Annual Report 2015
About this report
Welcome to the 2015 Annual
Report of The Berkeley Group
Holdings plc (“the Berkeley
Group”, “Berkeley”, “the Group”),
a publicly owned company, listed
on the London Stock Exchange
within the FTSE 250. The Strategic
Report explains Berkeley’s strategy,
business model, performance and
outlook. The Governance Section
covers the role and activities of the
Board in running the business and
their remuneration. The detailed
Financials, accompanied by a
report from the Group’s auditors,
complete the Annual Report.
Cover image: Goodman’s Fields, Aldgate.
Below: One Tower Bridge.
Strategic Report
02 2015 Performance Highlights
06 Chairman’s Statement
07 Managing Director’s Statement
08 Business model
17 What we do
23 How we manage risk
32 Where we operate
37 Our plan and commitments for
the business: ‘Our Vision’
49 Trading and Financial Review
and Outlook
Governance
58 Board of Directors
60 Corporate Governance Report
64 Audit Committee Report
66 Directors’ Remuneration Report
84 Directors’ Report
Financials
90 Independent Auditors’ Report
94 Consolidated Income Statement
94 Consolidated Statement of
Comprehensive Income
95 Consolidated Statement of
Financial Position
96 Consolidated Statement of
Changes in Equity
97 Consolidated Cash Flow Statement
98 Notes to the Consolidated Financial
Statements
121 Company Balance Sheet
122 Notes to the Company
Financial Statements
126 Five year summary and definitions
127 Financial Diary
127 Registered Office and Advisors
Proud to be a member of the Berkeley Group of Companies
The Berkeley Group
Berkeley builds new homes, neighbourhoods and communities
for everyone, from families to first time buyers, student
accommodation to senior living and luxury homes to affordable
housing, with a focus on quality.
Its business model recognises that Berkeley operates in a cyclical
property market and that there are significant operational risks in
identifying, designing, building and selling homes and creating places.
Berkeley mitigates these risks by focusing on development
in London and the South of England, markets which it
knows and understands, and forward selling new homes
wherever possible. In doing this, Berkeley maintains a strong
balance sheet, keeps financial risk low and carefully allocates
resources to the right projects at the right time, matching
supply to demand wherever it can.
READ MORE ONLINE:
www.berkeleygroup.co.uk/about-berkeley-group
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BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
2015 Performance Highlights
A year of strong growth across all of our
key performance indicators.
Performance (Financial Key Performance Indicators)
Adjusted profit before tax
Basic earnings per share
£454.6million
313.0p
2011
2012
2013
2014
2015
£136.2m
£214.8m
£270.7m
£380.0m
£454.6m
72.1p
2011
2012
121.0p
2013
160.0p
2014
221.8p
2015
313.0p
Note: includes proportion of earnings per share paid as dividends per share.
Key Measure
Result
Key Measure
Result
This is our core measure
of profitability, our absolute
return from the sale and
delivery of new homes in
the year before the impact
of profit from the sale of
ground rent assets.
Adjusted profit before
tax of £454.6m, an increase
of 19.6% on last year.
Adjusted profit before tax
excludes £85.1m of profit from
the sale of ground rent assets.
The unadjusted profit before
tax is £539.7m.
This measure of profitability
allows for total profit after tax
and takes into account the
weighted average number of
shares in issue during the year.
The dividend per share paid
in the year is articulated in the
graph to show earnings cover.
Basic earnings per share is
313.0 pence, up 91.2 pence
from last year.
Adjusted earnings per share,
which excludes the effect
of £85.1m of profit from the
sale of ground rent assets, is
263.6p (2014: 221.8p).
Adjusted return on equity
Net asset value per share
29.5%
1,199p
2011
2012
2013
2014
2015
15.3%
21.2%
22.4%
27.5%
29.5%
2011
2012
2013
2014
2015
709p
839p
1,009p
1,066p
1,199p
Key Measure
Result
Key Measure
Result
Calculated as profit before
tax, excluding profit from the
sale of ground rent assets as
a percentage of the average
of opening and closing
shareholders’ funds, this
measure shows the efficiency
of the returns generated
from shareholder equity in
the business.
A result of 29.5%, up from
27.5% last year, represents a
strong performance ahead of
our long-term historic range.
The unadjusted return on
equity, including profit from
the sale of ground rent
assets, was 35.1%.
This balance sheet measure
reflects the value of
shareholders’ interests in
the net assets of the business
on an historical cost basis.
The growth of 133 pence
to 1,199 pence per share
demonstrates value delivered
to shareholders even after
allowing for dividend
payments of 180 pence
per share.
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BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
Outlook (Financial Key Performance Indicators)
Cash due on forward sales
Gross margin on land holdings
£2,959million
£5,272million
2011
2012
2013
2014
2015
£814m
£1,056m
£1,453m
£2,274m
£2,959m
2014
2015
Note: 2014 and 2015 figures now include legacy pipeline of future land.
£4,514m
£5,272m
Key Measure
Result
Key Measure
Result
This measures cash due from
customers during the next
three financial years under
unconditional contracts for
sale, and provides visibility
over the security of future
cash flows.
This has risen by £685 million
to £2,959 million in the year,
an increase of 30.1 %.
This provides a measure of
expected value in the Group’s
existing land holdings in
the event that the Group
successfully sells and delivers
the schemes planned for
this land.
This has increased by
£758 million to £5,272 million
in the year, a result of further
value added from planning
consents, sales secured and
schemes acquired over and
above profit recognised in
the year.
Performance (Non-financial Key Performance Indicators)
Our People
Accident Incident Rate
per 1,000 employees
2.46(2014: 2.92)
Customers
Net Promoter
Score
69.8
(2014: not applicable)
Managing health and safety on
our sites is a priority to protect the
wellbeing of our staff and contractors.
This year we have performed within
our target of 3.25, and the industry
average of 4.12.
We introduced this independently
assessed measure of customer satisfaction
in 2015 that enables comparison to
companies across all markets and sectors.
A result of 69.8 ranks us alongside some
of Britain’s top companies.
Our People
Staff Engaged with the
Berkeley Foundation
73%
(2014: 64%)
Our aim is for all employees to
be involved with the Berkeley
Foundation, providing a positive
impact on society.
Read more: see pg 46
Read more: see pg 38
Read more: see pg 46
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71 new apartments
at Ebury Square in
Belgravia were
completed this year.
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BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT Strategic Report
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BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS Chairman’s Statement
I believe that Berkeley
has the right plan in place
to deliver long-term
sustainable success.
TONY PIDGLEY CBE
CHAIRMAN
90p
Per share – interim dividend
payable in September 2015
£1.7billion
To be returned in cash
to shareholders by 2021
“I am pleased to announce pre-tax profits
for the Berkeley Group of £539.7 million
for the year ended 30 April 2015. This
result underlines the benefit of operating
the right strategy consistently through
the cycle. By maintaining our financial
discipline Berkeley can apply its unique
operating model to develop sites which are
complex and where others may perceive
that the risk is too great, and in doing so,
we unlock land for new homes that would
not otherwise come forward.
Berkeley accepts this additional operational
risk which is managed carefully and
intensively to create sustainable added
value returns.
Berkeley is delivering some 10% of all new
homes in London and 10% of the Capital’s
affordable homes across our 74 sites.
This creates economic value of £1.4 billion
and sustains some 12,000 jobs. In addition,
we remain committed to increase site-based
apprenticeships and training to help address
the skills shortage which our industry faces.
We are acutely aware of the importance
to our society of all forms of tenure for
new housing and welcome the vision of
Government, the Greater London Authority
and local councils to increase the number
of new homes built. For Berkeley it is
equally important to ensure that we are
market leaders in terms of the quality of
the places and homes we create.
We welcome the stability in Central
Government following the General Election
and the commitment to increase housing
supply, but political uncertainty remains
with the London Mayoral Election and
referendum on Britain’s relationship with
Europe on the horizon. Berkeley is a
supporter of the UK remaining in Europe
as this is the best way for London to remain
a world city. There is no doubt, however,
that for business to thrive, we must not
be bound by over-regulation, be this from
our own Government or from Europe.
The Board has declared a further
interim dividend of 90 pence per share
(£122.9 million), payable on 17 September
2015 to shareholders on the register on
14 August 2015. This will complete the
first milestone of paying 434 pence per
share by 30 September 2015. The Board
considers that the Group is well positioned
to meet the remaining milestones of
433 pence by September 2018 and 433
pence by September 2021.
In closing, I would like to express my thanks
to my colleagues in Berkeley for their
dedication and hard work in delivering this
strong performance. I firmly believe that
Berkeley has the right plan in place to deliver
long-term sustainable success, a strategy
which can adapt to any changes in the
market to protect the business, in what is a
cyclical market, and continue to deliver value
to shareholders and the community alike.”
Tony Pidgley CBE
Chairman
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BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
Managing Director’s Statement
Berkeley continues
to be defined by its
focus on quality.
ROB PERRINS
MANAGING DIRECTOR
£454.6m
Adjusted profit before
tax for the year
£5,272m
Estimated gross margin
in land holdings
“Berkeley has delivered adjusted pre-tax
earnings of £454.6 million, an increase of
19.6% on last year from the sale of 3,355
new homes at an average selling price
of £575,000, and an additional profit of
£85.1 million from the sale of a portfolio
of ground rent assets, giving total pre-tax
earnings of £539.7 million.
With £3 billion of cash due on forward
sales over the next three years and stable
market conditions, Berkeley anticipates
that adjusted earnings for the current year
will be at similar levels to 2014/15, and is
targeting the delivery of pre-tax profits in
the region of £2.0 billion over the three
year period comprising 2015/16, 2016/17
and 2017/18. This profit will be generated
from our key regeneration sites including
Riverlight, Chelsea Creek, Goodman’s Fields,
Battersea Reach, Abell & Cleland, Vista, One
Tower Bridge, The Corniche, London Dock,
Kidbrooke Village, Beaufort Park, Royal
Arsenal Riverside and Woodberry Park.
By nature, the scale of these schemes
makes profit delivery in specific periods
sensitive to timing and we will always
prioritise quality ahead of individual
period financial targets.
We have made great strides with our land
holdings, acquiring five new sites, securing
28 planning consents and moving eight new
sites into production. This has given us the
certainty to integrate our pipeline sites into
the land bank, which now comprises some
37,000 plots with £5.3 billion of estimated
future gross margin, an increase in the year
of £0.8 billion. Work continues to bring
forward the first 10 sites identified for our
St William joint venture with National Grid.
Since the year end its first site achieved
planning for 800 units in Battersea.
Berkeley continues to be defined by
its focus on quality. This, alongside
the Company’s sustained commercial
performance, is what differentiates the
brand. It begins with the quality of design
that we commission, through the quality
of build and service to the quality of the
places we create. This strategy underpins
the offer we make to landowners, local
authorities and our customers.
We also have robust evidence to
demonstrate performance in each of these
areas. Our development at Roman House
won the top Considerate Constructors Site
award from a pool of 9,015 sites across the
UK; Berkeley’s net promoter score, which
measures customer loyalty, is the highest
in the property sector; and Berkeley is the
only public company in Britain to address
and measure people’s wellbeing in the
places that we build.
Berkeley continues to invest directly in
the people and communities connected
to our sites. We recognise that public
companies need to play a more proactive,
more productive role in society since the
recession. The Berkeley Foundation has so
far committed £6 million in four key areas,
of which £1.6 million has so far been raised
by our staff. Projects like Street Elite are
helping young adults involved with gangs
or crime on London estates find a job or
get into college; thirteen are now directly
employed with Berkeley itself.
Berkeley has the land, forward sales, balance
sheet and people to achieve its targets. We
are well positioned to pay the 433 pence of
scheduled dividends equally over the period
to September 2018 and build a successful
and sustainable business for the long term
that maximises returns in a cyclical market.”
Rob Perrins
Managing Director
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STRATEGIC REPORTGOVERNANCEFINANCIALS BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
Business model
Berkeley builds new homes, neighbourhoods and communities. Its strategy rests
on five core principles, it has a clear plan to implement this strategy, and
the results can be seen in the places we create and our shareholder returns.
What we do
Our business is about placemaking
not just housebuilding, creating
strong communities where people
enjoy a great quality of life.
These places range in size from
a few homes in market towns
to complex, mixed-use urban
regeneration schemes of over
4,000 homes all built with safety,
sustainability and quality at
their heart.
Berkeley runs the business with
the aim of being successful over
the long-term.
Read more: see pg 17
‘What we do’
Strategy
Berkeley’s strategy rests on five
key principles in two areas
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1 : Cyclical market
We recognise that the property market is
inherently cyclical.
Read more: see pg 23 ‘How we manage risk’
2 : Operational challenges
We understand that there are significant operational
risks in successfully identifying, designing, building
and selling homes and creating new places.
Read more: see pg 23 ‘How we manage risk’
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3 : Knowing our market
We operate in London and the South of England,
markets that we know and understand. We believe that
recognising the importance of relationships and local
knowledge gives us a competitive advantage and
enables us to deliver new places which are socially,
environmentally and economically successful.
Read more: see pg 32 ‘Where we operate’
4 : Sound financials
We aim to keep financial risk low, by maintaining
a strong balance sheet, forward selling new homes
where possible, carefully allocating resources
to the right projects and buying land in the right
locations at the right time.
Read more: see pg 49 ‘Trading and financial review and outlook’
5 : Autonomy and values
We have recognised brands and autonomous, talented
operational teams who carefully manage each individual
scheme, regardless of size, to a bespoke design, and
embrace Berkeley’s core values in their approach.
Read more: see pg 23 ‘How we manage risk’
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BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
Plan
How we embed our
strategy in the business
Results
The results of what we
do and how we do it
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Berkeley’s plan, designed
to implement this strategy
and help all of our people
contribute to the success of
the business, is embedded in
the framework of “Our Vision”,
which articulates a clear set
of commitments across
every area of the business.
This framework, and our
progress in delivering
against these commitments,
is explained in more detail
in the Strategic Report.
We believe that meeting
our commitments under
this plan is central to
how we can generate
long-term value.
Read more: see pg 37
Shareholder returns
We have a plan to return £13 per share (over
£1.7 billion) by 2021 and to retain a successful,
sustainable business thereafter. Our performance
demonstrates that we are on track to achieve this.
Read more: see pg 49
Homes
We are building new homes to help the country
meet the housing shortfall and creating places
characterised by the quality of their design, public
realm, transport and access to jobs and amenities.
Read more: see pg 10
Jobs
We have created some 12,000 jobs in our offices
and on our developments and we continue to
support our supply chain. We have a loyal and
dedicated workforce.
Read more: see pg 12
Community
We aim to deliver sustainable communities
which endure long after our work is complete,
supported by our engagement with local people
through the Berkeley Foundation which has
raised over £6 million over the last four years.
Read more: see pg 14
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Homes
Quality and attention to
detail in all our homes
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BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTResults: Building quality sustainable
homes for the future
Berkeley has built a total of nearly
17,000 new homes over the last five
years, of which over 10,000 have
been built over the last three.
This year in particular we have delivered
some exceptional affordable housing
schemes. These include 180 one, two, three
and four bedroom homes delivered by
St James at Chambers Wharf in Southwark,
designed by Ian Simpson architects, and
the first new affordable homes delivered
by Berkeley Homes at One Tower Bridge.
The homes delivered by Berkeley include
a broad range of tenures including private
housing, social housing for Registered
Providers, housing sold to qualifying residents
under discount schemes agreed with local
authorities, student accommodation, senior
living and housing with care. Some 65%
of the homes that were built by Berkeley
over the five years to 2014 were sold for less
than £250,000, below the 5% (previously
3%) threshold for stamp duty.
Regardless of tenure, we believe in building
homes of exceptional quality, using
leading architects to design every scheme
individually to suit its location and context
and the right amenities for its setting. We
treat landscaping as an integral part of each
development, placing huge significance on
creating beautiful outside spaces that work
in harmony with their settings.
We recognise that delivering homes that
are environmentally sound is right for our
customers and we led the industry with our
commitment in 2008 for all new schemes to
reach Code for Sustainable Homes Level 3.
Since this time, environmental performance
of homes has become heavily regulated
and we are now focusing on connectivity
and guaranteeing space standards for all
new homes.
16,900
new homes delivered over
the last five years
65%
homes sold for less than £250,000
over the five years to 2014
Main image: Marryat Place, Wimbledon.
Above left: One Tower Bridge Above right: Woodberry Park, Hackney.
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BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS Jobs
5.6 jobs created for each
home built by Berkeley
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BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTResults: Creating growth through
long-term job opportunities
L ast year, Berkeley supported a total of
21,000 jobs either directly, indirectly
through its subcontractors and
The programme is designed to open up
opportunities to people for whom the job
market seems closed. Inevitably, many of
these people need support with the process of
moving into work. By working with partners
like Young London Working and Crisis, we
can ensure that this support is there when it
is most needed.
suppliers, or through the induced effects
of their employees’ expenditure creating jobs
in the wider economy. This is 5.6 jobs in the
UK for each home built by Berkeley. In 2014
we launched a new commitment to increase
site-based apprenticeships and training.
Amongst the many activities of the Berkeley
Foundation, its Job Creation Programme,
now in its second year, helps unemployed
people to access job opportunities within
the Berkeley Group and our supply chain.
It is our response to the employment crisis
that followed the recession.
Berkeley has committed to creating 500 jobs
for unemployed people across the lifetime
of the programme. They range across
the property and construction industry,
from office based roles in administration,
marketing and customer services, to site
based roles across the full range of trades.
21,000
jobs supported by Berkeley and
its supply chain in 2014
Not everybody in the Job Creation
Programme comes through this route.
Operating companies and supply chain
companies working on Berkeley sites are
also encouraged to employ formerly
unemployed people wherever possible. In
total, 400 unemployed people have moved
into work in this way since July 2013.
500
jobs being created for
unemployed people through
the Berkeley Foundation’s Job
Creation Programme
Left: Site inspection at Chelsea Creek Above: Apprentices working for Berkeley and its contractors.
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BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS Community
Berkeley built a brand new primary school in
Barns Green to replace their old small school
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BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTResults: BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
We are dedicated to
creating places that will be
enjoyed for years to come
Our business is about placemaking,
not just housebuilding. At Berkeley,
we recognise that the quality of
new development has a direct impact on
people’s wellbeing.
Working with the University of Reading and
Social Life, the Berkeley Group has created a
toolkit which helps developers and planners
apply the idea of social sustainability in
practice. It does this by measuring people’s
views about their own wellbeing and their
experience of living on our developments,
alongside an assessment of the quality of
local amenities and infrastructure.
Berkeley uses this framework to measure
and increase people’s quality of life on all its
developments of more than 100 homes. It
uses the toolkit throughout the planning
process and beyond to consider the issues
of placekeeping as well as placemaking.
The toolkit can help our wider stakeholders,
including planners and decision-makers, by
helping councils meet the social sustainability
requirements of the NPPF and to discharge
responsibilities for improving public health,
measuring the long-term impact of planning
and regeneration policies on the wellbeing
of residents and empowering councillors
and planning officers to demand more of the
right things from applicants.
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The framework is made up of 13
criteria covering three themes:
Social cultural life – what
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it’s like to live there
Voice and influence – how
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people affect what goes on
Amenities and social
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infrastructure – the design
and facilities
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Local integration
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OICE AND IN F L U E N C E
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71%
of people at Woodberry Down feel
able to influence local decisions
compared to an average of 40%
across Britain
91%
of residents at Kidbrooke Village
reported feeling like they belong to
the neighbourhood; across Britain
only 67% of people feel the same
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BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
Edenbrook, Fleet.
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BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
What we do
Our business is about placemaking, not just
housebuilding; it’s about creating strong communities
where people enjoy a great quality of life.
Identifying and
acquiring land
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Customer
service and
stewardship
Making
the right
decisions
Designing
and planning
new homes
and places
Marketing and
selling homes
Building new
homes and places
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What we do
The places that we create range from a few homes in market towns to complex,
mixed-use urban regeneration schemes of over 4,000 homes.
Identifying and
acquiring land
We have invested nearly £2 billion in new land since the
bottom of the market in 2009 and have formed St William,
a joint venture with National Grid, to regenerate redundant
gas works across London and the South of England.
Experience
Our experienced land teams understand
our focus on investing selectively in the
right locations in our core markets of
London and the South of England where
there is underlying demand for new
homes, good transport links and the
scope to create successful new places.
Appraisal
We undertake a rigorous internal appraisal
process to assess the opportunities
and risks of potential acquisitions and
pre-authorise all land offers at Board
level which enables us to act quickly,
innovatively and decisively, and deliver
on our offers.
Entrepreneurship
The Group thrives in adopting an
entrepreneurial approach in taking on
complex, challenging, brownfield land
which others shy away from, but only
where there are the right commercial
fundamentals, the potential to add
value and where we have the vision to
create something special through the
development process.
Designing and planning
new homes and places
We work with consultants, local authorities and
communities and aim to create places characterised by
the quality of their design, public realm, sustainability,
transport links and access to jobs and amenities.
Consultation
We use professional architects and leading
consultants and engineers to provide
bespoke designs for every new scheme,
however large or small, in consultation
with local communities. With the knowledge
gained on our other developments, we strive
to deliver schemes which are of high quality,
sensitive to their heritage and surroundings
and meet the aspirations of our customers
and local and national stakeholders.
Sustainability
We have addressed the challenge of
understanding what makes a successful
place by implementing a framework to
promote quality of life and strength of
community, which we now apply to our
schemes. We have led the way in delivering
environmentally sustainable living on large-
scale developments and continue to lead
our sector in sustainable development.
Partnerships
We engage closely with our partners in
the local authorities and communities
surrounding each of our sites to understand
stakeholders’ needs and prevailing
sensitivities and reflect these in our designs.
We continue to cement our reputation
for quality and for delivering on our
promises, and thrive on the strong working
relationships that we have developed.
18
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
Building new
homes and places
We are employing some 12,000 people in our offices
and on our schemes under construction, building new
homes and places for this generation and the next.
Intensive management
Each of our developments is led by a
dedicated project team responsible for all
aspects of detailed design, quality, delivery,
health and safety, commercial appraisal
and technical detail. The coordination of
professional teams of consultants and
contractors and strong communication
throughout are critical in ensuring the
smooth delivery of every project.
Health and safety
We place the utmost importance on the
health, safety and wellbeing of our people
and our subcontractor teams on site with
dedicated health and safety managers
overseeing all of our developments and
health and safety matters monitored,
prioritised and debated at every Board
meeting in every company within the
business. We are proud of our record in
this area but seek continual improvement
in other methodologies and approach.
Considerate construction
The reputation of Berkeley amongst its
partners and stakeholders relies on all of our
project teams engaging with surrounding
communities, being a responsible and
considerate neighbour and working with our
suppliers and contractors to complete our
schemes on time and budget. We recently won
the award for most considerate construction
site in Britain at Roman House. We are signed
up to the Prompt Payment Code, and aim
to develop strong, long-term relationships.
Marketing and
selling homes
Whether first-time buyers, families, experienced
investors, retailers, our partners in housing associations
or providers of student accommodation, Berkeley
strives to ensure that its customers receive an
unparalleled service when buying from Berkeley.
Customer focus
Sales teams across the business have an
in-depth knowledge of their developments
and help our customers find the right
home to suit their needs. They have the
knowledge and understanding to explain
the intricacies of every development,
from the specification of each new
home and the technical details to the
on-site amenities and wider context of
the scheme.
Meeting demand
We aim to forward sell our homes where
possible to ensure that what we are
building reflects what our customers
want and enables us to provide a range of
customer choices and a bespoke service
across all of our developments. Our
financial strength affords us the flexibility
to evolve our product to meet our
customers’ tastes and be flexible in how
and when we deliver it.
Modern living
We are constantly evolving our design,
product and features, as well as the wider
on-site amenities on each scheme, to help
turn our developments into the homes
that people expect today. Many of our
commitments under “Our Vision” reflect
changing priorities for our customers and
help keep our homes at the forefront of
modern living.
19
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS What we do
continued
Customer service
and stewardship
Customer satisfaction is the essential measure
of whether our homes and our service meet the
aspirations of our customers.
Estate management
Successful places need the right
long-term management strategy
and we work closely with appointed
managing agents to set the right tone
for our schemes long after they have
been completed, and are committed
to investigating and implementing the
best forms of estate management and
community governance on our schemes.
Future-proofing
We recognise that technology advances
rapidly, sometimes more quickly than
we can build our schemes, and that we
need to be at the forefront of employing
new techniques and enabling the latest
technology to serve our customers. Our
current commitments under “Our Vision”
include enabling fibre optic broadband
cabling in all our new homes.
Customer journey
Dedicated customer relationship managers
look after every stage of the customer
journey and provide a level of care and
service after completion which we expect
to match the quality of our product
across all of our schemes. We benchmark
our performance on customer service
not just across the sector but against
the top businesses in the country, and
look to continually improve our offering
with features such as My Home Plus, an
interactive portal for our customers.
Awards
Queen’s Award for Enterprise:
Sustainable Development 2014
PLC Awards 2014 - Winner -
Achievement in Sustainability March 2015
Winner - Most Considerate Site -
Considerate Constructors Scheme
Awards 2015 (Roman House)
MOST CONSIDERATE SITE
20
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT Seasonal changes at
Edenbrook in Fleet.
21
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
Our site teams, as in the photo below at
Goodman’s Fields, Aldgate, understand
the importance of supporting all our
employees to enable them to work in
a safe environment and to continue to
advance their knowledge and skills.
22
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
How we manage risk
Risk management is embedded in the organisation.
We understand that there are significant operational risks
in successfully identifying, designing, building and
selling homes and creating new places.
I
S
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R
A
T
E
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C
R
E
P
O
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23
How we manage risk
Carefully managing the risks of each and every site that we
acquire and develop is at the heart of how we work.
A strategy embedded
in understanding and
mitigating risk
These five principles underpin the
spirit of Berkeley, and are driven by the
engagement and quality of our people
and the attention to detail which
characterises the way we work. This
anchors our approach to managing
the specific operational and financial
risks of the business.
Two of the five principles which
underpin Berkeley’s strategy represent
an understanding of the fundamental
risks that face the company as a
residential developer:
1
2
We recognise that the property
market is inherently cyclical.
We understand that there are
significant operational risks in
successfully identifying, designing,
building and selling homes and
creating new places.
The remaining three principles represent
our headline corporate approach to
managing these macro risks:
3
4
5
We operate in London and the
South of England, markets that
we know and understand. We
believe that recognising the
importance of relationships
and local knowledge gives us
a competitive advantage and
enables us to deliver new places
which are socially, environmentally
and economically successful.
We aim to keep financial risk low,
by maintaining a strong balance
sheet, forward selling new homes
where possible, carefully allocating
funds to the right projects and
buying land in the right locations
at the right time.
We have recognised brands and
autonomous, talented operational
teams who carefully manage each
individual scheme, regardless of
size, to a bespoke design, and
embrace Berkeley’s core values
in their approach.
Day-to-day
management of
specific risks
Risk management is embedded in the
organisation. At operating company and
divisional level, Board meeting agendas
are structured around the key specific
risks facing the Group. Risk management
is the basis of debate in every operational
Board meeting on the progress of each
and every site acquired, developed and
sold by the Group.
In terms of formal risk reporting, and
guided by a risk framework identified
at Main Board level, each division of the
Group completes a quarterly risk review,
incorporating Group-wide standard risks
and any other risks identified as specific
to their business. These are combined,
overlaid with corporate risks and
reported quarterly to the Main Board.
The controls and processes surrounding
how we assess risk across the Group
are explained further in the Corporate
Governance report on page 62.
The principal operating risks and our
approach to mitigating them are described
in more detail on pages 26 to 31.
Our approach is anchored in a desire to
understand each and every risk on all of
our schemes through careful appraisal of
new purchases, successfully and effectively
negotiating the planning process, building
safely, efficiently, on programme and on
budget, forward selling where possible and
providing exceptional customer service.
We create bespoke solutions for each site
and as such do not produce a standard
product, which requires experienced,
intensive management.
24
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT Keeping financial
risk low
Berkeley keeps financial risk low by
maintaining a strong balance sheet
and simplicity and transparency in its
approach to financing the business.
Exposure to financial risks
The risks to which Berkeley is exposed include:
Liquidity risk
The risk that the funding required for
the Group to pursue its activities may
not be available.
Market interest rate risk
The risk that Group financing activities
are affected by fluctuations in market
interest rates.
Market credit risk
The risk that counterparties (mainly
customers) will default on their
contractual obligations, resulting in a
loss to the Group. The Group’s exposure
to credit risk is comprised of cash
and cash equivalents and trade and
other receivables.
Other financial risks
Berkeley contracts all of its sales and the
vast majority of its purchases in sterling,
and so has no significant exposure to
currency risk, but does recognise that
its credit risk includes receivables from
customers in a range of jurisdictions
who are themselves exposed to
currency risk in contracting in sterling.
Management of financial risks
Berkeley adopts a prudent approach to
managing these financial risks.
– Treasury policy and central overview
– Forward sales
The Board approves treasury policy and
senior management control day-to-day
operations. Relationships with banks
and cash management are coordinated
centrally at Berkeley’s head office. The
treasury policy is intended to maintain
an appropriate capital structure to
manage the financial risks identified
and provide the right platform for the
business to manage its operating risks.
– Ungeared
The Group is currently financing its
operations through shareholder equity,
supported by over £430 million of net
cash on the balance sheet, and so has
adopted a prudent approach to gearing
the business and in turn mitigated its
current exposure to interest rate risk.
– Headroom provided by bank facilities
The Group refinanced its borrowing
facilities in the year, and now has
£575 million of committed undrawn
credit facilities maturing in 2020.
This refinancing increased Berkeley’s
revolving credit facilities by £50 million,
extended the maturity date by two
years to give five clear years to maturity
and reduced costs across the life of
the facility. This refinancing cemented
Berkeley’s strong working partnership
with the six banks which provide the
facilities and are listed on page 127
and is key to Berkeley’s approach to
mitigating liquidity risk.
Berkeley’s approach to forward selling
new homes to customers provides
good visibility over future cash flows,
as expressed in cash due on forward
sales which stands at £2,959 million
at 30 April 2015. It also helps mitigate
market credit risk by virtue of
customers’ deposits held from the point
of unconditional exchange of contracts
with customers. These deposits stood
at £920.9 million at 30 April 2015 and
provide security for Berkeley in the
event of customer default at the point
of completion of sales.
– Land holdings
By investing in land at the right point in
the cycle, holding a clear development
pipeline in our land holdings and
continually reviewing our existing
holdings, we are not under pressure to
buy new land when it would be wrong
for long-term success of the business.
