these financial statements.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19 DEFERRED TAX CONTINUED
The deferred tax credited to equity during the year was as follows:
Deferred tax on actuarial loss recognised in the pension scheme (note 6)
Deferred tax in respect of employee share schemes (note 6)
Movement in the year
Cumulative deferred tax credited to equity at 1 May
Cumulative deferred tax credited to equity at 30 April
20 SHARE CAPITAL AND SHARE PREMIUM
The movements on allotted and fully paid share capital for the Company in the year were as follows:
At 1 May 2011 and 30 April 2012
At 30 April 2013
At 1 May 2011 and 30 April 2012
At 30 April 2013
2013
£m
0.2
21.4
21.6
11.1
32.7
Share
capital
£m
6.7
6.7
2012
£m
0.1
4.2
4.3
6.8
11.1
Ordinary
shares
Number (‘000)
134,857
134,857
Share
premium
£m
49.3
49.3
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 2013 there were 3.6m shares held as ‘treasury shares’ (2012: 3.6m). The company has the right to re-issue these shares at a later date.
At 30 April 2013 there were 0.2m shares held in trust (2012: 0.2m). The market value of these shares at 30 April 2013 was £4.9m (2012: £3m).
21 RESERVES
The movement in reserves is set out in the Consolidated Statement of Changes in Equity on page 89.
Other reserve
The other reserve of negative £961.3m (2012: negative £961.3m) 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. A release of £929,000 in the year (2012: £nil) to retained earnings was recognised as the associated fair
value adjustments were credited to the income statement. At 30 April 2013 the balance in the revaluation reserve relating to the acquisition of St James Group
Limited is £3,823,000 (2012: £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 £304,000 in the year
(2012: £60,000) to retained earnings were recognised as the associated fair value adjustments were charged to the income statement. At 30 April 2013 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 £177,000
(2012: £481,000).
Capital redemption reserve
The capital redemption reserve 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 and the Company’s Employee Benefit Trust acquired none (2012: none) of its own shares through purchases on the London Stock Exchange in the
year. The total amount to acquire the shares was £nil (2012: £nil) and has been deducted from retained earnings within shareholders’ equity. These shares are held
as ‘treasury shares’.
22 DIVIDENDS PER SHARE
The dividends paid in 2013 were £19.7 million (15 pence per share) (2012: £nil). A further interim dividend of £77.3 million (59 pence per share) has been declared
for payment on 27 September 2013. These financial statements do not reflect this further interim dividend.
104 BERKELEY ANNUAL REPORT 2013
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23 CONTINGENT LIABILITIES
The Group has guaranteed road and performance agreements in the ordinary course of business of £15.7m (2012: £14.5m).
24 OPERATING LEASES – MINIMUM LEASE PAYMENTS
The total future aggregate minimum lease payments of the Group under non-cancellable operating leases are set out below:
Amounts due within:
Within one year
Between one and five years
After five years
25 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
– Profit on sale of investment properties
– Profit on sale of subsidiary
– Finance income
– Finance costs
– Share of results of joint ventures after tax
– 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 generated from/(used in) operations
Reconciliation of net cash flow to net cash/(debt):
Net increase/(decrease) in cash and cash equivalents, including bank overdraft
Net cash outflow from decrease in borrowings
Movement in net cash in the year
Opening net (debt)/cash
Closing net cash/(debt)
Net cash/(debt):
As at 30 April
Cash and cash equivalents
Non-current borrowings
Current borrowings
Net cash/(debt)
2013
£m
1.5
3.9
3.0
8.4
2013
£m
209.7
61.0
3.5
(3.6)
–
(1.5)
9.6
1.3
11.8
(244.5)
(12.2)
154.5
(0.6)
189.0
2013
£m
64.1
38.5
102.6
(57.9)
44.7
2013
£m
66.8
–
(22.1)
44.7
2012
£m
0.1
1.7
8.1
9.9
2012
£m
158.1
56.7
2.1
–
(30.7)
(2.4)
11.8
2.2
8.2
(341.2)
(23.4)
50.3
(0.6)
(108.9)
2012
£m
(263.6)
163.7
(99.9)
42.0
(57.9)
2012
£m
2.7
(12.5)
(48.1)
(57.9)
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BERKELEY ANNUAL REPORT 2013 105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26 CAPITAL MANAGEMENT, FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
The Group finances its operations by a combination of shareholders’ funds, 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, reported in more
detail in the Trading and Financial Reviews on pages 41 to 51, 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 2013 was £1,277.7m (2012: £1,157.7m). The increase in capital
employed in the year of £120.0m reflects further 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: bank loans, trade
payables, deposits and on account receipts, loans from joint ventures and accruals. Cash and cash equivalents and borrowings 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
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.
