201 8
A N N U A L R E P O R T
A B O U T T H I S
R E P O R T
Welcome to the 2018 Annual
Report of the Berkeley Group
Holdings plc (“the Berkeley
Group”, “Berkeley”, “the
Group”), a publicly owned
company, listed on the London
Stock Exchange. The Strategic
Report explains Berkeley’s
strategy, business model, risk
management processes and
provides an overview of
current 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.
A B O U T B E R K E L E Y
For Berkeley, development and regeneration
is about people. It is about transforming
places and lives and creating thriving and
sustainable communities.
Our operating model recognises the cyclical
nature of the housing market and the high
operating risk of our complex, long-term
developments, by placing product quality
and customer service at its core, while keeping
financial risk low at all times which enables
investment at the right time in the cycle.
This unique approach enables Berkeley to
deliver strong risk-adjusted returns to our
shareholders, whilst having a positive impact
for our stakeholders and on society.
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2
3
S T R A T E G I C
R E P O R T
2018 Key Performance Indicators
2
Chairman’s Statement
6
8
2017– 2018 Achievements
10 Chief Executive’s Statement
18 Berkeley’s Strategic Framework
20 Our Vision
44 Berkeley Foundation
48 Our Business Model
56 Where We Operate
59 How We Manage Risk
74 Trading and Financial Review
G O V E R N A N C E
F I N A N C I A L S
80 Board of Directors
86 Corporate Governance Report
91 Audit Committee Report
93 Nomination Committee Report
94 Directors’ Remuneration Report
116 Directors’ Report
Independent Auditors’ Report
122
128 Consolidated Income
Statement
128 Consolidated Statement
of Comprehensive Income
129 Consolidated Statement
of Financial Position
130 Consolidated Statement
of Changes in Equity
Consolidated Cash
Flow Statement
131
132 Notes to the Consolidated
Financial Statements
156 Company Balance Sheet
Company Statement of
157
Changes in Equity
158 Notes to the Company
Financial Statements
162 Five Year Summary
163 Financial Diary
Registered Office and Advisors
Front cover: Chiswick Gate — collection of apartments and townhouses inspired by the timeless quality of London's residential squares.
Inside front cover: Gauging Square at London Dock, Wapping
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS 2 0 1 8
K E Y P E R F O R M A N C E
I N D I C A T O R S
F I N A N C I A L K P Is
P R O F I T
B E F O R E TA X
B A S I C E A R N I N G S
P E R S H A R E
£934.9M 562.7p
P R E -TA X R E T U R N
O N E Q U I T Y
39.3%
2 0 1 8
2 0 1 7
2 0 1 6
2 0 1 5
2 0 1 4
£934.9M
2018
£812. 4M
2017
£530.9M
2016
£539.7M
2015
£380.0M
2014
56 2.7 p
20 18
467 . 8p
201 7
295 .8p
201 6
313. 0p
201 5
221 .8p
201 4
39.3%
41.1%
30.8%
35.1%
27.5%
This is our core measure of profitability,
our absolute return from the sale and
delivery of new homes in the year.
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.
Earnings cover is illustrated by showing
the proportion of earnings per share
paid as dividends per share in the year.
The efficiency of the returns generated
from shareholder equity in the business is
measured by calculating profit before tax
as a percentage of the average of opening
and closing shareholders’ funds.
N E T A S S E T VA L U E
P E R S H A R E
£19.59
C A S H D U E O N
F O R WA R D S A L E S
G R O S S M A R G I N
O N L A N D H O L D I N G S
£2,193M
£6,003M
201 8
20 17
20 16
20 15
20 14
£19.59
2018
£15.56
2017
£13.14
2016
£11.99
2015
£10.66
2014
£2,193M
2018
£2,743M
2017
£3,259M
2016
£2,959M
2015
£2,274M
2014
£6,003M
£6,378M
£6,146M
£5,2 72M
£4,514M
This balance sheet measure reflects
the value of shareholders’ interests in
the net assets of the business on an
historical cost basis. NAVPS has grown
by 26% this year.
This measures cash due from customers
during the next three financial years under
unconditional contracts for sale, and provides
good visibility over future cash flows.
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 developments planned for.
N O N - F I N A N C I A L K P Is
N E T P R O M O T E R
S C O R E
73.9
(2017: 70.8)
1.42
(2017: 1.83)
The six-month rolling Net Promoter Score
is an indicator of the success of the
customer journey and is used across all
industry sectors. Our high levels of
customer satisfaction, as a result of our
continued efforts to provide world-class
customer service, are evidenced through
the Net Promoter Score. It compares
favourably to the industry average of 29
(Home Builders Federation, 2018).
Managing health and safety on our sites is
a priority, to protect the wellbeing of our
staff and contractors. This measure shows
the number of reportable injuries, during
the year, to the number of Berkeley
employees and contractors working
across our sites. It compares favourably
to the industry average of 3.97 (Health
and Safety Executive, 2017).
A C C I D E N T I N C I D E N C E R AT E
P E R 1 , 0 0 0 P E O P L E
A P P R E N T I C E S
A N D T R A I N I N G
G R E E N H O U S E G A S
E M I S S I O N S I N T E N S I T Y
A F F O R DA B L E H O U S I N G A N D
W I D E R C O N T R I B U T I O N S
9.8%
(2017: 11.7%)
Calculated as the percentage of our
direct and indirect workforce across
our operating companies that was
undertaking an apprenticeship or
vocational training during the year.
2.15
(2017: 1.76)
0.42BN
(2017: 0.5BN)
This measure relates our annual
greenhouse gas emissions to the number
of Berkeley employees and the number
of contractors working on our sites.
This measures our contribution to affordable
housing subsidies and wider community and
infrastructure benefits in the year.
See page 25
See page 42
See page 37
See page 117
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS
1
S T R A T E G I C
R E P O R T
Wimbledon Hill Park
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS C H A I R M A N ’ S
S T A T E M E N T
Berkeley’s unique operating
model is focused on developing
complex sites, which others are
not willing or able to take on,
creating fantastic, sustainable
places with homes built to a
high quality in which our
customers want to live, and
enriching the wider community
by bringing homes, jobs and
amenities for all.
Year Awards from Building Magazine and
WhatHouse? respectively, and Riverlight
won a RIBA London Award. These are all
testament to our people and partners
working together to deliver fantastic new
communities and homes. I am also
immensely proud of the Queen's Award
for Enterprise (Sustainable Development)
that Berkeley has held since 2014. This is
the UK’s highest business accolade,
recognising economic, social and
environmental achievements.
I am delighted to welcome Rachel
Downey and Peter Vernon to the Board
as Non-executive Directors and warmly
congratulate Justin Tibaldi and Paul
Vallone on their appointment as Executive
Directors. I would also like to recognise
the significant contribution Sir John Armitt
has made to Berkeley as he steps down
from his roles as Deputy Chairman and
Senior Independent Director after six
years. I am delighted that Sir John is
remaining on the Board and that we have
such a capable replacement as Glyn
Barker. We have a strong Board and I
would like to thank them all as we look to
the future for which we are well placed.
T O N Y P I D G L E Y C B E
C H A I R M A N
There has been a significant increase in
housing supply across England over the
past year. Completions have grown by 16%
and starts by 5% during 2017. This national
picture reflects positive decisions and
fresh investment by Government and the
private sector. However, it masks a
complex picture at a local level, with
London starts approximately 30% lower
than two years ago. It is telling that some
funders and builders are choosing to exit
the market when faced with the degree
of risk and regulation that now confronts
development in the Capital where macro
and political uncertainty, including Brexit,
are leading to this caution. This is a
great shame as London is a fantastic
world-class city with unique attributes
that will last long beyond the current
hiatus which is only exacerbating the
well documented under-supply.
In this environment, Berkeley has itself
invested cautiously, focusing as always on
the quality of the homes and communities
we build. We are growing the business in
Birmingham through our newest brand,
St Joseph and we have broken ground
on our first modular factory in Ebbsfleet,
which, once operational, will help us
deliver a significant portion of
construction value through off-site
assembly. The number of apprentices on
our sites and in our offices has reached
850 across the business over the last two
years, an increase of 30%.
Significantly, Berkeley is now a carbon
positive company, fulfilling a commitment
we made in May 2016. This relates
specifically to the operation of our
business and we will now match this with
a commitment to enable all our homes
to operate at net zero carbon by 2030.
This will help us cut costs, reduce risk
and support the environment.
One year ago, we shared the horror
everybody felt at the Grenfell fire. Since
then, Berkeley has reviewed its high-rise
buildings, engaging with local fire
authorities, residents, fire safety experts
and MHCLG to ensure our buildings are
safe while the future regulatory approach
is clarified, following the Hackitt Review.
Berkeley has now returned £9.34 of
£16.34 to be returned to shareholders by
30 September 2021 and announced the
next £1 per share which will be returned
by 30 September 2018; £10.34 paid or
committed in total. Total Shareholder
Returns in the year were £287.1 million,
with £146.7 million returned through
dividends and £140.4 million through the
purchase of 4.0 million shares. Of the
£139.2 million to be returned in the six
months to 30 September 2018,
£32.2 million has already been returned
through share buy-backs. The amount
that will be returned as a dividend will be
announced on 16 August 2018 and paid
on 14 September 2018 to shareholders
on the register on 24 August 2018, taking
account of any further share buy-backs
in the intervening period.
In closing, I would like to thank all our
people for the quality of their work and
their commitment and integrity and I am
delighted that their efforts, in conjunction
with our partners in the public and private
sector, have been recognised through a
number of industry awards. In particular,
Woodberry Down, which we are
developing in partnership with Hackney,
has won numerous accolades including
WhatHouse? Best Partnership Award,
Planning Magazine’s Best Community-led
Placemaking Award and the RICS
Regeneration and Project of the Year
Awards. Berkeley itself won the Best Large
Housebuilder and Housebuilder of the
BERKELEY IS PROUD TO HAVE EARNED A NUMBER OF PRESTIGIOUS COMPANY AWARDS AND
CONTINUES TO PARTICIPATE IN IMPORTANT EXTERNAL INDICES AND BENCHMARKS
Berkeley currently holds the
Queen’s Award for Enterprise
for Sustainable Development.
This was awarded in 2014 and
is valid for five years.
In December 2017 Berkeley
was voted second across all
sectors in Management
Today’s Britain’s Most
Admired Companies. It was
also the 12th year running in
which we were named the
most admired housebuilder.
Berkeley has been included
on the FTSE4Good Index
since 2003, reflecting strong
social, environmental and
governance (ESG) practices.
DISCLOSURE I NSIGHT ACTION
Berkeley participates annually
in CDP’s Climate Change
Programme. In 2017 we
achieved an ‘A-’ rating.
BERKELEY IS ALSO PROUD TO HAVE EARNED A NUMBER OF INDUSTRY AND DEVELOPMENT AWARDS
Building
Awards 2017
Best Large
Housebuilder
Berkeley Group
WhatHouse?
Awards 2017
Housebuilder
of the Year
Berkeley Group
Best Regeneration
Scheme
Royal Arsenal
Riverside
Best Mixed-Use
Development
One Tower Bridge
Best Partnership
Scheme
Woodberry Down
RICS Awards
2017
Regeneration
Category and
London Project
of the Year
Woodberry Down
RIBA London
Awards 2018
RIBA London
Award
Riverlight
Planning
Awards 2018
Best Use of
Brownfield Land
in Placemaking
Southall Waterside
Award for
Community-led
Placemaking
Woodberry Down
London
Evening Standard
New Homes
Awards 2018
Best Family Home
Fitzroy Gate
Best Luxury Home
The Corniche
Best Large
Development
Woodberry Down
190 Strand
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS 2 0 1 7 – 2 0 1 8
A C H I E V E M E N T S
E C O N O M I C C O N T R I B U T I O N
BERKELEY’S CONTRIBUTION
TO HOUSEBUILDING, JOB
CREATION AND THE WIDER
ECONOMY REMAINS STRONG.
£3.0BN
C O N T R I B U T I O N
T O E C O N O M Y
Berkeley’s contribution to UK
GDP was £3.0 billion in 2017,
up 14% from 2016 and the ninth
consecutive year of growth.
3,895
H O M E S
B U I LT
Berkeley has built 3,895 homes
in 2018 and a total of 19,597
homes over the last five years
(including joint ventures).
N O N - F I N A N C I A L C O N T R I B U T I O N
BERKELEY MEASURES ITS
BUSINESS PERFORMANCE
THROUGH ITS KEY
PERFORMANCE INDICATORS
(PAGE 2), BUT WE ALSO
MONITOR A HOST OF OTHER
PERFORMANCE DATA
ACROSS ALL AREAS OF OUR
BUSINESS WHICH IMPACT
A VARIETY OF STAKEHOLDERS.
97%
C U S T O M E R S W O U L D
R E C O M M E N D U S
Compared to an industry
average of 86%. 90% of
our customers are satisfied,
compared to an industry average
of 76% (both Home Builders
Federation, March 2018).
12
S I T E S H AV E
A D E D I C AT E D
C O M M U N I T Y
P L A N
In addition, to date more than
45 sites have completed
community assessment work.
43/50
AV E R A G E
C O N S I D E R AT E
C O N S T R U C T O R S
S C H E M E S C O R E
Compared to an industry
average of 36/50, with over
60% of our sites recognised
at the CCS Awards compared
to just 11% nationally.
100%
P L A N N I N G
A P P L I C AT I O N S
S U B M I T T E D W I L L
D E L I V E R A N E T
B I O D I V E R S I T Y G A I N
This means that there will be
more nature after development
than before.
33,000
J O B S
S U P P O R T E D
Berkeley supported a total of
33,000 jobs in 2017 directly
and through its supply chain.
Berkeley has supported an
average of 6.5 jobs for every
new home built over the last
five years.
22%
R E D U C T I O N I N
C A R B O N P R O D U C E D
T H R O U G H
O P E R AT I O N S
By offsetting more than our
remaining emissions we have
become the first carbon
positive housebuilder. Our 22%
reduction over the last two
years excludes the impact
of one-off remediation activities
at Southall Waterside.
25
D AY S AV E R A G E
PAY M E N T P E R I O D
The average number of days
taken to pay our supply chain.
£750M
C O N T R I B U T E D
T O T H E T R E A S U R Y
Berkeley contributes to the
UK public finances through
the taxes paid directly and by
the taxes paid by its suppliers
and customers.
In 2017 the total tax paid was
£756 million and over the last
five years £2.7 billion has been
contributed to the
Treasury, through direct
and wider taxation.
95%
C O N S T R U C T I O N
W A S T E R E U S E D
O R R E C Y C L E D
111,000 tonnes of construction
waste was produced on-site,
of which 95% was reused
or recycled.
850
A P P R E N T I C E S
Worked across our sites
or in our offices in the last
two years.
£1.9M
C O M M I T T E D B Y
T H E B E R K E L E Y
F O U N D AT I O N
More than £13 million has
been committed to support
young people, their families
and communities since it
was launched in 2011.
73%
C O M P L E T E D
H O M E S S U P P L I E D
W I T H L O W
C A R B O N O R
R E N E W A B L E
E N E R G Y.
100%
C U S TO M E R S W I L L
H AV E AC C E S S TO
U LT R A FA S T
B R OA D B A N D
In 2018, 100% of our customers
will have access to Ultrafast
Fibre to the Premises (FTTP)
broadband and we are
committed to all homes
having FTTP going forwards.
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS C H I E F E X E C U T I V E ’ S
S T A T E M E N T
S U M M A R Y O F P E R F O R M A N C E
Berkeley has delivered pre-tax earnings
of £934.9 million for the year, an increase
of 15.1% on last year. This is from the sale
of 3,536 homes (2017: 3,905) at an
average selling price of £715,000 (2017:
£675,000), reflecting the mix of
properties sold in the year.
These results, taken together with the
£812.4 million delivered last year and the
visibility provided by robust forward sales
of £2.2 billion, means that Berkeley is able
to raise its pre-tax profit guidance for the
two years ending 30 April 2019 by
£75 million to at least £1.575 billion, and
the guidance for the five years ending
30 April 2021 by a similar amount to
at least £3.375 billion.
As previously identified, these results are
a consequence of Berkeley’s operating
model and the sites it enabled Berkeley
to acquire in the period from 2010 to 2013.
They represent a peak for Berkeley with
profitability returning to more normal
levels from 2018/19, when profits are
anticipated to be around 30% lower.
Thereafter Berkeley will target a 20%
pre-tax return on equity over the cycle,
depending upon the level of cash, which
currently includes around £400 million
excess due to macro uncertainty.
We have acquired 12 new sites in the year,
of which four are on a conditional basis,
totalling some 3,600 plots. We have also
secured eight new planning consents and
in excess of 50 revised consents. This
activity has seen our land holdings rise
to 46,867 plots with an estimated future
gross margin of £6.0 billion, compared
to 46,351 plots and £6.4 billion of future
gross margin a year ago.
Berkeley’s strategy for capital allocation
remains unchanged. This is to: first, invest
in opportunities for the business where
the right risk-adjusted returns are
available; second, to ensure the financial
strength reflects the prevailing macro
environment; and third, to make returns
to shareholders through either dividends
or share buy-backs.
£687.3M
N E T C A S H
£2.2BN
C A S H D U E O N
F O R WA R D S A L E S
£6.0BN
G R O S S M A R G I N O N
L A N D H O L D I N G S
These results reflect
Berkeley’s operating model,
which places financial
strength and sustainability
at its heart, and the sites this
enabled Berkeley to acquire
in the period from 2010 to
2013. They represent a peak
for Berkeley with profitability
returning to more normal
levels from 2018/19, when
profits are anticipated to be
around 30% lower. Thereafter
Berkeley will target a 20%
pre-tax return on equity
over the cycle, depending
upon the level of cash, which
currently includes around
£400 million excess due to
macro uncertainty.
Taplow Riverside
S T R A T E G I C D E L I V E R Y
The current Shareholder Returns
Programme was established in 2011 as a
framework through which Berkeley would
return £13.00 per share to shareholders
over a 10 year timeframe. The total returns
were increased by £3.34 per share to
£16.34 per share in December 2015.
Having returned £4.34 at the time, the
remaining £12.00 per share was to be paid
in equal annual dividends of £2.00 per
share over 6 years by September 2021.
A year later in December 2016, Berkeley
introduced flexibility such that the
remaining £10.00 per share, at the time,
could be returned through a combination
of share buy-backs and dividends,
as opposed to solely dividends.
Consequently, the shareholder return
payments are now categorised as an
absolute value per annum which is
increased appropriately for any new
shares issued, ensuring that the same
quantum of cash is returned as previously
anticipated. Therefore, on a per share
basis, the amount of Shareholder Return
increases with share buy-backs, which are
undertaken to the extent the Board
believes these are in the best interests
of all shareholders.
Berkeley has now paid or committed
£10.34 of the £16.34 Shareholder Returns
Programme. During the year, Shareholder
Returns totalled £287.1 million, with
£146.7 million returned through dividends
and £140.4 million through share
buy-backs. This includes £32.2 million
towards the £139.2 million committed to
be returned by 30 September 2018. The
amount to be paid on 14 September
2018 will be announced on 16 August
2018 and paid to shareholders on the
register on 24 August 2018, taking
account of any further share buy-backs
in the intervening period.
Since the amendment to the Shareholder
Returns Programme in December 2016,
Berkeley has returned £184.8 million via
share buy-backs acquiring 5.5 million
shares, at an average cost of £33.67 pence
per share (range: £28.08 — £38.45 per
share), including 4.0 million shares this
year. The annual returns for the years to
30 September 2019 through 2021 of
£278.4 million, initially equated to £2.00
per annum, are currently equivalent
to £2.08 per share following share
buy-backs undertaken.
AS OF 19 JUNE 2018
SHAREHOLDER RETURN
RETURN MECHANISM
Per share*
Value
Dividends
Buy-backs
To 30 September 2016
To 30 September 2017
To 31 March 2018
By 30 September 2018
£6.34
£2.00
£1.00
£1.00
£854.9M
£854.9M
£277.7M
£139.2M
£139.2M
£188.0M
£76.3M
—
£89.7M
£62.9M
**
£32.2M**
Returns — announced
£10.34
£1,411.0M
£1,119.2M
£184.8M
By 30 September 2019
By 30 September 2020
By 30 September 2021
£2.00
£2.00
£2.00
£278.4M
£278.4M
£278.4M
Shareholder Returns
£16.34
£2,246.2M
* Shareholder Return expressed on a per share basis, prior to any share buy-backs
** As of 19 June 2018. The amount to be paid as a dividend in September 2018 will depend upon
the extent of any share buy-backs (currently £32.2 million) prior to the announcement of the
dividend in August 2018.
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS C H I E F E X E C U T I V E ’ S
S T A T E M E N T
H O U S I N G M A R K E T
While the underlying demand for new
homes remains strong, the housing
market in London and the South East
has remained subdued over the last
year, in spite of the well documented
endemic under-supply. The Government
interventions that have helped transactions
and starts increase nationally, have little
impact in London and the South East
where a number of headwinds continue
to constrain the market for many. These
include property taxation, mortgage
regulation and macro uncertainty.
However, for those less affected by these
factors, this is a good time to buy with the
supply of well-located new-build property
built to a high standard of quality, well
below the required numbers, at the same
time as reduced availability on the
secondhand market.
For Berkeley, the year has seen new
reservations higher than last year by 12%
and, in a year of high revenue delivery, this
has sustained forward sales at £2.2 billion
(April 2017: £2.7 billion). Reservations in
the year include sales from the launch of
new developments at White City, Millbank
and Ealing (Filmworks) in London, as well
as new phases on our regeneration
schemes and developments outside the
Capital in the South East. Prices remain at
or above business plan levels. Sales
continue to be split broadly evenly
between owner occupiers and investors.
The headwinds, which are described in
detail below, are most keenly felt by UK
customers, while overseas customers
continue to see relative value in the
London market. In the year Berkeley sold
just 204 homes through the Government’s
Help to Buy scheme (2017: 157).
Looking at London as a whole:
overall transaction volumes (including
secondhand) are 19% lower than two years
ago (Land Registry data); and new starts,
the most important measure for assessing
the health of the market, are still some
30% lower than in 2015 (according to
MHCLG data).
The changes to SDLT since 2015 have
particularly impacted both home movers
and buy-to-let customers. For the former,
the SDLT rates mean that the cost of
moving is too high and this is harmful for
social mobility, with the effect on chains
rippling out to all price points, and the
efficient occupation of homes. Buy-to-let
purchasers are additionally impacted by
the 3% surcharge and removal of
mortgage interest deductibility.
Buy-to-let has an important role to play
in the London market. The early forward
sales it provides underpin and de-risk the
capital intensive urban regeneration
developments that represent the majority
of London’s remaining development sites,
and contribute significantly to the delivery
of affordable homes. Importantly buy-to-let
properties are also available for recycling to
home-owners on a future sale. This
contrasts to build-to-rent which does not
support the same level of affordable
housing and does not deliver homes that
are suitable for, or will ever be available to,
home owners. The market needs both forms
of tenure if we are to see the additionality
required to meet the target of 65,000 new
homes in London each year. New starts are
currently around 20,000 per annum.
While interest rates remain low, mortgage
availability is good, however, regulation
restricting income multiples means that
many potential home-owners, who are
capable of affording today’s cost of
ownership, are unable to do so.
We support the Mayor of London’s latest
concordat for homes to be marketed
exclusively to Londoners for the first three
months. We also join him in requesting
that the lending banks and Bank of
England support and bring forward
24 month mortgage offers to enable
more home-owners to purchase early in
the development cycle, at the same time
cash buyers and investors are able to.
On the supply side, land remains slow to
come forward for development and the
combined demands of high levels of
affordable housing, CIL and other Section
106 requirements are not reflecting the
current market conditions.
In times of macro uncertainty, it is
important that these market dislocations
are addressed. If London is to meet its
housing targets, we need more builders,
but the current operating environment is
not one in which small developers can
survive as the barriers to entry are so high
and we are even seeing a number of large
developers either withdraw from, or
reduce activity in, London.
Build costs have increased between
4% and 5% in the year, with the currency
movements noted last year now largely
embedded within materials prices.
The increase this year was across both
labour and materials.
Looking forward, we remain concerned
that the impact of recognised skills gap
in the UK construction workforce may
become more pronounced as the UK exits
the European Union. While this is hard to
predict, it is a fact that over half of
London’s site labour comes from the EU.
This needs to be addressed by a
combination of continued access to EU
labour, skills training and innovation in
construction if the industry is to achieve
its medium term production aspirations.
O U R V I S I O N
Berkeley aspires to be a world-class
business, defined by the quality of the
places we create, generating long-term
value and having a positive impact on
society. Through the framework of ‘Our
Vision’ we articulate our strategy across
our five areas of strategic focus:
Customers, Homes, Places, Operations
and Our People and we are proud to hold
a Queen's Award for Enterprise for
Sustainable Development, which is
recognition of the Group’s economic,
social and environmental achievements.
Berkeley has also been included on the
Lorem ipsum dolor duis
12
FTSE4Good Index since 2003, reflecting
strong social, environmental and
governance (ESG) practices.
In May we launched a new set of
commitments to achieve over the next
two years. This follows extensive research
to understand the views of our
stakeholders as well as key industry issues.
We have also aligned our strategy to the
UN’s Sustainable Development Goals, in
recognition of the role business must play
in achieving these global aims.
C U S T O M E R S
H O M E S
Our customers’ experience remains
central to our strategy and we use the
independently assessed Net Promoter
Score (NPS) to drive and measure
progress in this area. Our NPS of 73.9
(on a scale of -100 to +100) is sector
leading and within the top quartile for
retail brands across all sectors. 97% of
our customers would recommend us
to a friend, surpassing the industry
average of 86%.
We are delighted that Berkeley achieved
the Investor in Customers Gold Award in
2018, following an independent
assessment of our customer service.
The quality of the homes we deliver is
fundamental to the success of our
business, and we believe our core value
of excellence through detail is a key
differentiator. We are delighted that our
homes continue to be recognised
externally. We have taken action over the
past year to future-proof our homes in a
number of areas, such as incorporating
infrastructure to support smart
technology and adaptation measures for
the effects of climate change. Building on
the steps we have taken to become a
carbon positive business, over the next
two years we will be focusing on the
homes we build by setting out plans
to ensure they can operate at net zero
carbon by 2030.
Following the Grenfell Tower tragedy we
undertook a thorough review of all of our
high-rise buildings, including engaging
with the local fire authorities, fire safety
experts, residents and the Ministry of
Housing, Communities and Local
Government (MHCLG). We have ensured
all our buildings are safe whilst the future
regulatory approach is clarified following
the outcomes of the Hackitt Review and
subsequent government consultation.
Woodberry Down, Finsbury Park
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS C H I E F E X E C U T I V E ’ S
S T A T E M E N T
Pizza Union, Goodman's Fields, Aldgate
P L A C E S
O P E R AT I O N S
O U R P E O P L E
There is nothing more important to Berkeley
than the health and safety of our people.
Our health and safety record has improved
year-on-year for five years, with fewer than
1.5 accidents per 1,000 people per year.
Following winning the coveted Sir George
Earle trophy in 2017, Berkeley East Thames
was delighted to win a sector award in
2018. Our emphasis on safety has been
strengthened in recent years with a focus
on health and wellbeing in the workplace,
and this will be further supported by work
on mental health over the next two years.
Attracting and retaining talent is key and
we continue to improve our approach to
talent management, alongside specific
initiatives such as the graduate scheme,
apprenticeship programmes and
specialist academies.
Building strong communities can
transform people’s wellbeing and their
quality of life. Sometimes it happens
naturally, but it often takes years, if not
decades, to evolve. Since 2012 we have
been working on a structured approach
to investing time, money and care in
accelerating the process. On every site
with more than 100 homes we undertake
an assessment pre-planning to clarify
what kind of community we are trying to
create. More recently we have trialled the
implementation of bespoke Community
Plans at 12 occupied developments to
drive an events programme and a
digital forum and create a system of
community governance.
We recognise that our impact is wider
than just the developments we create.
In 2017, 33,000 jobs were supported and
£0.42 billion was provided in affordable
housing subsidies and community and
infrastructure benefits. During 2018/19 we
will be investigating how to quantify the
wider financial and non-financial impacts
generated by our activity — known as
social value — on a development scale.
We are proud to be the first housebuilder
to have an approach for achieving net
biodiversity gain on each site; put simply,
this means there will be more nature
afterwards than before. This year we
have introduced a new commitment to
sustainable transport, which builds upon
our existing requirements for electric
car charging points and cycle storage,
to understand and respond to future
changes in the transport mix and our
customers’ needs.
We are pleased to have become the first
carbon positive housebuilder having
met our commitment set two years ago
to achieve a 10% reduction in carbon
emissions at our sites, offices and sales
suites and introduced a programme
to offset the remaining emissions. We
recognise the risks climate change presents
to our business and are responding to the
Task Force on Climate-related Financial
Disclosures (TCFD) recommendations,
whilst continuing to participate in the CDP
Climate Change Programme in which
Berkeley achieved an ‘A-‘ rating this year.
A considerate approach to construction is
critical to maintaining good relationships
with the communities in which we work
as well as with our employees and wider
workforce. Around 60% of our sites
were recognised at the 2018 Considerate
Constructors Scheme National Site Awards,
compared to just 10% nationally. Our
average audit score of 43/50 is testament
to the efforts of our site teams
in maintaining high standards.
Making our contribution to tackling the
industry’s skills crisis continues to be an
area of focus; in the two-year period there
have been over 850 apprentices working on
our sites and in our offices, a 30% increase.
Overall, people in apprenticeships or training
now make up around 10% of the workforce.
After successful completion of a number
of homes using modular methods
of construction, during the year we
were delighted to be granted planning
permission for our new manufacturing
facility. This will enable us to deliver high
quality homes alongside other benefits
including reduced time on-site and reduced
environmental impact.
Demonstration to local school pupils at
the Kidbrooke Construction Skills Centre
T H E B E R K E L E Y
F O U N D A T I O N
O U T L O O K
Berkeley is a business set up for the long
term. We have an operating model that
allows us to invest at the right time in the
cycle and deliver robust risk-adjusted
returns, and the expertise to transform
complex sites into thriving, sustainable
communities, while having a positive
impact on our stakeholders and society.
We have chosen to focus our operations
around one of the world’s pre-eminent
cities. London’s attributes are unique and
well known and will endure well into the
future. They are founded on openness,
respect, tolerance and diversity. It is an
environment in which, when the right
conditions are present, growth, innovation
and prosperity for all, will flourish.
At present, political and economic
uncertainty, in part due to the uncertainty
around Brexit, weigh on sentiment but do
present opportunities for customers who
can look beyond this short-term volatility.
The Berkeley Foundation is a registered
charity which provides support across
four themes: homes, jobs, skills and
care. Now in its eighth year, new annual
commitments exceeded £2 million last
year, and included a number of mental
health charities, an area of recent focus
for the Foundation. Since 2014, it has
supported more than 15,000 people
across London and the South East to
move out of homelessness, build their
skills, move into work and access new
opportunities. 60% of employees across
Berkeley do something each year to
contribute to the Foundation and we
are proud of its Platinum Give as You
Earn status.
Berkeley is delighted that the Foundation
won the Better Society Award for Best
Partnership with a National Children’s
Charity, in recognition of Super 1s, its
partnership with The Lord’s Taverners.
The Foundation continues its innovative
programmes with its seven strategic
partners as well as a number of other
charities who share its vision to improve
the lives of young people and their
communities across London and the
South East.
Berkeley, with its unrivalled financial
strength, land position and expertise,
is able to look past this prevailing
uncertainty with measured confidence
but, like all responsible businesses,
is cautious in its investment in this
environment and this will determine the
speed with which it delivers the value
from its assets in the medium term.
R O B P E R R I N S
C H I E F E X E C U T I V E
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS The Bridge Theatre, One Tower Bridge
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17
BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS B E R K E L E Y ’ S
S T R A T E G I C
F R A M E W O R K
O U R A S P I R A T I O N
O U R S T R A T E G Y
O U R B U S I N E S S M O D E L
O U R R I S K M A N A G E M E N T
TO BE A WORLD-CLASS
BUSINESS, DEFINED BY THE
QUALITY OF THE PLACES
WE CREATE, GENERATING
LONG-TERM VALUE AND
HAVING A POSITIVE IMPACT
ON SOCIETY.
TO ENSURE WE REMAIN FIRMLY FOCUSED ON ACHIEVING
OUR ASPIRATION, OUR STRATEGIC PLAN IS ARTICULATED
THROUGH THE FRAMEWORK OF OUR VISION.
DEVELOPMENT AND REGENERATION IS ABOUT
PEOPLE. WE TRANSFORM PLACES AND LIVES
AND CREATE THRIVING COMMUNITIES.
RISK MANAGEMENT UNDERPINS OUR
BUSINESS MODEL.
Our Vision is structured around five areas of focus and a core
set of company values. It gives our employees clear direction
across every discipline of the business and enables them to
contribute to its ongoing success.
F O C U S
A R E A S
C O R E
VA L U E S
Customers
Have integrity
Homes
Places
Respect people
Think creatively
Operations
Be passionate
Our People
Excellence through detail
Every two years we set targeted, challenging new commitments
in each of the five focus areas. This enables us to continually
improve, as well as to respond to global and industry issues.
In May 2018 we set new commitments based on detailed
research and a review of the United Nations' Sustainable
Development Goals. The detailed commitment-setting exercise
is explained on page 21.
We do this through five core business activities,
all of which are integral to supporting our
strategic commitments:
C O R E B U S I N E S S A C T I V I T I E S
Identifying and acquiring land
Designing and planning new homes and places
Building new homes and places
Marketing and customer service
Placekeeping and stewardship
Through undertaking these activities in a responsible
way and with a long-term focus, we deliver value for
all our stakeholders, including our customers, local
communities, employees, partners, shareholders and
wider society.
We understand our risks and set an appropriate level
of appetite for risk throughout our business.
M A R K E T R I S K
Berkeley recognises that the housing market is
inherently cyclical, where market sentiment and
transaction levels can change quickly. Consequently,
we focus on London and the South of England,
markets that we know and understand, with a
long-term, added value approach to development.
O P E R AT I O N A L R I S K S
Berkeley focuses on complex and long-term
regeneration developments, particularly in
London, which present a complex array of
operational challenges.
Accordingly, risk management is embedded
throughout the business and our autonomous
operational teams are required to carefully manage
each development’s design and delivery, regardless
of size, whilst embracing Berkeley’s core values,
Our Vision commitments and overall
quality-led approach.
F I N A N C I A L R I S K S
Given the operational risks present in its
developments, Berkeley keeps financial risk low by
maintaining a strong balance sheet and land position
as well as forward selling its homes where possible.
This ensures that the business is always well placed,
with the financial flexibility to invest as opportunities
arise at the right point in the market cycle.
See page 20
See page 48
See page 60
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS O U R V I S I O N
BERKELEY ASPIRES TO BE A WORLD-CLASS BUSINESS,
DEFINED BY THE QUALITY OF THE PLACES WE CREATE, GENERATING
LONG-TERM VALUE AND HAVING A POSITIVE IMPACT ON SOCIETY.
OUR VISION IS THE LONG-TERM STRATEGY FOR THE BUSINESS
WHICH SETS OUT THIS GOAL AND IS STRUCTURED AROUND
FIVE AREAS OF FOCUS AND OUR CORE SET OF COMPANY VALUES.
O U R A R E A S O F F O C U S
CUSTOMERS
HOM ES
PLACES
OPE RATI ONS
OUR P EOPLE
Provide
exceptional
service to all of
our customers
and put them at
the heart of our
decisions
Deliver high
quality homes
with low
environmental
impact where
people aspire
to live
Create strong
communities
where residents
can live an
enjoyable,
sustainable life
Make the right
long-term
decisions, run
the business
efficiently
and work
collaboratively
with our
supply chain
Develop highly
skilled teams that
work together in
a safe, healthy
and supportive
environment and
contribute to
wider society
O U R VA L U E S
HAVE
INTEGRITY
Build trust
by being
open, clear
and credible
RESP ECT
PEOP LE
Work together,
empower people
and value their
contribution
THINK
CREATIVE LY
Find individual
solutions for
every site
and situation
BE
PASS IO NATE
Take pride in
what we do
and the impact
we make
EXCELLENCE
THROUGH DETAIL
Deliver the best
through attention
to detail in
everything we do
D R I V I N G T H E
B U S I N E S S F O R W A R D
We review and develop our strategy
every two years in order to drive continual
improvement and to ensure we address
any emerging global, industry or business
issues and opportunities. In May 2018 we
launched 10 new headline commitments
to achieve by April 2020, underpinned
by revised supporting commitments in
each focus area.
The development of the new
commitments was informed by
in-depth initial research followed by
a materiality assessment to understand
the views of our employees and key
external stakeholders.
With the support of an objective external
party, all employees were invited to
provide their views; responses were
received from approximately 1,200
people, representing 45% of the business.
Views from key external stakeholders
were also requested via both an online
survey and detailed interviews.
We used the results of this work to
shortlist topic themes for further
consultation with each of our
autonomous companies and specialist
committees. Workshops were run on
each of the focus areas to debate and
refine the commitments before sign-off
by the Main Board.
ICONS
ICONS
ICONS
17 ICONS: COLOUR VERSION
17 ICONS: COLOUR VERSION
17 ICONS: COLOUR VERSION
NO
NO
POVERTY
POVERTY
S U P P O R T I N G T H E
NO
ZERO
GOOD HEALTH
GOOD HEALTH
ZERO
POVERTY
U N I T E D N A T I O N S ’
AND WELL-BEING
HUNGER
AND WELL-BEING
HUNGER
S U S T A I N A B L E
D E V E L O P M E N T G O A L S
AFFORDABLE AND
AFFORDABLE AND
CLEAN ENERGY
CLEAN ENERGY
CLIMATE
CLIMATE
ACTION
ACTION
DECENT WORK AND
DECENT WORK AND
ECONOMIC GROWTH
ECONOMIC GROWTH
AFFORDABLE AND
INDUSTRY, INNOVATION
INDUSTRY, INNOVATION
CLEAN ENERGY
AND INFRASTRUCTURE
AND INFRASTRUCTURE
Our vision is to be a world-class business,
and therefore it is important that we help
to address global challenges. In 2015, all
193 Member States of the United Nations
adopted a plan for achieving a better
future for all — laying out a path to end
extreme poverty, fight inequality and
injustice, and protect our planet. This
plan is called ‘Agenda 2030’ and at the
heart of it are 17 Sustainable Development
Goals (SDGs).
LIFE
LIFE
BELOW WATER
BELOW WATER
CLIMATE
LIFE
LIFE
ACTION
ON LAND
ON LAND
We have aligned the Our Vision
commitments to support the goals. All the
goals are important and inter-connected,
but we focus our efforts on eight that we
have the most material ability to influence.
ICONS
ICONS
ICONS
ICONS
Employees at St Edward
ICONS
ICONS
48
ICONS
ICONS
ICONS
48
48
48
ICONS
48
17 ICONS: COLOUR VERSION
17 ICONS: COLOUR VERSION
17 ICONS: COLOUR VERSION
17 ICONS: COLOUR VERSION
17 ICONS: COLOUR VERSION
ICONS
48
ICONS
48
ICONS
48
NO
POVERTY
NO
NO
ZERO
NO
POVERTY
POVERTY
HUNGER
POVERTY
ZERO
GOOD HEALTH
ZERO
ZERO
NO
HUNGER
AND WELL-BEING
HUNGER
HUNGER
POVERTY
GOOD HEALTH
QUALITY
GOOD HEALTH
GOOD HEALTH
ZERO
AND WELL-BEING
EDUCATION
AND WELL-BEING
AND WELL-BEING
HUNGER
QUALITY
GENDER
QUALITY
QUALITY
GOOD HEALTH
EDUCATION
EQUALITY
EDUCATION
EDUCATION
AND WELL-BEING
GENDER
GENDER
QUALITY
GENDER
CLEAN WATER
EQUALITY
EQUALITY
AND SANITATION
EDUCATION
EQUALITY
CLEAN WATER
CLEAN WATER
CLEAN WATER
GENDER
AND SANITATION
AND SANITATION
AND SANITATION
EQUALITY
CLEAN WATER
AND SANITATION
ZERO
QUALITY
QUALITY
HUNGER
EDUCATION
EDUCATION
GOOD HEALTH
AFFORDABLE AND
GENDER
GENDER
AND WELL-BEING
CLEAN ENERGY
EQUALITY
EQUALITY
QUALITY
AFFORDABLE AND
AFFORDABLE AND
DECENT WORK AND
AFFORDABLE AND
CLEAN WATER
CLEAN WATER
EDUCATION
CLEAN ENERGY
CLEAN ENERGY
ECONOMIC GROWTH
CLEAN ENERGY
AND SANITATION
AND SANITATION
GENDER
DECENT WORK AND
DECENT WORK AND
INDUSTRY, INNOVATION
DECENT WORK AND
AFFORDABLE AND
EQUALITY
ECONOMIC GROWTH
AND INFRASTRUCTURE
ECONOMIC GROWTH
ECONOMIC GROWTH
CLEAN ENERGY
CLEAN WATER
INDUSTRY, INNOVATION
REDUCED
INDUSTRY, INNOVATION
INDUSTRY, INNOVATION
DECENT WORK AND
AND SANITATION
AND INFRASTRUCTURE
INEQUALITIES
AND INFRASTRUCTURE
AND INFRASTRUCTURE
ECONOMIC GROWTH
REDUCED
REDUCED
SUSTAINABLE CITIES
REDUCED
INDUSTRY, INNOVATION
INEQUALITIES
AND COMMUNITIES
INEQUALITIES
INEQUALITIES
AND INFRASTRUCTURE
SUSTAINABLE CITIES
SUSTAINABLE CITIES
SUSTAINABLE CITIES
RESPONSIBLE
REDUCED
AND COMMUNITIES
AND COMMUNITIES
AND COMMUNITIES
CONSUMPTION
INEQUALITIES
AND PRODUCTION
RESPONSIBLE
RESPONSIBLE
SUSTAINABLE CITIES
RESPONSIBLE
CONSUMPTION
CONSUMPTION
AND COMMUNITIES
CONSUMPTION
AND PRODUCTION
AND PRODUCTION
AND PRODUCTION
RESPONSIBLE
CONSUMPTION
AND PRODUCTION
DECENT WORK AND
REDUCED
REDUCED
ECONOMIC GROWTH
INEQUALITIES
INEQUALITIES
INDUSTRY, INNOVATION
CLIMATE
SUSTAINABLE CITIES
SUSTAINABLE CITIES
AND INFRASTRUCTURE
ACTION
AND COMMUNITIES
AND COMMUNITIES
REDUCED
CLIMATE
CLIMATE
LIFE
CLIMATE
RESPONSIBLE
RESPONSIBLE
INEQUALITIES
ACTION
ACTION
BELOW WATER
ACTION
CONSUMPTION
CONSUMPTION
AND PRODUCTION
AND PRODUCTION
SUSTAINABLE CITIES
LIFE
LIFE
LIFE
LIFE
CLIMATE
AND COMMUNITIES
BELOW WATER
BELOW WATER
ON LAND
BELOW WATER
ACTION
RESPONSIBLE
LIFE
PEACE, JUSTICE
LIFE
LIFE
LIFE
CONSUMPTION
ON LAND
ON LAND
AND STRONG
ON LAND
BELOW WATER
AND PRODUCTION
INSTITUTIONS
PEACE, JUSTICE
PARTNERSHIPS
PEACE, JUSTICE
PEACE, JUSTICE
LIFE
AND STRONG
FOR THE GOALS
AND STRONG
AND STRONG
ON LAND
INSTITUTIONS
INSTITUTIONS
INSTITUTIONS
PARTNERSHIPS
PARTNERSHIPS
PEACE, JUSTICE
PARTNERSHIPS
FOR THE GOALS
FOR THE GOALS
FOR THE GOALS
AND STRONG
INSTITUTIONS
PARTNERSHIPS
FOR THE GOALS
LIFE
PEACE, JUSTICE
PEACE, JUSTICE
BELOW WATER
AND STRONG
AND STRONG
INSTITUTIONS
INSTITUTIONS
When an icon is on a square, that square must be proportional 1 x 1.
When an icon is on a square, that square must be proportional 1 x 1.
When an icon is on a square, that square must be proportional 1 x 1.
When an icon is on a square, that square must be proportional 1 x 1.
When an icon is on a square, that square must be proportional 1 x 1.
LIFE
PARTNERSHIPS
PARTNERSHIPS
ON LAND
FOR THE GOALS
FOR THE GOALS
PEACE, JUSTICE
AND STRONG
INSTITUTIONS
PARTNERSHIPS
FOR THE GOALS
The white icon should be contained by its defined colour, or black
background.
The white icon should be contained by its defined colour, or black
The white icon should be contained by its defined colour, or black
The white icon should be contained by its defined colour, or black
The white icon should be contained by its defined colour, or black
background.
background.
background.
background.
Do not alter the colours of the SDG icons.
Do not alter the colours of the SDG icons.
Do not alter the colours of the SDG icons.
Do not alter the colours of the SDG icons.
Do not alter the colours of the SDG icons.
Further information on how we address each
of the prioritised goals can be found at:
20
21
Do not alter the colours of the SDG icons.
Do not alter the colours of the SDG icons.
Do not alter the colours of the SDG icons.
The white icon should be contained by its defined colour, or black
background.
The white icon should be contained by its defined colour, or black
background.
The white icon should be contained by its defined colour, or black
background.
When an icon is on a square, that square must be proportional 1 x 1.
When an icon is on a square, that square must be proportional 1 x 1.
When an icon is on a square, that square must be proportional 1 x 1.
www.berkeleygroup.co.uk/sustainability
BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS C O M M I T M E N T S
WE SET NEW HEADLINE COMMITMENTS EVERY TWO YEARS
TO HELP DRIVE THE BUSINESS TOWARDS BEING WORLD-CLASS.
IN MAY 2018 WE LAUNCHED A NEW SET OF 10 STRETCHING
COMMITMENTS TO ACHIEVE BY APRIL 2020.
The headline commitments
are underpinned by leading
commitments, either within
the industry or out of sector,
and by business as usual
commitments. These help us
to ensure a consistently
strong approach in key areas.
More detail is provided on
pages 24 to 43.
Learn more about Our Vision at:
www.berkeleygroup.co.uk/about-
berkeley-group/our-vision
22
C U S T O M E R S
H O M E S
P L A C E S
O P E R A T I O N S
O U R P E O P L E
Our approach in this area has evolved
from ensuring that customer-facing
teams provide exceptional service to
a strong emphasis on all employees
placing the customer at the
heart of every decision.
Our approach in this area has
developed from a long-standing focus
on quality to also ensuring the homes
are healthy and environmentally-sound
as well as being fit for the future.
Our approach in this area has developed
from a focus on the public realm, to
developing an understanding of how
to build communities and enable our
customers to live sustainable lifestyles.
Our approach in this area has evolved
from established financial success to
ensuring that, at the same time, we
work with our supply chain to make
a positive contribution to both society
and the environment.
Our approach in this area has
evolved from ensuring safe working
environments to also promoting health,
wellbeing and inclusion alongside talent
management initiatives.
2 0 1 6 – 2 0 1 8 H E A D L I N E
C O M M I T M E N T S
Net Promoter Score
Deliver world-class customer
service as evidenced by a top
quartile Net Promoter Score
compared to UK Customer
Satisfaction Index results.
PERFORMANCE
2 0 1 6 – 2 0 1 8 H E A D L I N E
C O M M I T M E N T S
PERFORMANCE
2 0 1 6 – 2 0 1 8 H E A D L I N E
C O M M I T M E N T S
PERFORMANCE
2 0 1 6 – 2 0 1 8 H E A D L I N E
C O M M I T M E N T S
PERFORMANCE
2 0 1 6 – 2 0 1 8 H E A D L I N E
C O M M I T M E N T S
PERFORMANCE
Climate change adaptation
Design our homes to consider
future climate change to ensure
continued thermal comfort.