– Detailed appraisal of spending
commitments
A culture which prioritises an
understanding of the impact of all
decisions on the Group’s spending
commitments and hence its balance
sheet, alongside weekly and monthly
reviews of cash flow forecasts at
operating company, divisional and
Group levels, recognises that ‘cash
is king’ and central to the continued
success of Berkeley.
25
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS
How we manage risk
continued
We carefully manage each of the key operating risks of our business to drive performance.
Risk Description
Approach to mitigating risk
Impact and measurement
Economic
conditions
Regulation
As a property developer operating
within the wider housing market,
Berkeley’s business is sensitive to
economic factors such as changes
in interest rates, employment levels
and general consumer confidence.
Some customers are also sensitive
to changes in the sterling exchange
rate in terms of their buying decisions
or ability to meet their obligations
under contracts.
Changes to economic conditions in the
UK, Europe and worldwide may lead
to a reduction in demand for housing
which could impact on the Group’s
ability to deliver its corporate strategy.
Adverse changes to Government
policy on areas such as taxation,
housing and the environment 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.
Land
availability
An inability to source suitable land to
maintain the Group’s land holdings
at appropriate margins in a highly
competitive market could impact
on the Group’s ability to deliver its
corporate strategy.
Funds are carefully targeted at investing only in land
which is underpinned by demand fundamentals and
a solid viability case even when markets are uncertain.
Levels of committed expenditure are carefully monitored
against forward sales secured, cash levels and headroom
against our available bank facilities, 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, through autonomous
businesses to maintain the flexibility to react swiftly, when
necessary, to changes in market conditions.
The effects of changes to Government policies at all
levels are closely monitored by operating businesses and
the Board, and representations made to policy-setters
where appropriate.
Berkeley’s experienced teams are well placed to interpret
and implement new regulations at the appropriate time
through direct lines of communication across the Group,
with support from internal and external legal advisors.
Detailed policies and procedures are in place where
appropriate to the prevailing regulations and these
are communicated to all staff.
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 and hence it stands the best
chance of securing a viable planning consent.
Berkeley acquires land opportunistically, where it meets
its internal criteria for purchase, and considers joint
ventures in particular as a vehicle to work with the right
partners who bring good quality land complemented
by Berkeley’s expertise.
Each land acquisition is subject to a formal internal appraisal
and approval process prior to the submission of a bid and
again prior to exchange of contracts to give the Group the
best chance to secure targeted land.
The Group maintains its land holdings to mitigate against
significant impacts from market changes or delayed build
activity. Berkeley has experienced land teams with strong
market knowledge in their areas of focus.
Key:
Identifying and acquiring land Designing and planning new homes and places Building new homes and places
Marketing and selling new homes Customer service and stewardship
26
Recognition that Berkeley operates in a cyclical market
is central to our strategy as articulated within our
business model.
Maintaining sound financials through a strong balance sheet
and measuring the commitment of expenditure against
2015 Performance highlights (KPIs)
forward sales are also central to our business model. This is what
(page 02)
protects us against adverse changes in economic conditions.
Read more
Business model
(page 08)
- Cyclical market
- Sound financials
- Net asset value per share
- Adjusted profit before tax
- Basic earnings per share
- Adjusted return on equity
The strength of the balance sheet is measured by
monitoring our KPIs, principally net asset value per share,
the profitability of the business through profit before tax
and basic earnings per share, and the efficiency of the
balance sheet through return on equity.
Berkeley is focused geographically on London and the South
of England, which limits our risk when understanding and
determining the impact of new regulation across multiple
locations and jurisdictions.
Business model
(page 08)
- Knowing our market
- Autonomy and values
We have talented operational teams with an appropriate
support structure which enables them to act autonomously
and in the best interests of the business in the long-term.
The business is therefore well placed with the right people
to assess the impact of changes in regulations and to
implement them accordingly.
Understanding the markets in which we operate is central
to Berkeley’s strategy and gives us the confidence to buy
land without an implementable planning consent where we
- Knowing our market
understand what local stakeholders want.
Business model
(page 08)
- Sound financials
Keeping strong financials gives us the liquidity and flexibility
to remain competitive when bidding for new land and gives
vendors the confidence that Berkeley will deliver on any deals
negotiated, and has enabled us to partner with National Grid
on St William to bring in more land.
We carefully monitor the level of estimated future gross margin
in our land holdings as a key performance indicator. This reflects
the future potential of the business from current land holdings
valued at current prices and current costs.
Over the last five years, the Group has had stated targets to
invest in land. Accordingly the growth of estimated gross margin
in our land holdings has been a key performance target for
remuneration of Executive Main Board directors as explained
in the Remuneration Report.
2015 Performance highlights (KPIs)
(page 03)
- Gross margin on land holdings
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT Risk Description
Approach to mitigating risk
Impact and measurement
Economic
conditions
As a property developer operating
Funds are carefully targeted at investing only in land
within the wider housing market,
which is underpinned by demand fundamentals and
Berkeley’s business is sensitive to
a solid viability case even when markets are uncertain.
or ability to meet their obligations
The business is committed to operating at an optimal
economic factors such as changes
in interest rates, employment levels
and general consumer confidence.
Some customers are also sensitive
to changes in the sterling exchange
rate in terms of their buying decisions
under contracts.
Changes to economic conditions in the
UK, Europe and worldwide may lead
to a reduction in demand for housing
which could impact on the Group’s
ability to deliver its corporate strategy.
Levels of committed expenditure are carefully monitored
against forward sales secured, cash levels and headroom
against our available bank facilities, with the objective of
keeping financial risk low to mitigate the operating risks of
delivery in uncertain markets.
size, with a strong balance sheet, through autonomous
businesses to maintain the flexibility to react swiftly, when
necessary, to changes in market conditions.
Recognition that Berkeley operates in a cyclical market
is central to our strategy as articulated within our
business model.
Maintaining sound financials through a strong balance sheet
and measuring the commitment of expenditure against
forward sales are also central to our business model. This is what
protects us against adverse changes in economic conditions.
The strength of the balance sheet is measured by
monitoring our KPIs, principally net asset value per share,
the profitability of the business through profit before tax
and basic earnings per share, and the efficiency of the
balance sheet through return on equity.
Read more
Business model
(page 08)
- Cyclical market
- Sound financials
2015 Performance highlights (KPIs)
(page 02)
- Net asset value per share
- Adjusted profit before tax
- Basic earnings per share
- Adjusted return on equity
GDP growth, a
decisive General
Election result and
London’s continuing
attractiveness are
balanced by ongoing
Eurozone uncertainty.
Regulation
Adverse changes to Government
The effects of changes to Government policies at all
policy on areas such as taxation,
levels are closely monitored by operating businesses and
housing and the environment could
the Board, and representations made to policy-setters
restrict the ability of the Group to
where appropriate.
Berkeley is focused geographically on London and the South
of England, which limits our risk when understanding and
determining the impact of new regulation across multiple
locations and jurisdictions.
Business model
(page 08)
- Knowing our market
- Autonomy and values
deliver its strategy.
Failure to comply with laws
and regulations could expose
the Group to penalties and
reputational damage.
Berkeley’s experienced teams are well placed to interpret
and implement new regulations at the appropriate time
through direct lines of communication across the Group,
with support from internal and external legal advisors.
Detailed policies and procedures are in place where
appropriate to the prevailing regulations and these
are communicated to all staff.
We have talented operational teams with an appropriate
support structure which enables them to act autonomously
and in the best interests of the business in the long-term.
The business is therefore well placed with the right people
to assess the impact of changes in regulations and to
implement them accordingly.
Land
availability
An inability to source suitable land to
Land acquisition is focused on Berkeley’s core markets
maintain the Group’s land holdings
of London and the South of England, markets which
at appropriate margins in a highly
it understands and where it believes that the demand
competitive market could impact
fundamentals are strong and hence it stands the best
on the Group’s ability to deliver its
chance of securing a viable planning consent.
corporate strategy.
Berkeley acquires land opportunistically, where it meets
its internal criteria for purchase, and considers joint
ventures in particular as a vehicle to work with the right
partners who bring good quality land complemented
by Berkeley’s expertise.
Each land acquisition is subject to a formal internal appraisal
and approval process prior to the submission of a bid and
again prior to exchange of contracts to give the Group the
best chance to secure targeted land.
The Group maintains its land holdings to mitigate against
significant impacts from market changes or delayed build
activity. Berkeley has experienced land teams with strong
market knowledge in their areas of focus.
Understanding the markets in which we operate is central
to Berkeley’s strategy and gives us the confidence to buy
land without an implementable planning consent where we
understand what local stakeholders want.
Business model
(page 08)
- Knowing our market
- Sound financials
2015 Performance highlights (KPIs)
(page 03)
- Gross margin on land holdings
Keeping strong financials gives us the liquidity and flexibility
to remain competitive when bidding for new land and gives
vendors the confidence that Berkeley will deliver on any deals
negotiated, and has enabled us to partner with National Grid
on St William to bring in more land.
We carefully monitor the level of estimated future gross margin
in our land holdings as a key performance indicator. This reflects
the future potential of the business from current land holdings
valued at current prices and current costs.
Over the last five years, the Group has had stated targets to
invest in land. Accordingly the growth of estimated gross margin
in our land holdings has been a key performance target for
remuneration of Executive Main Board directors as explained
in the Remuneration Report.
Regulatory changes,
whether legal, planning
or tax-related, are a
continuing challenge.
Accessing good quality
land is a core inherent
risk of the business that
we steadily manage
in a cyclical market.
In a competitive
market with new
entrants from the UK
and overseas, the risks
on new land have
heightened this year.
27
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS How we manage risk
continued
Risk Description
Approach to mitigating risk
Impact and measurement
Read more
Planning
process
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.
Retaining
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.
Securing
sales
An inability to match supply to
demand in terms of product, location
and price could result in missed
sales targets and / or high levels of
completed stock which in turn could
impact on the Group’s ability to
deliver its corporate strategy.
The Group follows a principle of investing in markets that it
knows and understands, and is geographically focused on
London and the South of England, which we believe gives
us the best chance of conceiving and delivering the right
consents for the land that we acquire.
Full detailed planning and risk assessments are performed
and monitored for each site without planning permission,
both before and after purchase. Some sites are acquired
conditionally and some unconditionally depending on our
assessment of the risk profile. The planning status of all
sites is reviewed at monthly divisional Board meetings and
Main Board meetings.
The Group works closely with local communities in
respect of planning proposals and strong relationships are
maintained with local authorities and planning officers.
We have developed a series of commitments within Our
Vision, our plan for the business, to ensure that we retain
and develop the best people to support the business
in the long-term.
Succession planning is regularly reviewed at both divisional
and Main Board level. Close relationships and dialogue are
maintained with key personnel.
Remuneration packages are constantly benchmarked
against the industry to ensure they remain competitive.
We want our people to be engaged with the business and
its impact on wider society through the activities of the
Berkeley Foundation.
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 and underpinning the
financial investment in each of the Group’s sites. Completed
stock levels are reviewed and debated regularly.
Mortgage
availability
Mortgage providers were negatively
impacted by the financial crisis from
2008 to 2011, and this reduced their
ability to provide mortgages to
potential purchasers at the time.
An inability of customers to secure
sufficient mortgage finance now or in
the future could have a direct impact
on the Group’s transaction levels.
Berkeley has a broad product mix and customer base
which reduces the reliance on mortgage availability across
its portfolio.
The Group participates in the Government’s Help to Buy
scheme, which provides deposit assistance to first time
buyers, and has participated in other Government schemes
historically. 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.
Key:
Identifying and acquiring land Designing and planning new homes and places Building new homes and places
Marketing and selling new homes Customer service and stewardship
28
The geographical focus on London and the South of
England is central to our strategy as articulated within our
business model.
By maintaining a strong balance sheet, and through a
long-established reputation for delivery, our stakeholders
in local communities trust our ability to deliver against any
commitments that we make, whether financial or operational.
We believe that our commitments in the areas of customer
service, design, the quality of new homes and placemaking
can make us the developer of choice for local authorities which
will help deliver the right planning consents for our schemes.
This has led to us securing further new consents this year to
support the future business.
Business model
(page 08)
- Knowing our market
- Sound financials
Our Vision
- Customers (Page 38)
- Homes (Page 40)
- Places (Page 42)
Remuneration packages are designed with retention in
2015 Performance highlights (KPIs)
mind and are explained in the financial statements within
(pages 02 to 03)
the Financials section of this report and accounted for in
- Adjusted profit before tax
accordance with International Financial Reporting Standards.
- Basic earnings per share
Hence they are appropriately reflected in our profit-related key
- Staff engaged with the
performance indicators and senior management across the
Berkeley Foundation
business has remained stable.
Berkeley’s commitments in the area of people are articulated
within the Our Vision section of this report. We measure the
engagement of our people with the Berkeley Foundation as
representative of their engagement with the business and its
wider impact.
Our Vision
- Our People (Page 46)
The level of cash due on forward sales secured is a key
performance indicator which measures the cash which
2015 Performance highlights (KPIs)
(pages 02 to 03)
Berkeley expects to receive on contracted forward sales
- Cash due on forward sales
over the next three financial years. This is a function
- Net promoter score
of reservation levels compared to trading reported in the
income statement, and so provides both a good indication
Our Vision
of past sales performance and visibility over future
- Customers (Page 38)
cash flows.
Through our commitments to Customers in Our Vision,
we have put customer service, interaction with our purchasers
and a commitment to market schemes in the UK first at
the centre of our plan for the business. We recognise this by
measuring our performance through the Net Promotor score.
The financial measure of cash due on forward sales
2015 Performance highlights (KPIs)
provides an indication of the level of sales on which deposits
(page 03)
have been taken and hence hedges against the risk of
- Cash due on forward sales
non-completion of sales.
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT Planning
process
Delays or refusals in obtaining
commercially viable planning
The Group follows a principle of investing in markets that it
knows and understands, and is geographically focused on
permissions on the Group’s land
London and the South of England, which we believe gives
holdings could result in the Group
us the best chance of conceiving and delivering the right
being unable to develop the land it
consents for the land that we acquire.
has purchased.
Full detailed planning and risk assessments are performed
This could have a direct impact on
and monitored for each site without planning permission,
the Group’s ability to deliver its
product and on its profitability.
both before and after purchase. Some sites are acquired
conditionally and some unconditionally depending on our
assessment of the risk profile. The planning status of all
sites is reviewed at monthly divisional Board meetings and
Main Board meetings.
The Group works closely with local communities in
respect of planning proposals and strong relationships are
maintained with local authorities and planning officers.
Retaining
people
An inability to attract, develop,
motivate and retain talented
We have developed a series of commitments within Our
Vision, our plan for the business, to ensure that we retain
employees could have an impact
and develop the best people to support the business
on the Group’s ability to deliver
in the long-term.
its strategic priorities.
Succession planning is regularly reviewed at both divisional
Failure to consider the retention
and Main Board level. Close relationships and dialogue are
and succession of key management
maintained with key personnel.
could result in a loss of knowledge
and competitive advantage.
Remuneration packages are constantly benchmarked
against the industry to ensure they remain competitive.
We want our people to be engaged with the business and
its impact on wider society through the activities of the
Berkeley Foundation.
Securing
sales
An inability to match supply to
Detailed market demand assessments of each site are
demand in terms of product, location
undertaken before acquisition and regularly during delivery
and price could result in missed
of each scheme to ensure that supply is matched to demand
sales targets and / or high levels of
in each location.
completed stock which in turn could
impact on the Group’s ability to
deliver its corporate strategy.
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 and underpinning the
financial investment in each of the Group’s sites. Completed
stock levels are reviewed and debated regularly.
Mortgage
availability
Mortgage providers were negatively
Berkeley has a broad product mix and customer base
impacted by the financial crisis from
which reduces the reliance on mortgage availability across
2008 to 2011, and this reduced their
its portfolio.
ability to provide mortgages to
potential purchasers at the time.
The Group participates in the Government’s Help to Buy
scheme, which provides deposit assistance to first time
An inability of customers to secure
buyers, and has participated in other Government schemes
sufficient mortgage finance now or in
historically. Deposits are taken on all sales to mitigate the
the future could have a direct impact
financial impact on the Group in the event that sales do not
on the Group’s transaction levels.
complete due to a lack of mortgage availability.
Risk Description
Approach to mitigating risk
Impact and measurement
Read more
The geographical focus on London and the South of
England is central to our strategy as articulated within our
business model.
By maintaining a strong balance sheet, and through a
long-established reputation for delivery, our stakeholders
in local communities trust our ability to deliver against any
commitments that we make, whether financial or operational.
We believe that our commitments in the areas of customer
service, design, the quality of new homes and placemaking
can make us the developer of choice for local authorities which
will help deliver the right planning consents for our schemes.
This has led to us securing further new consents this year to
support the future business.
Business model
(page 08)
- Knowing our market
- Sound financials
Our Vision
- Customers (Page 38)
- Homes (Page 40)
- Places (Page 42)
The planning process
is complex but has
been stable this
year, and so the risk
profile is steady.
Remuneration packages are designed with retention in
mind and are explained in the financial statements within
the Financials section of this report and accounted for in
accordance with International Financial Reporting Standards.
Hence they are appropriately reflected in our profit-related key
performance indicators and senior management across the
business has remained stable.
Berkeley’s commitments in the area of people are articulated
within the Our Vision section of this report. We measure the
engagement of our people with the Berkeley Foundation as
representative of their engagement with the business and its
wider impact.
The level of cash due on forward sales secured is a key
performance indicator which measures the cash which
Berkeley expects to receive on contracted forward sales
over the next three financial years. This is a function
of reservation levels compared to trading reported in the
income statement, and so provides both a good indication
of past sales performance and visibility over future
cash flows.
Through our commitments to Customers in Our Vision,
we have put customer service, interaction with our purchasers
and a commitment to market schemes in the UK first at
the centre of our plan for the business. We recognise this by
measuring our performance through the Net Promotor score.
2015 Performance highlights (KPIs)
(pages 02 to 03)
- Adjusted profit before tax
- Basic earnings per share
- Staff engaged with the
Berkeley Foundation
Our Vision
- Our People (Page 46)
A stable senior team
has continued to
manage the normal
pressures of people
retention.
2015 Performance highlights (KPIs)
(pages 02 to 03)
- Cash due on forward sales
- Net promoter score
Our Vision
- Customers (Page 38)
The financial measure of cash due on forward sales
provides an indication of the level of sales on which deposits
have been taken and hence hedges against the risk of
non-completion of sales.
2015 Performance highlights (KPIs)
(page 03)
- Cash due on forward sales
29
Whilst sales have
reduced since last
year, our experience
is of a return to a
normal market.
Low interest rates,
combined with a return
to economic growth,
have supported mortgage
availability, which has
reduced this risk this year.
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS How we manage risk
continued
Risk Description
Approach to mitigating risk
Impact and measurement
Read more
Environmental
and social
sustainability
Health
and Safety
Build cost &
programme
Berkeley is 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.
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.
Build costs are affected by the
availability of skilled labour and the
price and availability of materials,
supplies and subcontractors.
Changes to these prices and the
availability of labour could impact on
the profitability of each scheme.
Berkeley’s plan for the business, Our Vision, includes
specific commitments to enhance environmental and social
sustainability considerations in the delivery of our schemes.
On social sustainability in particular, we have sought to lead
the agenda.
These complement existing practices within the Group
to focus on brownfield development, monitor carbon
emissions and to be a considerate contractor on all of our
schemes and welcomed in the communities within which
we operate.
Berkeley’s health and safety strategy is set by the Board.
Dedicated health and safety teams are in place in each
division and at Head Office.
Procedures, training and reporting are all regularly
reviewed to ensure that high standards are maintained and
comprehensive accident investigation procedures are in
place. Adequate insurance is held to cover the risks inherent
in large-scale construction projects.
The Group has implemented a number of initiatives
to improve health and safety standards on site, with
workshops held with contractors during the year.
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.
Berkeley’s commitments within Our Vision, under the headings
Our Vision
of Homes and Places, focus on the long-term sustainability of
- Homes (Page 40)
our schemes, including ensuring minimum space standards and
- Places (Page 42)
putting fibre broadband into all new schemes, carrying out
- Operations (Page 44)
social sustainability assessments across our developments
and adapting all developments to climate change through
measures on flooding, overheating and water shortage. Our
plan recognises that these are essential considerations to
support the long-term viability of the places that we create.
Our success in this field is demonstrated by our ranking as
the most sustainable housebuilder in the UK for the ninth year
in a row in the Next Generation Benchmark 2014.
We continue to monitor RIDDOR reportable Accident
Incident Rates, reported within the Our People section
of Our Vision, and promote continual health and safety
programmes across the business.
Berkeley’s commitments within Our Vision, under the
Operations heading, includes the launch of a £2 million
Innovation Fund to support innovation in health and safety.
This was successfully launched during 2015 and aims to
promote further modernisation of the industry from within
and outside the business whether staff, contractors,
students or entrepreneurs.
Our Vision
- Operations (Page 44)
- Our People (Page 46)
2015 Performance highlights (KPIs)
(page 03)
- Accident Incident Rate
Delivering new homes to customers on time and on budget
2015 Performance highlights (KPIs)
are crucial to meeting our profit targets, as measured by
our profit-related key performance indicators.
Control of capital, whilst embracing the sector-leading
commitments in Our Vision, in particular under the
Operations heading, is essential to promoting the long-term
success of the business and delivering planned returns to
shareholders by 2021.
(pages 02 to 03)
- Adjusted profit before tax
- Basic earnings per share
- Adjusted return on equity
Our Vision
- Operations (Page 44)
Product
quality
Berkeley has a reputation for high
standards of quality in its product.
If the Group fails to deliver against
these standards and its wider
development obligations, it could
be exposed to reputational damage,
as well as reduced sales and
increased cost.
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.
The Group monitors its development obligations and
recognises any associated liabilities which arise.
We believe that delivering a quality product in great places
2015 Performance highlights (KPIs)
drives long-term profitability through the planning consents
(pages 02 to 03)
that we can secure, demand for the product and
recommendations from our customers.
Commitments under the Homes and Places headings of
Our Vision demonstrate Berkeley’s targets for continual
improvement of the product that we deliver, and under the
Customers heading to gain assurance, especially in the area
of customer service, that the product delivers the right
experience for our customers.
- Adjusted profit before tax
- Basic earnings per share
- Adjusted return on equity
- Net promoter score
Our Vision
- Homes (Page 40)
- Places (Page 42)
Key:
Identifying and acquiring land Designing and planning new homes and places Building new homes and places
Marketing and selling new homes Customer service and stewardship
30
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT Environmental
and social
sustainability
Berkeley is aware of the
Berkeley’s plan for the business, Our Vision, includes
environmental and social impact of
specific commitments to enhance environmental and social
the homes and communities that it
sustainability considerations in the delivery of our schemes.
builds, both during the construction
On social sustainability in particular, we have sought to lead
phase and on occupation by its
the agenda.
customers.
Failure to address sustainability
issues could affect the Group’s
These complement existing practices within the Group
to focus on brownfield development, monitor carbon
emissions and to be a considerate contractor on all of our
ability to acquire land, gain planning
schemes and welcomed in the communities within which
permission, manage sites effectively
we operate.
and respond to increasing customer
demand for sustainable homes.
Health
and Safety
Berkeley’s operations have a direct
Berkeley’s health and safety strategy is set by the Board.
impact on the health and safety of its
Dedicated health and safety teams are in place in each
people, contractors and members of
division and at Head Office.
the public. Berkeley considers this to
be an area of critical importance.
Procedures, training and reporting are all regularly
reviewed to ensure that high standards are maintained and
A lack of adequate procedures and
comprehensive accident investigation procedures are in
systems to reduce the dangers
place. Adequate insurance is held to cover the risks inherent
inherent in the construction process
in large-scale construction projects.
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.
The Group has implemented a number of initiatives
to improve health and safety standards on site, with
workshops held with contractors during the year.
Build cost &
programme
Build costs are affected by the
A procurement and programming strategy for each
availability of skilled labour and the
development is agreed by the divisional Board before site
price and availability of materials,
acquisition.
supplies and subcontractors.
Changes to these prices and the
undertaken and agreed by the divisional Board prior to the
availability of labour could impact on
commencement of construction.
A further assessment of procurement and programming is
the profitability of each scheme.
Build cost reconciliations and build programme dates are
presented and reviewed in detail at divisional cost review
meetings each month.
Risk Description
Approach to mitigating risk
Impact and measurement
Read more
Berkeley’s commitments within Our Vision, under the headings
of Homes and Places, focus on the long-term sustainability of
our schemes, including ensuring minimum space standards and
putting fibre broadband into all new schemes, carrying out
social sustainability assessments across our developments
and adapting all developments to climate change through
measures on flooding, overheating and water shortage. Our
plan recognises that these are essential considerations to
support the long-term viability of the places that we create.
Our success in this field is demonstrated by our ranking as
the most sustainable housebuilder in the UK for the ninth year
in a row in the Next Generation Benchmark 2014.
We continue to monitor RIDDOR reportable Accident
Incident Rates, reported within the Our People section
of Our Vision, and promote continual health and safety
programmes across the business.
Berkeley’s commitments within Our Vision, under the
Operations heading, includes the launch of a £2 million
Innovation Fund to support innovation in health and safety.
This was successfully launched during 2015 and aims to
promote further modernisation of the industry from within
and outside the business whether staff, contractors,
students or entrepreneurs.
Our Vision
- Homes (Page 40)
- Places (Page 42)
- Operations (Page 44)
Our focus on this
area remains a key
differentiator of
Berkeley and the risks
and our approach
continually evolve.
Our Vision
- Operations (Page 44)
- Our People (Page 46)
2015 Performance highlights (KPIs)
(page 03)
- Accident Incident Rate
This has been and
remains an operational
priority for Berkeley.
Delivering new homes to customers on time and on budget
are crucial to meeting our profit targets, as measured by
our profit-related key performance indicators.
Control of capital, whilst embracing the sector-leading
commitments in Our Vision, in particular under the
Operations heading, is essential to promoting the long-term
success of the business and delivering planned returns to
shareholders by 2021.
2015 Performance highlights (KPIs)
(pages 02 to 03)
- Adjusted profit before tax
- Basic earnings per share
- Adjusted return on equity
Our Vision
- Operations (Page 44)
Product
quality
Berkeley has a reputation for high
Detailed reviews are undertaken of the product on each
standards of quality in its product.
scheme both during the acquisition of the site and
If the Group fails to deliver against
throughout the build process to ensure that the quality
these standards and its wider
of the product is maintained.
development obligations, it could
be exposed to reputational damage,
as well as reduced sales and
increased cost.
Customer Satisfaction surveys are undertaken on
the handover of all private apartments, and feedback
incorporated in shaping the specification and quality
of subsequent schemes.
The Group monitors its development obligations and
recognises any associated liabilities which arise.
We believe that delivering a quality product in great places
drives long-term profitability through the planning consents
that we can secure, demand for the product and
recommendations from our customers.
Commitments under the Homes and Places headings of
Our Vision demonstrate Berkeley’s targets for continual
improvement of the product that we deliver, and under the
Customers heading to gain assurance, especially in the area
of customer service, that the product delivers the right
experience for our customers.
2015 Performance highlights (KPIs)
(pages 02 to 03)
- Adjusted profit before tax
- Basic earnings per share
- Adjusted return on equity
- Net promoter score
Our Vision
- Homes (Page 40)
- Places (Page 42)
An increasingly
competitive landscape
has put increased
pressure on costs and
labour availability
this year.
Our strong focus on
maintaining quality
of design and product
has remained steady.
31
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
Where we operate
We focus on London and South of England,
markets that we know and understand.
3232
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT I
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BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
South of
England
25Sites outside London
100%
All sites with an
implementable
planning consent are
in construction
Tunbridge Wells
Royal Wells Park is a new community
of over 200 homes in Tunbridge Wells
in Kent, which includes the construction
of a new school.
Barns Green
69 homes and a school are being built
in this West Sussex location.
London
49Sites in London
100%
All sites with an
implementable consent
are in construction
i
e
g
a
m
d
e
t
a
r
e
n
e
g
r
e
t
u
p
m
o
C
London Dock
A consent has been secured for over 1,800
new homes at this former print works.
Kidbrooke Village
1,000 homes of 4,700 have already been
built at this major regeneration scheme.
33
33
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORT
Where we operate
continued
London
34 33
5
14 35
31
38
8
21
13
26
4
8
22
10
3
1
24
9
25
1
28
36
3
4
29
19
9
10
27
11
11
6
18 17
15
32
2
12
7
16
6
2
20
5
37
23
30
7
London under construction
London future sites
1 190 Strand
2 375 Kensington High Street
(including Homebase and Telereal)
3 Abell & Cleland House, Westminster
4 Battersea Reach
5 Beaufort Park, Hendon
6 Brewery Wharf, Twickenham
7 Chelsea Creek / Imperial Wharf
8 City Forum, City of London
9 The Corniche, Albert Embankment
10 Dickens Yard, Ealing
11 Fitzroy Gate, Isleworth
12 Fulham Reach, Hammersmith
13 Goodman’s Fields, Aldgate
14 High Road, Finchley
15 Hogarth, Chiswick
16 Hurlingham Gate, Fulham
17 Kew Bridge Road
18 Kew Bridge West, Brentford
19 Kidbrooke Village
20 Kingston
21 London Dock, Wapping
22 Marine Wharf, Deptford
23 Marryat Place, Wimbledon
24 Merano, Albert Embankment
25 One Blackfriars, Southwark
26 One Tower Bridge
27 One Victoria Road, Acton
28 Riverlight, Battersea
29 Royal Arsenal Riverside
30 Saffron Square, Croydon
31 Smithfield Square, Hornsey
32 Sovereign Court, Hammersmith
33 St Joseph’s Gate, Mill Hill
34 Stanmore Place
35 The Avenue, Finchley
36 Vista, Battersea
37 Wimbledon Hill Park
38 Woodberry Park
34
1 22-26 Albert Embankment
2 Barnes, Richmond
3 Battersea Gardens
4 Chambers Wharf, Southwark
5 Kingston*
6 Latchmere House, Richmond
7 Orpington
8 South Quay Plaza, Docklands
9 Southall
10 Westminster
11 White City
*New sites contracted for acquisition during the year
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT South of England
W
orc
e
s
t
e
r
s
19
h
ir
e
Warwickshire
Gloucestershire
6
Oxfordshire
n s h ir e
p t o
N ortha m
B
u
c
k
i
n
g
h
a
m
s
h
ir
e
Cambridgeshire
e
hir
s
d
r
dfo
e
B
e rtf o r d shire
H
Essex
10 4
2
LONDON
3
Wiltshire
Somerset
Berkshire
4
15
1
13 18
1
7
Hampshire
5
Surrey
12
2
5
8
11
Kent
3
16
17
West Sussex
East Sussex
9
14
Out of London under construction
Out of London future sites
1 Ascot
2 Barns Green
3 Bath
4 Beaconsfield
5 Caterham
6 Cirencester
7 Fleet
8 Gillingham
9 Gosport
10 High Wycombe
11 Holborough
12 Horsham
13 Maidenhead
14 North Bersted
15 Reading
16 Sevenoaks
17 Tunbridge Wells
18 Warfield
19 Worcester
1 Reading*
2 Rickmansworth*
3 Sevenoaks (2 sites)*
4 Taplow
5 Winchester*
*New sites contracted for acquisition during the year
35
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
£6 million has been raised by the Berkeley Foundation since its
launch in March 2011, with 73% of Berkeley staff now involved.