Financial instruments: Financial liabilities
The Group’s financial liabilities can be summarised as follows:
Current
Bank loans
Trade payables
Deposits and on account contract receipts
Loans from joint ventures
Accruals
Other loans
Non-current
Trade payables
Other loans
Total financial liabilities
All amounts included above are unsecured.
2013
£m
105.9
66.8
172.7
2013
£m
(4.7)
(381.1)
(426.1)
(0.1)
(72.0)
(17.4)
(901.4)
(115.5)
–
(115.5)
(1,016.9)
2012
£m
105.3
2.7
108.0
2012
£m
(48.1)
(369.7)
(422.9)
(0.1)
(56.7)
–
(897.5)
(30.4)
(12.5)
(42.9)
(940.4)
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.
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. This loan was repaid following completion of the sale of 534 HCA funded residential properties on 5 June
2013 (see note 15).
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
106 BERKELEY ANNUAL REPORT 2013
2013
£m
(27.7)
(87.8)
–
(115.5)
2012
£m
(20.7)
(22.2)
–
(42.9)
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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).
Non-current trade payables comprise long-term land payables, 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 2013 a rate of 0.43% was applied (2012: 0.74%). 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.
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
2013
£m
(901.4)
(27.9)
(89.0)
–
(1,018.3)
2012
£m
(897.5)
(21.0)
(22.5)
–
(941.0)
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.
If interest rates on the Group’s cash/debt balances had been 50 basis points higher throughout the year ended 30 April 2013, profit after tax for the year would
have been £26,000 higher (2012: £14,000 lower). This calculation is based on the monthly closing net cash/debt balance throughout the year. A 50 basis point
increase in interest rate represents management’s assessment of a reasonably possible change for the year ended 30 April 2013. The Group’s loan stock amounts
to £nil (2012: £9,000) 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 (2012: £nil), nor are there any provisions held against trade receivables (2012: £nil), and no trade receivables are past their due
date (2012: £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:
Revolving credit facility one
Revolving credit facility two
2013
2012
Available
£m
Drawn
£m
Undrawn Termination
date
£m
Available
£m
Drawn
£m
Undrawn Termination
date
£m
275
250
525
–
–
–
May-17
Apr-18
275
250
525
200
250
450
10
25
35
Nov-13
Apr-16
190
225
415
At 30 April 2013 the total drawn down balance across both facilities was £nil. In addition, at 30 April 2013 there were bank bonds in issue of £0.2m (2012: £4.7m).
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 May 2017 in the case of revolving credit facility one and April 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.
A one year extension was granted on 8 April 2013 for revolving credit facility two which extended the maturity date on this facility until April 2018, and on 24 May
2013 for revolving credit facility one, which extended the maturity date on this facility until May 2018.
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BERKELEY ANNUAL REPORT 2013 107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27 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 paid £20,156 to Berkeley Homes plc for works carried out at his home under the Group’s own build scheme (2012:
Mr A W Pidgley £47,771 and Mr S Ellis £143,442). 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 at Ebury Square, London SW1 on 20 March 2012 from Berkeley Homes (PCL)
Limited, a wholly owned subsidiary of the Company, for £6,050,000, (Apartment 1). Mr Pidgley is also a Director of Berkeley Homes (PCL) Limited.
Approval for this purchase was received from shareholders at the 2012 Annual General Meeting and the purchase then became unconditional.