Community plans
Implement community plans on
our developments to facilitate
thriving communities.
Carbon positive
Reduce our operational carbon
emissions intensity by 10% and
introduce a programme to
become carbon positive.
Healthy workplaces
Launch and implement a new
programme to promote the
wellbeing of our staff and create
healthy workplaces.
Customer insight
Run a programme of engagement
and research to further enhance
our product and processes based
on the needs of our customers.
Smart homes
Understand the evolution of
smart technology and connectivity
in homes and on developments.
Net biodiversity gain
Develop and apply an approach
to ensure that all new developments
create a net biodiversity gain.
Apprentices and training
Ensure at least 1,500 people across
our direct and indirect workforce
undertake an apprenticeship or
vocational training.
Talent management
Invest in training and development
through our talent management
programmes to realise the potential
of our people across all areas of
the business.
2 0 1 8 – 2 0 2 0 H E A D L I N E
C O M M I T M E N T S
Net Promoter Score
Establish Berkeley amongst the top
performing companies for customer
service, as evidenced by the Net
Promoter Score.
2 0 1 8 – 2 0 2 0 H E A D L I N E
C O M M I T M E N T S
Safe and healthy homes
Launch a design framework to
contribute to the wellbeing of our
customers, including safety, air
quality and thermal comfort.
Mortgage lending
Make the case for a proportionate
approach to lending, including two year
mortgage offers, so that every purchaser
has a fair chance in the new build market.
Net zero carbon
Develop a transition plan for each
new development which enables the
homes to operate at net zero carbon
by 2030.
2 0 1 8 – 2 0 2 0 H E A D L I N E
C O M M I T M E N T S
Community and social value
Understand the social value
generated by new development
and embed a coherent approach to
building communities on all our sites.
Sustainable transport
Explore future transport trends
and encourage a modal shift away
from an over-reliance on petrol and
diesel cars.
2 0 1 8 – 2 0 2 0 H E A D L I N E
C O M M I T M E N T S
Off-site manufacture
Deliver the Berkeley Modular
facility and ensure that 30% of
construction value is delivered
through off-site assembly by 2020.
2 0 1 8 – 2 0 2 0 H E A D L I N E
C O M M I T M E N T S
Industry image
Engage with young people,
education providers and employers
to transform perceptions of careers
in the built environment.
Waste and plastics
Work with our supply chain to develop
a zero waste strategy, focusing
on key wastes including plastics.
Diversity and inclusion
Implement a programme to create an
inclusive environment where employees
can reach their full potential, irrespective
of their identity or background.
See page 24
See page 28
See page 32
See page 36
See page 40
23
BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS C U S T O M E R S
PROVIDE EXCEPTIONAL SERVICE TO ALL
OF OUR CUSTOMERS AND PUT THEM AT
THE HEART OF OUR DECISIONS.
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
Net Promoter Score
Deliver world-class customer
service as evidenced by a top
quartile Net Promoter Score
compared to UK Customer
Satisfaction Index results.
Customer insight
Run a programme of
engagement and research to
further enhance our product
and processes based on the
needs of our customers.
2 0 1 8 H I G H L I G H T S
There were also commitments
covering the following areas:
— Communicating digitally with
customers via MyHome Plus
— Marketing homes in the UK first
— Communicating Our Vision
to customers
— Communicating sustainability
to customers
— Providing Living Guides
73.9
Sixth-month rolling average
Net Promoter Score
(compared to a Home
Builders Federation industry
average of 29)
Green
Mortgage
Partner organisation working
with Barclays for the first green
home mortgage in the UK
97%
Customers would
recommend us to a friend
(compared to a Home
Builders Federation industry
average of 86%)
Londoners
First
Signatory to the Mayor of
London’s initiative to offer
lower value new-build homes
within London and the UK first
Investor in Customers
Gold 2017
Achieved across all of our
operating companies
Sales suite at Woodberry Down
Customers at Kidbrooke Village
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
C U S T O M E R S E R V I C E A N D
T H E N E T P R O M O T E R S C O R E
The service we provide is professional,
efficient and helpful to make the home
buying process as straightforward and
enjoyable as possible. We aim to exceed
our customers’ expectations, starting from
the moment a customer first enquires
about a property. Each customer receives
tailored information relating to their
purchase and has a dedicated person to
guide them through their buying journey
and beyond.
We have created a ‘customer first’
mind-set and empower teams to think
and act differently. This is supported by
a range of employee training and the
continuation of our Sales Academy to
bring talented individuals from other
industries into the business.
This year we are delighted to have
achieved the Investor in Customers Gold
award across all of our operating
companies. This follows an independent
assessment of customer service, from
understanding and meeting customer
needs to delighting customers and
engendering loyalty. Customer feedback
showed a high level of customer
satisfaction and loyalty and employee
feedback showed that staff in all roles and
at all levels understand the needs of the
customer and are committed to delivering
an excellent customer experience.
We use the Net Promoter Score to
benchmark the levels of service we provide
against well-regarded companies across all
sectors. Our six-month rolling average Net
Promoter Score of 73.9 compares
extremely favourably against the industry
average of 29 and overall UK average of
15.3. Overall, 97% of our customers would
recommend us to a friend.
Net Promoter Score
(on a scale of -100 to +100)
73.9
80
70
60
50
40
30
20
10
0
40.4
29.0
15.3
Berkeley
Top quartile of
UK Customer
Satisfaction Index for
Retail (Non-food)
Home Builders
Federation (HBF)
industry average
UK Customer
Satisfaction Index
UK average
C U S T O M E R
I N S I G H T
Key to the ongoing success of our
business is that we listen to, understand
and respond to the needs of our
customers. Over the last two years we
have implemented a range of new
initiatives to gain customer insight.
A new data tool has been used to provide
further insight from existing customer
surveys. We have also developed an
online portal to share lessons learnt
across Berkeley.
Customer focus groups are run at many
of our developments, including the
Skyline apartments at Woodberry Down.
These give customers an opportunity to
provide feedback on the homes and
places in which they live whilst providing
us with invaluable information to help
inform future improvements both on-site
and beyond.
We also recognise the value in obtaining
feedback from potential customers who
chose not to purchase a property.
Surveys of around 170 potential customers
completed at seven developments have
enabled us to better understand
purchaser expectations and priorities.
Going forward, we will undertake this
for all sites.
Site-specific information is supported by
annual brand research of 500 people from
our target market on what is important to
people when selecting a new home.
24
25
BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS
C U S T O M E R S
ICONS
ICONS
17 ICONS: COLOUR VERSION
17 ICONS: COLOUR VERSION
ICONS
ICONS
48
48
NO
NO
POVERTY
POVERTY
ZERO
ZERO
HUNGER
HUNGER
GOOD HEALTH
GOOD HEALTH
AND WELL-BEING
AND WELL-BEING
QUALITY
QUALITY
EDUCATION
EDUCATION
GENDER
GENDER
EQUALITY
EQUALITY
CLEAN WATER
CLEAN WATER
AND SANITATION
AND SANITATION
S U P P O R T I N G T H E
U N ’ S S U S TA I N A B L E
D E V E L O P M E N T G O A L S
AFFORDABLE AND
AFFORDABLE AND
CLEAN ENERGY
CLEAN ENERGY
DECENT WORK AND
DECENT WORK AND
ECONOMIC GROWTH
ECONOMIC GROWTH
INDUSTRY, INNOVATION
INDUSTRY, INNOVATION
AND INFRASTRUCTURE
AND INFRASTRUCTURE
REDUCED
REDUCED
INEQUALITIES
INEQUALITIES
SUSTAINABLE CITIES
SUSTAINABLE CITIES
AND COMMUNITIES
AND COMMUNITIES
RESPONSIBLE
RESPONSIBLE
CONSUMPTION
CONSUMPTION
AND PRODUCTION
AND PRODUCTION
CLIMATE
CLIMATE
ACTION
ACTION
LIFE
LIFE
BELOW WATER
BELOW WATER
LIFE
LIFE
ON LAND
ON LAND
PEACE, JUSTICE
PEACE, JUSTICE
AND STRONG
AND STRONG
INSTITUTIONS
INSTITUTIONS
PARTNERSHIPS
PARTNERSHIPS
FOR THE GOALS
FOR THE GOALS
When an icon is on a square, that square must be proportional 1 x 1.
When an icon is on a square, that square must be proportional 1 x 1.
The white icon should be contained by its defined colour, or black
The white icon should be contained by its defined colour, or black
background.
background.
Do not alter the colours of the SDG icons.
Do not alter the colours of the SDG icons.
Sales advisor at The Corniche
Residents at Ryewood, Sevenoaks
Senior living at Highwood Mill, Horsham
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
C O M M U N I C AT I N G
W I T H C U S T O M E R S
We strive for seamless communication
with customers from the moment they
first contact us.
Once a customer has chosen to buy a
new home they are given the opportunity
to use our interactive online system,
MyHome Plus. It covers a range of
features, from selecting choices and
options to receiving updates on
construction progress and the Living
Guide on completion.
Communication with customers does not
end when they purchase their home. For
example at Goodman’s Fields the estate
management and Berkeley teams hold
regular meetings with residents to discuss
topics which directly affect them, such as
service charges and the refuse strategy.
S U S TA I N A B I L I T Y
We continue to promote sustainable
living at all stages of the customer journey.
Site-specific features are noted in
brochures and in information provided to
the customer at purchase and completion.
Berkeley was delighted to be one of five
partner organisations supporting Barclays
with its launch of the UK’s first green
mortgage in April 2018. If a customer is
purchasing an energy efficient new-build
home, they will be eligible for a Barclays
Green Home Mortgage which offers
discounted rates compared to
standard mortgages.
U K A N D L O N D O N F I R S T
Our UK First Policy has been in place since
2014 for all developments, requiring that
every individual home is made available in
the UK either first or at the same time as
launching overseas. This enables UK
customers to have the opportunity to buy
our homes, whilst also appreciating the
vital role that international investors play
in generating the cash flow and
confidence required to begin construction.
In February 2018 we were pleased to
support the Mayor of London’s initiative to
offer lower-cost new properties exclusively
to Londoners and UK-based buyers first.
The sale of any new-build homes within
London of up to £350,000 is being
restricted to UK buyers for three months
before any overseas marketing takes place.
USING DATA TO FURTHER
UNDERSTAND CUSTOMER
FEEDBACK
A sophisticated text analysis
programme has been used to
review the past eight years of
customer verbatim comments.
Whilst customer verbatims
have always been of critical
importance to us, this is
the first time that such a
detailed and consolidated
trend analysis has been
completed which allows us
to turn the comments into
actionable insight.
Information is now available at
a consolidated Group level, as
well as for our autonomous
businesses and individual sites.
This will provide invaluable
information to aid us in the
continual improvement of our
product and service offering.
Learn more about customers at:
www.berkeleygroup.co.uk/
about-berkeley-group/
our-vision/customers
26
2 0 1 8 – 2 0 2 0 N E W C O M M I T M E N T S
N E T P R O M O T E R
S C O R E
M O R T G A G E
L E N D I N G
Establish Berkeley amongst the
top performing companies for
customer service, as evidenced by
the Net Promoter Score.
Make the case for a proportionate
approach to lending, including two-year
mortgage offers, so that every purchaser
has a fair chance in the new build market.
Having high levels of customer
satisfaction is critical to our business
and we aim to exceed our customers’
expectations, starting from the
moment a customer first enquires
about a property.
For the last four years, we have used
the Net Promoter Score to benchmark
the levels of service we provide against
well-regarded companies across all
sectors and help drive improvements.
We will continue to monitor our
performance, share good practice,
and implement new initiatives to ensure
that our customers receive excellent
levels of service.
We want every homebuyer to have the
same chance as an investor to purchase
a property in the new-build market.
Mortgage offers today typically last for
six months, but this does not lend itself
to buying off-plan because the offer has
usually expired before the new property
is completed.
Through this commitment we will
encourage lenders to introduce mortgage
offers which give every purchaser a fair
chance of buying a new-build home.
Through research, debate and fresh
thinking, we want to create a level playing
field for every purchaser.
O T H E R A R E A S
O F F O C U S
In addition to the two headline
commitments, we have specific
targets to:
— Understand and respond to
customers’ emotional journeys
— Promote the use of MyHome Plus
— Market homes in the UK and London first
— Meet minimum standards for sales
and marketing suite set-up
— Communicate Our Vision
— Communicate sustainable living
— Promote digital and sustainable
communication
— Undertake sales and marketing
suite exit interviews
27
BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS H O M E S
DELIVER HIGH QUALITY HOMES WITH LOW
ENVIRONMENTAL IMPACT WHERE PEOPLE
ASPIRE TO LIVE.
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
Thermal comfort
Design our homes to consider
future climate change to ensure
continued thermal comfort.
Smart homes
Understand the evolution of
smart technology and connectivity
in homes and on developments.
2 0 1 8 H I G H L I G H T S
Launched
Thermal comfort risk
assessment for all new homes
WINNER
There were also commitments
covering the following areas:
— Enabling fibre broadband and
community Wi-Fi
— Undertaking research and
development
— Meeting space standards
— Installing internal recycling facilities
London Evening Standard
New Homes Awards 2018
The Sunday Times British
Homes Awards 2017
Innovative Living
Berkeley Urban House
Best Apartment
Wimbledon Hill Park
Best Family Home
Fitzroy Gate
Best Luxury Home
The Corniche
Best Large Development
Woodberry Down
91%
Completed homes with an
EPC rating of at least B
100%
Customers will have access to
Ultafast broadband in 2018
73%
Completed homes
supplied with low carbon
or renewable energy
THERMAL COMFORT
AT CLARENDON
During the early planning
stages of Clarendon, the
thermal comfort risk
assessment tool highlighted
that the development was
at risk of overheating as it
is located within an urban
area adjacent to a mainline
railway and because
communal heating was
proposed throughout.
Dynamic thermal modelling
was undertaken and a
number of design measures
have been incorporated to
mitigate the effects of
overheating, including:
— External shading from
balcony overhangs and
recessed balconies
— Natural ventilation
measures
— Use of rain gardens
and green roofs
Computer Generated Image of Clarendon
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
T H E R M A L C O M F O R T
S M A R T H O M E S
The potential for overheating in new
homes has become a growing issue
for the industry as an unintended
consequence of improvements to
regulatory standards for energy efficiency
and air tightness. We want to ensure
the thermal comfort of our customers
both now and in the future with
expected changes in climate.
Over the last two years we have developed
and implemented a thermal comfort risk
assessment tool for use on all new sites;
we are the only developer to apply such an
approach consistently across all schemes.
The risk assessment, which was based on
industry research and feedback from our
own employees and external experts, has
been undertaken for 21 sites to date.
The tool takes into account factors which
can affect overheating, such as location,
building type and ventilation strategies.
It then highlights site-specific risks and
actions to reduce them.
We are increasingly living in a connected
world, with our customers expecting
access to the internet and good
connectivity from the first day they move
in. Technology continues to develop, from
enabling us to control the temperature of
our homes through a smart phone, to
intelligent devices learning our behaviours
and movements.
Over the last two years we have
developed new minimum infrastructure
recommendations for new sites, covering
broadband and cabling provision. These
enable customers to benefit from the
freedom of being able to ‘plug in’
technologies as they become available.
We continue to incorporate relevant
smart technologies into our
developments. These can range from
items such as smart thermostats at
Kennet Island to more advanced systems
linking the digital and electrical
infrastructure within the homes at South
Quay Plaza, enabling our customers to
connect their homes via the IOT (Internet
of Things).
Research and field trials continue at
Kidbrooke Village into other technologies
such as home battery storage, which
when combined with photovoltaic panels,
an electric car charging point and smart
controls would enable us to offer a ‘smart
home’ as an option to our customers.
E N V I R O N M E N TA L P E R F O R M A N C E
All our homes incorporate measures to
reduce their impact on the environment.
We begin by applying the energy
hierarchy in design by focusing on the
building fabric and then incorporating
clean and renewable technologies. Around
three quarters of our completed homes
incorporate low carbon or renewable
energy technologies. These measures
ensure our homes are efficient, as
demonstrated by our average EPC rating
of ‘B’ for homes which completed in 2018.
In March 2018 we were a signatory of the
UK Green Building Council’s letter to
Government to move towards net zero
carbon homes by 2030.
Throughout the design stage we also
consider daylighting, space standards
and noise to maximise the performance
and comfort of our homes. To help our
customers lead more sustainable
lifestyles we incorporate energy efficient
appliances, provide internal recycling bins
and install water efficient fittings.
28
29
BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS ICONS
17 ICONS: COLOUR VERSION
NO
POVERTY
ICONS
GOOD HEALTH
AND WELL-BEING
ZERO
HUNGER
ICONS
48
ICONS
48
ICONS
48
ICONS
GENDER
EQUALITY
QUALITY
EDUCATION
CLEAN WATER
AND SANITATION
S U P P O R T I N G T H E
U N ’ S S U S TA I N A B L E
D E V E L O P M E N T G O A L S
H O M E S
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
Q U A L I T Y
Excellence through detail is one of our
company values and is applied at every
stage of the project to create exceptional
homes. Our brand is defined by the quality
of the homes we build and we have high
design and construction standards in place.
To ensure that we meet these standards we
have deployed technology to improve our
quality procedures, such as Viewpoint Field
View, which enables our project teams to
communicate instantly with contractors.
We are delighted to have been recognised
externally for our high standards of
excellence. Management Today ranked us
joint first for the quality of goods and
services across all sectors in Britain’s Most
Admired Companies 2017 and we are
honoured to have received many
development-specific awards for design
and quality, including at the International
Property Awards 2017 and the London
Evening Standard New Homes Awards 2018.
R E S E A R C H A N D D E V E L O P M E N T
Research and development occurs
across the business to enable continual
improvement. We undertake research on
an individual site level and at a Group level
through our Production Committee.
We continue to utilise and develop our
innovative Urban House type which
enables high densities to be achieved
whilst providing low-rise back-to-back
adaptable family housing. The design was
recognised at the Sunday Times British
Homes Awards 2017 through the
Innovative Living Award.
We regularly seek to collaborate with
external organisations and are pleased
to have contributed to the Chartered
Institution of Building Services Engineers’
(CIBSE) Homes for the Future Group.
Learn more about homes at:
www.berkeleygroup.co.uk/about-
berkeley-group/our-vision/homes
30
Apartment at The Corniche, Albert Embankment
The Urban House at Kidbrooke Village
17 ICONS: COLOUR VERSION
17 ICONS: COLOUR VERSION
AFFORDABLE AND
CLEAN ENERGY
DECENT WORK AND
ECONOMIC GROWTH
NO
INDUSTRY, INNOVATION
POVERTY
AND INFRASTRUCTURE
ZERO
HUNGER
REDUCED
INEQUALITIES
GOOD HEALTH
SUSTAINABLE CITIES
NO
AND WELL-BEING
AND COMMUNITIES
POVERTY
QUALITY
ZERO
EDUCATION
HUNGER
RESPONSIBLE
CONSUMPTION
AND PRODUCTION
GENDER
GOOD HEALTH
EQUALITY
AND WELL-BEING
CLEAN WATER
QUALITY
AND SANITATION
EDUCATION
GENDER
EQUALITY
CLEAN WATER
AND SANITATION
CLIMATE
ACTION
LIFE
BELOW WATER
AFFORDABLE AND
LIFE
CLEAN ENERGY
ON LAND
DECENT WORK AND
PEACE, JUSTICE
ECONOMIC GROWTH
AND STRONG
INSTITUTIONS
INDUSTRY, INNOVATION
PARTNERSHIPS
AFFORDABLE AND
AND INFRASTRUCTURE
FOR THE GOALS
CLEAN ENERGY
REDUCED
DECENT WORK AND
INEQUALITIES
ECONOMIC GROWTH
SUSTAINABLE CITIES
INDUSTRY, INNOVATION
AND COMMUNITIES
AND INFRASTRUCTURE
RESPONSIBLE
REDUCED
CONSUMPTION
INEQUALITIES
AND PRODUCTION
SUSTAINABLE CITIES
AND COMMUNITIES
RESPONSIBLE
CONSUMPTION
AND PRODUCTION
When an icon is on a square, that square must be proportional 1 x 1.
The white icon should be contained by its defined colour, or black
background.
Photovoltaic roof panel array at Goodman’s Fields
Do not alter the colours of the SDG icons.
CLIMATE
ACTION
LIFE
BELOW WATER
LIFE
CLIMATE
ON LAND
ACTION
PEACE, JUSTICE
LIFE
AND STRONG
BELOW WATER
INSTITUTIONS
PARTNERSHIPS
LIFE
FOR THE GOALS
ON LAND
PEACE, JUSTICE
AND STRONG
INSTITUTIONS
PARTNERSHIPS
FOR THE GOALS
When an icon is on a square, that square must be proportional 1 x 1.
When an icon is on a square, that square must be proportional 1 x 1.
The white icon should be contained by its defined colour, or black
background.
The white icon should be contained by its defined colour, or black
background.
Do not alter the colours of the SDG icons.
Do not alter the colours of the SDG icons.
2 0 1 8 – 2 0 2 0 N E W C O M M I T M E N T S
S A F E A N D H E A LT H Y H O M E S
N E T Z E R O C A R B O N
Launch a design framework to
contribute to the wellbeing of our
customers, including safety, air quality
and thermal comfort.
Produce a transition plan for each
new development which enables
the homes to operate at net zero
carbon by 2030.
We design a range of features into our
homes that benefit occupants’ health
and wellbeing, including good levels of
daylight, insulation to reduce noise and
help to regulate temperature, storage
space and adaptability, so the homes can
meet the needs of future residents. This is
vital because people spend around two
thirds of their time in their home and
research shows that sustainable,
well-designed homes lead to better
health and wellbeing of occupants.
We will create a new Berkeley Safe
and Healthy Homes Design Framework
covering a range of issues including noise,
air quality, overheating, materials, daylight,
storage and security. This will be applied
to all new sites, with the aim to positively
influence the health and wellbeing of
our customers.
At Berkeley we have traditionally had a
leading approach to energy efficiency in
our homes, and were the first developer
to commit to achieving Code for
Sustainable Homes Level 3 in 2007.
Whilst Government policy has moved
away from the zero carbon homes
agenda, there is recognition within the
industry, and by the Mayor of London,
that to meet our national carbon targets
new build standards should be tightened.
There remains uncertainty about the
right long-term technological solution
for achieving zero carbon. In the interim,
we will develop Low Carbon Transition
Plans to identify clear routes for how the
homes could operate at net zero carbon
by 2030 together with future-proofing
measures which will be incorporated
when they are built.
O T H E R A R E A S O F F O C U S
In addition to the two headline
commitments, we have specific
targets to:
— Develop a strategic partnership
with the Royal Society for the
Prevention of Accidents (RoSPA)
on ‘safer by design’
— Undertake post occupancy evaluation
— Enable connected homes
— Specify sustainable materials
— Install recycling facilities
— Ensure water efficiency of homes
— Install energy efficient lighting
— Meet Berkeley minimum fire ratings
and energy efficiency standards for
domestic appliances, which are over
and above Government guidelines
31
BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS P L A C E S
CREATE STRONG COMMUNITIES WHERE RESIDENTS
CAN LIVE AN ENJOYABLE, SUSTAINABLE LIFE.
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
Community plans
Implement community plans
on our developments to
facilitate thriving communities.
Net biodiversity gain
Develop and apply an
approach to ensure that all
new developments create
a net biodiversity gain.
There were also commitments
covering the following areas:
— Undertaking community
assessments pre-planning
— Undertaking community
engagement
— Incorporating climate change
adaptation measures
— Consulting ecologists
— Implementing electric car charging
— Installing cycle storage facilities
— Incorporating rainwater harvesting
— Achieving BREEAM Very Good
— Installing living roofs
2 0 1 8 H I G H L I G H T S
12
Developments implementing
community plans
100%
New developments
committed to creating
a net biodiversity gain
39,000
Cycle storage spaces and
2,650 electric car charging
points being installed on
sites under construction
The Sunday Times British
Homes Awards 2017
Outstanding Placemaking
Woodberry Down
CIRIA BIG Biodiversity
Challenge Awards 2017
Medium Scale
Permanent Award
Fitzroy Gate
WhatHouse? Awards 2017
Housebuilder of the Year
Berkeley Group
Gold awards for:
Best Public Realm
Heritage Walk
Kew Bridge West
Best Regeneration Scheme
Royal Arsenal Riverside
Best Mixed-Use Development
One Tower Bridge
Best Partnership Scheme
Woodberry Down
BU ILDI NG CO MMUNITY
AT ROYAL WELLS PARK
As part of the community
plan at Royal Wells Park,
we prompted the residents
to form a social committee.
They organised a summer
party and, as a result,
developed the appetite
and confidence to get
directly involved in estate
management and
decision-making. We
then took them to meet
and share ideas with a
more established group
on another of our sites
and there is now an
increasingly strong and
empowered community
at Royal Wells Park.
Community event at Royal Wells Park, Royal Tunbridge Wells
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
C R E AT I N G
C O M M U N I T I E S
Our ambition is to create safe and
inclusive places that remain great places
for decades to come, where people feel
proud of their home, connected to each
other and able to influence what goes on.
Our approach goes beyond placemaking
and placekeeping, to creating places
where communities can thrive.
During construction, we build infrastructure
to benefit the local community, such as
play spaces, and look for opportunities to
create temporary facilities, such as pop-up
parks. All of our commercial space, student
accommodation and relevant senior living
housing is designed to achieve at least a
BREEAM Very Good rating.
This begins at the outset; when acquiring
land, we consider the site’s location and
potential to support a community. At the
very early stages of design, we engage the
local community in the design of our
developments and use our toolkit, Creating
Successful Places, on new developments as
a framework for ensuring the right facilities
and mechanisms are in place to enable a
thriving community.
Sometimes a sense of community
develops naturally, but it often takes years,
if not decades, to evolve. We recognise
that our customers and our managing
agents play a key role in creating
communities, and so we are increasingly
putting structures in place
to support them to do so.
D E L I V E R I N G C O M M U N I T I E S :
C O M M U N I T Y P L A N S
Over the last two years we have been
developing and piloting community
plans on 12 of our developments, ranging
from rural villages and suburban
neighbourhoods to London regeneration
schemes, as part of a structured approach
to building communities.
Each community plan is different,
reflecting local needs and aspirations.
The community plan provides the
structure to enable the community to
mix and meet, usually through an events
programme and an online forum.
Through this, we are seeing community
governance systems beginning to form,
ranging from social clubs to residents’
committees. These help to embed a sense
of shared ownership and self-management.
Whilst we initially lead the plans, it is our
residents and estate managers who will
look after the place in the long term, so it
is important that they help to inform,
influence, develop and own the plan.
32
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS ICONS
17 ICONS: COLOUR VERSION
NO
POVERTY
AFFORDABLE AND
CLEAN ENERGY
ICONS
ICONS
ICONS
48
ICONS
GOOD HEALTH
AND WELL-BEING
ZERO
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QUALITY
EDUCATION
GENDER
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AND SANITATION
ICONS
48
17 ICONS: COLOUR VERSION
ICONS
48
ICONS
48
DECENT WORK AND
ECONOMIC GROWTH
INDUSTRY, INNOVATION
NO
AND INFRASTRUCTURE
POVERTY
S U P P O R T I N G T H E
U N ’ S S U S TA I N A B L E
D E V E L O P M E N T G O A L S
REDUCED
ZERO
INEQUALITIES
HUNGER
SUSTAINABLE CITIES
GOOD HEALTH
AND COMMUNITIES
AND WELL-BEING
RESPONSIBLE
QUALITY
CONSUMPTION
EDUCATION
AND PRODUCTION
GENDER
EQUALITY
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AND SANITATION
P L A C E S
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NO
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NO
GOOD HEALTH
POVERTY
AND WELL-BEING
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CLIMATE
QUALITY
HUNGER
ACTION
EDUCATION
GOOD HEALTH
LIFE
GENDER
AND WELL-BEING
BELOW WATER
EQUALITY
QUALITY
LIFE
CLEAN WATER
AFFORDABLE AND
EDUCATION
ON LAND
AND SANITATION
CLEAN ENERGY
GENDER
PEACE, JUSTICE
DECENT WORK AND
EQUALITY
AND STRONG
ECONOMIC GROWTH
INSTITUTIONS
CLEAN WATER
PARTNERSHIPS
INDUSTRY, INNOVATION
AND SANITATION
FOR THE GOALS
AND INFRASTRUCTURE
REDUCED
INEQUALITIES
SUSTAINABLE CITIES
AND COMMUNITIES
RESPONSIBLE
CONSUMPTION
AND PRODUCTION
AFFORDABLE AND
CLEAN ENERGY
DECENT WORK AND
ECONOMIC GROWTH
AFFORDABLE AND
INDUSTRY, INNOVATION
CLEAN ENERGY
AND INFRASTRUCTURE
DECENT WORK AND
REDUCED
ECONOMIC GROWTH
INEQUALITIES
INDUSTRY, INNOVATION
SUSTAINABLE CITIES
AND INFRASTRUCTURE
AND COMMUNITIES
When an icon is on a square, that square must be proportional 1 x 1.
The white icon should be contained by its defined colour, or black
background.
Do not alter the colours of the SDG icons.
REDUCED
RESPONSIBLE
CLIMATE
INEQUALITIES
CONSUMPTION
ACTION
AND PRODUCTION
SUSTAINABLE CITIES
LIFE
AND COMMUNITIES
BELOW WATER
RESPONSIBLE
LIFE
CONSUMPTION
ON LAND
AND PRODUCTION
PEACE, JUSTICE
AND STRONG
INSTITUTIONS
PARTNERSHIPS
FOR THE GOALS
CLIMATE
ACTION
LIFE
BELOW WATER
CLIMATE
LIFE
ACTION
ON LAND
LIFE
PEACE, JUSTICE
BELOW WATER
AND STRONG
INSTITUTIONS
When an icon is on a square, that square must be proportional 1 x 1.
When an icon is on a square, that square must be proportional 1 x 1.
The white icon should be contained by its defined colour, or black
background.
The white icon should be contained by its defined colour, or black
background.
Do not alter the colours of the SDG icons.
Do not alter the colours of the SDG icons.
LIFE
PARTNERSHIPS
ON LAND
FOR THE GOALS
PEACE, JUSTICE
AND STRONG
INSTITUTIONS
PARTNERSHIPS
FOR THE GOALS
When an icon is on a square, that square must be proportional 1 x 1.
The white icon should be contained by its defined colour, or black
background.
Do not alter the colours of the SDG icons.
Sustainable urban drainage
at Kidbrooke Village
Electric car charging at
Fitzroy Gate, Old Isleworth
Living roof at Goodman’s Fields
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
2 0 1 8 – 2 0 2 0 N E W C O M M I T M E N T S
Natural England welcomes
the development of the
Berkeley Group
Biodiversity Toolkit.
Bringing key ecological
information and data
together into a single and
easy to use template, this
should help all involved in
the process to readily and
easily access information
needed to help design in
a biodiversity net gain
outcome to the project.
NATURAL ENGLAND
Learn more about places at:
www.berkeleygroup.co.uk/about-
berkeley-group/our-vision/places
34
E N H A N C I N G
B I O D I V E R S I T Y
D E S I G N I N G F O R
C L I M AT E C H A N G E
Truly sustainable places are great places
now, but also stand the test of time.
Climate change could adversely affect the
places we create, and our customers living
within these, through changing weather
patterns which are likely to cause wetter
winters, hotter summers and more frequent
heat waves. We are focused on addressing
the risks most relevant to the design of our
developments: flooding, water shortage
and ensuring thermal comfort.
We incorporate a number of features into
the design of our developments to
increase resilience to these impacts, such
as sustainable drainage systems, rainwater
harvesting and green infrastructure such
as trees, parks, gardens and living roofs.
These help our developments to manage
water effectively. They also provide a
cooling effect, which has a wider benefit
of helping to reduce the urban heat island
effect in dense urban areas.
Biodiversity plays an important role within
our towns and cities as it helps to improve
air quality, provides resilience to climate
change, adds amenity value and supports
wellbeing. Despite this, biodiversity
continues to decrease at an alarming rate.
New development can help to reverse this
trend, by providing the opportunity to
enhance biodiversity.
Through our commitment to net
biodiversity gain, we seek to ensure that
our developments make a positive impact
on their local environment by creating
an overall enhancement for biodiversity.
Put simply, there should be more nature
afterwards than before we began.
Our Biodiversity Toolkit, which we
developed and launched in 2017, enables
project teams and their appointed
ecologist to baseline the biodiversity of a
site before any work occurs. Through the
design process, project teams use the
toolkit to identify features that will create
a net gain. To provide practical advice of
how to design for biodiversity net gain,
we have published a guide called The
Nine Concepts: Making Space for Nature
and Beauty.
All our new developments submitted to
planning during 2018 targeted a net gain
through the landscape design.
S U S TA I N A B L E
T R A N S P O R T
C O M M U N I T Y A N D
S O C I A L VA L U E
Explore future transport trends
and encourage a modal shift away
from an over-reliance on petrol and
diesel cars.
Understand the social value generated
by new development and embed a
coherent approach to building
communities on all our sites.
O T H E R A R E A S
O F F O C U S
In addition to the two headline
commitments, we have specific
targets to:
— Achieve net biodiversity gain
— Develop an approach to integrated
water management
— Explore temporary alternative uses
during construction works
— Achieve BREEAM Very Good
— Install living roofs
— Review the performance of managing
agents and the durability of schemes
The way we travel is changing; more
people are choosing to cycle and in the
future there is likely to be less travel per
person, but more logistics traffic. We are
likely to see fewer conventional petrol
and diesel cars and more electric and
autonomous vehicles.
In order to design developments fit for
the future, we need to understand our
customers’ needs and expectations, as
well as how the transport mix is likely to
change over time. Research undertaken
through this commitment will ensure
that we put the right infrastructure
and services in place to meet customer
expectations and promote sustainable
travel. This builds on our existing
commitments to provide cycle
storage and electric car charging on
all developments.
We have developed an approach to
building communities on our schemes
over many years. Through our new
commitment we will seek to further
embed this work on every site.
We will also explore how we quantify
and explain our wider impacts. New
development generates benefits for local
communities, the local economy and the
environment. This is often termed ‘social
value’ and is focused on maximising public
benefit and outcomes that support the
public good. Stakeholders demand real
value creation in the local area yet
it can be difficult to define, measure
and deliver.
35
BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS O P E R A T I O N S
MAKE THE RIGHT LONG-TERM DECISIONS,
RUN THE BUSINESS EFFICIENTLY AND WORK
COLLABORATIVELY WITH OUR SUPPLY CHAIN.
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
Carbon positive
Reduce our operational carbon
emissions intensity by 10% and
introduce a programme to become
carbon positive.
Apprentices and training
Ensure at least 1,500 people
across our direct and
indirect workforce undertake
an apprenticeship or
vocational training.
There were also commitments
covering the following areas:
— Procuring contractors on best
overall value
— Procuring materials sustainably,
including certified timber
— Reducing and reusing or recycling
construction waste
— Reducing water and paper
consumption
— Achieving a minimum Considerate
Constructors Scheme audit score
of 38/50
— Completing sustainability
assessments on-sites and offices
— Running an Innovation Fund
2 0 1 8 H I G H L I G H T S
22%
Reduction in operational
carbon emissions intensity
achieved and carbon positive
programme implemented
25
Average number of days
taken to pay suppliers
Off-site Construction
Awards 2018
850
A-
Apprentices worked on
our sites or in our offices
in the last two years
Leadership score achieved
in CDP’s 2017 Climate
Change Programme
Housing Project
of the Year
Urban House at
Kidbrooke Village
60%
Sites recognised at the
Considerate Constructors
Scheme 2018 National Site
Awards (compared to a
national average of 11%)
REACH Apprentice
Photovoltaic panels on the roof of
the site welfare facilities at London Dock
S U P P LY C H A I N A N D
R E S P O N S I B L E P R O C U R E M E N T
Collaborating with our supply chain is
critical to ensuring a high quality and
timely product. We communicate our
requirements at the earliest stages of the
tender process and continue to engage
regularly throughout each project and
at wider supplier days and conferences.
We recognise that ensuring prompt
payment is imperative and are pleased
to confirm that suppliers are paid
within an average of 25 days, less than
the new 30 day period outlined as part
of the Construction Supply Chain
Payment Charter.
On a broader level we continue to take
action against modern slavery and our
statement setting out more detail is
available on our website.
In March 2018, we held an internal
campaign to coincide with the
International Day of Forests to raise
awareness and highlight our commitment
to procuring certified timber.
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
C A R B O N
P O S I T I V E
A P P R E N T I C E S
A N D T R A I N I N G
Training the next generation of talented
workers is key to tackling the skills crisis
in the built environment industry. In the
last two years alone, more than 850
apprentices worked across our sites and
offices, whilst over 1,200 additional people
undertook other types of formal training.
Following the success of our first
Apprentice Awards in 2016, in autumn
2017 we once again recognised individuals
and businesses who have demonstrated
an extraordinary commitment to
apprenticeships across our supply chain.
Within the year, we have progressed our
work with West London College to
develop the West London Construction
Academy at Southall Waterside, which
will be used to train its first intake of
apprentices from September 2018. There
was also a second intake of apprentices
under our REACH apprenticeship scheme;
we have now directly employed more than
40 trade apprentices.
We continue to be a partner member of
Build UK and support industry initiatives
to improve the image of construction,
such as the Open Doors initiative which
involved opening up nine of our sites to
visitors in spring 2018.
We are delighted to have become the
first carbon positive housebuilder by
decreasing carbon emissions and
offsetting more than our remaining
emissions during 2018.
Since setting this commitment we
have increased our understanding of
energy consumption across our
day-to-day activities and issued guidance
on how to address out-of-hours electricity
consumption together with minimum
recommendations for site set up
and operation.
All sites now complete a Carbon
Management and Action Plan to detail
energy consumption and efficiency
measures and many have retrofitted more
energy efficient measures or are including
these from site start. The use of energy
from renewable sources has also been
encouraged, either through the purchase
of renewable energy tariff supplies or
on-site generation such as the welfare
facility solar photovoltaic panels at
London Dock.
We are pleased that our efforts have led
to a 22% reduction in operational carbon
emissions per person across our activities
compared to our baseline in 2016. This
figure excludes Southall Waterside due to
one-off remediation activities in the year.
Greenhouse gas emissions data aligned
to Berkeley's reporting on greenhouse
gas emissions as required under the
Companies Act is provided on page 117.
We have worked with the Carbon Trust
to help to develop our long-term carbon
positive programme.
36
37
BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS O P E R A T I O N S
ICONS
ICONS
ICONS
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48
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48
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48
NO
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ZERO
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AND WELL-BEING
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QUALITY
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EDUCATION
ZERO
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QUALITY
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EDUCATION
AND WELL-BEING
GENDER
QUALITY
EQUALITY
EDUCATION
CLEAN WATER
GENDER
AND SANITATION
EQUALITY
CLEAN WATER
AND SANITATION
HIGH Q UALITY MOD ULAR HOU SI NG
AFFORDABLE AND
CLEAN ENERGY
DECENT WORK AND
ECONOMIC GROWTH
INDUSTRY, INNOVATION
AND INFRASTRUCTURE
From our purpose-built manufacturing
facility in Northfleet, Kent, our
multi-skilled workforce will produce a
range of modular housing products
designed to the high specification and
CLIMATE
excellent build standards that customers
ACTION
demand from Berkeley.
Construction work is now ongoing and
we intend to begin manufacturing the
first live scheme by 2020. The key driver
for us is build quality. The facility will
also enable improved construction
productivity, whilst at the same time
ensuring the efficient use of resources.
LIFE
BELOW WATER
LIFE
ON LAND
AFFORDABLE AND
REDUCED
CLEAN ENERGY
INEQUALITIES
DECENT WORK AND
SUSTAINABLE CITIES
AFFORDABLE AND
ECONOMIC GROWTH
AND COMMUNITIES
CLEAN ENERGY
INDUSTRY, INNOVATION
RESPONSIBLE
DECENT WORK AND
AND INFRASTRUCTURE
CONSUMPTION
ECONOMIC GROWTH
AND PRODUCTION
REDUCED
INDUSTRY, INNOVATION
INEQUALITIES
AND INFRASTRUCTURE
SUSTAINABLE CITIES
REDUCED
AND COMMUNITIES
INEQUALITIES
RESPONSIBLE
SUSTAINABLE CITIES
CONSUMPTION
AND COMMUNITIES
AND PRODUCTION
RESPONSIBLE
CONSUMPTION
AND PRODUCTION
CLIMATE
PEACE, JUSTICE
ACTION
AND STRONG
INSTITUTIONS
LIFE
PARTNERSHIPS
CLIMATE
BELOW WATER
FOR THE GOALS
ACTION
LIFE
LIFE
ON LAND
BELOW WATER
PEACE, JUSTICE
LIFE
AND STRONG
ON LAND
INSTITUTIONS
PARTNERSHIPS
PEACE, JUSTICE
FOR THE GOALS
AND STRONG
INSTITUTIONS
PARTNERSHIPS
FOR THE GOALS
When an icon is on a square, that square must be proportional 1 x 1.
When an icon is on a square, that square must be proportional 1 x 1.
When an icon is on a square, that square must be proportional 1 x 1.
The white icon should be contained by its defined colour, or black
background.
The white icon should be contained by its defined colour, or black
background.
The white icon should be contained by its defined colour, or black
background.
Do not alter the colours of the SDG icons.
Do not alter the colours of the SDG icons.
Do not alter the colours of the SDG icons.
Site operations at Prince of Wales Drive, Battersea
Considerate Constructors Scheme event at Woodberry Down
Computer Generated Image of the Berkeley Modular facility
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
2 0 1 8 – 2 0 2 0 N E W C O M M I T M E N T S
I N N O VAT I O N
B U I L D Q U A L I T Y
O F F - S I T E M A N U FA C T U R E
WA S T E A N D P L A S T I C S
O T H E R A R E A S O F F O C U S
Innovation occurs continually on a
project-by-project basis. For example,
considerable research and development
has occurred over the past few years to
develop the Urban House type and, more
recently, to deliver it using a fully-fitted
modular system built off-site.
We also support external projects under
our Innovation Fund, including a number
of health and safety initiatives. fuseAware
provides an app for workers and a
dashboard for employers that provides
real time data in order to improve
productivity, worker safety and wellbeing.
It was trialled at a number of our sites
before being launched to the industry.
Learn more about operations at:
www.berkeleygroup.co.uk/
about-berkeley-group/our-
vision/operations
38
Each of our sites and homes has strict
procedures to ensure a high quality
of build.
We support the work on the industry’s
Get It Right Initiative (GIRI) which aims
to increase productivity significantly by
reducing error and its associated
consequences. One of our Operations
Directors has specific responsibility for
overseeing the Skills and Training
workstream which aims to develop
innovative training courses in relation to
error reduction through the management
of interfaces during the design process
and on-site.
R E S O U R C E E F F I C I E N C Y
In 2018, 111,000 tonnes of construction
waste was produced on-site, of which 95%
was reused or recycled. These results are
testament to initiatives implemented by
our project teams, such as the donation
of spare materials by Berkeley Eastern
Counties to Kent Wildlife Trust and
Sevenoaks Scout Group. We have also
begun to address plastic waste; St George
at Beaufort Park has worked with
contractors to eliminate the use of plastic
wrapping around materials that are to be
stored internally, whilst Berkeley Capital has
partnered with Yes Recycling to process
hard hats into pellets for reuse.
Throughout the year we used almost
177,000 cubic metres of water, a reduction
of 9% compared to 2017 excluding
one-off remediation activities at
Southall Waterside.
To reduce print wastage and ensure
efficient print settings as standard, we
have been rolling out a print release
system since autumn 2017. This measure,
along with awareness raising and reviews
of our printing practices, has led to a
reduction in printing by 18% per person
compared to 2017.
C O N S I D E R AT E C O N S T R U C T I O N
Managing our sites with consideration of
our workforce, the local community and
the environment is imperative. We register
each of our sites to the Considerate
Constructors Scheme (CCS) and our
performance against the Code of
Considerate Practice is regularly assessed
by independent monitors. We are pleased
that Berkeley’s average score of 43/50 in
2018 demonstrates performance beyond
the industry average of 36/50 and that
33 sites were recognised at this year’s
CCS National Site Awards.
Deliver the Berkeley Modular facility
and ensure that 30% of construction
value is delivered through off-site
assembly by 2020.
Work with our supply chain to
develop a zero waste strategy,
focusing on key wastes
including plastics.
Off-site manufacture brings a number
of potential benefits including improved
quality, reduced build time on-site and
minimised environmental impacts.
Through this commitment we will be
delivering the Berkeley Modular facility
and developing an approach considering
both volumetric off-site manufacture and
the use of off-site components within the
homes of all new projects.
The construction industry continues to be
the UK’s largest user of natural resources,
and produces vast amounts of waste.
The need to drastically reduce the
amount of plastic waste in particular
has become a topical issue.
Through this commitment we seek to
better understand the waste streams
produced across our activities, with a
particular focus on the type, recyclability
and management of plastic wastes.
Working with our supply chain, we will
seek opportunities to improve, and will
take action to address key issue areas
through design, procurement and
behavioural change. In addition, we will also
aim to eliminate avoidable plastic waste
across our divisional offices and sites.
In addition to the two headline
commitments, we have specific
targets to:
— Reduce carbon emissions and evolve
our carbon positive programme
— Use and provide feedback from our
Tender Scoring Matrix
— Broaden the Innovation Fund
— Reduce water use
— Use paper efficiently and source
it sustainably
— Source materials responsibly, including
certified timber
— Undertake office sustainability reviews
and site sustainability assessments
— Sign up to the Considerate
Constructors Scheme
— Enhance procedures for build quality
and quality assurance
39
BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS
O U R P E O P L E
DEVELOP HIGHLY SKILLED TEAMS THAT WORK
TOGETHER IN A SAFE, HEALTHY AND SUPPORTIVE
ENVIRONMENT AND CONTRIBUTE TO WIDER SOCIETY.
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
Talent management
Invest in training and development
through our talent management
programmes to realise
the potential of our people
across all areas of the business.
Healthy workplaces
Launch and implement a new
programme to promote the
wellbeing of our staff and create
healthy workplaces.
There were also commitments
covering the following areas:
— Paying the Living Wage
Foundation’s living wage
— Maintaining Berkeley health and
safety standards
— Undertaking Director health and
safety visits
— Targeting reduced health and safety
incident and injury rates
— Undertaking employee training
assessments
— Supporting the Berkeley Foundation
60%
Employees involved with
Berkeley Foundation
2 0 1 8 H I G H L I G H T S
1.42
Accident Incident Rate
(compared to the Health and
Safety Executive’s industry
average of 3.97)
38%
Direct employees
are women
40
RoSPA Health and
Safety Awards 2018
Sector Award
Berkeley East Thames
NHBC Pride in the Job
Awards 2017
Supreme Award
Stephen Kirwan, Construction
Director at St George
Site Health and Safety visit at Vista
Graduates from the 2017 intake
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
TA L E N T M A N A G E M E N T
H E A LT H Y W O R K P L A C E S
I N C L U S I V I T Y
Our talented employees are our strongest
resource; it is vital that we provide the
right opportunities within the business to
enable people to grow and flourish.
Through our commitment to providing
healthy workplaces we seek to improve
the quality of life of our employees, staff
satisfaction and productivity.
As a minimum, everyone should have a
training assessment and annual personal
development review. All employees, but
particularly those in the early years of
their career, are encouraged to pursue
professional accreditation to bodies such
as the Royal Institution of Chartered
Surveyors (RICS). This is then
supplemented by more detailed local
programmes, ranging from informal lunch
and learns to leadership courses.