Funds are allocated to 5 Strategic Partnerships, 15 Designated
Charities and One-off Community Investment Grants.
www.berkeleyfoundation.org.uk
36
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
Our plan and commitments for
the business: ‘Our Vision’
Berkeley’s plan for the business is articulated through the
framework of “Our Vision”. It sets out our aspiration to be
a world-class business and five areas of focus. Every two years
we set targeted, challenging commitments to meet in each of
the five areas alongside our everyday actions.
I
S
T
R
A
T
E
G
C
R
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P
O
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N
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A
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Our Vision
To be a world-class business generating long-term value by
creating successful, sustainable places where people aspire to live.
Five Focus Areas
Customers
Homes
Places
Operations
Provide exceptional
service to all of our
customers and put
them at the heart of
our decisions.
Develop individually
designed, high quality
homes with low
environmental impact.
Create great places
where residents enjoy
a good quality of life,
now and in the future.
Make the right long-term
decisions whilst running
the business efficiently
and working with our
supply chain.
Develop a highly skilled workforce who run autonomous businesses, operate in a safe
and supportive working environment, and contribute to wider society.
Our People
For Berkeley to generate long-term value,
the skills, commitment and approach of
our people throughout the business are
crucial. We need to ensure that everyone
has the right tools to enable them to
work towards a common set of goals. Our
Vision sets out our company values with
five key focus areas and a series of clear
strategic commitments to help empower
our people and give them clear direction
across every discipline of the business.
Our Vision also helps to explain our
approach and areas of focus externally.
In 2014 we set 16 challenging commitments
to work towards over a two year period.
These were determined based on input
from an external stakeholder panel and
issues review, together with consultation
with each of our autonomous companies
and specialist committees. We are now
half way through the current two year
cycle of commitments.
The vision is underpinned by a core set of
values. These are having integrity, being
passionate about what we do, showing
respect for people, thinking creatively and
achieving excellence through detail.
This culture informs the way we work,
the way we lead the business, and what
we deliver to our customers. We focus
just as hard on the way we work as the
products we deliver.
We expand on each of the five
focus areas of Our Vision over the
next few pages.
For more information see
www.berkeleygroup.co.uk/our-vision
37
Customers
Provide exceptional service to all of our customers
and put them at the heart of our decisions.
Our approach
Why focus on customers
Our customers are at the heart of all our decisions. We
aim to understand their needs and consistently meet
or exceed their expectations. The service we provide
is professional, efficient and helpful to make the home
buying process as straightforward and enjoyable as
possible. Our levels of customer service aim to be
comparable to other top brands.
Ensuring our customers are satisfied is crucial to the
ongoing success of the business; ultimately all
areas of our strategy are focused on the end customer
and putting them at the centre of our decisions.
This extends beyond customer-facing activities,
from the initial purchase of the land through to the
design of the home and development.
All our customers are provided with a commitment
that when they buy a new home from Berkeley they
can be safe in the knowledge that it is built to very high
standards of design and quality, has low environmental
impact and that they will enjoy an exceptional customer
experience. Each customer receives tailored information
relating to their purchase and has a dedicated point of
contact throughout the customer journey.
Everyday actions
Give every customer a dedicated point of contact at all stages in the customer journey
Clearly set out our commitment to our customers
Incorporate information on sustainability and Our Vision within sales suites and marketing material
Provide all customers with easy-to-use Living Guides to help them operate their home efficiently
Follow the sales manual to ensure consistently high standards
Key commitments for 2014 – 2016
Deliver world-class customer service measured though the Net Promoter Score
Launch an interactive way of communicating with our customers, ‘My Home Plus’
Market all our developments in the UK first
69.8 Net Promoter Score
(Average NPS is 50, on a scale of -100 to +100)
Institute of Customer Service
ServiceMark achieved across
all businesses
98%
customers would recommend us to a friend
38
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT Sustainable living
Our Vision sets out a commitment that we
will develop homes with low environmental
impact where residents can enjoy a good
quality of life. To raise awareness of this
from the outset, sales suites and marketing
materials include information on all aspects
of sustainability, from environmental
features to community facilities.
Later in the purchasing process
customers are given access to information
on sustainable living and how to operate
their home efficiently. After completion
we seek feedback from our customers
on the sustainability features to help
inform our approach.
Learn more about Customers at
www.berkeleygroup.co.uk/
about-berkeley-group/
our-vision/customers
Customer service
We aim to provide exceptional customer
service, from the moment someone
enquires about a property, through
the sales process, handover and post
occupation.
A customer’s experience should be
professional, efficient and enjoyable and
our high levels of customer satisfaction are
testament to this. Over 98% of customers
would recommend us to a friend and our
Net Promoter Score ranks us alongside
world-class brands such as Apple and
First Direct.
We are delighted that, following joining
the Institute of Customer Service in 2014,
each of our operating businesses has now
achieved the ServiceMark accreditation. This
is a national standard based on customer
feedback and engagement of employees
which recognises our commitment to, and
achievement in, customer service. We are
the only developer with this accolade.
In 2015 we launched a new sales manual
to ensure a consistent approach and high
standards across all developments. This
supplements extensive training provided in
2014 to all sales consultants and a range of
online modules and assessments.
My Home Plus
My Home Plus is an interactive online
system enabling customers to receive
information and communicate with us
throughout the purchasing process, and
after completion. The first phases of the
new system were successfully launched in
2015, with several developments trialling
the portal. Customer feedback has been
positive and we are now adding further
functionality and sites.
Customers will be able to receive updates,
such as photos of the construction
process, make specification choices online
and access documents and manuals
relating to their home.
UK First
International investors play a vital role in
bringing inward investment into the UK.
In London, they help to reflect the city’s
status as a world-class city. However, we
recognise that customers from the UK
should be given priority. In August 2013,
ahead of the Mayoral Concordat, we made
a pledge to offer all developments in the
UK before marketing overseas.
Our UK First Policy continues to be
implemented on all schemes. This requires
the initial sales launch to be in the UK first,
and every individual home to be made
available to customers in the UK either first
or at the same time as launching overseas.
Ensuring our customers are satisfied is crucial to the ongoing success of the business.
39
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS Homes
Develop individually designed, high quality
homes with low environmental impact.
Our approach
Why focus on homes
Each of our homes and developments is bespoke
and we use qualified architects to design each scheme.
Attention to detail in design is paramount to ensure
homes meet the needs of our customers and our
specifications are planned to meet the varied needs
of all types of homebuyers, from luxurious houses to
key worker apartments. The impact on the environment
throughout the lifetime of the home is considered
during its design with an aim to minimise impacts
and provide home owners with the opportunity to
live more sustainably. The high quality finish which
we demand in our new homes requires a skilled
workforce and thorough checks before handover.
As a residential-led developer, building high quality and
well designed homes is fundamental to our business
and is intrinsic to all the other areas of Our Vision. It is
demanded of us by our customers and helps to set us
apart from volume housebuilders. It is clear that to have
a successful business, our focus has to be on the end
product of the homes right from the outset.
Everyday actions
Ensure optimal layouts and specifications
Complete detailed checks of every home prior to handover
Apply the principles of adaptability and flexibility
Ensure each home has recycling facilities
Key commitments for 2014 – 2016
Enable fibre broadband on all new homes and provide community Wi-Fi
Guarantee space standards for all new homes
Launch a new R&D programme to utilise customer feedback and drive innovation through improved design
broadband-connected homes
100% new developments to provide fibre
63%
Evening Standard Awards
2014, Best London Home
individual homes supplied with low
carbon or renewable technology
375 Kensington High Street
40
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT Broadband and connectivity
The internet is now regarded as the fourth
utility, with customers demanding better
connected homes. We are committed to
ensuring that fibre optic infrastructure is
enabled in our homes. Where possible,
we aim to set this up so it is ready to use
on move-in day. To achieve connectivity
we are reliant on third party infrastructure
and service providers.
The majority of our new developments will
be able to meet this commitment. We are
also part of a Government and industry
round table to find practical solutions for
helping the whole industry to provide
more connected homes.
Space standards
Lack of space is one of the most common
reasons why customers choose not to
buy new build homes. In response, we
were the first private developer to commit
to minimum space standards across
its portfolio. We believe this provides a
genuinely better home for our customers.
We have set standards for three core
aspects in every home we build, covering
master bedroom size, floor-to-ceiling
height and storage space. Since launching
the commitment, the Government has
published a new Nationally Described
Space Standard for use from autumn
2015 where it is referenced in local
planning policy.
We will meet the Government’s new
standard where requested, and will
continue to meet our three criteria in
other locations.
Research and development
The design of our homes is continuously
evolving. To help this process we are
undertaking research and development
in two key areas.
The first is to strengthen feedback loops
between customers and other stakeholders
and our design teams. The second element
is research and development through
trialling new processes, materials and
products to further improve our homes.
Bespoke design
There is no generic Berkeley scheme. Every
design is bespoke and we use architects
on every project, something which is
uncommon within the industry. We
continue to promote good urban design
across the industry through sponsorship
of the London Festival of Architecture.
Attention to detail
The quality which we demand in our
new homes requires a skilled workforce
and attention to detail. We use our
marketing suites as the benchmark for
build quality and finish in each individual
home. Every area is thoroughly checked
before handover to ensure that high
standards are maintained.
Sustainability
In March 2015 the Government concluded
its review of housing standards, marking a
significant change for the home building
industry. With the Code for Sustainable
Homes now withdrawn, alongside many
other standards, we are reviewing our
priorities. Our approach continues to be
to achieve a high standard across all of
our developments, regardless of location
or tenure.
We are preparing for the implementation
of Allowable Solutions from 2016 as part
of the Government’s zero carbon homes
policy. We also sit on the UK Green
Building Council’s new round table on
the future of sustainable homes.
Homes for everyone
Berkeley builds for everyone: from
families to first time buyers, students
to older people, and luxury living to
affordable housing.
We are pleased to have won the First
Time Buyer Award 2015 for our homes at
Kidbrooke Village and are proud of the
homes we deliver for every generation.
Learn more about Homes at
www.berkeleygroup.co.uk/
about-berkeley-group/
our-vision/homes
Left: Roman House, City of London Right: Barns Green, West Sussex.
41
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS Places
Create great places where people enjoy a good
quality of life, now and in the future.
Our approach
Why focus on places
To remain a developer of choice it is essential that
we focus on the outcome of our developments in
the long-term. This begins right from the outset by
ensuring the location is right at land purchase, to
focusing on placemaking during design and to
ensuring that suitable management processes are
in place once the development is occupied.
We create well-designed, high quality, safe and
sustainable places which will endure as settled, vibrant
communities long into the future. These are places
where people choose to live, work and spend their
time, that directly encourage people’s wellbeing and
quality of life, and offer them a space and a base from
which to lead safe and fulfilling lives. Through our
ability both to collaborate and to deliver, we aim to
be the developer of choice for local authorities and
existing communities. 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.
Everyday actions
Apply our Community Engagement Strategy on all developments
Consult an ecologist for all developments and incorporate living roofs on all suitable
apartment roof spaces
Incorporate rainwater harvesting, electric car charging points and cycle storage
Achieve at least BREEAM Very Good on offices, retail space, Extra Care and
student accommodation
Key commitments for 2014 – 2016
Measure and increase people’s quality of life by applying a framework for social sustainability
Test new forms of estate management and community governance
Adapt all developments to climate change through measures on flooding, overheating and water shortage
assessments completed
20 social sustainability
100%
new developments followed the
community engagement strategy
Ideal Home Show Blue
Ribbon Awards, Housing
Development of the Year
Kidbrooke Village
42
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT Quality of life
In 2014 we launched a toolkit to help
us measure and enhance people’s quality
of life. We refer to it during the design
process for all new developments and
are committed to conducting a formal
assessment pre-planning for every
development of 100 homes or more. In
2015 100% of these larger developments
conducted a formal assessment. A report
on life at Royal Arsenal Riverside showed
that people report high levels of happiness,
belonging, and trust in their neighbours.
We presented the methodology at UK
Green Building Council events in June
and November and held a policy briefing
in January on housing and wellbeing.
Estate management and
community governance
Our work on quality of life and social
sustainability has identified that
placekeeping is as important as
placemaking and that they should be
thought about as two elements of
the same process.
We take a long-term view for our
developments to ensure that they remain
great places in which to live for decades
to come. We have begun to review
current estate management practices
across the business.
A Clore Social Leadership Programme
research project has been undertaken
on one of our developments on the
different management options for green
and public space.
Climate change adaptation
The effects of climate change are already
being observed in the UK. Climate change
adaptation is about taking action now to
ensure that our homes and developments
remain comfortable places in which to
live in decades to come. In 2015, all new
developments submitted for planning will
incorporate climate change adaptation
measures around the three key issues of
flooding, overheating and water shortage.
Based on research during 2014, we have
produced a checklist for our development
teams to help them to identify which issues
are likely to be most important on a site
depending on the type of development
planned and its location.
Sustainability
Sustainability of the wider development
is as important as the individual homes
we create. Typically issues such as ecology
and transport are the focus areas. We
consult an ecologist on all schemes and
incorporate living roofs on all suitable
roof spaces.
We were pleased that the new linear park
and tree planting at Kidbrooke Village
were highlighted as a best practice case
study within the UK Green Building
Council’s report on green infrastructure
in February 2015.
Community engagement
Our Community Engagement Strategy is
referred to for all new schemes. The type
of engagement varies depending on the
scheme and location. Many of our schemes
adopt community planning strategies
where local people are involved in the
design, whereas others include different
types of community events to share
information and encourage input from
an early stage.
Partnerships
Partnership arrangements need to be
tailored to suit each project, skilfully
coordinating the investment and ambitions
of Berkeley, the local authority, residents,
Registered Social Landlords and other
stakeholders. We listen to what local people
and other partners want and incorporate
this into the design wherever possible.
At Royal Wells Park we are working to
build the first developer-led free school,
whilst at Highwood in Horsham we have
helped to deliver the second new road
built in the district in 13 years; the first
was also built by Berkeley.
Learn more about Places at
www.berkeleygroup.co.uk/
about-berkeley-group/
our-vision/places
The Boat Race at Fulham Reach.
43
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS Operations
Make the right long-term decisions whilst running the business
efficiently and working with our supply chain.
Our approach
Why focus on operations
Through recognition that the property market is
inherently cyclical we make decisions with a focus on
the long-term. We understand the operational risks
in trying to successfully identify, design, build and sell
homes and create new places. We aspire to maintain
excellent partnerships with our supply chain to ensure
that high quality services and materials are consistently
provided and we are a client of choice. We support and
engage with our supply chain and, through our supply
chain, we help to provide employment and support to
young people. We conduct our day-to-day operations
in an environmentally efficient manner and with
consideration to our neighbours.
Running our operations effectively and considerately is
fundamental to the long-term success of the business.
We need a skilled and reliable supply chain to help us
deliver the pipeline of work and good relationships
with local stakeholders are essential to maintain our
reputation for quality.
Everyday actions
Communicate our requirements to contractors and procure on overall value rather than cost alone
Register all sites with the Considerate Constructors Scheme and achieve at least 38/50 in every audit
Ensure all timber is FSC or PEFC certified
Implement water and carbon efficiency measures on each construction site and achieve a
waste recycling rate of at least 90%
Key commitments for 2014 – 2016
Achieve a 50% increase in site-based apprenticeships and training
Launch a £2 million fund for the supply chain to support innovation in health and safety
Map our supply chain risks and develop a sustainable specification and procurement strategy
15% reduction in office carbon
emissions per person
Considerate Constructors
Scheme Awards 2015
Most Considerate Site
MOST CONSIDERATE SITE
Roman House
41.6/50
Average Considerate Constructors Score
(Industry average: 35.7)
44
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT Apprenticeships and training
Key challenges for industry and
Government are to encourage young
people into the industry and increase
capability in the workforce to ensure that
there are enough people with the right
skills to deliver the pipeline of future work.
Our supply chain, as well as employees,
industry bodies and universities, are
encouraged to apply for a grant of up to
£250,000 for an innovative idea. The fund
has already received several successful
applications. For more information, see
www.berkeleygroup.co.uk/innovation-fund.
Considerate construction
We are delighted that our approach to
considerate construction continues to
be recognised. One site, Roman House,
was awarded with the most prestigious
accolade in the UK, the Most Considerate
Site award.
We have produced a new booklet for our
supply chain to help provide information
on how to take on an apprentice and the
funding available to help encourage uptake.
The Berkeley Apprenticeship Scheme was
launched at Kidbrooke Village in autumn
2014 to offer 200 career opportunities over
five years to local people and help increase
the level of skilled workers. The first intake
of apprentices are now working with the
supply chain. Various other initiatives are
in progress to encourage young people
into the industry, including hosting the
8th Annual Careers Fair at Imperial Wharf
in March.
Supply chain
Once schemes are in production, the
support of a reliable and competent supply
chain is critical to success. Engagement
with our suppliers is key to remaining a
client of choice and achieving high quality
outcomes, on time and on budget.
In 2015 we have focused on making it easier
for small businesses to work with us. Our
paperwork has been simplified and there
is a new online portal which includes all the
pertinent documents contractors need to
be aware of. Our Supply Chain Taskforce
has also worked with new companies to
broaden our potential supply chain.
We continue to monitor the number of
apprentices working on our sites and are
planning more initiatives for 2016.
Innovation Fund
A new Innovation Fund for the supply
chain was launched in January 2015 to
promote innovation in health and safety
which reduces construction-related risk,
drives the industry forward and improves
health and safety performance.
Sustainable procurement
We recognise that the majority of our
sustainability impacts are likely to occur
indirectly through the supply chain. In
2015 we identified our top materials
and undertook research into sustainable
specification and procurement of these.
A baselining exercise has been completed
in advance of a new strategy being
launched in 2016.
Another site was awarded Runner-Up
status, putting it in the top 30 sites in the
country, alongside more than 30 other
Gold, Silver and Bronze awards.
In August 2014 we were the first
homebuilder to reach the milestone of
500 sites registered and Goodman’s
Fields is now one of the first ‘ultra sites’,
a new initiative from the Scheme where
services and materials are sourced from
registered suppliers.
Resource efficiency
We are pleased to report that office carbon
emissions per person have reduced by 15%.
Further information on carbon emissions
is set out within the Directors’ report on
page 85. Our site waste recycling rate has
remained above our target of 90%.
Due to increasing legislation in this area,
for example with the introduction of the
Energy Savings Opportunity Scheme, we
are in the process of implementing more
advanced systems for recording
and analysing information.
Learn more about Operations at
www.berkeleygroup.co.uk/
about-berkeley-group/
our-vision/operations
Left: Site inspection at Fulham Reach, Hammersmith.
45
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS Our People
Develop a highly skilled workforce who run autonomous businesses, operate in
a safe and supportive working environment, and contribute to wider society.
Our approach
Why focus on our people
A devolved business structure is at the heart of our
strategy. Our recognised brands and autonomous
operational teams carefully manage each individual
scheme to ensure that the entrepreneurial spirit of
the business continues. Recruiting and retaining a
high calibre workforce is crucial to our approach.
We must support both our direct employees and the
wider workforce of the contractors working on our
sites. We are proud to be safe; safety continues to
be a key focus area across all of our operations, in
addition to enhancing health and wellbeing. We
also aim to have a positive impact on society and
enable young people to get into work through our
support of the Berkeley Foundation.
Our people are key to the development process, from
the identification and purchase of land through to the
sale of our homes and ongoing customer service.
To run any business successfully it is vital to ensure
that the workforce is highly skilled and motivated.
We understand the importance of supporting all our
employees to allow them to work in a safe environment
and to continue to advance their knowledge and skills.
Developing and retaining our workforce enables us to
deliver our objectives and grow as a business.
Everyday actions
Monitor staff retention rates and employee diversity
Undertake individual training assessments for each member of staff
Monitor and report on accident and incident rates
Undertake unannounced H&S audits on all sites, in addition to weekly Director visits
Support the Job Creation Programme as part of the Berkeley Foundation
Key commitments for 2014 – 2016
Pay at least the Living Wage to all direct employees
Reduce energy costs by up to £500,000, investing 50% of the saving in new health
and wellbeing initiatives
Encourage and support every member of staff to be involved with the Berkeley Foundation each year
Launch a talent management programme which develops new ideas to enhance the business
2.46 Accident Incident Rate
(Industry average: 4.12 (HSE, 2014 figures)
Gold Medal:
Berkeley First, East Thames,
Oxford and Chiltern
73%
Employees involved with the Berkeley Foundation
(2014: 64%)
46
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT Living Wage
The Living Wage is calculated according
to the basic cost of living and provides
enough for an acceptable standard of
living. We pay at least the Living Wage
to all our employees, and encourage our
contractors to do so.
Energy and wellbeing
We have set a target to reduce energy
consumption by around 10% each
year across all aspects of the business
including sites, offices and sales suites. In
2015, we have focused on understanding
consumption and charges for energy.
A number of our sites are trialling more
effective sub-metering and there has been a
focus on out-of-hours usage and temporary
electrics. We have also undertaken a
comparison exercise of unit charges for
energy across our different facilities.
Health and wellbeing initiatives have
been selected locally and include well
person clinics, office fruit baskets and
exercise classes.
The Berkeley Foundation
The percentage of staff engaged with
the activities of the Berkeley Foundation
increased from 64% to 73% in 2015. This
includes fundraising, Give As You Earn and
volunteering. Our aim is for all employees to
be involved with the Foundation each year.
Over the last four years the Foundation
has committed or invested more than
£6 million to the lives of young people and
their families, including a new three year
agreement with Shelter.
The Job Creation Programme launched
in 2013 has so far enabled more than
400 unemployed people to get into
work. Street Elite has been another major
programme we have supported. We
are delighted that a graduate of Street
Elite, Yasar Ugar won the Construction
Youth Trust Award in 2015 and 14 of the
graduates of the scheme now work
for us. For more information see
www.berkeleyfoundation.org.uk.
Talent management
This commitment looks to recognise
employees’ performance and potential and
to provide support and further development
through a focus on implementing their ideas
to enhance the business. There are various
talent management programmes in place
across the operating businesses. Some are
intensive schemes for selected individuals,
whereas other businesses are progressing
programmes for all staff.
There has been a focus in 2015 on improving
inductions for new starters and on reviewing
our approach to training, increasingly
moving to a broader assessment of not
only technical and safety skills, but also
softer skills.
We are delighted that one of our project
managers, Damian Bates, won the
prestigious accolade of the NHBC’s
Pride in the Job Supreme Award for the
multi-storey category in January.
Supporting a diverse workforce
Our business continues to grow; we now
have over 2,100 direct employees who
are central to our success. Our employees
work in a range of roles across more than
100 sites and offices. Across the Group,
37% of employees are female as are 30%
of our Main Board directors.
In addition to our direct employees, we
also support a large workforce through our
contractors; in April 2015 more than 10,500
people were working on our sites.
Health and safety
In 2015 we rolled out new Group Health
and Safety Standards to ensure a
consistent approach across all of our
sites and our supply chain. We have also
launched a new strategy document which
clearly sets out our approach. The launch
of the Innovation Fund (summarised within
the Operations section on page 45) is an
example of a leading initiative to improve
health and safety, not just within Berkeley
but across the industry as a whole.
We are pleased to be able to report a
reduced Accident Incident Rate (AIR)
of 2.46 (2014: 2.92), demonstrating
performance beyond the industry average.
Our AFR is 0.12, down from 0.16 in 2014.
Learn more about Our People at
www.berkeleygroup.co.uk/
about-berkeley-group/
our-vision/our-people
Employee diversity
Female
Male
Total
Total Employees
800
1,378
2,178
Senior Management
Board of Directors
At 30 April 2015.
2
3
5
10
7
13
Our people are key to the development process.
47
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
New apartment at
Riverlight in Nine Elms.
48
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
Trading and Financial
Review and Outlook
We have a plan to return £13 per share
(over £1.7 billion) to shareholders by 2021 and
to retain a successful and sustainable business
thereafter. Our performance demonstrates
that we are on track to achieve this.
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Clockwise from top left: The Ashmiles, Barns Green; Wimbledon Hill Park, Wimbledon; Hurlingham Gate, Fulham; One Tower Bridge.
49
Trading and Financial Review and Outlook
continued
Overview
The operational highlights of the year
ended 30 April 2015 were the start of a
further eight new schemes across London
and the South of England, the achievement
of 28 new planning consents across these
regions, which secure future delivery of
schemes and value, and the announcement
of our new joint venture with National Grid
plc, St William, which is targeted to deliver
over 7,000 new homes from 10 initial sites.
In terms of performance, Berkeley built
and sold 3,355 new homes this year at
an average selling price of £575,000. This
led to an increase in adjusted pre-tax
profits of £454.6 million, an increase of
19.6% compared to last year, and a profit
of £85.1 million from the sale of a portfolio
of ground rent assets, giving total pre-tax
earnings of £539.7 million.
After paying £243.5 million in dividends in
the year, the Group has remained ungeared
throughout, with net cash rising from
£129.2 million at the start of the year to
£430.9 million at 30 April 2015. In terms
of visibility and outlook, the Group has
reported cash due on forward sales at
30 April 2015 of £3.0 billion, up from
£2.3 billion last year, and estimated
future gross margin in the land bank of
£5.3 billion, an increase of £0.8 billion
since last year.
Housing market
This year the housing market has returned
to normal transaction levels from a high
point in 2013/14. Domestic demand has
been strong in our core markets of London
and the South of England, whilst London
has continued to benefit from a stable
social and political environment, enabling
it to attract inward investment from the
UK and overseas. Berkeley has experienced
sales price increases in line with those
reported in the wider market and these
have generally been matched by cost
increases at a similar rate.
A clear General Election result provides
stability in the national political
landscape and we are encouraged by the
commitment to bring forward more public
land and to existing initiatives, such as Help
to Buy. The challenge, however, remains
significant as development appraisals must
factor in the considerable and needed
contributions to local communities,
currently funded through affordable
housing subsidies and payments towards
local infrastructure, such as transport,
public realm, education and healthcare. It
also encompasses operational capacity;
having the skills, expertise and labour in a
busy development sector to deliver new
homes of the right quality. This complexity
demands time, expertise and an appetite
for risk underpinned by financial strength.
London’s continued pre-eminence as a
world city is a critical factor in addressing
the capital’s housing shortage. It attracts
the investment to fund development, as
well as the diverse range of expertise and
talent that make London such a unique
place. For this reason, Berkeley considers
it important that the UK continues to play
a major role in, and operate as part of, the
European Union.
Berkeley launched a number of new
schemes to the market this year, from
London Dock in Wapping to Smithfield
Square in Hornsey and 250 City Road in
Islington amongst others, all of which were
marketed in the UK first and have been
well received by customers. Berkeley’s
focus remains on providing new places
that benefit from quality of design, public
realm, transport links and access to jobs
and amenities.
The stable market has resulted in
cancellation rates of 10%, which is below
normal historic levels of 15% to 20% and
completed stock remains at historically
low levels, with 31 completed residential
properties in inventories at 30 April 2015
(39 at 30 April 2014).
Income Statement
Year ended 30 April
Revenue from operations
Operating profit from operations
Net finance costs
Share of joint ventures result
Adjusted profit before tax
Profit from sale of ground rent assets
Profit before tax
Tax
Profit after tax
Basic earnings per share
Pre-tax return on equity
Adjusted earnings per share
Adjusted pre-tax return on equity
Homes sold (excluding joint ventures)
2015
£’million
2,020.2
439.0
(12.7)
28.3
454.6
85.1
539.7
(116.2)
423.5
313.0p
35.1%
263.6p
29.5%
3,355
2014
£’million
1,620.6
374.8
(6.9)
12.1
380.0
-
380.0
(87.1)
292.9
221.8p
27.5%
221.8p
27.5%
3,742
Change
£’million
+399.6
+64.2
-5.8
+16.2
+74.6
+85.1
+159.7
-29.1
+130.6
+91.2p
+7.6%
+41.8p
+2.0%
%
+24.7%
+17.1%
+19.6%
+42.0%
+44.6%
+41.1%
+18.8%
Average selling price
£575,000
£423,000
50
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT Land
Berkeley has made strong progress in
delivering value into and from its land
holdings during the year, and now has
37,473 plots in its land bank. The Group’s
land bank now incorporates previously
identified pipeline sites as the risk on these
has evolved over recent periods through
delivery and planning.
The land bank is a combination of owned
or contracted sites, most of which have a
planning consent and are in construction,
and the rest of which cannot be moved
into development as they do not have an
implementable planning consent and/or as
there are practical technical constraints and
challenges surrounding, for example, vacant
possession which need to be resolved. We
also hold a strategic pipeline of long-term
options for in excess of 5,000 plots.
Following the announcement in November
2014 of the formation of a joint venture
with National Grid, St William, Berkeley
is working closely with its partner to
identify sites from across its portfolio
to bring through into its pipeline and
land holdings. This has the potential to
deliver some 7,000 plots from an initial 10
sites and is a clear source of future land.
One site at Battersea was already in the
Group’s land bank, and one further site at
Rickmansworth has been added this year.
Land holdings
Owned
Contracted
Plots
Estimated sales value
Average selling price
Average plot cost
Land cost (%)
Estimated gross margin
Gross margin (%)
Berkeley has secured 28 planning
consents this year, nine on schemes which
did not previously have an implementable
planning consent and 19 revised consents.
The new consents include Fitzroy Gate
in Isleworth, 250 City Road in Islington,
22-29 Albert Embankment in Lambeth,
Smithfield Square in Hornsey, South Quay
Plaza in Docklands, and further residential
schemes in Kingston, Bracknell, Barnes and
Orpington in Kent. The revised consents
have improved the planning position on
each of the schemes on which earlier
phases are already in construction, and
these include a full re-plan of the third phase
at Kidbrooke Village and a detailed consent
on the waterfront block at Royal Arsenal
Riverside which will contribute further
impetus to this core regeneration scheme.