Approval is now being sought at this Annual General Meeting for Mr Pidgley to
a) be released from his contract to purchase the property (Apartment 1) and simultaneously
b) purchase a different property at Ebury Square from Berkeley Homes (PCL) Limited in lieu of the above property for £10,500,000 (Apartment 2).
Mr R C Perrins, a Director of the Company, contracted to purchase an apartment at 190 Strand, London WC1 for £2,100,000 on 31 May 2013 from SES Manager
Limited and SES Nominee Limited, subsidiaries of St Edward Homes Limited, a joint venture vehicle, owned by The Prudential Assurance Company Limited,
part of the Prudential Group, and The Berkeley Group plc, a wholly owned subsidiary of the Company. Mr Perrins is also a Director of St Edward Homes Limited.
Both the agreement between Berkeley Homes (PCL) Limited and Mr Pidgley for Apartment 2 and the agreement between SES Manager Limited and SES
Nominee Limited and Mr Perrins 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 respect of Mr Pidgley, the agreement in respect of Apartment 2 is conditional on both the
release of Mr Pidgley from the agreement for the sale and purchase of Apartment 1 and to the sale of Apartment 2 to Mr Pidgley. Under the contractual
arrangements it is not possible for Mr Pidgley to acquire both Apartment 1 and Apartment 2 nor for him to be released from the agreement for Apartment 1
unless the agreement to acquire apartment 2 simultaneously becomes unconditional.
As these 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 2 September 2013.
Transactions with Joint Ventures
During the financial year there were no transactions with joint ventures other than movements in loans. 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 2013 an amount of £21,319,000 was outstanding
and included within trade receivables (2012: £24,631,000). Loans with joint ventures are disclosed in note 11.
108 BERKELEY ANNUAL REPORT 2013
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28 SUBSIDIARIES AND JOINT VENTURES
(a) Subsidiaries
At 30 April 2013 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 (Carnwath Road) Limited (Isle of Man)
Berkeley Commercial Developments Limited
Berkeley First Limited (1)
Berkeley Homes (Capital) plc (1)
Berkeley Homes (Carmelite) Limited
Berkeley Homes (Central London) Limited (1)
Berkeley Homes (East Thames) Limited (1)
Berkeley Homes (Eastern Counties) Limited (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 Strategic Land Limited
Berkeley Homes (West London) Limited (1)
Berkeley Homes Public Limited Company
Berkeley Partnership Homes Limited (1)
Berkeley Ryewood Limited
BH (City Forum) Limited
St George Battersea Reach Limited (Jersey)
St George Blackfriars Limited
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
Other activities
BRP Investments No.1 Limited (Jersey)
BRP Investments No.2 Limited (Jersey)
(b) Joint Ventures
At 30 April 2013 the Group had an interest in the following joint ventures which have been equity accounted to 30 April, have an accounting date of 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
Principal activity
Residential-led mixed-use development
Residential-led mixed-use development
Residential-led mixed-use development
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BERKELEY ANNUAL REPORT 2013 109
FINANCIALS
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 2013 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 Statement of Directors’ Responsibilities set out on pages 82 and 83, 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 Company’s affairs as at 30 April 2013;
• 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 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 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 2013.
John Waters (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
16 July 2013
110 BERKELEY ANNUAL REPORT 2013
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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 account
Capital redemption reserve
Profit and loss account
Total shareholders’ funds
FINANCIALS
Notes
2013
£m
2012
£m
C5
C6
C7
C8
C9
C9
C9
C10
1,395.1
1,395.1
1,391.3
1,391.3
8.3
0.9
9.2
(680.4)
(671.2)
723.9
6.7
49.3
24.5
643.4
723.9
4.5
0.9
5.4
(625.4)
(620.0)
771.3
6.7
49.3
24.5
690.8
771.3
The financial statements on pages 111 to 114 were approved by the board of directors on 16 July 2013 and were signed on its behalf by:
N G Simpkin
Finance Director
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BERKELEY ANNUAL REPORT 2013 111
FINANCIALS
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 total recognised gains and losses for the year as there are no separate gains or losses arising in the year.