Our successful graduate scheme brought
26 young people into the business in
autumn 2017 and we are recognised as
one of the top 100 graduate employers
by TheJobCrowd. Together with our
sandwich placement scheme, we are also
focusing on increasing the number of
directly employed apprentices in a range
of specialisms including construction
management, surveying, project
management and business administration.
We are proud that Stephen Kirwan,
Construction Director at St George, was
recognised nationally for his hard work
and talent by winning one of just four
NHBC Pride in the Job Supreme Awards.
A checklist has been developed based on
recognised frameworks such as the Mayor
of London’s Healthy Workplace Charter
and the WELL Building Standard. We have
also utilised our links with Bupa to set out
a framework approach to individual health.
Health and wellbeing programmes are
now in operation across all of our
autonomous businesses, including a
variety of initiatives such as health
assessments, exercise classes,
encouragement of healthy eating and
sessions on managing stress and personal
finances. Many of our operating
companies run health and wellbeing
weeks to raise awareness further, such as
Berkeley Oxford and Chiltern’s programme
of activities to boost health and mental
wellbeing in November 2017. The new Your
Road to Health and Wellbeing programme
launched in summer 2017 within Berkeley
Eastern Counties has been well received.
We understand the benefits a diverse
workforce can bring and recognise
that the industry as a whole faces
under-representation of women as
well as those from a broad range
of backgrounds.
38% of our direct employees are women,
as are a quarter of our Board of Directors
and one third of senior management. The
median pay gap for the Group is 37.9% and,
like much of our industry, this is primarily
driven by the shape of our workforce, with
a lower proportion of women in senior,
higher paid roles. We published our gender
pay gap report in March 2018; further
information can be found in our Corporate
Governance Statement and on our website.
We are already taking steps to increase
the proportion of women overall and at
senior levels in the business.
Total
Employees
Reporting
to Senior
Management
Senior
Management
Board of
Directors
At 30 April 2018
FEMALE
MALE TOTAL
1,017
1,672
2,689
41
183
224
2
4
4
12
6
16
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS O U R P E O P L E
2 0 1 6 – 2 0 1 8 C O M M I T M E N T S
H E A LT H A N D S A F E T Y
Accident Incident Rate
Number of RIDDOR reportable injuries per 1,000 people
5
4
3
2
1
0
1.42
Berkeley
3.34
3.97
Home Builders
Federation (HBF)
industry average
Health and Safety
Executive (HSE)
industry average
Health and safety noticeboard
at Southall Waterside
We are committed to operating incident
and injury free and aspire to have a
positive health impact on all those
employed and affected by what we do.
Our Group Health and Safety Strategy and
Standards set clear direction across all of
our business and supply chain. There is an
emphasis on strong leadership and
continual improvement, together with
a focus on high risk operations.
Three corporate programmes provide
a platform for actively delivering
improvements; Good Order to raise
standards of the physical working
environment; Good Work to promote
a positive culture and develop attitudes
and behaviour; and Good Health to
improve health awareness.
We aim to achieve industry-leading
performance and have seen a
year-on-year decrease in our Accident
Incident Rate (AIR) for five years.
During 2018 there were fewer than 1.5
incidents for every 1,000 people working
on our sites and in our offices.
Following winning the coveted Sir George
Earle trophy in 2017, Berkeley East
Thames was delighted to win a Sector
Award at the RoSPA Health and Safety
Awards 2018.
T H E B E R K E L E Y F O U N DAT I O N
Berkeley employees continue to support
the Berkeley Foundation, with 60% of
people getting involved. Give As You Earn
rates have remained high (33%) and
45% of employees get involved in
fundraising activities. Our aim is to inspire
all employees to do something every year
for the Foundation. More information
on the Foundation can be found on
page 44.
Learn more about our people at:
www.berkeleygroup.co.uk/about-
berkeley-group/our-vision/
our-people
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ICONS
17 ICONS: COLOUR VERSION
ICONS
NO
POVERTY
ICONS
ZERO
HUNGER
GOOD HEALTH
AND WELL-BEING
QUALITY
EDUCATION
S U P P O R T I N G T H E
U N ’ S S U S TA I N A B L E
D E V E L O P M E N T G O A L S
ICONS
48
ICONS
48
ICONS
48
GENDER
EQUALITY
CLEAN WATER
AND SANITATION
17 ICONS: COLOUR VERSION
17 ICONS: COLOUR VERSION
NO
AFFORDABLE AND
POVERTY
CLEAN ENERGY
ZERO
DECENT WORK AND
NO
HUNGER
ECONOMIC GROWTH
POVERTY
GOOD HEALTH
INDUSTRY, INNOVATION
ZERO
AND WELL-BEING
AND INFRASTRUCTURE
HUNGER
QUALITY
REDUCED
GOOD HEALTH
EDUCATION
INEQUALITIES
AND WELL-BEING
GENDER
SUSTAINABLE CITIES
QUALITY
EQUALITY
AND COMMUNITIES
EDUCATION
CLEAN WATER
RESPONSIBLE
GENDER
AND SANITATION
CONSUMPTION
EQUALITY
AND PRODUCTION
CLEAN WATER
AND SANITATION
AFFORDABLE AND
CLIMATE
CLEAN ENERGY
ACTION
DECENT WORK AND
LIFE
AFFORDABLE AND
ECONOMIC GROWTH
BELOW WATER
CLEAN ENERGY
LIFE
ON LAND
INDUSTRY, INNOVATION
DECENT WORK AND
AND INFRASTRUCTURE
ECONOMIC GROWTH
REDUCED
PEACE, JUSTICE
INDUSTRY, INNOVATION
INEQUALITIES
AND STRONG
AND INFRASTRUCTURE
INSTITUTIONS
SUSTAINABLE CITIES
PARTNERSHIPS
REDUCED
AND COMMUNITIES
FOR THE GOALS
INEQUALITIES
RESPONSIBLE
SUSTAINABLE CITIES
CONSUMPTION
AND COMMUNITIES
AND PRODUCTION
RESPONSIBLE
CONSUMPTION
AND PRODUCTION
When an icon is on a square, that square must be proportional 1 x 1.
CLIMATE
ACTION
LIFE
CLIMATE
BELOW WATER
ACTION
The white icon should be contained by its defined colour, or black
background.
Do not alter the colours of the SDG icons.
LIFE
LIFE
ON LAND
BELOW WATER
PEACE, JUSTICE
LIFE
AND STRONG
ON LAND
INSTITUTIONS
PARTNERSHIPS
PEACE, JUSTICE
FOR THE GOALS
AND STRONG
INSTITUTIONS
PARTNERSHIPS
FOR THE GOALS
Site entrance at Royal Arsenal Riverside
When an icon is on a square, that square must be proportional 1 x 1.
When an icon is on a square, that square must be proportional 1 x 1.
COLLAB ORATING TO
IMPROVE HEALTH AND
SA FETY STANDARDS
Over the past two years we
have been leading on the
production of new health
and safety guidance on
the planning, design and
construction of tall buildings
as part of the Health and
Safety Executive’s
Construction Industry
Advisory Network
(HSE’s CONIAN).
We also funded thought-
leadership research by
Glasgow Caledonian
University focusing on the
effectiveness of the worker
engagement model.
The white icon should be contained by its defined colour, or black
background.
The white icon should be contained by its defined colour, or black
background.
Do not alter the colours of the SDG icons.
Do not alter the colours of the SDG icons.
2 0 1 8 – 2 0 2 0 N E W C O M M I T M E N T S
I N D U S T R Y I M A G E
D I V E R S I T Y A N D I N C L U S I O N
O T H E R A R E A S O F F O C U S
Engage with young people,
education providers and employers
to transform perceptions of careers
in the built environment.
Implement a programme to create an
inclusive environment where employees
can reach their full potential, irrespective
of their identity or background.
The UK built environment is facing
a skills shortage as more people are
leaving the industry than joining it; this
forms a genuine threat to future levels
of production.
Through this commitment we seek to
encourage young, talented people into
the industry by showing the breadth of
viable, attractive career opportunities that
exist. To help achieve this, we will
undertake a range of activities including
ensuring that existing material for the
industry includes clear pathways for
progression and by developing a
programme for school and further
education engagement. We will
encourage our employees, across all roles
and levels, to act as role models and
mentors for the industry.
The industry is known for its lack of
diversity and we believe there are real
benefits in ensuring diverse views, skills
and perspectives which can lead to
creative thinking and more effective
problem solving.
Through this commitment we seek to
attract and retain a diverse workforce.
To help us achieve this, we will develop
guiding principles for diversity and
inclusion, to be applied by each of our
autonomous companies. This will be
supplemented by a range of additional
activities, which could include a wider
review of our policies, processes and
procedures to ensure we create an
inclusive environment.
In addition to the two headline
commitments, we have specific
targets to:
— Develop and implement a strategy
for mental health
— Maintain programmes for
healthy workplaces
— Ensure each employee has
opportunities for learning and
development
— Promote early stage careers
— Promote apprenticeships and
training to our supply chain
— Raise awareness of modern slavery
— Pay the Living Wage Foundation’s
Living Wage
— Undertake Director health and
safety visits
— Reduce health and safety
incident rates
— Support the Berkeley Foundation
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS B E R K E L E Y
F O U N D A T I O N
The Berkeley Foundation is a registered
charity launched by Berkeley in 2011, to
support young people, their families and
communities in London and Southern
England. Its work has four themes: homes,
jobs, skills and care.
Now in its eighth year, the Berkeley
Foundation works in close partnership
with other voluntary sector organisations,
providing funding, volunteering, and
capacity building support. The Foundation
builds long-term, impactful partnerships
with the voluntary sector on three levels:
S T R AT E G I C PA R T N E R S H I P S
Crisis, Imperial College, The Lord’s
Taverners, MyBnk, Shelter, The Change
Foundation, The Mayor’s Fund for London
and The Prince’s Trust.
D E S I G N AT E D C H A R I T I E S
18 charities chosen by the employees in
our operating businesses which are local
to their offices and developments.
C O M M U N I T Y I N V E S T M E N T F U N D
Targeted funding programmes focused on
specific issues, such as improving young
people’s mental health.
Berkeley provides the core funding for the
Foundation, pays all of its overheads, and
covers the cost of specific fundraising
events. This support means that every
penny raised for the Foundation is spent
on charitable activities.
F O U N D A T I O N H I G H L I G H T S
£13
MILLION
The Berkeley Foundation has
committed more than £13 million
to support young people, their
families and communities to date
60%
of Berkeley staff do something each year
to support the Berkeley Foundation
Learn more about the Foundation at:
www.berkeleyfoundation.org.uk
15,000
Since 2014, the Foundation’s work
has reached more than 15,000
people, helping them to move out of
homelessness, build their skills, move
into work or access new opportunities
Better Society Awards Winner 2018
Best Partnership with a National Children’s
Charity, in recognition of Super 1s, our
partnership with The Lord’s Taverners.
A L E X ’ S S T O R Y
Super 1s, the Berkeley
Foundation’s partnership with
the Lord’s Taverners, delivers
year round cricket coaching
and competition to disabled
young people across London
and Warwickshire.
Alex, 15, is autistic and
getting through everyday life
can be a struggle. She feels
she isn’t understood and
doesn’t fit in with her peers.
She is reluctant to go to
school, where she is often
bullied, and tends to stay
at home at the weekends.
The only exception to this
is when playing cricket.
On practise days she is
excited and up early, even
in mid-winter, in anticipation
of going to training and
meeting her friends there.
“Cricket has become the
highlight of her life,” says
Alex’s mum. “She just loves it
and she is a different person
because of it. The team are
her friends, they accept her
and listen to her and make
her feel welcome. I am so
proud of her — what she has
overcome and what she has
achieved. I now feel really
positive about her future.”
Employees and clients at SPEAR
Crisis Employability Programme
Charity cricket match for Thames Reach
Imperial College's The Invention Rooms
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The Lord's Taverners Super 1s indoor cricket programme
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B U S I N E S S
M O D E L
FOR BERKELEY, DEVELOPMENT AND REGENERATION IS
ABOUT PEOPLE. IT IS ABOUT TRANSFORMING PLACES
AND LIVES AND CREATING THRIVING COMMUNITIES.
I N P U T S
OUR
PEOPLE
— Strategic appreciation
of the cyclical nature
of the market
— Focus on geographical
markets we know and
understand
— Expertise and
experience to deliver
complex regeneration
developments
— Heath and
wellbeing focus
RE LAT IONS HI PS
AN D PARTNE RS HI PS
— Relationships with
land owners, local
authorities and
communities who
grant us consent
— Strong supply chain
engagement
— Public and private
Joint Venture
partners
PH YSI CAL
FI N AN CI A L
— Well located land
holdings with
a long-term,
regeneration focus
where we can
add value
— Intensive on-site
management and
innovative build
solutions
— Financial discipline
underpinned by
strong balance
sheet, net cash
and forward sales
— Rigorous land
investment
appraisal process
C O R E B U S I N E S S A C T I V I T I E S
Identifying and
acquiring land
Designing and
planning new
homes, places
and communities
Building new
homes and
places
Marketing
and customer
service
Placekeeping
and stewardship
O U T P U T S
SKILLED
WOR KFORCE A N D
JOB CREATIO N
CO M MUN ITY AN D
PART NE RSH IP S
EXC EPT ION A L
PLACEMA KIN G
— Strong retention,
— Enduring stakeholder
— Developments
training and
development of
skilled workforce
— Excellent health and
safety record and
employee wellbeing
— Jobs created through
our construction
activity and on
our completed
developments
relationships
underpinned by trust
through delivering on
our commitments
— Thriving communities
where people aspire
to live and work with
homes built to a high
quality for all tenures
which incorporate
stunning public
realm and amenities
sympathetic to their
neighbourhood
— Residents embracing
stewardship of
their developments
following our
community
governance structures
SU STA IN A BLE
FI N AN CI A L
R ETU RN S
— Ability to invest
at the right point
in the cycle
— Sustainable, risk
adjusted returns
for shareholders
W H A T S E T S U S A P A R T
— We operate through a network
of autonomous brands and
management teams
— Framework of Our Vision which
gives our teams clear direction
and keeps Berkeley ahead
— A consistent set of core values
and culture exist throughout our
autonomous teams
— An unrivalled reputation for
quality delivery for more
than 40 years
— Unrelenting commitment to
customer satisfaction
— Our contribution to society
through the creation of
jobs, support of the Berkeley
Foundation and environmental
commitments
Residents at Holborough Lakes
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A C Q U I R I N G L A N D
WE ACQUIRE LAND SELECTIVELY WITH A FOCUS ON
LONG-TERM, COMPLEX DEVELOPMENTS WHERE WE CAN
USE OUR EXPERTISE TO ADD VALUE THROUGH CREATING
NEW HOMES, PLACES AND COMMUNITIES.
D E S I G N I N G A N D
P L A N N I N G N E W
H O M E S, P L A C E S
A N D C O M M U N I T I E S
WE WORK CLOSELY WITH LOCAL AUTHORITIES AND
COMMUNITIES TO CREATE UNIQUE PLACES SYMPATHETIC
TO THEIR NEIGHBOURHOODS WHICH ARE CHARACTERISED
BY THE QUALITY OF THEIR DESIGN, PUBLIC REALM AND
SUSTAINABILITY FEATURES, CREATING STRONG COMMUNITIES.
L O C AT I O N A N D A P P R A I S A L
Our experienced land teams focus on
investing selectively in the right locations
where there is strong demand for new
homes, good transport links and the scope
to create successful new places and
communities where people aspire to live.
We undertake a rigorous evaluation of the
opportunities and risks of each potential
acquisition prior to all land offers, each of
which is authorised at Main Board level.
C O M P L E X R E G E N E R AT I O N
Most major development opportunities
today involve complex brownfield sites
that require a huge amount of time,
expertise and capital to bring them
forward and a commitment on all sides to
share risks and rewards, often over one or
more decades. We have the requisite
expertise and capital to undertake these
complex developments that carry high
operational risk, which others are usually
not willing or able to take on.
F I N A N C I A L A G I L I T Y
By taking low financial risk we have the
financial resources to act quickly, decisively
and opportunistically when land prospects
arise at the right commercial terms for the
prevailing point in the cycle.
R E L AT I O N S H I P S
We recognise the importance of
developing and maintaining strong
relationships and applying our extensive
knowledge of our markets in providing us
with the platform to deliver exceptional
new places. Our thorough appraisal
process and strong financial position
ensures that we always deliver on our
offers and commitments which
fosters trust and underpins these
enduring relationships.
S N O W H I L L W H A R F , B I R M I N G H A M
This year St Joseph acquired a former industrial site within
the Gun Quarter of Birmingham. The Gun Quarter has a rich
heritage and includes 160 metres of canalside frontage on to
the Birmingham and Fazeley Canal with the cultural, retail and
leisure heart of the city within easy access.
St Joseph worked with the Canals and Rivers Trust and Severn
Trent Water to overcome risks around the canal wall and
services, respectively. St Joseph also engaged with the local
authority, Historic England and the neighbouring St Chad’s
Cathedral and Salvation Army to ensure the development
proposals were sympathetic to all stakeholders’ needs.
Having established these foundations, the development will
deliver over 400 homes and three landscaped gardens in the first
major residential development in this city centre location, at the
same time creating a platform for further regeneration in the Gun
Quarter and establishing a new place for the community to thrive.
Computer generated image of Snow Hill Wharf
D E S I G N A N D P U B L I C R E A L M
No two Berkeley developments are the
same. Attention to detail is paramount to
our design to ensure the specification of
each home and building suits the lifestyle
of our customers. However, design is about
more than just the homes and buildings.
High quality landscape and public realm
is the essence of a successful masterplan.
We also consider how best to connect
the development to the surrounding
neighbourhood to bring about the greatest
sense of community and integration.
PA R T N E R S H I P S
We approach each development in a spirit
of partnership and work in collaboration
with the local authorities and communities,
which give us permission to unlock
development. We understand their needs
and sensitivities and reflect these in our
designs to the greatest extent possible.
In doing so we continue to strengthen
our reputation.
C O M M U N I T Y
We strive to establish a true sense of
community on our developments where
people feel connected and responsible and
want to spend their time, enhancing theirs
and others wellbeing and quality of life.
We do this by undertaking a community
assessment within our larger developments
as part of the design and planning process.
S U S TA I N A B I L I T Y
We incorporate a range of sustainability
features into our homes, from energy
efficient lighting to recycling facilities.
On a wider development scale we ensure
sustainable transport options are available
and every new development seeks to
achieve a net biodiversity gain.
T R E N T P A R K , E N F I E L D
Berkeley worked with the local authority and community,
establishing a Working Group, to understand the local
sensitivities and key issues for this historic site which includes
a Grade II Listed Mansion House which played an important
role in intelligence gathering during World War II.
Over 2,000 people attended the exhibitions and more than
1,000 hours were spent on consultation prior to and during
the determination of the planning application.
The development will deliver a range of 124 new houses and
134 new apartments including 15 as a part of the restoration of
the Mansion House which will include a museum to celebrate
the site’s history. We will also make investment in the local
hockey club, improvements to a neighbouring wildlife centre,
as well as planting over 400 trees in the process of restoring
historic landscaping and creating new areas of public realm
for the public to enjoy.
Computer generated image of Trent Park
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N E W H O M E S
A N D P L A C E S
THE QUALITY OF EACH INDIVIDUAL HOME WE BUILD
AND OUR FOCUS UPON PLACEMAKING ARE AT THE
FOREFRONT OF OUR ON-SITE ACTIVITIES.
I N T E N S I V E M A N A G E M E N T
Each of our developments is led by a dedicated and
experienced project team responsible for all aspects of the
delivery. The coordination of our in-house expertise and
teams of external consultants and contractors through
effective communication is paramount to our ability to
deliver high quality developments.
S K I L L E D W O R K F O R C E A N D S U P P LY C H A I N
Recruitment and retention of a high calibre workforce
is crucial. We recognise employees’ performance ensuring we
retain our best people, whilst providing support and development
opportunities. We also work with our supply chain to secure
employment and training opportunities for the local communities
in which we build.
Engagement with our supply chain is also critical to the success
of our business and forms a key part of our risk management.
We conduct a comprehensive procurement process with
considerable focus on sourcing sustainable materials and
combatting forms of modern slavery.
H E A LT H A N D S A F E T Y
The health, safety and wellbeing of our people and on-site
contractor teams is paramount. Each development has dedicated
resource responsible for the implementation of a robust health
and safety programme covering training, risk assessment,
monitoring and reporting. Senior Management review the health
and safety status of every operating business at each Board
meeting. Regular site visits by directors set the right tone from
the top of the organisation.
I N N O VAT I V E B U I L D S O L U T I O N S
We combine our experience from previous developments with
the knowledge and skills of our talented workforce to enable us
to tackle complex development risks and successfully regenerate
brownfield land.
C O N S I D E R AT E C O N S T R U C T I O N
The reputation of Berkeley amongst its stakeholders, including
the local communities in which we build, relies on our project
teams’ engagement with them and actions undertaken to
mitigate the development impact on both local infrastructure
and the surrounding communities as far as possible. We strongly
believe in being a responsible and considerate neighbour.
S O U T H A L L W A T E R S I D E
The transformation of this 88 acre
brownfield site into 3,750 new homes, a new
primary school, a health centre, extensive
retail and leisure facilities and over 40 acres
of open public space, including wetlands and
parks is among the most complex
regeneration projects in London.
At this initial stage of the project, minimising
vehicle movements on the local roads around
the site is a key focus area. To address this,
Berkeley has established a Soil Hospital to
treat the contaminated soil on-site and
installed an on-site concrete batching plant,
reducing the need to bring in pre-mixed
concrete. We estimate that over the project
life these facilities remove the need for over
80,000 HGV movements, reducing
associated travel by circa 3 million miles.
We have re-established the local historic use
of the Grand Union Canal at Southall and are
using it as an innovative transport route to
site. Several barges moved by a tug deliver
circa 500-700 tonnes of raw aggregates to
site every day aiding construction progress
and dramatically reducing the project’s
impact on local roads.
Community initiatives have included running
safety awareness days and ‘Have a Go’
practical construction skills training events at
local schools. We regularly participate in local
community events and hold drop-in sessions
for our neighbours to keep them informed of
the progress on the development.
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Southall Waterside
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C U S T O M E R S E R V I C E
WE STRIVE TO ENSURE THAT RIGHT FROM THEIR
INITIAL CONTACT POINT WITH BERKELEY EACH
CUSTOMER RECEIVES UNPARALLELED SERVICE.
P L A C E K E E P I N G
A N D S T E W A R D S H I P
WE ARE PROUD OF THE HOMES AND COMMUNITIES WE
CREATE AND TAKE A LONG-TERM VIEW ON BOTH PLACEMAKING
AND PLACEKEEPING TO ENSURE PEOPLE ASPIRE TO LIVE IN
THE PLACES WE BUILD FOR DECADES TO COME.
C U S T O M E R F O C U S
We are a customer centric business
and never forget that we are building
someone’s home. Buying a home is one
of the most significant decisions a person
makes and we recognise the need to
consistently meet and exceed their
expectations in providing an empathetic,
professional, efficient and helpful
home-buying service.
M A R K E T I N G
Each sales team has an in-depth
knowledge of their development and
location to help our customers find the
right home to best suit their needs. They
are equipped to explain the intricacies of
each distinct development, from the
specification and technical details of each
home to the on-site amenities, whilst
providing the context of how the scheme
fits within the community.
Each customer receives a tailored
information pack relating to their home and
has a designated Berkeley representative
throughout their journey. In evaluating our
customer experience we benchmark our
customer service performance against
both the wider housebuilding sector and
other UK blue chip companies using NPS.
F O R WA R D S A L E S
Our approach to placemaking and
communities, coupled with our reputation
for high-quality delivery and customer
service, provides Berkeley with the best
opportunity to forward sell our homes
where possible. This approach underpins
our future financial performance and
provides good visibility of cash flow and
is imperative as a risk management tool in
a capital intensive cyclical industry.
U K A N D O V E R S E A S M A R K E T S
Creating exceptional places requires
significant upfront investment in
infrastructure, public realm and
landscaping. International investment
plays a pivotal role in generating the early
security of future cash flows and
momentum to commence construction.
All of our homes are marketed in the UK
either first or at the same time as they are
marketed abroad. We have a network of
overseas sales offices to support our
overseas marketing initiatives.
54
Marketing suite at Fitzroy Gate
C U S T O M E R P E A C E O F M I N D
Dedicated customer relationship
managers continue to provide a high level
of care and service after our customers
move into their home.
T E C H N O L O G Y
We recognise that the speed of
technological advancement has the
potential to evolve at a quicker pace than
we are able to deliver our schemes.
Therefore we need to be at the forefront
of employing new innovative technologies
and the right infrastructure to best
serve and future-proof our homes for
our customers.
B U I L D I N G C O M M U N I T Y
We explore structured ways to build
community, foster community governance
and encourage placekeeping, and are
piloting community plans on a variety of
developments. They provide new places
with an events programme, ranging from
social clubs to resident committees, and
digital forum to help create a system of
community governance. These initiatives
help build a sense of self-management
that continues after Berkeley passes the
stewardship of its developments to estate
managers and the residents.
E S TAT E M A N A G E M E N T
We think hard about the role of each
managing agent to ensure the right level
of community governance, facility and
development management and skills exist
to support the community long after the
completion of the development. We
remain committed to exploring and
implementing excellent estate
management practices across all of
our developments.
W O O D B E R R Y D O W N , F I N S B U R Y
At Woodberry Down we actively encourage all residents and
stakeholders to get involved in decision making processes.
This has created a strong, successful and multi-award winning
partnership, which continues to support a thriving community.
In a first for regeneration practice Berkeley signed a Partnership
Agreement earlier this year with the local authority and local
resident stakeholder groups which sets out the key objectives
for the development, the first priority being the creation of a
sustainable, balanced and well-integrated community.
The Partners host community events such as the annual Fun
day, Hidden River Festival and outdoor cinema screenings.
These events allow the Partners to involve the community
in the regeneration to ensure Woodberry Down is a place
where people are proud to live, and will look after it for
future generations.
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Woodberry Down community event
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L O N D O N
O U T O F L O N D O N
34
28
39
6
16
1
15
2
2
20
12
9
29
1
22
31 32 23
21
4
35
26
8
4
5
24
27
18
13
6
36
3
37
30
9
33
14
5
17
3
8
38
11
10
11
7
12
7
19
25
10
16
WEST
MIDLANDS
W
O
R
C
E
S
T
E
R
S
H
I
R
E
14
WARWICKSHIRE
14
N O R T H A
GLOUCESTERSHIRE
OXFORDSHIRE
B
U
C
K
I
N
G
H
A
M
S
H
I
R
E
E
H I R
S
N
O
P T
M
CAMBRIDGESHIRE
E
R
HI
S
D
R
O
F
D
E
B
H
9
D S HIRE
10
R
O
F
T
R
E
ESSEX
WILTSHIRE
5
8
6
SOMERSET
HAMPSHIRE
23
17
3
7
BERKSHIRE
18
2
21
17
9
1
11
5
SURREY
2
7
4
19
22
18
15
12
20
16
WEST SUSSEX
12
1
LONDON
6
15
8
13
13
4
11
10
KENT
3
EAST SUSSEX
L O N D O N U N D E R C O N S T R U C T I O N
1 190 Strand
2 250 City Road, City of London
3 375 Kensington High Street
& Kensington Row
4 Abell & Cleland, Westminster
5 Battersea Reach
6 Beaufort Park, Hendon
7 Brewery Wharf, Twickenham
8 Chelsea Creek
9 Chiswick Gate
10 Dickens Yard, Ealing
11 Filmworks, Ealing
12 Fitzroy Gate, Isleworth
13 Forbury, Blackheath
14 Fulham Reach, Hammersmith
15 Goodman’s Fields, Aldgate
16 Highbury*
17 Hurlingham Gate, Fulham
18 Kidbrooke Village
19 Richmond Chase
20 London Dock, Wapping
21 Millbank, Westminster
22 One Blackfriars, Southwark
23 One Tower Bridge
24 Prince of Wales Drive,
Battersea
25 Queenshurst, Kingston
26 Riverlight, Battersea
27 Royal Arsenal Riverside
28 Smithfield Square, Hornsey
29 South Quay Plaza,
Docklands
30 Sovereign Court,
Hammersmith
31 The Corniche, Albert
Embankment
32 The Dumont,
Albert Embankment
33 The Villas, Barnes
34 Trent Park,
Cockfosters
35 Vista, Battersea
36 West End Gate,
Paddington
37 White City
38 Wimbledon Hill Park
39 Woodberry Down,
Finsbury
L O N D O N
F U T U R E S I T E S
1 Bethnal Green*
2 Bow Common*
3 Centre House,
Wood Lane
4 Chambers Wharf,
Southwark
5 Fulham
6 Clarendon
7 Northfields
8 Oval* (two sites)
9 Poplar
10 Royal Exchange,
Kingston
11 Southall
12 Stephenson Street
*New sites contracted for
acquisition during the year
O U T O F L O N D O N
U N D E R C O N S T R U C T I O N
1 Bersted Park
2 Fairwood Place,
Borehamwood
3 Green Park Village, Reading
4 Hawkenbury
5 Edenbrook Village, Fleet
6 Holborough Lakes
7 Kennet Island, Reading
8 London Road, Sevenoaks
9 London Road, Staines*
10 Victory Pier, Gillingham
11 Pachesham, Leatherhead
12 Royal Clarence Marina,
Gosport
13 Royal Wells Park,
Tunbridge Wells
14 The Waterside,
Royal Worcester
15 Ryewood, Sevenoaks
16 Broadacres, Southwater
17 Taplow Riverside
18 The Brackens, Ascot
19 Warfield, Bracknell
20 Highwood, Horsham
21 Elmswater, Rickmansworth
22 Eldridge Park, Wokingham
23 Winchester
O U T O F L O N D O N
F U T U R E S I T E S
1 Ascot
2 Camberley*
3 Cranbrook*
4 Cranleigh
5 Effingham*
6 Farnham
7 Frimley Green*
8 Grove Farm, Fleet*
9 Hemel Hempstead
10 Hertford
11 Oxted
12 Rudgwick
*New sites contracted for
acquisition during the year
13 Sevenoaks
14 Stratford-upon-Avon*
15 Sunningdale Park
16 Snow Hill Wharf,
Birmingham*
17 Wallingford
18 Watford
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H O W W E
M A N A G E R I S K
THE ASSESSMENT OF RISK AND EMBEDDING RISK
MANAGEMENT THROUGHOUT BERKELEY IS A KEY ELEMENT
OF SETTING AND DELIVERING THE GROUP’S STRATEGY.
R I S K A P P E T I T E
The Board is responsible for setting and monitoring the risk appetite for Berkeley
when pursuing its strategic objectives. The Board’s approach to, and appetite for
risk is summarised below:
C YC L I C A L
M A R K E T
O P E R AT I O N A L
C O M P L E X I T Y
A U T O N O M Y
A N D VA L U E S
F I N A N C I A L
S T R E N G T H
Berkeley’s business model
is centred on the Board’s
appreciation of the risks of
the cyclical market in which
the business operates, where
market sentiment and
transaction levels can change
quickly, requiring us to adopt
a flexible approach to our
investment decisions.
The business model also
recognises the complexity of
the planning and delivery of
the sites Berkeley undertakes,
and mitigates this risk by
focusing its activities in
London and the South East,
recognising the importance
of relationships and local
knowledge and having highly
skilled teams in place.
We have recognised brands
and autonomous, talented
and experienced teams who
embrace Berkeley’s core values
in their approach. We create
bespoke solutions for each site
which requires experienced,
intensive management and
as such do not produce a
standard product.
This translates into an
approach that, at all times
through the cycle, keeps
financial risk low in recognition
of the operational risks within
the business (see page 61).
The Group’s risk appetite is reviewed annually and approved by the Board. Berkeley’s risk
appetite has reduced in the year due to the complexities of the current operating environment
and background macro-economic uncertainty.
This review guides the actions we take to implement our strategy.
In accordance with provision C2.1 of the 2016 revision of the UK Corporate Governance Code,
the Directors have carried out a robust assessment of the principal risks facing the company,
including those that would threaten its business model, future performance, solvency or liquidity.
Royal Arsenal Riverside
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M A N A G E R I S K
R I S K M A N A G E M E N T
F R A M E W O R K
V I A B I L I T Y
S T A T E M E N T
E X P O S U R E T O
F I N A N C I A L R I S K S
M A N A G E M E N T O F
F I N A N C I A L R I S K S
The Board takes overall responsibility for
risk management, and the assessment of
risk. Embedding risk management into the
business is a key element of setting and
delivering our strategy. Our approach
combines a top-down strategic review and
feedback of risks by the Board, coupled
with a bottom-up review and reporting of
risk by each operating business.
The top-down assessment of risk by the
Board includes a review of the external
environment in which Berkeley operates,
coupled with a deep seated knowledge of
our industry and operations based on the
substantial experience of the Board. This
takes into account the likelihood and
impact of risks, whether pre-existing or
emerging, which may materialise in the
short or longer-term.
A fundamental principle of the operating
structure of the Group is that the prime
responsibility for assessing, managing and
monitoring the majority of the risks rests
with operational management, thus
ensuring risk management is embedded
in our day-to-day operations.
Risk registers at operational level are
overlain by wider strategic risks facing
the Group, such as macro-economic risk.
This is then assessed and managed by
the Board and Executive Committee.
The Audit Committee has responsibility for
ensuring the effectiveness of risk
management and internal controls on behalf
of the Board. The controls and processes
surrounding how we assess risk across the
Group are explained further in the
Corporate Governance report on page 89.
The principal operating risks and our
approach to mitigating them are described
in more detail on pages 62 to 71.
In accordance with provision C2.2
of the 2016 revision of the UK
Corporate Governance Code, the
Directors have assessed the longer
term viability of the Group.
The Directors have undertaken their
assessment over a three year period
from 1 May 2018 to 30 April 2021.
The end of this period coincides with
the end of the earnings guidance
provided by the Board and broadly
with the end of the current
Shareholder Returns Programme.
The majority of the Group’s
developments are long-term in
nature and the Board’s strategic
planning reviews cover at least this
timeframe. Furthermore, the Group
owns or controls the land required
for this period and accordingly there
is sufficient detail within the
individual site cash flow forecasts
to enable a meaningful assessment
over this period.
In making its assessment, the
Directors have considered the
principal risks facing the Group and
how the Group mitigates such risks,
which are summarised on pages
62 to 71 of the Strategic Report.
The majority of risks to the Group
are operational in nature primarily
because the sites acquired are
generally complex, long-term
regeneration schemes and therefore
risk management is appropriately
embedded in the day-to-day
business processes and controls.
The individual site cash flow
forecasts, which are used to prepare
the Group’s consolidated cash
forecasts, take account of these
individual site operational risks.
The Group’s business model, as set
out on page 48 of the Strategic
Report, recognises these operational
risks, and that the property market
is inherently cyclical. Accordingly
a core risk management principal for
the Group is to keep financial risk
sufficiently low through forward
selling where possible, maintaining
a sound balance sheet and
headroom within its financing
activities. The Group’s consolidated
cash flow forecasts include
appropriate allowances for
discretionary investment and the
quantum and timing of this is in turn
subject to the delivery of the
individual site operational cash flows.
The viability assessment has
considered the impact of reduced
sales activity in the three year period
from the business plan levels as a
result of adverse macro-economic
conditions and the Directors have
also taken into account appropriate
mitigating actions which may be
instigated in response, primarily
around curtailed discretionary
investment, such as lower new land
purchases or deferment of new site
starts, amongst others.
Based on the assessment, the
Directors confirm that they have
a reasonable expectation that the
Group will be able to continue in
operation and meet its liabilities as
they fall due over the three year
period commencing 1 May 2018.
The financial risks to which Berkeley is
exposed include:
L I Q U I D I T Y R I S K
The risk that the funding required for
the Group to pursue its activities may
not be available.
M A R K E T C R E D I T R I S K
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.
M A R K E T I N T E R E S T R AT E R I S K
The risk that Group financing activities
are affected by fluctuations in market
interest rates.
O T H E R F I N A N C I A L R I S K S
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.
Berkeley adopts a prudent approach to managing these financial risks.
T R E A S U R Y P O L I C Y
A N D C E N T R A L O V E R V I E W
F O R WA R D
S A L E S
The Board approves treasury policy and
senior management control day-to-day
operations. Relationships with banks and
cash management are coordinated
centrally as a Group function. 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.
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
£2,193 million at 30 April 2018. It also
helps mitigate market credit risk by
virtue of customers’ deposits held from
the point of unconditional exchange
of contracts with customers.
L OW G E A R I N G
L A N D H O L D I N G S
The Group is currently financing its
operations through shareholder equity,
supported by over £687 million of net
cash on the balance sheet. This in turn
has mitigated its current exposure to
interest rate risk.
H E A D R O O M P R O V I D E D
B Y B A N K FA C I L I T I E S
The Group has £750 million of committed
credit facilities maturing in November 2022,
after the Group exercised the first of two
options to extend the facilities by a year.
This comprises a term loan of £300 million
and the revolving credit facility of
£450 million. The facilities include an
optional extension to November 2023.
Berkeley has a strong working partnership
with the six banks that provide the facilities
listed on page 163 and is key to Berkeley’s
approach to mitigating liquidity risk.
By investing opportunistically in land at
the right point in the cycle, holding a clear
development pipeline in our land holdings
and continually optimising our existing
holdings, we are not under pressure to
buy new land when it would be wrong for
the long-term returns for the business.
D E TA I L E D A P P R A I S A L
O F S P E N D I N G C O M M I T M E N T S
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 flow management is central to
the continued success of Berkeley.
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H O W W E
M A N A G E R I S K
E X T E R N A L R I S K S
E C O N O M I C
O U T L O O K
R I S K D E S C R I P T I O N A N D I M PA C T
A P P R O A C H T O M I T I G AT I N G R I S K
As a property developer, Berkeley’s
business is sensitive to wider 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.
Recognition that Berkeley operates in a cyclical market is
central to our strategy and maintaining a strong financial
position is fundamental to our business model and protects
us against adverse changes in economic conditions.
Land investment in all market conditions is carefully targeted
and underpinned by demand fundamentals and a solid viability
case, respecting the cyclical nature of the property industry.
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.
Production programmes are continually assessed, depending
upon market conditions.
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.
P O L I T I C A L
O U T L O O K
Significant political events, including the
impact of the vote to leave the EU, may
impact Berkeley’s business through, for
instance, the reluctance of buyers to
make investment decisions due to
political uncertainty and, subsequently,
specific policies and regulation may be
introduced that directly impact our
business model.
Whilst we cannot directly influence political events, the risks
are taken into account when setting our business strategy
and operating model. In addition, we actively engage in the
debate on policy decisions.
R E G U L A T I O N
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.
Berkeley is primarily 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.
Failure to comply with laws and
regulations could expose the Group to
penalties and reputational damage.
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.
Following the Grenfell Tower tragedy we undertook a
thorough review of all of our high-rise buildings, including
engaging with the local fire authorities, expert fire
consultants, residents and MHCLG.
R E S I D U A L
R I S K R AT I N G
L I K E L I H O O D
C H A N G E
D U R I N G Y E A R
I M PA C T C H A N G E
D U R I N G Y E A R
C O M M E N TA R Y
H I G H
H I G H
H I G H
UK economic performance has remained resilient over the last
year and has fared better than many expected. There however
remains significant uncertainty on the economic outlook
from the decision to leave the EU and the progress to date in
exit negotiations.
Consumer spending continues to be squeezed, although there
are signs that inflation is moderating.
Equity and foreign exchange markets have been less volatile
this year and the Bank of England has increased interest rates
for the first time in a decade. Further increases are likely but
are expected to be limited and gradual.
See pages 6 and 10
Key Performance indicators see pages 2 and 3
— Net asset value per share
— Profit before tax
— Basic earnings per share
— Return on equity
— Basic EPS
Despite an agreed Brexit transition period now being in place,
uncertainty remains over the outcome of negotiations over our
future relationship with the EU, which may impact investment
levels from both domestic and overseas customers and investors.
Critical issues such as continued access to EU labour need to be
addressed, with over half of London’s construction labour
coming from the EU.
In addition, the present hung parliament creates domestic
policy uncertainty.
See pages 6 and 10
The level of risk associated with regulation has increased in the
last year. High levels of property taxes remain, and following
consultation the Government announced during the year
changes to ground rents and the intention to reform leasehold
regulation. In addition, the General Data Protection Regulation
(GDPR) came into force on 25 May 2018 controlling the use of
personal data which has a significant impact on the business.
The Letwin Review was instigated last year to consider the gap
between planning permissions and starts on-site and is expected
to report in the next few months.
Following the tragic fire at Grenfell Tower last June, there has
also been an increased focus on how buildings are delivered and
managed, including building design, cladding and fire safety.
Dame Judith Hackitt’s review into Building Regulations following
the Grenfell Tower fire tragedy has recently concluded and
the industry and regulators are reviewing the implications of
this report.
See pages 6 and 10
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS
H O W W E
M A N A G E R I S K
I N T E R N A L R I S K S
R I S K D E S C R I P T I O N A N D I M PA C T
A P P R O A C H T O M I T I G AT I N G R I S K
R E S I D U A L
R I S K R AT I N G
L I K E L I H O O D
C H A N G E
D U R I N G Y E A R
I M PA C T C H A N G E
D U R I N G Y E A R
C O M M E N TA R Y
Understanding the markets in which we operate is central
to Berkeley’s strategy and, consequently, land acquisition is
primarily focused on Berkeley’s core markets of London and
the South of England, markets in which it believes that the
demand fundamentals are strong.
Berkeley has experienced land teams with strong market
knowledge in their areas of focus, which gives us the confidence
to buy land without an implementable planning consent and, with
an understanding of local stakeholders’ needs, positions Berkeley
with 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 greatest chance
of securing targeted land.
The Group maintains its land holdings to mitigate against
significant impacts from market changes or delayed build activity.
The Group’s strategic geographical focus and expertise places it
in the best position to conceive and deliver the right consents for
the land acquired.
Full detailed planning and risk assessments are performed and
monitored for each site without planning permission, both before
and after purchase.
Our assessment of the risk profile dictates whether sites are
acquired either conditionally or unconditionally.
The planning status of all sites is reviewed at both 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. This includes
a talent management programme, investment in training and the
implementation of health and wellbeing initiatives.
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.
L A N D
AVA I L A B I L I T Y
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.
P L A N N I N G
P R O C E S S
Delays or refusals in obtaining
commercially viable planning
permissions could result in the
Group being unable to develop
its land holdings.
This could have a direct impact
on the Group’s ability to deliver
its product and on its profitability.
R E TA I N I N G
P E O P L E
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.
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64
M E D I U M
H I G H
M E D I U M
The Group continues to focus on enhancing the value of the land
bank through a combination of acquiring new sites, enhancing the
value of existing sites and bringing sites through the strategic
pipeline of long-term options. Investment decisions are affected
by the uncertainty in the political and economic outlook
as well as a complexities in the planning system.
The risk remains unchanged in the year, with Berkeley remaining
selective in the land market, acquiring 12 new sites in the year.
In addition, the Group continues to work closely with National
Grid to identify sites from across its portfolio to bring into the
St William joint venture, with a further three sites added this year.
See pages 50 and 77
Key Performance indicators see pages 2 and 3
— Gross margin on land holdings
The planning process remains highly complex and time
consuming with increased demands from a combination
of affordable housing, the Community Infrastructure Levy,
Section 106 obligations and review mechanisms.
There are also further challenges in getting land ready for
development once planning is secured, including utilities,
remediation, easements, compulsory purchase orders and
the discharge of planning conditions. These are all added
impediments to increased delivery.
See pages 52 and 77
The motivation, retention and progression of our people remains
fundamental to the delivery of our strategy.
The Group continues to have a stable senior management team
and despite the normal pressure of people retention, overall
retention rates have again improved this year as a result of the
ongoing focus on talent management, career progression
opportunities, training and health and wellbeing initiatives.
There has been a recent change in the marketplace this year,
particularly in London, with a number of competitors reducing
or exiting their London operations.
See page 40
Key Performance indicators see pages 2 and 3
— Apprentices and training
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS
H O W W E
M A N A G E R I S K
R I S K D E S C R I P T I O N A N D I M PA C T
A P P R O A C H T O M I T I G AT I N G R I S K
R E S I D U A L
R I S K R AT I N G
L I K E L I H O O D
C H A N G E
D U R I N G Y E A R
I M PA C T C H A N G E
D U R I N G Y E A R
C O M M E N TA R Y
S E C U R I N G
S A L E S
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.
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 across a broad range of property prices to appeal
to a wide market.
The Group’s ability to forward sell reduces the risk 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 regularly.
L I Q U I D I T Y
Reduced availability of the external
financing required by the Group
to pursue its activities and meet
its liabilities.
Failure to manage working capital may
constrain the growth of the business and
ability to execute the business plan.
M O R T G A G E
AVA I L A B I L I T Y
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.
The Board approves treasury policy and senior management
control day-to-day operations. Relationships with banks and cash
management are coordinated centrally as a Group function.
The treasury policy is intended to maintain an appropriate capital
structure to manage the Group’s financial risks and provide the
right platform for the business to manage its operating risks.
Cash flow management is central to the continued success of
Berkeley, and there is 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.
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.
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66
M E D I U M
L O W
M E D I U M
Whilst transaction levels have increased this year, they are not
at a level that could support growth in the medium term.
The impact of changes in recent years to SDLT and buy-to-let
mortgage interest deductibility is partly offset by the continued
availability of mortgage finance at low interest rates, and
favourable currency exchange rates.
Furthermore, the Group has well-located developments which
are well presented and the design and mix of homes on each
development are continually reviewed to ensure these respond
to market demand.
Customers are at the heart of all of our decisions, and Berkeley
prioritises customer service through its Our Vision commitments,
with levels of service comparable to other top performing
companies. We are committed to understanding their needs and
consistently meeting or exceeding their expectations.
See pages 10, 26 and 54
Key Performance indicators see pages 2 and 3
— Cash due on forward sales
— Net Promoter Score
The Group has £750 million of committed credit facilities
maturing in November 2022 after the Group exercised the first of
the two options to extend the facilities by a year. This comprises
a term loan of £300 million and the revolving credit facility of
£450 million. The facilities include an optional extension to
November 2023.
Berkeley has a strong working partnership with the six banks that
provide the facilities and is key to Berkeley’s approach to
mitigating liquidity risk.
The Group is currently financing its operations through
shareholder equity, supported by over £687 million of net cash
on the balance sheet.
In line with last year, an economic environment of continued low
interest rates, combined with resilient economic performance, has
supported mortgage availability, resulting in a steady risk profile.
However, regulation restricting income multiples means that
many potential home owners who are more than capable of
affording today’s cost of home ownership are unable to do so.
The Group also believes that the introduction of 24-month
mortgage offers is key to enable more home owners to purchase
early in the development cycle, at the same time that cash
buyers and investors are able to do so.
Key Performance indicators see pages 2 and 3
— Cash due on forward sales
67
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H O W W E
M A N A G E R I S K
C L I M AT E
C H A N G E
R I S K D E S C R I P T I O N A N D I M PA C T
A P P R O A C H T O M I T I G AT I N G R I S K
The effects of climate change could
directly impact Berkeley’s ability to
deliver its product through disruptions
to programme and supplies of materials.
Our customers and communities could
be adversely affected through
overheating, water shortages or flooding.
There is also an increased level of interest
in disclosures on climate change
management. Failure to report in line
with regulations or key recommendations
could expose Berkeley to penalties
and reputational damage.
The Group Sustainability Team identifies strategic climate change
risks and opportunities facing the business through the regular
review of issues and trends, along with active collaboration with
external experts. These are shared with the Chief Executive and
Board Director Responsible for Sustainability.