Since the year end, Berkeley has secured
a resolution to grant planning at its scheme
in White City for over 1,400 homes to be
delivered over the next 15 years, and a
resolution to grant planning for 839 at
St William’s first scheme in Battersea.
Two new sites have been acquired
unconditionally during the year, a 15,000
sq ft office building in Sevenoaks and a
scheme for over 600 homes in Reading
in our St Edward joint venture. Three have
been acquired on a conditional basis,
including sites in Kingston and Winchester,
as well as the second St William site at
Rickmansworth.
At 30 April 2015, the Group has 74 sites in
its land holdings, of which 57 (77%) have
an implementable planning consent and
are in construction, a further 10 (14%) have
at least a resolution to grant planning but
the consent is not yet implementable
and seven remain in the planning process.
The Group’s land holdings now stand
at 37,473 plots (30 April 2014: 35,963
restated to include 11,957 pipeline plots),
with an estimated future gross margin
of £5,272 million (30 April 2014: £4,514
million, restated to include £1,500 million
of pipeline gross margin) and an average
selling price of £456,000 (30 April 2014:
£419,000, restated to include pipeline
revenue and plots).
Change
+6,210
-4,700
+1,510
April 2014
28,005
7,958
35,963
+£1,996m
£15,079m
+£37k
-£5k
-2.4%
+£758m
+1.0%
£419k
£63k
15.1%
£4,514m
29.9%
April 2015
34,215
3,258
37,473
£17,075m
£456k
£58k
12.7%
£5,272m
30.9%
51
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS Trading and Financial Review and Outlook
continued
Trading analysis
Revenue of £2,120.0 million in the year
(2014: £1,620.6 million) included
£2,020.2 million of revenue from
operations (2014: £1,620.6 million) and
£99.8 million from the sale of a portfolio
of ground rent assets (2014: £nil).
a 90,000 sq ft hotel at Goodman’s Fields
in Central London. The £15.6 million of
revenue last year was mainly from the sale
of retail space on developments including
Marine Wharf in Deptford, Goodman’s Fields
in Aldgate, Fulham Reach in Hammersmith
and Imperial Wharf in Fulham.
The £2,020.2 million of revenue from
operations included £1,936.2 million of
residential revenue (2014: £1,605.0 million),
£12.3 million from land sales on three sites
(2014: £nil) and £71.7 million of commercial
revenue (2014: £15.6 million).
3,355 new homes (2014: 3,742) were sold
across London and the South of England
at an average selling price of £575,000
(2014: £423,000). The increase in average
selling price reflects first completions
at Ebury Square, Riverlight, Fulham
Reach and One Tower Bridge, all London
schemes acquired in 2009/10. The year
ended 30 April 2014 included the disposal
of 534 properties from Berkeley’s rental
fund to M&G Investments at an average
selling price of £197,000 and the sale of
two student developments.
Revenue of £71.7 million from commercial
activities (2014: £15.6 million) included the
sale of some 130,000 sq ft of office, retail
and leisure space across a number of the
Group’s developments including Fulham
Reach in Hammersmith, Langham Square
in Putney and Royal Worcester as well as
During the year, the Group sold a portfolio
of approximately 10,000 ground rent
leases across some 60 sites for proceeds
of £99.8 million and a gross profit of
£85.1 million. Income and expenses
associated with this sale have been
recognised in the income statement
through revenue and gross profit.
The adjusted gross margin percentage,
excluding profit from the sale of ground
rent assets, has been broadly stable at
31.3% (2014: 31.4%), and reflects the mix
of homes sold in the period.
Overheads of £192.7 million (2014: £134.1
million) included a charge of £47.0 million
(2014: £nil) in respect of the Company’s
decision to settle the tax and national
insurance liabilities arising on the vesting
of options for participants in Part B of
the 2009 LTIP scheme on 15 April 2015,
in lieu of issuing shares to this value, and
the intention to do the same in respect of
options vesting on 15 April 2016. Of this
£47.0 million, £33.5 million is in respect of
prior periods and £13.5 million in respect
of the year ended 30 April 2015.
The result is that the Group’s adjusted
operating margin, excluding the profit from
sale of the ground rent assets, has reduced
from 23.1% to 21.7% in the year.
Berkeley’s share of the results of joint
ventures was a profit of £28.3 million
(2014: £12.1 million) which reflects a further
230 completions at 375 Kensington High
Street and Stanmore Place.
The Group has remained cash positive
throughout the year, and also completed
a refinancing of its corporate banking
facilities. The result is that net finance costs
in the year have increased from £6.9 million
to £12.7 million. This includes £1.8 million
in respect of the amortisation of ongoing
facility fees and the expensing of the
£3.9 million of unamortised fees in respect
of the previous refinancing in 2012, and
other finance income and costs including
imputed interest on land creditors, which
more than offset any interest income from
cash holdings during the year.
Profit before tax: 2014
Increase in gross margin
from operations
Profit on sale of ground rent assets
Increase in overheads
Increase in net finance costs
Increase in result from joint ventures
Profit before tax: 2015
£’million
380.0
122.8
85.1
(58.6)
(5.8)
16.2
539.7
Analysis of capital employed
Investment in joint ventures
Other non-current assets
Inventories
Trade and other receivables
Trade and other payables
- Deposits and on account receipts
- 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
Change
£’million
-11.3
+7.1
+172.9
-13.4
-179.2
-89.1
+25.9
-18.0
-105.1
Change
£’million
-150.4
+12.5
-137.9
+301.3
+9.5
+172.9
April 2014
£’million
61.4
118.5
2,481.2
159.0
-741.7
-625.5
-83.7
-57.1
1,312.1
April 2014
£’million
492.4
786.1
1,278.5
1,180.3
22.4
2,481.2
April 2015
£’million
50.1
125.6
2,654.1
145.6
-920.9
-714.6
-57.8
-75.1
1,207.0
April 2015
£’million
342.0
798.6
1,140.6
1,481.6
31.9
2,654.1
52
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT
The Group ended the year ungeared
with net cash of £430.9 million (30 April
2014: £129.2 million). This is an increase of
£301.7 million during the year (2014: £84.5
million) as a result of £528.4 million of cash
generated from operations (2014: £337.6
million), £8.3 million from the disposal of
rental fund properties (2014: £138.2 million)
and a net inflow of £115.2 million
in working capital (2014: net investment
of £77.9 million), before tax and other
cash outflows of £106.7 million (2014:
£118.2 million) and dividends of £243.5
million (2014: £195.2 million).
Adjusted pre-tax return on equity,
excluding profit from the sale of ground
rent assets, has increased from 27.5%
to 29.5%. Basic earnings per share has
risen by 41.1% from 221.8 pence to 313.0
pence, which takes into account a further
reduction in the corporate tax rate from
21% to 20% in the year, and the issue of a
further 1.3 million shares issued in April to
satisfy share awards.
Taxation
The Group has an overall tax charge of
£116.2 million for the year and an effective
tax rate of 21.5%. The effective tax rate has
fallen from 22.9% in line with the reduction
in the UK headline rate of corporation
tax to 20% with effect from 1 April 2015.
The Group manages its tax affairs in an
open and transparent manner with the
tax authorities and observes all applicable
rules and regulations in the countries in
which it operates. Factors that may affect
the Group’s tax charge in future periods
include changes in tax legislation and the
resolution of open issues. The Group holds
tax provisions in respect of the potential
tax liability that may arise on the resolution
of open tax issues, however the amount
ultimately payable may be lower than the
amount accrued thus improving the overall
profitability and cash flow of the Group in
future periods.
Cash flow
Adjusted profit before tax
Increase in inventories
Increase in customer deposits
Other working capital movements
Profit on sale of ground rents
Profit from sale of rental fund
Net receipts from/(investment in) joint ventures
Tax paid
Other movements
Cash inflow before dividends
Dividends
Increase in net cash
Opening net cash
Closing net cash
Financial position
Net assets increased over the course of the
year by £196.6 million, or 13.6%, to £1,637.9
million (2014: £1,441.3 million). This is after
payment of £243.5 million of dividends and
equates to a net asset value per share of
1,199 pence, up 12.5% from 1,066 pence at
30 April 2014.
Inventories have increased by £172.9
million from £2,481.2 million at 30 April
2014 to £2,654.1 million at 30 April 2015.
Inventories include £342.0 million of land
not under development (30 April 2014:
£492.4 million), £2,280.2 million of work in
progress (30 April 2014: £1,966.4 million)
and £31.9 million of completed stock
(30 April 2014: £22.4 million). With this
continued investment in our schemes,
upward pressure on costs and the limited
availability of skilled labour and materials
in the supply chain remain key challenges,
albeit ones that we continue to manage.
Trade and other payables are £1,635.5
million at 30 April 2015 (£1,367.2 million at
30 April 2014). These include £920.9 million
of on account receipts from customers
(30 April 2014: £741.7 million), which have
increased as a result of strong trading in the
period, and land creditors of £205.1 million
(30 April 2014: £210.0 million). Provisions
of £75.1 million (30 April 2014: £57.1 million)
include post completion development
obligations and other provisions.
2015 £’million
2014 £’million
380.0
(414.5)
315.6
21.0
-
84.9
(5.2)
(92.4)
(9.7)
279.7
(195.2)
84.5
44.7
129.2
454.6
(172.9)
179.2
108.9
85.1
-
39.6
(140.5)
(8.8)
545.2
(243.5)
301.7
129.2
430.9
53
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS Trading and Financial Review and Outlook
continued
Banking
The Group’s financial position is further
supported by the re-negotiation of the
Group’s banking facilities during the year.
On 23 March 2015, Berkeley increased its
committed corporate banking facilities
from £525 million to £575 million, extending
the maturity date of the Group’s facilities
from April 2018 (£250 million) and May
2018 (£275 million) to March 2020 (£575
million). This gives clarity of financing
for five years, with options over a further
two years of extensions, and has reduced
materially the ongoing costs associated
with the facility. A further £60 million of
banking facilities in St Edward Homes,
which were undrawn at 30 April 2014, were
cancelled during the year as they were no
longer required by the joint venture.
St Edward
Investments accounted for using the equity
method have reduced from £61.4 million
at 30 April 2014 to £50.1 million at 30 April
2015 which reflects distributions in the year.
This relates almost exclusively to Berkeley’s
investment in St Edward, a joint venture
with Prudential.
St Edward has three schemes currently
in development at Stanmore Place, 375
Kensington High Street and 190 Strand.
230 homes were sold in the year at an
average selling price of £1,229,000
(2014: 203 at £1,235,000), which reflects
the mix of properties sold, predominantly
at 375 Kensington High Street.
2,116 plots in Berkeley’s land holdings relate
to St Edward schemes (30 April 2014:
1,389), which includes a site at Green Park in
Reading which was acquired during the year.
St Edward is continuing to identify
opportunities to develop the joint venture
through further sites to which it can add
value, and controls a commercial site in
Westminster which has a detailed planning
consent but is conditional on vacant
possession and is included in the land bank.
Ground rents
The Group has reported the sale of
a portfolio of ground rent assets for
£99.8 million, which gave rise to a profit
on disposal of £85.1 million in its results
for the year ended 30 April 2015.
The Group has exchanged contracts for
the sale of a further portfolio of ground
rent assets for £53 million. The sale is
expected to be completed in the first
half of the year ending 30 April 2016
and give rise to a profit on disposal
of approximately £50 million after
transaction costs in that period.
Outlook
These results demonstrate a strong
performance which has enabled Berkeley
to meet its targets in returning the first
434 pence per share to shareholders by
the first milestone date of September 2015,
and that it is well-placed, with the visibility
of forward sales and developments already
in construction, to meet the next milestone
payment by September 2018, which it
currently intends to do through regular
equal dividends.
Whilst earnings remain sensitive to
the timing of delivery of certain key
developments, the Board currently expects
adjusted earnings for the current year to
be similar to 2014/15, and is targeting the
delivery of pre-tax profits in the region
of £2.0 billion over the three year period
comprising 2015/16, 2016/17 and 2017/18.
This target is a result both of Berkeley
planning to deliver the London sites which
were acquired in the period from 2009 and
2013 and of continuing to benefit from the
maturity of its longer term regeneration
sites. The current year will see increased
investment in construction ahead of this
enhanced profit delivery. Any surplus capital
generated through this period of investment
and delivery, will either be reinvested in the
business or used to fund further dividend
payments or share buybacks.
There remain structural challenges to be
addressed in our industry to meet the
latent and ongoing demand for homes of
all tenure types. Addressing these requires
a regulatory environment that is responsive
and supportive of development. It also
requires the UK’s continued participation in
the European Union to maintain London’s
pre-eminence as a world city.
The complexity of delivering new homes in
London and the capital allocation required
in a cyclical market is well understood by
Berkeley and embedded in its strategy. As
a consequence, the Group is well placed
to achieve its targets for the next three
years, meet its commitment to return over
£1.7 billion to shareholders by 2021 and,
with the visibility afforded by the land
bank, provide a successful and sustainable
business thereafter.
Rob Perrins
Managing Director
30 June 2015
Paid in year ended 30 April 2013
Paid in year ended 30 April 2014
Paid in year ended 30 April 2015
Interim dividend declared for payment in
September 2015
Total paid or committed by 30 September
2015 (first milestone) *
By 30 September 2018 (second milestone) *
By 30 September 2021 (third milestone) *
* Based on 136.6 million shares currently in issue
Pence
per
share
15
149
180
90
434
433
433
1,300
Returns to
Shareholders
£’million
20
195
244
123
582
591
591
1,764
54
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT The first phase of new family
homes at Wimbledon Hill Park
were completed this year.
55
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORTSTRATEGIC REPORTGOVERNANCEFINANCIALS Groundworks
underway at the next
phase of new homes
at Fulham Reach in
Hammersmith.
56
BERKELEY ANNUAL REPORT 2015 / GOVERNANCE Governance
57
BERKELEY ANNUAL REPORT 2015 / GOVERNANCESTRATEGIC REPORTGOVERNANCEFINANCIALS Board of Directors
Chairman and Executive Directors
Tony Pidgley CBE N
Rob Perrins BSC (Hons) FCA
Richard Stearn FCA
Karl Whiteman BSC (Hons)
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
and is currently Chairman of the
London Chamber of Commerce
and Industry. He is Chairman
of the Nomination Committee.
Joined the Company in 1994.
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. He is also
a Governor of Wellington
College and Aston University.
Re-joined Berkeley on 13 April
2015 as Finance Director, having
previously worked for the
company from 2002 to 2011 as
Group Financial Controller. Prior
to re-joining Berkeley, Richard
spent three years at Quintain
Estates and Development plc,
becoming its Finance Director in
July 2012. He originally trained
and practiced for 12 years as a
chartered accountant with PwC.
Joined Berkeley in 1996 as
a Construction Director and
currently leads the Berkeley
Homes East Thames division.
He joined the Board on
10 September 2009 as a
Divisional Executive Director.
Non-executive Directors
Sir John Armitt N R
Adrian Li
Alison Nimmo CBE A
Veronica Wadley N A
Appointed a Non-executive
Director on 5 September 2011,
Alison is Chief Executive of The
Crown Estate. 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 trustee of the UK’s
Green Building Council.
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.
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. He was Chairman of
the Engineering and Physical
Science Research Council
until 31 March 2012. From
2001 to 2007, he was Chief
Executive of Network Rail
and its predecessor, Railtrack.
Sir John is the Senior
Independent Director.
Appointed a Non-executive
Director on 2 September
2013. He is currently Executive
Director and Deputy Chief
Executive of The Bank of East
Asia, Ltd. He is an Independent
Non-executive Director of
Sino Land Company Ltd.,
Tsim Sha Tsui Properties Ltd.,
Sino Hotels (Holdings) Ltd.,
China State Construction
International Holdings Ltd.
and COSCO Pacific Ltd. He is
a member of the International
Advisory Board of Abertis
Infraestructuras, S.A.
58
BERKELEY ANNUAL REPORT 2015 / GOVERNANCE Chairman and Executive Directors
Non-executive Directors
Sean Ellis BSC (Hons)
Greg Fry FCA
Joined Berkeley in 2004 with
an expertise in land and is
currently Chairman of St James
Group, Berkeley Homes Eastern
Counties and St William Homes.
He joined the Group Main
Board on 9 September 2010 as
a Divisional Executive Director.
Joined the Group in 1982 and
is currently Chairman of St
George, 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.
Jim Farrer
With great sadness we
report that our Honorary Life
President, Jim Farrer, passed
away during the year. Jim,
along with Tony Pidgley, was
a co-founder of Berkeley
and Group Chairman until
his retirement in 1992.
Company Secretary
E A Driver
Glyn Barker BSc (Hons) FCA A R
Andy Myers BEng ACA A R
Appointed a Non-executive
Director on 6 December 2013,
he is currently Chief Financial
Officer at McLaren Technology
Group Limited, having previously
held senior finance roles in Rolls
Royce plc and BMW/Rover
Group. He is Chairman of the
Audit Committee.
Appointed a Non-executive
Director on 3 January 2012
following a 35 year career with
PwC, most recently as its UK
Vice Chairman. He previously
held a number of senior posts
within PwC including Managing
Partner and Head of Assurance
and also established and ran
their Transactions Services
business. Glyn is a Non-
executive Director of Aviva
plc and Transocean Limited,
Chairman of the law firm
Irwin Mitchell and a Director
of the English National Opera
Company. He is Chairman of
the Remuneration Committee.
Diana Brightmore-
Armour FCCA, MCT
Appointed as a Non-executive
Director on 1 May 2014, Diana
is currently the UK CEO of The
Australia and New Zealand
Banking Group Ltd and
previously held the position
of CEO, Corporate Banking at
Lloyds Banking Group (2004-
2012). Diana has 30 years of
international experience in
banking, corporate finance,
financial management,
treasury and audit.
59
Key
N Nomination Committee
A Audit Committee
R Remuneration Committee
BERKELEY ANNUAL REPORT 2015 / GOVERNANCESTRATEGIC REPORTGOVERNANCEFINANCIALS Corporate Governance Report
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 2012 (the Code). In the year to 30
April 2015, the revised principles and
provisions of the Code (published In
September 2012 by the Financial Reporting
Council (FRC) applied to the Company. The
provisions of the UK Corporate Governance
Code 2014 will apply to the Company
with effect from 1 May 2015 and so are not
adopted in this report.
This section, including the Audit Committee
Report and the Directors’ Remuneration
Report, details how the Company has
applied the principles and provisions of
the Code. The Company’s business model
is explained in the Strategic Report. It is
the Board’s view that it has been fully
compliant with the Code throughout the
2014/15 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 material 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, Diversity and Independence
At the date of this report the Board
comprises thirteen Directors: the Chairman,
five Executive Directors and seven
independent Non-executive Directors. The
biographies of these directors are set out
on pages 58 and 59.
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 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 Board considers that all of the current
Non-executive Directors were independent
throughout the year. At the Annual General
Meeting on 1 September 2014, David
Howell stepped down after ten years 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.
During the year, the Company dismissed
its previous Finance Director, Mr Nicolas
Simpkin, who left the Board on 8
September 2014 and is currently on full
paid garden leave until 23 September 2015.
Richard Stearn was appointed as an
Executive Director, and re-joined the
Company on 13 April 2015 in the role of
Group Finance Director, having previously
held the position of Group Financial
Controller from 2002 to 2011. In the
intervening period between the departure
of Nicolas Simpkin and the appointment
of Richard Stearn, the financial function of
Berkeley was managed by Rob Perrins, the
Group Managing Director and previously
the Group Finance Director, supported by
Ben Marks, the Group Financial Controller.
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
60
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 five times during 2014/15
and there were no absences.
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 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
offer themselves for re-election at the
Annual General Meeting on 8 September
2015.
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
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berkeley AnnuAl report 2015 / governAnce 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 Code requires that the Board
undertakes an annual evaluation of its own
performance and that of its committees
and individual directors with an externally
facilitated evaluation conducted at least
every three years. The Board evaluation
for 2015 was, in accordance with Code
Provision B.6.2, externally facilitated,
carried out by Clare Howard Consultancies,
who have no other connection with the
Company. The Board evaluation covered:
• Strategic matters
• Board structure, committees and their
operation
• Succession planning
• Induction and development
• Assessment of the performance of
individual committees and the Chairman
• Shareholder communication
The unanimous outcome 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 interset
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 Directors of 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 had in place at 30 April
2015 an appropriate policy which insures
Directors against certain liabilities, including
legal costs, which they may incur in
carrying out their duties. This remains in
place.
Board committees
The Board has delegated certain matters
to individual Executives and to the
specific committees of the Board; audit,
remuneration and nomination. The main
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.
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,
Richard Stearn, Karl Whiteman, Sean
Ellis and Greg Fry alongside other senior
management.
Audit committee
The Audit Committee is responsible for
monitoring and reviewing the financial
reporting and accounting policies of
the Company, reviewing the adequacy
of internal controls and the activities of
61
the Group’s internal audit function and
overseeing the relationship with the
external auditor. The Audit Committee
comprises four independent Non-executive
Directors. The Committee is chaired by
Andy Myers and the other members at 30
April 2015 were Alison Nimmo, Glyn Barker
and Veronica Wadley.
Andy Myers and Glyn Barker are all
considered to have recent and relevant
experience. Andy Myers is qualified as
a chartered accountant and is currently
Chief Financial Officer at McLaren Group
Limited and Glyn Barker is also qualified as
a chartered accountant, having previously
held a number of senior posts within PwC
including Managing Partner and Head of
Assurance.
The Committee met formally on three
occasions during the year to 30 April 2015
with no absences, with the exception of
one meeting in March 2015 from which
Veronica Wadley was absent.
An explanation of the role and activities
of the Audit committee during the year is
contained in the Audit Committee report
on pages 64 and 65.
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.
At 30 April 2015, the Committee comprised
Glyn Barker, Sir John Armitt and Andy
Myers who are independent Non-executive
Directors. The Committee was chaired by
Glyn Barker.
The Committee met formally on three
occasions during the year to April 2015
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.
The principles and details of Directors’
remuneration are contained in the
Directors’ Remuneration Report on pages
66 to 83.
Nomination committee
The Nomination Committee ensures
that the membership and composition
of the Board, including the balance of
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continued
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 2015 were Sir John Armitt and
Veronica Wadley.
The Committee met formally on two
occasions during the year to 30 April 2015
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.
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 ensuring that the Group’s
system of internal control comply with
the UK Corporate Governance Code 2012
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 2015 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 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
62
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 at divisional
and Group level 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, staff
and external stakeholders can report in
confidence any concerns they may have of
malpractice, financial irregularity, breaches
of any Group procedures, or other matters.
The policy is available to view on the
Group’s website.
Bribery act
The Board has responsibility for complying
with the requirements of the Bribery Act
2010 and is charged with overseeing the
development and implementation of
the Group’s policies and procedures and
monitoring ongoing compliance.
Relations with shareholders
The Company encourages active
dialogue with its current and prospective
shareholders through ongoing meetings
with institutional investors. Major
shareholders have the opportunity to
meet all Directors after the Annual General
Meeting in addition to individual meetings
with the Company.
Shareholders are also kept up to date
with the Company’s activities through the
Annual and Interim Reports and Interim
Management Statements. 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.
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berkeley AnnuAl report 2015 / governAnce 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.
In accordance with the Code, 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.
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berkeley AnnuAl report 2015 / governAnceStrategic reportgovernanceFinancialS Audit Committee Report
the period is included in note 18 to the
financial statements.
• Revenue recognition
The Committee recognises that
the Group’s accounting policy for
revenue recognition, namely that
properties are treated as sold and
profits are recognised when contracts
are exchanged and building work is
physically complete, involves an element
of judgement in determining the point
at which building work is physically
complete. The Committee reviewed the
quantum of properties not yet legally
completed at each balance sheet date in
conjunction with the review undertaken
by the Group’s external auditor and
concluded that the judgements were
appropriate.
The Board of Directors presents its Audit
Committee Report for the year ended 30
April 2015 which has been prepared on the
recommendation of the Audit Committee
(“the Committee”).
statements issued during the year.
The Committee’s review incorporated
consideration of the appropriateness of the
relevant accounting policies and financial
reporting judgements adopted therein.
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.
The Committee’s review of the Annual
Report concentrated on whether,
taken as a whole, it was fair, balanced
and understandable and provided the
information necessary for users of the
Annual Report to assess the Group’s
business strategy and performance.
Details of the composition, experience and
the number of meetings of the Committee
are reported on page 61 of the Corporate
Governance Report.
Role and responsibilities of the Audit
committee
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
as follows:
• Financial Reporting
Monitoring the integrity of the financial
reporting of the Company and reviewing
significant financial reporting issues and
accounting policies;
• Internal Control and Internal Audit
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
• External Audit
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.
This report considers each of these
responsibilities in turn, and how the
Committee has discharged them during
the year.
Financial reporting
At each of the Audit Committee meetings,
the Group Managing Director and/or
the Group Finance Director presented,
and the Committee debated, the results
and business plan of the Group and any
significant financial reporting judgements
relevant to this.
The Committee reviewed, prior to their
publication, the financial disclosures in
the Group’s Annual Report and Accounts,
Preliminary Announcement, Interim Report
and the contents of interim management
The views of the Group’s auditor, which
was in attendance at each meeting of the
Committee during the year, were taken
into account in reaching its conclusions on
these matters.
The significant matters considered by the
Committee in 2015 included:
• Carrying value of inventories and
• Share-based payments
margin recognition
Inventories comprise land not under
development, work in progress and
completed units, which are held in
the balance sheet at the lower of
cost and net realisable value. This
demands a periodic assessment by the
management team of each of Berkeley’s
sites which is sensitive to assumptions
in terms of future sales prices and
construction costs and recognises the
inherently cyclical nature of the property
market and the risks of delivery. These
assumptions are also relevant to the
determination of profit recognised on
properties sold. The conclusions of this
assessment were reported by exception
to the Committee in a financial overview
paper prior to release of the Group’s
annual and interim results.
• Provisions
The Committee recognises that
accounting for provisions relies on
management judgement in estimating
the quantum and timing of outflows of
resources to settle any associated legal
or constructive obligations. The Group
holds provisions for post-completion
development obligations, onerous lease,
estate liabilities and other litigation. The
basis for determining these provisions
was presented to the Committee for
their consideration. The Committee
reviewed the relevant papers and
discussed the assumptions underlying
this determination with management
and the Group’s external auditor and
concluded that it was satisfied that the
assumptions adopted were appropriate.
A table of movements in provisions over
64
The Committee recognises that
accounting for share-based payments
represents a complex accounting area
and particularly so in a year in which
there was a modification in the method
of settlement. The Committee reviewed
the impact of this modification in
conjunction with the external auditor’s
assessment and concluded that the
judgement and application were
appropriate.
• Compliance with laws and regulations
The Committee recognises that the
Company is subject to laws and
regulations across a number of areas
including, but not limited to, anti-bribery,
anti-money laundering and sanctions
checking. The Committee considered
the Group’s approach to reviewing and
updating its policies with respect to
compliance with laws and regulations.
In performing this review, it considered
relevant legal matters. The Committee
was satisfied that there were no material
instances of non-compliance.
Other matters considered by the
Committee included management’s
assessment of the going concern status of
the Group at the balance sheet date. The
Committee concurred with management’s
adopted approach on all of these matters.
Since the year end, the Committee has
completed its review of the 2015 Annual
Report and has confirmed to the Board
that it considers it to be fair, balanced and
understandable.
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berkeley AnnuAl report 2015 / governAnce at each meeting. There is open dialogue
between KPMG and the Company’s senior
finance team to monitor any proposed new
instructions.
The Committee has concluded that
it is comfortable that the auditors are
independent.
Appointment of KPMG
On completion of the audit, the
Committee reviewed the performance and
effectiveness of KPMG with feedback from
executive management. The Committee
has resolved to propose KPMG’s
appointment at the 2015 Annual General
Meeting.
The Committee remains mindful of
evolving best practice under the UK
Corporate Governance Code 2012, and
will monitor the proposals of the Financial
Reporting Council and the European Union
in determining its future approach to re-
tendering the external audit appointment.
A Myers
Chairman, audit committee
30 June 2015
Internal control and internal audit
The Committee undertook its annual
review of the Group’s Internal Control
Framework during the year. This review
focused on the system of risk management
and internal control in place which is
explained in more detail on page 62 of
the Corporate Governance Report, and
covered:
• the key risks facing the Group;
• the key elements of the Group’s control
processes to mitigate these risks;
• the operations and effectiveness of
internal audit.
A paper was also presented to the
Committee which summarised the Group’s
consideration, controls and monitoring of
fraud risk across its activities.
The Committee also considered any
internal control recommendations
raised by the Group’s auditors during
the course of the external audit and the
company’s response to dealing with such
recommendations.
A report summarising the recent activities
of the Internal Audit function within
Berkeley was presented to each of the
Committee meetings during the year.
These reports covered:
• a summary of the key findings arising
from the most recent formal internal
audits undertaken;
• management responses to any control
weaknesses identified, the closure of any
open items and any recurring themes;
• the outcome of other operational review
work undertaken by the internal audit
function;
• the internal audit plan for the coming
year, for debate with and the approval of
the Committee.
The Committee was satisfied that the
scope, extent and effectiveness of the
Internal Audit function are appropriate for
the Group.
External audit
Following a competitive tender
process for the audit of the Company
and its subsidiaries undertaken in the
year ended 30 April 2014, KPMG LLP
(“KPMG”) was identified to replace
PricewaterhouseCoopers LLP as the
Company’s auditor and consequently
was appointed to fill a casual vacancy in
accordance with the Companies Act 2006.
The appointment of KPMG was approved
at the 2014 Annual General Meeting.
Approach
KPMG presented its audit strategy to the
Audit Committee meeting during the
year. The strategy document identified its
assessment of the key risks of the business
for the purpose of the audit, the scope of
their work and updated the Committee on
regulatory changes for the current year.
KPMG reported to the Committee at the
year end, prior to the public announcement
of the Company’s results, in which it set
out its assessment of the Company’s
judgements and estimates in respect of
these risks and any other findings arising
from its work.
The external auditors have open recourse
to the Non-executive Directors should
they consider it necessary. There is private
dialogue between the Chairman of the
Audit Committee and the external auditors
prior to each Audit Committee meeting
and, after each meeting, the opportunity
for the Committee to meet with the
external auditors without the Executive
Directors and management present.
Independence of the external auditors
As part of its audit strategy presentation,
and through the audit tender process,
KPMG identified the safeguards in
place within its internal processes and
procedures to protect, in respect of its own
role, the independence of its audit.
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 2015 was within
the limits of this ratio. Audit and non-audit
fee disclosures are set out in Note 5 of the
Consolidated Financial Statements.