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
2013
£m
0.1
No disclosure of other non-audit services has been made as this is included within note 4 of the consolidated financial statements.
C3 DIRECTORS AND EMPLOYEES
Staff costs
Wages and salaries
Social security costs
Share-based payments
2013
£m
4.5
10.2
7.8
22.5
2012
£m
0.1
2012
£m
4.3
3.2
6.0
13.5
The average monthly number of persons employed by the company during the year was 9, all of whom are Directors (2012: 8).
Directors
Details of Directors’ emoluments are set out in the Remuneration Report on pages 61 to 77.
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 £46,800 (2012: £41,000) 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 £7.8m (2012: £6.0m). Further information on the Company’s share
incentive schemes are included in the Remuneration Report on pages 61 to 77 as well as note 5 to the Consolidated Financial Statements.
112 BERKELEY ANNUAL REPORT 2013
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FINANCIALS
C4 THE BERKELEY GROUP HOLDINGS PLC PROFIT AND LOSS ACCOUNT
The loss for the year in the Company is £39.4m (2012: loss of £31.5m).
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
2013
£m
1,391.3
3.8
1,395.1
2012
£m
1,389.1
2.2
1,391.3
Additions in the year relate to company contributions to the Berkeley Group plc for employee services to be settled through the issue of shares on the vesting of
the Berkeley Group Holdings plc 2009 Part (a), 2009 Part (b) and 2011 Long Term Incentive Plan awards for the benefit of executive directors of its subsidiaries.
The directors believe that the carrying value of the investments is supported by their underlying net assets.
Details of principal subsidiaries are given within note 28 of the Consolidated Financial Statements.
C6 DEBTORS
Current
Deferred tax
The movements on the deferred tax asset are as follows:
At 1 May
Deferred tax in respect of employee share schemes credited to reserves
At 30 April
C7 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Amounts owed to subsidiary undertakings
Other taxation and social security
2013
£m
8.3
2013
£m
4.5
3.8
8.3
2013
£m
(666.1)
(14.3)
(680.4)
2012
£m
4.5
2012
£m
2.6
1.9
4.5
2012
£m
(620.1)
(5.3)
(625.4)
All amounts included above are unsecured. The interest rate on £601m (2012: £578m) of the balance owed to subsidiary undertakings is 4.0% (2012: 4.0%). At 30
April 2013 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
2013
Number ‘000
2012
Number ‘000
925,000
50
925,000
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.
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BERKELEY ANNUAL REPORT 2013 113
FINANCIALS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
C8 CALLED-UP SHARE CAPITAL CONTINUED
The movements on allotted and fully paid share capital for the Company in the year were as follows:
At 1 May 2011 and 30 April 2012
At 30 April 2013
At 1 May 2011 and 30 April 2012
At 30 April 2013
Ordinary
shares
Number ‘000
134,857
134,857
Called-up
share capital
£m
Share
premium account
£m
6.7
6.7
49.3
49.3
At 30 April 2013 there were 3.6m shares held as ‘treasury shares’ (2012: 3.6m). The Company has the right to re-issue these shares at a later date.
At 30 April 2013 there were 0.2m shares held in trust (2012: 0.2m). The market value of these shares at 30 April 2013 was £4.9m (2012: £3.0m).
The movements in the year are disclosed in note 20 of the Consolidated Financial Statements.
C9 RESERVES
At 1 May 2012
Loss for the financial year
Dividends paid
Credit in respect of employee share schemes
At 30 April 2013
Share
premium account
£m
49.3
–
–
–
49.3
Capital
redemption
reserve
£m
24.5
–
–
–
24.5
C10 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
Loss for the financial year
Dividends paid
Credit in respect of employee share scheme
Opening equity shareholders’ funds
Closing equity shareholders’ funds
C11 RELATED PARTY TRANSACTIONS
Profit and
loss account
£m
690.8
(39.4)
(19.7)
11.7
643.4
2013
£m
(39.4)
(19.7)
11.7
(47.4)
771.3
723.9
Total
£m
764.6
(39.4)
(19.7)
11.7
717.2
2012
£m
(31.5)
–
8.2
(23.3)
794.6
771.3
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.