Climate change action is a key focus for Berkeley with this
featuring prominently under Our Vision, with commitments to
both mitigate and adapt to climate change.
By taking action under our carbon emissions reduction target
our sites, offices and sales suites are identifying and investing in
energy efficiency measures. We are also increasingly using energy
from low carbon or renewable sources.
.
Climate change adaptation measures are considered for all
new developments submitted for planning to build resilience
into our homes and developments. Mitigation measures are
also incorporated.
We welcome the recommendations from the Financial Stability
Board’s Task Force on Climate-related Financial Disclosures
(TCFD) and are taking action to implement these over time
through the evolvement of our processes and reporting.
SUSTAINABILITY
Berkeley is aware of the environmental
and social impact of the homes and
places that it builds, both throughout
the development process and during
occupation and use by customers and
the wider community.
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 demands for
sustainable homes and communities.
The strategic direction for sustainability is set at a Group level.
Our Vision includes specific commitments to enhance
environmental and social sustainability considerations in
the operation of our business and the delivery of our homes
and places.
Operational procedures and processes are regularly reviewed
to ensure high standards and legal compliance are maintained.
Dedicated sustainability teams are in place in each business
and at Group, providing advice, monitoring performance and
driving improvement.
M E D I U M
M E D I U M
H E A LT H A N D
S A F E T Y
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.
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.
M E D I U M
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.
Procedures, training and reporting are all regularly reviewed to
ensure high standards are maintained and comprehensive
accident investigation procedures are in place. Insurance is held
to cover the risks inherent in large-scale construction projects.
The Group continues to implement initiatives to improve health
and safety standards on-site.
R E S I D U A L
R I S K R AT I N G
L I K E L I H O O D
C H A N G E
D U R I N G Y E A R
I M PA C T C H A N G E
D U R I N G Y E A R
C O M M E N TA R Y
We monitor the actions taken to reduce carbon emissions
across our activities and report the greenhouse gas emissions
for which we are responsible. In 2018, we were the first major
housebuilder to become carbon positive, offsetting more
emissions than we produce.
We also regularly review the features incorporated into our
homes and places to both mitigate and adapt to climate change.
This year we have committed to produce transition plans which
enable homes to operate at net zero carbon by 2030.
This year, Berkeley is reporting qualitatively on the governance,
strategy and risk management components of the TCFD
recommendations on our website.
See pages 28, 32 and 36
Key Performance indicators see pages 2 and 3
— Greenhouse gas emissions intensity
In these areas of continually evolving risks, the Group continues
to focus on commitments and initiatives that focus on the
long-term success of our business and developments, and that
differentiate Berkeley. This includes ensuring that all new
developments from May 2017 create a net biodiversity gain and
working with our supply chain over the next two year period to
develop a zero waste strategy.
See page 32
High levels of production continued during the year, with an
average of approximately 12,000 people on our sites every day.
Health and safety remains an operational priority for Berkeley
and our Accident Incident Rate has decreased by a further 20%
this year to stand at 1.42 at the year end, well below our target of
3.00 and remains one of the best in the industry.
See page 42
Key Performance indicators see pages 2 and 3
— Accident Incident Rate
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS
H O W W E
M A N A G E R I S K
R I S K D E S C R I P T I O N A N D I M PA C T
A P P R O A C H T O M I T I G AT I N G R I S K
P R O D U C T
Q U A L I T Y
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 product quality is maintained.
Customer satisfaction surveys are undertaken on the handover
of our homes, and feedback incorporated into the specification
and design of subsequent schemes.
B U I L D C O S T
A N D
P R O G R A M M E
Build costs are affected by the
availability of skilled labour and the
price and availability of materials,
suppliers and contractors.
Declines in the availability of a skilled
workforce, and changes to these prices
could impact on our build programmes
and the profitability of our schemes.
.
C Y B E R A N D
DATA R I S K
The Group acknowledges that it places
significant reliance upon the availability,
accuracy and security of all of its
underlying operating systems and the
data contained therein.
The Group could suffer significant
financial and reputational damage
because of the corruption, loss or theft
of data, whether inadvertent or via a
deliberate, targeted cyber attack.
A procurement and programming strategy for each development
is agreed by the divisional Board before site acquisition, whilst
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.
The Group monitors its development obligations and recognises
any associated liabilities which arise.
Our Vision includes ongoing commitments to promote
apprenticeships and training across both our employees and our
indirect workforce and the Group works closely with contractors,
schools, colleges and training providers to promote the industry,
reach talent and up-skill our workforce through the completion
of relevant qualifications.
Berkeley’s systems and control procedures are
designed to ensure that data confidentiality and integrity
are not compromised.
Our Information Security Programme focuses primarily on
stopping security breaches, and ongoing monitoring and
scanning are also conducted. We also work closely with our
suppliers and partners to improve the understanding of
security best practices.
An IT Security Committee meets monthly to address all cyber
security matters. The Group has achieved Cyber Essentials Plus
certification and implemented a Group-wide security awareness
programme, which is refreshed on a regular basis to update
employees on current cyber security trends.
The Group operates multiple data centres, thereby ensuring
that there is no centralised risk exposure and the adequacy
of the IT disaster recovery plan is regularly assessed.
The Group has Cyber insurance in place to mitigate against
any financial impact.
R E S I D U A L
R I S K R AT I N G
L I K E L I H O O D
C H A N G E
D U R I N G Y E A R
I M PA C T C H A N G E
D U R I N G Y E A R
C O M M E N TA R Y
M E D I U M
M E D I U M
M E D I U M
The Group’s continued focus on improving the quality of design
and product, with attention to every detail in our homes, remains
at the heart of our delivery.
We are constantly looking at ways to meet the demands of
changing lifestyles, as well as the rapidly changing levels of
expectations from our customers over the digital capacity
of their homes by targeting connectivity from day one for all
our homes.
We have also broken ground on our first modular factory in the
year and this will help deliver a significant portion of construction
value through offsite assembly by 2020.
See pages 30 and 52
Key Performance indicators see pages 2 and 3
— Net Promoter Score
Build cost increases have been between 4% and 5% this year,
across both labour and materials.
Pressures from skills shortages remain, with the UK construction
industry facing a significant skills shortage, with more people
leaving the industry than joining it. The impact of the vote to leave
the EU on the ongoing supply of skilled labour is still uncertain.
The numbers of apprentices on our sites has more than doubled
in 24 months and is now over 800.
See pages 37 and 52
Key Performance indicators see pages 2 and 3
— Apprentices and training
The threat from cyber attacks remains high.
The methods of attack continue to evolve and are becoming
more sophisticated, with a step change in the methods and
available technologies that can be used. These tools are now in
the domain of smaller sized and less funded cyber criminals as
well as the more advanced state sponsored organisations.
With this step change in attack sophistication security
companies are devising additional capabilities to deter,
detect, protect and respond to threats.
Technology companies continue to actively work to fix
vulnerabilities before they are exposed by cyber criminals
and the awareness and openness to sharing cyber incidents
has meant organisations are more prepared to deal with
cyber attacks.
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70
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS
Vista, Battersea
72
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS T R A D I N G A N D
F I N A N C I A L R E V I E W
T R A D I N G P E R F O R M A N C E
Revenue of £2,703.7 million in the year
(2017: £2,723.5 million) arose primarily
from the sale of new homes in London
and the South East of England. This
included £2,566.7 million of residential
revenue (2017: £2,667.4 million),
£28.4 million from the sale of ground
rent assets (2017: £27.2 million) and
£108.6 million of commercial revenue
(2017: £28.9 million). There were no land
sales in the year (2017: £nil).
3,536 new homes (2017: 3,905) were sold
across London and the South East of
England at an average selling price of
£715,000 (2017: £675,000). The changes
to the average selling price are a result of
mix on the Group’s developments in
central London in the year.
Revenue of £108.6 million from
commercial activities (2017: £28.9 million)
included the sale of hotels at One
Blackfriars and Royal Arsenal as well as
some 254,000 sq ft of office, retail and
leisure space across a number of the
Group’s developments including Kew
Bridge Road, Goodman’s Fields in Aldgate
and Smithfield Square in Hornsey. The
£28.9 million of revenue last year was from
the sale of some 85,000 sq ft of office,
retail and leisure space.
The gross margin percentage of 35.0% is
in line with last year’s 34.5%. This remains
high due to the benefit from the significant
investment in new land following the
2008/09 downturn.
Overheads of £166.5 million (2017:
£183.6 million) decreased by £17.1 million
in the year. This is principally due to a
decrease in the charge to the income
statement for the Group’s share schemes.
The Company cash settled the tax and
National Insurance liabilities arising on the
vesting of options for participants in the
2011 LTIP on 2 October 2017 in lieu of
issuing shares, as was done in the prior
year for the options which vested in
September 2016. The lower charge arises
firstly, because 13.3% of the options vested
on 2 October 2017 compared to 33.3% in
September 2016 and secondly, as a result
of the imposition of the LTIP caps with
effect from 1 May 2017.
The result is that the Group’s operating
margin has increased to 28.8% from
27.8% last year.
Berkeley’s share of the results of joint
ventures was a profit of £158.0 million
(2017: £63.8 million) which reflects the
stage of delivery of completions during
the current financial year at 190 Strand,
375 Kensington High Street, Stanmore
Place and Green Park within St Edward,
and pre-development costs within
St William ahead of profit delivery
with three developments in production
at the year end.
The Group has remained cash positive
on a net basis throughout the year. Net
finance costs totalled £2.7 million for the
year (2017: £7.6 million) due to facility
fees, interest on the £300 million term
borrowing and imputed interest on land
creditors which outweighed interest
income on cash deposits.
Pre-tax return on equity for the year is
39.3%, compared to 41.1% last year. Basic
earnings per share have increased by
20.3% from 467.8 pence to 562.7 pence,
which takes into account the issue of a
further 0.35 million shares in October 2017
to satisfy the net share awards under the
2011 LTIP scheme as well as the buy-back
of 4.0 million shares at a cost of
£140.4 million under the Shareholder
Returns Programme.
30 APRIL
2018
£’MILLION
2,703.7
946.1
(166.5)
779.6
(2.7)
158.0
934.9
(172.8)
762.1
562.7p
108.3p
39.3%
35.0%
6.2%
28.8%
34.6%
18.5%
30 APRIL
2017
£’MILLION
2,723.5
939.8
(183.6)
756.2
(7.6)
63.8
812.4
(167.3)
645.1
467.8p
185.0p
41.1%
34.5%
6.7%
27.8%
29.8%
20.6%
CHANGE
£’MILLION
CHANGE
%
-19.8
+6.3
+17.1
+23.4
+4.9
+94.2
+122.5
-5.5
+117.0
+94.9p
-76.7p
-1.8%
-0.7%
+0.7%
+9.3%
+3.1%
+15.1%
+18.1%
20.3%
-41.5%
INCOME STATEMENT
FOR THE YEAR ENDED
Revenue
Gross profit
Operating expenses
Operating profit
Net finance costs
Share of joint venture results
Profit before tax
Tax
Profit after tax
Earnings Per Share — Basic
Dividend Per Share
Pre-Tax Return on Equity
74
TA X AT I O N
The Group has an overall tax charge
of £172.8 million for the year (2017:
£167.3 million) and an effective tax
rate of 18.5% (2017: 20.6%). 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 include changes in tax
legislation and the closure of open
tax matters in the ordinary course of
events. The adjustments in respect of
previous years reflects agreement of
a number of previously open issues
and tax relief claims.
Total Tax paid (year ended 30 April 2018)
£359.5M
£238.0M
£26.3M
£10.3M
£71.1M
£13.8M
Corporation tax
Employer's NI
SDLT
PAYE
Employees' NI
For the year ended 30 April 2018, the total tax contribution to the UK Treasury was
£359.5 million; split between taxes borne by Berkeley of £274.6 million (corporation tax,
employer's NIC and SDLT) and taxes borne by our employees of £84.9 million (PAYE and
employees' NIC). This total tax contribution does not include the indirect tax contribution paid
by Berkeley's suppliers and customers. The wider indirect tax impact is set out on page 9.
ABRIDGED CASH FLOW
FOR THE YEAR ENDED
Profit before tax
Decrease / (Increase) in inventory
(Decrease) in customer deposits
Other working capital movements
Net reduction / (investment) in working capital
Net receipts from / (investment in) joint ventures
Tax paid
Other movements
Cash inflow before share buy-backs and dividends
Shareholder returns — share buy-backs
Shareholder returns — dividends
Increase / (decrease) in net cash
Opening net cash
Closing net cash
30 APRIL
2018
£’MILLION
934.9
30 APRIL
2017
£’MILLION
812.4
243.5
(79.9)
2.7
(227.3)
(130.9)
125.1
166.3
(180.0)
(238.0)
5.7
688.9
(140.4)
(146.7)
401.8
285.5
687.3
(233.1)
15.0
(115.6)
18.5
497.2
(64.5)
(254.6)
178.1
107.4
285.5
75
BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS
T R A D I N G A N D
F I N A N C I A L R E V I E W
ABRIDGED BALANCE SHEET AS AT
30 APRIL
2018
£’MILLION
MOVEMENTS
£’MILLION
30 APRIL
2017
£’MILLION
Non-current assets
— Investment in Joint Ventures
— Other non-current assets
Total non-current assets
Inventories
Debtors
Deposits and on account receipts
Other trade payables
Provisions
Capital employed
Net cash
Net assets
Net asset value per share
315.0
102.0
417.0
3,239.9
132.3
(895.0)
(879.7)
(81.8)
1,932.7
687.3
2,620.0
1,959p
+180.0
+2.6
+182.6
-243.5
-97.2
+79.9
+141.4
+18.1
+81.3
+401.8
+483.1
+403p
135.0
99.4
234.4
3,483.4
229.5
(974.9)
(1,021.1)
(99.9)
1,851.4
285.5
2,136.9
1,556p
ANALYSIS OF INVENTORY AS AT
30 APRIL
2018
£’MILLION
MOVEMENTS
£’MILLION
30 APRIL
2017
£’MILLION
Land not under development
Work in progress: land cost
Work in progress: build cost
Completed units
Inventories
LAND HOLDINGS AS AT
Owned
Contracted
Plots
Sales value
Average selling price (ASP)*
Average plot cost
Land cost (%)
Gross margin
GM%
*ASP reflects joint venture revenues at 100%
337.7
728.7
1,066.4
2,051.1
122.4
3,239.9
-76.4
-190.3
-266.7
-11.6
+34.8
-243.5
414.1
919.0
1,333.1
2,062.7
87.6
3,483.4
30 APRIL
2018
32,921
13,946
46,867
VARIANCE
-850
+1,366
+516
30 APRIL
2017
33,771
12,580
46,351
£21,303m
-£464m
£21,767m
£507k
£61k
13.3%
£6,003m
28.2%
-£13k
-£1k
+0.1%
£520k
£62k
13.2%
-£375m
£6,378m
-1.1%
29.3%
F I N A N C I A L P O S I T I O N
Net assets increased over the course of
the year by £483.1 million, or 22.6%, to
£2,620.0 million (2017: £2,136.9 million).
This is after payment of £146.7 million of
dividends and the £140.4 million of share
buy-backs. This equates to a net asset
value per share of 1,959 pence, up 25.9%
from 1,556 pence at 30 April 2017, given the
share buy-backs undertaken in the year.
Inventories have decreased by
£243.5 million from £3,483.4 million
at 30 April 2017 to £3,239.9 million at
30 April 2018. Inventories include
£337.7 million of land not under
development (30 April 2017: £414.1 million),
£2,779.8 million of work in progress
(30 April 2017: £2,981.7 million) and
£122.4 million of completed stock
(30 April 2017: £87.6 million).
Trade and other payables are £1,727.4
million at 30 April 2018 (30 April 2017:
£1,878.4 million). These include £895.0
million of on-account receipts from
customers (30 April 2017: £974.9 million)
and land creditors of £105.2 million (30
April 2017: £142.9 million). Provisions of
£81.8 million (30 April 2017: £99.9 million)
include post completion development
obligations and other provisions.
The Group ended the year with net cash
of £687.3 million (30 April 2017: £285.5
million) which consists of cash holdings
of £987.3 million and a £300.0 million term
loan drawn under the Group’s banking
facilities. This is an increase of £401.8
million during the year (2017: £178.1 million)
as a result of £790.9 million of cash
generated from operations (2017: £769.8
million) and a net inflow of £166.3 million in
working capital (2017: net outflow of
£232.8 million), before tax and other net
cash outflows of £268.3 million (2017: £39.8
million), share buy-backs of £140.4 million
(2017: £64.5 million) and dividends of
£146.7 million (2017: £254.6 million).
B A N K I N G
The Group’s financial strength is further
supported by its banking facilities which
total £750 million, consisting of a drawn
£300 million term loan and an undrawn
£450 million revolving credit facility. The
Group has clarity of financing with the
facilities in place to November 2022 after
the Group exercised the first of two
options during the year to extend the
facilities by one year. The Group’s cash
holdings are currently placed on deposit
with its relationship banks.
The Group’s land holdings at 30 April 2018
comprise some 93 sites (30 April 2017: 90
sites). Of these, 62 (67%) have an
implementable planning consent and are
in construction and a further 14 (15%) have
at least a resolution to grant planning but
the consent is not yet implementable;
typically due to practical technical
constraints and challenges surrounding,
for example, vacant possession, CPO
requirements or utilities provision. The
remaining 17 sites (18%) are in the planning
process, with 13 of these subject to
conditional contracts which means there is
low financial risk on balance sheet. This
means Berkeley owns just 4 sites
unconditionally which do not have
planning consent.
The estimated future gross margin
represents management’s risk-adjusted
assessment of the potential gross profit for
each site, taking account of a wide range of
factors, including: current sales and input
prices; the political and economic backdrop;
the planning regime; and other market
forces; all of which could have a significant
effect on the eventual outcome.
R O B P E R R I N S
C H I E F E X E C U T I V E
2 0 J U N E 2 0 1 8
J O I N T V E N T U R E S
L A N D
Investments accounted for using the equity
method have increased from £135.0 million
at 30 April 2017 to £315.0 million at 30 April
2018. Berkeley’s joint ventures include
St Edward, a joint venture with Prudential
plc, and St William, a joint venture with
National Grid plc. The increase in joint
venture investments during the year
reflects Berkeley’s share of joint venture
profits of £158.0 million and further funding
into St William of £22.0 million.
In St Edward, 361 homes were sold in
the year at an average selling price of
£1,646,000 (2017: 251 at £1,322,000).
These completions were across four
developments; Stanmore Place,
Kensington, 190 Strand and Green Park in
Reading, with the mix weighted towards
the central London developments. In total,
1,835 plots (2017: 2,152 plots) in Berkeley’s
land holdings relate to St Edward
schemes. Stanmore Place completed
in the second half of the year, whilst
190 Strand has completed since financial
year end. During the second half of the
year, St Edward moved its site on Millbank
in Westminster into production.
In total, 7,900 plots (2017: 6,459 plots)
in Berkeley’s land holdings relate to
St William schemes. These plots are
across 14 developments, with three new
developments contracted during the
year. The new developments are at Bow
Common, Seven Sisters Road in Highbury
and Bethnal Green.
During the year sales and production
continued at Prince of Wales Drive in
Battersea, whilst production commenced
at Elmswater in Rickmansworth, Fairwood
Place in Borehamwood and at Seven
Sisters Road in Highbury. In terms of
planning, consents were obtained at
Clarendon in Hornsey for some 1,700
homes and on small sites in Oxted and
Watford. The remaining sites all remain
within the planning process and these
form a significant part of the Group’s
conditional land bank holdings. Berkeley
continues to work closely with National
Grid to identify sites from across its
portfolio to bring through into the
joint venture.
Berkeley’s land bank comprises 46,867
plots (2017: 46,351 plots) at 30 April 2018.
Of these land holdings, 32,921 plots (2017:
33,771 plots) are owned and included on
the balance sheet of the Group or joint
ventures and 13,946 plots (2017: 12,580
plots) are on contracted sites which either
do not yet have a planning consent or
have another conditional element such as
vacant possession. The Group also holds
a strategic pipeline of long-term options
for in excess of 5,000 plots.
The plots in the land bank at 30 April 2018
have an estimated future gross margin of
£6,003 million (2017: £6,378 million),
which includes the Group’s 50% share of
the anticipated margin on any joint
venture development.
Whilst plots in the land bank have
increased during the year, the gross
margin has reduced. This reflects the mix
of properties sold in the year, which
included a number across our high value
Central London sites and the nature of
new sites added to the land bank, with the
majority outside London. In total, Berkeley
has acquired 12 new sites in the year,
including three into St William,
as set out in the Joint Ventures section.
The other nine sites comprise one in
central London in Oval, whilst eight are
outside London. The eight sites are in
locations with strong demand, including
four sites in Surrey in the towns of
Effingham, Camberley, Frimley Green and
Staines, a site in Fleet in Hampshire, a site
in Cranbrook in Kent and two in St Joseph,
one in Birmingham’s Gun Quarter and the
other in Stratford-upon-Avon.
Berkeley has secured eight new planning
consents this year, as well as a significant
number of revised consents which have
sought to improve the development
solution for each scheme to add value
and/or reduce risk, which is a key part of
Berkeley’s approach. The new consents
include, in London, Trent Park in
Cockfosters and St William’s site at
Clarendon in Hornsey, whilst six consents
are outside London at Effingham,
Birmingham, Fleet, Camberley and in
St William’s sites at Oxted and Watford.
76
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BERKELEY ANNUAL REPORT 2018 STRATEGIC REPORTBERKELEY ANNUAL REPORT 2018 STRATEGIC REPORT01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS
2
G O V E R N A N C E
Riverlight, Vauxhall
78
WINNER
RIBA LONDON
AWARD
2018
79
BERKELEY ANNUAL REPORT 2018 GOVERNANCEBERKELEY ANNUAL REPORT 2018 GOVERNANCE01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS B O A R D O F D I R E C T O R S
CHAIRMAN AND EXECUTIVE DIRECTORS
T O N Y P I D G L E Y
CBE N
R O B P E R R I N S
BSc (HONS) FCA
R I C H A R D S T E A R N
BSc (HONS) FCA
CHAIRMAN
CHIEF EXECUTIVE
GROUP FINANCE DIRECTOR
K A R L W H I T E M A N
BSc (HONS)
S E A N E L L I S
BSc (HONS)
J U S T I N T I B A L D I
P A U L VA L L O N E
EXECUTIVE DIRECTOR
EXECUTIVE DIRECTOR
EXECUTIVE DIRECTOR
EXECUTIVE DIRECTOR
Date of appointment
to the Board:
1 May 2001
Date of appointment
to the Board:
13 April 2015
Committee memberships:
None
Committee memberships:
None
Skills and experience:
Rob joined the Company in 1994
having qualified as a chartered
accountant with Ernst & Young
in 1991. He was appointed to the
Group Main Board on 1 May 2001
on becoming Managing Director
of Berkeley Homes plc. He
became Group Finance Director
on 2 November 2001, moving to
his current role as Chief Executive
on 9 September 2009.
In 2010 Rob launched Berkeley
Group’s “Our Vision” strategy with
its aspiration for Berkeley to be a
world-class business. Rob has
24 years’ experience working in
the property industry, he regularly
contributes to public debates
about the direction of housing
policy and the property market
and is a member of the Bank
of England’s Residential
Property Forum.
Skills and experience:
Richard re-joined Berkeley on
13 April 2015 as Finance Director,
having previously worked for the
company from 2002 to 2011 as
Group Financial Controller. In the
intervening period, 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
PricewaterhouseCoopers.
Richard has 15 years’ experience
in the property and development
industry. His responsibilities
include oversight of the Group’s
finance, treasury, tax, risk
management, internal audit
and IT teams.
Other appointments:
None
Other appointments:
Council member,
Aston University
Governor,
Wellington College
Date of appointment
to the Board:
Co-founder of Berkeley in 1976
with Jim Farrer, Tony led the
business as Group Managing
Director for 33 years. On
9 September 2009 he was
appointed as Group Chairman.
Committee memberships:
Chairman of the
Nomination Committee.
Skills and experience:
His expertise of the property
market and the wider industry is
widely recognised, and has been
sought out for advisory roles
including the Estate Regeneration
Panel, Lord Heseltine’s Thames
Estuary Growth Commission,
with the Mayor of London on the
Outer London Commission, and
the Government on the disposal
of public sector land.
His passion for quality in the built
environment and for placemaking
is the cornerstone of what makes
Berkeley the company it is today.
He was awarded the CBE in 2013
for services to the housing sector
and the community. He was also
awarded an Honorary Doctorate
of Heriot-Watt University in 2013
in recognition of his outstanding
contribution to house building
and achievements in sustainable
urban development.
Other appointments:
President, London Chamber
of Commerce and Industry
Vice President, Wildfowl
& Wetlands Trust
80
Date of appointment
to the Board:
10 September 2009
Committee memberships:
None
Skills and experience:
Karl joined Berkeley in 1996 with
expertise in construction. He
joined the Group Main Board
on 10 September 2009 as a
Divisional Executive Director.
Karl is Chairman of the Berkeley
(East and West Thames) division.
Karl leads on the delivery of
three of the largest regeneration
projects in the UK — Kidbrooke
Village, Royal Arsenal Riverside
and Southall Waterside. He
oversees Our Vision and Health
& Safety strategies across
the Group.
After qualifying with a degree
in Construction Management
Karl started his career in Main
Contracting and prior to joining
Berkeley held several senior
construction positions at
Barratt London.
Other appointments:
None
Date of appointment
to the Board:
9 September 2010
Date of appointment
to the Board:
8 December 2017
Date of appointment
to the Board:
8 December 2017
Committee memberships:
None
Committee memberships:
None
Committee memberships:
None
Skills and experience:
Justin joined Berkeley in 1999 as
a senior surveyor. He has held
board positions as commercial
and production director in the
Group’s London divisions for a
number of years and since 2011
has been Managing Director of
Berkeley Homes (Capital).
Other appointments:
None
Skills and experience:
Paul joined Berkeley in 1990.
He is Divisional Managing
Director of Berkeley Homes
(Central and West London)
and has operational responsibility
for the St Edward joint venture.
He is also responsible for the
Group’s Sales and Marketing
Committee and is Chairman
of Berkeley’s international
office network.
Other appointments:
None
Skills and experience:
Sean joined Berkeley in 2004
with expertise in land and
planning. He joined the Group
Main Board on 9 September
2010 as a Divisional Executive
Director. Sean is Chairman of
St James Group, Berkeley
Homes (Eastern Counties) and
St William (the Joint Venture
with National Grid) and has
overall responsibility for
the performance of these
three businesses.
Sean began his career at Beazer
Homes and prior to joining
Berkeley held various senior
positions at Laing Homes where
he was appointed Managing
Director in 1999.
Other appointments:
None
K E Y
N Nomination Committee
A Audit Committee
R Remuneration Committee
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BERKELEY ANNUAL REPORT 2018 GOVERNANCEBERKELEY ANNUAL REPORT 2018 GOVERNANCE01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS
N O N - E X E C U T I V E D I R E C T O R S
B O A R D O F D I R E C T O R S
T E N U R E
SIR JOHN ARMITT
ALISON NIMMO CBE
VERONICA WADLEY CBE
GLYN BARKER* BSC (HONS) FCA
ADRIAN LI MA (CANTAB), MBA, PLC
ANDY MYERS BENG (HONS), ACA
DIANA BRIGHTMORE-ARMOUR FCCA, MCT
PETER VERNON FRICS
RACHEL DOWNEY ACA
YEARS
10.5
6.5
6.25
6.25
4.5
4.25
4.0
0.5
0.25
*DEPUTY CHAIRMAN AND SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR
Landscaped rooftop gardens
at Goodman's Fields
82
K E Y
N Nomination Committee
A Audit Committee
R Remuneration Committee
NON-EXECUTIVE DIRECTORS
S I R J O H N A R M I T T
NON-EXECUTIVE
DIRECTOR
A L I S O N N I M M O
CBE
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
V E R O N I C A W A D L E Y
CBE
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
Date of appointment
to the Board:
1 October 2007 Sir John served
as Deputy Chairman and Senior
Independent Director from 5
September 2012 to 18 April 2018.
Committee memberships:
None
Skills and experience:
Sir John is currently Chairman
of National Express Group PLC,
City & Guilds Group, National
Infrastructure Commission and
the Thames Estuary 2050 Growth
Commission. He is an
Independent Non-executive
Director of Expo 2020. Sir John
was President of the Institution of
Civil Engineers (2015–2016),
Chairman of the Olympic Delivery
Authority (2007–2014) and
Chairman of the Engineering and
Physical Science Research
Council (2007–2012). From 2001
to 2007, he was Chief Executive
of Network Rail and its
predecessor, Railtrack, and prior
to that was Chairman of John
Laing plc’s international and civil
engineering divisions. He has
amassed extensive operational,
commercial and technical
experience throughout his career.
Sir John received a knighthood in
2012 for services to engineering
and construction and was
awarded the CBE in 1996 for his
contribution to the rail industry.
Other appointments:
Chairman, National
Express Group PLC
Chairman, City & Guilds Group
Chairman, National Infrastructure
Commission
Chairman, Thames Estuary 2050
Growth Commission
Independent Non-executive
Director, Expo 2020
Date of appointment
to the Board:
5 September 2011
Date of appointment
to the Board:
3 January 2012
Committee memberships:
Audit Committee
Committee memberships:
Nomination Committee
Skills and experience:
Veronica is a Journalist by
profession; she was Editor of the
Evening Standard from 2002 to
2009 and previously Deputy
Editor of the Daily Mail and The
Daily Telegraph. She was Chair of
Arts Council, London and
National Council member of Arts
Council England from 2010-2018
and Senior Adviser to the Mayor
of London from 2012 to 2016
during which time Veronica
oversaw the delivery of youth
volunteering and employment
programmes and developed a
new strategy for business
relationships and sponsorship for
the Greater London Authority.
Other appointments:
Independent Director, Times
Newspapers Holdings Ltd
Member of City of London
Education Board
Royal College of Music Board
Governor of Yehudi
Menuhin School
Co-Founder and Trustee of
London Music Fund
Skills and experience:
Alison is a Chartered Surveyor
and Town Planner by training and
is currently Chief Executive of
The Crown Estate. Prior to joining
The Crown Estate, 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 and
was the lead on sustainability
and legacy for the Olympic Park.
Her previous roles have included
Chief Executive of Sheffield One
and Project Director of
Manchester Millennium Ltd.
Alison was awarded a CBE in
2004 for services to urban
regeneration and is a Fellow of
the Institute of Civil Engineers
and the Royal Institute of British
Architects. In 2014, Alison was
awarded the prestigious Royal
Town Planning Institute Gold
Medal for recognition of her
services to town planning
and sustainability throughout
her career.
Other appointments:
Chief Executive,
The Crown Estate
Member of Imperial College’s
Council and Chair of its White
City Syndicate Board
Trustee of the UK Green
Building Council
Chair of the CBI’s Economic
Growth Board
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NON-EXECUTIVE DIRECTORS
G LY N B A R K E R
BSc (HONS) FCA
DEPUTY CHAIRMAN AND
SENIOR INDEPENDENT
DIRECTOR
A D R I A N L I
MA (CANTAB), MBA, LPC
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
A N D Y M Y E R S
BEng (HONS) ACA
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
Date of appointment
to the Board:
6 December 2013
Committee memberships:
Audit Committee (Chairman)
Remuneration Committee
Skills and experience:
Andy qualified as a Chartered
Accountant with KPMG in 1990
and has extensive finance and
commercial experience. Until
recently Andy was Chief
Financial Officer at McLaren
Technology Group where he
had responsibility for Finance,
IT and Strategic Procurement.
Prior to joining McLaren in 2004,
Andy held senior finance roles
at Rolls Royce plc and at the
BMW/Rover Group. He joined
Rolls Royce Plc as Finance
Director of the Combustion
Business Unit in 2000 and was
promoted to CFO of the Energy
Sector, based in Washington DC
two years later.
Other appointments:
None
Date of appointment
to the Board:
2 September 2013
Committee memberships:
None
Skills and experience:
Adrian is Executive Director and
Deputy Chief Executive of The
Bank of East Asia, where he
assists the Chief Executive with
the overall management of the
group. He holds a Master of
Management degree from the
Kellogg School of Management
and an MA in Law from the
University of Cambridge.
Adrian brings banking
experience to the Board and
provides valuable insight into
the Far East property and
finance markets.
Other appointments:
Executive Director and Deputy
Chief Executive of The Bank
of East Asia, Ltd
Independent Non-executive
Director of two listed companies
under the Sino Group (Sino Land
Company Ltd. and Tsim Sha
Tsui Properties Ltd.)
Independent Non-executive
Director, China State Construction
International Holdings Ltd
Independent Non-executive
Director, COSCO SHIPPING
Ports Ltd
Date of appointment
to the Board:
3 January 2012 and as Deputy
Chairman and Senior
Independent Director on
18 April 2018.
Committee memberships:
Remuneration Committee
(Chairman)
Audit Committee
Nomination Committee
Skills and experience:
Glyn is a Chartered Accountant
and has extensive experience as
a business leader and trusted
adviser to FTSE 100 companies.
He has a deep understanding
of accounting and regulatory
issues along with extensive
understanding of transactional
and financial services.
Glyn was appointed as a
Non-executive Director
of Berkeley following a
35 year career with
PricewaterhouseCoopers LLP
(“PwC”), where he held a number
of senior posts including UK Vice
Chairman, UK Managing Partner
and UK Head of Assurance. He
also established and ran PwC’s
Transactions Services business.
Other appointments:
Senior Independent
Non-executive Director, Aviva plc
Independent Non-executive
Director, Transocean Limited
Chairman, Irwin Mitchell
Holdings Limited
Chairman, Interserve plc
Senior Advisory Partner,
Novalpina Capital
D I A N A B R I G H T M O R E -
A R M O U R FCCA, MCT
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
Date of appointment
to the Board:
1 May 2014
Committee memberships:
Nomination Committee
Skills and experience:
Diana is a Fellow of the
Chartered Certified Accountants
and a Fellow of the Association
of Corporate Treasurers. She is
currently the Chief Executive
Officer, UK & Europe of The
Australia and New Zealand
Banking Group Ltd where she is
responsible for oversight of the
day-to-day activities of the
branch, including the local
execution of the Group’s
strategy, promoting a culture
of compliance and ensuring
appropriate standards of
conduct and governance.
Diana was previously CEO,
Corporate Banking at Lloyds
Banking Group (2004-2012) and
spent her early career at The
Coca Cola Company. Diana has
30 years’ international
experience in banking, corporate
finance, financial management,
treasury and audit.
Other appointments:
Chief Executive Officer, UK &
Europe of The Australia and
New Zealand Banking Group Ltd
Member of the Board of the
Association of Foreign Banks
P E T E R V E R N O N
FRICS
R A C H E L D O W N E Y
ACA
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
Date of appointment
to the Board:
6 September 2017
Committee memberships:
Remuneration Committee
Skills and experience:
Peter is Group Executive Director
at Grosvenor where he has
responsibility for overseeing the
Group’s operating companies in
North America, Asia and Britain
and Ireland with an active
programme of real estate
investment and development in
11 world cities and assets under
management of over £8.5 billion.
During the period 2008 to 2016,
Peter was Chief Executive of
Grosvenor Britain and Ireland.
Peter is also a trustee of
Peabody, the Housing
Association that owns and
manages more than 55,000
homes across London and
South East, housing over
111,000 residents.
Other appointments:
Group Executive Director,
Grosvenor
Trustee of Peabody
Date of appointment
to the Board:
8 December 2017
Committee memberships:
Audit Committee
Skills and experience:
Rachel is Project Director of
Manchester Life, a joint venture
between Abu Dhabi United
Group and Manchester City
Council established in 2014 to
make a significant contribution
towards achieving Manchester’s
regeneration and residential
growth ambitions.
Prior to that Rachel has managed
various projects including the
submission to the Government
for £113 million to transform the
public-housing stock in several
neighbourhoods across
Manchester and Salford as
part of the Housing Market
Renewal Pathfinder.
Rachel, a Chartered Accountant,
is also currently a Trustee of the
We Love Manchester Emergency
Fund and the Lord Mayor
of Manchester’s Charity
Appeal Trust.
Other appointments:
Project Director,
Manchester Life
Trustee of We Love Manchester
Emergency Fund
Trustee of the Lord Mayor
of Manchester’s Charity
Appeal Trust
COMPANY SECRETARY
J S P CRANNEY FCIS
84
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berkeley AnnuAl report 2018 Governance
berkeley AnnuAl report 2 018 Gover nance
c o r p o r a t e
g o v e r n a n c e
r e p o r t
Dear Shareholder
I am delighted to introduce the Corporate Governance Statement for the 2017/18 financial year. The Company is committed to
maintaining a high standard of corporate governance and this section, including the Audit Committee Report, Directors’ Remuneration
Report and the Nomination Committee Report, details how the Company has applied the main principles and provisions of the UK
Corporate Governance Code 2016 (the Code):
— Leadership
— Effectiveness
— Accountability
— Remuneration
— Relations with shareholders
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 2017/18 financial year. A copy of the Code is available on the Financial Reporting Council’s website www.frc.org.uk.
The Board has carried out a number of key governance activities this year including:
— Board succession planning, including the appointment of four new Directors;
— Reviewing the roles undertaken by our Non-executive Directors including Board Committee membership;
— Reviewing the Company’s approach to Diversity and Inclusion and the Board’s Diversity Policy;
— Reviewing the continued progress of the Shareholder Returns programme;
— Reviewing and approving the Company’s Tax Policy;
— Reviewing the Company’s risk appetite in the context of the prevailing operating environment; and
— Reviewing the Company’s approach to Cyber Security and GDPR.
Each of these areas are discussed in more detail within the annual report and I look forward to hearing your views at and in advance of
our 2018 AGM.
Looking forward to 2018/19, the Board will continue to monitor the Corporate Governance agenda in the UK, including any new
provisions introduced in the 2018 Corporate Governance Code once published.
In closing, I would like to welcome Peter Vernon, Rachel Downey, Justin Tibaldi and Paul Vallone to the Board and thank all Board
members for their service during the year. I would also like to thank Sir John Armitt for his contribution as Senior Independent Director
and to welcome the appointment of Glyn Barker as the new Senior Independent Director.
a W PIDGLey, cBe
Executive Chairman
Le aDe rS H I P
The Board has 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;
independent Non-executive Directors. The
biographies of these directors are set out
on pages 80 to 85.
— 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,
Business Ethics, Equality, Modern Slavery
and Share Dealing.
eF Fe cT Iv e n eS S
Composition and Independence
At the date of this report the Board
comprises sixteen Directors: the
Chairman, six Executive Directors and nine
The Board has put in place the succession
planning that all successful organisations
require and, as explained in the Nomination
Committee Report on page 93, the
composition of the Board continues to
be reviewed on a regular basis. During
2017/18 the Board has appointed two new
Executive Directors, Justin Tibaldi and
Paul Vallone, and two new Independent
Non-executive Directors, Rachel Downey
and Peter Vernon. Berkeley seeks to have
a Board of diverse experience, contribution
and skills and each of these Directors, as
set out in their biographies on pages 81
and 85, brings complementary talents and
experience which we believe will enhance
the Board.
The Board reviews the independence of
Non-executive Directors on an annual
basis taking into account each individual’s
professional characteristics, behaviour
and their contribution to unbiased and
independent debate.
Conscious of the changes proposed by
the 2018 Corporate Governance Code, the
Board recognises that Sir John Armitt,
having more than nine years’ service on
the Board, will no longer be considered
independent. While the Board is of the
view that he continues to maintain and
contribute an independent view in all
Board deliberations, to comply with
best practice, Sir John stepped down as
Senior Independent Director, as Deputy
Chairman and from his committee
roles on 18 April 2018 as outlined in the
Nomination Committee Report on page
93. He was succeeded in the roles of
Senior Independent Director and Deputy
Chairman by Glyn Barker. Sir John’s
unrivalled experience in construction
and infrastructure and his independent
challenge continue to be of value to
the Board.
The Non-executive Directors, led by the
Senior Independent Director Glyn Barker,
have the skills, experience, independence
and knowledge of the Company to enable
them to discharge their respective duties
and responsibilities effectively. Each Non-
executive Director is prepared to question
and to challenge management. All of the
Non-executive Directors are considered
to have been independent throughout
the year.
Last year some shareholders raised
concerns regarding the number of
directorships held by Adrian Li and
whether this may impact his ability to
fulfil his duties as an Independent Non-
executive Director of Berkeley, particularly
should there be an exceptional period
of Board activity at one or more of the
companies on which Adrian serves as a
Director. This resulted in 33.5% of votes
being cast against the re-election of Adrian
at the 2017 Annual General Meeting. Adrian
is an active and valuable member of the
Board. He attends all Board meetings and
plays an active role in Board discussions. As
explained in the Public Statement made in
November 2017, which can be found on our
website, Adrian has both legal and financial
professional qualifications and brings a
truly global and diverse perspective to
Board discussions. In addition he provides
invaluable insight into Far Eastern and
emerging markets and supply chains.
Adrian devotes significant time to Berkeley
outside Board meetings and the Board
strongly believes that he has sufficient
capacity and commitment to Berkeley to
fulfil his obligations to the Company both
in the normal course of business and at
a time of unforeseen corporate need. As
noted in his biography on page 84, two of
Adrian’s directorships are linked under the
Sino Group which is a common corporate
structure in South East Asia. Adrian is
based in Hong Kong and it should be
noted that his appointments in Hong Kong
comply with local guidelines and he is not
considered overboarded.
The Executive Directors do not hold any
Non-executive Director appointments or
commitments required to be disclosed
under the Code.
Chairman and Chief Executive
The roles of Chairman and Chief Executive
are separately held and there are clear
written guidelines to support the division of
responsibility between them. The Chairman
is responsible for the effective operation
of the Board and shareholder general
meetings, for overseeing strategy and for
ensuring that each Director contributes
to effective decision-making. The Chief
Executive 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 and to develop the
management team.
Tony Pidgley is Executive Chairman which
we believe is the best succession model for
Berkeley in order to ensure the continued
long-term success of the Company. Having
a strong Senior Independent Director and
Deputy Chairman, first in Sir John Armitt
and now in Glyn Barker, ensures that there
is a balance of power at the top of the
Company. The transition to this model
took place in 2009 and shareholders have
supported this structure ever since.
Meetings
The Board met formally four times during
the year to 30 April 2018 and there were
no absences. There were also three Board
conference calls during the year.
In addition to the above formal meetings
of the whole Board, the Non-executive
Directors meet with the Chairman twice
per year. The Chief Executive and 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 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.
In accordance with the requirements of
the Code, all Directors offer themselves
for re-election annually at the Annual
General Meeting each year including at
the Annual General Meeting to be held on
5 September 2018.
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.
All new Directors are provided with
training on Directors’ Duties and
Corporate Governance provided by
external legal counsel.
Ongoing training is available to all
Directors to meet their individual needs.
Board members also receive guidance
on regulatory matters and the corporate
governance framework that the Group
operates under. For example, since the year
end, Directors have received training on
Data Breaches in light of the new General
Data Protection Regulations.
Members of the Audit and Remuneration
Committees receive briefings from
our auditors and remuneration advisers
respectively to ensure they remain
up to date with current regulations
and developments.
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All Directors have access to advice from
the Company Secretary and independent
professional advisors, 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. External reviews having
been conducted in each of the last three
years, the Board evaluation for 2018 was
internally facilitated by the Group Solicitor
in one-to-one confidential discussions with
each of the Main Board Directors.
The evaluation concentrated on the
performance of the Board and its
Committees over the year which had been
an important one for succession planning
with four new Directors appointed. The
two new Executive Director appointments
reflect the Board’s belief that Board
experience is an important aspect of
developing future leaders. Long-term
succession planning is equally important
for Non-executive Directors and the two
new Non-executive appointments exhibit
the right attributes to complement those of
our existing Board members.
During the year, the Board has performed
well. The main areas of success have been:
— in the identification and appointment
of the new Non-executive Directors
who had been through a thorough
appointment and induction process and
had both settled in well;
— the change in the Senior Independent
Director and Deputy Chairman;
— the openness of the Board to debate
and challenge on a wide range of
matters, including strategy and
innovation, demonstrating a positive and
inclusive culture. The comments of the
new Directors were particularly pertinent
as they felt encouraged to contribute
and challenge on every aspect of the
matters under discussion; and
— the strong and constructive working
relationship between the Executive and
Non-executive Directors.
The Board identified three key areas of
importance for the coming year:
— ensuring that the size of the Board, an
increase of 30%, does not hamper open
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debate and challenge and that everyone
has ample opportunity to contribute,
even when the agenda is full;
— the need continually to re-assess risk in
the uncertain macro environment; and
— further development on diversity and
inclusion throughout the business to
ensure that all persons of talent are
identified and supported to bring
through the next generation of leaders.
Conflicts of interest
In accordance with the Companies
Act 2006, the Company’s Articles of
Association allow the Board to authorise
potential conflicts of interest that may arise
and to impose such limits or conditions
as it thinks fit. The decision to authorise a
conflict of interest can only be made by
non-conflicted Directors (those who have
no interest in the matter being considered)
and in making such a decision the Directors
must act in a way they consider in good
faith will be most likely to promote the
Company’s success.
The Company has established a procedure
whereby actual and potential conflicts of
interest of current and proposed roles to be
undertaken by 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 considers these procedures to be
working effectively.
Insurance
The Company had in place at 30 April
2018 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 Company’s website.
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 Chief Executive,
R C Perrins, chairs this Committee and
other members comprise A W Pidgley
CBE, S Ellis, R J Stearn, J Tibaldi,
P M Vallone and K Whiteman.
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
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 A Myers and the other members as
at 30 April 2018 were A Nimmo CBE,
G Barker and R Downey. V Wadley CBE
also served as a member of the Committee
during the year.
A Myers and G Barker are both considered
to have recent and relevant experience as
demonstrated by their biographies on page
84. All members of the Committee have
competence relevant to the residential
development sector. The Committee met
formally on three occasions during the year
to 30 April 2018 with no absences.
An explanation of the role and activities
of the Audit Committee during the year is
contained in the Audit Committee Report
on pages 91 and 92.
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 2018, the Committee comprised
G Barker, A Myers and P Vernon who are
all independent Non-executive Directors.
The Committee was chaired by G Barker.
Sir John Armitt served as a member of the
Committee during the year.
The Committee met formally on two
occasions during the year to 30 April 2018
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 Chief Executive
and Finance Director regarding the
remuneration of their Executive colleagues.
effectiveness of the system of internal
control as part of its year end procedures.
The key features of the system of internal
control include:
The principles and details of Directors’
remuneration are contained in the
Directors’ Remuneration Report on pages
94 to 115.
Nomination Committee
The Nomination Committee ensures
that the membership and composition
of the Board, including the balance of
skills, is appropriate, as well as giving full
consideration to succession planning on a
regular basis.
The Committee is chaired by the Chairman,
A W Pidgley CBE, and at 30 April 2018
included G Barker, V Wadley CBE and
D Brightmore-Armour who are all
independent Non-executive Directors.
Sir John Armitt also served as a member of
the Committee during the year.
The Committee met formally on three
occasions during the year to 30 April 2018
with no absences.
An explanation of the role and activities of
the Nomination Committee during the year
is contained in the Nomination Committee
Report on page 93.
a c c oUnT aB I L I Ty
Internal control and risk management
The Board acknowledges that it has overall
responsibility for ensuring that the Group’s
system of internal control complies with the
Code and for reviewing its effectiveness, at
least annually.
Internal control procedures are designed to
manage rather than eliminate risk. They 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 2018 Annual
Report and Accounts were approved and
accord with Principles C.2.1 and C.2.3 of the
Code and with the FRC’s Guidance on Risk
Management, Internal Control and Related
Business Reporting.