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 such
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
65
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berkeley AnnuAl report 2015 / governAnceStrategic reportgovernanceFinancialS Directors’ Remuneration Report
Annual statement from Chairman of Remuneration Committee
Dear Shareholder
This Remuneration Report is split into two parts:
• Our Remuneration at a Glance sets out a summary of Berkeley’s Directors’ Remuneration policy and the key remuneration decisions
made by the Committee for the financial year ending 30 April 2015.
• The Annual Report on Remuneration sets out payments and awards made to the Directors and details the link between Company
performance and remuneration for the 2014/15 financial year.
The Annual Report on Remuneration together with this letter is subject to an advisory shareholder vote at the AGM in September 2015.
The sections of this report that have been subject to audit are labelled accordingly.
In line with the The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013,
the Directors’ Remuneration Policy has not been presented in this report given that the Policy was approved at last year’s AGM on
1 September 2014 and it is not intended to move a similar resolution again at the 2015 AGM. The Directors’ Remuneration Policy is
available to view in full on the Company’s website at www.berkeleygroup.co.uk/investor-information/corporate-governance.
Corporate Performance
Berkeley has delivered strong performance and growth during 2014/15, with the key highlights being:
• Adjusted* pre-tax return on shareholders’ equity of 29.5% (2014: 27.5%).
• Dividends paid to shareholders of £243 million (2014: £195 million).
• Future anticipated gross margin in the land bank up 16.8% to £5,272 million (2014: £4,514 million).
• Adjusted* earnings per share increased by 18.8% to 263.6 pence (2014: 221.8 pence).
• Net asset value per share increased by 12.5% to 1,199.3 pence (2014: 1,065.6 pence).
The results continue to underline the Group’s strategy of balancing earnings in the near term and creating a sustainable business,
delivering value to shareholders over the long term.
Berkeley’s Return on Equity compared with the sector over the last seven years illustrates the relative performance of the Company:
2008/9
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
Berkeley
Sector highest
Sector lowest
16.2%
16.2%
13.3%
13.3%
15.3%
15.3%
21.2%
21.2%
(73.4%)
(44.2%)
(6.2%)
(0.4%)
Sector average (excluding Berkeley)
(26.0%)
(18.1%)
1.0%
4.8%
* Adjusted figures exclude gross margin from the sale of ground rents
22.4%
22.4%
3.4%
8.5%
27.5%
27.5%
3.5%
11.4%
29.5%*
29.5%
12.2%
18.2%
Berkeley’s total shareholder return, when compared to the companies in the sector and also the FTSE 250 and FTSE All Share indices,
illustrates the value delivered to shareholders over the long term.
Total shareholder return from 30 April 2005 (%)
550
500
450
400
350
300
250
200
150
100
50
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
66
Berkeley Group
Holdings plc
FTSE 250 Index
FTSE All Share Index
Sector
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berkeley AnnuAl report 2015 / governAnce Berkeley’s remuneration policy aims to encourage, reward and retain the Executives and ensure that their actions are aligned with the
Company’s strategy. In particular, the emphasis on performance related pay aligns the Executives with the performance of the business
which is coupled with long term incentives that lock in the Executive team for up to 10 years which is far longer than is typical in most
publicly listed companies.
Incentive Outcomes in 2014/15
The key incentive outcomes from the performance this year are:
• A W Pidgley, R C Perrins, G J Fry, K Whiteman and S Ellis earned 100% of the maximum annual contribution under the Bonus Plan;
• 50% of the 2009 LTIP Part B awards vested during the year. The exercise of these awards resulted in a significant increase in
shareholding for A W Pidgley, R C Perrins, G J Fry, K Whiteman and S Ellis.
Operation of Policy in 2015/16
There are no material changes to the operation of the policy for 2015/16.
The Executive Directors have received salary increases for 2015/16 of approximately 3%, compared to average salary increases across
the Group of 5.2%.
In addition 2015/16 will be the first year of operation of the new Bonus Plan which formed part of the Directors’ Remuneration Policy
approved last year at the AGM on 1 September 2014.
The Committee is comfortable that its Directors’ Remuneration Policy is in line with the new UK Corporate Governance Code (applying
for financial years beginning on or after 1 October 2014). We provide further details on page 72.
In conclusion
The Directors’ Remuneration Policy was subject to a binding vote at the AGM in September 2014, and will last for a period of three years
from that date or until another Policy is approved in a general meeting. The Annual Report on Remuneration together with this letter will
be subject to an advisory shareholder vote at the forthcoming AGM in September 2015.
Details of voting at last year’s Annual General Meeting, where 95.88% and 91.61% of those voting supported the resolutions to approve
the Directors’ Remuneration Policy and the Annual Report on Remuneration respectively, are set out on page 83 of this report.
I look forward to receiving your support for the resolution seeking approval of the Annual Report on Remuneration at our forthcoming
AGM.
Glyn Barker
Chairman, Remuneration Committee
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berkeley AnnuAl report 2015 / governAnceStrategic reportgovernanceFinancialS Directors’ Remuneration Report
continued
Our remuneration at a glance
Ahead of the detail behind payments for 2014/15, I would like to take this opportunity to outline the Committee’s policy, key decisions
and performance outcomes during the past year.
Summary of Directors’ Remuneration Policy
Element
Policy summary description
Maximum opportunity
Executive Directors
Base salary
Core element of remuneration, set at a level which is sufficiently competitive
to recruit and retain Executive Directors of the appropriate calibre and
experience to achieve the Company’s business strategy.
In setting levels of base salary, the Committee takes into account the following
factors:
• 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;
• The performance of the individual Executive Director and the Group;
• Pay and conditions throughout the Group.
Where an Executive is extremely
experienced and has a long-track
record of proven performance
salaries may be in the upper decile
when compared to companies
of broadly comparable size and
complexity – in particular those
within the comparator group and
those in the FTSE 250.
In general salary rises will be limited
to the level provided to employees
of the Company as a whole.
Pension and benefits
The Company’s policy is either to provide a contribution to a pension
arrangement or provide payments in lieu of pension.
The maximum contribution or
payment in lieu is 25% of salary.
Other benefits are provided to the Executive Directors including a fully
expensed company car or cash allowance alternative, medical insurance and
other benefits may be provided from time to time.
Levels of benefits are defined by
market rates.
Annual bonus
This summary relates
to the new six-year
Bonus Plan approved
by shareholders at the
2014 AGM.
The Bonus Plan aligns rewards to the key objectives linked to short to
medium term performance whilst ensuring that there is a balance between
incentivising the Executive Directors, providing a sustainable ongoing level
of return to shareholders and ensuring the long term sustainability of the
Company.
Under the Bonus Plan awards are earned annually over a six year plan period,
subject to stretching Group and Divisional performance targets.
50% of a participants plan account will be paid out annually for the first five
years with 100% of the balance paid at the end of the sixth plan year.
300% of salary.
Long term Incentives
No plan available for new grants during the three year Policy Period unless, on recruitment, where a new Executive
Director may be eligible to participate in the 2011 LTIP and also provided the total number of awards granted to all
participants do not exceed the limits agreed with shareholders at the 2011 AGM.
Shareholding
requirement
The Committee operates a system of shareholder guidelines to encourage
long-term share ownership by the Executive Directors.
This should be achieved within five years of appointment for Executive
Directors.
400% of base salary for the Group
Chairman, 200% of base salary for
other Executive Directors.
Non-executive Directors
Fees
Each Non-executive Director receives a fee which relates to membership of
the Board and additional fees are paid for Committee Chairmanship.
In setting fees, the Board looks
at the upper quartile fee levels of
companies of broadly similar size
and complexity – in particular those
within the comparator group and
those in the FTSE 250.
In general fee rises will be limited to
the level provided to employees of
the Company as a whole.
The Directors’ Remuneration Policy is available to view in full on the Company’s website at
www.berkeleygroup.co.uk/investor-information/corporate-governance.
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berkeley AnnuAl report 2015 / governAnce How have we performed against our 2014/15 Bonus Plan objectives?
The following table sets out the various performance metrics targeted by the Bonus Plan and how the Company has performed against
these metrics in respect of 2014/15. It should be noted that this is the last year of the operation of the five-year Bonus Plan that has been
in operation since the start of the 2010/11 financial year.
Bonus Plan performance conditions
Targets set at the start of the year
Group performance
condition - 100%
weighting for the
Group Executives, 50%
weighting for Divisional
Directors
Return on
Equity
Land Bank
Growth
ROE of 25% (maximum target)
Land Bank Growth of 5% (maximum target)
Divisional PBT
performance condition
for the Divisional
Directors - 50%
weighting for Divisional
Directors
Notes
Divisional
PBT targets
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. Disclosure
of PBT targets are considered to be commercially sensitive
as the disclosure of such details could be detrimental to the
Company’s future strategic plans.
Percentage
of bonus
element
earned
following
assessment
against the
performance
targets
100%
100%
Actual
performance
outcome
29.5%
ROE(1)
16.8% Land
Bank Growth
100% of
Divisional
PBT target
achieved(2)
1. Adjusted Return on Equity excludes gross margin from the sale of ground rents.
2. Divisional PBT performance condition for the Divisional Directors – the percentage achievement of target is shown as the average performance for each
Division.
The Committee is satisfied that there is strong alignment between Company performance and the remuneration of the Executive
Directors. As a result of strong performance during the year, the Committee determined that the Executive Directors would receive
bonus payments equal to 100% of their maximum bonus potential as set at the start of the year. N G Simpkin was not entitled to receive
a bonus for the year ending 30 April 2015.
Further details are set out in the Annual Report on Remuneration on pages 74 to 76.
Other remuneration outcomes during the year
50% of the awards granted under the 2009 LTIP Part B vested on 15 April 2015. These awards vested following the achievement of the
Net Assets per share performance condition underpin of £9.00. Actual Net Assets per share were £11.97 as at April 2015.
Shareholder approval was received at the 2011 AGM to amend the rules of the 2009 LTIP 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. The exercise price of the 2009 LTIP Part B
awards at the date of vesting was £4.96 following £3.44 of dividends being paid during the vesting period. Full details are disclosed on
page 77.
New appointment during the year
R J Stearn was appointed Group Finance Director on 13 April 2015. In line with our recruitment remuneration policy R J Stearn’s
remuneration package is made up of:
• Base salary equal to £350,000 per annum from the date of appointment.
• Standard benefits package and a pension contribution of 15% of salary.
• Maximum bonus opportunity of 200% of salary for the financial year ending 30 April 2016.
• A buy-out package for incentives foregone in respect of his role at Quintain Estates and Development plc, and awards under the
2011 LTIP. In line with the Company’s recruitment policy, when determining the package the Committee considered the structure
of Quintain’s incentive arrangements, the proportion of the relevant performance periods completed, the associated performance
conditions and the likelihood of vesting. Further details of the buy-out package granted on 13 April 2015 and awards to be granted
under the 2011 LTIP can be found on page 78.
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berkeley AnnuAl report 2015 / governAnceStrategic reportgovernanceFinancialS Directors’ Remuneration Report
continued
Single total figure of Remuneration for Executive Directors for 2014/15
The table below summarises the 2014/15 single total figure of remuneration:
Executive Director
£’000
Salary
Benefits Annual bonus
Multi-year
performance
incentive(1)
Pensions
Other(2)
A W Pidgley
R C Perrins
R J Stearn
N G Simpkin(3)
G J Fry
K Whiteman
S Ellis
825
500
19
119
344
324
324
48
31
1
8
26
30
20
2,475
1,500
–
–
602
567
713
19,808
10,241
–
–
6,281
3,427
2,646
140
85
3
18
52
49
49
–
–
1,609
–
–
–
–
Total
23,296
12,357
1,632
145
7,305
4,397
3,752
Notes
1. 2014/15 Multi-year performance incentive – the amounts relate to awards that were released under the Bonus Plan and the 2009 Part B LTIP awards that
vested in 2014/15.
2. Buy out compensation awarded on joining Berkeley on 13 April 2015 (cash payment and conditional shares granted on 13 April 2015).
3. Left the Board on 8 September 2014.
Total equity exposure at 30 April 2015
The following table and chart sets out all subsisting interests in the equity of the Company held by the Executive Directors at 30 April
2015:
Scheme interests – Options and awards over shares
Executive Director
Shares
2009 LTIP Part B
A W Pidgley
R C Perrins
R J Stearn
G J Fry
K Whiteman
S Ellis
6,368,153
1,461,792
3,867
1,243,056
80,560
57,029
750,000
375,000
–
250,000
125,000
87,500
Notes
1. Buy out conditional shares awared on joining Berkeley on 13 April 2015.
Option interests subject to conditions
Other share
awards subject to
conditions(1)
Total Interests
held
2011 LTIP
5,000,000
5,000,000
–
–
–
45,672
1,866,503
1,000,000
2,250,000
–
–
–
5,750,000
5,375,000
45,672
2,116,503
1,125,000
2,337,500
200
9,102
9,951
K Whiteman (% of salary)
200
626
5,605
R J Stearn (% of salary)
S Ellis (% of salary)
200
28
329
200
443
11,401
Value/gain on interests over shares (unvested)
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berkeley AnnuAl report 2015 / governAnceA W Pidgley (% of salary)R C Perrins (% of salary)2007,36517,14740019,44411,312G J Fry (% of salary)Shareholding requirementKey: Value of beneficially owned shares Statement of implementation of remuneration policy in the following financial year
Executive Directors
The remuneration policy and its implementation for the forthcoming financial year is summarised below.
Salary: The salaries for 2015/16 are set out below:
Executive Director
2014/15 Salary
£’000
2015/16 Salary
£’000
% change
FTSE 250 - £’000
Lower Quartile
Median
Upper Quartile
A W Pidgley
R C Perrins
R J Stearn
G J Fry
K Whiteman
S Ellis
825
500
350
344
324
324
850
515
350
355
335
335
3.0
3.0
–
3.2
3.4
3.4
459
461
307
295
295
295
524
526
344
340
340
340
607
605
399
390
390
390
In reviewing the salaries of the Executive Directors for 2015/16, the Committee has also taken account of the employment conditions and
salary increases awarded to employees throughout the Group, which were on average 5.2%.
Benefits and Pension: No changes are proposed benefits or pension in 2015/16.
Bonus Plan: The maximum bonus potentials for the year ending 30 April 2016 (first year of operation of the new Bonus Plan approved
by shareholders at the 2014 AGM) are set out below:
Executive Director
A W Pidgley
R C Perrins
R J Stearn
G J Fry
K Whiteman
Maximum Bonus (%
of salary)
300%
300%
200%
175%
200%
S Ellis
220%
The Committee has approved an increase in K Whiteman’s maximum bonus potential for 2015/16, from 175% to 200%, reflecting his
performance and contribution to the business.
The bonus payable to each of the Group Chairman, Group Managing Director and Group Finance Director will be determined by
reference to the Group performance conditions. For the Divisional Directors, 50% of the potential bonus payable will be determined by
reference to the Group performance condition and 50% by reference to the Divisional performance condition.
Group performance condition (year ending 30 April 2016)
Performance Requirement Matrix
<0%
0.0%
0.0%
50.0%
y
t
i
u
q
E
n
o
n
r
u
t
e
R
<20.0%
20.0%
21.0%
22.0%
23.0%
24.0%
25.0%
0%
50%
60%
70%
80%
90%
100%
Bonus Plan
Deduction
0%
0%
0%
0%
0%
0%
0%
25%
30%
35%
40%
45%
50%
Net Asset Value Growth
1.0%
60%
0%
30%
36%
42%
48%
54%
60%
2.0%
70.0%
3.0%
80.0%
4.0%
5.0%
90.0%
100.0%
0%
35%
42%
49%
56%
63%
70%
0%
40%
48%
56%
64%
72%
80%
0%
45%
54%
63%
72%
81%
90%
0%
50%
60%
70%
80%
90%
100%
Divisional performance condition (year ending 30 April 2016)
The Divisional performance targets are set at the beginning of the financial year, based upon the business plan, including PBT targets of
the relevant division, at a level which is challenging taking into account the potential level of bonus payments, the market, development
availability and other relevant issues. It is the view of the Committee that the disclosure of these targets in advance would provide the
Company’s competitors with an unfair advantage. However the Committee may in the future provide retrospective disclosure to allow
shareholders to judge the level of bonus actually earned against the relevant Division’s performance.
Long-term incentives: No changes are proposed to the Company’s long-term incentive arrangements in 2015/16.
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berkeley AnnuAl report 2015 / governAnceStrategic reportgovernanceFinancialS
Directors’ Remuneration Report
continued
Impact of the new UK Corporate Governance Code
The Committee is comfortable that its Policy is in line with the new UK Corporate Governance Code (applying for financial years
beginning on or after 1 October 2014 which the Company will apply with effect from the year ending 30 April 2016). The following table
sets out the key elements of the revised Code and how the Company’s remuneration policy for Executive Directors is in line with the
Governance Code:
Code Provision
Company Remuneration Policy
Executive Directors’ remuneration
should be designed to promote the
long-term success of the Company.
Incentive Schemes should include
provisions that would enable the
company to recover sums paid or
withhold the payment of any sum,
and specify the circumstances in
which it would be appropriate to
do so.
For share-based remuneration, the
Remuneration Committee should
consider requiring directors to hold
a minimum number of shares and
to hold shares for a further period
after vesting or exercise, including
for a period after leaving the
company, subject to the need to
finance any costs of acquisition and
associated tax liabilities.
The 2014 Bonus Plan provides a rolling deferral in shares and an ongoing performance based risk
adjustment. In addition, the end of the rolling deferral period is 6 years.
The 2011 LTIP performance period does not finish until 2021 providing a very long-term equity based
incentive plan.
It is the Committee’s view that the 2014 Bonus Plan and 2011 LTIP together provide a holistic approach
to ensuring Executive Directors are focused on the long-term success of the Company.
The 2014 Bonus Plan and new grants* under the 2011 LTIP include best practice malus and clawback
provisions. The circumstances in which malus and clawback could apply are as follows:
• discovery of a material misstatement resulting in an adjustment in the audited consolidated accounts
of the Company;
• the assessment of any performance target or condition in respect of an award was based on error, or
inaccurate or misleading information;
• the discovery that any information used to determine the number of shares subject to an award was
based on error, or inaccurate or misleading information;
• action or conduct of an award holder which, in the reasonable opinion of the Board, amounts to
employee misbehaviour, fraud or gross misconduct;
• events or behaviour of an award holder have led to the censure of the Company by a regulatory
authority or have had a significant detrimental impact on the reputation of any Group Company
provided that the Board is satisfied that the relevant award holder was responsible for the censure or
reputational damage and that the censure or reputational damage is attributable to him.
The 2014 Bonus Plan has a malus period finishing on the date of each payment under the Plan with a
clawback period extending for a further three years following each payment.
The 2011 LTIP* has a malus period extending to the end of the Plan period in 2021 with a clawback
period extending for a further two years.
The Committee believes that the rules of the Plans provide sufficient powers to enforce malus and
clawback if required.
* The new malus and clawback provisions in the 2011 LTIP will only apply to grants where the grant or
the commitment to make the grant is made after the Committee determined to amend the rules of
the 2011 LTIP on 15 June 2015.
The policy contains the following relevant features:
• Minimum shareholding requirement of 200% of salary for Executive Directors with the Executive
Chairman having a 400% of salary requirement;
• The Committee believes that the long-term nature of both the 2014 Bonus Plan (6 years) and 2011
LTIP (10 years) means that there is no requirement for additional holding periods.
The Committee, therefore, believes that its Policy is in line with best practice.
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72
berkeley AnnuAl report 2015 / governAnce Non-executive Directors
The following table sets out the fee rates for the Non-executive Directors in the year ended 30 April 2015 and those rates which will
apply in the year ending 30 April 2016:
Non-executive Director
Deputy Chairman and SID fees
Basic Fee
Additional fee for chairmanship of Audit and Remuneration Committee
2014/15
£’000
106.0
58.5
12.5
2015/16
£’000
109.25
60.25
12.5
% change
3.1
3.0
–
In reviewing the fees of the Non-executive Directors for 2015/16, the Committee has also taken account of the employment conditions
and salary increases awarded to employees throughout the Group, which were on average 5.2%.
Annual report on remuneration
This section of the Remuneration Report contains details of how the Company’s 2014/15 remuneration policy for Directors was
implemented during the financial year that ended on 30 April 2015. An advisory resolution to approve this report will be put to
shareholders at the AGM.
Single total figure of remuneration (Audited)
The table below sets out the single total figure of remuneration and breakdown for each Executive Director paid in the 2014/15 financial
year. Comparative figures for 2013/14 have also been provided.
Executive
Director
(£’000)
A W Pidgley
R C Perrins
R J Stearn
N G Simpkin(5)
G J Fry
K Whiteman
S Ellis
Salary
Benefits(1)
Annual bonus
Multi-year
performance
incentive
Pensions
Other(4)
Total
2015
2014
2015
2014
2015
2014
2015(2)
2014(3)
2015
2014
2015
2014
2015
2014
825
500
19
119
344
324
324
800
484
–
321
334
314
314
48
31
1
8
26
30
20
47
32
–
23
28
24
27
2,475
1,200
19,808
1,500
726
10,241
–
–
602
567
713
–
353
292
275
275
–
–
6,281
3,427
2,646
1,574
947
–
424
359
294
333
140
85
3
18
52
49
49
136
82
–
–
–
1,609
48
50
47
47
–
–
–
–
–
–
–
–
–
–
–
23,296
3,757
12,357
2,271
1,632
–
145
1,169
7,305
1,063
4,397
3,752
954
996
Notes
1. Benefits include a fully expensed company car or cash allowance alternative and medical insurance.
2. 2014/15 Multi-year performance incentive – the amounts relate to awards that were released under the Bonus Plan and the 2009 Part B LTIP awards that
vested in 2014/15.
3. 2013/14 Multi-year performance incentive – the amounts relate to awards that were released under the Bonus Plan.
4. Other – this represents buy out compensation awarded to R J Stearn on joining Berkeley on 13 April 2015 (cash payment and conditional shares granted
on 13 April 2015) – see page 78 for details.
5. Left the Board on 8 September 2014.
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berkeley AnnuAl report 2015 / governAnceStrategic reportgovernanceFinancialS Directors’ Remuneration Report
continued
The table below sets out the single total figure of remuneration and breakdown for each Non-executive Director.
Non-Executive Director
(£’000)
J Armitt
D Howell (1)
A Nimmo
G Barker
V Wadley
A Li
A Myers
D Brightmore-Armour(2)
Basic fees
Additional fees(3)
Total fees
2015
106.0
19.8
58.5
58.5
58.5
58.5
58.5
58.5
2014
103.0
56.5
56.5
56.5
56.5
38.0
23.0
–
2015
2014
–
4.2
–
12.5
–
–
8.3
–
–
12.5
–
12.5
–
–
–
–
2015
106.0
24.0
58.5
71.0
58.5
58.5
66.8
58.5
2014
103.0
69.0
56.5
69.0
56.5
38.0
23.0
–
Notes
1. Resigned from the Board on 1 September 2014.
2. Appointed to the Board on 1 May 2014.
3. Additional fees represent fees paid for the role of Committee Chairmanship.
4. Non-executive Directors do not participate in any of the Company’s incentive arrangements nor do they receive benefits.
Additional details in respect of single total figure table (Audited)
Taxable benefits
Taxable benefits comprise a fully expensed company car or cash allowance alternative and medical insurance.
Annual Bonus
In respect of the year under review, the Executive Directors’ performance was carefully reviewed by the Committee and performance
against the Bonus Plan targets is summarised below:
Maximum Annual
Bonus
Weighting - % of
maximum paid for
Group Performance
Weighting - % of
maximum paid
for Divisional
Performance
Annual Bonus
Contribution to
Plan Account for
2014/15 £’000
300%
300%
175%
175%
220%
100%
100%
50%
50%
50%
0%
0%
50%
50%
50%
2,475
1,500
602
567
713
Annual Bonus
Contribution to
Plan Account for
2014/15
% of maximum
100%
100%
100%
100%
100%
Executive Director
A W Pidgley
R C Perrins
G J Fry
K Whiteman
S Ellis
Notes
1. N G Simpkin was not entitled to receive a bonus for the year ended 30 April 2015.
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74
berkeley AnnuAl report 2015 / governAnce Assessment of Group performance condition
The matrix of targets against which performance has been assessed for the year ended 30 April 2015 is set out below:
Performance Requirement Matrix
<0%
0.0%
0.0%
50.0%
y
t
i
u
q
E
n
o
n
r
u
t
e
R
<20.0%
20.0%
21.0%
22.0%
23.0%
24.0%
25.0%
0%
50%
60%
70%
80%
90%
100%
Bonus Plan
Deduction
0%
0%
0%
0%
0%
0%
0%
25%
30%
35%
40%
45%
50%
Land Bank Growth
1.0%
60%
0%
30%
36%
42%
48%
54%
60%
2.0%
70.0%
3.0%
80.0%
4.0%
5.0%
90.0%
100.0%
0%
35%
42%
49%
56%
63%
70%
0%
40%
48%
56%
64%
72%
80%
0%
45%
54%
63%
72%
81%
90%
0%
50%
60%
70%
80%
90%
100%
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 that could be earned for 2014/15.
2. Straight line bonus vesting between points.
3. Return on Equity (ROE) is defined as profit before tax divided by average shareholders’ funds.
4. Land Bank Growth is defined as the annual percentage increase in the development margin in the land bank.
Actual performance against the maximum targets for 2014/15 is set out below, along with the targets and actual performance for the
preceding four years of the five year plan:
Return on Equity
Land Bank Growth
Bonus Plan year
Maximum Target
2014/15
2013/14
2012/13
2011/12
2010/11
25.0%
20.0%
18.5%
16.5%
13.5%
Actual
29.5%*
27.5%
22.4%
21.2%
15.3%
Maximum Target
5.0%
5.0%
10.0%
8.0%
10.0%
Actual
16.8%**
5.7%
10.5%
12.0%
13.1%
* Adjusted ROE for the year ended 30 April 2015 excludes gross margin from the sale of ground rents
** The land bank has been rebased to include the pipeline that was previously disclosed separately. Land bank growth, if calculated on a similar basis to last
year, was 25.7%
For the 2014/15 financial year, the annual Bonus Plan contribution based on performance against the Group performance targets matrix
equated to 100% of the maximum annual bonus subject to this condition.
Assessment of Divisional PBT performance condition
Percentage of bonus
element paid for
threshold performance
Percentage of bonus
element paid for
maximum performance
Level of actual
performance as a
percentage of the
maximum performance
target
Percentage of bonus
element earned
following assessment
against the performance
target
0%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Division
St George
Berkeley Homes East
Thames
St James Group
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. Disclosure of PBT targets are considered to be
commercially sensitive as the disclosure of such details could be detrimental to the Company’s future strategic plans.
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berkeley AnnuAl report 2015 / governAnceStrategic reportgovernanceFinancialS
Directors’ Remuneration Report
continued
For the 2014/15 financial year, the annual Bonus Plan contribution based on performance against the Divisional PBT targets equated to
100% of maximum annual bonus subject to this condition.
The Committee exercised no discretion in determining incentive outcomes for the year ended 30 April 2015.
Bonus earned but deferred under the Bonus Plan
Under the Bonus Plan, the earned bonus for the year is added to each individual Director’s plan account. On the basis that this is the
final year of the 2011 Bonus Plan, in line with the Plan rules, 100% of the balance of the plan account at the end of the financial year is
released.
The plan account for each Executive Director is set out below.
a. Plan
account
brought
forward
b. Plan
account
brought
forward(1)
Shares
120,912
72,948
28,398
24,801
26,505
£’000
3,263
1,969
766
669
715
£’000
2,475
1,500
602
567
713
Executive
Director
A W Pidgley
R C Perrins
G J Fry
K Whiteman
S Ellis
Total
c.
Contribution
into plan
account for
the financial
year 2014/15
d. Plan
account
balance
following
contribution
for financial
year 2014/15
e. Amount
released
following
contribution
for financial
year
2014/15(3)
f. Amount
released
- annual
bonus
(100% of
column c)
g. Amount
released -
Multi-year
(column e
less column
f)
h. Plan
account
carried
forward
£’000
£’000
£’000
£’000
£’000
5,738
3,469
1,368
1,236
1,428
5,738
3,469
1,368
1,236
1,428
2,475
1,500
602
567
713
3,263
1,969
766
669
715
–
–
–
–
–
–
273,564
7,382
5,857
13,239
13,239
5,857
7,382
Notes
1. Converted at a share price of £25.19 at 30 April 2015 plus £0.90 dividend paid 26 September 2014 plus £0.90 dividend paid 23 January 2015.
2. N G Simpkin was not entitled to receive a bonus for the year ended 30 April 2015. The balance of his plan account brought forward from the year ended
30 April 2014 (£777,000) lapsed following notice of termination of employment.
3. 50% of the amount released following the contribution for the financial year 2014/15 is payable in cash, and 50% in shares, as set out in the table below.
The shares released have been converted using a share price of £25.19 at 30 April 2015:
Executive Director
A W Pidgley
R C Perrins
G J Fry
K Whiteman
S Ellis
Total
Amount released
Amount released in cash
(50%)
Amount released in
shares (50%)
Number of shares
released
£’000
5,738
3,469
1,368
1,236
1,428
13,239
£’000
2,869
1,734
684
618
714
6,619
£’000
2,869
1,734
684
618
714
6,619
Number
113,903
68,854
27,163
24,541
28,348
262,809
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berkeley AnnuAl report 2015 / governAnce Long-term incentives
50% of the Part B awards granted under the 2009 Long Term Incentive Plan vested on 15 April 2015. The table below sets out the
numbers of awards that vested for each Executive Director participant and the achievement against the conditions required for vesting.
The table also sets out the remaining 50% of the 2009 LTIP Part B awards which will vest on the 15 April 2016 provided that the
Executive remains in employment and the satisfaction of the Net Assets per share underpin condition is achieved at the vesting date
(£9.00 at 15 April 2016). Should these awards vest, the value at vesting will be disclosed in the 2015/16 single total figure of remuneration.
Number
of awards
granted
(50% of
the 2009
LTIP Part B
awards)(1)
Executive
Director
Performance
measures
Performance
outcome
Percentage
of awards
vesting
Number
of awards
vesting
(50% of
the 2009
LTIP Part B
awards)
Value of
awards that
vested on 15
April 2015
(£’000)(2)
Number
of awards
that will
potentially
vest on 15
April 2016
(50% of
the 2009
LTIP Part B
awards)(3)
A W Pidgley
750,000 Continued
R C Perrins
375,000
G J Fry
250,000
K Whiteman
125,000
S Ellis
87,500
employment to the
vesting date and the
satisfaction of the
underpin condition
that Net Assets per
share are at least
£9.00 at 15 April 2015
Achieved – Net
Assets per share of
£11.97 at April 2015
100%
100%
100%
100%
100%
750,000
16,545
750,000
375,000
250,000
125,000
87,500
8,273
5,515
2,758
1,930
375,000
250,000
125,000
87,500
Notes
1. The original exercise price was adjusted from £8.40 to £4.96 to reflect the payment of dividends during the vesting period – as approved by shareholders
at the 2011 AGM.