114 BERKELEY ANNUAL REPORT 2013
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FIVE YEAR SUMMARY
Years ended 30 April
Income statement
Revenue
Operating profit
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 cash/(debt)
Net assets
Non-controlling interest
Shareholders’ funds
Net assets per share attributable to shareholders (1)
Ratios and statistics
Return on capital employed (2)
Return on equity after tax (3)
Return on equity before tax (4)
Units sold (5)
FINANCIALS
2013
£m
2012
£m
2011
£m
2010
£m
2009
£m
1,372.6
1,041.1
742.6
615.3
702.2
280.1
226.4
135.7
106.2
124.9
(1.3)
(8.1)
270.7
(61.0)
209.7
(2.2)
(9.4)
214.8
(56.7)
158.1
2.1
(1.5)
(0.2)
4.4
(0.9)
(3.6)
136.3
110.4
120.4
(41.8)
94.5
(30.8)
(34.3)
79.6
86.1
209.7
158.5
–
(0.4)
209.7
158.1
95.1
(0.6)
94.5
79.7
(0.1)
79.6
86.1
–
86.1
160.0p
121.0p
72.1p
60.0p
71.3p
1,277.7
1,157.7
44.7
(57.9)
1,322.4
1,099.8
891.8
42.0
933.8
545.4
316.9
862.3
–
–
(4.4)
(3.7)
1,322.4
1,099.8
1,009p
839p
929.4
709p
858.6
637p
516.5
284.8
801.3
–
801.3
615p
22.9%
17.3%
22.4%
3,712
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
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(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 completed and taken to sales in the year excluding joint ventures.
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BERKELEY ANNUAL REPORT 2013 115
FINANCIALS
FINANCIAL DIARY
Annual General Meeting and Interim Management Statement
Half Year End
Interim Results Announcement for the six months ending 31 October 2013
Interim Management Statement
Year End
Preliminary Announcement of Results for the year ending 30 April 2014
Publication of 2014 Annual Report
2 September 2013
31 October 2013
6 December 2013
March 2014
30 April 2014
June 2014
July 2014
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: 0870 162 3100
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
AUDITORS
PricewaterhouseCoopers LLP
116 BERKELEY ANNUAL REPORT 2013
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INSIDE FRONT
SPINE
8.5mm
INSIDE BACK
CONTENTS
Highlights
Financials
About this report
1 Who We Are and What We Do
2 Business Performance
3 Chairman’s Statement
4 Running a Sustainable Business
5 Managing Director’s Statement
86
Independent Auditors’ report on the
consolidated financial statements
87 Consolidated income statement
Consolidated statement of
comprehensive income
88 Consolidated statement of
Building Homes for Everyone
financial position
6 Building Homes for Everyone
Running a Sustainable Business
22 Running a Sustainable Business
Trading And Financial Review
41 Trading Review
47 Financial Review
52 Berkeley’s Principal Operating Risks
Governance
56 Board of Directors
58 Directors’ Report
61 Remuneration Report
78 Corporate Governance Report
89 Consolidated statement of changes
in equity
90 Consolidated cash flow statement
91 Notes to the consolidated financial
statements
110 Independent Auditors’ report on
the Company financial statements
111 Company balance sheet
112 Notes to the Company financial
statements
115 Five year summary
116 Financial diary, registered office
and advisors
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
report, we give an overview of Berkeley’s
performance this year in the Highlights
section followed by a showcase of our
portfolio of developments in London and
the South of England in Building Homes for
Everyone, before explaining how we operate
in Running a Sustainable Business and a
review of the year in our Trading and Financial
Review. Our Governance section and the
detailed Financials accompanied by a report
from the Group’s auditors, complete the
Annual Report.
This page: Fulham Reach, Hammersmith
Cover: Beaufort Park, Hendon
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BACK COVER
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FRONT COVER
Annual Report 2013
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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
Design by Hunter Design
Printed in England by Crystal
This report is printed on EBB Chromomat
9597_001_RA_2013_Cover_AW.indd 1-3
Our vision
for the future
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