The processes are regularly reviewed by
the Board and include an annual review
by the Directors of the operation and
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 a Group level.
Risk assessment
Risk reporting is embedded within ongoing
management reporting throughout
the Group. At operating company and
divisional level, Board meeting agendas
and information packs are structured
around the key risks facing the businesses.
These risks include health and safety, sales,
production (build cost and programme),
land and planning, retaining people,
economic and political outlook, regulatory
and site-specific matters.
In addition, there is a formalised process
whereby each division produces quarterly
risk and control reports that identify
risks, the potential impact and the
actions being taken to mitigate the risks.
These risk reports are reviewed and
updated quarterly.
A Group Risk Management Report is
presented at each Group Board Meeting,
which overlays wider strategic risks than
those covered by the operations. This sets
out the annual changes in the risk profile
of the Group, the impact and mitigation of
these risks.
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 legal,
environmental, planning and financial
appraisal and are subject to executive
authorisation. Rigorous procedures are also
followed for the selection of consultants
and contractors. The review and
monitoring of all build programmes and
budgets are a fundamental element of the
Company’s financial reporting cycle.
Policies and procedures
Policies and procedures, including
operating and financial controls, are
detailed in policies and procedures
manuals that are refreshed and improved
as appropriate. Training to staff is given
where necessary.
Central functions
Strong central functions, including Legal,
Health & Safety and Company Secretarial,
provide support and consistency to the
Group. In addition, the principal treasury-
related risks, decisions and control
processes are managed by the Group
Finance function, under the direction of the
Finance Director.
Internal audit
Internal auditors are in place at Group
level and divisional level as appropriate, 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
employees, where Directors, management,
employees 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 and Anti-Money Laundering
Regulations
The Board has responsibility for complying
with the requirements of the Bribery
Act 2010 and The Money Laundering,
Terrorist Financing and Transfer of Funds
(Information on the Payer) Regulations
2017 and is charged with overseeing the
development and implementation of
the Group’s policies and procedures and
monitoring ongoing compliance.
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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
regarding 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.
contInUeD
r eM Un e r a T Io n
The principles and details of Directors’
remuneration are contained in the
Directors’ Remuneration Report on pages
94 to 115.
r eLa T Io nS W I T H
S Ha r eHoL De rS
The Company encourages active
dialogue with its current and prospective
shareholders through ongoing meetings
or calls with institutional investors. During
2017/18 discussions covered topics such
as performance, markets, strategy and
governance. In addition to these regular
meetings, Executive Directors, have spoken
to several shareholders and proxy advisory
agents in order to discuss their concerns
regarding the re-election of Adrian Li. The
Board also meets with retail shareholders
at the Annual General Meeting.
Shareholders are also kept up to date
with the Company’s activities through
the Annual Reports, Interim Results
announcements and Trading Updates. In
addition, the corporate website provides
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 in the
Investor Relations section of the website.
The Board is kept informed of the views
of the shareholders through periodic
reports from the Company’s broker, UBS.
Additionally, the Non-executive Directors
have the opportunity to attend the bi-
annual analyst presentations.
The Senior Independent Director is
available to shareholders if they have
concerns where contact through the
normal channels has failed or when such
contact is inappropriate.
Annual General Meeting
All shareholders are invited to participate
in the Annual General Meeting (“AGM”)
on 5 September 2018 at 11:00am where
the Chairman, the Chief Executive 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
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The Board of Directors presents its Audit
Committee Report for the year ended 30
April 2018 which has been prepared on the
recommendation of the Audit Committee.
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.
Details of the composition and experience
of the Committee can be found in the
Directors’ biographies on pages 83 to 85
and details of the number of meetings of
the Committee are reported on page 88 of
the Corporate Governance Report.
r oLe a nD r eS Po nS I B I L I T IeS
oF T He a U D I T c oM M I T Te e
The Committee has formal Terms of
Reference which set out its role and the
authority delegated to it by the Board. The
Terms of Reference were reviewed and
updated during 2017/18 together with the
policy on the Independence of External
Auditors. 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 matters
and accounting policies;
— risk Management and Internal control
Reviewing the adequacy and
effectiveness of the Group’s risk
management and internal control
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.
F In a n cIaL r ePo rT InG
At each of the Audit Committee meetings,
the 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, Half
Year and Year end Results Announcements
and the contents of Trading Updates
issued during the year. The Committee’s
review incorporated consideration of the
appropriateness of the relevant accounting
policies and financial reporting estimates
and judgements adopted therein.
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.
The views of the Group’s external auditor,
who 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 during the 2017/18 financial
year included:
— carrying value of inventories and
margin recognition
Inventories comprise work in progress,
completed units and land not under
development, which are held in the
balance sheet at the lower of cost and
net realisable value. This requires a
periodic assessment by management
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 notably over the
longer term sites. 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 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, estate liabilities
and 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 the period is included
in note 15 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 and the
ability of the purchaser to 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 Committee also reviewed and
debated a paper on the impact of
the new IFRS 15 Revenue standard
applicable to the Group from 1 May 2018.
It concluded that a change in the point
of revenue recognition was appropriate
as IFRS 15 focuses on the point at
which control of the asset rests with the
customer which (taking into account the
indicators of control in the standard) is
considered to be legal completion. Under
the previous standard, IAS 18, revenue
was recognised when the significant risks
and rewards of ownership had passed to
the customer. The impact of this change
is set out in the Accounting Policies note
to the financial statements.
Audit Quality Review
During the year we were notified by KPMG
LLP (“KPMG”) that the Financial Reporting
Council’s (“FRC”) Audit Quality Review
(“AQR”) team would review KPMG’s audit
of the Group’s 2017 financial statements,
as part of their annual inspection of
audit firms. The Committee reviewed the
findings of the AQR report with KPMG
and the Chair of the Audit Committee
met with the FRC team to discuss their
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comments. The Committee is satisfied that
the recommendations from the review
(which focused on the areas of accounting
estimates and judgements) have been
appropriately addressed in this year’s audit.
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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 89 of the Corporate
Governance Report, and covered:
— the assessment of the principal risks
facing the Group;
— the key elements of the Group’s control
processes to mitigate these risks; and
— 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 considered any internal
control recommendations raised by the
Group’s auditors during the course of the
external audit and the Group’s response to
dealing with such recommendations.
A report summarising the recent activities of
the Internal Audit function was presented at
each of the Committee meetings during the
year. These reports covered:
— a summary of the key findings arising
from the most recent 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; and
— 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.
eX Te r n aL a U D I T
KPMG was appointed as the Company’s
auditor in the year ended 30 April 2014 by
way of a competitive tender.
Approach
KPMG presented its audit strategy to
the Audit Committee during the year.
The strategy document identified its
assessment of the risks and other areas
of focus for the purpose of the audit, the
scope of the audit 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
accounting 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,
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.
In order to safeguard auditor
independence, the Committee has a policy
on the provision of non-audit services by
the external auditors. In accordance with
that policy the ratio of audit fees to non-
audit fees should be no greater than 0.7:1,
with a target of lower than 0.5:1 in any one
year and in aggregation over the previous
three financial years. The ratio for the year
ended 30 April 2018 was within this limit.
Audit and non-audit fee disclosures are set
out in note 4 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; or
iii) the nature of the transaction is such
that the Group’s auditors are the only
practical appointment.
Non-audit work carried out by all
accounting firms, including the auditors, is
formally reported to the Audit Committee
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 the
auditors are independent.
Appointment of KPMG
On completion of the audit, the Committee
reviewed the performance and effectiveness
of KPMG with feedback from senior
management. The Committee has resolved
to propose KPMG’s re-appointment at the
2018 Annual General Meeting.
The Committee remains mindful of
evolving best practice under the UK
Corporate Governance Code 2016 and 2018
and is subject to the new requirements of
the Financial Reporting Council and the
European Union in determining its future
approach to re-tendering the external
audit appointment. The Company confirms
that it complied with the provisions of the
Competition and Markets Authority’s Order
for the financial year under review.
a MyerS
Chairman, Audit Committee
20 June 2018
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c o M M It t e e
r e p o r t
Committee recommended that Peter
Vernon be appointed as a member of the
Remuneration Committee and that Rachel
Downey be appointed as a member of
the Audit Committee. Veronica Wadley
stepped down as a member of the Audit
Committee at the same time. These
recommendations were unanimously
supported by the Board.
The process for identifying and
recommending new appointments to
the Board includes a combination of
discussions and consultations, in addition
to formal interviews, utilising the services
of independent recruitment specialists,
when appropriate. The two new Executive
Directors were appointed from within the
Group. In respect of the Non-executive
Director appointments made during the
year, although discussions were held with
recruitment consultants, it was decided
that the best candidates were those who
were known to and held in high regard
by the other Non-executive Directors.
Following meetings with the members of
the Nomination Committee and with the
Board, the appointments were approved.
Board Diversity Policy
Recognising the benefits that diversity can
bring to all areas of the Group and noting
the recommendations of the Hampton-
Alexander and Parker reviews, Berkeley
seeks to build a Board which represents
a wide range of backgrounds and
experience. Appointments to the Board are
made on the basis of merit and capability
and in the best interests of the Group.
Berkeley strives to be an equal opportunity
employer and a Group-wide Equality and
Diversity Policy, making it clear that it does
not tolerate discrimination in any form, is in
place. A copy of this policy is available on
the Company’s website.
a W PIDGLey, cBe
Chairman, Nomination Committee
20 June 2018
The Board of Directors presents its
Nomination Committee Report for the year
ended 30 April 2018.
Details of the composition, skills and the
number of meetings of the Nomination
Committee are reported on page 89 of the
Corporate Governance Report.
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:
— reviewing the structure, size and
composition of the Board and
Board Committees and making
recommendations to the Board;
— evaluating the balance of skills,
knowledge and experience on the Board;
and
— leading the process for identifying
and nominating candidates for Board
vacancies.
Succession Planning
During the year the Committee reviewed
the Board’s composition to ensure that it
had the correct balance of skills, experience
and knowledge required for the leadership
of the Group. Consideration was also given
to succession planning for both Executive
and Non-executive Directors. Following its
review the Nomination Committee made
recommendations to the Board to appoint
two new Non-executive Directors, Peter
Vernon and Rachel Downey, and two new
Executive Directors, Justin Tibaldi and Paul
Vallone. Each of these appointments was
unanimously approved by the Board.
The Committee also considered Board
roles and the composition of the
Audit, Nomination and Remuneration
Committees reflecting Sir John Armitt’s
tenure on the Board. Following this review
the Committee recommended that Sir
John step down as Senior Independent
Director and Deputy Chairman and
as a member of the Nomination and
Remuneration Committees. The Committee
considered the skills and experience of
the Independent Non-executive Directors
and recommended that Glyn Barker be
appointed as Senior Independent Director
and Deputy Chairman and as a member
of the Nomination Committee. In order
to best utilise the skills and experience
of the new Non-executive Directors the
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PART A: ANNUAL STATEMENT FROM THE CHAIRMAN OF THE REMUNERATION COMMITTEE
i n C e n t i v e O u t C O m eS
Dear Shareholder
This year’s Remuneration Report is split into four parts as follows:
As set out above, Berkeley has continued to deliver strong financial results as well as maintaining the financial strength of the Company
in order to underpin future performance. We are committed to ensuring a strong alignment between pay and performance and as a
result of the strong performance in the year, the following incentives have been earnt.
Part A:
Chairman’s Annual Statement in which I have set out the decisions of the Committee during the year and the business context in
which these decisions have been made.
B O n uS
Part B:
Our Remuneration at a Glance sets out the key information with regard to remuneration at Berkeley.
Part C:
Part D:
Annual Report on Remuneration sets out payments and awards made to the Directors and details the link between Company
performance and remuneration for the 2017/18 financial year.
Summary Remuneration Policy sets out a summary of our Remuneration Policy as approved at the 2017 EGM which took effect
from 1 May 2017 onwards.
We hope that by arranging the report in this way you can navigate your way through the information in a helpful and transparent way.
C O R P O R At e P e R f O Rm A n C e D u R i nG 2 0 1 7/ 1 8
Berkeley has delivered strong results in what is a challenging operating environment in London and the South East, as set out elsewhere
in this annual report. This is due to the disciplined execution of the Group’s operating model which recognises the cyclical nature of the
housing market and the high operational risk associated with the developments Berkeley undertakes, by retaining financial strength and
focusing on the quality of the homes and places it creates. This financial strength allows Berkeley to invest at the right time in the cycle
and these results benefit from investment made at the end of the financial crisis. Today’s environment is more challenging but Berkeley
remains well positioned to continue delivering sustainable risk adjusted returns for its shareholders.
The key highlights of the results for 2017/18 are:
— Net cash of £687.3 million (2017: £285.5 million) after making shareholder return payments of £287.1 million (2017: £299.0 million)
— Pre-tax return on shareholders’ equity of 39.3% (2017: 41.1%)
— Net asset value increased by 22.6% to £2,620 million (2017: £2,137 million)
— Forward sales of £2.19 billion (2017: £2.74 billion)
— Future anticipated gross margin in the land bank of £6,003 million (2017: £6,378 million)
— Earnings per share increased by 20.3% to 562.7 pence (2017: 467.8 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 nine years
illustrates the relative performance of the Company:
Berkeley
Sector highest
Sector lowest
Sector average*
(excluding Berkeley)
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
13.3%
13.3%
15.3%
15.3%
21.2%
21.2%
(44.2%)
(6.2%)
(0.4%)
(18.1%)
1.0%
4.8%
22.4%
22.4%
3.4%
8.5%
27.5%
27.5%
3.5%
11.4%
35.1%
35.1%
12.2%
18.2%
30.8%
30.8%
16.0%
22.3%
41.1%
41.1%
15.7%
39.3%
39.3%
11.0%
24.2%
23.3%
* Sector includes Barratt Developments, Bovis Homes, Redrow, Taylor Wimpey, Bellway and Persimmon,
B eR k e l e y ’S R e m u n eR A t iO n PO l iC y
As shareholders will be aware, we held an Extraordinary General Meeting on 23 February 2017 to obtain approval for our new
Remuneration Policy. This included the introduction of caps to Executive remuneration, as well as changes to the operation of the 2011
LTIP to ensure that the remuneration arrangements remained directly linked to the achievement of the Company’s corporate strategy.
Over 97% of you voted in favour of the Remuneration Policy and over 93% in favour of the changes to the 2011 LTIP. Prior to finalising
the proposed amendments to the Remuneration Policy and the 2011 LTIP, the Remuneration Committee consulted with its main
shareholders as well as shareholder representative bodies. A summary of our Remuneration Policy can also be found on pages 112 to 115.
We will operate under the agreed Policy in 2018/19.
The Executive Directors earned 100% of the maximum annual contribution under the Bonus Plan for 2017/18 following performance
against stretching Return on Equity and Net Asset Value Growth targets. These performance targets ensure the Executive Directors are
focused on delivering a strong ongoing return to shareholders whilst balancing the long term sustainability of the Company. In awarding
the maximum contribution the Committee considered the underlying financial performance of the Company as well as the performance
of the divisions and individual Directors and are satisfied that this outcome is appropriate. Further details are set out on page 101.
lt i P v e S t i nG
Following the change in vesting schedule of the 2011 LTIP approved by shareholders at the Extraordinary General Meeting held on
16 February 2016, to ensure alignment with the new strategy, the second tranche of the 2011 LTIP vested in full on 2 October 2017
following the Company meeting its shareholder return target for the year to September 2017 of £277.7 million, via a combination of
dividends and share buy-backs.
This vesting reflected the continued strong performance of the Company in the period and represents the vesting of 13.4% of the total
2011 LTIP award. Further details are set out on page 103.
i m P l e m e n tAt iO n O f t h e PO l iC y fO R 2 0 1 8 / 1 9
C hA n G e S t O t h e BO A R D
On 8 December 2017, Justin Tibaldi and Paul Vallone were appointed to the Board as Divisional Executive Directors. Details of their
remuneration arrangements for 2018/19 are set out on page 107 and were disclosed in the announcement of their appointments.
On 6 September 2017 Peter Vernon was appointed to the Board as a Non-executive Director. On 8 December 2017 Rachel Downey was
appointed to the Board as a Non-executive Director. Both will receive fees in line with the Company’s Remuneration Policy.
PAy fA i R n eS S A n D e mP l Oy e e R e wA R D
The Committee is responsible for overseeing remuneration for the most senior employees at the Company. However, we are aware of
our duty to oversee remuneration principles at all levels, ensuring that pay is fair, competitive and strategically aligned for our employees.
Remuneration arrangements are in place which ensure that all employees can share in the Company’s success and these arrangements
are discussed further on page 99.
The Committee are also aware of ongoing regulatory and corporate governance developments and will continue to monitor these over
the following year.
i n C O n C l u S i O n
The Annual Report on Remuneration together with this letter will be subject to an advisory shareholder vote at the forthcoming AGM
in September 2018. The sections of this report that have been subject to audit are labelled accordingly. Details of voting at last year’s
Annual General Meeting, where 83.91% of those voting supported the resolution to approve the Annual Report on Remuneration, are set
out on page 111 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. If you have any questions on our Remuneration Policy or its implementation I am happy to discuss and can be contacted via our
Company Secretary Jared Cranney.
G BARkeR
Chairman, Remuneration Committee
20 June 2018
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PART B: OUR REMUNERATION AT A GLANCE
Ahead of the detail behind payments for 2017/18, I would like to take this opportunity to outline our remuneration philosophy, payments
due to the Directors for the year and how these are linked to the Company’s strategy and performance.
Our core remuneration philosophy
Berkeley’s remuneration policy aims to encourage, reward and retain the current Executive Directors and ensure their actions are aligned
with the Company’s strategy. The core philosophies are:
BASe SAlARy AnD
BenefitS
The Committee sets salaries for the Executive Directors based on their experience, role, individual and corporate
performance. Salaries on appointment to the Board may be set below that of the comparator group and
subsequently, based on appropriate levels of individual and corporate performance, may be increased with experience
gained over time.
AnnuAl
PeRfORmAnCe-
RelAteD PAy
lOnG teRm
SuStAinABle
PeRfORmAnCe
The Committee believes that shareholders’ interests are best served by remuneration packages that have a large
emphasis on performance-related pay which encourage the Executive Directors to focus on delivering the business
strategy.
The long term incentives which now extend to 2023 have been designed to lock in the Executive team for a far longer
period than is typical in most publicly listed companies. This helps to ensure that the Executive team are focused on
generating long term sustainable value for shareholders, not just on meeting short term performance targets.
SuBStAntiAl
equity hOlDinGS
In order to align the interests of Executive Directors and shareholders, the reward strategy is designed so that,
provided performance is delivered, the Executive team become material (in relation to their overall compensation)
shareholders in the Company.
RemuneRAtiOn
CAPS
The Committee is cognisant of the broader environment regarding executive remuneration and the potential concerns
regarding the quantum available to Executive Directors notwithstanding the level of performance and growth
which may have been achieved by the Company. The Committee considers the use of remuneration caps to be an
appropriate response to these challenges.
A summary of our Remuneration Policy can be found on pages 112 to 115.
what was the remuneration of our new executive Directors?
The RNS Announcement issued on 8 December 2017 set out the key elements of the remuneration packages for Justin Tibaldi and Paul
Vallone on their appointment as Executive Directors of the Company. All elements of the remuneration are in line with the Remuneration
Policy:
element Of RemuneRAtiOn
Salary
JuStin
tiBAlDi
PAul
vAllOne
£355,000
£355,000
Maximum Bonus Opportunity (%age of Salary)
200%
200%
2011 LTIP (options granted)
300,000
300,000
Pension Contribution (%age of Salary)
15%
15%
Benefits
LTIP Cap
Standard
Standard
£1,150,000
£1,150,000
Total Remuneration Cap
£2,400,000
£2,400,000
There are no legacy awards held by these Directors as all existing annual and deferred bonus and incentive entitlements lapsed on their
appointment, other than awards under the 2011 LTIP.
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what have we paid our executives in the year?
The following table sets out the single figure of remuneration for the Executive Directors for the year.
exeCutive
DiReCtOR £’000
SAlARy
2018
PenSiOn
2018
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi(7)
P Vallone(7)
200
545
370
355
355
141
141
—
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53
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21
AnnuAl
BOnuS
2018(1)
ltiP 2018
tOtAl
RemuneRAtiOn
2018
Cap(2)
Actual(3)
Cap(4) Actual(5)
—
8,000
8,000
8,200
8,200
1,635
5,500
5,500
8,000
7,772
3,165
3,118
740
710
781
282
282
2,000
2,000
3,250
2,000
2,000
3,250
3,750
3,750
5,000
4,939
1,150
1,150
—
—
2,400
2,400
444
444
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2018(6)
tOtAl
2018
tOtAl
2017
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24
21
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7
8,256
29,192
7,806
27,963
3,185
3,142
5,970
6,173
4,960
12,740
450
451
N/A
N/A
Notes
1. This represents the contribution into the Bonus Plan for the level of performance achieved in the financial year. 50% of this contribution is deferred in
shares or share equivalents. The actual payments made in the year are set out on page 102.
2. The LTIP Cap limits the value of the LTIP vesting in the year. This was introduced as part of the Remuneration Policy approved by shareholders at the
2017 EGM (see page 115 for further details).
3. This represents the second tranche of the 2011 LTIP that vested on 2 October 2017 at share price at £37.36 subject to the operation of the LTIP Cap (see
table on page 103 for details). Where the LTIP value would have been greater without the Cap, it is the capped amount which is payable and therefore
disclosed in the single figure of remuneration.
4. The Total Remuneration Cap limits the amount of total remuneration that has been earned over the financial year and is capable of being paid out. This
was introduced as part of the Remuneration Policy approved by shareholders at the 2017 EGM (see page 113 for further details).
5. The Total Remuneration Cap operated for the 2017/18 financial year and where the remuneration would have been greater without the Cap, it is the
capped amount which is payable and therefore disclosed in the single figure of remuneration.
6. Benefits, which are not included in calculating the remuneration cap, include a fully expensed company car or cash allowance alternative and medical
insurance.
7. J Tibaldi and P Vallone became Executive Directors on 8 December 2017. The single figure includes their remuneration since joining the Board.
what is the equity exposure of our executive Directors?
It is a core facet of Berkeley’s remuneration policy that the Executive Directors acquire and hold material shareholdings in the Company,
in order to align their interests with those of the Company’s shareholders. The following table sets out all subsisting interests in the
equity of the Company held by the Executive Directors at 30 April 2018. The number of shares of the Company in which current
Executive Directors had a beneficial interest as at 30 April 2018 are set out in detail on page 104.
The table below illustrates the minimum shareholding requirements for the Executive Directors, the value of the shares they currently
own and the value of share incentives held. The Company’s minimum shareholding requirements are currently 400% of base salary for
the Group Chairman and Group Chief Executive and 200% of base salary for other Executive Directors.
% Of SAlARy
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
ShARehOlDinG
RequiRement
vAlue Of BenefiCiAlly
OwneD ShAReS
vAlue GAin On inteReStS
OveR ShAReS (unveSteD)
400%
400%
200%
200%
200%
200%
200%
90,541%
9,565%
1,422%
2,967%
2,825%
191%
174%
43,761%
16,059%
4,612%
4,931%
11,094%
2,760%
2,760%
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All the Executive Directors exceed their minimum shareholding requirements.
Due to the large shareholdings of the Executive Directors, a relatively small change in the share price would have a material impact on
their wealth. The ability for the Executive Directors to gain and lose dependent on the share price performance of the Company at a
level which is material to their total remuneration is a key facet of the Company’s Remuneration Policy.
how have we performed since the 2011 ltiP was introduced?
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 2011 LTIP locks in the Executive team for at least 10 years, which is far longer than is typical in most
publicly listed companies and ensures that they are focused on the long term performance of the company.
The following chart shows Berkeley’s Total Shareholder Return (“TSR”) performance against the FTSE 250, FTSE 100 and FTSE All Share
indices since 2011.
500
450
400
350
300
250
200
150
100
50
0
Berkeley Group
Holdings plc
FTSE 250 Index
FTSE 100 Index
FTSE All Share Index
2011
2012
2013
2014
2015
2016
2017
2018
how is our approach to incentives linked to the Company strategy?
The Company’s overall strategic objective is to provide long-term sustainable risk adjusted returns to shareholders in an inherently
cyclical market place. The Remuneration Committee’s purpose in designing the 2011 LTIP and Bonus Plan was to ensure the
incentivisation and retention of the Executive Directors to successfully meet this objective. Over the period since the introduction of
these Plans the Committee has adjusted their implementation to support the operationalisation of this objective.
The following table summarises how the Plans meet the primary objective and how they have been adjusted to support the
operationalisation of this objective over the period.
OBJeCtive
BOnuS PlAn
2011 ltiP
To provide long-term sustainable risk adjusted
returns to shareholders in an inherently
cyclical market place.
The Committee committed to setting performance
conditions to ensure that, over the six year plan
period, the average ROE and NAV growth targets
were in the following ranges:
— ROE range 20% to 25% p.a.;
— NAV Growth range 0% to 5% p.a.
The Plan complemented the 2011 LTIP by setting
stretching ROE targets, a measure of annual
profitability, underpinned by a net asset measure
to ensure measured and consistent delivery of the
Shareholder Returns.
The Bonus Plan provides long-term alignment with
shareholders and retention of participants through
the deferral of part of any bonus earned each year in
shares with the final payment from the Bonus Plan
being six years after its introduction.
OPeRAtiOnAliSAtiOn Of thiS
OBJeCtive
Returns to shareholders enhanced resulting
from performance and good market
conditions following the Financial Crisis.
Including share buy-backs as part of the
returns to shareholders committed to by the
Company as part of the strategy. Ensuring
that returns are provided in the most value
enhancing way to shareholders.
Provision of annual tranche payments of the
return to shareholders to provide greater
line of sight to when payments would be
made and ensuring greater discipline on
management around the timing of payments.
Introduction of caps on remuneration to
reflect the potential reputational issues of
high levels of remuneration irrespective of the
level of performance achieved.
In order to ensure a maximum level of remuneration
payable to the Executive Directors in the year bonus
payments are part of the remuneration subject to an
annual Total Remuneration Cap.
The 2011 LTIP targets significant returns to
shareholders in cash over a sustained period of 10
years, whilst maximising the value of the ongoing
business; creating a dynamic balance between
investment in the business and cash returns.
The 2011 LTIP provides long-term alignment with
shareholders and the retention of participants
through the use of options which may not be fully
vested and exercised prior to 2023.
The Company announced in December 2015 that
it was increasing the shareholder returns from
£13.00 per share to £16.34 per share, reflecting
the strength of the business following investment
at the end of the Financial Crisis and strong
subsequent London market.
The Committee amended the 2011 LTIP so
that share buy-backs would be included in the
targeted levels of return to shareholders. To
ensure no element of double benefit the exercise
price of options is only reduced by actual
dividend payments.
Following the amendment of the 2011 LTIP
the options granted have been separated into
individual tranches with an associated annual
return target. If the annual return target is not met
the options lapse.
There is a separate annual LTIP Cap which limits
the value of options vesting in the year.
In addition, to this LTIP Cap which applies to the
Executive Directors there is an overall cap on the
value of shares provided under the 2011 LTIP of
£35 per share.
how do we share our success with our employees?
The Company believes in fairness throughout the organisation and sharing the Company’s success with employees. The following table
sets out our approach to remuneration throughout the organisation in more detail.
element Of
RemuneRAtiOn
DetAilS
Salary
Pension
Benefits
Bonus
We set salaries to ensure that we remain competitive in the market and that levels are appropriate considering
roles and responsibilities of individuals. We have also committed to ensuring that all our employees receive at
least the voluntary Living Wage as set by the Living Wage Foundation.
We provide either a contribution to a pension arrangement or a payment in lieu of pension. The maximum
pension contribution for employees is 15% of salary.
We offer a range of benefits to our employees, including medical insurance.
Each business operates a bonus scheme for its employees. For senior employees elements of the bonus plan
are linked to the performance of the relevant Division and are deferred to ensure performance over the long
term and to provide lock-in.
Medium term incentives
In addition, medium term incentive schemes are in place for all levels of staff, with currently over one third of all
employees receiving awards under these schemes.
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PART C: ANNUAL REPORT ON REMUNERATION
This section of the Remuneration Report contains details of how the Company’s remuneration policy for Directors was implemented
during the financial year that ended on 30 April 2018. An advisory resolution to approve this report (including the Chairman’s
Statement) will be put to shareholders at the AGM in September 2018.
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 2017/18 financial
year. The components of the single figure for 2017/18 are aligned with the calculation of the individual elements of remuneration for the
purposes of the remuneration caps, which were introduced as part of the Remuneration Policy approved by shareholders at the 2017 EGM.
exeCutive
DiReCtOR £’000
SAlARy
2018
PenSiOn
2018
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi(7)
P Vallone(7)
200
545
370
355
355
141
141
—
92
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53
53
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BOnuS
2018(1)
ltiP 2018
tOtAl
RemuneRAtiOn
2018
Cap(2)
Actual(3)
Cap(4) Actual(5)
—
8,000
8,000
8,200
8,200
1,635
5,500
5,500
8,000
7,772
3,165
3,118
2,000
2,000
2,000
2,000
3,250
3,250
3,750
3,750
5,000
4,939
1,150
1,150
—
—
2,400
2,400
444
444
740
710
781
282
282
BenefitS
2018(6)
tOtAl
2018
56
34
20
24
21
6
7
8,256
7,806
3,185
3,142
4,960
450
451
Notes
1. This represents the contribution into the Bonus Plan for the level of performance achieved in the financial year. 50% of this contribution is deferred in
shares or share equivalents. The actual bonus payments made in the year are set out on page 102.
2. The LTIP Cap limits the value of the LTIP vesting in the year. This was introduced as part of the Remuneration Policy approved by shareholders at the
2017 EGM (see page 115 for further details).
3. This represents the second tranche of the 2011 LTIP that vested on 2 October 2017 at share price at £37.36 subject to the operation of the LTIP Cap (see
table on page 103 for details). Where the LTIP value would have been greater without the Cap, it is the capped amount which is payable and therefore
disclosed in the single figure of remuneration.
4. The Total Remuneration Cap limits the amount of total remuneration that has been earned over the financial year and is capable of being paid out. This
was introduced as part of the Remuneration Policy approved by shareholders at the 2017 EGM (see page 113 for further details).
5. The Total Remuneration Cap operated for the 2017/18 financial year and where the remuneration would have been greater without the Cap, it is the
capped amount which is payable and therefore disclosed in the single figure of remuneration.
6. Benefits, which are not included in calculating the remuneration cap, include a fully expensed company car or cash allowance alternative and medical
insurance.
7. J Tibaldi and P Vallone became Executive Directors on 8 December 2017. The single figure includes their remuneration since joining the Board.
Comparative figures for 2016/17, as disclosed in last year’s Directors’ Remuneration Report, are set out in the table below.
exeCutive DiReCtOR
(£’000)
SAlARy
2017
BenefitS
2017
AnnuAl
BOnuS
2017(1)
multi-yeAR inCentive
veStinG AwARDS
2017(2)
PenSiOnS
2017
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
875
530
360
345
345
53
34
19
25
21
1,312
795
360
345
379
26,803
26,514
5,177
5,406
11,943
149
90
54
52
52
tOtAl
2017
29,192
27,963
5,970
6,173
12,740
Notes
1. In accordance with the old Remuneration Policy, in 2016/17 the Company disclosed 50% of the contribution into the Bonus Plan for the level of
performance achieved in the financial year because of the ongoing risk of performance based forfeiture of the deferred amount. Following consultation
with shareholders on the new Policy and to provide greater transparency on what is actually earned in respect of the year 100% of the contribution is
now disclosed under the new Policy.
2. The impact of the treatment under the old Remuneration Policy of bonus was that when the risk of performance based forfeiture was removed on the
deferred amount it was disclosed in the single figure table as a multi-year incentive along with any vesting element of the 2011 LTIP. Under the new Policy
because 100% of the contribution into the Bonus Plan for the level of performance achieved in the financial year is disclosed in respect of that year there
will be no elements of deferred bonus disclosed as multi-year awards.
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The table below sets out the single total figure of remuneration and breakdown for each Non-executive Director. Non-executive
Directors do not participate in any of the Company’s incentive arrangements nor do they receive benefits.
nOn-exeCutive DiReCtOR
(£’000)
J Armitt
A Nimmo
G Barker
V Wadley
A Li
A Myers
D Brightmore-Armour
P Vernon (2)
R Downey (3)
BASiC feeS
ADDitiOnAl feeS(1)
tOtAl feeS
2018
116.0
64.0
64.0
64.0
64.0
64.0
64.0
41.8
25.3
2017
2018
2017
112.5
62.0
62.0
62.0
62.0
62.0
62.0
N/A
N/A
—
—
13.0
—
—
13.0
—
—
—
—
—
12.5
—
—
12.5
—
N/A
N/A
2018
116.0
64.0
77.0
64.0
64.0
77.0
64.0
41.8
25.3
2017
112.5
62.0
74.5
62.0
62.0
74.5
62.0
N/A
N/A
Notes
1. Additional fees represent fees paid for the role of Committee Chairmanship.
2. P Vernon was appointed to Board as a Non-executive Director on 6 September 2017.
3. R Downey was appointed to Board as a Non-executive Director on 8 December 2017.
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 financial year, the Executive Directors’ performance was carefully reviewed by the Committee. The actual performance
against the maximum targets under Bonus Plan for the performance year 2017/18 is set out below:
mAximum
AnnuAl BOnuS
(% Of SAlARy)
RetuRn Of equity
net ASSet vAlue
GROwth
maximum
target
Actual
maximum
target
Actual
AnnuAl BOnuS
COntRiButiOn tO
PlAn ACCOunt
fOR 2017/18
% Of mAximum
AnnuAl BOnuS
COntRiButiOn tO
PlAn ACCOunt
fOR 2017/18
£’000
—
300%
200%
200%
220%
200%
200%
30.0%
39.3%
5.0%
22.6%
100%
—
1,635
740
710
781
710
710
exeCutive
DiReCtOR
A W Pidgley(1)
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi(2)
P Vallone(2)
Notes
1. Under the new Remuneration Policy with effect from 1 May 2017, A W Pidgley is no longer eligible to earn new contributions under the Bonus Plan. The
balance of his Plan account will however continue to pay out in accordance with the terms and timings under the previous Remuneration Policy.
2. As stated in the RNS Announcement of their appointment J Tibaldi and P Vallone have participated in the Bonus Plan for the entire year. All their
previous annual and deferred bonus and incentive entitlements lapsed on their appointment as Executive Directors, other than their existing awards
under the Company’s 2011 LTIP.
100
100
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Further details of the matrix of targets against which performance has been assessed for the year ended 30 April 2018 is set out below:
PeRfORmAnCe RequiRement
mAtRix
y
t
i
u
q
e
n
O
n
R
u
t
e
R
<25.0%
25.0%
27.0%
29.0%
31.0%
33.0%
35.0%
0%
50%
60%
70%
80%
90%
100%
<0%
0%
0%
0%
0%
0%
0%
0%
0%
0.0%
50%
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%
35%
42%
49%
56%
63%
70%
3.0%
80%
0%
40%
48%
56%
64%
72%
80%
4.0%
90%
0%
45%
54%
63%
72%
81%
90%
5.0%
100%
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 2017/18.
2. Straight line bonus vesting between points.
3. Return on Equity (ROE) is defined as profit before tax divided by average shareholders’ funds.
4. Net Asset Value Growth is defined as the annual percentage increase in the Net Asset Value.
Whilst the bonus payable for all the Executive Directors will be determined based on the satisfaction of the Group targets, divisional
performance continues to be an important part of the Committee’s assessment. The Committee assessed the performance of each
individual division and Director for 2017/18 and determined that the bonus as calculated was reflective of performance during the period.
The Committee did not use any discretion during the period to adjust bonus amounts.
Bonus earned but deferred under the Bonus Plan (Audited)
Under the Bonus Plan, the earned bonus for the year is added to each individual Director’s plan account. 50% of the balance of the Plan
account at the end of the financial year is released in cash and 50% deferred. See the summary of the Remuneration Policy on page 112
for details of the operation of the Bonus Plan.
A. PlAn
ACCOunt
BROuGht
fORwARD
ShAReS
62,781
38,031
17,225
16,500
18,150
—
—
B. PlAn
ACCOunt
BROuGht
fORwARD(1)
C. COntRiButiOn
intO PlAn
ACCOunt fOR
the finAnCiAl
yeAR 2017/18(2)
D. PlAn ACCOunt
BAlAnCe
fOllOwinG
COntRiButiOn
fOR finAnCiAl
yeAR 2017/18
e. AmOunt PAiD
fOllOwinG
COntRiButiOn
fOR finAnCiAl
yeAR 2017/18 (50%
Of COlumn D)
f. PlAn
ACCOunt
CARRieD
fORwARD
G. PlAn
ACCOunt
CARRieD
fORwARD(3)
£’000
2,624
1,590
720
690
759
—
—
£’000
£’000
£’000
£’000
ShAReS
—
1,635
740
710
781
710
710
2,624
3,225
1,460
1,400
1,540
710
710
(1,312)
(1,612)
(730)
(700)
(770)
(355)
(355)
1,312
1,612
730
700
770
355
355
32,227
39,598
17,928
17,188
18,907
8,718
8,718
152,687
6,383
5,286
11,669
(5,834)
5,834
143,284
exeCutive
DiReCtOR
A W Pidgley(4)
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi(5)
P Vallone(5)
total
Notes
1. Converted at a share price of £40.72 at 30 April 2018 plus £0.5176 dividend paid on 15 September 2017 and £0.5675 dividend paid on 23 March 2018.
2. Contribution into the plan account for the year is the amount disclosed in the single figure table for 2017/18.
3. Converted at a share price of £40.72 at 30 April 2018.
4. Under the new Remuneration Policy which took effect on 1 May 2017, A W Pidgley is no longer eligible to earn new contributions under the Bonus Plan.
The balance of his Plan account will however continue to pay out in accordance with the terms and timings under the previous Remuneration Policy.
5. As stated in the RNS Announcement of their appointment J Tibaldi and P Vallone have participated in the Bonus Plan for the entire year. The 2017/18
financial year was their first year of participation and therefore there is no Plan account balance to be brought forward. All their previous annual and
deferred bonus and incentive entitlements lapsed on their appointment as Executive Directors, other than their existing awards under the Company’s
2011 LTIP. The amount disclosed in the single figure table reflects the amount for the period since appointment to the Board.
6. All amounts are rounded to the nearest £’000.
long term incentives (Audited)
The second vesting of options under the 2011 LTIP occurred on 2 October 2017. The maximum level of options capable of vesting was
13.4% of the total grant provided that £277.7 million of shareholder returns had been made in the year to September 2017, through a
combination of dividends and share buy-backs. This performance condition was met in full and therefore 13.4% of options vested.
The table below sets out the numbers of options over shares that vested for each Executive Director and the achievement against the
conditions required for vesting taking into account the application of the LTIP Caps (see page 115 for further information on the LTIP
Caps).
OPtiOnS
GRAnteD
unDeR 2011
ltiP
PeRCentAGe
Of OPtiOnS
CAPABle Of
veStnG
PeRfORmAnCe
meASuRe AnD
OutCOme
OPtiOnS
CAPABle
Of veStinG
vAlue Of
GAin On
veSteD
OPtiOnS(1)
ltiP CAP
(AnD vAlue
veStinG)(2)
numBeR Of
OPtiOnS
veSteD (AfteR
APPliCAtiOn
Of CAP)(3)
vAlue
ABOve the
ltiP CAP(4)
BAnkeD
OPtiOnS(5)
A W Pidgley
5,000,000
R C Perrins
5,000,000
R J Stearn
954,328
13.4%
K Whiteman
1,000,000
S Ellis
2,250,000
£277.7m of
shareholder
returns from
October
2016 to 30
September
2017 — 100%
achieved
670,000
19,249,100 8,000,000
278,455
11,249,100
391,545
670,000
19,249,100
5,500,000
191,438
13,749,100
478,562
127,880
3,673,991
2,000,000
69,614
1,673,991
134,000
3,849,820 2,000,000
69,614
1,849,820
58,266
64,386
301,500
8,662,095
3,750,000
130,526
4,912,095
170,974
Notes:
1. The value of gain on the options at vesting is calculated using the closing middle market share price of £37.36 on 2 October 2017 (the date the options
vested and became exercisable) less the exercise price of £8.63 per share.
2. The LTIP Cap limits the value of the LTIP vesting in the year. This was introduced as part of the Remuneration Policy approved by shareholders at the
2017 EGM (see page 115 for further details). The LTIP Cap operated for the 2017/18 financial year and where the LTIP value would have been greater
without the Cap, it is the capped amount which is payable and therefore disclosed in the single figure of remuneration.
3. This is the actual number of options which vested on 2 October 2017 and can be exercised by the participants.
4. This is the value of the options above the LTIP Cap which would have vested had the Cap not operated.
5. This is the number of options representing the value above the Cap. which are banked and capable of vesting at a future vesting date.
6. Each Executive Director exercised all the options that vested on 2 October 2017. Under the rules of the Plan, after the sale of shares to pay tax, only 10%
of shares are permitted to be sold each year until 30 September 2023 at which point the sale restriction falls away.
7. J Tibaldi and P Vallone became Executive Directors on 8 December 2017 and their awards under the 2011 LTIP, following their appointment, will also be
subject to the LTIP cap, as set out on page 115 .
total pension entitlements (Audited)
No Executive Directors participate in any defined benefit arrangements.
As set out in the 2017 EGM Notice from 1 May 2017, A W Pidgley no longer receives a pension contribution from the Company.
S Ellis is a member of a defined contribution scheme and received a contribution equal to 15% of salary. P Vallone is also a member of a
defined contribution scheme and received an element of his pension entitlement of 15% of salary as contributions, with the remainder
received by way of payments in lieu of a pension contribution from the Company.
No amounts were paid into pension arrangements in respect of R C Perrins, K Whiteman, R J Stearn and J Tibaldi during the year ended
30 April 2018, who instead received payments in lieu of a pension contribution from the Company (2017/18: percentages of salary 17%,
15%, 15%, and 15% respectively).
Payments to past Directors (Audited)
During the period the Company settled the proceedings brought by Mr Nicolas Simpkin, its former Finance Director, in the Employment
Tribunal and High Court. Under the settlement Berkeley made a payment of £4.95 million to Mr Simpkin and a further payment of
£4.55 million towards his legal fees and disbursements. On being dismissed by the Company, Mr Simpkin’s options over 3.5 million
shares in the Company lapsed. All allegations made by Mr Simpkin in the proceedings have been withdrawn.
Payments for loss of office (Audited)
None.
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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 Chairman and Chief Executive 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 £40.72 on 30 April 2018, compliance with these requirements was as follows:
exeCutive
DiReCtOR(1)
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi(1)
P Vallone(1)
nOn-exeCutive
DiReCtOR(2)
J Armitt
A Nimmo
G Barker
V Wadley
A Li
A Myers
D Brightmore-Armour
P Vernon(2)
R Downey(2)
OBliGAtiOn
(% BASe SAlARy)
ACtuAl ShARehOlDinG
AS % BASe SAlARy
At 30 APRil 2018
AChievement
At 30 APRil 2018
400%
400%
200%
200%
200%
200%
200%
90,541%
9,565%
1,422%
2,967%
2,825%
191%
174%
√
√
√
√
√
n/a
n/a
OBliGAtiOn
(% neD net feeS)
ACtuAl ShARehOlDinG
AS % net feeS
At 30 APRil 2018
AChievement
At 30 APRil 2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
518%
240%
1,096%
463%
2,401%
299%
120%
—
—
√
√
√
√
√
√
√
n/a
n/a
Notes
1. To be achieved within 5 years of appointment.
2. To be achieved within 3 years of appointment
The table below summarises the Directors’ interests in shares at 30 April 2018.
BenefiCiAlly
OwneD ShAReS(1)
4,446,995
1,280,158
129,170
258,634
246,327
16,654
15,210
PlAn inteReStS — OPtiOnS AnD AwARDS OveR ShAReS
2011 ltiP OPtiOn
inteReStS SuBJeCt
tO COnDitiOnS(2)
OtheR AwARDS
SuBJeCt tO
COnDitiOnS(3)
tOtAl inteReStS
helD
2,680,000
2,680,000
511,520
536,000
1,206,000
300,000
300,000
—
—
8,834
—
—
—
—
2,680,000
2,680,000
520,354
536,000
1,206,000
300,000
300,000
exeCutive
DiReCtOR
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
104
104
nOn-exeCutive
DiReCtOR
BenefiCiAlly
OwneD ShAReS(1)
2011 ltiP OPtiOn
inteReStS SuBJeCt
tO COnDitiOnS(2)
OtheR AwARDS
SuBJeCt tO
COnDitiOnS(3)
tOtAl inteReStS
helD
PlAn inteReStS — OPtiOnS AnD AwARDS OveR ShAReS
J Armitt
A Nimmo
G Barker
V Wadley
A Li
A Myers
D Brightmore-Armour
P Vernon(4)
R Downey(5)
8,112
2,000
10,982
4,000
20,000
3,000
1,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Notes
1. Beneficial interests include shares held directly or indirectly by connected persons.
2. The second tranche of the 2011 LTIP awards vested and were exercised during the year by the Executive Director participants (see page 103 for details).
3. Other share awards subject to conditions relate to the buy-out shares awarded to R J Stearn on joining Berkeley on 13 April 2015 (the performance
conditions on these shares had been met at the point of the buy-out). Full details were set out in the 2014/15 Directors’ Remuneration Report. In the
event that dealing restrictions were to apply when awards vest, the Company decided that share awards would be converted into a nil-cost option over
the same number of shares on 29 April 2016. The change provides no additional benefit to R J Stearn.
4. P Vernon was appointed to Board as a Non-executive Director on 6 September 2017.
5. R Downey was appointed to Board as a Non-executive Director on 8 December 2017.
There are no vested but unexercised options. Between 30 April 2018 and the date this report was signed there were no changes to the
beneficial interests shown above.
Performance and Group Chairman and Chief executive pay over past 9 years
The graph below shows the Company’s performance, measured by total shareholder return (“TSR”), compared with the performance of
the FTSE 250, FTSE 100 and the FTSE All Share indices. The Company considers these the most relevant indices for total shareholder
return disclosure required under these Regulations.
600
550
500
450
400
350
300
250
200
150
100
50
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Berkeley Group
Holdings plc
FTSE 250 Index
FTSE 100 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.
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The table below shows the remuneration of the Chairman and Chief Executive for each of the financial years shown in the graph on
page 105. Given the nature of the roles of A W Pidgley and R C Perrins, the table below provides information on both individuals.
Relative importance of spend on pay
The table below sets out the relative importance of spend on pay in the 2017/18 and 2016/17 financial years compared with distributions
to shareholders.
exeCutive
DiReCtOR
2017/18
2016/17
2015/16
2014/15
2013/14
2012/13
2011/12
2010/11
2009/10
SinGle tOtAl fiGuRe Of RemuneRAtiOn
(£’000)(1)
A w PiDGley
ChAiRmAn
R C PeRRinS
Chief exeCutive
AnnuAl BOnuS
PAy-Out
(AS % mAximum
OPPORtunity)(2)
8,256
29,192
21,489
23,296
3,757
3,638
2,799
2,033
2,406
7,806
27,963
10,993
12,357
2,271
2,198
1,692
1,226
1,127
100%
100%
100%
100%
100%
100%
100%
100%
100%
multi-yeAR
inCentive
veStinG AwARDS
(AS % mAximum
OPPORtunity)
100%/See Note 7
100%/See Note 6
100%/See Note 5
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, introduced in 2010/11 and then
the new six year Bonus Plan put in place for 2015/16.
3. 2011/12, 2012/13 and 2013/14 Multi-year vesting awards represent deferred awards that were released during the year under the initial Bonus Plan. In
accordance with the initial 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, the last financial year of the initial Bonus
Plan, there were no forfeiture events under the Bonus Plan.
4. 2014/15 Multi-year vesting represents the 2009 LTIP Part B awards that vested during the year and the deferred Bonus Plan awards as per note 3 above.
5. 2015/16 Multi-year vesting represents the 2009 LTIP Part B awards that vested during the year.
6. 2016/17 Multi-year vesting represents the 2011 LTIP first tranche that vested during the year and deferred awards that were released during the year under
the Bonus Plan.
7. 2017/18 Multi-year vesting represents the 2011 LTIP second tranche that vested during the year (see table on page 103 for details) and deferred awards
that were released during the year under the Bonus Plan (see table on page 102 for details).
Percentage change in Chief executive’s remuneration
The Committee has determined that for 2017/18 and on an ongoing basis it will disclose only the percentage change in the Chief
Executive’s pay. This follows the changes to the Chairman’s remuneration as part of the Remuneration Policy approved by shareholders
at the 2017 AGM where on an ongoing basis he receives fees only and payments from the legacy incentive awards he holds.
The following table compares the Chief Executive’s pay (including salary, taxable benefits and annual bonus) between 2016/17 and
2017/18, 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:
2016/17 tO 2017/18 yeAR On yeAR ChAnGe (%)
R C PeRRinS
Chief exeCutive
GROuP emPlOyeeS
2.8%
(0.2%)
2.8%
4.6%
(9.0%)
4.2%
Base salary
Taxable benefits
Annual bonus
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Remuneration of Group employees (including Directors)
Distributions to shareholders
2017/18
(£m)
220
287
2016/17
(£m)
194
299
% ChAnGe
13%
(4%)
Statement of implementation of Remuneration Policy for 2018/19
executive Directors
The Remuneration Policy and its implementation for the forthcoming financial year is summarised below. As disclosed in our 2016/17
Directors’ Remuneration Report, the Remuneration Committee has determined under the new Remuneration Policy that the only
remuneration payable to the Chairman other than an annual fee of £200,000 will be provided through the award that was granted to
him under the 2011 LTIP (provided the performance conditions are met) and the earned balance in his Bonus Plan account which will
continue to pay out in line with the rules of the Plan. There will be no entitlement to other salary, pension or bonus.
Salary: In reviewing the salaries of the Executive Directors for 2018/19, the Committee has also taken account of the employment
conditions and salary increases awarded to employees throughout the Group, which were on average 4.4%. The salaries for 2018/19 are
set out below:
exeCutive
DiReCtOR
A W Pidgley(2)
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
2017/18
SAlARy
(£’000)
2018/19
SAlARy(1)
(£’000)
ftSe 100 — £’000
% ChAnGe
lOweR
quARtile
meDiAn
uPPeR
quARtile
200
545
370
355
355
355
355
200
545
370
355
355
355
355
—
—
—
—
—
—
—
310
793
473
426
426
426
426
410
890
568
539
539
539
539
575
1,102
718
699
699
699
699
Notes
1. The Remuneration Committee awarded the Executive Directors salary increases of 2.8% for 2018/19 but the Executives decided not to take these in
recognition of the uncertainty in today’s operating environment.
2. As set out in the 2017 EGM Notice, from 1 May 2017, A W Pidgley’s salary for 2017/18 and ongoing was set at an annual fee of £200,000. This fee is
benchmarked in the table above against fees for Non-executive Chairmen.
Benefits and Pension: The pension contributions for 2018/19 are as follows:
exeCutive
DiReCtOR
A W Pidgley(1)
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
2018/19
PenSiOn COntRiButiOn
(% Of SAlARy)
0%
17%
15%
15%
15%
15%
15%
Notes
1. As set out in the 2017 EGM Notice, from 1 May 2017, A W Pidgley no longer receives a pension contribution from the Company.
No changes proposed to benefits in 2018/19.
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Bonus Plan: The maximum bonus opportunities for the year ending 30 April 2019, the third year of operation, are set out below. As set
out in the 2017 EGM Notice, A W Pidgley will no longer be eligible to earn new contributions under the Bonus Plan going forward. The
maximum bonus potential for the other Executive Directors are the same as those provided last financial year.
Caps on LTIP Value and Total Remuneration: For 2017/18 and onwards the Remuneration Committee has introduced remuneration
caps on the value provided under the Remuneration Policy each year. The following table shows the annual LTIP Cap and the Total
Remuneration Cap for each Executive Director.
exeCutive
DiReCtOR
R C PeRRinS
R J SteARn k whitemAn
S elliS
J tiBAlDi
P vAllOne
Maximum Bonus (% of salary)
300%
200%
200%
220%
200%
200%
The table below sets out the targets in respect of the forthcoming year for all Executive Directors.
Group performance condition (year ending 30 April 2019)
In line with best practice bonus targets are disclosed prospectively in full.
PeRfORmAnCe RequiRement
mAtRix
y
t
i
u
q
e
n
O
n
R
u
t
e
R
<20.0%
20.0%
21.5%
23.0%
24.5%
26.0%
27.5%
0%
50%
60%
70%
80%
90%
100%
<0%
0%
0%
0%
0%
0%
0%
0%
0%
0.0%
50%
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%
35%
42%
49%
56%
63%
70%
3.0%
80%
0%
40%
48%
56%
64%
72%
80%
4.0%
90%
0%
45%
54%
63%
72%
81%
90%
5.0%
100%
0%
50%
60%
70%
80%
90%
100%
The Committee when setting the Group performance conditions follows the approach agreed with shareholders as part of the approval
of the Bonus Plan. The Committee committed to setting performance conditions to ensure that, over the six year plan period, the
average ROE and NAV growth targets were in the following ranges:
— ROE range 20% to 25% p.a.;
— NAV Growth range 0% to 5% p.a.
The Committee believes that taking into account the market faced by the Company and the strategy set that the above targets are
suitably challenging given the incentive opportunity that can be earned. The ROE targets reflect the Company’s expectations on
performance over the next period in the context of the prevailing market uncertainty and risk. The Company noted in last year’s report
that profitability would normalise from 2018/19, following the delivery of exceptional profits generated from investment made at the end
of the Financial Crisis which has seen annualised ROE of approximately 35% over the first three years of the six year Bonus Plan. The
targets set for 2018/19, at 20% to 27.5% are above the long-term average set for the Plan and reflect the beginning of this transition.
The NAV Growth condition remains the same as the Committee believes this together with the ROE condition provide the appropriate
dynamic tension with the requirement to pay dividends whilst maintaining the Company’s asset base.
Whilst the bonus payable for all the Executive Directors will be determined by the satisfaction of the Group targets, the divisional
performance continues to be an important part of the Committee’s assessment. At the discretion of the Committee the failure of a
particular Division to meet its individual targets may result in a reduction to the bonus amount paid to the relevant Divisional Director.
Long term incentives: The current Executive Directors will not be granted additional options under the 2011 LTIP.
exeCutive DiReCtOR
A W Pidgley(2)
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
ltiP CAP (1)
(£’000)
OtheR elementS
(SAlARy, BOnuS & PenSiOn)
(£’000)
tOtAl RemuneRAtiOn
CAP (1)
(£’000)
8,000
5,500
2,000
2,000
3,750
1,150
1,150
200
2,500
1,250
1,250
1,250
1,250
1,250
8,200
8,000
3,250
3,250
5,000
2,400
2,400
Notes
1. The Total Remuneration Cap covers Salary, Bonus; Pension; and LTIP options. The LTIP Cap covers the value at vesting of LTIP options and is a separate
cap within the overall Total Remuneration Cap. In the operation of the LTIP Cap where shares have vested as a result of the performance conditions being
met but the value is capped in a given year, the balance of the shares will be banked and carried forward. This banked balance will still be subject to
continued employment but will become exercisable at the next vesting date provided the Caps are not exceeded. This process will continue until 2023 at
which point any banked shares which have not become exercisable will lapse. The Remuneration Committee has extended the period over which banked
shares become exercisable to 2023 to provide a longer lock-in of participants. The LTIP Cap provides an extension of two years from when the 2011 LTIP
was originally due to finish in 2021.
2. From 1 May 2017, the Remuneration Committee determined under the Remuneration Policy that the only remuneration payable to the Chairman is a fixed
fee of £200,000 p.a., other than the award that was granted to him under the 2011 LTIP, which will be subject to the new remuneration caps, and the
earned balance in his Bonus Plan account which will continue to pay out in line with the rules of the Plan. There will be no entitlement to other salary,
pension or bonus. The Remuneration Committee believes that the Chairman should primarily be rewarded through the equity incentives which reflect
both the historic value he has helped create and his ongoing strategic role with the Company to ensure an alignment of his interests with shareholders.
non-executive Directors
The following table sets out the fee rates for the Non-executive Directors in the year ended 30 April 2018 and those rates which will
apply in the year ending 30 April 2019:
nOn-exeCutive
DiReCtOR
Deputy Chairman and SID fees
Basic Fee (1)
Additional fee for chairmanship of Committee
2017/18
(£’000)
116.0
64.0
13.0
2018/19
(£’000)
119.5
66.0
13.0
% ChAnGe
3.0%
3.1%
—
Notes
1. The fee for Sir John Armitt, the outgoing SID and Deputy Chairman, has been set at £80,000, reflecting his experience and pre-eminent standing in
construction and infrastructure, and the value he continues to add to the Board.
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Service contracts
Details of the service contracts or letters of appointment for the current Directors are as follows:
Role of the Committee and activities
The key responsibilities of the Committee are to:
DAte Of COntRACt/
letteR Of
APPOintment
24 June 1994
15 July 2002
exPiRy DAte
nOtiCe PeRiOD
By COmPAny
OR DiReCtOR
Rolling service contract with no fixed expiry date
12 months
Rolling service contract with no fixed expiry date
12 months
— 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;
3 October 2014
Rolling service contract with no fixed expiry date
12 months
— Take into account the views of shareholders when determining plans under the Remuneration Policy;
15 January 1996
Rolling service contract with no fixed expiry date
12 months
— Ensure that the contractual terms on termination, and any payments made, are fair to the individual and the Company and that failure
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i
exeCutive
DiReCtOR
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
5 May 2004
30 June 1999
Rolling service contract with no fixed expiry date
12 months
Rolling service contract with no fixed expiry date
12 months
25 September 1990
Rolling service contract with no fixed expiry date
12 months
nOn-exeCutive
DiReCtOR
DAte Of COntRACt/
letteR Of
APPOintment
exPiRy DAte
nOtiCe PeRiOD
By COmPAny
OR DiReCtOR
J Armitt
A Nimmo
G Barker
V Wadley
A Li
A Myers
1 October 2007
Renewable annually on 1 May
5 September 2011
Renewable annually on 1 May
3 January 2012
3 January 2012
Renewable annually on 1 May
Renewable annually on 1 May
2 September 2013
Renewable annually on 1 May
6 December 2013
Renewable annually on 1 May
D Brightmore-Armour
1 May 2014
Renewable annually on 1 May
P Vernon
R Downey
6 September 2017
Renewable annually on 1 May
8 December 2017
Renewable annually on 1 May
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
All service contracts and letters of appointments are available for viewing at the Company’s registered office. The Company’s practice
is to appoint the Non-executive Directors under letters of appointment, which are renewable annually on 1 May. They are subject to the
provisions of the Articles of Association dealing with appointment and rotation every three years, however in accordance with the UK
Corporate Governance code all Directors are subject to annual re-election.
When setting notice periods for Executive Directors, the Committee has regard to market practice and corporate governance best
practice. Notice periods will not be greater than 12 months.
Consideration by the Directors of matters relating to Directors’ remuneration
members of the Committee
The Committee currently comprises of three Independent Non-executive Directors, G Barker (Chairman), A Myers and P Vernon.
Sir J Armitt stood down as a member of the Committee on 18 April 2018, and P Vernon was appointed to the Committee on 18 April
2018. 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.
numBeR Of meetinGS
DuRinG finAnCiAl yeAR
numBeR Of meetinGS
AttenDeD
3
3
3
3
3
3
DiReCtOR
G Barker
Sir J Armitt
A Myers
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is not rewarded; and
— Note annually the remuneration trends and any major changes in employee benefit structures across the Company or Group.
The Committee has formal terms of reference which describes its full remit. These can be downloaded from the section dealing with
Investor Relations on the Berkeley website (www.berkeleygroup.co.uk).
The Committee’s activities during the 2017/18 financial year included:
meetinG
June 2017
itemS DiSCuSSeD
— Annual performance targets under the Bonus Plan
— Draft Remuneration Report for the year ended 30 April 2017
— Pay review for the Group for the year ended 30 April 2017
November 2017
— Market trends and governance review
March 2018
— Executive Remuneration Benchmarking report
— Operation of LTIP caps
Advisors to the Committee
In determining the Executive Directors’ remuneration for the year, the Committee consulted with the Chairman, A W Pidgley, the Chief
Executive, R C Perrins and the Finance Director, R J Stearn. No Director played a part in any discussion about his own remuneration.
PricewaterhouseCoopers LLP (PwC) are the independent remuneration advisor to the Committee. 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.
Statement of voting at General meeting
The table below shows the binding vote approving the Directors’ Remuneration Policy at the 2017 EGM and the advisory vote on the
Annual Report on Remuneration at the 2017 AGM.
Directors’ Remuneration Policy
95,192,980
Annual Report on Remuneration
81,907,253
vOteS fOR
%
97.18
83.91
vOteS AGAinSt
%
vOteS withhelD
2,737,132
15,701,650
2.79
16.09
1,774,458
19,222
The Remuneration Committee believes that with the very strong vote for the Directors Remuneration Policy there is no requirement to
amend the Policy or its operation for the year ahead.
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PART D: REMUNERATION POLICY SUMMARY
In line with the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, the Directors’
Remuneration Policy has been presented in this report in summary given that the Policy was approved at the 2017 EGM and it is not
intended to move a similar resolution again at the 2018 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.
key feAtuReS
mAximum OPPORtunity
PeRfORmAnCe
COnDitiOnS AnD
ASSeSSment
There are no performance
conditions on salary.
However, the performance
of the individual and the
Company are reflected in the
salary they are paid.
No recovery provisions apply.
Typically, the base salaries of
Executive Directors in post at the
start of the Policy Period and who
remain in the same role throughout
the Policy Period will be increased
by a similar percentage to the
average annual percentage
increase in salaries of all other
employees in the Group.
The Total Remuneration Cap may
apply to salary.
OBJeCtive AnD link
tO StRAteGy
exeCutive DiReCtORS
Base salary
To recruit and retain
Executive Directors of the
appropriate calibre and
experience to achieve
the Company’s business
strategy.
Pension and benefits
To provide competitive
levels of retirement
benefits.
Annual bonus
Aligns reward 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.
An Executive Director’s basic salary is set on
appointment and reviewed annually (effective
from 1 May each year) or when there is a
change in position or responsibility.
When determining an appropriate level of
salary, the Committee considers:
— the Executive Director’s experience and
responsibilities;
— the performance of the individual
Executive Director and the Group;
— pay and conditions throughout the Group;
— general salary rises to employees;
— the economic environment; and
— levels of base salary for similar positions
with comparable status, responsibility and
skills in peers.
The Company’s policy is either to provide a
contribution to a pension arrangement or
provide payments in lieu of pension. 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.
Under the Bonus Plan, awards are earned
annually over a six year plan period, subject to
stretching performance targets, which are set
at the beginning of the plan year.
50% of a participant’s 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.
Malus applies up to the date of payment.
Clawback applies three years post the date of
payment.
Shareholding
requirement
To ensure that Executive
Directors’ interests are
aligned with those of
shareholders over a longer
time horizon.
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.
nOn-exeCutive DiReCtORS
To attract Non-executive
Directors with the
requisite skills and
experience to contribute
to the strategy of the
Company and to review
its implementation.
Each Non-executive Director receives a fee
which relates to membership of the Board
and additional fees are paid for Committee
Chairmanship.
Changes are effective from 1 May each year.
Shareholding requirement for Non-executive
Directors equal to 100% of net fees.
Non-executive Directors do not participate
in any variable remuneration or benefits/
pension arrangements.
The maximum pension contribution
allowance for Executive Directors is
20% of salary.
Levels of benefits are defined by
market rates.
No performance or recovery
provisions apply.
The maximum bonus opportunity
is 300% of salary for any plan year.
In operation of the Bonus Plan the
following maximums are currently
applied:
R C Perrins 300%;
R J Stearn 200%
K Whiteman 200%
S Ellis 220%
J Tibaldi 200%
P Vallone 200%
The Total Remuneration Cap may
apply to new awards earned under
the Bonus Plan.
An award under the Bonus
Plan is subject to satisfying
financial and strategic/
operational performance/
personal performance
conditions and targets
measured over a period of
one financial year.
The current performance
condition is a matrix of
Return on Equity (ROE) and
Net Asset Value Growth
(NAV).
There is a risk adjustment
mechanism built into the
operation of the Bonus Plan.
If the threshold levels of ROE
or NAV are not met for any
financial year during the six
years of operation of the
Bonus Plan up to 50% of a
participant’s plan account will
be forfeited.
long term incentives
No plan available for
new grants during the
Policy Period to current
Executive Directors.
total Remuneration Cap
To achieve a balance
between the need to
reward and incentivise
the Executive Directors to
implement the Company
strategy and the interests
of other stakeholders in
the Company.
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.
Further details on the operation of the 2011 LTIP are set out below this table.
Individual caps will limit the amount of total
remuneration that has been earned over the
financial year and is capable of being paid
out.
The Total Remuneration Caps
for the Executive Directors
commencing on 1 May 2017 are
set out below:
None
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Individual Total Remuneration Caps are in
addition to the LTIP Cap.
The elements of remuneration subject to the
Total Remuneration Cap are:
— salary;
— bonus;
— pension; and
— 2011 LTIP (also subject to a separate
LTIP Cap).
Where the total remuneration would exceed
the Total Remuneration Cap the 2011 LTIP
vesting will be reduced first followed by the
bonus.
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tOtAl
RemuneRAtiOn
CAP P.A. (£’000’S)
8,200
8,000
3,250
3,250
5,000
2,400
2,400
A w PiDGley
R C PeRRinS
R J SteARn
k whitemAn
S elliS
J tiBAlDi
P vAllOne
400% of base salary for the Group
Chairman and Chief Executive.
200% of base salary for other
Executive Directors.
In general fee rises will be limited to
the level provided to employees of
the Company as a whole.
None
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2011 ltiP
2011 ltiP
The following subsisting options will continue to operate on the terms and conditions set out in the 2011 LTIP rules, as approved by
The following subsisting options will continue to operate on the terms and conditions set out in the 2011 LTIP rules, as approved by
shareholders. Full details of the subsisting options are set out in previous years’ Annual Reports on Remuneration. Options under these
shareholders. Full details of the subsisting options are set out in previous years’ Annual Reports on Remuneration. Options under these
arrangements do not form part of the ongoing Remuneration Policy; however payments may be made in the future subject to the
arrangements do not form part of the ongoing Remuneration Policy; however payments may be made in the future subject to the
achievement of the relevant performance conditions.
achievement of the relevant performance conditions.
OBJeCtive AnD link tO StRAteGy
OBJeCtive AnD link tO StRAteGy
key feAtuReS
key feAtuReS
mAximum OPPORtunity
mAximum OPPORtunity
PeRfORmAnCe COnDitiOnS AnD ASSeSSment
PeRfORmAnCe COnDitiOnS AnD ASSeSSment
exeCutive DiReCtORS
exeCutive DiReCtORS
To align Executive Directors’ interests with those of shareholders by
To align Executive Directors’ interests with those of shareholders by
focusing on creating sustainable superior returns to shareholders over a
focusing on creating sustainable superior returns to shareholders over a
ten year period.
ten year period.
The 2011 LTIP is a ten year plan which directly supports the Company’s
The 2011 LTIP is a ten year plan which directly supports the Company’s
corporate strategy.
corporate strategy.
The 2011 LTIP aims to make returns to shareholders in cash over a sustained
The 2011 LTIP aims to make returns to shareholders in cash over a sustained
period, ensuring that the Group remains at the right size and balances
period, ensuring that the Group remains at the right size and balances
investment and returns to shareholders.
investment and returns to shareholders.
Options vest in annual tranches based on cumulative return targets. The
Options vest in annual tranches based on cumulative return targets. The
exercise price of options will be £16.34 per share less an amount equal to the
exercise price of options will be £16.34 per share less an amount equal to the
value of all dividends paid between the date of approval of the 2011 LTIP and
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.
30 September 2021, provided the exercise price cannot be less than zero.
Individual caps (LTIP Caps) will limit the amount of an option that is capable
Individual caps (LTIP Caps) will limit the amount of an option that is capable
of exercise. Any options that are vested but not exercisable due to the LTIP
of exercise. Any options that are vested but not exercisable due to the LTIP
Cap, will be banked and be capable of exercise in subsequent years subject
Cap, will be banked and be capable of exercise in subsequent years subject
to the operation of the LTIP Cap in those years. The period over which
to the operation of the LTIP Cap in those years. The period over which
banked options can become exercisable has been extended for an additional
banked options can become exercisable has been extended for an additional
two years (2022 and 2023) after the end of the original performance period
two years (2022 and 2023) after the end of the original performance period
(2021). Any banked options which have not become exercisable by 2023 will
(2021). Any banked options which have not become exercisable by 2023 will
lapse.
lapse.
The total value of all options granted under the 2011 LTIP is subject to a global
The total value of all options granted under the 2011 LTIP is subject to a global
cap at vesting based on the following formulae: Number of shares subject
cap at vesting based on the following formulae: Number of shares subject
to Plan x £35 per share. The value of an option for the purpose of the cap
to Plan x £35 per share. The value of an option for the purpose of the cap
is calculated as the gain on vesting (market price of a share on vesting less
is calculated as the gain on vesting (market price of a share on vesting less
the exercise price x number of shares vesting). The global cap is allocated
the exercise price x number of shares vesting). The global cap is allocated
proportionately to each vesting. Any element of unused global cap will roll
proportionately to each vesting. Any element of unused global cap will roll
forward to the next vesting.
forward to the next vesting.
Any shares acquired through the exercise of options under the 2011 LTIP are
Any shares acquired through the exercise of options under the 2011 LTIP are
subject to a restriction that no more than 10% of these shares are eligible to
subject to a restriction that no more than 10% of these shares are eligible to
be sold each year until 30 September 2023 at which point the sale restriction
be sold each year until 30 September 2023 at which point the sale restriction
falls away. This limit is cumulative so if no shares are sold in a year that
falls away. This limit is cumulative so if no shares are sold in a year that
number can be sold in a subsequent year as well as the shares eligible for sale
number can be sold in a subsequent year as well as the shares eligible for sale
in respect of that year.
in respect of that year.
Malus applies up to the date of exercise Clawback applies two years post the
Malus applies up to the date of exercise Clawback applies two years post the
date of exercise.
date of exercise.
No new options will be granted under the 2011 LTIP to the current Executive Directors. On
No new options will be granted under the 2011 LTIP to the current Executive Directors. On
recruitment, a new Executive Director will be eligible to participate in the 2011 LTIP subject to
recruitment, a new Executive Director will be eligible to participate in the 2011 LTIP subject to
availability for new grants.
availability for new grants.
In order for options to vest, the following levels of return
In order for options to vest, the following levels of return
(through a combination of dividends and share buy-
(through a combination of dividends and share buy-
backs) must be provided to shareholders.
backs) must be provided to shareholders.
The maximum number of shares capable of being granted to all participants is 19,616,503
The maximum number of shares capable of being granted to all participants is 19,616,503
shares.
shares.
Options were granted to the current
Options were granted to the current
Executive Directors as follows:
Executive Directors as follows:
The following individual caps on the value of
options capable of exercise will operate:
executive
executive
Director
Director
A w Pidgley
A w Pidgley
R C Perrins
R C Perrins
R J Stearn
R J Stearn
k whiteman
k whiteman
S ellis
S ellis
J tibaldi
J tibaldi
P vallone
P vallone
number of
number of
shares
shares
5,000,000
5,000,000
5,000,000
5,000,000
954,328
954,328
1,000,000
1,000,000
2,250,000
2,250,000
300,000
300,000
300,000
300,000
executive
Director
A w Pidgley
R C Perrins
R J Stearn
k whiteman
S ellis
J tibaldi
P vallone
ltiP Cap
(£’000’s) (p.a.)
8,000
5,500
2,000
2,000
3,750
1,150
1,150
Date
Date
(By)
(By)
Sept
Sept
16
16
Sept
Sept
17
17
Sept
Sept
18
18
Sept
Sept
19
19
277,690,956*
277,690,956*
277,690,956*
277,690,956*
Where the value of options vesting in a period (as calculated for the purposes of the single
Where the value of options vesting in a period (as calculated for the purposes of the single
total figure of remuneration disclosure) is greater than the LTIP Cap, the options above the
total figure of remuneration disclosure) is greater than the LTIP Cap, the options above the
LTIP Cap will not become exercisable at this vesting date and will be banked. The following
LTIP Cap will not become exercisable at this vesting date and will be banked. The following
sets out how the LTIP Cap will operate:
sets out how the LTIP Cap will operate:
1. The potential gain of the tranche of the 2011 LTIP options at the relevant date of vesting (B)
1. The potential gain of the tranche of the 2011 LTIP options at the relevant date of vesting (B)
is limited by the LTIP Cap (A) as set out in respect of each Executive Director in the table
is limited by the LTIP Cap (A) as set out in respect of each Executive Director in the table
above. In all cases the performance conditions will have been satisfied or the tranche will
above. In all cases the performance conditions will have been satisfied or the tranche will
lapse.
lapse.
277,690,956*
277,690,956*
Sept
Sept
20
20
277,690,956*
277,690,956*
Sept
Sept
21
21
Return (£)
Return (£)
Cumulative Return (£)
Cumulative Return (£)
Paid
Paid
Paid
Paid
Paid
Paid
Paid
Paid
555,381,912 plus £2 for each
555,381,912 plus £2 for each
share issued or reissued in
share issued or reissued in
the period 1 October 2016
the period 1 October 2016
to the 29 September 2018
to the 29 September 2018
833,072,868 plus £2 for
833,072,868 plus £2 for
each share issued or
each share issued or
reissued in the period 1
reissued in the period 1
October 2016 to the 29
October 2016 to the 29
September 2019
September 2019
1,110,763,824 plus £2
1,110,763,824 plus £2
for each share issued or
for each share issued or
reissued in the period 1
reissued in the period 1
October 2016 to the 29
October 2016 to the 29
September 2020
September 2020
1,388,454,780 plus £2
1,388,454,780 plus £2
for each share issued or
for each share issued or
reissued in the period 1
reissued in the period 1
October 2016 to the 29
October 2016 to the 29
September 2021
September 2021
2. This potential gain (B) at the date of vesting is calculated as follows:
2. This potential gain (B) at the date of vesting is calculated as follows:
Number of options capable of vesting x
Number of options capable of vesting x
(market price of a share on the date of vesting — exercise price) = (B)
(market price of a share on the date of vesting — exercise price) = (B)
3. Where (B) is greater than (A) the excess value will be converted into a number of options
3. Where (B) is greater than (A) the excess value will be converted into a number of options
by dividing it by the gain per share subject to each option calculated at the date of vesting.
by dividing it by the gain per share subject to each option calculated at the date of vesting.
These options will not become exercisable at this vesting date and will be banked.
These options will not become exercisable at this vesting date and will be banked.
4. The number of options calculated under 3 equivalent to the excess value will be banked and
4. The number of options calculated under 3 equivalent to the excess value will be banked and
subject to the following terms:
subject to the following terms:
a. There are no further performance conditions to be satisfied;
a. There are no further performance conditions to be satisfied;
b. They remain subject to an employment condition until they become exercisable;
b. They remain subject to an employment condition until they become exercisable;
c. They will become exercisable at the next vesting date in part or in full up to the value of
c. They will become exercisable at the next vesting date in part or in full up to the value of
the LTIP Cap for that financial year taking into account options vesting in respect of that
the LTIP Cap for that financial year taking into account options vesting in respect of that
year’s 2011 LTIP tranche using the above methodology. In addition;
year’s 2011 LTIP tranche using the above methodology. In addition;
i. irrespective of whether the relevant tranche for that year vests (i.e. whether the
i. irrespective of whether the relevant tranche for that year vests (i.e. whether the
performance conditions have been met for the tranche) it does not affect the potential
performance conditions have been met for the tranche) it does not affect the potential
exercise of options in the bank; and
exercise of options in the bank; and
n/a
n/a
Sept
Sept
22
22
n/a
n/a
Sept
Sept
23
23
n/a
n/a
n/a
n/a
* Based on shares in issue at 2017 EGM. These have subsequently
* Based on shares in issue at 2017 EGM. These have subsequently
increased due to shares issued and the target has increased
increased due to shares issued and the target has increased
accordingly (£2/share for each share issued)
accordingly (£2/share for each share issued)
If the annual return payment is not made for the
If the annual return payment is not made for the
relevant year that tranche of the option will lapse. If in a
relevant year that tranche of the option will lapse. If in a
subsequent year the cumulative returns paid reach the
subsequent year the cumulative returns paid reach the
targeted level, the tranche for that year will vest; however,
targeted level, the tranche for that year will vest; however,
tranches where the annual return payment was not made
tranches where the annual return payment was not made
for the relevant year will remain lapsed.
for the relevant year will remain lapsed.
% of
% of
Option
Option
vesting
vesting
33.0%
33.0%
(vested)
(vested)
13.4%
13.4%
(vested)
(vested)
13.4%
13.4%
13.4%
13.4%
13.4%
13.4%
13.4%
13.4%
Banked
Banked
balance
balance
to cap
to cap
Banked
Banked
balance
balance
to cap
to cap
114
114
115
115
ii. this process will continue until all banked options have become exercisable or until 30
ii. this process will continue until all banked options have become exercisable or until 30
September 2023 at which point any banked options that have not become exercisable
September 2023 at which point any banked options that have not become exercisable
will lapse.
will lapse.
It should be noted that any new shares issued (from
It should be noted that any new shares issued (from
Treasury or as newly listed shares) increase the absolute
Treasury or as newly listed shares) increase the absolute
level of cumulative return required.
level of cumulative return required.
The above calculations will be performed at each vesting date for a tranche under the 2011
The above calculations will be performed at each vesting date for a tranche under the 2011
LTIP. It is therefore possible that options may be banked in a number of years.
LTIP. It is therefore possible that options may be banked in a number of years.
The Directors Remuneration Report has been approved by the Board.
By Order of the Board
G BARkeR
Chairman, Remuneration Committee
20 June 2018
BERKELEY ANNUAL REPORT 2018 GOVERNANCEBERKELEY ANNUAL REPORT 2018 GOVERNANCE01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS
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berkeley AnnuAl report 2018 Governance
berkeley AnnuAl report 2 018 Gover nance
D I R E C T O R S ’
R E P O R T
The Directors submit their report together
with the audited consolidated and
company financial statements for the year
ended 30 April 2018.
P r i n c iP a l a c t i v i t i e s a n d
r e v i e w o f t h e b u s i n e s s
The Company is the UK holding company
of a Group engaged in residential-led
property development focusing on
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 4 to 77 of the
Annual Report which provides 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 59 to 71 of
the Strategic Report.
t r a d i nG r e s u lt s a n d
d i v i d e n d s
The Group’s consolidated profit after
taxation for the financial year was
£762.1 million (2017: £645.1 million).
The Group’s joint ventures contributed
a profit after taxation of £158.0 million
(2017: £63.8 million).
An interim dividend of 51.76 pence per
share was paid to shareholders on
15 September 2017 and a further interim
dividend of 56.75 pence per share was paid
to shareholders on 23 March 2018. A further
interim dividend is proposed to be paid
as part of the £139.2 million shareholder
return to be provided by 30 September
2018 through a combination of dividends
and share buy-backs. The amount to be
paid as a dividend will be announced on
16 August 2018, taking account of any
share buy-backs undertaken as part of
the Shareholder Returns Programme. The
dividend will be paid on 14 September
2018 to shareholders on the register on
24 August 2018.
P o s t b a l a n c e s h e e t e v e n t
There are no post balance sheet events
that require disclosure.
s h a r e c aP i ta l
The Company had 140,157,183 ordinary
shares in issue at 30 April 2018
116
116
(2017: 140,157,183). During the year to
30 April 2018 and in accordance with
the authority provided by shareholders
at the 2016 and 2017 Annual General
Meetings, the Company has purchased
3,957,058 ordinary shares with a nominal
value of £197,853 which equated to
2.82% of the called up share capital of
the Company at the beginning of the
period, excluding Treasury shares. The
aggregate consideration paid for these
shares was £140.4 million. As at 30 April
2018 the Company held 6,000,530 shares
in Treasury. These shares have no voting
rights. Authority will be sought from
shareholders at the forthcoming Annual
General Meeting to renew the authority
given at the 2017 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 17 to the consolidated
financial statements.
Information on the Group’s share option
schemes is set out in note 5 to the
consolidated financial statements. Details
of the Long-Term Incentive Schemes
and Long-Term Incentive Plans for key
executives are set out within the Directors’
Remuneration Report on pages 94 to 115.
a r t i c l e s o f a s s o c i at i o n
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.
A special resolution to amend the
existing Articles will be proposed at the
Annual General Meeting to be held on
5 September 2018. Details of the
proposed changes can be found in the
Notice of Meeting.
d i r e c t o r s
The Directors of the Company and their
profiles are detailed on pages 80 to 85.
P Vernon was appointed as a Director on
6 September 2017 and R Downey, J Tibaldi
and P M Vallone were appointed as
Directors on 8 December 2017.
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 2016
all of 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 pages 94 and 115. At 30 April
2018 each of the Executive Directors were
deemed to have a non-beneficial interest
in 443,062 (2017: 424,872) ordinary shares
held by the Trustees of The Berkeley
Group Employee Benefit Trust (“EBT”). The
Trustee of the EBT has waived entitlement
to dividends until further notice and 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 24 to the consolidated financial
statements, the contracts of employment
of the Executive Directors, which are
terminable within one year, and the
appointment terms of the Non-executive
Directors, which are renewable annually
and terminable on one month’s notice.
d i r e c t o r s ’ i n d e m n i t i e s
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.
s u b s ta n t i a l s h a r e h o l d e r s
The Company has been notified of the
following interests, pursuant to Rule 5 of
the Disclosure Guidance and Transparency
Rules (“DGTR”), as at 30 April 2018:
number of
ordinary
shares held(i)
% of
voting
rights(i)
nature of
holdings
13,621,578
10.15
Indirect
First Eagle
Investment
Management LLC (ii)
BlackRock Inc.
11,698,607
8.72
Indirect
A W Pidgley, CBE
4,446,995
3.32
Direct
(i) The number of ordinary shares held and percentage
of voting rights is as stated by the shareholder at the
time of notification.
(ii) First Eagle Global Fund have notified the Company
that they hold 6,719,082 ordinary shares which is 5.01%
of voting rights. This holding is included in the indirect
interests of 10.15% held by First Eagle Investment
Management LLC.
Between 30 April 2018 and 19 June 2018
the Company has also been notified of the
following interests, pursuant to Rule 5 of
the DGTR:
number of
ordinary
shares held
% of voting
rights(i)
nature of
holdings
13,338,990
9.94
Indirect
First Eagle
Investment
Management
LLC (ii)
(i) The number of ordinary shares held and percentage
of voting rights held is as stated by the shareholder at
the time of notification.
(ii) First Eagle Global Fund have notified the Company
that they hold 6,602,948 ordinary shares which is
4.92% of voting rights. This holding is included in
the indirect interests of 9.94% held by First Eagle
Investment Management LLC.
d o n at i o n s
The Group made no political donations
(2017: £nil) during the year.
e m P l oy m e n t P o l i c y
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.
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 41.
The Group has implemented Human
Rights, Modern Slavery and Child Labour
policies in support of human rights which
is implicit in all of its pre-existing corporate
policies and procedures. The Group
believes these policies to be effective in
promoting and protecting human rights
by establishing clear ethical standards for
ourselves and our expectations for those
external parties who work with the Group
or on our behalf.
s u s ta i n a b i l i t y
The Group is committed to being a
responsible and sustainable business
which thinks about the long-term and
creates positive environmental, social and
economic impacts. These aspects are
considered in the Group’s approach to
managing its operational activities and in
the homes and places it develops.
The Group has an integrated strategy for
the business; Our Vision. Sustainability is a
key element of the Group’s strategy with a
number of commitments directly relating
to material sustainability topics such as
climate change. Information on Our Vision
can be found within the Strategic Report
and on the Group’s website.
The Directors have ultimate responsibility
for sustainability within the Group. The
Sustainability Leadership Team, which
meets monthly to set strategic direction
and review performance, consists of
the Chief Executive, the Board Director
Responsible for Sustainability and the
Group Sustainability Team. Dedicated
operational practitioners work throughout
the business to ensure sustainability is
incorporated into daily activities.
G r e e n h o u s e Ga s e m i s s i o n s
Scope 1 (tCO2e)
Scope 2 (tCO2e)
Scope 3 (tCO2e)
Total (tCO2e)
Emissions intensity
(tCO2e/person)
2018
2,553 a
7,402 a
14,326 a
2017
2,272
9,984
11,447
24,281 a
23,703
2.15
1.76
2018 ( a ) information has been subject to limited
assurance by PricewaterhouseCoopers LLP. For further
details of the assurance provided in 2018 and prior
years, see the independent assurance reports found at
berkeleygroup.co.uk/sustainability/reports-and-case-
studies.
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
travel (business and other travel where
expensed) in company owned vehicles;
Scope 2 – indirect emissions from
electricity and heat consumed for office,
sales and development site activities;
Scope 3 – other indirect emissions relating
to office, sales and development site
activities; travel (business and other travel
where expensed) in company leased and
employee owned vehicles; business air
travel; transmission and distribution losses
of purchased electricity and heat; 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 number of Berkeley employees
and the number of contractors working
on our sites. It is the average figure for
the year and includes 50% of employees
and contractors working in offices or
on development sites of Berkeley’s joint
ventures.
The UK Government Environmental
Reporting Guidelines 2013, UK Government
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berkeley AnnuAl report 2018 Governance
berkeley AnnuAl report 2 018 Gover nance
D I R E C T O R S ’
R E P O R T
CONTINUED
GHG Conversion Factors for Company
Reporting and International Energy
Agency emission factors have been
used to calculate and report the Group’s
greenhouse gas emissions.
The Directors confirm that reported
greenhouse gas emissions have been
prepared in accordance with the Group’s
established reporting criteria, are free
from material misstatement and have
been presented in a manner that provides
relevant, reliable, comparable and
understandable information.
Note that emissions reported outside of
this Directors’ Report are based on the
Group’s operational reporting boundary.
They include 100% joint venture emissions
and exclude emissions from Southall
Waterside. 2017 data has also been revised
based on more accurate data now being
available for energy consumption within
the period. Further details on our reporting
boundaries, our established reporting
criteria and the methodology adopted for
the overall calculations can be found at
berkeleygroup.co.uk/sustainability/reports-
and-case-studies.
ta k e o v e r d i r e c t i v e –
a Gr e e m e n t s
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
agreements, 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 of
either National Grid or Berkeley may give
the other joint venture partner the ability to
sell its interest in the joint venture.
In addition, the Company’s share schemes
contain provisions which take effect
upon change of control. These do not
entitle the participants to a greater
interest in the shares of the Company
than that created by the initial grant of
the award. The Company does not have
any arrangements with any Director that
provide compensation for loss of office or
employment resulting from a takeover.
i n d eP e n d e n t a u d i t o r s a n d
d i s c l o s u r e o f i n f o r m at i o n
t o a u d i t o r s
Each of the persons who is a Director at
the date of approval of this Annual Report
confirms that:
— so far as the Director is aware, there is no
relevant audit information of which the
Company’s auditors are unaware; and
— the Director has taken all the steps that
he/she ought to have taken as a Director
in order to make himself/herself aware
of any relevant audit information and to
establish that the Company’s auditors
are aware of that information.
This confirmation is given and should
be interpreted in accordance with the
provisions of Section 418 of the Companies
Act 2006.
A resolution to re-appoint KPMG LLP as
auditors to the Company will be proposed
at the Annual General Meeting.
a n n u a l Ge n e r a l m e e t i nG
The Annual General Meeting of the
Company is to be held at the Woodlands
Park Hotel, Woodlands Lane, Stoke
D’Abernon, Cobham, Surrey KT11 3QB at
11.00am on 5 September 2018. The Notice
of Meeting, which is contained in a separate
letter from the Chairman accompanying
this report, includes a commentary on the
business to be transacted at the Annual
General Meeting.
s h a r e c aP i ta l s t r u c t u r e
The Company is compliant with DGTR
7.2.6. and the information relating to
the Company’s share capital structure
is included in the Directors’ Report on
page 116.
s tat e m e n t o f d i r e c t o r s ’
r e sP o n s i b i l i t i e s i n r e sP e c t
o f t h e a n n u a l r e P o r t a n d
t h e f i n a n c i a l s tat e m e n t s
The Directors are responsible for preparing
the Annual Report and the Group
and parent Company financial statements
in accordance with applicable law
and regulations.
Company law requires the Directors to
prepare Group and parent Company
financial statements for each financial
year. Under that law they are required to
prepare the Group financial statements
in accordance with International Financial
Reporting Standards as adopted by the
European Union (IFRSs as adopted by
the EU) and applicable law and have
elected to prepare the parent Company
financial statements in accordance with UK
accounting standards, including FRS 101
Reduced Disclosure Framework.
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 parent Company and of their profit or
loss for that period. In preparing each of
the Group and parent Company financial
statements, the Directors are required to:
— select suitable accounting policies and
then apply them consistently;
— make judgements and estimates that
are reasonable, relevant, reliable and
prudent;
— for the Group financial statements, state
whether they have been prepared in
accordance with IFRSs as adopted by
the EU;
— for the parent Company financial
statements, state whether applicable
UK accounting standards have been
followed, subject to any material
departures disclosed and explained
in the parent company financial
statements;
— assess the Group and parent Company’s
ability to continue as a going concern,
disclosing, as applicable, matters related
to going concern; and
— use the going concern basis of
accounting unless they either intend
to liquidate the Group or the parent
Company or to cease operations, or have
no realistic alternative but to do so.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the parent
Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the parent Company
and enable them to ensure that its financial
statements comply with the Companies
Act 2006. They are responsible for
such internal control as they determine
is necessary to enable the preparation
of financial statements that are free
from material misstatement, whether
The Group has significant financial
resources and the Directors have assessed
the future funding requirements of the
Group, including the return of £2.2 billion
to shareholders by September 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 and for this reason they continue
to adopt the going concern basis of
accounting in preparing the annual
financial statements.
By order of the Board
J s P cranney
Company Secretary
The Berkeley Group Holdings plc
Registered number: 5172586
20 June 2018
due to fraud or error, and have general
responsibility for taking such steps as are
reasonably open to them to safeguard the
assets of the Group and to prevent and
detect fraud and other irregularities.
Under applicable law and regulations,
the Directors are also responsible
for preparing a Strategic Report,
Directors’ Report, Directors’ Remuneration
Report and Corporate Governance
Statement that complies with that law
and those regulations.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on
the company’s website. Legislation in
the UK governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
d i r e c t o r s ’ r e sP o n s i b i l i t y
s tat e m e n t
Each of the Directors, whose names
and functions are listed on pages 80 to
85 confirm that, to the best of each
person’s knowledge:
a. the Group financial statements, which
have been prepared in accordance with
IFRS’s as adopted by the European Union,
give a true and fair view of the assets,
liabilities, financial position and profit of
the Group;
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, including those that would threaten
its business model, future performance,
solvency or liquidity; and
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
financial performance and position,
business model and strategy.
G o i nG c o n c e r n
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 74 to 77.
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BERKELEY ANNUAL REPORT 2018 GOVERNANCEBERKELEY ANNUAL REPORT 2018 GOVERNANCE01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALS
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Taplow Riverside
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i N D E P E N D E N T a uD i T o r ’ s rE Po rT
T o T h E mE m bE r s o f T h E b Er kE l E y G r o uP h o lD i N Gs Pl C o Nly
OpiniOns and cOnclusiO ns arising frOm Our audit
1) Our opinion is unmodified
We have audited the financial statements of The Berkeley Group
Holdings plc (“the Group”) for the year ended 30 April 2018 which
comprise the Consolidated Income Statement, Consolidated
Statement of Comprehensive Income, Consolidated Statement of
Financial Position, Consolidated Statement of Changes in Equity,
Consolidated Cash Flow Statement, Company Balance Sheet,
Company Statement of Changes in Equity, and the related notes,
including the accounting policies in Note 1 and C.1.
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
2018 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,
including FRS 101 Reduced Disclosure Framework; and
— the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards
the Group financial statements, Article 4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to the
audit committee.
We were appointed as auditor by the Directors on 27 November
2013. The period of total uninterrupted engagement is for the five
financial years ended 30 April 2018. We have fulfilled our ethical
responsibilities under, and we remain independent of the Group
in accordance with, UK ethical requirements including the FRC
Ethical Standard as applied to listed public interest entities. No
non-audit services prohibited by that standard were provided.
Overview
Materiality:
group financial
statements as a whole
£35.0m (2017: £30.0m)
3.7% (2017: 3.7%) of group profit before tax
Coverage
93% (2017: 92%) of group profit before tax
Risks of material misstatement vs 2017
Recuring risks
Carrying value of inventories
and profit recognition
Revenue recognition
Provisions
Carrying value of investments
2) Key audit matters: our assessment of risks of material
misstatement
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the
financial statements and include the most significant assessed
risks of material misstatement (whether or not due to fraud)
identified by us, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. We
summarise below the key audit matters, in decreasing order of
audit significance, in arriving at our audit opinion above, together
with our key audit procedures to address those matters and,
as required for public interest entities, our results from those
procedures. These matters were addressed, and our results are
based on procedures undertaken, in the context of, and solely
for the purpose of, our audit of the financial statements as a
whole, and in forming our opinion thereon, and consequently
are incidental to that opinion, and we do not provide a separate
opinion on these matters.
Compliance with Laws and Regulations is no longer considered
a significant risk. However, we continue to perform procedures
over Compliance with Laws and Regulations and report on this in
Section 7, respective responsibilities, of our audit report.
Carrying value of inventories
and profit recognition
(£3,239.9 million; 2017: £3,483.4
million)
Refer to page 91 (Audit
Committee Report), note 1 on
page 135 (accounting policy)
and note 11 page 144 (financial
disclosures).
Revenue recognition
Refer to page 91 (Audit
Committee Report), note 1 on
page 135 (accounting policy).
The risk
Our response
Forecast-based assessment
Our procedures included:
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 including an allowance
for risk. Further estimation
uncertainty and exposure to
cyclicality exists within the long
term sites.
Forecasts are dependent on
market conditions, which can
be difficult to predict and be
influenced by political and
economic factors including, but
not limited to, the uncertainty
surrounding the UK’s exit from
the European Union.
Inventory represents the
capitalised site costs to date
less amounts expensed on
sales by reference to the above
forecasts. 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 inappropriate assumptions
in these forecasts can impact
the assessment of the carrying
value of inventories.
— Control observation: We inspected the minutes, and attended a selection
of the Group’s build cost review meetings. This included assessing whether
the appropriate individuals attended the meetings, and assessing that the
forecast costs for developments were discussed and the valuations updated as
appropriate.
— We inspected whole site forecasts on a sample basis and challenged the inputs
and assumptions by:
— Tests of detail: Agreed a sample of forecast costs to purchase contracts,
supplier agreements or tenders, and agreeing a sample of costs incurred in the
year to invoice and/or payment, including checking that they were allocated to
the appropriate site.