2. The value of awards at vesting is calculated using the closing middle market share price of £27.02 on 15 April 2015, the date the awards became
exercisable, less the exercise price of £4.96 per share.
3. The value at vesting will be dependent upon the share price and exercise price at 15 April 2016.
4. N G Simpkin’s 2009 LTIP Part B awards lapsed following notice of termination of employment.
5. The accounting for the 2009 B LTIP is disclosed in Note 6 to the financial statements.
The above participants exercised their vested awards on the 15 April 2015.
Total pension entitlements (Audited)
No Executive Directors participate in any defined benefit arrangements.
Sean Ellis and Richard Stearn are members of a defined contribution scheme. They received contributions equal to 15% of salary.
No amounts were paid into pension arrangements in respect of Tony Pidgley, Rob Perrins, Greg Fry and Karl Whiteman during
the year ended 30 April 2015, who instead received payments in lieu of a pension contribution from the Company (2014/15:
percentages of salary 17%, 17%, 15% and 15% respectively).
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berkeley AnnuAl report 2015 / governAnceStrategic reportgovernanceFinancialS Directors’ Remuneration Report
continued
Replacement awards made to R J Stearn (Audited)
In line with Berkeley’s recruitment policy, on appointment to the role as Group Finance Director, R J Stearn was granted
replacement share awards over 45,672 Berkeley shares on 13 April 2015 and provided with a cash payment of £359,842 in lieu of
his entitlement over Quintain incentives that were forfeited when he joined Berkeley.
Further details of the conditional shares granted in the year are provided below:
Type of award
Conditional shares
Conditional shares
Number of
awards
Face value of
awards made(1)
16,195
11,848
£442,933
£324,043
Date of vesting
Conditions
23 May 2016
Continued employment
22 July 2016
Continued employment to vesting date and sale
restriction until 22 July 2018
Conditional shares
8,795
£240,543
23 May 2017
Conditional shares
8,834
£241,610
23 May 2018
Continued employment to vesting date and sale
restriction until 23 May 2019
Continued employment to vesting date and sale
restriction until 23 May 2020
Notes
1. At the time of recruitment the total value of R J Stearn’s buy-out shares was determined to be £1,014,832. This was converted into replacement share
awards over 45,672 Berkeley shares using a share price of £22.22. In line with the regulations, the face value of the replacement shares was calculated
using the closing middle market share price of £27.35 on 13 April 2015, the date of joining Berkeley and the date the awards were granted.
In addition, in accordance with the Company’s recruitment policy, R J Stearn will be granted 704,328 options over shares under the 2011
LTIP following the announcement of the results for the year ended 30 April 2015. A further 250,000 options over shares will be granted
to him following the first anniversary of commencement of employment.
Type of award
Number of
awards
Date of grant
Date of vesting
Conditions
704,328
Following announcement of results
for year ended 30 April 2015
2011 LTIP – Options
30 September
2021
250,000
Following the first anniversary of
commencement of employment
Performance will be measured against
cumulative distribution targets. All awards
granted to participants in the 2011 LTIP have
the same performance conditions.
See detailed terms on pages 62 to 63 of
the Directors’ Remuneration Policy at
www.berkeleygroup.co.uk/investor-
information/corporate-governance.
Payments to past Directors (Audited)
No payments to past Directors were made during the year.
Payments for loss of office (Audited)
N G Simpkin received twelve months’ notice of termination of his employment on 24 September 2014. N G Simpkin is on gardening
leave and during this period will receive his salary and benefits, including pension contributions, totalling £452,427, as follows:
N G Simpkin
Salary
Benefits
Pension
Total
Payments for 12 months’ notice
£’000
335
67
50
452
N G Simpkin was not entitled to receive a bonus for the year ended 30 April 2015. The balance of his Bonus Plan account brought
forward from the year ending 30 April 2014 and his 2009 LTIP Part B and 2011 LTIP awards lapsed following notice of termination of
employment.
N G Simpkin has issued legal proceedings against the Company arising from his employment and its termination. These proceedings
were received by the Company on 12 December 2014 and 25 June 2015. The Company is defending the proceedings with the assistance
of external legal advisers.
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berkeley AnnuAl report 2015 / governAnce Directors’ shareholding and share interests (Audited)
The Company has a shareholding requirement for both Executive and Non-executive Directors, linked to base salary or net fee they
receive from the Company. In the case of the Group Chairman this is 400% of base salary, for other Executive Directors 200% of base
salary and for the Non-executive Directors 100% of net fees. This should be achieved within five years of appointment for Executive
Directors and three years of appointment for Non-executive Directors.
Using the Company’s closing share price of £25.19 on 30 April 2015, compliance with these requirements was as follows:
Obligation
(% base salary/NED net fees)
% base salary/NED net fees at
30 April 2015
Achievement at 30 April 2015
Executive Director
A W Pidgley
R C Perrins
R J Stearn
G J Fry
K Whiteman
S Ellis
Non-executive
J Armitt
A Nimmo
G Barker
V Wadley
A Li
A Myers
D Brightmore-Armour
Notes
1. To be achieved within 5 years of appointment.
2. To be achieved within 3 years of appointment.
19,444%
7,365%
28%
9,102%
626%
443%
373%
297%
614%
483%
742%
40%
–
√
√
x (1)
√
√
√
√
√
√
√
√
x (2)
x (2)
400%
200%
200%
200%
200%
200%
100%
100%
100%
100%
100%
100%
100%
79
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berkeley AnnuAl report 2015 / governAnceStrategic reportgovernanceFinancialS
Directors’ Remuneration Report
continued
The table below summarises the Directors’ interests in shares at 30 April 2015.
Scheme interests – Options and awards over shares
Option interests subject to conditions(3)
Executive Director
Shares(1)
2009 LTIP Part B(4)
A W Pidgley
R C Perrins
R J Stearn
N G Simpkin(2)
G J Fry
K Whiteman
S Ellis
Non-executive
J Armitt
A Nimmo
G Barker
V Wadley
A Li
A Myers
D Brightmore-Armour
6,368,153
1,461,792
3,867
27,000
1,243,056
80,560
57,029
9,1 1 2
4,000
10,042
6,500
10,000
650
–
750,000
375,000
–
–
250,000
125,000
87,500
–
–
–
–
–
–
–
2011 LTIP(5)
5,000,000
5,000,000
–
–
1,866,503
1,000,000
2,250,000
–
–
–
–
–
–
–
Other share
awards subject to
conditions(6)
Total Interests held
at 30 April 2015
–
–
45,672
–
–
–
–
–
–
–
–
–
–
–
5,750,000
5,375,000
45,672
–
2,116,503
1,125,000
2,337,500
–
–
–
–
–
–
–
Notes
1. Beneficial interests include shares held directly or indirectly by connected persons.
2. At 8 September 2014 – N G Simpkin’s 2011 LTIP and 2009 LTIP Part B awards lapsed on notice of termination of employment.
3. Please see the description of 2009 LTIP Part B awards and 2011 LTIP awards in the ‘elements of previous policy that continue to apply’ section
of the Directors’ Remuneration Policy on pages 61 to 63, which is available to view in full on the Company’s website at
www.berkeleygroup.co.uk/investor-information/corporate-governance.
4. 2009 LTIP Part B option exercise price £4.96 at 30 April 2015.
5. 2011 LTIP option exercise price £9.56 at 30 April 2015.
6. Other share awards subject to conditions relate to the buy out conditional shares awared to R J Stearn on joining Berkeley on 13 April 2015.
50% of the 2009 LTIP Part B awards vested and were exercised during the year by the Executive Director participants. See the long-
term incentives section under the additional details in respect of single total figure table on page 77 for details.
Dilution
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, after the priority return of £1.7 billion (£13 per share), representing 183% of Net Assets at
30 April 2011, that the dilution on existing shareholders until the hurdle return has been achieved will have no effect and the dilution will
only have effect on the value created above the priority return of £1.7 billion.
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berkeley AnnuAl report 2015 / governAnce Performance and pay
The graph below shows the Company’s performance, measured by total shareholder return (TSR), compared with the performance of
the FTSE 250 and the FTSE All Share. The Company considers these the most relevant indices for total shareholder return disclosure
required under these Regulations.
Total shareholder return from 30 April 2009 (%)
300
250
200
150
100
50
0
2009
2010
2011
2012
2013
2014
2015
Berkeley Group
Holdings plc
FTSE 250 Index
FTSE All Share Index
Notes
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.
Group Chairman and Managing Director remuneration over past 6 years
The table below shows the remuneration of the Group Chairman and Managing Director for each of the financial years shown above.
Given the nature of the roles of A W Pidgley and R C Perrins, the table below provides this information for both individuals.
Single figure of total remuneration (£’000)(1)
Executive Director
A W Pidgley
Group Chairman
R C Perrins
Managing Director
Annual bonus pay-out
(as % maximum
opportunity)(2)
Multi-year incentive
vesting awards (as %
maximum opportunity)
2014/15
2013/14
2012/13
2011/12
2010/11
2009/10
23,296
3,757
3,638
2,799
2,033
2,406
12,357
2,271
2,198
1,692
1,226
1,127
100%
100%
100%
100%
100%
100%
100%/See Note 4
See Note 3
n/a
n/a
Notes
1. Single figure of total remuneration for each year has been calculated in accordance with the Regulations.
2. From 2010/11 onwards the annual bonus pay-out figures represent annual Company contributions under the Bonus Plan.
3. 2011/12, 2012/13 and 2013/14 Multi-year vesting awards represent deferred awards that were released during the year under the Bonus Plan. In accordance
with the Bonus Plan rules the Company’s contribution is earned based on the satisfaction of the annual performance conditions. Part of the Company
contribution is provided as a deferred award. 100% of these deferred awards will be paid out unless there has been forfeiture during the deferral period
and subject to continued employment at the date of release. At the year ended 30 April 2015 there has not been a forfeiture event under the Bonus Plan.
4. 2014/15 Multi-year vesting represents the 2009 Part B LTIP awards that vested during the year and the deferred Bonus Plan awards as per note 3 above.
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berkeley AnnuAl report 2015 / governAnceStrategic reportgovernanceFinancialS Directors’ Remuneration Report
continued
Percentage change in Group Chairman’s and the Managing Director’s remuneration
The table below compares the percentage increase in the Group Chairman’s and Managing Director’s pay (including salary, taxable
benefits and annual bonus) between 2013/14 and 2014/15, with the wider employee population. The Company considers the full-time
employee population, excluding the Main Board, to be an appropriate comparator group and the most stable point of comparison:
Base salary
Taxable benefits
Annual bonus
2013/14 to 2014/15 year on year change (%)
A W Pidgley
Group Chairman
R C Perrins
Managing Director
Group employees
3.1%
2.2%
3.1%
3.3%
(3.0%)
3.3%
6.0%
0.6%
2.6%
Relative importance of spend on pay
The table below sets out the relative importance of spend on pay in the 2014/15 and 2013/14 financial years compared with distributions
to shareholders.
Remuneration of Group employees
(including Directors)
Distributions to shareholders
2014/15
(£m)
177
243
2013/14
(£m)
142
195
% change
25%
25%
Statement of implementation of Remuneration Policy for 2015/16
The details surrounding the statement of implementation of our Remuneration Policy for 2015/16 can be found in ‘Our Remuneration at
a glance’ on pages 71.
Consideration by the directors’ of matters relating to director’s remuneration
Members of the Committee
The Committee currently comprises of three Independent Non-executive Directors, Glyn Barker (Chairman), Sir John Armitt and Andy
Myers.
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 the running of the business.
Director
Glyn Barker
Sir John Armitt
Andy Myers
Number of meetings during financial year
Number of meetings attended
2
2
2
2
2
2
Role of the Committee and activities
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, Bonus
Plans, share options, other share based incentives and pensions;
• Determine the performance conditions for the 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;
• Note annually the remuneration trends and any major changes in employee benefit structures across the Company or Group.
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berkeley AnnuAl report 2015 / governAnce 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).
The Committee’s activities during the 2014/15 financial year included:
Meeting
June 2014
Items discussed
• Annual performance targets under the Annual Bonus Plan
• Draft Remuneration Report for the year ended 30 April 2014
• Proposed shareholder consultation regarding the new Annual Bonus Plan
• Pay review for the Group for the year ended 30 April 2014
March 2015
• Executive Remuneration Benchmarking report
• Market trends and Corporate Governance update
• 2009 LTIP Part B vesting
Advisors to the Committee
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 then Group Finance Director, Nick Simpkin. No Director played a part in any discussion
about his own remuneration.
In addition, the Committee appointed PricewaterhouseCoopers LLP (PwC) as its independent remuneration advisor following the
appointment of new auditors. PwC also provided Berkeley with tax advisory services during the year. The Committee reviewed the
nature of the other services provided by PwC and was satisfied that no conflict of interest exists or existed in the provision of these
services.
PwC is a member of the Remuneration Consultants Group and the voluntary code of conduct of that body is designed to ensure
objective and independent advice is given to remuneration committees
Fixed fees of £50,000 were provided to PwC during the year in respect of remuneration advice received. In 2013/14, the Company paid
a retainer fee of £50,000 to PwC for services in relation to remuneration advice provided to the Board.
Statement of Voting at General Meeting
The table below shows the binding vote approving the Directors’ Remuneration Policy and the advisory vote on the Annual Report on
Remuneration at the AGM held on 1 September 2014.
2014 AGM resolution
Votes for
%
Votes against
%
4.11
4,090,177
8,651,549
8.38
Votes withheld
4,238,568
605,509
Directors’ Remuneration Policy
Annual Report on Remuneration
95,528,881
94,600,568
95.88
91.61
The Directors Remuneration Report has been approved by the Board.
By Order of the Board
Glyn Barker
Chairman of the Remuneration Committee
30 June 2015
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berkeley AnnuAl report 2015 / governAnceStrategic reportgovernanceFinancialS Directors’ Report
The Directors submit their report together
with the audited consolidated and
company financial statements for the year
ended 30 April 2015.
Principal activities and review of the
business
The Company is the UK 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 Strategic report
can be found on pages 6 to 54 of the
Annual Report which provide more
detailed commentaries on the business
performance during the year together with
the outlook for the future. In particular,
information in respect of the principal
financial and operating risks of the business
is set out on pages 23 to 31 of the Strategic
Report.
Trading results and dividends
The Group’s consolidated profit after
taxation for the financial year was £423.5
million (2014: £292.9 million). The Group’s
joint ventures contributed a profit after
taxation of £28.3 million (2014: £12.1 million).
An interim dividend of 90 pence per
share was paid to shareholders on 26
September 2014 and a further interim
dividend of 90 pence per share was paid to
shareholders on 23 January 2015. A further
interim dividend of 90 pence per share
is proposed, payable on 17 September
2015 to shareholders on the register on
14 August 2015.
Post balance sheet event
The Group has exchanged contracts for
the sale of a portfolio of ground rent assets
for £53 million. The sale is expected to give
rise to a non-recurring profit on disposal of
approximately £50 million after transaction
costs following legal completion in the year
ending 30 April 2016.
Share capital
The Company had 136,657,183 ordinary
shares in issue at 30 April 2015 (2014:
135,357,183). No shares are held in treasury.
Authority will be sought from shareholders
at the forthcoming Annual General Meeting
to renew the authority given at the 2014
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 6 to the
consolidated financial statements. Details
of the Long-Term Incentive Schemes
and Long-Term Incentive Plans for key
executives are set out within the Directors’
Remuneration Report on pages 66 to 83.
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 58 and 59.
All of these Directors served throughout
the year under review with the exception of
Richard Stearn who was appointed to the
Board on 13 April 2015. David Howell stood
down from the Board on 1 September
2014 and Nick Simpkin left the Board on
8 September 2014.
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 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.
The Directors’ interests in the share capital
of the Company and its subsidiaries are
shown in the Directors’ Remuneration
Report on page 70. At 30 April 2015 each
of the Executive Directors were deemed
to have a non-beneficial interest in 100,156
(2014: 106,799) ordinary shares held by the
Trustees of The Berkeley Group Employee
Benefit Trust. The trustee of the Berkeley
Group Holdings Employee Benefit Trust
(“EBT”) has agreed not to vote on any
shares held in the EBT at any general
meeting.
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 6 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.
Substantial shareholders
The Company has been notified of the
following interests, pursuant to Rule 5 of
the Disclosure Rules and Transparency
Rules, as at 29 June 2015:
Number of ordinary
shares held
% of issued
share capital
First Eagle Investment
Management LLC
BlackRock Inc.
Anthony William Pidgley
13,092,232
9,343,421
6,368,153
Standard Life Investments
6,443,253
9.97
6.84
4.66
4.76
Nature of
holdings
Direct
Indirect
Direct
Indirect/Indirect
84
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berkeley AnnuAl report 2015 / governAnce Donations
The Group made no political donations
(2014: £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.
All disclosures concerning diversity of the
Group’s Directors, senior management
and employees (as required under the
Companies Act 2006 (Strategic Report
and Directors’ Report) Regulations 2013)
are contained within the Strategic Report
on page 47.
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, Our Vision, sets out
our integrated approach to managing
sustainability within the context of the
wider aims for the business. This approach
is outlined within the Strategic Report and
more extensive information is available on
Berkeley’s website. We believe that this
integrated 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. The Board is responsible
for setting the strategic objectives
and continues to monitor strategic
development and progress against
commitments and Key Performance
Indicators. The Sustainability Working
Group is responsible for delivering these
objectives and reviewing progress against
targets.
Greenhouse gas emissions
2015
2014
Restated
2,283
1,853
11,248
8,907
14,534
11,481
28,066
22,242
2.56
2.53
Scope 1 (tCO2e)
Scope 2 (tCO2e)
Scope 3 (tCO2e)
Total (tCO2e)
Emissions intensity
(tCO2e/person)
The Group has reported on greenhouse
gas emissions for which it is responsible, as
required under the Companies Act 2006
(Strategic Report and Directors’ Reports)
Regulations 2013. The emissions disclosed
are aligned to the Group’s financial
reporting year, are considered material
to its business and have the following
parameters:
Scope 1 – direct emissions relating to office,
sales and development site activities; and
work-related travel in company owned
vehicles;
Scope 2 – indirect emissions from
electricity consumed for office, sales and
development site activities;
Scope 3 – other indirect emissions relating
to office, sales and development site
activities; work related travel in leased and
employee owned vehicles; business air
travel; transmission and distribution losses
of purchased electricity; and upstream
emissions.
Emissions include 50% of those resulting
from the Group’s joint ventures on the basis
of its equity share.
The intensity ratio has been calculated
using the total number of direct employees
across the Group and the number of
contractors working on our sites.
The UK Government Environmental
Reporting Guidelines 2014 and UK
Government GHG Conversion Factors
for Company Reporting 2014 have been
used to calculate and report the Group’s
greenhouse gas emissions.
2014 data has been restated based on
energy billing information which was
received after the publication of the
85
Annual Report 2014. Further details on the
methodology adopted can be found at
berkeleygroup.co.uk/sustainability/reports-
and-case-studies, and other environmental
key performance indicators (KPIs) can
be found at berkeleygroup.co.uk/about-
berkeley-group/our-vision/performance.
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. The Board 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.
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 partners,
Prudential Assurance Company Limited
and National Grid plc, the ability to exercise
certain rights under the shareholder
agreements in relation to their St Edward
Homes and St William Homes joint
ventures respectively.
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
02_BERKAR15_DirRemReport_66-87NEW.indd 85
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berkeley AnnuAl report 2015 / governAnceStrategic reportgovernanceFinancialS
Directors’ Report
continued
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 6 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 appoint KPMG 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 8 September 2015. 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.
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 84.
Statement of Directors’ responsibilities
in respect of the Annual Report and the
Financial Statements
The Directors are responsible for preparing
the Annual Report, the Directors’
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.
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
Directors’ 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 on pages 58 and 59
confirm that, to the best of each person’s
knowledge:
86
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 Strategic Report, together with 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;
c. the Annual Report, taken as a whole, is
fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Company’s
performance, business model and
strategy.
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 Strategic Report. The
financial position of the Group, its cash
flows, liquidity position and borrowing
facilities are all described in the Trading and
Financial Review on pages 50 to 54.
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.
By order of the Board
EA Driver
Company Secretary
The Berkeley Group Holdings plc
Registered number: 5172586
30 June 2015
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berkeley AnnuAl report 2015 / governAnce Kidbrooke Village.
87
BERKELEY ANNUAL REPORT 2015 / GOVERNANCESTRATEGIC REPORTGOVERNANCEFINANCIALS Joggers on the riverbank at
Woodberry Park in Hackney.
88
BERKELEY ANNUAL REPORT 2015 / FINANCIALS Financials
89
BERKELEY ANNUAL REPORT 2015 / FINANCIALSSTRATEGIC REPORTGOVERNANCEFINANCIALS Independent Auditors’ report
to the members of The Berkeley Group Holdings plc
Opinions and conclusions arising from our audit
1) Our opinion on the financial statements is unmodified
We have audited the financial statements of The Berkeley Group Holdings plc for the year ended 30 April 2015 set out on pages 94 to
125. In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 30 April 2015
and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as
adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with UK Accounting Standards; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
2) Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements the risks of material misstatement that had the greatest effect on our
audit were as follows:
The risk
Our response
Carrying value of inventories and profit recognition (inventories:
£2,654.1m, gross profit: £716.8m)
Refer to page 64 (Audit Committee Report), pages 99 and 100
(accounting policy) and page 112 (financial disclosures)
The Group recognises profit on each sale by reference to the overall
site margin, which is the forecast profit percentage for a site that
may comprise multiple phases and can last a number of years. The
recognition of profit is therefore dependent on the Group’s estimate
of future selling prices and build costs, which form the basis of the site
forecast.
Future selling prices are dependent on market conditions, which can
be difficult to predict. Future build costs are subject to a number
of variables including the accuracy of designs, market conditions in
respect of materials and sub-contractor cost and construction issues.
Inventory represents the costs of land, materials, design and related
production and site costs to date. It is held at the lower of cost and
net realisable value, the latter also being based on the forecast for the
site. As such errors in these forecasts can impact the assessment over
the carrying value of inventories and gross profit.
There is a risk that the actual revenue and costs are different to those
forecast across whole sites resulting in material misstatement of
inventory and gross profit recognised.
There is also a risk that costs are inappropriately recognised within
inventories or that the allocation of costs that relate to the whole site,
such as land and infrastructure, is inappropriate across development
phases, resulting in a material misstatement of inventory or gross
profit.
Our audit procedures in respect of this area included:
Testing the Group’s controls by checking approvals over reviewing and
updating selling price and cost forecasts, authorising and recording of
costs.
We inspected the minutes and attended a selection of management’s
cost review meetings. At these meetings management review
actual costs and revenues against detailed site budgets. Estimates
of future costs and selling prices in the forecasts are challenged by
management including reference to tendered works packages, actual
costs incurred and forward sales reservation prices. Our inspection
of the minutes and attendance at a selection of meetings included
assessing whether the appropriate individuals attended the meetings
and that the valuations and costs to complete forecasts for all
developments were discussed, challenged and the valuations updated
as appropriate.
We inspected the site forecasts, on a sample basis, and challenged the
assumptions for future costs and sales.
We corroborated a sample of forecast costs back to supplier
agreements or tenders. We also considered the appropriateness of
allowances made for cost increases and for risks inherent in longer
term developments. We agreed a sample of additions in the inventory
balance to invoices and/or payments, including checking that they
were allocated to the appropriate site and development phase and
met the definition of inventory costs.
For all significant new land acquisitions and a sample of other land
acquisitions we inspected purchase contracts to understand the
terms and any deferred or contingent payments. We re-performed
the calculation of such amounts to check the amounts recorded. For
a sample of both pre-development and active sites we evaluated
the reliance on planning and other third party actions to achieve the
forecast and considered the impact on carrying values.
We compared the margin recognised in the year on any units sold
to the forecast site margin over the life of the development. We
evaluated the sensitivity of the margin to a change in sales prices and
costs and considered whether this indicated a risk of impairment of
the inventory balance.
We considered the adequacy of the Group’s disclosures over
inventory and the degree of judgement and estimation involved in
arriving at the forecast and resultant profit.
03_BERKAR15_IndAuditors_90-93.indd 90
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90
berkeley AnnuAl report 2015 / finAnciAls The risk
Our response
Revenue recognition (£2,120.0m)
Our audit procedures in respect of this area included:
Refer to page 64 (Audit Committee Report) and page 99 (accounting
policy).
It is the Group’s policy to recognise 100% of revenue on property units
when contracts are exchanged and the building work is physically
complete, being the point at which the Group is satisfied it has
discharged its obligations to the buyer. Contract exchange, including
the payment of a deposit, may have occurred sometime in the past.
However, the legal completion of the sale, being the point at which the
balance of the sale is paid for and title transfers, remains dependent
on the receipt of final payment. The recognition of revenue is generally
before legal completion, and as such is potentially more subjective
than recognising at the latter point.
The risk is that the unit is not physically complete or that the buyer
does not complete the purchase, as should either of these be the case
the revenue should not be recognised.
The group also recognised revenue and resultant profit on the
disposal of a portfolio of ground rents in the period. A second tranche
of ground rent sales is due to complete after the balance sheet
date. The risk pertaining to the sale of ground rents in both tranches
is whether the risks and rewards of ownership of the assets have
transferred to the purchaser at the balance sheet date and that the
transaction is recorded appropriately in the financial statements.
Testing controls over property sales including:
• documentation evidencing internal and third party physical
inspection and confirmation of build complete status;
• customer signature in acceptance of the physical condition of the
property; and
• customer background checks including checks of availability of
funds
For a sample of property sales in the year, we performed the following
test:
• inspected the paperwork confirming legal completion
For a sample of sales recorded close to the year end where the final
payment was not yet received, we performed the following tests:
• performed site visits to verify build completion status;
• inspected the internal sign-off sheets to check that sales recorded
in the year had gone through the Group’s approval process for sale
of properties;
• after the year end, and up to the date of signing the audit report,
we confirmed whether final payments from buyers had been made
and appeared as receipts in the bank statements. Where significant
amounts were still outstanding we considered other information,
such as correspondence agreeing subsequent payment and
reasons for this, or reasons for known recessions, in evaluating the
recoverability of these amounts and appropriateness of related
revenue recognition.
We also performed a physical inspection on a sample of properties for
which the sale had not been recognised to check that these did not
meet this criterion for revenue recognition.
We also used data analytics to look at journal entries posted
throughout the period that impacted revenue to make sure the
journals were appropriate.
We reviewed the contracts for the sale of ground rent assets that
exchanged and completed in the period, as well as that which had not
completed as at the balance sheet date. We considered the respective
treatments in conjunction with the revenue recognition principles of
the group’s accounting policy and those under EU-IFRS to ascertain
if revenue and profit is appropriately recognised in the correct
accounting period.
In particular we considered the transfer of risks and rewards made
under the agreement and timing of these. We have recalculated
the profit on disposal recorded for the transaction completed in the
period, and verified revenue recorded to the sale agreement.
We have also considered the adequacy of the Group’s disclosures in
respect of the judgements taken in recognising revenue for property
units prior to legal completion and the adequacy of the disclosure of
the Group’s accounting policy with regards to sales of ground rent
assets, and the disclosure of the two transactions undertaken.
03_BERKAR15_IndAuditors_90-93.indd 91
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91
berkeley AnnuAl report 2015 / finAnciAlsStrategic reportgovernanceFinancialS Independent Auditors’ report to the members
of The Berkeley Group Holdings plc
continued
The risk
Provisions (£75.1m)
Refer to page 64 (Audit Committee Report), page 100 (accounting
policy) and page 113 (financial disclosures)
The Group holds provisions in respect of claims and construction
related liabilities that have arisen, or that prior claims experience
indicates may arise, subsequent to the completion of certain
developments, as well as in relation to other matters of litigation.
The determination and valuation of provisions is judgmental by
its nature and there is a risk that the estimate is incorrect and the
provision is materially misstated.
Our response
Our audit procedures in respect of this area included:
Enquiring of Group and divisional Directors and inspecting board
minutes for actual and potential claims arising in the year, and
challenging whether provisions are required for these claims.
For all significant known issues and claims provided for we inspected
the calculation of the provision held and compared this to third party
evidence, where available.
For claims that past events indicated may arise, we evaluated settled
issues and considered any differences in the development portfolio
then and now, such as increasing complexity of construction, as
evidence for the calculation of the provision.
In respect of open matters of litigation, we had discussions with the
Group’s external legal advisors and reviewed correspondence in
respect of these matters.
We assessed each provision against the requirements of the relevant
accounting standards and the Group’s policy and assessed whether
the Group’s disclosures disclose the potential liabilities of the Group in
accordance with accounting standards.
Share-based payment recognition (£55.5m)
Our audit procedures in respect of this area included:
Refer to page 64 (Audit Committee Report), page 100 (accounting
policy) and page 103 (financial disclosures)
Share-based payments is a complex accounting area and there
is a risk in the financial statements that amounts are incorrectly
recognised and/or inappropriately disclosed.
The Group also changed the method of settlement on its share-based
long term incentive plan awards which vest in April 2015 and April
2016 from equity-settled to cash-settled. This requires further complex
accounting considerations.
We made inquiries of the directors to understand the share-based
payment schemes in place and the changes made to the awards and
inspected communications made to scheme members regarding
these changes. We agreed the terms of settlement to the revised
scheme documents. We considered whether the modifications met
the criteria for a change in accounting treatment and whether the
accounting treatment was appropriate. We also considered whether
the modification impacted the treatment of other awards by setting
an expectation regarding settlement.
For equity-settled options we recalculated the estimated charge
which reflected the best estimate of the number of options expected
to vest. For cash-settled schemes we inspected the vesting price and
recalculated the amounts to be recognised in the financial statements.
We considered the adequacy of the Group’s disclosures in respect
of the judgements taken in the choice of equity or cash settled
recognition treatment.
Compliance with Laws and Regulations
Our audit procedures in respect of this area included:
Refer to page 64 (Audit Committee Report)
The Group is subject to a number of laws and regulations. These
include, but are not limited to, anti-bribery, anti-money laundering,
sanctions checking and those relevant to publicly traded companies.
Failure to comply with any of these applicable laws and regulations
could have a material financial and reputational impact on the
business.
The Directors have conducted a review of their policies in these areas,
during the year and did not record any material instances of non-
compliance.
Obtaining an understanding of the relevant legal and regulatory
framework within which the Group operates and assessing the design
and operation of its key controls over this framework.
We discussed the applicable policies and procedures with divisional
and group management, including internal legal counsel. We reviewed
Board papers, and internal audit reports for any recorded instances
of potential non-compliance, and maintained a high level of vigilance
when carrying out our other audit procedures for indications of non-
compliance.
We reviewed the Group’s documentation and correspondence with
respect to relevant legal matters. We had discussions with the Group’s
external legal advisors in respect of these matters.
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berkeley AnnuAl report 2015 / finAnciAls 3) Our application of materiality and an overview of the scope of our audit
The materiality for the Group financial statements as a whole was set at £22.5m, determined with reference to a benchmark of Group
profit before taxation (excluding profit on ground rent disposal), of £454.6m, of which it represents 5%.
We report to the audit committee any corrected or uncorrected identified misstatements exceeding £1.1m, in addition to other identified
misstatements that warranted reporting on qualitative grounds.
Of the Group’s 14 reporting components, we subjected 8 to audits for group reporting purposes. Our procedures for group reporting
purposes covered balances that accounted for 88% of Group revenue; 94% of Group profit before taxation and 86% of Group total
assets.
For the remaining components, we performed analysis at an aggregated Group level to re-examine our assessment that there were no
significant risks of material misstatement within these.
The work on all components was performed by the Group audit team using component materialities ranging from £2.3m to £11.3m
having regard to the mix of size and risk profile of the Group across the components.
4) Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006; and
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements.
5) We have nothing to report in respect of the matters on which we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have
identified other information in the annual report that contains a material inconsistency with either that knowledge or the financial
statements, a material misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
• we have identified material inconsistencies between the knowledge we acquired during our audit and the directors’ statement that
they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s performance, business model and strategy; or
• the Audit Committee report does not appropriately address matters communicated by us to the audit committee.
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
• the directors’ statement, set out on page 86, in relation to going concern; and
• the part of the Corporate Governance Statement on pages 60 relating to the company’s compliance with the ten provisions of the
2012 UK Corporate Governance Code specified for our review.
We have nothing to report in respect of the above responsibilities.
Scope and responsibilities
As explained more fully in the Directors’ Responsibilities Statement set out on page 86, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view. A description of the scope of an audit of financial
statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. This report is made solely to
the Company’s members as a body and subject to important explanations and disclaimers regarding our responsibilities, published on
our website at www.kpmg.com/uk/auditscopeukco2014a which are incorporated into this report as if set out in full and should be read
to provide an understanding of the purpose of this report, the work we have undertaken and the basis of our opinions.
Sean McCallion (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London, E14 5GL
30 June 2015
93
03_BERKAR15_IndAuditors_90-93.indd 93
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berkeley AnnuAl report 2015 / finAnciAlsStrategic reportgovernanceFinancialS Consolidated Income Statement
For the year ended 30 April
Revenue
Revenue includes:
Revenue from operations
Revenue from sale of ground rent assets
Cost of sales
Gross profit
Gross profit includes:
Gross profit from operations
Gross profit from sale of ground rent assets
Net operating expenses
Operating profit
Finance income
Finance costs
Share of results of joint ventures using the equity method
Profit before taxation for the year
Income tax expense
Profit after taxation for the year
Earnings per ordinary share:
Basic
Diluted
Notes
3
3
4
4
11
2, 5
7
2015
£m
2,120.0
2,020.2
99.8
(1,403.2)
716.8
631.7
85. 1
(192.7)
524. 1
3.0
(15.7)
28.3
539.7
(116.2)
423.5
2014
£m
1,620.6
1,620.6
–
(1,111.7)
508.9
508.9
–
(134. 1 )
374.8
3.4
(10.3)
12. 1
380.0
(87. 1 )
292.9
8
8
313.0p
276.9p
221.8p
188.4p
Consolidated Statement of
Comprehensive Income
For the year ended 30 April
Profit after taxation for the year
Other comprehensive expense:
Items that will not be reclassified to profit or loss
Remeasurements of the net defined benefit asset/liability
Deferred tax on remeasurements of the net defined benefit asset/liability
Total items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss
Change in value of other investments
Total items that may be reclassified subsequently to profit or loss
Other comprehensive income for the year
Total comprehensive income for the year
94
Notes
6
7
12
2015
£m
423.5
(0.6)
0. 1
(0.5)
1.0
1.0
0.5
2014
£m
292.9
(0.6)
0. 1
(0.5)
1.0
1.0
0.5
424.0
293.4
04_BERKAR15_PrimaryStats_94-97.indd 94
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berkeley AnnuAl report 2015 / 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
Other investments
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Trade and other payables
Provisions for other liabilities
Current liabilities
Borrowings
Trade and other payables
Current tax liabilities
Provisions for other liabilities
Total liabilities
Total net assets
Equity
Shareholders’ equity
Share capital
Share premium
Capital redemption reserve
Other reserve
Revaluation reserve
Retained profit
Total equity
Notes
9
10
10
11
12
19
13
14
15, 25
17
18
16
17
18
20
20
21
21
21
21
2015
£m
17.2
23.5
0.2
50. 1
12.0
72.7
175.7
2,654. 1
145.6
430.9
3,230.6
3,406.3
(131.7)
(61.1 )
(192.8)
–
(1,503.8)
(57.8)
(14.0)
(1,575.6)
(1,768.4)
1,637.9
6.8
49.6
24.5
(961.3)
–
2,518.3
1,637.9
2014
£m
17.2
22.0
7.2
61.4
11.0
61. 1
179.9
2,481.2
159.0
130.2
2,770.4
2,950.3
(148.6)
(48.5)
(197.1 )
(1.0)
(1,218.6)
(83.7)
(8.6)
(1,311.9)
(1,509.0)
1,441.3
6.8
49.3
24.5
(961.3)
4.1
2,317.9
1,441.3
The financial statements on pages 94 to 120 were approved by the board of directors on 30 June 2015 and were signed on its behalf by:
R J Stearn
Finance Director
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berkeley AnnuAl report 2015 / finAnciAlsStrategic reportgovernanceFinancialS
Consolidated Statement of
Changes in Equity
Share
Share
capital premium
£m
£m
Notes
Capital
redemption
Other
reserve reserve
£m
£m
Revaluation Retained
earnings
£m
reserve
£m
Total
£m
6.8
49.3
24.5
(961.3)
4. 1
2,317.9
1,441.3
At 1 May 2014
Profit after taxation for the year
Other comprehensive income for the year
Total comprehensive income for the year
Reserves transfer from revaluation reserve
Issue of ordinary shares
Transactions with shareholders:
Credit in respect of employee
share schemes
Deferred tax in respect of
employee share schemes
Dividends to equity holders of
the Company
–
–
–
–
–
–
–
–
–
–
–
–
0.3
–
–
–
21
20
6
7
22
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
At 30 April 2015
6.8
49.6
24.5
(961.3)
Share
Share
capital premium
£m
£m
Notes
Capital
redemption
Other
reserve reserve
£m
£m
–
–
–
(4. 1 )
–
–
–
–
–
423.5
423.5
0.5
0.5
424.0
424.0
4. 1
–
–
0.3
2.7
2.7
13.1
13.1
(243.5)
(243.5)
2,518.3
1,637.9
Revaluation Retained
earnings
£m
reserve
£m
Total
£m
At 1 May 2013
Profit after taxation for the year
Other comprehensive income for the year
Total comprehensive income for the year
Reserves transfer from revaluation reserve
Issue of ordinary shares
Transactions with shareholders:
Credit in respect of employee
share schemes
Deferred tax in respect of
employee share schemes
Dividends to equity holders of
the Company
6.7
49.3
24.5
(961.3)
4.0
2,199.2
1,322.4
–
–
–
–
0. 1
–
–
–
21
20
6
7
22
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0. 1
–
–
–
–
292.9
292.9
0.5
0.5
293.4
293.4
(0.1 )
–
–
0.1
3.3
3.3
17.3
17.3
(195.2)
(195.2)
At 30 April 2014
6.8
49.3
24.5
(961.3)
4. 1
2,317.9
1,441.3
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berkeley AnnuAl report 2015 / finAnciAls
Consolidated Cash Flow Statement
For the year ended 30 April
Cash flows from operating activities
Cash generated from operations
Proceeds from sale of investment properties*
Interest received
Interest paid
Income tax paid
Net cash flow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of financial assets
Dividends from investments accounted for using the equity method
Proceeds on disposal of property, plant and equipment
Movements in loans with joint ventures
Net cash flow from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Increased/(Repayment of) borrowings
Dividends paid to Company’s shareholders
Net cash flow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the start of the financial year
Cash and cash equivalents at the end of the financial year
Notes
25
10
11
11
22
15, 25
2015
£m
643.6
8.3
3.2
(5.4)
(140.5)
509.2
(4.6)
–
12.3
0.6
27.3
35.6
0.4
(1.0)
(243.5)
(244. 1 )
300.7
130.2
430.9
2014
£m
259.7
138.2
2.7
(5.0)
(92.4)
303.2
(8.9)
(10.0)
–
0.6
(5.2)
(23.5)
–
(21. 1 )
(195.2)
(216.3)
63.4
66.8
130.2
* The Group has reviewed the classification of Proceeds from the sale of investment properties which is included within Cash flows from operating activities.
In 2014, this was included within Cash flows from investing activities.
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berkeley AnnuAl report 2015 / finAnciAlsStrategic reportgovernanceFinancialS
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 83.
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 101.
The following new standards, amendments to standards and interpretations are applicable to the Group and are mandatory for the first time for the
financial year beginning 1 May 2014: IFRS 10 Consolidated Financial Statements; IFRS 11 Joint Arrangements; IFRS 12 Disclosure of Interest in Other Entities;
IAS 27 (amendment), Consolidated and Separate Financial Statements; IAS 28 (Amendment), Investments in Associates and Joint Ventures; IAS 32
(amendment), Financial Instruments; IAS 36 (amendment), Impairment of Assets and IAS 39 (amendment), Financial Instruments.
These standards have not had a material impact on the results of the Company for the year ended 30 April 2015.
The following new standards, amendments to standards and interpretations have been issued, but are not yet effective for the financial year ending 30 April
2015 and have not been adopted early: IAS 19 (Amendments) Employee contributions, Annual Improvements 2010-2012 Cycle, Annual Improvements
2011-2013 Cycle, Annual Improvements 2012-2014, IFRS10 and IAS 28 (Amendments) Sale or Contribution of Assets between an Investor and its Associate
or Joint Venture, IFRS15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments.
These standards are not expected to have a significant impact on the Consolidated Financial Statements.
The Group has significant financial resources and the Directors have assessed the future funding requirements of the Group and compared this to the level
of committed loan facilities and cash resources over the medium term. In making this assessment, consideration has been given to the uncertainty inherent
in future financial forecasts and where applicable, reasonable sensitivities have been applied to the key factors affecting the financial performance of the
Group. The Directors have a reasonable expectation that the Group 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 its Consolidated Financial Statements.
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.
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential
voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of
subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Losses
applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests
to have a deficit balance.
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.
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) Joint ventures
Joint ventures are accounted for using the equity method (equity accounted investees) and are initially recognised at cost. The Group’s investment includes
goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share of the total
comprehensive income and equity movements of equity accounted investees, from the date that joint control commences until the date that joint control
ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the Group’s carrying amount is reduced to nil and recognition
of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an
investee.
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.
05_BERKAR15_Notes_98-120.indd 98
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berkeley AnnuAl report 2015 / finAnciAls 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 they do not meet the size thresholds to be disclosed as a separate reportable segment.
Revenue
Revenue represents the amounts receivable from the sale of properties, investment properties and ground rent assets 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. Ground rent assets are treated as sold when all material conditions precedent to the sale have been satisfied and the risks and
rewards of ownership have transferred to the purchaser. See Accounting estimates and judgements below for further disclosures on revenue recognition.
Rental income is recognised in the income statement on a straight line basis over the life of the lease. Any lease incentives are recognised as an integral part
of the total rental income.
Expenditure
Expenditure recorded in inventory is expensed through cost of sales at the time of the related property sale. The amount of cost related to each property
includes its share of the overall site costs including, where relevant, its share of forecast costs to complete. 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. See Accounting estimates and judgements below for further
disclosures on cost recognition.
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
15% / 20%
Computer equipment
33 1/3 %
Freehold property disclosed in the notes 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.
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berkeley AnnuAl report 2015 / finAnciAlsStrategic reportgovernanceFinancialS Notes to the Consolidated Financial Statements
continued
1 Accounting policies continued
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.
Sales of investment properties are recognised in revenue and cost sales. These are considered to be similar in nature to the underlying property sales of the
Group.
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 cost. Where such land is purchased on deferred
settlement terms, and the cost differs from the amount that will subsequently be paid in settling the liability, this difference is charged as a finance cost in
the income statement over the period to settlement.
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for
impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use
of an allowance account, and the amount of the loss is recognised in the income statement within net operating expenses. When a trade receivable is
uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited
against net operating expense in the income statement.
Cash and cash equivalents
Cash and cash equivalents comprises cash balances in hand and at the bank, including bank overdrafts repayable on demand which form part of the
Group’s cash management, for which offset arrangements across Group businesses have been applied where appropriate.
Share capital
Ordinary shares 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. See Accounting estimates and judgements below for further
disclosures on recognition of provisions.
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
Equity-settled
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, taking into account only service and non-market conditions.
100
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berkeley AnnuAl report 2015 / finAnciAls 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.
Cash-settled
The cost of cash settled transactions is recognised as an expense over the vesting period measured by reference to the fair value of the corresponding
liability which is recognised on the balance sheet. The liability is remeasured at fair value at each balance sheet date until settlement with changes in fair
value recognised in the income statement.
During the year, the Company changed its policy for the accounting of equity-settled share-based payment schemes in the event that such schemes are
modified, in full or in part, to become cash settled. The effect of this change in policy has been to recognise a charge in the income statement of £47.0
million, which previously would have been debited directly to reserves. This related to the modification of the basis of settlement for a proportion of the
awards under Part B of the 2009 LTIP which was undertaken in the year. The effect on basic earnings per share in the year was a reduction of 34.7 pence.
There is no impact of this change in accounting policy on the prior years presented in the financial statements, nor in those years presented in the five year
record.
See Accounting estimates and judgements below for further disclosures on recognition of share based payments.
Dividends
Dividend distributions to shareholders are recognised as a liability in the period in which the dividends are appropriately authorised and approved for
payout and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the financial
statements.
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 assess the risks and forecast the costs in
future years 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) Provisions
The Group makes assumptions to determine the timing and its best estimate of the quantum of its construction and other liabilities for which provisions are
held.
(c) Revenue recognition
Assumptions are made which complement external certifications to assess whether the building work for properties sold is physically complete and legal
completion is highly probable and hence whether the Group’s revenue recognition criteria have been satisfied.
(d) 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.
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.
In addition to its development activities, the Group holds certain residential properties for investment purposes. These investment activities represent a
separate segment which is included within other activities as it does not meet the size thresholds to be disclosed as separate reportable segments. Revenue
and operating profit for the year ended 30 April 2015 included £8.3 million and £1.3 million, respectively, on the sale of 53 other investment properties.
Revenue and operating profit for the year ended 30 April 2014 included £105.4 million and £29.6 million, respectively, on the sale of 534 properties to M&G
Investments and £32.8 million and £13.6 million, respectively, on the sale of 141 other investment properties.
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berkeley AnnuAl report 2015 / finAnciAlsStrategic reportgovernanceFinancialS Notes to the Consolidated Financial Statements
continued
2 Segmental disclosure continued
Segment results
Profit before tax
Residential-led mixed-use development
Other activities
2015
£m
539.4
0.3
539.7
2014
£m
379.7
0.3
380.0
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. Segmental profit before tax on other activities is stated after
charging external and intercompany interest and depreciation.
Segment assets
Assets
Residential-led mixed-use development
Other activities
2015
£m
3,406. 1
0.2
3,406.3
2014
£m
2,943. 1
7.2
2,950.3
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 Disposal of ground rent assets
During the year end 30 April 2015, the Group sold a portfolio of ground rent assets for consideration of £99.8 million and a gross profit of £85. 1 million.
Income and expenses associated with this sale have been recognised in the income statement through revenue and gross profit in accordance with the
Group’s accounting policy for revenue and expenditure.
The Group has exchanged contracts for the sale of a further portfolio of ground rent assets for £53 million. The sale is expected to give rise to a profit on
disposal of approximately £50 million after transaction costs in the year ending 30 April 2016. The sale will be recognised in the income statement through
revenue and profit in accordance with the Group’s accounting policy for revenue and expenditure.
4 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
2015
£m
3.0
(4.8)
(5.7)
(5.2)
(15.7)
(12.7)
2014
£m
3.4
(5.1)
(1.3)
(3.9)
(10.3)
(6.9)
Finance income predominantly represents interest earned on cash deposits.
Amortisation of facility fees includes fees expensed in relation to a refinancing of the Group’s revolving credit facilities in 2012 which was superseded by the
recent refinancing of the facilities in 2015. See note 26 for further information.
Other finance costs represent imputed interest on taxation and on land purchased on deferred settlement terms.
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5 Profit before taxation
Profit before taxation is stated after charging/(crediting) the following amounts:
Staff costs (note 6)
Depreciation of property, plant and equipment (note 10)
Loss on sale of fixed assets
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 previous auditor for other services:
– Audit related assurance services
Fees paid and payable to the Company’s current auditor for the audit of the Parent Company
and consolidated financial statements
Fees paid and payable to the Company’s current auditor for other services:
– Audit of the Company’s subsidiaries
– Audit related assurance services
– Taxation advisory services
2015
£m
270.3
2.7
0.2
(1.3)
(0. 1)
0. 1
2.6
–
0.2
0. 1
0. 1
0. 1
2014
£m
177.3
1.9
0.7
(43.2)
(0.9)
0.2
2.7
0. 1
0.2
0. 1
–
0. 1
The value of inventories expensed and included in the cost of sales is £1,325.4m (2014: £1,032.9m).
In addition to the above services, the Group’s current auditor has been asked to act 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 £10,000 (2014: £nil).
Fees paid in the year to the Group’s current auditor for audit-related assurance services relate to the interim review. In the prior year, fees paid to the Group’s
current auditor for other services disclosed in the table above relate only to the period from the date of appointment of 6 December 2013. Fees paid in
respect of the full year ended 30 April 2014 were £0.1 million for taxation advisory services and £0. 1 million for all other non-audit services.
In the prior year, remuneration paid to the Group’s previous auditors in respect of audit related assurance services relates to the interim review.
6 Directors and employees
Staff costs
Wages and salaries
Social security costs
Share-based payments
Pension costs
2015
£m
176.7
32.8
55.5
5.3
270.3
2014
£m
141.8
28.5
3.3
3.7
177.3
The average monthly number of persons employed by the Group during the year was 2,045 (2014: 1,647).
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 as included in the Income Statement during the year are as follows:
Directors’ remuneration
Amounts charged under the long term incentive scheme
Company contributions to the defined contribution pension schemes
Payments for loss of office
2015
£m
3.8
41.7
0.1
0.5
46.1
2014
£m
3.5
13.1
0.1
–
16.7
The Directors’ Remuneration Report includes disclosure of the gains made by Directors on the exercise of share options during the year, which was £35.0
million in aggregate.
During the year the Company dismissed its finance director, Mr Nicolas Simpkin, who is currently on fully paid garden leave ending on 23 September 2015.
Mr Simpkin has issued legal proceedings against the Company arising from his employment and its termination. These proceedings were received by the
Company on 12 December 2014 and 25 June 2015. The Company is defending the proceedings with the assistance of external legal advisers.
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Notes to the Consolidated Financial Statements
continued
6 Directors and employees continued
Equity-settled share-based payments
The Group operates two 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 and the 2011 Long-Term Incentive Plan was £55.5m (2014:
£9.0m). The charge of £55.5m in 2015 includes £47.0m, of which £33.5m relates to the modification of the basis of settlement and £13.5m relates to the fair
value charge for the current year, in respect of the Company’s decision to offer to pay the income tax and national insurance liabilities of participants under
Part B of the 2009 Long-Term Incentive Plan in lieu of issuing shares of an equivalent value to them. This effectively determined the part of the scheme to
be accounted for on a cash-settlement basis, which is explained further below. The decision and the resultant income statement charge relates to options
vesting at both 15 April 2015 and 15 April 2016. The charge to the income statement attributable to key management is £33.0m (2014: £2.3m).
There were no exercisable share options at the end of the year.
2009 Long-Term Incentive Plan
Part B
Part B of the 2009 Long-Term Incentive Plan covers 6,830,000 (2014: 6,830,000) share options with an exercise price of £4.96. 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 £9.00 at 15 April 2015 and 15 April 2016. During the year, 280,000 options
lapsed on the departure of employees (2014: 30,000) prior to the shares vesting on 15 April 2015, leaving 5,810,000 options to vest. In accordance with the
scheme, 50% of these options became exercisable by the relevant employees on 15 April 2015. As a result, 2,384,943 shares were issuable to the
participants, representing 2,905,000 options that vested under 2009 LTIP Part B, less 520,057 of shares equivalent to the exercise price on vesting of £4.96
per share, where the exercise price was not settled in cash by the participants. The Company elected to enable participants to choose to allow the
Company to settle the income tax and national insurance liabilities of the participants of the Scheme in lieu of issuing shares to them for an equivalent value.
This reduced the number of shares issuable by a further 1,078,300 to 1,306,643 which were issued on 15 April 2015. The share price at the date of vesting
was £27.11. As at 30 April 2015 there were 2,905,000 options outstanding (2014: 6,090,000), and there was £23.7 million carrying amount of liabilities in
respect of these options.
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
£4.34 per share
£4.33 per share
£4.33 per share
A 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.
Cash-settled share-based payments
Bonus Plan.
Under the Bonus Plan, in the Directors’ Remuneration Report on page 76, the balance on the plan account at the end of the financial year was the final
balance and has been settled 50% in cash and 50% in shares.
The liability has been accrued over the vesting period. The income statement is charged with an estimate for the vesting of notional shares awarded subject
to service and non-market performance conditions. The charge for 2015 was £8.7m (2014: £10.8m).
The total carrying amount of liabilities for the Bonus Plan at the end of the year was £13. 1 m (2014: £11.4m).
104
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Senior Management share appreciation rights
Certain key members of senior management and staff have been awarded cash bonuses deferred in notional shares in the Company. The notional shares
have a contractual life of five years after the bonus is allocated, and are settled in cash subject to continued employment by the Company and individual
and divisional performance criteria.
The liability is accrued over the vesting period. The income statement is charged with an estimate for the vesting of notional shares awarded subject to
service and non-market performance conditions. The charge for 2015 was £13.7m (2014: £6.9m).
The total carrying amount of liabilities for share appreciation rights at the end of the year was £26.7m (2014: £13.0m).
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 £4.5m (2014: £3.3m) were paid into the defined contribution schemes during the year.
Defined benefit plan
As at 30 April 2015, the Group operated one defined benefit pension scheme which was closed to future accrual with effect from 1 April 2007. This is a
separate trustee administered fund holding the pension plan assets to meet long term pension liabilities for some 335 past employees. The level of
retirement benefit is principally based on salary earned in the last three years of employment prior to leaving active service and is linked to changes in
inflation up to retirement.
The Berkeley Final Salary Plan is subject to an independent actuarial valuation at least every three years. The most recently finalised valuation was carried
out as at 1 May 2013 and finalised in December 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 4.00% per annum and pension increases of 3.25% per annum. The market value of the Berkeley Final Salary
Plan assets as at 1 May 2013 was £16.2m and covered 97% 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 2013 valuation, the Group agreed with the Trustees
of the Scheme to make additional contributions to the Scheme of £0.2m for the remainder of the year (1 December 2013 to 30 April 2014) to address the
Scheme’s deficit after which required contributions were reduced to zero. Notwithstanding this the Group made additional voluntary contributions of
£0.5m during the year (2014: £0.6m).
For the purposes of IAS 19, the 2013 valuation was updated for 30 April 2015.
The most significant risks to which the plan exposes the group are:
Inflation risk: A rise in inflation rates will lead to higher plan liabilities as a large proportion of the defined benefit obligation is indexed in line with price
inflation. This effect will be limited due to caps on inflationary increases to protect the plan against extreme inflation.
Interest rate risk: A decrease in corporate bond yields would result in an increase to plan liabilities although this effect would be partially offset by an
increase in the value of the plan’s bond holdings.
Mortality risk: An increase in life expectancy would result in an increase to plan liabilities as a significant proportion of the Pension Schemes’ obligations are
to provide benefits for the life of the member.
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
Effect of the asset ceiling
Net amount recognised on the statement of financial position
2015
£m
(16.6)
18. 1
1.5
(1.5)
–
2014
£m
(14.8)
16.0
1.2
(1.2)
–
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Notes to the Consolidated Financial Statements
continued
6 Directors and employees continued
Movement in net defined benefit asset:
Balance at 1 May
Included in income statement
Net interest
Included in other comprehensive income
Remeasurements:
Actuarial (loss)/gain arising from:
– demographic assumptions
– financial assumptions
– experience adjustments
Return on plan assets
(excluding interest income)
Other
Contributions by the employer
Benefits paid out
Balance at 30 April
Defined Benefit Obligation
Fair Value Plan Assets
Net Defined Benefit Asset
2015
£m
(14.8)
2014
£m
(14.6)
2015
£m
16.0
2014
£m
16.0
2015
£m
1.2
2014
£m
1.4
(0.6)
(0.6)
0.7
0.6
0. 1
–
–
(1.8)
0. 1
–
–
0.5
(16.6)
–
(0. 1 )
0. 1
–
–
–
–
–
–
–
1.4
(0.8)
–
0.4
(14.8)
0.5
(0.5)
18. 1
0.6
(0.4)
16.0
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 the effect of the asset ceiling
Cumulative amounts of losses recognised in the statement of comprehensive income at 30 April
The fair value of the assets were as follows:
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)
Index Linked Gilts (over 5 years)
Corporate Bonds
Cash
Fair value of plan assets
–
(1.8)
0. 1
1.4
0.5
–
1.5
2015
£m
(5.0)
(0.3)
(0.3)
(5.6)
–
(0. 1 )
0. 1
(0.8)
0.6
–
1.2
2014
£m
(4.4)
(0.8)
0.2
(5.0)
30 April 2015
Long-term
Value
£m
0.8
3. 1
1.4
0.9
0.9
3.0
1.7
0.9
1.7
1.9
1.3
0.5
18. 1
30 April 2014
Long-term
Value
£m
0.8
3.0
0.7
1.3
0.9
2.9
1.5
1.6
0.8
–
2.3
0.2
16.0
All equity securities and government bonds have quoted prices in active markets. All government bonds are issued by European governments and are
AAA- or AA- rated. All other plan assets are not quoted in an active market.
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History of asset values
Fair value of scheme assets
Present value of scheme liabilities
Net surplus in the plan
30 April
2015
£m
18. 1
(16.6)
1.5
30 April
2014
£m
16.0
(14.8)
1.2
30 April
2013
£m
16.0
(14.6)
1.4
30 April
2012
£m
14.0
(13.3)
0.7
Actuarial assumptions
The major assumptions used by the actuary for the 30 April 2015 valuation were:
Valuation at:
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
2015
3.50%
3.30%
2.40%
3.30%
30 April
2011
£m
12.8
(12.4)
0.4
30 April
2014
4.30%
3.40%
2.50%
3.40%
The mortality assumptions are the standard S1PA CMI_2014_X [1.0%] (2014: 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 24.3 years respectively (2014: 22.0 and 24.2). The life expectancy of male and female deferred
pensioners (now aged 50) retiring at age 65 after the balance sheet date is 23.7 years and 26.1 years respectively (2014: 23.0 and 25.3).
Sensitivity Analysis
The calculation of the defined benefit obligation is sensitive to the assumptions set out above. The following table summarises how the impact on the
defined benefit obligation at the end of the reporting period would have increased as a result of a change in the respective assumptions.
Discount rate
Rate of inflation
Rate of mortality
Change in
Change in defined benefit
obligation
Assumption
-0.25% p.a
+0.25% p.a
+ 1 year
+4.2%
+2.9%
+3.0%
These calculations provide an approximate guide to the sensitivity of results and may not be as accurate as a full valuation carried out on these
assumptions. In practice, changes in some of the assumptions are correlated and so each assumption change is unlikely to occur in isolation, as shown
above.
Funding
The Group expects to pay £0.6m in contributions to its defined benefit plan in the year ending 30 April 2016 (i.e. the next annual reporting period), albeit it
has no obligation to do so.
7 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 20% (note 19) (2014: 21%)
Tax on items recognised directly in other comprehensive income is as follows:
Deferred tax on remeasurements of the net defined benefit asset/liability (note 19)
107
2015
£m
(130.2)
4.8
(125.4)
9.2
(116.2)
2015
£m
0. 1
2014
£m
(94.3)
(4.0)
(98.3)
11.2
(87. 1)
2014
£m
0. 1
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Notes to the Consolidated Financial Statements
continued
7 Taxation continued
Tax on items recognised directly in equity is as follows:
Deferred tax in respect of employee share schemes (note 19)
Current tax in respect of employee share schemes (note 19)
2015
£m
13. 1
(11.5)
1.6
2014
£m
17.3
(23. 1)
(5.8)
The tax charge assessed for the year differs from the standard rate of UK corporation tax of 20.92% (2014: 22.84%). The differences are explained below:
Profit before tax
Tax on profit at standard UK corporation tax rate
Effects of:
Expenses not deductible for tax purposes
Tax effect of share of results of joint ventures
Adjustments in respect of previous periods
Prior year adjustment in respect of change of tax rate from 23% to 21%/20% (note 19)
Utilisation of losses
Other
Tax charge
2015
£m
539.7
113.2
0.5
0.9
1.9
–
–
(0.3)
116.2
2014
£m
380.0
86.8
0.5
0. 1
4.0
5.3
(0.8)
(8.8)
87. 1
Corporation tax is calculated at 20.92% (11 months at 21%, 1 month at 20%) of the estimated assessable profit for the year.
The adjustments in respect of previous years includes items such as the earlier recognition of costs in the statutory accounts and other timing differences
that are not individually significant and have not therefore been separately disclosed.