— Recalculation: Recalculated the costs of sales amount recognised on units
taken to sale in the current year based upon the unit sales price and gross
margin percentages.
— Benchmarking assumptions: Assessed, based on the risks highlighted
by the Group’s build cost review meetings and industry cost indices, the
appropriateness of allowances made for cost increases and longer term
development risks as well as contingencies.
— Our sector experience: Used the team’s experience, supported as appropriate
by the firm’s property experts to consider the appropriateness of the forecast
assumptions. Compared forecast sales prices against recent prices achieved
in the local market, historical salesprices, and considered factors that may
influence the achievable price on future sales.
— Sensitivity analysis: We evaluated the impact of varying changes in sales prices
and costs on the forecast margin and considered whether this indicated a risk of
impairment of the inventory balance and alternative basis of profit recognition in
the year.
— Assessing transparency: We considered the adequacy of the Group’s disclosures
in note 1 to the financial statements regarding the degree of judgement and
estimation involved in arriving at the forecast, resultant profit and carrying value
of inventory.
Our results
— We considered the carrying value of inventories to be acceptable. We considered
the profit recognised in the year to be acceptable (2017: Acceptable).
Revenue recognised for units
before legal completion:
It is the Group’s policy
to recognise revenue on
residential property units when
contracts are exchanged and
the building work is physically
complete.
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 this latter
point.
There is a risk that the unit is
not physically complete or
that the buyer is unable to
subsequently complete the
purchase, as in either of these
cases the revenue should not
have been recognised.
Our procedures included:
— Control observation: Tested controls over property sales which included:
— inspecting documentation evidencing internal approval of physical inspection
and confirmation of build complete status and third party certifications.
— For a sample of sales recorded where the final payment was not yet received, we
performed the following:
— Site visits: Physically visited sites at the balance sheet date to observe build
completion status.
— Control observation: Inspected the internal sign-off sheets to check whether
sales had gone through the Group’s approval process for those sites not visited.
— Tests of detail: Where sales were not legally completed at year end, we inspected
post-year end bank statements for payments from buyers. Where significant
amounts were still outstanding we considered other information, such as
correspondence with the buyer, in evaluating the recoverability of amounts and
appropriateness of related revenue recognition.
— Assessing transparency: We have also considered the adequacy of the Group’s
disclosures in note 1 to the financial statements in respect of the judgements
taken in recognising revenue for residential property units prior to legal
completion and the proposed change to the revenue recognition policy on
adoption of IFRS 15 to recognise revenue at legal completion.
Our results
— We considered the amount of revenue recognised to be acceptable
(2017: Acceptable).
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i N D E P E N D E N T a uD i T o r ’ s rE Po rT
T o T h E mE m bE r s o f T h E b Er kE l E y G r o uP h o lD i N Gs Pl C o Nly
CoNTiNuED
2) Key audit matters: our assessment of risks of material misstatement continued
Provisions
Subjective estimate
Our procedures included:
The risk
Our response
(£81.8 million; 2017: £99.9
million)
Refer to page 91 (Audit
Committee Report), note 1 on
page 135 (accounting policy)
and note 15 on page 145
(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, in respect
of remediation of defects
subsequent to the completion
of certain developments, as well
as in relation to other matters of
litigation including legal disputes.
The identification and estimate
of amounts for provisions is
judgemental by its nature and
there is a risk that the estimate
is incorrect and the provision is
materially misstated.
— Internal enquiry: We enquired of Group and divisional Directors, and
inspected board minutes for claims arising.
— Tests of detail: For significant known issues and claims, when a provision has
been made, we inspected the calculation of the provision held and considered
internal cost assessments and third party evidence, where available.
— Benchmarking assumptions: For claims that past events indicated may arise,
we evaluated risk assessments performed in respect of known issues, settled
issues and considered any differences in the development portfolio over time,
such as increasing complexity of construction, in assessing the calculation of
the provision.
— Enquiry of lawyers: In respect of open matters of litigation, we held
discussions with the Group’s legal counsel and reviewed relevant
correspondence to assess the provisions recorded.
— Assessing transparency: We assessed whether the Group’s disclosures in
note 1 and note 15 to the financial statements sufficiently present the potential
exposure of provisions and contingent liabilities.
Our results
— We considered the carrying value of provisions to be acceptable
(2017: Acceptable).
Carrying value of investments
Low risk, high value:
Our procedures included:
(£1,417.6 million; 2017: £1,413.9
million)
Refer to note C1 on page 158
(accounting policy) and note
C5 on page 160 (financial
disclosures).
The carrying amount of the
parent Company’s investments
in subsidiaries represents 95.4%
(2017: 98.5%) of the Company’s
total assets. Their recoverability
is not a high risk of significant
misstatement or subject to
significant judgement. However,
due to their materiality in the
context of the parent Company
financial statements, this is
considered to be the area that had
the greatest effect on our overall
parent Company audit.
— Tests of detail: Compared the carrying amount of 100% of investments with
the relevant subsidiaries’ draft balance sheet to identify whether their net
assets, being an approximation of their minimum recoverable amount, were in
excess of their carrying amount and assessed whether those subsidiaries have
historically been profit-making.
Our results
— We found the carrying amount of the investment in subsidiaries to be
acceptable (2017: Acceptable).
3) Our application of materiality and an overview of the scope
of our audit
Materiality for the Group financial statements as a whole was set
at £35.0 million (2017: £30.0 million), determined with reference
to a benchmark of Group profit before taxation of £934.9 million
(2017: Group profit before taxation of £812.4 million), of which it
represents 3.7% (2017: 3.7%).
We reported to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £1.75 million
(2017: £1.5 million), in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Materiality for the parent Company financial statements as a
whole was set at £31.5 million (2017: £27.0 million), determined
with reference to a benchmark of company total assets of
£1,439.0 million (2017: £1,435.3 million), of which it represents
2.2% (2017: 1.9%).
Of the Group’s 18 (2017: 18) components, we subjected 11 (2017: 11)
to full scope audits for group purposes and 7 (2017: 5) to specified
risk-focused procedures, all performed by the group team. The
latter components were not individually financially significant
enough to require a full scope audit for group purposes but did
present specific individual risks that needed to be addressed.
Profit before taxation
£934.9m (2017: £812.4m)
Group materiality
£35.0m (2017: £30.0m)
5
3
0
3
£35.0m Whole financial
statements materiality
(2017: £30.0m)
5
2
0
2
£21.9m Range of materiality
at 11 components
(£1.9m to £21.9m)
5
1
(2017: £1.2m to £24.7m)
0
1
5
Profit before taxation
Group materiality
0
£1.75m Misstatements
reported to the audit committee
(2017: £1.5m)
Group revenue
Group profit before tax
7
8
93%
(2017 92%)
92
93
The components within the scope of our work accounted for the
percentages illustrated opposite.
17
9
There are no residual components in 2018. For the residual
components in 2017, we performed analysis at an aggregated
Group level to re-examine our assessment that there were no
significant risks of material misstatements within these.
83%
(2017 91%)
91
83
Group total assets
13
12
87%
(2017 87%)
87
87
Full scope for group audit purposes 2018
Specified risk-focused audit procedures 2018
Full scope for group audit purposes 2017
Specified risk-focused audit procedures 2017
Residual components
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4. We have nothing to report on going concern
We are required to report to you if:
— we have anything material to add or draw attention to in
relation to the Directors’ statement in notes 1 and C.1 to the
financial statements on the use of the going concern basis
of accounting with no material uncertainties that may cast
significant doubt over the Group and Company’s use of that
basis for a period of at least twelve months from the date of
approval of the financial statements; or
period they have done so and why they considered that period
to be appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or
assumptions.
Under the Listing Rules we are required to review the Viability
Statement. We have nothing to report in this respect.
— if the related statement under the Listing Rules set out on page
Corporate governance disclosures
6. We have nothing to report on the other matters on which we
are required to report by exception
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
We are required to report to you if:
— certain disclosures of Directors’ remuneration specified by law
119 is materially inconsistent with our audit knowledge.
We have nothing to report in these respects.
5. We have nothing to report on the other information in the
Annual Report
The Directors are responsible for the other information presented
in the Annual Report together with the financial statements. Our
opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion
or, except as explicitly stated below, any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work,
the information therein is materially misstated or inconsistent with
the financial statements or our audit knowledge. Based solely on
that work we have not identified material misstatements in the
other information.
Strategic report and Directors’ report
Based solely on our work on the other information:
— we have identified material inconsistencies between the
knowledge we acquired during our financial statements 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 position and
performance, business model and strategy; or
— the section of the Annual Report describing the work of the
Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
We are required to report to you if the Corporate Governance
Report does not properly disclose a departure from the eleven
provisions of the UK Corporate Governance Code specified by the
Listing Rules for our review.
We have nothing to report in these respects.
Based solely on our work on the other information described
above:
— we have not identified material misstatements in the strategic
report and the Directors’ report;
— in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
— with respect to the Corporate Governance Report disclosures
about internal control and risk management systems in relation
to financial reporting processes and about share capital
structures:
— in our opinion those reports have been prepared in accordance
— we have not identified material misstatements therein; and
— the information therein is consistent with the financial
statements; and
— in our opinion, the Corporate Governance Report has been
prepared in accordance with relevant rules of the Disclosure
Guidance and Transparency Rules of the Financial Conduct
Authority.
with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw
attention to in relation to:
— the Directors’ confirmation within the Viability Statement on
page 60 that they have carried out a robust assessment of
the principal risks facing the Group, including those that
would threaten its business model, future performance,
solvency and liquidity;
— the principal risks disclosures describing these risks and
explaining how they are being managed and mitigated; and
— the Directors’ explanation in the Viability Statement of how
they have assessed the prospects of the Group, over what
are not made; or
— we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 119,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and
fair view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing
the Group and parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless
they either intend to liquidate the Group or the parent Company or
to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or other irregularities (see
below), or error, and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud, other irregularities or error and
are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of
users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identified areas of laws and regulations that could reasonably
be expected to have a material effect on the financial statements
from our sector experience, through discussion with the Directors
and other management (as required by auditing standards).
We had regard to laws and regulations in areas that directly
affect the financial statements including financial reporting
(including related company legislation) and taxation legislation.
We considered the extent of compliance with those laws and
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regulations as part of our procedures on the related financial
statement items.
In addition we considered the impact of laws and regulations in
the specific areas of health and safety, anti-bribery, anti-money
laundering and sanctions checking. With the exception of any
known or possible non-compliance, and as required by auditing
standards, our work in respect of these was limited to enquiry of
the Directors and other management and inspection of regulatory
and legal correspondence. We considered the effect of any
known or possible non-compliance in these areas as part of our
procedures on the related financial statement items.
We communicated identified laws and regulations throughout our
team and remained alert to any indications on non-compliance
throughout the audit.
As with any audit, there remained a higher risk of non-detection of
non-compliance with relevant laws and regulations (irregularities),
as these may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls.
8. The purpose of our audit work and to whom we owe
our responsibilities
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the
Company’s members, as a body, for our audit work, for this report,
or for the opinions we have formed.
Sean McCallion (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London, E14 5GL
20 June 2018
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127
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C o n s o l i d a t e d i n C o m e
s t a t e m e n t
C o n s o l i d a t e d s t a t e m e n t o f
f i n a nC i a l p o s i t i o n
For the year ended 30 April
Revenue
Cost of sales
Gross profit
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
10
2, 4
6
2018
£m
2,703.7
(1,757.6)
946.1
(166.5)
779.6
6.6
(9.3)
158.0
934.9
(172.8)
762. 1
2017
£m
2,723.5
(1,783.7)
939.8
(183.6)
756.2
2.1
(9.7)
63.8
812.4
(167.3)
645.1
7
7
562.7p
550.2p
467.8p
451.4p
C o n s o l i d a t e d s t a t e m e n t o f
C o m p r e h e n s i v e i nC o m e
For the year ended 30 April
Profit after taxation for the year
Other comprehensive (expense)/income:
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
other comprehensive expense for the year
Notes
5
6
2018
£m
762. 1
(0.6)
0.1
(0.5)
(0.5)
2017
£m
645.1
(0.6)
0.1
(0.5)
(0.5)
As at 30 April
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investments in joint ventures
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
total assets
LiABiLities
Non-current liabilities
Borrowings
Trade and other payables
Provisions for other liabilities and charges
Current liabilities
Trade and other payables
Current tax liabilities
Provisions for other liabilities and charges
total liabilities
total net assets
equity
shareholders’ equity
Share capital
Share premium
Capital redemption reserve
Other reserve
Retained earnings
total equity
Notes
2018
£m
2017
£m
8
9
10
16
11
12
13, 22
22
14
15
14
15
17
17
18
18
18
17.2
25.9
315.0
58.9
417.0
3,239.9
132.3
987.3
4,359.5
4,776.5
17.2
22.8
135.0
59.4
234.4
3,483.4
229.5
585.5
4,298.4
4,532.8
(300.0)
(62.6)
(68.0)
(430.6)
(300.0)
(69.2)
(73.0)
(442.2)
(1,664.8)
(1,809.2)
(47.3)
(13.8)
(1,725.9)
(2,156.5)
2,620.0
7.0
49.8
24.5
(961.3)
3,500.0
2,620.0
(117.6)
(26.9)
(1,953.7)
(2,395.9)
2,136.9
7.0
49.8
24.5
(961.3)
3,016.9
2,136.9
The financial statements on pages 128 to 155 were approved by the Board of Directors on 20 June 2018 and were signed on its behalf by:
total comprehensive income for the year
761.6
644.6
R J steARN
Finance Director
128
128
129
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C o n s o l i d a t e d s t a t e m e n t o f
C h a nG e s i n e Q Ui tY
C o n s o l i d a t e d
C a s h f l oW s t a t e m e n t
At 1 May 2017
Profit after taxation for the year
Other comprehensive expense for the year
total comprehensive income for the year
Purchase 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
shARe
CAPitAL
£m
shARe
PRemium
£m
Notes
CAPitAL
ReDemPtioN
ReseRve
£m
otheR
ReseRve
£m
RetAiNeD
eARNiNGs
£m
totAL
£m
7.0
49.8
24.5
(961.3)
3,016.9
2,136.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
17
5
6
19
—
—
—
—
—
—
—
—
—
—
—
—
—
—
762.1
(0.5)
761.6
762.1
(0.5)
761.6
(140.4)
(140.4)
4.2
4.4
4.2
4.4
(146.7)
(146.7)
At 30 April 2018
7.0
49.8
24.5
(961.3)
3,500.0
2,620.0
At 1 May 2016
Profit after taxation for the year
Other comprehensive expense for the year
total comprehensive income for the year
Issue of ordinary shares
Purchase of ordinary shares
Transactions with shareholders:
Charge in respect of employee share schemes
Deferred tax in respect of employee share schemes
Dividends to equity holders of the Company
At 30 April 2017
6.9
—
—
—
0.1
—
—
—
—
7.0
17
17
5
6
19
shARe
CAPitAL
£m
shARe
PRemium
£m
Notes
CAPitAL
ReDemPtioN
ReseRve
£m
otheR
ReseRve
£m
RetAiNeD
eARNiNGs
£m
49.8
24.5
(961.3)
2,692.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
totAL
£m
1,812.8
645.1
645.1
(0.5)
(0.5)
644.6
644.6
—
0.1
(64.5)
(64.5)
(1.3)
(0.2)
(1.3)
(0.2)
(254.6)
(254.6)
49.8
24.5
(961.3)
3,016.9
2,136.9
For the year ended 30 April
CAsh fLows fRom oPeRAtiNG ACtivities
Cash generated from operations
Interest received
Interest paid
Income tax paid
Net cash flow from operating activities
CAsh fLows fRom iNvestiNG ACtivities
Purchase of property, plant and equipment
Dividends from investments
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 the issue of shares
Purchase of own shares
Increase in borrowings
Dividends paid to Company’s shareholders
Net cash flow from financing activities
Notes
22
9
10
10
19
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
13, 22
2018
£m
957.2
4.9
(7.5)
(238.0)
716.6
(6.1)
—
0.4
(22.0)
(27.7)
—
(140.4)
—
(146.7)
(287.1)
401.8
585.5
987.3
2017
£m
537.0
1.9
(2.7)
(115.6)
420.6
(2.8)
70.0
0.5
8.8
76.5
0.1
(64.5)
300.0
(254.6)
(19.0)
478.1
107.4
585.5
0
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N o t e s t o t h e C oN s o l i d a t e d
F iN a N Ci a l s t a t e m eN t s
1 a c c O UnTi nG P Ol i c iEs
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 116.
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 135.
The following new standards, amendments to standards and interpretations (“Standards”) are applicable to the Group and are mandatory for the first time
for the financial year which began on 1 May 2017: Amendments to IAS 7 ‘Statement of Cash Flows - Changes in Liabilities arising from Financing Activities’
and Amendment to IAS 12 ‘Recognition of Deferred Tax Assets for Unrealised Losses’. These Standards have not had a material impact on the results of the
Company for the year ended 30 April 2018.
The following new standards, amendments to standards and interpretations (“New Standards”) have been issued, but are not yet effective for the financial
year ended 30 April 2018 and have not been adopted early:
IFRS 9 ‘Financial Instruments’ replaces IAS 39 ‘Financial Instruments: Recognition and Measurement’ and is effective from 1 January 2018. The Group does not
presently hold any complex financial instruments. Accordingly, the principal area of consideration for IFRS 9 is the new provision approach it introduces to bad
debt provisions. Given the adoption of a legal competition basis of revenue recognition under IFRS 15 as described below no material bad debt provisions are
currently anticipated by the Group, and thus it is expected that the new standard will not have a material impact on the Group’s reported results.
IFRS 15, ‘Revenue from Contracts with Customers’ replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction Contracts’, setting out new revenue recognition criteria
particularly with regard to performance obligations and assessment of when control of goods or services passes to the customer. The standard is effective
for periods beginning on or after 1 January 2018 and will be implemented by the Group from 1 May 2018.
Currently, under IAS 18, revenue and profit on the sale of units is recognised when substantially all the risks and rewards of ownership have transferred to the
customer. As set out in the Accounting Estimates and Judgements, this occurs when the unit is physically complete and there is an exchanged contract in
place, with the customer able to proceed to legal completion.
Under IFRS 15, revenue and profit on the sale of units will be recognised at the point control of the unit is passed to the customer which, based on the
indicators in the standard as well as industry practices and interpretations, has been determined as the point of legal completion. The impact of this change
is limited only to those contracts which have not legally completed at the financial year end.
The comparative results to be included in the 2019 financial statements will be re-stated using the full retrospective transition method, under which it is
expected that:
— Net assets of the Group as at 1 May 2017 will reduce by £62 million.
— Profit after tax for the year ended 30 April 2018 will increase by £33 million. This consists of an increase in revenue of £137 million, an increase in operating
profit of £37 million, an increase in profit from joint ventures of £5 million and an increase in tax expense of £9 million.
— Net assets of the Group as at 30 April 2018 will reduce by £29 million.
IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ and is effective from 1 January 2019. The new standard requires all assets held by the Group under lease
agreements of greater than 12 months in duration to be recognised as assets within the balance sheet, unless they are considered to be of low value.
Similarly, the present value of future payments to be made under those lease agreements must be recognised as a liability. It is expected that the
implementation of the standard will increase both the assets and liabilities of the Group however the impact on net assets is still being considered and
is not expected to be material.
Amendment to IFRS 2 ‘Share-based Payments’, Amendment to IFRS 4 ‘Insurance Contracts’ regarding the implementation of IFRS 9 ‘Financial Instruments’,
and Annual Improvements 2014-2016, all effective from 1 January 2018, are not expected to have a significant impact on the Group’s financial statements.
Annual Improvements 2015-2017, Amendment to IAS 28 ‘Investments in Associates and Joint Ventures’, IFRIC 23 ‘Uncertainty over Income Tax Treatments’,
and Amendments to IAS 19, ‘Employee Benefits’ on Plan Amendment, Curtailment or Settlement’, all effective from 1 January 2019, are not expected to have
a significant impact on the Group’s financial statements.
Going Concern
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 it continues 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
substantive 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.
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.
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.
Revenue
Revenue represents the amounts receivable from the sale of 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 contracts are exchanged, 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 on page 135 for further disclosures on revenue recognition.
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 on page 135 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.
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N o t e s t o t h e C oN s o l i d a t e d
F iN a N Ci a l s t a t e m eN t s
CoNtiN ued
1 a c c O UnTi nG P Ol i c iEs c OnTi nU Ed
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
2%
Fixtures and fittings
15%/20%
Motor vehicles
25%
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.
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 on page 135 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.
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.
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 forecast the costs to complete on such developments.
In making such assessments and allocations, there is a degree of inherent estimation uncertainty; in particular due to the need to take account of future
direct input costs, sales prices and the need to allocate site-wide costs on an appropriate basis to reflect the overall level of development risk, including
planning risk. The Group has established internal controls designed to effectively assess and centrally review inventory carrying values and ensure the
appropriateness of the estimates made. These assessments and allocations evolve over the life of the development in line with the risk profile, and
accordingly the margin recognised reflects these evolving estimates. Similarly, these estimates impact the carrying value of inventory at each reporting date
as this is a function of costs incurred in the year and the allocation of inventory to costs of sales on each property sold.
In addition, the Group has consistently applied its approach to margin recognition in relation to the Group’s particularly complex, long term regeneration
developments where certain whole-site costs are accelerated to the early stages of the development to reflect the greater uncertainty and the evolution of
risk over the life of such developments. These developments, where the development life cycle is typically greater than ten years, are considered to be
particularly susceptible to potential downward shifts in profitability due to the cyclical nature of the property market and its impact on both revenue and
costs. As such, the inherent estimation uncertainty is increased.
A fundamental principle of the Group’s accounting policy is to reduce the possibility of recognising margin in the early stages of a development that could
subsequently reverse. As such, for these long term sites with greatest estimation uncertainty, a greater proportion of whole-site costs are recognised during
the earlier stages of the development up to a point of inflection when such developments are deemed to be sufficiently de-risked. Subsequent to this
inflection point, and should the uncertainties have not materialised, margin would increase as the visibility over projected revenue and costs across the
development improves.
For the year ended 30 April 2018, had the gross margin recognised on these long term sites, in the early stages prior to the point of inflection, differed by
10%, the impact on profit before tax would have been £7.4 million. As with all judgements involving estimation over a long term horizon, the outcome of
future events may affect the eventual accounting outcome.
(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
Berkeley recognises revenue and profit on development property sales at the point of physical completion, where there are contracts exchanged and the
customer is able to proceed to legal completion. This differs from many other housebuilders who recognise revenue and profit on legal completion. The
Directors believe that Berkeley’s basis of accounting is appropriate for the circumstances of its business and that it is in accordance with International
Financial Reporting Standards as adopted by the EU, but note that its approach results in the recognition of both revenue and profits earlier than the legal
completion methodology. Reaching a view as to whether revenue should be recognised requires judgement. These judgements are complemented by
external certifications in assessing whether the properties sold meet the criteria for recognition in respect of physical completion. The customers’ ability to
complete the purchase is also considered at the point of revenue recognition.
Berkeley’s accounting policy removes absolute reliance on the date of legal completion, which Berkeley believes is a significant contributing factor to many
of the customer service issues within the wider industry, without materially altering the financial reporting risk. Adopting an alternative ‘legal completion’
basis for the current year would be equivalent to the expected IFRS 15 adjustment disclosed in the Basis of Preparation.
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berkeley AnnuAl report 2018 financials
berkeley AnnuAl report 2 018 fi nancials
N o t e s t o t h e C oN s o l i d a t e d
F iN a N Ci a l s t a t e m eN t s
CoNtiN ued
2 sE Gm EnT a l di s c l O sUr E
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.
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.
3 nE T fi n a n cE c O sTs
Finance income
Finance costs:
Interest payable on bank loans and non-utilisation fees
Amortisation of facility fees
Other finance costs
Net finance costs
Finance income predominantly represents interest earned on cash deposits.
Other finance costs represent imputed interest on taxation and on land purchased on deferred settlement terms.
4 P rO f iT bE f O r E Ta x aTiOn
Profit before taxation is stated after charging/(crediting) the following amounts:
Staff costs (note 5)
Depreciation of property, plant and equipment (note 9)
Profit on sale of property, plant and equipment
Operating lease costs
Fees paid and payable to the Company’s current auditor for the audit of the Parent Company
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
2018
£m
6.6
(7.5)
(1.8)
—
(9.3)
(2.7)
2018
£m
279.3
2.7
—
3.4
0.5
0.1
0.1
—
2017
£m
2.1
(3.9)
(1.5)
(4.3)
(9.7)
(7.6)
2017
£m
270.3
2.8
(0.2)
2.7
0.5
0.1
0.1
0.1
The value of inventories expensed and included in the cost of sales is £1,603.2 million (2017: £1,625.7 million).
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 £8,500 (2017: £8,500).
Fees paid in the year to the Group’s current auditor for audit-related assurance services relate to the interim review.
5 dir EcT Or s a nd E m P lO y E Es
Profit before taxation is stated after charging the following amounts:
Staff costs
Wages and salaries
Social security costs
Share-based payments — Equity settled
Share-based payments — Cash settled
Pension costs
2018
£m
208.1
31.3
15.6
17.3
7.0
279.3
2017
£m
194.4
20.1
39.0
10.6
6.2
270.3
The average monthly number of persons employed by the Group during the year was 2,617 (2017: 2,443).
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
Amount charged under long term incentive schemes
Company contributions to the defined contribution pension schemes
2018
£m
2.4
19.4
0.1
21.9
2017
£m
2.9
41.0
0. 1
44.0
The Directors’ Remuneration Report includes disclosure of the gains made by Directors on the exercise of share options during the year, which was
£21.3 million (2017: £83.8 million) in aggregate. In 2018 the value of the gain made by Directors on the exercise of share options is limited by the LTIP cap,
which was introduced as part of the Remuneration Policy approved by shareholders at the 2017 EGM (see page 109 for further details).
The Company reports that, during the year, it settled the proceedings brought by Mr Nicolas Simpkin, its former Finance Director, in the Employment
Tribunal and High Court. Under the settlement Berkeley made a payment of £4.95 million to Mr Simpkin and a further payment of £4.55 million towards his
legal fees and disbursements. On being dismissed by the Company, Mr Simpkin’s options over 3.5 million shares in the Company lapsed. All allegations
made by Mr Simpkin in the proceedings have been withdrawn.
Equity settled share based payments
The Group operates one (2017: one) equity settled share-based payment scheme. The charge to the income statement in respect of share-based payments
in the year relating to grants of share options awarded under the 2011 Long Term Incentive Plan was £14.8 million (2017: £40.6 million). The charge to the
income statement attributable to key management is £13.1 million (2017: £35.0 million). The credit to the reserves during the year in respect of employee
share schemes was £4.2 million (2017: £1.3 million charge), resulting from the non-cash IFRS 2 charge for the year, as reflected in the cash flow statement,
adjusted for the reclassification of reserves on the decision to cash settle the part of the award relating to taxes which vested during the year.
There were 44,319 exercisable share options at the end of the year (2017: 24,789). During the year 2,042,825 options vested under the 2011 Long Term
Incentive Plan (2017: 5,740,438).
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. In December 2015, a revision to the plan was proposed to return an additional £0.5 billion to shareholders.
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 followed by amendments at the Annual General Meeting on 16 February 2016 and the Extraordinary
General Meeting on 23 February 2017. The key features of the 2011 LTIP are:
— if the Company returns £2.3 billion to shareholders over a ten year period via a series of dividend payments and share buy-backs (£16.34 per share)
by the milestone dates referred to below, participants will be entitled to exercise options and receive a number of ordinary shares in the capital of the
Company at the end of each period.
— the maximum number of shares capable of being earned by all participants was 19,616,503 shares, being 13% of the fully diluted share capital of the
Company at the date of approval of the plan. During the year, the introduction of individual participant caps was approved by shareholders.
— the exercise price of options granted under the 2011 LTIP will be £16.34 per share less an amount equal to the value of all dividends, paid between the
date of approval of the 2011 LTIP and vesting dates, beginning in September 2016 with five annual vestings thereafter, provided the exercise price cannot
be less than zero.
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berkeley AnnuAl report 2018 financials
berkeley AnnuAl report 2 018 fi nancials
N o t e s t o t h e C oN s o l i d a t e d
F iN a N Ci a l s t a t e m eN t s
CoNtiN ued
5 dir EcT Or s a nd E m P lO y E Es c OnTi nU Ed
The cumulative distributions required by the plan on or before the relative milestone dates are set out below:
30 September 2016
30 September 2017
30 September 2018
30 September 2019
30 September 2020
30 September 2021
cUmUlaTivE disTribUTiOns
£6.34 per share
£8.34 per share
£10.34 per share
£12.34 per share
£14.34 per share
£16.34 per share
The fair value of the options granted during that year, determined using the current market pricing model, was £3.17 for options which then 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%
As a result of modifications in 2017, which introduced individual participant caps and extended the service period by a further two years, there was a
decrease in the fair value cost of the options. This has been considered a non-beneficial modification for accounting purposes, and accordingly there has
been no impact on the accounting treatment applied.
The discount rate was determined by calculating the Group’s expected cost of capital over the vesting period at the grant date.
During the year 533,000 new additional options were granted (2017: none) and no options lapsed (2017: 1,250,557 lapsed on departure of one employee).
As at 30 April 2018 there were 8,677,955 options outstanding (2017: 10,187,780).
Cash settled share based payments
Bonus Banking Plan
Under the Bonus Banking Plan, detailed in the Directors’ Remuneration Report on page 112, 50% of the balance on the plan account at the end of the
financial year is deferred in notional shares in the Company. The notional shares will be settled in cash each year excluding the year ending 30 April 2021
when the scheme will fully vest and at which point 50% of the remaining balance at that date will be settled in equity, and 50% in cash. Accordingly the plan
is accounted for as cash settled, with only the proportion expected to vest in shares at the end of the plan accounted for as equity settled. This amount is
not of significant quantum to warrant individual disclosure.
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 2018 was £6.3 million (2017: £6.0 million), all of which related to key management.
The total carrying amount of liabilities for the Bonus Banking Plan at the end of the year was £7.0 million (2017: £6.8 million), recorded in accruals and
deferred income.
Senior Management share appreciation rights
Certain key members of senior management 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 2018 was £11.9 million (2017: £3.1 million).
The total carrying amount of liabilities for share appreciation rights at the end of the year was £38.8 million (2017: £30.3 million), recorded in accruals
and deferred income.
Pensions
During the year, two principal pension schemes were in place for employees (2017: two). 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 £5.8 million (2017: £5.3 million) were paid into the defined contribution schemes during the year.
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Defined benefit plan
As at 30 April 2018, 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 312 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 2016 and finalised in July 2017. The method adopted in the 2016 valuation was the projected unit credit method, which assumed a return on
investment both prior to and after retirement of 4.10% per annum and pension increases of 3.25% per annum. The market value of the Berkeley Final Salary
Plan assets as at 1 May 2016 was £18.4 million and covered 96% of the scheme’s liabilities. Following the finalisation of the 2016 valuation, the Group agreed
with the Trustees of the Scheme to make additional contributions to the Scheme of £0.8 million over a fifteen month period (1 May 2016 to 31 July 2017) to
address the Scheme’s deficit after which required contributions were reduced to zero. Notwithstanding this the Group made additional voluntary
contributions of £0.6 million during the year (2017: £0.6 million).
The Group considers it does not have the unconditional right to a refund of an asset surplus in the plan and thus the asset ceiling applies.
For the purposes of IAS 19, the 2016 valuation was updated for 30 April 2018.
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 in the plan
Effect of the asset ceiling
Net amount recognised on the statement of financial position
Movement in net defined benefit asset:
2018
£m
(19.4)
21.5
2.1
(2.1)
—
2017
£m
(20.5)
21.0
0.5
(0.5)
—
dEfinEd bEnEfiT ObliGaTiOn
fair valUE Plan assETs
nET dEfinEd bEnEfiT assET
Balance at 1 May
Included in income statement
Net interest
Included in other comprehensive income
Remeasurements:
Actuarial gain/(loss) arising from:
— demographic assumptions
— financial assumptions
— experience adjustments
Return on plan assets
Other
Contributions by the employer
Benefits paid out
balance at 30 april
2018
£m
(20.5)
2017
£m
(15.9)
(0.5)
(0.6)
0.3
0.5
—
—
—
0.8
(0.6)
(3.7)
(0.3)
—
—
0.6
(19.4)
(20.5)
2018
£m
21.0
0.5
—
—
—
0.2
0.6
(0.8)
21.5
2017
£m
18.1
0.6
—
—
—
2.3
0.6
(0.6)
21.0
Cumulative actuarial gains and losses recognised in equity:
Cumulative amounts of losses recognised in the statement of comprehensive income at 1 May
Net actuarial gains/(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
2018
£m
0.5
—
0.3
0.5
—
0.2
0.6
—
2.1
2018
£m
(6.7)
1.0
(1.6)
(7.3)
2017
£m
2.2
—
(0.6)
(3.7)
(0.3)
2.3
0.6
—
0.5
2017
£m
(6.1 )
(2.3)
1.7
(6.7)
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berkeley AnnuAl report 2018 financials
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5 dir EcT Or s a nd E m P lO y E Es c OnTi nU Ed
The fair value of the assets were as follows:
UK Equities
Global Equities
Emerging Market Equities
High Yield Bonds
Diversified Growth Fund
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
30 aPril
2018
lOnG TErm
valUE
£m
30 aPril
2017
lOnG TErm
valUE
£m
1.0
4.8
1.8
2.0
5.0
1.1
1.9
2.3
1.5
0.1
21.5
0.9
4.3
1.5
1.9
4.9
1.1
1.9
2.4
1.4
0.7
21.0
6 Ta x aTiOn
The tax charge for the year is as follows:
Current tax
UK corporation tax payable
Adjustments in respect of previous years
Deferred tax
Deferred tax movements
Adjustments in respect of previous years
Tax on items recognised directly in other comprehensive income is as follows:
Deferred tax on remeasurements of the net defined benefit asset/liability (note 16)
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.
Tax on items recognised directly in equity is as follows:
History of asset values
Fair value of plan assets
Present value of defined benefit obligations
Net surplus in the plan
30 aPril
2018
£m
30 aPril
2017
£m
30 aPril
2016
£m
30 aPril
2015
£m
30 aPril
2014
£m
21.5
(19.4)
2.1
21.0
(20.5)
0.5
18.1
(15.9)
2.2
18.1
(16.6)
1.5
16.0
(14.8)
1.2
Actuarial assumptions
The major assumptions used by the actuary for the 30 April 2018 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
2018
30 aPril
2017
2.60%
3.40%
2.50%
3.40%
2.60%
3.60%
2.70%
3.60%
The mortality assumptions are the standard S2PA CMI_2017_X [1.0%] (2017: S2PA CMI_2015_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 21.8 years and 23.7 years respectively (2017: 22.0 and 24.0 years). The life expectancy of male and female deferred
pensioners (now aged 45) retiring at age 65 after the balance sheet date is 22.8 years and 24.9 years respectively (2017: aged 45, 23.3 and 25.5 years).
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
assUmPTiOn
-0.25% p.a
+0.25% p.a
+1 year
chanGE in
dEfinEd
bEnEfiT
ObliGaTiOn
+4.0%
+2.8%
+3.7%
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 £0.6 million in contributions to its defined benefit plan in the year ending 30 April 2019, albeit it has no obligation to do so.
Deferred tax in respect of employee share schemes (note 16)
Current tax in respect of employee share schemes (note 16)
The tax charge assessed for the year differs from the standard rate of UK corporation tax of 19.0% (2017: 19.92%).
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 years
Effect of change in rate in tax (note 16)
Other
Tax charge
Corporation tax is calculated at 19.0% of the estimated assessable profit for the year.
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 closure of open tax
matters in the ordinary course of events. The adjustments in respect of previous years reflects the agreement of a number of previously open issues and tax
relief claims.
Changes to UK corporation tax rates were substantially enacted as part of Finance Act (2015) (No2) on 18 November 2015 and the Finance Act 2016 on
15 September 2016. These changes include reductions to the main rate of corporation tax to 19% from 1 April 2017 and to 17% from 1 April 2020. Deferred
taxes at the balance sheet date have been measured using these enacted tax rates and are based on when these assets are expected to be realised.
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2018
£m
(177.8)
9.4
(168.4)
(1.8)
(2.6)
(4.4)
2017
£m
(162.4)
1.8
(160.6)
(1.7)
(5.0)
(6.7)
(172.8)
(167.3)
2018
£m
0.1
2018
£m
4.4
(0.6)
3.8
2018
£m
934.9
177.6
0.6
(0.2)
(6.8)
1.2
0.4
172.8
2017
£m
0. 1
2017
£m
(0.2)
(5.6)
(5.8)
2017
£m
812.4
161.8
0.9
0. 1
3.2
1.2
0.1
167.3
01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALSBERKELEY ANNUAL REPORT 2018 FINANCIALSBERKELEY ANNUAL REPORT 2018 FINANCIALS
berkeley AnnuAl report 2018 financials
berkeley AnnuAl report 2 018 fi nancials
N o t e s t o t h e C oN s o l i d a t e d
F iN a N Ci a l s t a t e m eN t s
CoNtiN ued
7 Ea r n i nGs P Er O r di n ar y s h a r E
9 P rO P Er T y, Pl a nT a nd E q UiPm EnT
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)
2018
762.1
135.4
562.7
2017
645.1
137.9
467.8
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 2018, the Group had two (2017: two) categories of potentially dilutive ordinary shares: 10.4 million (2017: 11.4 million) share
options under the 2011 LTIP and 21,000 (2017: 12,000) share options under the Bonus Banking Plan.
A calculation is performed 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 — 2011 LTIP (m)
Shares used to determine diluted EPS (m)
Diluted earnings per ordinary share (p)
8 inT a nGib lE a s s E T s
Cost
At 1 May 2017 and 30 April 2018
Accumulated impairment
At 1 May 2017 and at 30 April 2018
Net book value
At 1 May 2017 and at 30 April 2018
Cost
At 1 May 2016 and 30 April 2017
Accumulated impairment
At 1 May 2016 and at 30 April 2017
Net book value
At 1 May 2016 and at 30 April 2017
2018
762.1
135.4
3.1
138.5
550.2p
2017
645.1
137.9
5.0
142.9
451.4p
GOOdwill
£m
17.2
—
17.2
17.2
—
17.2
The goodwill balance relates solely to the acquisition of the 50% of the ordinary share capital of St James Group Limited, completed on 7 November 2006
that was not already owned by the Group. The goodwill balance is tested annually for impairment. The recoverable amount has been determined on the
basis of the value in use of the business using the current five year pre-tax forecasts. Key assumptions are as follows:
(i) Cash flows beyond a five year period are not extrapolated; and
(ii) A pre-tax discount rate of 7.91% (2017: 8.36%) 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.
PrOPErTy, PlanT and EqUiPmEnT
frEEhOld
PrOPErTy
£m
fixTUrEs
and
fiTTinGs
£m
mOTOr
vEhiclEs
£m
TOTal
£m
Cost
At 1 May 2017
Additions
Disposals
at 30 april 2018
Accumulated Depreciation
At 1 May 2017
Charge for the year
Disposals
at 30 april 2018
Net book value
At 1 May 2017
at 30 april 2018
Cost
At 1 May 2016
Additions
Disposals
At 30 April 2017
Accumulated Depreciation
At 1 May 2016
Charge for the year
Disposals
At 30 April 2017
Net book value
At 1 May 2016
At 30 April 2017
1 0 in v E sT m EnT s i n jOi nT vEnT Ur
Es
Unlisted shares at cost
Loans
Share of post-acquisition reserves
Elimination of profit on transfer of inventory to joint ventures
Details of the joint ventures are provided in notes 24 and 25.
The Group’s share of joint ventures’ net assets, income and expenses is made up as follows:
At 1 May
Profit after tax for the year
Dividends from investments
Net increase/(decrease) in loans to joint ventures
At 30 April
17.4
4.1
—
21.5
1.2
0.3
—
1.5
16.2
20.0
17.4
—
—
17.4
1.1
0.1
—
1.2
16.3
16.2
12.1
1.4
(0.9)
12.6
7.5
1.9
(0.9)
8.5
4.6
4.1
10.0
2.6
(0.5)
12.1
5.6
2.2
(0.3)
7.5
4.4
4.6
3.7
0.6
(0.9)
3.4
1.7
0.5
(0.6)
1.6
2.0
1.8
4.5
0.2
(1.0)
3.7
1.7
0.5
(0.5)
1.7
2.8
2.0
2018
£m
11.0
92.3
211.8
(0.1)
315.0
2018
£m
135.0
158.0
—
22.0
315.0
0
1
S
t
r
a
t
e
g
c
r
e
p
o
r
t
i
0
2
g
o
v
e
r
n
a
n
c
e
i
0
3
F
n
a
n
c
a
l
S
i
33.2
6.1
(1.8)
37.5
10.4
2.7
(1.5)
11.6
22.8
25.9
31.9
2.8
(1.5)
33.2
8.4
2.8
(0.8)
10.4
23.5
22.8
2017
£m
11.0
70.3
53.8
(0.1)
135.0
2017
£m
150.0
63.8
(70.0)
(8.8)
135.0
143
143
142
142
Net increase/(decrease) in loans to joint ventures includes movements in unlisted shares at cost. The current year movement includes no non-cash
movement (2017: no non-cash movement).
01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALSBERKELEY ANNUAL REPORT 2018 FINANCIALSBERKELEY ANNUAL REPORT 2018 FINANCIALS
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1
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t
r
a
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e
g
c
r
e
p
o
r
t
i
0
2
g
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a
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c
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0
3
F
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a
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a
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berkeley AnnuAl report 2018 financials
berkeley AnnuAl report 2 018 fi nancials
N o t e s t o t h e C oN s o l i d a t e d
F iN a N Ci a l s t a t e m eN t s
CoNtiN ued
1 0 in v E sT m EnT s c OnTi nU Ed
The Group’s share of joint ventures’ net assets, income and expenses is made up as follows:
sT Edward
£m
sT william
£m
OThEr
£m
285.1
91.1
376.2
(79.9)
(49.5)
246.8
314.6
(143.3)
171.3
1.5
172.8
(0.3)
172.5
8.1
151.0
159.1
(66.5)
(24.5)
68.1
—
(12.6)
(12.6)
(1.9)
(14.5)
—
(14.5)
0.1
—
0.1
—
—
0.1
—
—
—
—
—
—
—
sT Edward
£m
sT william
£m
OThEr
£m
129.9
126.7
256.6
(131.2)
(51.0)
74.4
168.7
(94.7)
74.0
(1.4)
72.6
(0.2)
72.4
1.2
107.3
108.5
(36.0)
(12.0)
60.5
—
(7.7)
(7.7)
(0.9)
(8.6)
—
(8.6)
0.1
—
0.1
—
—
0.1
—
—
—
—
—
—
—
2018
£m
337.7
2,779.8
122.4
3,239.9
TOTal
£m
293.3
242.1
535.4
(146.4)
(74.0)
315.0
314.6
(155.9)
158.7
(0.4)
158.3
(0.3)
158.0
TOTal
£m
131.2
234.0
365.2
(167.2)
(63.0)
135.0
168.7
(102.4)
66.3
(2.3)
64.0
(0.2)
63.8
2017
£m
414.1
2,981.7
87.6
3,483.4
2018
Cash and cash equivalents
Other current assets
Current assets
Current liabilities
Non-current financial liabilities
Revenue
Costs
Operating profit
Interest (charges)/income
Profit before taxation
Tax charge
Share of post tax profit of joint ventures
2017
Cash and cash equivalents
Other current assets
Current assets
Current liabilities
Non-current liabilities
Revenue
Costs
Operating profit
Interest charges
Profit before taxation
Tax charge
Share of post tax profit of joint ventures
1 1 in v EnT Or iEs
Land not under development
Work in progress
Completed units
144
144
1 2 T ra d E a nd O T h E r rEcEiv a b lEs
Trade receivables
Other receivables
Prepayments and accrued income
Further disclosures relating to trade receivables are set out in note 23.
1 3 ca s h a nd c a s h E q Uiv a lEnT s
Cash and cash equivalents
1 4 T ra d E a nd O T h E r Pa ya b lEs
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
2018
£m
107.9
13.3
11.1
132.3
2018
£m
987.3
2018
£m
(589.3)
(895.0)
—
(48.6)
(131.9)
2017
£m
186. 1
32.6
10.8
229.5
2017
£m
585.5
2017
£m
(647.0)
(974.9)
(0. 1)
(49.8)
(137.4)
(1,664.8)
(1,809.2)
(62.6)
(1,727.4)
(69.2)
(1,878.4)
All amounts included above are unsecured. The total of £48.6 million (2017: £49.8 million) for other taxes and social security includes £14.7 million
(2017: £14.6 million) for Employer’s National Insurance provision in respect of share-based payments.
Further disclosures relating to current trade and non-current trade payables are set out in note 23.
1 5 P rO v i s iOn s fO r O T h E r l i ab i l iTiEs a nd c h a r G Es
At 1 May 2017
Utilised
Released
Charged to the income statement
at 30 april 2018
At 1 May 2016
Utilised
Released
Charged to the income statement
At 30 April 2017
POsT-
cOmPlETiOn
dEvElOPmEnT
PrOvisiOns
OThEr
PrOvisiOns
(80.1)
11.6
26.1
(31.8)
(74.2)
(19.8)
9.6
3.7
(1.1)
(7.6)
POsT-
cOmPlETiOn
dEvElOPmEnT
PrOvisiOns
OThEr
PrOvisiOns
(73.4)
1.3
24.8
(32.8)
(80.1 )
(15.1)
1.6
1.7
(8.0)
(19.8)
TOTal
£m
(99.9)
21.2
29.8
(32.9)
(81.8)
TOTal
£m
(88.5)
2.9
26.5
(40.8)
(99.9)
145
145
01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALSBERKELEY ANNUAL REPORT 2018 FINANCIALSBERKELEY ANNUAL REPORT 2018 FINANCIALS
berkeley AnnuAl report 2018 financials
berkeley AnnuAl report 2 018 fi nancials
N o t e s t o t h e C oN s o l i d a t e d
F iN a N Ci a l s t a t e m eN t s
CoNtiN ued
1 5 P rO v i s iOn s fO r O T h E r l i ab i l iTiEs a nd c h a r G Es c OnTi nU Ed
The deferred tax credited to equity during the year was as follows:
Analysis of total provisions:
Non-current
Current
Total
2018
£m
68.0
13.8
81.8
2017
£m
73.0
26.9
99.9
Deferred tax on remeasurements of the net defined benefit asset/liability (note 6)
Deferred tax in respect of employee share schemes (note 6)
Movement in the year
Cumulative deferred tax credited to equity at 1 May
Cumulative deferred tax credited to equity at 30 April
0
1
S
t
r
a
t
e
g
c
r
e
p
o
r
t
i
0
2
g
o
v
e
r
n
a
n
c
e
2018
£m
0.1
3.8
3.9
21.0
24.9
2017
£m
0. 1
(5.8)
(5.7)
26.7
21.0
i
0
3
F
n
a
n
c
a
l
S
i
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 the Group’s portfolio of complex mixed-use developments which are expected to be incurred in the ordinary course of business,
based on historic experience of the Group’s sites and current site-specific risks, but which are uncertain in terms of timing and quantum. The Group
continually reviews its utilisation of this provision and, in recognition that the risk of post-completion development obligations reduces over time, releases
any unutilised provision to the income statement on a systematic basis across the five years following post-completion.
In addition, the Group holds other provisions 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, as well as litigation. These are not individually significant in terms of quantum to warrant separate disclosure and
the timing of the utilisation of the other provisions is uncertain.
1 6 d Ef E r rE d Ta x
The movement on the deferred tax account is as follows:
At 1 May 2017
Adjustments in respect of previous years
(Charged) to the income statement in year
Adjustment in respect of change of tax rate from 20% to 19%/17% (note 6)
Charged to income statement in the year
Credited to equity at 19%/17%
Realisation of deferred tax asset on vesting of employee share scheme
Credited to equity in year (note 6)
at 30 april 2018
At 1 May 2016
Adjustments in respect of previous years
Credited/(charged) to the income statement in year
Adjustment in respect of change of tax rate from 20% to 19%/17% (note 6)
Charged to income statement in the year
Credited/(charged) to equity at 19%/17%
Realisation of deferred tax asset on vesting of employee share scheme
Credited/(charged) to equity in year (note 6)
At 30 April 2017
accElEraTEd
caPiTal
allOwancEs
£m
rETirEmEnT
bEnEfiT
ObliGaTiOns
£m
shOrT TErm
TiminG
diffErEncEs
£m
0.8
—
—
(0.1)
(0.1)
—
—
—
0.7
0.1
—
(0.1)
—
(0.1 )
0. 1
—
0.1
0.1
58.5
(2.6)
(0.5)
(1.1)
(1.6)
4.4
(0.6)
3.8
58.1
accElEraTEd
caPiTal
allOwancEs
£m
rETirEmEnT
bEnEfiT
ObliGaTiOns
£m
shOrT TErm
TiminG
diffErEncEs
£m
0.8
—
0.1
(0.1)
—
—
—
—
0.8
0.1
—
(0.1)
—
(0.1)
0.1
—
0.1
0.1
71.0
(5.0)
(0.6)
(1.1 )
(1.7)
(0.2)
(5.6)
(5.8)
58.5
TOTal
£m
59.4
(2.6)
(0.6)
(1.2)
(1.8)
4.5
(0.6)
3.9
58.9
TOTal
£m
71.9
(5.0)
(0.6)
(1.2)
(1.8)
(0.1)
(5.6)
(5.7)
59.4
Other short term timing differences primarily relates to deferred tax assets held in relation to long term incentive schemes and bonuses.
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 19/17% as appropriate (2017: 19/17%). There is no unprovided deferred tax (2017: 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 2018 is £58.9 million
(2017: £59.4 million).
Deferred tax assets of £45.6 million (2017: £44.7 million) are expected to be recovered after more than one year.
1 7 sha r E c aPiT a l a nd s h a r E P r E m iUm
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
Ordinary sharEs
sharE caPiTal
sharE PrEmiUm
2018
nO ‘000
2017
nO ‘000
140,157
—
140,157
138,257
1,900
140,157
2018
£m
7.0
—
7.0
2017
£m
6.9
0.1
7.0
2018
£m
49.8
—
49.8
2017
£m
49.8
—
49.8
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 28 September 2017, 0.4 million ordinary shares (2017: 1.9 million) were allotted and issued to the Employee Benefit Trust.
On 2 October 2017, 0.4 million ordinary shares (2017: 1.8 million) were transferred from the Employee Benefit Trust to Executive Directors to satisfy the
exercise of options under the 2011 Long Term Incentive Plan.
At 30 April 2018 there were 0.4 million shares held in trust (2017: 0.4 million) by the Employee Benefit Trust. The market value of these shares at
30 April 2018 was £18.0 million (2017: £13.8 million).
During the 2018 financial year, shares were repurchased for a total consideration of £140.4 million, excluding transaction costs (2017: £64.5 million).
These shares have not been cancelled.
At 30 April 2018 there were 6.0 million (2017: 2.4 million) treasury shares held by the Group. The market value of the shares at 30 April 2018 was
£244.3 million (2017: £78.8 million).
1 8 r EsEr v Es
The movement in reserves is set out in the Consolidated Statement of Changes in Equity on page 130.
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.
Other reserve
The other reserve of negative £961.3 million (2017: negative £961.3 million) 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.
Retained earnings
On 28 September 2017 the Company issued and transferred to the Company’s Employee Benefit Trust 0.4 million ordinary shares (2017: 1.9 million ordinary
shares). On 2 October 2017 0.4 million ordinary shares were transferred from the Employee Benefit Trust to Executive Directors to satisfy the exercise of
options under the 2011 Long Term Incentive Plan (2017: 1.8 million ordinary shares).
1 9 div i d End s P Er s h a r E
The dividends paid in 2018 were a total of £146.7 million, being £76.3 million in March 2018 (56.75 pence per share) and £70.4 million in September 2017
(51.76 pence per share) (2017: £254.6 million being £117.7 million in March 2017, 85.24 pence per share and £136.9 million in September 2016, 100 pence
per share).
2 0 c OnTi nG EnT l i ab i l iTiEs
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 £16.9 million which are guaranteed by third parties
(2017: £12.6 million). The Group considers that the likelihood of an outflow of cash under these agreements is low and that no provision is required.
146
146
147
147
01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALSBERKELEY ANNUAL REPORT 2018 FINANCIALSBERKELEY ANNUAL REPORT 2018 FINANCIALS
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c
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2
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berkeley AnnuAl report 2018 financials
berkeley AnnuAl report 2 018 fi nancials
N o t e s t o t h e C oN s o l i d a t e d
F iN a N Ci a l s t a t e m eN t s
CoNtiN ued
2 1 OP Er aTi nG lEa sEs — mi n im U m lEa sE Pa y mEnT s
2 3 caPiT a l ma n a G Em EnT , fi n a n c i a l i n s Tr U m EnT s a nd fi n a n c i a l ri sk ma n a G Em EnT
The total future aggregate minimum lease payments of the Group under non-cancellable operating leases are set out below:
Amounts due:
Within one year
Between one and five years
After five years
2 2 nO T Es T O T h E c On sOl id aT E d c a s h flOw s TaT E m EnT
Reconciliation of profit after taxation for the year to cash generated from operations:
Profit after taxation for the year
Adjustments for:
— Taxation
— Depreciation
— Profit on sale of property, plant and equipment
— 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:
— Decrease/(increase) in inventories
— Decrease/(increase) in trade and other receivables
— (Decrease)/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 inflow from increase in borrowings
Movement in net cash in the year
Opening net cash
Closing net cash
Net cash:
As at 30 April
Cash and cash equivalents
Borrowings
Net cash
2018
£m
2.7
5.0
1.2
8.9
2018
£m
762.1
172.8
2.7
—
(6.6)
9.3
(158.0)
8.6
243.5
97.0
(173.6)
(0.6)
957.2
2018
£m
401.8
—
401.8
285.5
687.3
2018
£m
987.3
(300.0)
687.3
2017
£m
2.5
5.2
1.6
9.3
2017
£m
645.1
167.3
2.8
0.2
(2.1)
9.7
(63.8)
10.9
(227.3)
(18.4)
13.2
(0.6)
537.0
2017
£m
478.1
(300.0)
178.1
107.4
285.5
2017
£m
585.5
(300.0)
285.5
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 opportunistically and work in progress at the right point in the cycle and deliver 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 was revised in December 2015 and the return to shareholders increased to £16.34 per share. This plan, reported in more detail
in the Strategic Report on page 11, 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 2018 was £1,932.7 million (2017: £1,851.4 million). The
increase in capital employed in the year of £81.3 million reflects an increase in net assets during the year (2017: £146.0 million).
The Group’s financial instruments comprise financial assets being: trade receivables and cash and cash equivalents and financial liabilities being: bank loans,
trade payables, deposits and on account receipts, loans from joint ventures and accruals. Cash and cash equivalents and borrowings are the principal
financial instruments used to finance the business. The other financial instruments highlighted arise in the ordinary course of business.
As all of the operations carried out by the Group are in sterling there is no direct currency risk, and therefore the Group’s main financial risks are primarily:
— liquidity risk — the risk that suitable funding for the Group’s activities may not be available;
— market interest rate risk — the risk that Group financing activities are adversely affected by fluctuation in market interest rates; and
— credit risk — the risk that a counterparty will default on their contractual obligations resulting in a loss to the Group.
Financial instruments: financial assets
The Group’s financial assets can be summarised as follows:
Current
Trade receivables
Cash and cash equivalents
Total financial assets
2018
£m
107.9
987.3
1,095.2
2017
£m
186. 1
585.5
771.6
Trade receivables and available-for-sale financial assets are non-interest bearing. Of the current trade receivables balance of £107.9 million (30 April 2017:
£186.1 million), £97.5 million (30 April 2017: £159.1 million) was not past due, with £8.3 million being 0–30 days past due (30 April 2017: £18.3 million, 0–30
days past due) and £2.1 million being over 30 days past due (30 April 2017: £8.7 million, over 30 days past due).
Cash and cash equivalents are short term deposits held at either floating rates linked to LIBOR or fixed rates.
There are currently no group’s assets that are measured at fair value.
Financial instruments: financial liabilities
The Group’s financial liabilities can be summarised as follows:
Current
Trade payables
Loans from joint ventures
Accruals and deferred income
Non-current
Trade payables
Borrowings
Total financial liabilities
All amounts included above are unsecured.
2018
£m
(589.3)
—
(131.9)
(721.2)
(62.6)
(300.0)
(362.6)
(1,083.8)
2017
£m
(647.0)
(0.1 )
(137.4)
(784.5)
(69.2)
(300.0)
(369.2)
(1,153.7)
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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berkeley AnnuAl report 2018 financials
berkeley AnnuAl report 2 018 fi nancials
N o t e s t o t h e C oN s o l i d a t e d
F iN a N Ci a l s t a t e m eN t s
CoNtiN ued
2 3 caPiT a l ma n a G Em EnT , fi n a n c i a l i n s Tr U m EnT s a nd fi n a n c i a l ri sk ma n a G Em EnT c OnTi nU Ed
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
2018
£m
(15.2)
(322.9)
(24.5)
(362.6)
2017
£m
(8.0)
(338.4)
(22.8)
(369.2)
The carrying amounts of the Group’s financial assets and financial liabilities approximate their fair value.
Current trade receivables and current trade and other payables approximate to their fair value as the transactions which give rise to these balances arise in
the normal course of trade and, where relevant, with industry standard payment terms and have a short period to maturity (less than one year).
Non-current trade payables comprise long term land payables, which are held at their discounted present value (calculated by discounting expected future
cash flows at prevailing interest rates and yields as appropriate) and borrowings. 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 2018 a rate of 0.84% was applied (2017: 0.21%).
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
2018
£m
(721.3)
(15.4)
(323.5)
(26.5)
(1,086.7)
2017
£m
(784.5)
(8.1)
(338.6)
(23.3)
(1,154.5)
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 2018, profit after tax for the year
would have been £1.2 million higher (2017: £1.1 million 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 2018.
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 (2017: £nil), nor are there any material provisions held against trade receivables (2017: £nil), and £10.4 million trade
receivables are past their due date (2017: £27.0 million).
The credit risk on cash and cash equivalents is limited because counterparties are leading international banks with long term A credit-ratings assigned by
international credit agencies.
Committed borrowing facilities
The Group has committed borrowing facilities as follows:
availablE
£m
drawn
£m
Undrawn
£m
TErminaTiOn
£m
availablE
£m
drawn
£m
Undrawn
£m
TErminaTiOn
£m
2018
2017
Term Loan
Revolving credit facility
300
450
750
(300)
—
(300)
—
450
450
nov-22
nov-22
300
450
750
(300)
—
(300)
—
450
450
Nov-21
Nov-21
The Group’s committed banking facilities currently total £750 million and expire in November 2022, after the Group exercised the first of two options to
extend the facilities by a year. One option remains to extend the facilities by a further year until 2023.
At 30 April 2018 the total drawn down balance of the facility was £300.0 million (2017: £300.0 million). In addition, at 30 April 2018 there were bank bonds
in issue of £5.0 million (2017: £5.0 million).
The committed facilities are secured by debentures provided by certain Group holding companies over their assets. The facility agreement contains financial
covenants, which is normal for such agreements, with all of which the Group is in compliance.
2 4 r El a T Ed Pa r T y T r a n s a cTiOn s
The Group has entered into the following related party transactions:
Transactions with Directors
In terms of new transactions in the 2018 financial year:
i) During the year, Mr A W Pidgley paid £73,317 (2017: £44,794) and Mr R C Perrins paid £14,577 (2017: £32,289) to the Group in connection with works
carried out at their respective homes at commercial rates in accordance with the relevant policies of the Group. In the prior financial year Mr S Ellis paid
£92,732 to the Group. There were no balances outstanding at the year end.
Director property purchases previously disclosed, which have all received shareholder approval, include:
— Ms D Brightmore Armour — purchase of an apartment at 190 Strand for £2,985,000 in 2014 along with a storage room at the property for £101,200
in 2015. During the financial year, Ms Brightmore-Armour legally completed on the purchase of both the apartment and storage room. All contractual
amounts have been paid to the Group.
— Mr S Ellis — purchase of an apartment at 190 Strand for £2,285,000 in February 2017. During the financial year, Mr S Ellis legally completed on the
purchase of the apartment. All contractual amounts have been paid to the Group.
— Mr K Whiteman — purchase of an apartment at Royal Arsenal Riverside for £650,000 in 2016. During the year Mr Whiteman paid £971 in respect
of enhancements to specification. As at 30 April 2018 all contractual amounts due have been paid to the Group and the property was still under
construction.
Berkeley Homes plc has 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. No payments have been made under this agreement in the year
(2017: nil) and there were no outstanding balances at the year end (2017: nil). Langham Homes has not introduced any new land to the Group in the year.
In the event that any further land purchases are agreed, further fees may be payable to Langham Homes in future years.
Transactions with joint ventures
During the financial period there were no transactions with joint ventures other than movements in loans, there were no dividends received from
joint ventures in the period (2017: £70,000,000). The outstanding loan balances with joint ventures at 30 April 2018 total £102,700,000
(30 April 2017: £80,700,000).
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 2018 no amounts were outstanding in respect of this transaction (30 April 2017: £736,000 included in trade receivables).
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(a) Subsidiaries
In accordance with section 409 of the Companies Act 2006 a full list of subsidiaries, partnerships, associates, joint ventures and joint arrangements, the
country of incorporation, the registered address and the effective percentage of equity owned, as at 30 April 2018 is disclosed below. The Berkeley Group
plc is the only direct subsidiary of The Berkeley Group Holdings plc and is an intermediate holding company. All wholly-owned and partly owned
subsidiaries are included in the consolidation and all associated undertakings are included in the Group’s financial statements.
All of the companies listed below are incorporated in England and Wales have their registered office address at Berkeley House, 19 Portsmouth Road,
Cobham, Surrey, KT11 1JG and the principal activity is residential-led mixed-use development and ancillary activities. All of the companies are wholly owned
by the Group and unless otherwise indicated, all of the companies have ordinary share capital.
agents of berkeley commercial developments
limited
Berkeley Homes (Western) Limited
Berkeley Homes (West Thames) Limited
Ely Business Park Limited
agents of berkeley (central london) limited
Berkeley Ninety-One Limited
Berkeley Partnership Homes Limited
St George Wharf (Block D) Commercial
Limited
St George Wharf Car Park Limited
agents of st john homes limited
Chelsea Bridge Wharf (Block A) Limited
Chelsea Bridge Wharf (Block B) Limited
Chelsea Bridge Wharf (Block P) Limited
Chelsea Bridge Wharf (C North) Limited
Chelsea Bridge Wharf (C South) Limited
agents of berkeley homes (hampshire)
limited
Berkeley Homes (South Western House No.1)
Limited
agents of berkeley homes plc
Berkeley (Canalside) Limited
Berkeley Build Limited
Berkeley Forty-Five Limited(i)
Berkeley Forty-Four plc
Berkeley Homes (Barn Elms) Limited
Berkeley Homes (Capital) plc
Berkeley Homes (Central & West London) plc
Berkeley Homes (Central London) Limited
Berkeley Homes (Chiltern) Limited
Berkeley Homes (East Anglia) Limited
Berkeley Homes (East Kent) Limited
Berkeley Homes (East Thames) Limited
Berkeley Homes (Eastern Counties) Limited
Berkeley Homes (Eastern) Limited
Berkeley Homes (Festival Waterfront
Company) Limited
Berkeley Homes (Hampshire) Limited
Berkeley Homes (Home Counties) plc
Berkeley Homes (North East London) Limited
Berkeley Homes (Oxford & Chiltern) Limited
Berkeley Homes (South East London) Limited
Berkeley Homes (South London) Limited
Berkeley Homes (Southern) Limited
Berkeley Homes (Surrey) Limited
Berkeley Homes (Thames Gateway) Limited
Berkeley Homes (Thames Valley) Limited
Berkeley Homes (Three Valleys) Limited
Berkeley Homes (Urban Developments)
Limited
Berkeley Seven Limited
Berkeley STE Limited
Berkeley SW Management Limited
Berkeley Urban Renaissance Limited
Clare Homes Limited
Lisa Estates (St Albans) Limited
PEL Investments Limited
St John Homes Limited
St Joseph Homes Limited
Stanmore Relocations Limited
Tabard Square (Building C) Limited
agents of berkeley Twenty limited
Thirlstone Homes (Western) Limited
Thirlstone Homes Limited
agents of st George central london limited
Castle Court Putney Wharf Limited
Imperial Wharf (Block C) Limited
Imperial Wharf (Block J) Limited
Imperial Wharf (Riverside Tower) Residential
Limited
agents of st George plc
Berkeley Sixty-Six Limited
non-agency companies(v)
Ancestral Homes Limited
Berkeley (Inner-City Partnerships) Limited
Berkeley (SQP) Limited
Berkeley (Virginia Water) Limited(i)
Berkeley Affordable Homes Limited
Berkeley Asset MSA Limited
Berkeley College Homes Limited
Berkeley Commercial Developments Limited
Berkeley Commercial Investments Limited
Berkeley Commercial Limited
Berkeley Community Villages Limited
Berkeley Construction Limited
Berkeley Developments Limited(i)
Berkeley Eighteen Limited
Berkeley Eighty Limited
Berkeley Eighty-One Limited
Berkeley Eighty-Three Limited
Berkeley Eighty-Two Limited
Berkeley Enterprises Limited
St George Central London Limited
Berkeley Festival Development Limited
St George City Limited
Berkeley Festival Hotels Limited
St George Developments Limited
Berkeley Festival Investments Limited
St George Kings Cross Limited
Berkeley Festival Limited
St George North London Limited
Berkeley Fifty Limited
St George South and Central London Limited
Berkeley Fifty-Eight Limited
St George South London Limited
Berkeley Fifty-Five Limited
St George West London Limited
Berkeley Fifty-Four Limited
agents of st George south london limited
Berkeley Fifty-Nine Limited
Battersea Reach Estate Company Limited
Berkeley Fifty-One Limited
Kensington Westside No. 2 Limited
Berkeley Fifty-Seven Limited
Putney Wharf Estate Limited
Berkeley Fifty-Three Limited
Riverside West (Block C) Commercial Limited
Berkeley Fifty-Two Limited
Riverside West (Block C) Residential Limited
Berkeley First Limited
Riverside West (Block D) Commercial Limited
Berkeley Five Limited
Riverside West (Block D) Residential Limited
Berkeley Forty Limited
Riverside West Car Park Limited
Berkeley Forty-Eight Limited
Berkeley Homes (Urban Living) Limited
St George Wharf (Block B) Limited
Berkeley Forty-Nine Limited
Berkeley Homes (Urban Renaissance) Limited
St George Wharf (Block C) Limited
Berkeley Forty-Seven Limited
Berkeley Homes (West London) Limited
Berkeley Forty-Six Limited
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Berkeley One Hundred and Seventy-Three
Limited
Berkeley One Hundred and Seventy-Two
Limited
Berkeley One Hundred and Six Limited
Berkeley One Hundred and Sixteen Limited
Berkeley One Hundred and Sixty-Five Limited
Berkeley One Hundred and Sixty-Four Limited
Berkeley One Hundred and Sixty-One Limited
Berkeley One Hundred and Sixty-Six Limited
Berkeley One Hundred and Sixty-Three
Limited
Berkeley One Hundred and Thirteen Limited
Berkeley One Hundred and Thirty-Eight
Limited
Berkeley One Hundred and Thirty-Five Limited
Berkeley One Hundred and Thirty-Four
Limited
Berkeley One Hundred and Thirty Limited
Berkeley One Hundred and Thirty-Nine
Limited
Berkeley One Hundred and Thirty-One Limited
Berkeley One Hundred and Thirty-Seven
Limited
Berkeley One Hundred and Thirty-Six Limited
Berkeley One Hundred and Thirty-Three
Limited
Berkeley One Hundred and Thirty-Two Limited
Berkeley One Hundred and Three Limited
Berkeley One Hundred and Twenty-Eight
Limited
Berkeley One Hundred and Twenty-Five
Limited
Berkeley One Hundred and Twenty-Four
Limited
Berkeley Forty-Three Limited
Berkeley One Hundred and Fifty-Five Limited
Berkeley Forty-Two Limited
Berkeley Fourteen Limited
Berkeley One Hundred and Fifty-Four Limited
Berkeley One Hundred and Fifty Limited
Berkeley Group Pension Trustees Limited
Berkeley One Hundred and Fifty-Nine Limited
Berkeley Group Services Limited
Berkeley One Hundred and Fifty-One Limited
Berkeley One Hundred and Fifty-Seven
Limited
Berkeley One Hundred and Fifty-Six Limited
Berkeley One Hundred and Fifty-Three Limited
Berkeley One Hundred and Fifty-Two Limited
Berkeley One Hundred and Five Limited
Berkeley One Hundred and Forty-Eight
Limited
Berkeley One Hundred and Forty-Five Limited
Berkeley One Hundred and Forty-Four Limited
Berkeley One Hundred and Forty Limited
Berkeley One Hundred and Forty-Nine Limited
Berkeley One Hundred and Forty-One Limited
Berkeley One Hundred and Forty-Seven
Limited
Berkeley One Hundred and Forty-Six Limited
Berkeley One Hundred and Four Limited
Berkeley One Hundred and Nine Limited
Berkeley One Hundred and Ninety-Eight
Limited
Berkeley One Hundred and Ninety-Five
Limited
Berkeley One Hundred and Ninety-Four
Limited
Berkeley One Hundred and Ninety Limited
Berkeley One Hundred and Ninety-Nine
Limited
Berkeley One Hundred and Ninety-Seven
Limited
Berkeley Group SIP Trustee Limited
Berkeley Guarantee One Limited
Berkeley Homes (Carmelite) Limited
Berkeley Homes (Chertsey) Limited
Berkeley Homes (City & East London) Limited
Berkeley Homes (City) Limited
Berkeley Homes (Dorset) Limited
Berkeley Homes (East London) Limited
Berkeley Homes (Essex) Limited
Berkeley Homes (Fleet) Limited(i)
Berkeley Homes (Greater London) Limited
Berkeley Homes Group Limited
Berkeley Homes (Hertfordshire &
Cambridgeshire) Limited
Berkeley Homes (Kent) Limited
Berkeley Homes (North Western) Limited(i)
Berkeley Homes (PCL) Limited
Berkeley Homes plc(iii)
Berkeley Homes (South) Limited
Berkeley Homes (Southall) Limited
Berkeley Homes (Stanmore) Limited
Berkeley London Residential Limited
Berkeley Manhattan Limited
Berkeley Modular Limited
Berkeley Ninety-Eight Limited
Berkeley Ninety-Five Limited
Berkeley Ninety-Four Limited
Berkeley Ninety-Nine Limited
Berkeley Ninety-Seven Limited
Berkeley Ninety-Six Limited
Berkeley Number Four Limited
Berkeley Number Seven Limited
Berkeley Number Six Limited
Berkeley One Hundred and Ninety-Six Limited
Berkeley One Hundred and Twenty Limited
Berkeley One Hundred and Ninety-Three
Limited
Berkeley One Hundred and Ninety-Two
Limited
Berkeley One Hundred and One Limited
Berkeley One Hundred and Twenty-Nine
Limited
Berkeley One Hundred and Twenty-One
Limited
Berkeley One Hundred and Twenty-Seven
Limited
Berkeley One Hundred and Eight Limited
Berkeley One Hundred and Seven Limited
Berkeley One Hundred and Eighteen Limited
Berkeley One Hundred and Seventeen Limited
Berkeley One Hundred and Twenty-Six Limited
Berkeley One Hundred and Eighty-Eight
Limited
Berkeley One Hundred and Eighty-Five
Limited
Berkeley One Hundred and Eighty Limited
Berkeley One Hundred and Eighty-Nine
Limited
Berkeley One Hundred and Eighty-One
Limited
Berkeley One Hundred and Eighty-Seven
Limited
Berkeley One Hundred and Eighty-Two
Limited
Berkeley One Hundred and Fifteen Limited
Berkeley One Hundred and Fifty-Eight Limited
Berkeley One Hundred and Seventy-Eight
Limited
Berkeley One Hundred and Seventy-Five
Limited
Berkeley One Hundred and Seventy-Four
Limited
Berkeley One Hundred and Twenty-Three
Limited
Berkeley One Hundred and Twenty-Two
Limited
Berkeley One Hundred and Two Limited
Berkeley Portsmouth Harbour Limited
Berkeley One Hundred and Seventy Limited
Berkeley Portsmouth Waterfront Limited
Berkeley One Hundred and Seventy-Nine
Limited
Berkeley One Hundred and Seventy-One
Limited
Berkeley One Hundred and Seventy-Seven
Limited
Berkeley One Hundred and Seventy-Six
Limited
Berkeley Properties Limited(i)
Berkeley Residential Limited(i)
Berkeley Ryewood Limited
Berkeley Seventy Limited
Berkeley Seventy-Four Limited
Berkeley Seventy-Nine Limited
Berkeley Seventy-One PLC(ii)
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Berkeley Two Hundred and Twenty-Six Limited
St Edward Homes Number Three Limited
Berkeley Seventy-Seven Limited
Berkeley Seventy-Six Limited
Berkeley Seventy-Three Limited
Berkeley Seventy-Two Limited
Berkeley Sixty Limited
Berkeley Sixty-Eight Limited
Berkeley Sixty-Five Limited
Berkeley Sixty-Four Limited
Berkeley Sixty-Nine Limited
Berkeley Sixty-One Limited
Berkeley Special Projects Limited
Berkeley Strategic Land Limited(ii)
Berkeley Sustainable Communities Limited
Berkeley Thirty-Eight Limited
Berkeley Thirty-Nine Limited
Berkeley Thirty-Three Limited
Berkeley Three Limited
Berkeley Twenty Limited
Berkeley Twenty-Eight Limited
Berkeley Twenty-Four Limited
Berkeley Twenty-Nine Limited
Berkeley Twenty-Seven Limited
Berkeley Twenty-Three Limited
Berkeley Twenty-Two Limited
Berkeley Two Hundred and Eight Limited
Berkeley Two Hundred and Eighteen Limited
Berkeley Two Hundred and Eleven Limited
Berkeley Two Hundred and Five Limited
Berkeley Two Hundred and Fourteen Limited
Berkeley Two Hundred and Nine Limited
Berkeley Two Hundred and Nineteen Limited
Berkeley Two Hundred and One Limited(i)
Berkeley Two Hundred and Seven Limited
Berkeley Two Hundred and Twenty-Three
Limited
Berkeley Two Hundred and Twenty-Two
Limited
Berkeley Two Hundred and Two Limited
Berkeley Two Hundred Limited
Berkeley Ventures Limited
BH (City Forum) Limited
Boardcable Limited
Bromyard House (Car Park) Limited
Bromyard House (Freehold) Limited
Bromyard House (North) Limited
Bromyard House Limited
BWW Management Limited
Charco 143 Limited(i)
Chelsea Bridge Wharf (Management
Company) Limited
Chelsea Bridge Wharf Car Park Limited
Community Housing Action Limited
Community Villages Limited
CPWGCO 1 Limited
Drummond Road (Number 1) Limited
Drummond Road (Number 2) Limited
Exchange Place No 2 Limited
Fishguard Bridge Limited
Fishguard Tunnel Limited
Great Woodcote Park Management Limited
Hertfordshire Homes Limited
Historic Homes Limited
Kentdean Limited
One Tower Bridge Limited
One Tower Bridge Partnership (unregistered)+
Quod Erat Demonstrandum Properties Limited
Berkeley Two Hundred and Seventeen Limited
Retirement Homes Limited
Berkeley Two Hundred and Six Limited
Berkeley Two Hundred and Sixteen Limited
Berkeley Two Hundred and Ten Limited
Berkeley Two Hundred and Thirteen Limited
Berkeley Two Hundred and Thirty Limited
Berkeley Two Hundred and Three Limited
Berkeley Two Hundred and Twelve Limited
Royal Clarence Yard (Marina) Limited
Royal Clarence Yard (Phase A) Limited
Royal Clarence Yard (Phase B) Limited
Royal Clarence Yard (Phase C) Limited
Royal Clarence Yard (Phase E) Limited
Royal Clarence Yard (Phase G) Management
Company Limited
Berkeley Two Hundred and Twenty Limited
Royal Clarence Yard (Phase H) Limited
St Edward Homes Number Two Limited
St Edward Limited
St George (Crawford Street) Limited
St George (Queenstown Place) Limited
St George Blackfriars Limited
St George Commercial Limited
St George Ealing Limited
St George Eastern Limited
St George Inner Cities Limited
St George Investments Limited
St George London Limited
St George Northfields Limited
St George Partnerships Limited
St George plc(iv)
St George Project Management Limited
St George Properties Limited
St George Real Estate Limited
St George Regeneration Limited
St George Southern Limited
St George Western Limited
St George Wharf Hotel Limited
St George's Hill Property Company Limited
St James Group Limited
St James Homes (Grosvenor Dock) Limited
St James Homes Limited
Tabard Square (Building A) Limited
Tabard Square (Building B) Limited
Tabard Square (Car Park) Limited
TBG (1) 2009 Limited
TBG (3) 2009 Limited
TBG (4) Limited
TBG (5) LLP
The Berkeley Festival Waterfront Company
Limited
The Berkeley Group plc
The Millennium Festival Leisure Company
Limited
The Oxford Gateway Development Company
Limited
The Tower, One St George Wharf Limited
Thirlstone (JLP) Limited
Thirlstone Commercial Limited
Berkeley Two Hundred and Twenty-Eight
Limited
Berkeley Two Hundred and Twenty-Five
Limited
Berkeley Two Hundred and Twenty-Four
Limited
Berkeley Two Hundred and Twenty-Nine
Limited
Berkeley Two Hundred and Twenty-One
Limited
Berkeley Two Hundred and Twenty-Seven
Limited
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Royal Clarence Yard (Phase I) Limited
Thirlstone plc
Royal Clarence Yard (Phase K) Management
Company Limited
Woodside Road Limited
Royal Clarence Yard Estate Limited
Sandgates Developments Limited
Sitesecure Limited
SJC (Highgate) Limited
South Quay Plaza Management Ltd (62.5%)(vi)
St Edward Homes Number Five Limited
St Edward Homes Number Four Limited
St Edward Homes Number One Limited
(i) A Ordinary and B Ordinary shares
(ii) Ordinary and Preference shares
(iii) Ordinary and Deferred shares
(iv) Ordinary, Deferred and Preference shares
(v) List contains companies that are a principle
to agency agreements but are not agents
themselves
(vi) Registered office is 83 The Avenue,
+
Sunbury-on-Thames, Middlesex, TW16 5HZ
Principal place of business is 19 Portsmouth
Road, Cobham, Surrey, KT11 1JG
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Aragon Investments Limited
Berkeley (Carnwath Road) Limited
Berkeley (Hong Kong) Limited
Jersey
Isle of Man
Hong Kong
28 Esplanade, Jersey, JE2 3QA
First Floor, Jubilee Buildings, Victoria Street, Douglas, IM1 2SH, Isle of Man
3806 Central Plaza, 18 Harbour Road, Wanchai, Hong Kong
Berkeley Homes Special Contracts plc(1)(i)
Scotland
Saltire Court, 20 Castle Terrace, Edinburgh, EH1 2EN
Berkeley Investments (IOM) Limited
Isle of Man
First Floor, Jubilee Buildings, Victoria Street, Douglas, IM1 2SH, Isle of Man
Berkeley Property Investments Limited
Jersey
28 Esplanade, Jersey, JE2 3QA
Berkeley Residential (Singapore) Limited
Singapore
3 Anson Road, #27-01 Springleaf Tower, Singapore, 079909
Berkeley Whitehart Investments Limited
BRP Investments No. 1 Limited
BRP Investments No. 2 Limited
Jersey
Jersey
Jersey
Kleinwort Benson House, P0 Box 76 Wests Centre, St Helier, Jersey, JE4 8PQ
28 Esplanade, Jersey, JE2 3QA
28 Esplanade, Jersey, JE2 3QA
Comiston Properties Limited
Bahamas
Shirlaw House, PO Box SS-19084, Shirley Street, Nassau, Bahamas
Real Star Investments Limited(2)
Silverdale One Limited
St George Battersea Reach Limited
TBG (Jersey) 2009 Limited
Jersey
Jersey
Jersey
Jersey
(1) Agency companies of Berkeley Homes plc
(2) Agency companies of St James Group Limited
(i) Ordinary, A Deferred and B Deferred shares
28 Esplanade, Jersey, JE2 3QA
28 Esplanade, Jersey, JE2 3QA
PO Box 521, 9 Burrard Street, St Helier, Jersey, JE4 5UE
44 Esplanade, St Helier, Jersey, JE4 9WG
(b) Joint Ventures
At 30 April 2018 the Group had an interest in the following joint ventures which have been equity accounted to 30 April and have an accounting date of
30 April unless otherwise indicated. All of the companies listed below are incorporated in England and Wales have their registered office address at
Berkeley House, 19 Portsmouth Road, Cobham, Surrey, KT11 1JG and the principal activity is residential-led mixed-use development and ancillary activities.
All of the companies are 50% owned by the Group and unless otherwise indicated, all of the companies have ordinary share capital:
Berkeley Breamore (Oceana) Limited(ii)
Berkeley Carlton Holdings Limited(i)
Berkeley Sutton Limited(ii)
Community Housing Initiatives Limited**
Diniwe One Limited
Diniwe Two Limited
SEH Manager Limited
SEH Nominee Limited
SES Manager Limited(iii)
SES Nominee Limited
St Edward Homes Limited(iv)
St William Eleven Limited*
St William Five Limited*
St William Fifteen Limited*
St William Four Limited*
St William Fourteen Limited*
St William Nine Limited*
St William One Limited*
St William Seven Limited*
St William Six Limited*
St William Sixteen Limited*
St William Ten Limited*
St Edward Homes Partnership Freeholds Limited
St William Thirteen Limited*
St Edward Strand Partnership Freeholds Limited
St William Three Limited*
St George Little Britain (No 1) Limited(ii)
St George Little Britain (No 2) Limited(ii)
St Katharine Homes LLP
STKM Limited
St William Twelve Limited*
St William Two Limited*
The St Edward Homes Partnership (unregistered)+
The St Edward (Strand) Partnership (unregistered)+
Strand Property Unit Trust (unregistered)+
Thirlstone Centros Miller Limited(ii)
St William Homes LLP*
St William Eight Limited*
U B Developments Limited(ii)
(i) A Ordinary shares
(ii) B Ordinary shares
(iii) A Ordinary and B Ordinary shares
(iv) A Ordinary, C Preference and D Preference shares
* Accounting date of 31 March
** Accounting date of 31 December
+ Principal place of business is 28 Esplanade, Jersey, JE2 3QA
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C O M P A N Y
B A L A N C E S H E E T
C O M P A N Y S T A T E M E N T O F
C H A N G E S I N E Q U I T Y
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
2018
£m
1,417.6
1,417.6
67.2
0.9
68.1
(746.8)
(678.7)
738.9
7.0
49.8
24.5
657.6
738.9
2017
£m
1,413.9
1,413.9
20.5
0.9
21.4
(718.9)
(697.5)
716.4
7.0
49.8
24.5
635.1
716.4
The financial statements on pages 156 to 161 were approved by the Board of Directors on 20 June 2018 and were signed on its behalf by:
R J steaRN
Finance Director
At 1 May 2017
Profit after taxation for the year
Purchase of ordinary shares
Transactions with shareholders:
Notes
C8
Credit in respect of employee share schemes
Deferred tax in respect of employee share
schemes
Dividends to equity holders of the Company
C9
at 30 april 2018
At 1 May 2016
Profit after taxation for the year
Issue of ordinary shares
Purchase of ordinary shares
Transactions with shareholders:
Notes
C8
C8
Charge in respect of employee share schemes
Deferred tax in respect of employee share
schemes
Dividends to equity holders of the Company
C9
At 30 April 2017
Called-up
shaRe
Capital
£m
7.0
—
—
—
—
—
7.0
Called-up
shaRe
Capital
£m
6.9
—
0.1
—
—
—
—
7.0
shaRe
pRemium
£m
49.8
Capital
RedemptioN
ReseRve
£m
24.5
—
—
—
—
—
—
—
—
—
—
49.8
24.5
shaRe
pRemium
£m
49.8
Capital
RedemptioN
ReseRve
£m
24.5
—
—
—
—
—
—
—
—
—
—
—
—
49.8
24.5
pRoFit
aNd loss
aCCouNt
£m
635.1
299.9
(140.4)
8.8
0.9
(146.7)
657.6
pRoFit
aNd loss
aCCouNt
£m
725.2
228.5
—
(64.5)
total
£m
716.4
299.9
(140.4)
8.8
0.9
(146.7)
738.9
total
£m
806.4
228.5
0.1
(64.5)
(0.1)
(0.1)
0.6
(254.6)
635.1
0.6
(254.6)
716.4
156
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N O T E S T O T H E C O M P A N Y
F I N A N C I A L S T A T E M E N T S
C 1 a C Co uN t iN G p o l iC i e s
Basis of preparation
These financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”).
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of International Financial
Reporting Standards as adopted by the EU (“Adopted IFRSs”), but makes amendments where necessary in order to comply with Companies Act 2006 and,
as set out below, where advantage of FRS 101 reduced disclosure exemptions has been taken.
The accounting policies adopted for the Parent Company, The Berkeley Group Holdings plc, are otherwise consistent with those used for the Group which
are set out on pages 132 to 136.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
— Cash Flow Statement and related notes;
— Disclosures in respect of transactions with wholly owned subsidiaries;
— Disclosures in respect of capital management;
— The effects of new but not yet effective IFRSs;
— Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instrument Disclosures; and
— Disclosures in respect of the compensation of Key Management Personnel.
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.
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
74 to 77.
The Group has significant financial resources and the Directors have assessed the future funding requirements of the Group, including the return of
£2.2 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 £678.7 million (2017: £697.5 million). 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 one equity settled, share-based compensation plan. 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. Amounts recognised in respect of executive Directors
of the Company’s subsidiaries are recognised as an addition to the cost of the investment.
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.
Creditors
Creditors are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.
C 2 p Ro F i t oN oR d iN a R y a C t i v i t i e s b eF o R e ta x at i oN
Profit 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 4 of the consolidated financial statements.
C 3 d i R e C t o R s aN d e m p l oy e e s
staff costs
Wages and salaries
Social security costs
Share-based payments — Equity settled
Share-based payments — Cash settled
2018
£m
0.1
2018
£m
2.5
3.3
9.8
3.6
19.2
2017
£m
0.1
2017
£m
2.6
(1.2)
27.5
4.8
33.7
The average monthly number of persons employed by the company during the year was 10, all of whom are Directors (2017: 10).
Directors
Details of Directors’ emoluments are set out in the Remuneration Report on pages 94 to 115.
Pensions
During the year, the Company participated in one of the Group’s pension schemes, The Berkeley Group plc Group Personal Pension Plan. Further details on
this scheme are set out in note 5 of the Consolidated Financial Statements. Contributions amounting to £nil (2017: £nil) were paid into the defined
contribution scheme during the year.
Share-based payments
The charge to the income statement in respect of equity settled share-based payments in the year, relating to grants of shares; share options and notional
shares awarded under the 2011 Long Term Incentive Plan was £9.8 million (2017: £27.5 million). The charge to the income statement in respect of cash
settled share-based payments under the Bonus Banking Plan was £3.6 million (2017: £4.8 million). The credit to the reserves during the year in respect of
employee share schemes was £8.8 million (2017: £0.1 million charge) which includes the corresponding entry to the cost of investment of £3.7 million
detailed in note C5. The offsetting entry within reserves results from the non-cash IFRS 2 charge for the year adjusted for the reclassification of reserves on
the decision to cash settle the part of the award relating to taxes which vested during the year. Further information on the Company’s share incentive
schemes are included in the Remuneration Report on pages 94 to 115 as well as note 5 to the Consolidated Financial Statements.
C 4 t h e b e R k e l e y GR o u p h o l d iN Gs p l C pR o F i t aN d l o s s a C Co uN t
The profit for the year in the Company is £299.9 million (2017: profit of £228.5 million).
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N O T E S T O T H E C O M P A N Y
F I N A N C I A L S T A T E M E N T S
CONTINUEd
C 5 i Nv e s t m eN t s
Investments in shares of subsidiary undertaking at cost at 1 May
Additions
Investment in shares of subsidiary undertaking at cost at 30 April
2018
£m
1,413.9
3.7
1,417.6
2017
£m
1,412.7
1.2
1,413.9
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 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 subsidiaries are given within note 25 of the Consolidated Financial Statements.
C 6 d e b t o R s
Current
Amounts owed from subsidiary undertakings
Deferred tax
All amounts owed from subsidiary undertakings are unsecured, bear no interest and are payable on demand
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
2018
£m
48.5
18.7
67.2
2018
£m
20.5
(1.4)
(0.4)
18.7
2017
£m
—
20.5
20.5
2017
£m
26.8
(2.5)
(3.8)
20.5
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 19/17% as appropriate (2017: 19/17%). Accordingly, all temporary differences have been calculated. There is no
unprovided deferred tax (2017: £nil) at the balance sheet date.
The deferred tax asset of £18.7 million relates to short term timing differences (2017: £20.5 million).
C 7 CR e d i t oR s : a m o uN t s Fa l l iN G d u e w i t h iN oN e y e aR
Amounts owed to subsidiary undertakings
Other taxation and social security
Accruals and deferred income
2018
£m
(731.1 )
(10.3)
(5.4)
(746.8)
2017
£m
(702.9)
(10.3)
(5.7)
(718.9)
All amounts included above are unsecured. The interest rate on £731.1 million (2017: £676.0 million) of the balance owed to subsidiary undertakings is 4.0%
(2017: 4.0%), with no fixed repayment date. At 30 April 2018 all other amounts owed to subsidiary undertakings are at floating rates linked to LIBOR and
have no fixed repayment date.
C 8 C a l l e d - u p s h aR e C a p i ta l
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
oRdiNaRy shaRes
shaRe Capital
shaRe pRemium
2018
No ‘000
2017
No ‘000
140,157
—
140,157
138,257
1,900
140,157
2018
£m
7.0
—
7.0
2017
£m
6.9
0.1
7.0
2018
£m
49.8
—
49.8
2017
£m
49.8
—
49.8
On 28 September 2017, 0.4 million ordinary shares were allotted and issued to the Employee Benefit Trust (2017: 1.9 million).
On 2 October 2017, 0.4 million ordinary shares (2017: 1.8 million) were transferred from the Employee Benefit Trust to Executive Directors to satisfy
the exercise of options under the 2011 Long Term Incentive Plan.
At 30 April 2018 there were 0.4m shares held in the Employee Benefit Trust (2017: 0.4m). The market value of these shares at 30 April 2018 was
£18.0 million (2017: £13.8 million).
During the 2018 financial year, shares were repurchased for a total consideration of £140.4 million, excluding transaction costs (2017: £64.5 million).
These shares have not been cancelled.
At 30 April 2018 there were 6.0 million (2017: 2.4 million) treasury shares held by the Company. The market value of the shares at 30 April 2018 was
£244.3 million (2017: £78.8 million).
The movements in the year are disclosed in note 18 and note 19 of the Consolidated Financial Statements.
C 9 d i v i d eN d s p eR s h aR e
The dividends paid in 2018 were a total of £146.7 million, £76.3 million in March 2018 (56.75 pence per share) and £70.4 million in September 2017 (51.76
pence per share) (2017: £254.6 million being £117.7 million in March 2017, 85.24 pence per share, and £136.9 million in September 2016, 100 pence per share).
C 1 0 R e l at e d paR t y tR a N s a C t i oN s
The Company has not undertaken related party transactions during the year with entities that are not wholly owned subsidiaries of The Berkeley Group
Holdings plc. Transactions with wholly owned members of The Berkeley Group Holdings plc are exempt under FRS 101 with reduced disclosure.
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berkeley AnnuAl report 2018 financials
berkeley AnnuAl report 2018 fi nancials
F I V E Y E A R
S U M M A R Y
F I N A N C I A L
d I A R Y
Years ended 30 April
income statement
Revenue from operations
Operating profit
Share of results of joint ventures
Net finance costs
profit before taxation
Taxation
profit after taxation
basic earnings per ordinary share
statement of financial position
Capital employed
Net cash
Net assets
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)
2018
£m
2017
£m
2016
£m
2015
£m
2,703.7
2,723.5
2,047.5
2,020.2
779.6
158.0
(2.7)
934.9
(172.8)
762. 1
562.7p
1,932.7
687.3
2,620.0
1,959p
41.2%
32.0%
39.3%
3,536
756.2
63.8
(7.6)
812.4
(167.3)
645.1
467.8p
1,851.4
285.5
2,136.9
1,556p
42.5%
32.7%
41.1%
3,905
501.9
36.5
(7.5)
530.9
(126.8)
404.1
295.8p
1,705.4
107.4
1,812.8
1,314p
34.5%
23.4%
30.8%
3,776
524.1
28.3
(12.7)
539.7
(116.2)
423.5
313.0p
1,207.0
430.9
1,637.9
1,199p
41.6%
27.5%
35.1%
3,355
2014
£m
1,620.6
374.8
12.1
(6.9)
380.0
(87.1 )
292.9
221.8p
1,312. 1
129.2
1,441.3
1,066p
29.9%
21.2%
27.5%
3,742
(1) Net assets attributable to shareholders divided by the number of shares in issue excluding shares held in treasury and shares held by the
employee benefit trust.
(2) Calculated as profit before interest and taxation (including joint venture profit before tax) divided by the average net assets adjusted
for (debt)/cash.
(3) Calculated as profit after taxation attributable to shareholders as a percentage of the average of opening and closing shareholders’ funds.
(4) Calculated as profit before taxation attributable to shareholders as a percentage of the average of opening and closing shareholders’ funds.
(5) The number of units completed and taken to sales in the year excluding joint ventures.
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5 September 2018
31 October 2018
December 2018
March 2019
30 April 2019
June 2019
August 2019
i
0
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Annual General Meeting and Trading Update
Half year end
Interim Results Announcement for the six months ending 31 October 2018
Trading Update
Year end
Announcement of Results for the year ending 30 April 2019
Publication of 2019 Annual Report
R E G I S T E R Ed O F F I C E
A Nd A d V I S O R S
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
bankers
Barclays Bank plc
HSBC UK Bank plc
Lloyds Bank plc
Santander UK plc
Svenska Handelsbanken AB (Publ)
National Westminster Bank plc
solicitors
Herbert Smith Freehills LLP
auditors
KPMG LLP
Registered office and
principal place of business
Berkeley House
19 Portsmouth Road
Cobham
Surrey KT11 1JG
Registered number: 5172586
Registrars
Link Asset Services
The Registery
34 Beckenham Road
Beckenham
Kent BR3 4TU
0871 664 0300 (from the UK)
+44 (0) 371 664 0300 (from overseas)
shareholderenquiries@linkgroup.co.uk
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01 STRATEGIC REPORT02 GOVERNANCE03 FINANCIALSBERKELEY ANNUAL REPORT 2018 FINANCIALSBERKELEY ANNUAL REPORT 2018 FINANCIALS
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
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