8 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)
2015
423.5
135.3
313.0
2014
292.9
132. 1
221.8
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 2015, the Group had three (2014: three) categories of potentially dilutive ordinary shares: 2.9 million £4.96 share options under
the 2009 LTIP Part B, 16. 1 million (2014: 19.6 million) £nil share options under the 2011 LTIP and 0.5 million (2014: nil) share options under the Bonus Banking
plan. 2.9 million share options vested on 15 April 2015 under the 2009 LTIP Part B scheme and 1.3 million were issued to participants, with the Company
settling the option price and participants’ tax liability in respect of the balance, in lieu of issuing shares. In 2014, 4.4 million share options vested and were
issued on 31 January 2014 under the Part A of the 2009 LTIP scheme.
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
Shares used to determine diluted EPS (m)
Diluted earnings per ordinary share (p)
2015
423.5
135.3
–
3.5
13.6
0.5
152.9
276.9
2014
292.9
132. 1
3.0
4.0
16.4
–
155.5
188.4
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9 Intangible assets
Cost
At 1 May 2014 and 30 April 2015
Accumulated impairment
At 1 May 2014 and at 30 April 2015
Net book value
At 1 May 2014 and at 30 April 2015
Cost
At 1 May 2013 and 30 April 2014
Accumulated impairment
At 1 May 2013 and at 30 April 2014
Net book value
At 1 May 2013 and at 30 April 2014
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 on St James Group Limited Cash Generating Unit 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 12.06% (2014: 13.21%) 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.
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Notes to the Consolidated Financial Statements
continued
10 Property, plant and equipment and investment property
Property, plant and equipment
Cost
At 1 May 2014
Additions
Disposals
At 30 April 2015
Accumulated depreciation
At 1 May 2014
Charge for the year
Disposals
At 30 April 2015
Net book value
At 1 May 2014
At 30 April 2015
Cost
At 1 May 2013
Additions
Disposals
At 30 April 2014
Accumulated depreciation
At 1 May 2013
Charge for the year
Disposals
At 30 April 2014
Net book value
At 1 May 2013
At 30 April 2014
Freehold
property
£m
Fixtures and
fittings
£m
Motor
vehicles
£m
16.3
0.3
–
16.6
0.7
0.3
–
1.0
15.6
15.6
6.0
2.9
(0.2)
8.7
2.3
1.7
(0.2)
3.8
3.7
4.9
4.0
1.4
(0.9)
4.5
1.3
0.7
(0.5)
1.5
2.7
3.0
Total
£m
26.3
4.6
(1. 1)
29.8
4.3
2.7
(0.7)
6.3
22.0
23.5
Investment
properties
£m
7.5
–
(7.3)
0.2
0.3
–
(0.3)
–
7.2
0.2
Property, plant and equipment
Freehold
property
£m
Fixtures and
fittings
£m
Motor
vehicles
£m
Total
£m
Investment
properties
£m
1 1. 1
5.2
–
16.3
0.5
0.2
–
0.7
10.6
15.6
8.8
2.2
(5.0)
6.0
5.3
1. 1
(4. 1)
2.3
3.5
3.7
3.5
1.5
(1.0)
4.0
1.3
0.6
(0.6)
1.3
2.2
2.7
23.4
8.9
(6.0)
26.3
7. 1
1.9
(4.7)
4.3
16.3
22.0
27.4
–
(19.9)
7.5
0.9
0. 1
(0.7)
0.3
26.5
7.2
The market value of the investment properties held at 30 April 2015 is £0.3m (30 April 2014: £10.3m) as determined by the Directors taking into account all
relevant factors including their nature and location. No independent valuation was undertaken.
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11 Investments accounted for using the equity method
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 investments accounted for using the equity method during the year is as follows:
At 1 May
Profit after tax for the year
Dividends from investments
Net (decrease)/increase in loans to joint ventures
At 30 April
Net (decrease)/increase in loans to joint ventures includes movements in unlisted shares at cost.
The Group’s share of joint ventures’ net assets, income and expenses is made up as follows:
Current assets
Current liabilities
Non-current liabilities
Revenue
Costs
Operating profit
Interest charges
Profit/(loss) before taxation
Tax charge
Share of post tax profit/(loss) of joint ventures
12 Other investments
Other investments comprise available-for-sale financial assets.
At 1 May
Additions
Fair value adjustment taken through other comprehensive income
At 30 April
2015
£m
11.0
15.7
23.9
(0.5)
50. 1
2015
£m
61.4
28.3
(12.3)
(27.3)
50. 1
2015
£m
196. 1
(92.4)
(53.6)
50. 1
141.5
(111. 1)
30.4
(1.9)
28.5
(0.2)
28.3
2015
£m
11.0
–
1.0
12.0
2014
£m
12. 1
41.9
7.9
(0.5)
61.4
2014
£m
44. 1
12. 1
–
5.2
61.4
2014
£m
180.4
(82.5)
(36.5)
61.4
125.6
(112. 1)
13.5
(1.2)
12.3
(0.2)
12. 1
2014
£m
–
10.0
1.0
11.0
As at 30 April 2015, the Group held 100,000 units (2014: 100,000 units) in a fund into which in 2014 the Group sold 534 rental properties. In accordance
with IFRS 7 ‘Financial Instruments: Disclosures’, these financial assets have been classified as Level 2 within the fair value hierarchy. Level 2 fair value
measurements are those that are derived from inputs other than quoted prices included within level 1 that are observable for the asset (that is, as prices) or
indirectly (that is, derived from prices).
On 30 April 2015, based on inputs other than quoted prices, the units had a market value of £12.0m (2014: £11.0m). A gain of £1.0m (2014: £1.0m) has been
recognised in the consolidated statement of comprehensive income for the year ended 30 April 2015.
Further disclosures relating to financial assets are set out in note 26.
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Notes to the Consolidated Financial Statements
continued
13 Inventories
Land not under development
Work in progress
Completed units
14 Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
Further disclosures relating to trade receivables are set out in note 26.
15 Cash and cash equivalents
Cash and cash equivalents
16 Borrowings
Current
Bank loans
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
2015
£m
342.0
2,280.2
31.9
2,654. 1
2015
£m
123.9
13.7
8.0
145.6
2015
£m
430.9
2015
£m
–
–
2015
£m
(391.9)
(920.9)
(0. 1)
(39.4)
(151.5)
(1,503.8)
(131.7)
(1,635.5)
2014
£m
492.4
1,966.4
22.4
2,481.2
2014
£m
134.0
15.3
9.7
159.0
2014
£m
130.2
2014
£m
(1.0)
(1.0)
2014
£m
(346.7)
(741.6)
(0. 1)
(39.4)
(90.8)
(1,218.6)
(148.6)
(1,367.2)
All amounts included above are unsecured. The total of £39.4m (2014: £39.4m) for other taxes and social security includes £24.7m (2014: £29.5m) 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.
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18 Provisions for other liabilities and charges
At 1 May 2014
Reclassified from accruals
Utilised
Released
Charged to the income statement
At 30 April 2015
At 1 May 2013
Utilised
Released
Charged to the income statement
At 30 April 2014
Analysis of total provisions:
Non-current
Current
Total
Total
£m
(57. 1 )
(5.9)
4.5
24.5
(41. 1 )
(75. 1)
Total
£m
(29.0)
2.5
1.2
(31.8)
(57. 1 )
2014
£m
48.5
8.6
57. 1
2015
£m
61. 1
14.0
75. 1
Provisions for other liabilities and charges primarily relate to 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, based on historic
experience, but which are uncertain in terms of timing and quantum. In addition, the Group holds provisions for litigation, for onerous leases on properties
leased by the Group and for the Group’s exposure to specific estate liabilities on historic sites developed by the Group. These are not individually significant
in terms of quantum.
19 Deferred tax
The movement on the deferred tax account is as follows:
At 1 May 2014
Transfer to corporation tax receivable
(Charged)/credited to the income statement in year
Credited to equity at 20%
Realisation of deferred tax asset on vesting of employee share scheme
Credited to equity in year (note 7)
At 30 April 2015
Accelerated
capital
allowances
£m
Retirement
benefit
obligation
£m
short-term
timing
differences
£m
0.3
–
0. 1
–
–
–
0.4
–
–
(0. 1)
0. 1
–
0. 1
–
60.8
0.7
9.2
13. 1
(11.5)
1.6
72.3
Total
£m
61. 1
0.7
9.2
13.2
(11.5)
1.7
72.7
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Notes to the Consolidated Financial Statements
continued
19 Deferred tax continued
At 1 May 2013
Transfer to corporation tax receivable
(Charged)/credited to the income statement at 23% (note 7)
Adjustment in respect of change of tax rate from 23% to 21%/20% (note 7)
(Charged)/credited to the income statement in year
Credited to equity at 23%
Adjustment in respect of change of tax rate from 23% to 21%/20%
Realisation of deferred tax asset on vesting of employee share scheme
Credited to equity in year (note 7)
At 30 April 2014
Accelerated
capital
allowances
£m
Retirement
benefit
obligation
£m
short-term
timing
differences
£m
0.3
–
–
–
–
–
–
–
–
0.3
–
–
(0. 1)
–
(0. 1)
0. 1
–
–
0. 1
–
56.4
(1. 1 )
16.6
(5.3)
11.3
21.2
(3.9)
(23. 1)
(5.8)
60.8
Total
£m
56.7
(1. 1)
16.5
(5.3)
11.2
21.3
(3.9)
(23. 1)
(5.7)
61. 1
Deferred tax is calculated in full on temporary differences at the tax rates that are expected to apply for the period when the asset is realised and the
liability is settled using a tax rate of 20% (2014: 21%/20%). Accordingly, all temporary differences have been calculated. There is no unprovided deferred tax
(2014: nil) at the balance sheet date.
All deferred tax assets are available for offset against deferred tax liabilities and hence the net deferred tax asset at 30 April 2015 is £72.7m (2014: £61. 1m).
Deferred tax assets of £49.0m (2014: £58.3m) are expected to be recovered after more than one year.
The deferred tax credited to equity during the year was as follows:
Deferred tax on remeasurements of the net defined benefit asset/liability (note 7)
Deferred tax in respect of employee share schemes (note 7)
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:
2015
£m
0. 1
1.6
1.7
27.0
28.7
2014
£m
0. 1
(5.8)
(5.7)
32.7
27.0
Issued
At start of year
Issued in year
At end of year
2015
No ‘000
Ordinary shares
2014
No ‘000
135,357
1,300
136,657
134,857
500
135,357
2015
£m
6.8
–
6.8
Share Capital
2014
£m
Share Premium
2014
£m
2015
£m
6.7
0. 1
6.8
49.3
0.3
49.6
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.
On 31 March 2015, 1.3 million ordinary shares (2014: 0.5 million) were allotted and issued to the Employee Benefit Trust.
On 15 April 2015, 1.3 million ordinary shares (2014: 4.2 million) were transferred from the Employee Benefit Trust to Executive Directors and Senior
Management to satisfy the exercise of options under the 2009 Long Term Incentive Plan Part B.
At 30 April 2015 there were 0. 1 million shares held in trust (2014: 0. 1 million). The market value of these shares at 30 April 2015 was £2.5m (2014: £2.4m).
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21 Reserves
The movement in reserves is set out in the Consolidated Statement of Changes in Equity on page 96.
Other reserve
The other reserve of negative £961.3m (2014: 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 £20.3m was originally created in accordance with IFRS 3 through fair value adjustments to the 50% of the net assets of St James
Group Limited owned by the Group prior to 7 November 2006. Transfers of £3.9m in the year (2014: £nil) out of retained earnings was recognised as the
associated fair value adjustments. At 30 April 2015 the balance in the revaluation reserve relating to the acquisition of St James Group Limited is £nil (2014:
£3.9m).
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 £0.6m 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 £0.2m in the year (2014: £nil) out of retained earnings were recognised as the associated fair value adjustments. At 30 April 2015 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 £nil
(2014: £0.2m).
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 (2014: none) of its own shares through purchases on the London Stock Exchange
in the year.
22 Dividends per share
The dividends paid in 2015 were a total of £243.5 million, £121.75 million in January 2015 (90 pence per share) and £121.75 million in September 2014 (90
pence per share) (2014: £195.2 million being £77.2 million in September 2013, 59 pence per share, and £118.0 million in January 2014, 90 pence per share).
A further interim dividend of £123.0 million (90 pence per share) has been declared for payment on 17 September 2015. These financial statements do not
reflect this further interim dividend.
23 Contingent liabilities
Certain companies within the Group have given performance and other trade guarantees on behalf of other members of the Group in the ordinary course
of business. The Group has performance agreements in the ordinary course of business of £19.5m which are guaranteed by third parties (2014: £15.0m). The
Group considers that the likelihood of an outflow of cash under these agreements is low and that no provision is required.
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
2015
£m
1.6
2.8
1.7
6. 1
2014
£m
1.9
4.4
2.4
8.7
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Notes to the Consolidated Financial Statements
continued
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
– Loss on sale of fixed assets
– Profit on sale of investment properties
– 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
– Decrease/(increase) in trade and other receivables
– Increase in trade and other payables
– Decrease in employee benefit obligations
Cash generated from operations
Reconciliation of net cash flow to net cash:
Net increase in cash and cash equivalents, including bank overdraft
Net cash outflow from decrease in borrowings
Movement in net cash/(debt) in the year
Opening net cash
Closing net cash
Net cash:
As at 30 April
Cash and cash equivalents
Current borrowings
Net cash
2015
£m
423.5
116.2
2.7
0.2
(1.3)
(3.0)
15.7
(28.3)
2.7
(172.9)
7.6
281. 1
(0.6)
643.6
2015
£m
300.7
1.0
301.7
129.2
430.9
2015
£m
430.9
–
430.9
2014
£m
292.9
87. 1
2.0
0.7
(43.2)
(3.4)
10.3
(12. 1)
3.3
(414.5)
(33.6)
370.8
(0.6)
259.7
2014
£m
63.4
21. 1
84.5
44.7
129.2
2014
£m
130.2
(1.0)
129.2
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. In 2012 the Group put in place a long-term strategic plan to see £13 per share returned to shareholders over the following 10 years. This
plan, reported in more detail in the Trading and Financial Review on pages 50 to 54, 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 2015 was £1,207.0m (2014: £1,312. 1m). The decrease in
capital employed in the year of £105. 1m reflects an increase in net cash holdings 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.
116
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Financial instruments: Financial assets
The Group’s financial assets can be summarised as follows:
Current
Trade receivables
Cash and cash equivalents
Non-current
Available-for-sale financial assets
Total financial assets
2015
£m
123.9
430.9
554.8
12.0
12.0
566.8
2014
£m
134.0
130.2
264.2
11.0
11.0
275.2
Trade receivables and available-for-sale financial assets are non-interest bearing. Of the current trade receivables balance of £123.9m (30 April 2014:
£134.0m), £119.1m (30 April 2014: £127.3m) was not past due, with £4.8m being 0–30 days past due (30 April 2014: £6.7m, 0–30 days past due).
Cash and cash equivalents are short-term deposits held at either floating rates linked to LIBOR or fixed rates.
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
– Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
– Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is,
derived from prices) (level 2).
– Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The following table presents the group’s assets that are measured at fair value:
2015
Assets
Available-for-sale financial assets
Total assets
2014
Assets
Available-for-sale financial assets
Total assets
Financial instruments: Financial liabilities
The Group’s financial liabilities can be summarised as follows:
Current
Bank loans
Trade payables
Loans from joint ventures
Accruals and deferred income
Non-current
Trade payables
Total financial liabilities
Notes
12
Notes
12
Level 1
£m
Level 2
£m
Level 3
£m
–
–
12.0
12.0
–
–
Level 1
£m
Level 2
£m
Level 3
£m
–
–
11.0
11.0
–
–
2015
£m
–
(391.9)
(0. 1)
(151.5)
(543.5)
(131.7)
(131.7)
(675.2)
Total
£m
12.0
12.0
Total
£m
11.0
11.0
2014
£m
(1.0)
(346.7)
(0. 1)
(90.8)
(438.6)
(148.6)
(148.6)
(587.2)
All amounts included above are unsecured.
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.
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Notes to the Consolidated Financial Statements
continued
26 Capital management, financial instruments and financial risk management continued
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
2015
£m
(67.4)
(32.3)
(32.0)
(131.7)
2014
£m
(54.3)
(93.3)
(1.0)
(148.6)
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).
Current trade receivables include £14.4m relating to amounts owed by St Edward Homes Limited in respect of the inventory sold by the Group in 2009
(Note 27). This is held at its 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. At 30 April 2015
a rate of 0.85% was applied (2014: 1.08%).
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 2015 a rate of 0.85% was applied (2014: 1.08%). 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
2015
£m
(543.5)
(68.0)
(33.0)
(35.0)
(679.5)
2014
£m
(441.5)
(55.0)
(96.0)
(1.0)
(593.5)
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 2015, profit after tax for the year
would have been £1,014,000 higher (2014: £483,000 higher). 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 2015.
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 (2014: £nil), nor are there any provisions held against trade receivables (2014: £nil), and no trade receivables are past
their due date (2014: £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.
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Committed borrowing facilities
The Group has committed borrowing facilities as follows:
Revolving credit facility one
Revolving credit facility two
New Revolving credit facility
Available
£m
Drawn
£m
–
–
575
575
–
–
–
–
£m
2015
Undrawn Termination
date
–
–
Mar-20
–
–
575
575
Available
£m
Drawn
£m
Undrawn
£m
275
250
–
525
–
–
–
–
275
250
–
525
2014
Termination
date
May-18
Apr-18
–
As of 23 March 2015, the two revolving credit facilities (RCF 1 and RCF 2) merged into one new revolving facility with the total facility increasing to £575
million (2014: £525 million). The term of the facility is 5 years with a maturity date of 23 March 2020.
At 30 April 2015 the total drawn down balance of the facility was £nil (2014: £nil). In addition, at 30 April 2015 there were bank bonds in issue of £5.0m
(2014: £0.2m).
The revolving credit facility is secured by debentures provided by certain Group holding companies over their assets. The facility agreement contains
financial covenants, which is normal for such agreements, with all of which the Group is in compliance.
27 Related party transactions
The Group has entered into the following related party transactions:
Transactions with directors
In terms of new transactions in the 2015 financial year:
i) During the financial year, Mr A W Pidgley paid £25,470 (2014: £440,052) to Berkeley Homes plc for works carried out at his home under the Group’s
own build scheme. 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) Berkeley Homes plc has entered into an agreement with Langham Homes, a company controlled by Mr T K Pidgley who is the son of the Group’s
Chairman, under which Langham Homes will be paid a fee for a land introduction on an arm’s length basis. A fee of £173,000 was paid under this
agreement in the period and there were no outstanding balances at 30 April 2015 when the land purchase became unconditional. Langham Homes
continues to introduce land to the Group and in the event that any further land purchases are agreed, further fees may be payable to Langham Homes in
future periods. In prior years, £1,274,000 has been paid to Langham Homes in respect of two sites acquired by the Group, also on an arm’s length basis.
iii) Mr G J Fry, a Director of the Company, contracted to purchase an apartment at Brewery Wharf, London and a car parking space for £565,000 on 21
August 2014 from St James Group Limited, a wholly owned subsidiary of the Company.
Ms D Brightmore-Armour, on 14 April 2014 prior to becoming a Director of the Company, contracted to purchase an apartment at 190 Strand, London for
£2,985,000 from St Edward Homes Limited, a joint venture of the Company, for which shareholder approval was not required. Subsequent to this purchase,
and having been appointed a Director of the Company, Ms Brightmore-Armour received Board approval to purchase a storage room at the property for
£101,200.
The agreements between St James Group Limited and Mr Fry and St Edward Homes Limited and Ms Brightmore-Armour are standard form sale and
purchase agreements used by the Company on its developments, save that Mr Fry’s purchase of his apartment and Ms Brightmore-Armour’s purchase of
the storage room are conditional upon the agreement of shareholders.
As these transactions are in excess of £100,000, they 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 Annual General Meeting in
September 2015.
Mr Fry paid a ten per cent deposit on exchange of contracts which will only be returned to him in the event that shareholders do not approve the
transaction. Ms Brightmore-Armour has already paid a 10% deposit on exchange of contracts for the apartment and no further deposit is payable on
purchase of the storage room, with payment due on completion.
In terms of transactions previously disclosed, all of which received shareholder approval, the purchases of an apartment by Mr G Fry at at Sovereign Court
for £819,950 in 2014 and by Mr R C Perrins at 190 Strand for £2,100,000 in 2013. At 30 April 2015, any contractual deposit due to date had been paid to the
Group, there were no current balances outstanding and the properties were still under construction and so the sales had not yet completed. The purchase
of an apartment by Mr A W Pidgley at Ebury Square in 2013 for £10,500,000 completed and the balance of monies were fully settled in the year, along with
a further £1,330,000 for enhancements to specification. The purchase of an apartment by Mr G Fry at Chelsea Creek in 2012 for £725,000 completed and
the balance was fully settled in the year.
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 2015 an amount of £14,449,000
was outstanding and included within trade receivables (2014: £16,219,000).
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Notes to the Consolidated Financial Statements
continued
28 Subsidiaries and joint ventures
(a) Subsidiaries
At 30 April 2015 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 and ancillary activities
Berkeley Commercial Developments Limited
Berkeley Homes (Western) 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 (West London) Limited (1)
Berkeley Partnership Homes Limited (1)
Berkeley Homes Public Limited Company
Berkeley Ryewood Limited
Berkeley Strategic Land 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 George City Limited (2)
St James (Grosvenor Dock) Limited
St James Group Limited
St James Homes Limited
St James (West London) Limited
The Berkeley Group plc (3)
The Tower, One St George Wharf Limited
(1) Agency companies of Berkeley Homes plc
(2) Agency companies of St George PLC
(3) The Berkeley Group plc is the only direct subsidiary of the Parent Company and is an intermediate holding company
Other activities
BRP Investments No.1 Limited (Jersey)
BRP Investments No.2 Limited (Jersey)
(b) Joint Ventures
At 30 April 2015 the Group had an interest in the following principal joint ventures which have been equity accounted to 30 April, have an accounting date
of 30 April otherwise indicated 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
St William Homes LLP*
* Accounting date of 31 March
Principal activity
Residential-led mixed-use development
Residential-led mixed-use development
Residential-led mixed-use development
Residential-led mixed-use development
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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
Notes
C5
C6
C7
C8
C9
C9
C9
C10
2015
£m
1,400.6
1,400.6
6.5
0.9
7.4
(618.2)
(610.8)
789.8
6.8
49.6
24.5
708.9
789.8
2014
£m
1,397.0
1,397.0
6.0
0.9
6.9
(622.9)
(616.0)
781.0
6.8
49.3
24.5
700.4
781.0
The financial statements on pages 121 to 125 were approved by the board of directors on 30 June 2015 and were signed on its behalf by:
R J Stearn
Finance director
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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.
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
50 to 54.
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.
Based on 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, notwithstanding its net current liability position of £610.8m (30 April 2014: £616.0m). For this reason they
continue to adopt the going concern basis of accounting in preparing the annual financial statements.
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.
Dividends
Dividend distributions to shareholders are recognised as a liability in the period in which the dividends are appropriately authorised and approved for
payout and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the financial
statements.
C2 Profit/(loss) on ordinary activities before taxation
Profit/(loss) on ordinary activities before taxation is stated after charging the following amounts:
Auditors’ remuneration – audit fees
No disclosure of other non-audit services has been made as this is included within note 5 of the consolidated financial statements.
2015
£m
0.1
2014
£m
0.1
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C3 Directors and employees
Staff costs
Wages and salaries
Social security costs
Share-based payments
2015
£m
12.9
7.6
19.2
39.7
2014
£m
15.0
10.0
1.4
26.4
The average monthly number of persons employed by the company during the year was 10, all of whom are Directors (2014: 9).
Directors
Details of Directors’ emoluments are set out in the Remuneration Report on pages 66 to 83.
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 6 of the Consolidated Financial Statements. Contributions amounting to £49,650 (2014: £48,150) 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 and the 2011 Long-Term Incentive Plan was £19.2m (2014: £1.4m). Further information on the Company’s share
incentive schemes are included in the Remuneration Report on pages 66 to 83 as well as note 6 to the Consolidated Financial Statements.
C4 The Berkeley Group Holdings plc profit and loss account
The profit for the year in the Company is £249.3m (2014: profit of £248.9m).
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
2015
£m
1,397.0
3.6
1,400.6
2014
£m
1,395. 1
1.9
1,397.0
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 (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 29 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
Realisation of deferred tax asset on vesting of employee share scheme
At 30 April
2015
£m
6.5
2015
£m
6.0
1.8
(1.3)
6.5
2014
£m
6.0
2014
£m
8.3
1. 1
(3.4)
6.0
Deferred tax is calculated in full on temporary differences at the tax rates that are expected to apply for the period when the asset is realised and the
liability is settled using a tax rate of 20% (2014: 21%/20%). Accordingly, all temporary differences have been calculated. There is no unprovided deferred tax
(2014: nil) at the balance sheet date.
The deferred tax asset of £6.5m relates to short-term timing differences (2014: £6.0m).
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Notes to the Company Financial Statements
continued
C7 Creditors: Amounts falling due within one year
Amounts owed to subsidiary undertakings
Other taxation and social security
2015
£m
(610. 1)
(8. 1)
(618.2)
2014
£m
(612.7)
(10.2)
(622.9)
All amounts included above are unsecured. The interest rate on £624.9m (2014: £601m) of the balance owed to subsidiary undertakings is 4.0% (2014:
4.0%).
At 30 April 2015 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
Each ordinary share of 5p is a voting share in the capital of the Company, is entitled to participate in the profits of the Company and on a winding-up is
entitled to participate in the assets of the Company.
The movements on allotted and fully paid share capital for the Company in the year were as follows:
Issued
At start of year
Issued in year
At end of year
2015
No ‘000
Ordinary shares
2014
No ‘000
2015
£m
Share Capital
2014
£m
Share Premium
2014
£m
2015
£m
135,357
1,300
136,657
134,857
500
135,357
6.8
–
6.8
6.7
0. 1
6.8
49.3
0.3
49.6
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.
On 31 March 2015, 1.3 million ordinary shares (2014: 0.5 million) were allotted and issued to the Employee Benefit Trust.
On 15 April 2015, 1.3 million ordinary shares (2014: 4.2 million) were transferred from the Employee Benefit Trust to Executive Directors to satisfy the exercise
of options under the 2009 Long Term Incentive Plan Part B.
At 30 April 2015 there were 0.1m shares held in trust (2014: 0.1m). The market value of these shares at 30 April 2015 was £2.5m (2014: £2.4m).
The movements in the year are disclosed in note 20 of the Consolidated Financial Statements.
C9 Reserves
At 1 May 2014
Issued in year
Profit for the financial year
Dividends paid
Credit in respect of employee share schemes
At 30 April 2015
Share
premium account
£m
49.3
0.3
–
–
–
Capital
redemption
reserve
£m
24.5
–
–
–
–
49.6
24.5
Profit and
loss account
£m
700.4
–
249.3
(243.5)
2.7
708.9
Total
£m
774.2
0.3
249.3
(243.5)
2.7
783.0
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C10 Reconciliation of movements in shareholders’ funds
Profit for the financial year
Dividends paid
Equity settlement of employee share schemes
Credit in respect of employee share scheme
Opening equity shareholders’ funds
Closing equity shareholders’ funds
2015
£m
249.3
(243.5)
0.3
2.7
8.8
781.0
789.8
2014
£m
248.9
(195.2)
0. 1
3.3
57. 1
723.9
781.0
C11 Dividends per share
The dividends paid in 2015 were a total of £243.5 million, £121.75 million in January 2015 (90 pence per share) and £121.75 million in September 2014 (90
pence per share) (2014: £195.2 million being £77.2 million in September 2014, 59 pence per share, and £118.0 million in January 2015, 90 pence per share).
A further interim dividend of £123.0 million (90 pence per share) has been declared for payment on 17 September 2015. These financial statements do not
reflect this further interim dividend.
C12 Related party transactions
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.
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Five year summary
Years ended 30 April
Income statement
Revenue from operations
Operating profit
Share of 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)
2015
£m
2014
£m
2012
£m
2011
£m
2010
£m
2,020.2
1,620.6
1,372.6
1,041. 1
742.6
524. 1
28.3
(12.7)
539.7
(116.2)
423.5
423.5
–
423.5
313.0p
1,207.0
430.9
1,637.9
–
1,637.9
1,199p
34.8%
25.2%
29.5%
3,355
374.8
12. 1
(6.9)
380.0
(87. 1 )
292.9
292.9
–
292.9
221.8p
1,312. 1
129.2
1,441.3
–
1,441.3
1,066p
29.9%
21.2%
27.5%
3,742
280. 1
(1.3)
(8. 1 )
270.7
(61.0)
209.7
209.7
–
209.7
160.0p
1,277.7
44.7
1,322.4
–
1,322.4
1,009p
22.9%
17.3%
22.4%
3,712
226.4
(2.2)
(9.4)
214.8
(56.7)
158. 1
158.5
(0.4)
158. 1
121.0p
1,157.7
(57.9)
1,099.8
–
1,099.8
839p
21.9%
15.6%
21.2%
3,565
135.7
2. 1
(1.5)
136.3
(41.8)
94.5
95. 1
(0.6)
94.5
72. 1 p
891.8
42.0
933.8
(4.4)
929.4
709p
19.2%
10.6%
15.3%
2,544
(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 adjusted* 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 adjusted* profit after taxation attributable to shareholders as a percentage of the average of opening and closing shareholders’ funds.
(4) Calculated as adjusted* 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.
* Adjusted figures exclude the benefit of profit on the sale of ground rent assets.
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BERKELEY ANNUAL REPORT 2015 / FINANCIALS
Financial Diary
Annual General Meeting and Interim Management Statement
Half Year End
Interim Results Announcement for the six months ending 31 October 2015
Interim Management Statement
Year End
Preliminary Announcement of Results for the year ending 30 April 2016
Publication of 2016 Annual Report
8 September 2015
31 October 2015
4 December 2015
March 2016
30 April 2016
June 2016
August 2016
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
0871 664 0300 (from the UK)
+44 20 8639 3399 (from overseas)
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
Herbert Smith Freehills LLP
Bankers
Barclays Bank plc
HSBC Bank plc
Lloyds TSB Bank plc
Santander UK plc
Svenska Handelsbanken AB (Publ)
The Royal Bank of Scotland plc
Auditors
KPMG LLP
127
STRATEGIC REPORTGOVERNANCEFINANCIALS The Berkeley Group Holdings plc
Berkeley House
19 Portsmouth Road
Cobham
Surrey KT11 1JG
UK
T +44 (0)1932 868 555
F +44 (0)1932 868 667
www.berkeleygroup.co.uk
Design by Hunter Design
Printed in England by Pureprint Group
This report is printed on Amadeus 100 silk
and Amadeus 100 offset
128
BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT