Building communities
2019 Annual Report
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About Berkeley
Building communities
Berkeley creates homes and neighbourhoods across London,
Birmingham and the South-East of England.
For Berkeley, development is all about people. We take a holistic approach
to placemaking, which goes beyond the conventional role of a developer
and puts the strength and well-being of the wider community at the
heart of every plan.
We think long-term and we invest more to create welcoming, sustainable
and biodiverse places. Every development has a unique, locally inspired
masterplan with a mix of beautiful public spaces, natural landscapes and
amenities that bring people together to enjoy community life.
Our developments provide homes for everyone; from families to first-time
buyers, students to older people, and a mix of affordable homes which
meet the needs of the local community.
Berkeley has the financial strength and placemaking expertise to take on
the most difficult, long-term, capital intensive developments. Transforming
these underused places into successful neighbourhoods creates greater
economic, social, environmental and commercial value over the full
development cycle. No other UK developer has the capacity or
experience to regenerate brownfield land on this scale.
Woodberry Down
Highlights
Delivering for all stakeholders
Financial Highlights
Profit before tax
Pre-tax return on equity
Net cash
£775.2m
(2018: £977.0m)
27.9%
(2018: 41.9%)
£975.0m
(2018: £687.3m)
Net asset value per share
Cash due on forward sales
Future gross margin in land holdings
£23.05
(2018: £19.38)
£1,831m
(2018: £2,193m)
£6,247m
(2018: £6,003m)
3,698
homes delivered
Operational Highlights
>£525m
of subsidies
includes more than 10% of London’s
new private and affordable homes
provided to deliver affordable housing
and committed to wider community
and infrastructure benefits in the year
>11,000
people
working across our sites,
including over 500 apprentices
Launch of a
second Construction
Academy
at Southall Waterside
73.5
Net Promoter Score
Maintained industry leading
Net Promoter Score (NPS) and
customer service ratings
Pioneering approach to
enhancing nature and
biodiversity,
recognised by Government,
with net biodiversity gain to be
a national policy requirement
Read more on page 24
Read more on page 16
Strategic Report
p 01-73
01 Highlights
04 Berkeley at a Glance
06 Long-Term Regeneration
08 Chairman’s Statement
18 Chief Executive’s Statement
26 Berkeley Foundation
28 Business Model
30 Key Performance Indicators
32 Business Strategy: Our Vision
54 Sustainable Development Goals
55 Non-Financial Reporting Statement
56 Stakeholder Engagement
58 How We Manage Risk
70 Trading and Financial Review
Corporate Governance
p 74–117
76 Board of Directors
80 Governance at a Glance
82 Chairman’s Introduction to the
Corporate Governance Statement
83 The Board’s Focus Areas
84 Corporate Governance Report
88 Audit Committee Report
91 Nomination Committee Report
92 Directors’ Remuneration Report
114 Directors' Report
Financial Statements
p 118–172
120 Independent Auditors’ Report
128 Consolidated Income Statement
128 Consolidated Statement of
Comprehensive Income
129 Consolidated Statement of Financial Position
130 Consolidated Statement of Changes in Equity
131 Consolidated Cash Flow Statement
132 Notes to the Consolidated Fnancial Statements
165 Company Balance Sheet
166 Company Statement of Changes in Equity
167 Notes to the Company Financial Statements
171 Five Year Summary
172 Financial Diary and Registered Office
and Advisers
01
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements The hard and isolated landscape of the
former Ferrier Estate is being transformed into
a welcoming neighbourhood with biodiverse
parks and wetlands, 4,800 mixed tenure homes,
a new village centre and a mix of lively
community events led by local people.
Find out more:
www.berkeleygroup.co.uk/kidbrookevillage
02
Berkeley Group2019 Annual Report Strategic Report
01 Highlights
04 Berkeley at a Glance
06 Long-Term Regeneration
08 Chairman’s Statement
18 Chief Executive’s Statement
26 Berkeley Foundation
28 Business Model
30 Key Performance Indicators
32 Business Strategy: Our Vision
54 Sustainable Development Goals
55 Non-Financial Reporting Statement
56 Stakeholder Engagement
58 How We Manage Risk
70 Trading and Financial Review
03
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Berkeley at a Glance
Creating homes, strengthening communities
and improving lives.
Berkeley has a unique operating model that is responsive to the cyclical nature
of the housing market and focuses on transforming the most challenging
and complex sites into exceptional places where communities thrive.
Unique long-term operating model
Strategic appreciation
that the market is
inherently cyclical
Focus on transforming
challenging sites
through complex, capital
intensive regeneration
Focus on London,
Birmingham and the
South East
Operational risk
offset through financial
strength at all times
Holistic approach
to placemaking
that adds lasting value for
all stakeholders
Recognised brands
and autonomous
experienced teams
Unrelenting commitment
to customer satisfaction
Market leading in
sustainability and the quality
of homes and places
Our brands
100% owned
Joint ventures
Berkeley is the original brand, founded
in 1976 in Surrey.
St Edward is a joint venture, formed in 2006
and co-owned by Berkeley and Prudential.
St George was originally formed as a
joint venture with the Speyhawk Group
in 1985 and became wholly owned
in 1991.
St William is a joint venture, formed in
2014 and co-owned by Berkeley and
National Grid.
St James was originally formed as a
joint venture with Thames Water in 1996
and became wholly owned in 2007.
St Joseph was formed in 2016 to
focus on the Birmingham and West
Midlands markets.
04
Read more online:
www.berkeleygroup.co.uk/ourbrands
WEST
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BERKSHIRE
BERKSHIRE
Our portfolio
69
sites under construction
30
future sites
99
total sites in the
land holdings
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WEST SUSSEX
WEST SUSSEX
EAST SUSSEX
EAST SUSSEX
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London under construction
1 9 Millbank, Westminster
2 250 City Road, Islington
3 Battersea Reach
4 Beaufort Park, Hendon
5 Chelsea Creek
6 Clarendon
7 Dickens Yard, Ealing
8 Filmworks, Ealing
9 Fitzroy Gate, Isleworth
10 Forbury, Blackheath
11 Fulham Reach
12 Goodman's Fields, Aldgate
13 Kensington Row and Royal
Warwick Square
14 Kidbrooke Village
15 King's Road Park, Fulham
16 London Dock, Wapping
17 One Blackfriars, Southwark
18 Oval Village
Berkeley Group2019 Annual Report 15
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EAST SUSSEX
WEST SUSSEX
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19 Prince of Wales Drive, Battersea
20 Queenshurst, Kingston
21 Richmond Chase
22 Royal Arsenal Riverside,
Woolwich
23 Smithfield Square, Hornsey
24 Southall Waterside
25 South Quay Plaza, Docklands
26 Sovereign Court, Hammersmith
27 The Corniche, Albert
Embankment
28 The Cottonworks, Finsbury Park
29 The Dumont, Albert Embankment
30 The Villas, Barnes
31 Trent Park, Enfield
32 Vista, Battersea
33 West End Gate, Paddington
34 White City Living
35 Wimbledon Hill Park
36 Woodberry Down, Finsbury Park
London future sites
1 Bethnal Green
2 Bow Common
3 Centre House,
Wood Lane
4 Chambers Wharf,
Southwark
5 Fulham
6 Grand Union,
Northfields
7 Hendon*
8 Lea Bridge*
9 Poplar
10 Royal Exchange,
Kingston
11 Stephenson Street
* New sites contracted for
acquisition during the year
Out of London
future sites
1 Ascot
2 Bath*
3 Camberley
4 Eastside Locks,
Birmingham*
5 Effingham
6 Fleet
7 Frimley Green
8 Hemel Hempstead
9 Hertford
10 High Wycombe*
11 Paddock Wood*
12 Reading*
13 Sevenoaks
14 Slough*
15 Snow Hill Queensway,
Birmingham*
16 Stratford-Upon-Avon
17 Sunningdale Park
18 Wallingford
19 Watford*
17 – 51 London Road, Staines
Out of London under
construction
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2 Barleycroft, Rudgwick
3 Bersted Park
4 Broadacres, Southwater
5 Brompton Gardens, Ascot
6 Courtyard Gardens, Oxted
7 Cranbrook
8 Edenbrook Village, Fleet
9 Eldridge Park, Wokingham
10 Elmswater, Rickmansworth
11 Fairwood Place, Borehamwood
12 Farnham
13 Green Park Village, Reading
14 Hartland Village, Fleet*
15 Highwood Village, Horsham
16 Holborough Lakes
17 Hollyfields, Hawkenbury
18 Horsham*
19 Huntley Wharf, Reading*
20 Kennet Island, Reading
21 Knights Quarter, Winchester
22 Leighwood Fields, Cranleigh
23 Princes Chase, Leatherhead
24 Quinton Court, Sevenoaks
25 Royal Clarence Marina, Gosport
26 Royal Wells Park, Tunbridge Wells
27 Ryewood, Sevenoaks
28 Snow Hill Wharf, Birmingham
29 Taplow Riverside
30 The Arches, Watford
31 The Waterside, Royal Worcester
32 Victory Pier, Gillingham
33 Woodhurst Park, Warfield
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On the following pages
you can read more about
our focus on long-term
regeneration opportunities
05
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Long-Term Regeneration
Berkeley’s focus is on large-scale regeneration opportunities where our unique
expertise can unlock long-term social and economic value. We have the
strong capital base to execute these highly capital intensive programmes.
The success of these developments is founded on trusted partnerships
with local authorities and communities. Bringing these brownfield sites
in to use is aligned with the Government's commitments to increase the
supply of good quality, mix tenure homes.
Existing regeneration sites
Royal Arsenal Riverside
Greenwich, London SE18
Over the last 20 years this vast,
isolated and heavily contaminated
munitions site has become a
beautiful riverside neighbourhood,
teeming with life, homes, jobs
and culture.
— Crossrail station box delivered
— 500 new trees
— 12 acres of open space
— 23 derelict heritage buildings
restored for use
Woodberry Down
Hackney, London N4
This community-led regeneration
partnership has revived a failing post-
war housing estate and is on course
to deliver 5,500 mixed tenure homes.
The masterplan includes 15.6 acres of
welcoming open space, with a mix of
amenities and events that draw people
together to enjoy community life.
— Community centre, parks and
wetlands nature reserve
— 1,798 homes delivered to date
— UK Project of the Year
Royal Institution of Chartered
Surveyors (RICS) Awards 2018
London Dock
Tower Hamlets, London E1
This historic former dockyard is
being transformed into a new
neighbourhood with 1,800 homes
and 7.5 acres of landscaped public
space, including a new civic square
and pedestrianised boulevard.
The Grade II Listed Pennington
Street Warehouse will be the site’s
commercial and cultural heart, and
a major new attraction for Wapping.
— Shops, restaurants and offices
— Community event programme
— Community Fund supporting
42 local projects
Kidbrooke Village
Greenwich, London SE3
Read more on Kidbrooke Village
in the Case Studies on pages 16, 41
and 45.
— 86 acres of biodiverse parks
and wetlands
— Regeneration of former
Ferrier Estate
Southall Waterside
Ealing, London UB2
Beaufort Park
Barnet, London NW9
Chelsea Creek
Hammersmith & Fulham, London SW6
Read more on Southall Waterside in the
Case Study on pages 14 to 15.
— Regeneration of 88 acre
contaminated gasworks
— 3,750 mixed tenure homes
— 40 acres of parkland
After more than a decade of disuse, St George has
transformed this 25 acre former RAF aerodrome
into a new part of the Colindale community, with
shops, bars, restaurants, parks and playgrounds.
To date, more than 2,200 new mix tenure homes
have been delivered and the historic Grahame-
White Watchtower has been restored.
More than half of this 7.8 acre former National
Grid site will be public open space, including
waterside gardens and landscaped walkways.
There will be more than 800 mixed tenure
homes and the development centres on the first
new canals to be created in London for more
than a century.
— Community event programme
— 335 permanent jobs
— 95 apprentices to date
— 25,000 sq ft commercial space
06
Berkeley Group2019 Annual Report Future regeneration sites
White City Living
Hammersmith & Fulham,
London W12
St James is transforming an
11 acre former warehousing
site into a community of more
than 1,800 mixed tenure homes
in the heart of the White City
Opportunity Area. There will be
8 acres of open space, alongside
new shops, cafes and restaurants.
— 5 acre public park
— 430 new trees
— 4 water features
South Quay Plaza
Tower Hamlets, London E14
This former 1980s docklands
office site will include one of
London’s tallest residential
towers, at 68 storeys. It features
a mix of generous communal
spaces for residents of all
tenures, including 2.5 acres
of landscaped gardens and
integrated playspaces.
— 1,290 mixed tenure homes
— 1,000 permanent jobs
— New community and
commercial spaces
Clarendon
Haringey, London N8
Grand Union
Brent, London HA0
Oval Village
Lambeth, London SE11
This St William site will see a former gasworks
become a new city village within the Haringey
Heartlands Opportunity Area. The masterplan
will create more than 1,700 homes and the 2
acre Hornsey Park with orchard style planting,
playspace and water features.
— A new town square
— 100,000 sq ft of commerical space
— 600 permanent new jobs
Read more on Grand Union in the Case Study
on pages 10 to 11.
— 11 acres of public space, including 850m
of canal and riverside walkways
— 2,900 mixed tenure homes
— 209,000 sq ft of workspace
— New shops, restaurants, community centre
and health centre
Berkeley’s regeneration of the former Oval
Gasworks, and a neighbouring site, will create
more than 1,300 mixed tenure homes, shops,
water features, squares, car-free streets,
restaurants, a community space and
a new co-working office hub.
— Restoration of Grade II Listed gasholder
— 2.5 acres of public space
— 1,400 permanent jobs
Stephenson Street
Newham, London E16
King's Road Park
Hammersmith & Fulham, London SW6
Hartland Village
Hampshire GU51
This former 26 acre Parcelforce depot
will become a community of more than
3,800 mixed tenure homes, set around 12 acres
of green open space, landscaped gardens and
wildflower meadows. The masterplan includes
a new school, bars and cafes, restaurants and
community spaces.
— 1 new station connection, 2 pedestrian
bridges and 1 road bridge
— Over 8,000 construction jobs
St William’s masterplan will see this redundant
16 acre gasworks stitched back in to the local
community through an open network of
footpaths, cycle routes, biodiverse parkland
and public squares. There will be more than
1,800 mixed tenure homes, a youth centre and
the site’s Grade II* Listed gasholder, the oldest
in the world, will be carefully restored.
— 460 permanent jobs
— 6 acre landscaped open space
Read more about Hartland Village in the
Case Study on page 21.
— Revival of long standing derelict
manufacturing site
— 70 acre country park
— Over 1,000 new trees
— 1,500 mixed tenure homes
07
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Chairman’s Statement
A true spirit of partnership
" The only way to create truly successful places
is to make housing a real partnership based
around improving people’s lives and wellbeing."
This has been another year of solid performance for Berkeley,
delivering financial results ahead of expectations while unlocking an
increasingly valuable mix of social, economic and environmental
benefits for the communities in which we work.
utility works and major industrial sites, which few other
developers have the financial strength or development
expertise to take on.
Our unique operating model, which recognises the cyclical
nature of residential property development, continues to set
us apart. We focus on large, complex and capital intensive
regeneration opportunities in London, Birmingham and the
South East of England, including a high proportion of former
These long-term regeneration programmes require extensive
remediation and enabling infrastructure works before they
can be reconnected with the communities around them.
Successfully reviving such vast and difficult sites presents
a mix of technical, design and social challenges which are
beyond the traditional role and scope of a developer.
Below: Local children celebrate the opening of Kite Park at Kidbrooke Village, Greenwich. This natural play space is open to the whole
community and has been created in partnership with the Royal Borough of Greenwich and the London Wildlife Trust.
08
Berkeley Group2019 Annual Report Our approach is holistic, long-term and highly collaborative.
We focus on the long-term strength and wellbeing of the local
community and build strong local partnerships that maximise
social value. This people-centred culture is what defines
Berkeley’s brand and ensures we are the clear partner of
choice within our sector.
Other performance highlights include completing 3,698 homes,
winning 26 Considerate Constructors Scheme National Site
Awards and securing an independently assessed customer
satisfaction score (Net Promoter Score) of 73.5 which is on a
par with highly respected consumer brands. In a further mark
of consistency, every Berkeley operating company achieved
an Investors in Customers Gold Award in 2018.
This was a breakthrough year for Berkeley’s pioneering
approach to reversing natural habitat loss and delivering a
measurable net biodiversity gain on all new sites. Over 25
developments submitted for planning have targeted a net
biodiversity gain through landscape design. We have delivered
our first large scale net biodiversity gain landscape strategy
at Kidbrooke Village in partnership with the London Wildlife
Trust. Following our pioneering work in this field, this year the
Government has announced that net biodiversity gain will be
mandatory for new developments through national policy.
I am also delighted to report that in May 2019, Berkeley’s
company-wide approach to tackle climate change was credited
with the Carbon Reduction or Offset Programme of the Year
accolade at the Better Society Awards 2019. This fantastic
result reflects our status as the country’s only carbon positive
residential developer, something we achieved in 2018.
This was also a great year for project-level milestones and
achievements. The regeneration of Woodberry Down in
Hackney celebrated its 10th anniversary, as did Kidbrooke
Village in Greenwich. At Southall Waterside, we have now
welcomed the first local Ealing residents to this 88 acre
former gasworks and seen more than 50 Londoners enrol
in the site’s state-of-the-art Construction Academy, delivered
in partnership with West London College.
During the year, Berkeley made shareholder returns of
£251.9 million, of which £198.9 million was represented by
share buy-backs and £53.0 million by dividends. This included
the £139.7 million scheduled return for the six months ended
31 March 2019. Of the £139.7 million return announced to be
made by 30 September 2019, £5.2 million has been made to
date through share buy-backs. The amount that will be returned
as a dividend will be announced on 15 August 2019 and paid on
13 September 2019 to shareholders on the register on 23 August
2019, taking account of any further share buy-backs in the
intervening period.
I am extremely proud of these results, and the unique operating
model which underpins them. Most of all, I am grateful and
indebted to our superb staff and fantastic partners. The passion
and care they bring to their work are what give the places we
create their life, pride and enduring value.
TONY PIDGLEY CBE
CHAIRMAN
A people-centred approach
Long-term regeneration is highly capital intensive and complicated
work. But the biggest challenge is neither financial nor technical, it
is all about people.
To create a place of real and enduring
value, we have to approach development
with an open mind and a readiness to
really listen and engage with the local
community. We need to act on what they
say and recognise the duty we owe them
as a big and disruptive force coming into
their lives. It is our responsibility to reach
out, collaborate and create a shared vision
that local people can believe in.
Then, when it comes to delivery, we have
to keep the conversations going and make
sure those vital local partnerships keep
growing stronger. Our programmes can
last 30 years, so we have to keep listening,
learning and making sure local people feel
a real connection to the places we create.
When we get this right, we create
welcoming neighbourhoods that are part
of the local community and the local
story, and they keep getting better long
after the regeneration work is over.
It is hard to explain how this approach
happens. It is not a technical process and
it is not driven by rules or procedures.
It comes from having the right working
culture and the right values. You have to
put people at the heart of every decision,
day after day, and have the passion and
care to get every small detail just right.
This is how we approach development
at Berkeley. The following pages provide
examples of what a people-centred
approach really means in practice
09
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Case Study
Collaborative masterplanning
Grand Union, Brent
“It’s a great scheme and one that, through the extensive consultation
work St George has undertaken, carries the support of residents,
businesses, politicians and, now, the council’s planning committee.”
Shama Tatler, Cabinet Member for Regeneration, Highways and Planning,
London Borough of Brent
The masterplan for this former industrial estate,
approved in 2018, has been shaped through a
far-reaching community engagement programme.
Local people helped St George to define the
vision and influenced everything from building
form to the mix of uses and amenities, including
a 5,000sq ft community centre, a canalside piazza,
central gardens and riverside meadows alongside
2,900 new homes.
Together with local residents, we designed an
extensive engagement programme with different
ways to get involved:
9,000
regular newsletters
sent to local homes
and businesses
4
community
design workshops
4
street interview
survey sessions
3
walk and talk
site tours
5
public
exhibitions
1
purpose built community
information centre
11
Community Liaison
Group meetings
3,597
visitors to a
dedicated website
We also established the Alperton Summer Festival,
which brought hundreds of local people together
for the first time. This included working with the
Alperton Community School to train and recruit the
'Alperton Ambassadors', talented young people who
helped shape the festivals.
Read more online:
www.berkeleygroup.co.uk/grandunion
10
Berkeley Group2019 Annual Report Computer generated image: Grand Union
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Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Case Study
Community-led regeneration
Woodberry Down, Hackney
Woodberry Down was named UK Project of the Year at the
Royal Institute of Chartered Surveys (RICS) Awards 2018.
“The Woodberry Down project team has taken on the regeneration of this area
with integrity and a genuine desire to improve not just the physical environment,
but also residents’ economic aspirations and social wellbeing.”
RICS Awards citation
This community-led regeneration programme has
revived a failing post-war housing estate and is on
course to deliver 5,500 mixed tenure homes.
In partnership with Woodberry Down Community
Organisation, Hackney Council, Notting Hill Genesis
and Manor House Development Trust, we have
already created 7.5 acres of welcoming public open
space and brought the banks of the neighbouring
reservoir to life with a new boardwalk, bridge-link
and waterside play ground. In partnership with the
London Wildlife Trust and Thames Water, Woodberry
Down has been connected to the Woodberry
Wetlands, a beautiful 25 acre nature reserve, open to
everyone all year round. There are also new shops,
cafes, a pub, playgrounds and an award winning
community centre.
Read more online:
www.berkeleygroup.co.uk/woodberrydown
25 acre
Woodberry Wetlands nature reserve
500
local resident volunteers
1,798
new homes delivered to date
12
Berkeley Group2019 Annual Report Woodberry Down
13
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Case Study
Southall Waterside
“This development is providing jobs and will bring a diverse mix
of new amenities to the area. Importantly, it is also delivering
affordable homes for Ealing residents – this means that
Southall Waterside is a community for all.”
Cllr Julian Bell, Leader of Ealing Council
Southall Waterside will create around 3,750 tenure
blind homes as this 88 acre former gasworks
is brought to life and reconnected with the
surrounding community.
The site's masterplan, developed in close collaboration
with Ealing Council, will see around half of this vast
brownfield site become public open space, including
approximately 40 acres of parkland and biodiverse
habitats. There will be a network of inviting nature
and fitness trails, wetlands, cycle-paths and walkways
alongside a mix of new amenities, including a health
centre, primary school and a commercial district with
shops, restaurants, and public squares.
In 2019 we welcomed our first local residents to their
new homes.
Read more online:
www.berkeleygroup.co.uk
3,750
mixed tenure homes
17 minutes
to Bond Street via Crossrail
40 acres
of parkland and net biodiverse habitats
Below left; the former Southall gasworks site was used as a Heathrow
car park prior to regeneration.
Below right; local people celebrate moving in to the first 186 homes,
which are being offered to Ealing residents on an affordable rent or
shared ownership basis.
14
Berkeley Group2019 Annual Report Computer generated image: Southall Waterside
15
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Increasing Nature and Reducing Carbon
We believe that all new developments should strengthen local communities and
improve the natural environment for future generations. Berkeley has implemented
industry-leading initiatives on biodiversity and carbon as part of our business strategy,
Our Vision, to help achieve these aims.
Net Biodiversity Gain
Since 2017, Berkeley has been applying its Biodiversity Toolkit
to every new development at the earliest stage of design.
This involves measuring the site’s existing nature and developing
a strategy to deliver net biodiversity gain. We have applied
the Toolkit to more than 25 sites and made a commitment to
increase the levels of nature.
We were the first developer in the country to develop and
implement a process for delivering net biodiversity gain
and our leading approach was recognised and shared in the
Government’s consultation on this topic. We are continuing
to share our learning across the industry.
Case study
Kidbrooke Village
At Kidbrooke Village in Greenwich we have implemented the
UK’s first large scale net biodiversity gain strategy in partnership
with the London Wildlife Trust. Initially we used our Biodiversity
Toolkit to baseline the ecological value of the park created in
an earlier phase of the development. We then redesigned the
landscape to create a more valuable network of natural habitats,
including meadows, grasslands and wetlands. As a result,
Kidbrooke Village is on course to achieve a net biodiversity
gain of more than 100%.
Below: Biodiverse landscape at Kidbrooke Village
Read more on page 45
“We recognise the Berkeley Group’s commitment to achieving
measurable net gain in biodiversity and welcome their positive
contribution and continued support for an industry-wide approach
to delivering net gain and an associated metric.”
Emma Howard Boyd
Chair, Environment Agency
16
Berkeley Group2019 Annual Report Better Society Awards 2019
Carbon Reduction or Offset Programme of
the Year
CIRIA BIG Biodiversity Challenge Award 2018
Client Award for net biodiversity gain approach
CIRIA BIG Biodiversity Challenge Award 2017
Medium Scale Permanent Award, Fitzroy Gate
CIRIA BIG Biodiversity Challenge Award 2016
Pollinator Award, One Tower Bridge
Awards
The Sunday Times British Homes Awards 2018
Best Garden/Landscaping Design, Fitzroy Gate
The Sunday Times British Homes Awards 2018
Best Placemaking, Kidbrooke Village
The Sunday Times British Homes Awards 2017
Outstanding Placemaking, Woodberry Down
Going Carbon Positive
Net Zero Carbon Homes
In 2018, Berkeley became the UK's first carbon positive
homebuilder by reducing its carbon emission intensity from
business operations by 22% (compared to 2016), procuring
renewable energy and offsetting 110% of remaining emissions
through the support of verified projects. Reductions resulted
from introducing the following:
— Minimum recommendations for site set up and operation
— Guidance on identifying and reducing unnecessary energy
consumption, particularly out of hours
— A best practice directory of energy efficient technologies
and initiatives
— A Carbon Management and Action Plan template
to effectively manage and identify carbon
reduction initiatives.
Berkeley has committed to creating new homes that can
operate at net zero carbon by 2030. Our goal is to create
highly efficient, low energy homes which can draw the power
they need from clean and renewable sources.
We are a partner of the UK Green Building Council's (UKGBC's)
Advancing Net Zero programme which has produced a
definition and framework for net zero buildings. As the only
housebuilder partner, we are helping lead the drive towards
decarbonising the built environment.
Solar photovoltaic panels on site welfare
facilities at London Dock, Wapping
Future Energy Home, Kidbrooke Village
Case study
Carbon reduction initiatives
Our sites and offices continue to implement energy efficiency
measures to reduce their carbon emissions impact. Our
London Dock site has installed solar photovoltaic panels
to help power their welfare cabins, whilst facilities at Royal
Arsenal Riverside have been retrofitted to include LED
lighting, along with master switches and time clocks on
equipment. Replacement of fluorescent ceiling lights with
ultra-efficient LED ones at our Chelsea Bridge Wharf office
has led to an energy saving on lighting of more than 15%.
Case study
Future Energy Home
Berkeley is collaborating with E.ON to pilot the Future Energy
Home at Kidbrooke Village. We have installed an innovative
solar glazing roof canopy which captures energy and stores
it in a battery that can help power the home and charge an
electric vehicle.
This clean energy solution is set within a thermally efficient
modular home, which has been fitted out with the latest
home technologies, including light switches, plug sockets,
thermostats and radiator valves which have smart functionality.
Read more on page 49
Read more on page 41
17
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Chief Executive’s Statement
" Berkeley’s purpose is to create homes,
strengthen communities and improve
people’s lives. Our sustained commercial
success enables the valuable and enduring
contributions we make to society, the
economy and the natural world."
Summary of Performance
Berkeley has delivered pre-tax earnings of £775.2 million for the
year. This is from the sale of 3,698 homes (2018: 3,678) at an
average selling price of £748,000 (2018: £725,000), reflecting
the mix of properties sold in the year.
Berkeley started the year anticipating profits for 2018/19 would
be approximately 30% lower than 2017/18, as the positive impact
of the investment made at the end of the financial crisis reduced
and profitability began to normalise. This is therefore a strong set
of results, reflecting robust trading in the year and the appeal of
Berkeley’s developments.
In December 2016, Berkeley set a plan to deliver £3.0 billion of
pre-tax profit over the five years to 30 April 2021. We are currently
18% ahead of this, in spite of the extended period of macro and
political uncertainty. In line with existing guidance and the original
plan, pre-tax profit for 2019/20 is anticipated to fall by around
a third from the 2018/19 level, with the pre-tax ROE expected
to settle at around 15% thereafter.
In the first three years of this plan, Berkeley has increased its net
cash position from £107.4 million to £975.0 million, a level which
represents under-investment commensurate with the uncertain
operating environment. Notwithstanding this, and the high level
of profit delivery over this period, Berkeley has maintained the
estimated gross profit in its land holdings at over £6.0 billion.
Strategy update
Berkeley’s strategy for capital allocation 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.
The current phase of the strategy began in 2011. We had entered
the financial crisis in a position of strength and identified what was
a unique opportunity to invest our capital to create value for our
shareholders and other stakeholders. At the time, Berkeley had
net assets of £0.9 billion (£7.09 per share), was ungeared and had
an estimated £2.3 billion of future gross profit in its land holdings.
From this base we made a commitment to return £1.7 billion
to shareholders (£13.00 per share) over the next 10 years,
which was subsequently increased by £0.5 billion to £2.2 billion
(£16.34 per share).
Since then Berkeley has successfully executed its strategy,
delivering exceptional financial returns that were unique to this
period, whilst continuing to invest. Consequently, Berkeley now has
an estimated £6.2 billion of future gross profit in its land holdings,
whilst net assets are £3.0 billion (£23.05 per share); a 225%
increase of £2.1 billion or £15.96 per share over the eight years over
which period shareholder returns of £11.34 have also been made
through a combination of dividends and share buy-backs.
The land holdings contain a number of fantastic regeneration sites
in our wholly owned business, as well as that of our joint ventures
which are in, or will shortly move into, production. In London,
these include sites at White City, South Quay Plaza, Grand Union
in Brent, Southall Waterside, Oval Village and Stephenson Street in
West Ham. Outside the capital, these include sites in Birmingham,
Watford, Reading, Slough and Staines. In its joint ventures, this
includes Hartland Village in Fleet in St Edward, and Clarendon
in Hornsey, King’s Road Park in Fulham and Poplar Riverside in
St William.
These long-term sites supplement our existing ongoing
regeneration sites at Royal Arsenal Riverside in Greenwich,
Woodberry Down in Finsbury, Kidbrooke Village in Greenwich,
Beaufort Park in Hendon, London Dock in Wapping and Green
Park Village in Reading, amongst others. We are also seeking
to invest in new opportunities as the market in London and the
South East adjusts to the prevailing macro uncertainty and policy
interventions of recent years.
Berkeley has the unique expertise to unlock the social and
economic value in all of these long-term sites, coupled with the
strong capital base required to execute their delivery as, by nature
they are highly capital intensive; particularly in the early stages of
remediation and investment in site infrastructure. The success of
these sites is founded on trusted partnerships with local authorities
and communities and their development is directly aligned to the
Government’s strategy for increasing the supply of good quality
homes for everyone, across all tenures.
18
Berkeley Group2019 Annual Report Signalling this new investment phase, Berkeley has commenced
production on 14 sites in the year, ten of which have been in the
second half of the financial year and include some of the next
wave of regeneration sites already referred to, such as Oval Village,
Southall Waterside, Hartland Village, Clarendon and King’s Road
Park. In this next phase of its strategy, Berkeley is targeting a
long-term, sustainable pre-tax return on equity of 15%. This return
is commensurate with the investment required to bring forward
the next generation of sites, their longevity and relative risk profile,
alongside Berkeley’s lasting commitment to investing in the wider
community benefits that good development brings.
As announced in our interim results, this investment phase
also underpins the extension of the current annual quantum of
shareholder returns of £280 million by a further four years to
September 2025, assuming there is no material deterioration
in the operating environment.
The Remuneration Committee of the Board is now consulting
with shareholders over a new three-year remuneration policy
to be put to the 2019 Annual General Meeting in September.
Shareholder Returns Programme
In its interim results, Berkeley announced that the next six
monthly £139.7 million Shareholder Return will be provided
by 30 September 2019 through a combination of dividends
and share buy-backs. By 30 April 2019, Berkeley had returned
£5.2 million via share buy-backs. The return amount will be
increased appropriately in the event that any new shares are
issued either from treasury or as newly listed shares.
In total, Berkeley has returned or committed to return
£12.34 per share of the £16.34 Shareholder Return to be made
by 30 September 2021. The final £4.00 per share under the
formal 2011 Shareholder Returns programme is scheduled to be
returned over the following two year period to 30 September
2021, with the current annual £280 million return continuing
thereafter to September 2025, as noted above.
This financial year, Shareholder Returns totalled £251.9 million,
with £53.0 million returned through dividends and £198.9 million
through share buy-backs (5.6 million shares). Of the Shareholder
Returns made to date under the 2011 programme, £383.7 million
has been made via share buy-backs, with 11.1 million shares
acquired, at an average cost of £34.63 pence per share (range:
£28.08 – £38.45 per share).
Fitzroy Gate, Old Isleworth
Following the share buy-backs executed to date, the annual
Shareholder Return (currently £280 million) now equates to
£2.16 per share; an 8% increase to the initial £2.00 per share.
Housing Market
For Berkeley, trading conditions and the value of new reservations
secured continues to be stable, with 2018/19 being marginally
ahead of 2017/18. These are at levels which underpin the business
plan but which are constrained by the continuing economic and
political uncertainty and policy interventions, including high
transaction costs and mortgage restrictions, both on income
multiples and mortgage offer periods.
According to the latest MHCLG data, new starts in London for the
2018 calendar year were broadly stable when compared with 2017,
remaining some 30% down from the peak in 2015, and less than
a third of the draft London Plan target of 66,000 new homes per
year. Whilst completion statistics in the capital had been rising for
some time, inevitably the reducing new starts of recent years are
impacting completion volumes for the first time. According to the
MHCLG data, completions for 2018 were down 32% on 2017.
Consequently, supply in London is reducing at a time when
more new homes need to come forward. In this environment,
pricing remains firm and we continue to secure prices above
the business plan levels, broadly covering build cost increases.
The level of cancellations remains stable and within the normal
range. Sales continue to be split broadly evenly between owner
occupiers and investors, with overseas customers continuing to
see relative value in the London market. Help to Buy reservations
accounted for 297 sales in the year.
Reflecting the profile of delivery on our London developments,
this has been a year in which high revenue has resulted in a
moderation of cash due on forward sales to £1.8 billion, down
from £2.2 billion at 30 April 2018. The cash due on these forward
sales will be collected in the next three financial years and
provides a strong underpin for the business plan.
This year we have launched 11 new developments to the market:
three in London, at Trent Park in Enfield, Oval Village and St
William’s Clarendon in Hornsey; and the rest outside the capital,
in Winchester, Leatherhead, Cranleigh, Sevenoaks, Ascot, Snow
Hill Wharf in Birmingham and in our joint ventures at Fleet and
Borehamwood. As noted earlier, with a number of new sites
having recently moved into production, we anticipate further
launches during 2019/20 at, for example, Southall Waterside,
19
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Chief Executive’s Statement continued
Grand Union in Brent and King’s Road Park in Fulham with other
launches subject to the next wave of sites coming forward for
development once pre-development restraints are resolved.
Berkeley has added 14 new sites to its land holdings in the year
and obtained nine new planning consents, along with over
60 revisions to existing consents. We are also seeing a number
of new opportunities as the market in London and the South
East factors in the prevailing macro uncertainty and policy
interventions of recent years but have been naturally cautious
in this period of extended political and economic volatility.
Homes
In May 2018 we committed to produce a transition plan for
each new development to enable our homes to operate at net
zero carbon by 2030, in our drive to help the built environment
transition towards a low carbon economy. In the year, we have
trialled transition plans for three of our developments, helping
us to further understand the long-term energy solutions that will
enable our customers to live low carbon lifestyles. We have built
upon our own commitment by becoming a programme partner
of the UK Green Building Council’s (UKGBC’s) Advancing Net
Zero work.
As reported in our interim results, build cost rises remain steady
at around 4% per annum and we continue to monitor the impact
presented by various Brexit scenarios. The risks associated with
a “no deal Brexit” are well documented. For Berkeley, areas of
potential impact include short-term materials availability and
pricing and, over the longer term, the availability of skilled labour.
Our Vision
Berkeley’s business strategy is called ‘Our Vision’ and includes
five strategic focus areas: Customers, Homes, Places, Operations
and Our People. Every two years we review and develop
strategic commitments under each of our focus areas to drive
continual business improvement and to address industry and
global issues.
Our Vision is an integrated business strategy, bringing together
our commitments across a wide range of business topics,
including sustainability and key themes such as climate change
and nature. We have reviewed the United Nations’ Sustainable
Development Goals (SDGs) and the targets that sit beneath
them, to understand how they relate to our business and
where we can make the most significant contribution.
We are making good progress against our commitments
launched in May 2018, with performance highlights as follows:
Customers
Our customers’ experience is central to our strategy and we use
the independently assessed Net Promoter Score (NPS) to drive
and measure progress in this area. Our NPS remains industry
leading at 73.5 (on a scale of -100 to +100). We continue to
gather insight into the customer journey to further improve
the professional and efficient service we provide.
The Villas, Barnes
At the same time, we continue to work with E.ON to pilot the
‘Future Energy Home’, which allows residents to generate
renewable energy on site and then store it in a battery; this
energy can then be used to charge electric vehicles and to
relieve pressure on the power grid at times of high demand.
Places
Creating beautiful, sustainable places that will endure as
settled, vibrant communities long into the future, is central
to our approach. Nature can bring a multitude of benefits
to communities, and we believe that new developments
can create places with more nature afterwards than before,
through the provision of higher quality habitats.
We have delivered our first measured implementation of net
biodiversity gain at Kidbrooke Village, as calculated using our
Biodiversity Toolkit. Here we have worked with the London
Wildlife Trust to transform parkland into a wetland area that
will attract wildlife and people. More broadly, Berkeley has
been sharing its approach to net biodiversity gain with Natural
England and the Greater London Authority to help inform future
policy. We are delighted that our approach has been nationally
recognised and shared in the Government’s consultation on
net biodiversity gain, making Berkeley well placed to meet the
Government’s intention to mandate net biodiversity gain for
new developments.
Operations
Berkeley has continued to progress delivery of its Berkeley
Modular facility in the year, having completed construction of
the factory building in the year. We are undertaking research
and development with our consultants and supply chain
partners to create a sophisticated modular solution.
We are proud that our team at One Blackfriars has demonstrated
industry leading performance in managing this complex construction
site with exemplary consideration of the workforce, community
and environment, achieving the accolade of ‘Most Considerate
Site (>£50m)’ at the Considerate Constructors Scheme National
Site Awards 2019. More broadly, our approach to ensuring our
operations are carbon positive has been recognised at the Better
Society Awards 2019, with Berkeley winning ‘Carbon Reduction
or Offset Programme of the Year’.
Our People
Contributing to tackling the industry’s skills crisis remains a key
area of focus for Berkeley. In autumn 2018, we saw the official
opening of one of the country's first purpose-built construction
academies on our Southall Waterside regeneration site.
The West London Construction Academy is being delivered
in partnership with West London College and was named as
one of the first Mayor’s Construction Academy (MCA) Hubs
in January 2019, a quality mark that identifies and recognises
high-quality construction skills training in London.
20
Berkeley Group2019 Annual Report Case study
Hartland Village, Hampshire
Work is now underway on Hartland Village, one of
St Edward's most ambitious brownfield regeneration
programmes outside of London. This project will
see a long standing derelict manufacturing site
transformed into a highly sustainable new village,
featuring biodiverse parkland, a lake and swales,
a village green, health centre, community hall
and school.
Community amenities, including a subsidised village
shop, will be delivered early to help people mix, meet
and enjoy village life. A Community Liaison Manager
will help nurture community growth and there will be
10km of walkable links, nature trails and cycle paths.
1,500 30
mixed tenure homes
acres of concrete
slabs reused on site
70
acre country park
1,000
new trees
Read more online:
www.berkeleygroup.co.uk/hartlandvillage
21
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements
Chief Executive’s Statement continued
The health, safety and wellbeing of our people is of the highest
importance to Berkeley. Our latest 12 month rolling Accident
Injury Incidence Rate (AIIR) is 1.14 reportable incidents for every
1,000 people working on our sites and in our offices (2018: 1.42).
We are strengthening our focus on wellbeing, and in particular
are developing and implementing a strategy for mental health,
with 80 Mental Health First Aiders having been trained in
the year.
The Berkeley Foundation
We continue to support our local communities through the
Berkeley Foundation (the “Foundation”), a registered charity.
The Foundation works in partnership with the voluntary sector
across London, Birmingham and the South East of England,
with a particular focus on reducing homelessness, increasing
access to employment, and improving health and wellbeing.
Since 2014, the Foundation’s partnerships have supported
almost 22,000 people.
This year, the Foundation has contributed more than £3.2 million
in funding, through grants, fundraising and Give As You Earn.
65% of Berkeley staff have got involved in its work, raising over
£1 million; more than ever before. Berkeley also earned the new
Diamond Payroll Giving Award – the highest level achievable.
The Foundation has recently launched its new strategic plan,
which will take the organisation through to 2021. This focuses
the Foundation’s efforts on improving social mobility for young
people in our local communities, working towards a new vision:
a society in which every young person can thrive. Over the
next three years, this will involve growing the Foundation’s
community investment, working with others to develop more
collaborative approaches to funding, and looking at how we
can maximise the value we are able to add to the Foundation’s
partners through the skills, experiences and opportunities
available at Berkeley.
Outlook
The operating environment has been uncertain for three years,
since the United Kingdom chose to leave the European Union,
resulting in a lack of visibility in the political outlook. When seen
alongside the increasing property tax burden since 2014, and
a complicated, costly and bureaucratic planning system, it is
unsurprising that both demand and supply are constrained at
present. Businesses are used to, and indeed thrive on changing
economic and commercial conditions but they do need a
supportive and stable political and regulatory environment
to invest with confidence and stimulate growth.
Underpinning the market for Berkeley over this period has been
robust demand for well-located homes, priced correctly and
that are built to a good standard of quality within welcoming
environments. We have invested in our brand, with our holistic
approach to place-making, putting people, nature and the
strength and wellbeing of the wider community at the core of
every development plan. London remains a fantastic global
City, a place where people aspire to live and work, and the
UK continues to benefit from strong employment and low
borrowing costs.
Berkeley starts the coming year from a position of strength,
with net cash of £975.0 million, forward sales of £1.8 billion and
an estimated £6.2 billion of gross profit in our land holdings,
and this means we can look beyond the current period of
uncertainty with confidence. However, like all responsible
businesses who operate in cyclical markets, we have been,
and will remain cautious in our investment in this environment,
and this will determine the speed with which we deliver the
value from our assets and invest in new opportunities.
ROB PERRINS
CHIEF EXECUTIVE
Dickens Yard, Ealing
22
Berkeley Group2019 Annual Report Case study
The Hamptons 10 years on
More than 10 years after St James completed the
final phase of The Hamptons in Worcester Park, this
distinctive New England style neighbourhood has
developed a strong sense of identity and a more
beautiful and mature natural landscape.
A former Thames Water sewage works, the site
required extensive remediation before being
transformed into 645 new homes, set within 30
acres of green space, including a public park with
amphitheatre, wetlands and a community centre.
23
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Case Study
West London
Construction Academy
In 2018, Berkeley launched the 20,000 sq ft West
London Construction Academy at Southall Waterside
in partnership with West London College. This is
one of the country’s first purpose built construction
training facilities, with a curriculum and learning
environment designed for industry, by industry.
The first cohort of apprentices are now enrolled and
are learning their trades with the direct support of
industry professionals from within Berkeley and its
supply chain. The Academy is now part of the Mayor
of London’s Construction Academy hub network,
a quality mark that identifies and recognises high
quality construction skills training.
24
Berkeley Group2019 Annual Report 25
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Berkeley Foundation
Berkeley Foundation
Building a society where every
young person can thrive
The Berkeley Foundation is a registered
charity, launched by Berkeley in 2011.
It works in partnership to help young
people in London, Birmingham and
the South of England to overcome
barriers, improve their lives and build
a fairer society.
It focuses its work in four areas:
A safe place to call home
Ensuring young people have secure,
stable accommodation
Health and wellbeing
Supporting young people to live happy,
healthy lives
The skills to succeed
Helping young people develop the skills
and capabilities they need to thrive
Access to employment
Enabling young people to overcome
barriers to work and kick-start
their careers
This year saw the launch of the
Foundation’s new strategy for
2018-2021, which has a sharper focus
on supporting young people and
increasing social mobility. Over the
coming years, the Foundation aims to
scale up its funding, grow its impact
and deepen its partnerships.
We also held the first ever Berkeley
Foundation Awards in April 2019,
celebrating the phenomenal contribution
made by our businesses, staff and supply
chain companies to the work of the
Foundation and its charity partners.
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.
You can read the Foundation’s full strategy at:
www.berkeleyfoundation.org.uk/about-us
Working in partnership
The Foundation builds long-term,
impactful partnerships with the voluntary
sector through three main routes:
Strategic partnerships
Long-term, high value charity
partnerships which operate on
multiple levels.
Designated charities
20 charities chosen by our employees
which are local to their offices
and developments.
Community investment fund
Targeted funding programmes, aimed
at supporting innovation and building
evidence of what works.
As well as funding frontline services, these
partnerships put the skills, resources and
networks of Berkeley to work, through
skilled volunteering, collaboration, and
by providing work experience and job
opportunities on our sites.
The Foundation’s partnership with Crisis
(opposite) is a great example of how this
works in practice.
Berkeley Foundation Awards 2019
26
Berkeley Group2019 Annual Report Foundation highlights
>5,300
This year, the Foundation’s work
has reached more than 5,300
people, helping them to move out of
homelessness, build their skills, move
into work or access new opportunities.
>10,000
Berkeley staff volunteer more than
10,000 hours each year to support
their local communities.
>£3.2m
This year, the Berkeley Foundation has
committed more than £3.2 million to
support our local communities.
65%
of Berkeley staff do something each year
to support the Berkeley Foundation.
32%
of Berkeley staff are signed up to our
Give As You Earn (GAYE) scheme,
earning Berkeley a Diamond Payroll
Giving Award in 2018 – the highest
level available.
£5.5m
Berkeley staff have raised more than
£5.5 million for the Berkeley Foundation
and its charity partners through
fundraising and GAYE to date.
Berkeley Foundation and Crisis
There are almost 160,000 households experiencing the
worst forms of homelessness in Britain. Crisis and the
Berkeley Foundation have been working together to
tackle this growing epidemic since 2013.
The partnership
supports people who
have experienced
homelessness to get
back into work. This year,
87 people accessed
education, employment
or training as a result of
the Foundation’s funding,
with 37 moving into
paid employment.
In 2018, 62 Berkeley
employees took part
in the Square Mile Run,
raising over £19,000 for
Crisis by racing through
the City of London.
Staff from across Berkeley
also offered their skills to
support Crisis members
into work by volunteering
at the biannual Crisis
Employment Platforms.
Meanwhile, more than 40
staff volunteered their
time at Crisis at Christmas,
supporting the running
of day and night centres
for homeless people
which welcomed over
4,000 guests in 2018 and
served more than 35,000
Christmas dinners.
“Crisis and the Berkeley Foundation have
worked in partnership for several years.
The partnership continues to be a huge
success and makes a genuine impact on
homelessness in Great Britain.
The Foundation supports a number of
innovative housing projects as well as our
Employment Services in London, Croydon
and Brent. These services have a strong
track record of helping homeless people
find and sustain jobs – an important
element of supporting people out of
homelessness for good.
The Berkeley Foundation is invested in the
delivery and development of our strategy
and the partnership is a great example of
collaborative working.”
Jon Sparkes, Chief Executive, Crisis.
27
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Business Model
Taking a long-term
view of value creation
Strategic focus areas
under our business strategy:
Our Vision
Read more on pages 32 to 53
Customers
Provide exceptional service to all
of our customers and put them at
the heart of our decisions
Homes
Deliver high quality homes with
low environmental impact where
people aspire to live
Inputs for value creation
Our unique operating model
People across the business
— Employees and supply chain with the
expertise and experience to deliver
complex regeneration developments
Relationships and partnerships with
key stakeholders
— Relationships with public and private
joint venture partners, land owners, our
supply chain, local authorities, industry
bodies, communities and customers
Physical and natural resources
— Well located land holdings where
we can add value
— High quality materials and resources
Financial
— Financial capital underpinned
by a strong balance sheet,
net cash and forward sales
— Rigorous land investment
appraisal process
Read more on pages 70 to 73
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, placemaking and customer
service at its core. Financial risk is kept low
at all times, which enables investment at
the right time in the cycle.
Our core activities
Identifying and
acquiring land
Designing
and planning new
homes, places and
communities
Building
new homes, places
and communities
Underpinned by our
core values
Have integrity
Build trust by being open,
clear and credible
Respect people
Work together, empower people
and value their contribution
28
Berkeley Group2019 Annual Report Places
Create strong communities where
residents can live an enjoyable,
sustainable life
Operations
Make the right long-term
decisions, run the business
efficiently and work
collaboratively with our
supply chain
Our People
Develop highly skilled teams that
work together in a safe, healthy
and supportive environment and
contribute to wider society
This unique approach enables Berkeley to
deliver sustainable risk-adjusted returns to
our shareholders, while having a positive
impact for our stakeholders, society and
the environment.
Marketing
and customer
service
Placekeeping
and
stewardship
Value created
People across the business
— Increased knowledge and skills through strong
retention, training and development
— Excellent health and safety record and
employee wellbeing
— Job creation through construction activity
and on completed developments
Relationships and partnerships with
key stakeholders
— Reputation for high quality delivery across all tenures
— Enduring stakeholder relationships underpinned by
trust and partnership approach
— Satisfied customers
Read more on pages 56 to 57
Physical and natural resources
— Thriving developments where people aspire to live
and work
— Reducing greenhouse gas emissions, water use and
waste production through direct activities and the
design of homes
— Enhancing biodiversity to support nature and
people’s wellbeing
Financial
— Strong, sustainable risk-adjusted returns
for shareholders
— Ability to invest at the right point in the cycle
Think creatively
Find individual solutions
for every site and situation
Be passionate
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
29
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Key Performance Indicators
Our key performance indicators (KPIs) are aligned to the business
strategy and are used to actively monitor business performance.
Profit before tax
Pre-tax return on equity
Net cash
Financial KPIs
£775.2m
(2018: £977.0m)
This is our core measure of profitability,
our absolute return from the sale and
delivery of new homes in the year.
27.9%
(2018: 41.9%)
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.
£975.0m
(2018: £687.3m)
This provides a measure of the
financial strength of the Group.
Net asset value per share
Cash due on forward sales
Future gross margin in land holdings
£23.05
(2018: £19.38)
£1,831m
(2018: £2,193m)
£6,247m
(2018: £6,003m)
This balance sheet measure reflects
the value of shareholders’ interests
in the net assets of the business.
This measures cash due from customers
during the next three financial years under
unconditional contracts for sale.
This provides a measure of expected value
in the Group’s land holdings, including
its share of joint ventures, in the event
that it successfully sells and delivers the
developments planned for.
Net Promoter Score
73.5
(2018: 73.9)
Non-financial KPIs
Annual Injury Incidence Rate per
1,000 people
1.14
(2018: 1.42)
Direct apprentices and training
9.8%
(2018: 7.3%)
Our six-month rolling Net Promoter Score
(NPS) is an indicator of the success of our
efforts to provide world-class customer
service. Our NPS significantly outperforms
the sector average of 32 (Home Builders
Federation, 2019) and compares favourably
with top performing consumer brands.
This measure shows the number of reportable
injuries during the year, in relation to the number
of Berkeley employees and contractors working
across our sites. It compares favourably to the
industry average of 3.58 (Health and Safety
Executive, 2018).
Calculated as the average monthly
percentage of our direct workforce
that are apprenctices, graduates or
employees undertaking formal training.
Over 500 apprentices have worked on
Berkeley sites during the year.
Greenhouse gas
emissions intensity
Affordable housing and
wider contributions
2.50
(2018: 2.15)
>£525m
(2018: >£420m)
This measure relates our annual greenhouse
gas emissions resulting from our operational
activities 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 delivered or
committed to during the year.
In addition to these non-financial
KPIs, Berkeley monitors and
reports on business performance
through a host of other data,
highlights and awards. Some of
these are detailed within the Our
Vision business strategy sections
of this report.
Read more on pages 32 to 53
30
Berkeley Group2019 Annual Report Economic Contribution
Each year EY completes an Economic Impact Assessment based on
Berkeley’s financial data as well as publicly available statistics. The results
for the last five years (1 May 2014 – 30 April 2019) are presented below.
Economy
Homes
Tax
£13.5bn
19,660
£3.6bn
Berkeley’s contribution to UK GDP was
£3.0 billion in 2018/19 and £13.5bn
for the five years.
Berkeley built 3,959 homes in 2018/19 and
a total of 19,660 over the last five years
(including joint ventures).
Total UK tax contribution of £816 million
in 2018/19 and over £3.6 billion during
the last five years.
This includes taxes paid directly by
Berkeley and the taxes paid by its
customers and suppliers as a result
of Berkeley activities.
Communities
Jobs
£2.1bn
29,250
Including more than £0.5bn in 2018/19. In total,
Berkeley has contributed £1.5bn as a subsidy for
affordable housing* and committed to additional
payments of £0.6bn to help pay for a wide range
of facilities and services for local communities.
Berkeley has supported, on average, 29,250
jobs per annum directly and through its
supply chain over the five year period.
On average, every new home built
by Berkeley in the last five years
has generated £290,000 of value
to the state through taxation and
contributions to the community.
*
Berkeley calculation, based on MHCLG valuation methodology.
31
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Business Strategy: Our Vision
Berkeley’s business strategy
is called ‘Our Vision’
Through the delivery of Our Vision, we aim 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.
There are five areas of strategic focus under Our Vision: Customers, Homes, Places, Operations and Our People. By focusing
on strategic objectives under these areas, we ensure that we continue to provide customers with an exceptional service,
whilst delivering high quality homes and places where communities can thrive and where people can live sustainable lifestyles.
We also recognise that the skills, knowledge and dedication of our people, alongside the efficient management of our operations,
are fundamental to the ongoing success of our business.
Strategic focus areas
Strategic objectives
Provide exceptional service to all of our customers
and put them at the heart of our decisions
Customers
Homes
Places
Operations
Our People
Read more on pages 34 to 37
Deliver high quality homes with low environmental
impact where people aspire to live
Read more on pages 38 to 41
Create strong communities where residents can
live an enjoyable, sustainable life
Read more on pages 42 to 45
Make the right long-term decisions, run the
business efficiently and work collaboratively with
our supply chain
Read more on pages 46 to 49
Develop highly skilled teams that work together
in a safe, healthy and supportive environment and
contribute to wider society
Read more on pages 50 to 53
32
Berkeley Group2019 Annual Report Strategic commitments
Sustainability
Every two years we review and develop strategic commitments
under each of our focus areas to drive continual improvement.
We ensure a consistently strong approach through the
following mechanisms:
— Integration of new themes
The regular review of commitments provides the opportunity
to identify and address any emerging global, industry or
business issues and opportunities. For example, we have
added off-site manufacture as a commitment for 2018-2020.
— Evolution of continuing themes
A number of themes remain high level priorities for Berkeley to
take action on. These feature within our strategic commitments
for recurring periods, in recognition of the need to drive
incremental change. Continuing themes include climate
change mitigation and adaptation, community, and customer
service levels.
Our headline commitments are our priority actions for each
two year period. In addition to these, we have supporting
commitments, which in many instances are previous headline
commitments that have become embedded into our
everyday activities.
In May 2018, we launched ten 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.
Materiality
With the support of an objective external party, in 2018 all
employees were invited to provide their views on material issues
to be addressed through Our Vision; responses were received
from just under 1,200 people, representing approximately 45%
of the business.
Views from key external stakeholders, including contractors,
partners and industry groups, were also requested via both an
online survey and detailed interviews.
The results of this work were used 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 being
signed-off by the Main Board.
Our Vision is an integrated business strategy,
bringing together our commitments across a wide
range of business topics, including sustainability.
This is reflected by having a Main Board Executive
Director with overarching responsibility for Our
Vision, sustainability, and health and safety.
We believe that each of our employees has a
duty to integrate sustainability into their role and
working practices. Policies and standards are set
at a Group level (see our Non-Financial Reporting
Statement on page 55), and are supported by a
sustainability management system in place across
all of our operating companies. This includes
procedures to manage sustainability at each stage
of the development process, from land purchase,
through design, procurement and construction,
all the way to marketing, sales and handover.
To be a world-class business, it is important that
we help to address global challenges. We have
reviewed the United Nations’ Sustainable
Development Goals (SDGs) and the targets that
sit beneath them, to understand how they relate
to our business and where we can make the most
significant contribution. Although all the goals are
important and interconnected, we have identified
four that we have the greatest ability to influence.
Read more on page 54
Read more about our approach to sustainability:
www.berkeleygroup.co.uk/sustainability
33
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Business Strategy: Our Vision – Customers
Provide exceptional service to all of our customers
and put them at the heart of our decisions
Our approach
Our customers are at the heart of every decision we make.
We are always mindful that we are building someone’s home;
the place they will enjoy, relax in and feel secure. This extends
beyond customer-facing activities, from the initial purchase
of land through to the design of each home and wider
development. We aim to understand our customers’ needs
and consistently meet or exceed their expectations, whilst
promoting sustainable lifestyles.
Customer service
We are a customer centric business; buying a home is one of the
most significant decisions a person makes and we recognise the
need to consistently meet and exceed expectations in providing
a professional, efficient and helpful home buying service. 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 opportunities and the continuation of
our Sales Academy to bring talented individuals from other
industries into the business.
Customer communications
Our sales teams have an in-depth knowledge of their
development and location to help our customers find the right
home to best suit their needs. Each customer receives a tailored
information pack relating to their home and has a designated
Berkeley representative throughout their home buying journey
and beyond. Customers are given the opportunity to use our
interactive online system, MyHome Plus. This covers a range
of features, from selecting choices and options to receiving
updates on construction progress and information that enables
residents to understand and operate their home.
Read more online:
www.berkeleygroup.co.uk/about-berkeley-group/
our-vision/customers
Holborough Lakes
Sustainable living
We aim to promote sustainable living at all stages of the
customer journey, including providing home specific information
during marketing, purchase and completion. Berkeley is one
of a select group of developers whose customers can secure
mortgage interest discounts on energy efficient new homes,
using Barclays’ Green Home Mortgage.
Customer insight
Key to the ongoing success of our business is that we listen to,
understand and respond to the needs of our customers. We use
a range of methods to gain customer insight, including surveys
and focus groups. In evaluating our customer experience we
benchmark our customer service performance against both the
wider housebuilding sector and others using the Net Promoter
Score (NPS).
Forward sales
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.
It is imperative as a risk management tool in a capital intensive
cyclical industry.
UK and overseas markets
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. We have a network of overseas sales offices to
support our overseas marketing initiatives. Our UK First Policy
requires each individual home to be made available in the UK
either first or at the same time as launching overseas. Berkeley
is proud to support the Mayor of London’s initiative to offer
lower-cost new properties exclusively to Londoners and
UK-based buyers first.
34
Berkeley Group2019 Annual Report
2019 Awards, highlights and performance
73.5
Six-month rolling average NPS,
compared with a Home Builders
Federation (HBF) national survey
industry average of 32
Vista, Battersea
Londoners
First
Signatory to the Mayor of
London’s initiative to offer new
build homes up to £350,000
in value to those within London
and the UK first
Green Home
Mortgage
Partner organisation
working with Barclays to
provide discounted rates
on the purchase of an
energy efficient new home
97.1%
Customers would recommend
us to a friend, compared with
a Home Builders Federation
(HBF) national survey industry
average of 87%
Investor in
Customers Gold
2018
Achieved across all of our
operating companies
35
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Business Strategy: Our Vision – Customers continued
2018–2020 Headline commitment overview
Net Promoter Score
Establish Berkeley amongst the top performing companies
for customer service, as evidenced by the Net Promoter Score.
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.
What we are looking to achieve
We look to continue to monitor our performance, share good
practice, and implement new initiatives to ensure that our
customers receive excellent levels of service.
What we are looking to achieve
Through engagement with lenders, brokers and other parties
we seek to make the case for the introduction of longer
mortgage offer periods to give every purchaser an equal
opportunity in the new build market.
Progress in 2019
— Berkeley's NPS continues to be high at 73.5. Although this
is a marginal decrease from our NPS of 73.9 in 2018, our
performance continues to compare extremely favourably
against the industry average of 32.
— Key to success is the continued focus on providing timely
and accurate responses to customer queries, ensuring that
homes are defect free and making customers feel special
and valued.
— The performance of managing agents working on
behalf of Berkeley has been identified as an increasing
challenge, with this being reviewed by the Estates
Management Committee.
Progress in 2019
— Berkeley has met with a number of the UK's leading
lending banks and has ongoing encouraging engagement
with them.
— The appetite among lenders is influenced by the traditional
housing market and the systems that are in place to serve
this. Other barriers include the regulatory cost and the
need to meet the current responsible lending criteria which
are determined by the existing paradigm.
— We believe there is a real opportunity for the banking
sector to help qualifying buyers to enter a part of the
housing market not currently available to them.
— Berkeley is pleased to be one of a select group of
developers to have been identified to make available
Barclay's Green Home Mortgage product, where
purchasers of our energy efficient new homes can receive
discounts on the interest rate they pay on their mortgage.
Priorities for 2020
— Continue to monitor the NPS for each operating company
Priorities for 2020
— Continue dialogue with major lending banks and others
and discuss performance at the Customer Service
Committee to identify areas for improvement.
— Encourage all employees to use our Lessons Learnt portal,
developed to help share knowledge and inform future
decisions and processes.
to further discuss mortgage offers.
— Determine if there is any opportunity to trial a
new approach.
In addition to progressing work under our headline commitments, we have been taking steps to deliver our other 2018-2020
commitments, which are to:
— Understand and respond to customers’ emotional journeys
— Communicate Our Vision to customers
— Promote the use of MyHome Plus
— Communicate sustainable living to customers
— Market homes in the UK and London first
— Promote digital and sustainable communication
— Meet minimum standards for sales and marketing suite set-up
— Undertake sales and marketing suite exit interviews
36
Berkeley Group2019 Annual Report Virtual Reality in use at
South Quay Plaza, Docklands
Our Vision in action
Case study
Innovating the customer experience at South Quay Plaza
Our teams look to evolve and improve the way that we engage
with potential and existing customers, particularly as new and
emerging systems and technologies continue to flourish.
method allows users to virtually walk through the development
and homes to obtain a 360-degree view, improving the quality
of the buying experience.
At South Quay Plaza, Virtual Reality is being used to change the
way in which people purchase their home, enabling potential
customers to view the future development through a virtual
world, even at the earliest stages of construction. This new
The interactive communications continue when a customer
purchases their home at South Quay Plaza, receiving monthly
newsletters and video blogs from the site providing an overview
of construction progress.
Forbury, Blackheath
Case study
Understanding customers'
emotional journeys
Berkeley has a diverse range of customers that have the
same ultimate aim of owning a home, but with differing
needs and prior knowledge of the home buying process.
Understanding expectations of customers at various stages
of their journey with us is key to ensuring continued high
levels of customer satisfaction.
To enable us to better understand and respond to customers’
emotional journeys, a working group with representatives from
our Sales, Marketing, IT and Customer Service teams has been
established. The emotional journeys for core customer groups,
including first-time buyers and families, have been reviewed to
identify potential:
— Customer actions, including how our customers interact
with us, such as through the use of our website and visits
to our sales and marketing suites and developments
— Questions, observations and feelings at different stages
of a customer’s journey.
We are using this work to predict key milestones and
touchpoints to further optimise delivery of our world-class
customer service.
37
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Business Strategy: Our Vision – Homes
Deliver high quality homes with low
environmental impact where people aspire to live
Our approach
We believe that everyone deserves a good home; a home that
has been designed and built to a high quality, that has low
environmental impact, and that enables its occupants to live
healthily and comfortably now and in the future. Our approach
is fundamental to our business; it is demanded of us by our
customers and differentiates Berkeley.
Design and quality
We build high quality homes for everyone: families, first-time
buyers, students, and for senior citizens, including those who
need care. We do not have any standard property types or
formats, and no two Berkeley developments are the same.
Instead we work with the best architects to create unique designs
that are planned to meet the varied requirements of all types of
homebuyers. Our homes are tenure blind, which means that the
affordable homes are designed with the same dedication and
attention to detail. Whether we are creating a city penthouse or
a country retreat, a modern studio or a traditional family home,
there is a relentless pursuit of quality in everything we do.
Safe and healthy homes
We design a range of features into our homes that benefit
residents’ health and wellbeing, including good levels of daylight,
insulation to help regulate temperature and reduce noise, and
storage space. To ensure that our homes are comfortable
both now and in the future with expected changes in climate,
we use our thermal comfort risk assessment on new sites.
The assessment takes into account factors that can affect
overheating, such as location, building type and ventilation
strategies, and then highlights site-specific measures and
actions to reduce them.
Environmental sustainability
We consider the environmental impact of our homes at every
stage of the development process. We apply the energy
hierarchy in design, by focusing on the building fabric and then
incorporating clean and renewable technologies. We seek to
ensure that the materials we specify and procure are responsibly
sourced, in accordance with our Sustainable Specification and
Procurement Policy. We also incorporate a range of features into
our homes to help our customers further reduce their impact,
from energy efficient light fittings and recycling bins, to low
water use fittings and fixtures.
Research and innovation
As technology continues to evolve and new products enter the
market, we continually undertake research and development,
such as investigating ‘smart home’ options. This enables us 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. At the same time, we continue to embed our
minimum infrastructure recommendations covering broadband
and cabling provision, which enable our customers to benefit
from the freedom of being able to ‘plug in’ technologies as they
become available.
Read more online:
www.berkeleygroup.co.uk/about-berkeley-group/
our-vision/homes
Leighwood Fields, Cranleigh
38
Berkeley Group2019 Annual Report
2019 Awards, highlights and performance
93%
Completed homes with an
Energy Performance Certificate
(EPC) rating of at least a B
72%
Completed homes to be supplied
with low carbon or renewable energy
94%
Completed homes provided
with internal recycling facilities
Royal Institute of
British Architects (RIBA)
London and National
Award Winner 2019
UK Green Building
Council (UKGBC) Gold
Leaf Member
Partner
of the UKGBC's
Advancing Net
Zero programme
The programme aims to help
drive the transition to a net zero
carbon built environment in the
UK, with a focus on shaping an
industry-led definition for net zero
carbon buildings.
“At a time when new
homes are so desperately
needed, it is encouraging
to see the Berkeley
Group making bold new
sustainability commitments.
UKGBC is calling for all new
development to be net zero
carbon in operation by 2030,
so we are particularly pleased
to see this feature within
Our Vision.”
Evening Standard
New Homes
Awards 2019
Best Large Development
Fulham Reach
Housebuilder
Awards 2018
Merano Residences, St James
Julie Hirigoyen, Chief Executive, UKGBC
Best Refurbishment
Wimbledon Hill Park
39
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Business strategy: Our Vision – Homes continued
2018–2020 Headline commitment overview
Safe and healthy homes
Launch a design framework to contribute to the wellbeing
of our customers, including safety, air quality and
thermal comfort.
Net zero carbon
Produce a transition plan for each new development which
enables the homes to operate at net zero carbon by 2030.
What we are looking to achieve
People spend around two thirds of their time in their home,
and research shows that sustainable, well-designed homes
can lead to better health and wellbeing outcomes for
residents. By developing and launching a design framework,
we want to positively contribute to the wellbeing of our
customers through the design of our homes.
What we are looking to achieve
There remains uncertainty about the right long-term solution
that will provide our homes with low carbon heating and energy.
Through the development of Low Carbon Transition Plans, we
aim to identify clear routes that will enable our homes to operate
at net zero carbon by 2030, together with the future-proofing
measures that can be incorporated when they are built.
Progress in 2019
— Initiated development of a healthy home design
framework. This will build on our existing approach of
applying minimum storage space requirements to homes
and using our thermal comfort risk assessment, and will
introduce a range of new measures that could be applied
to help create a healthier building. Key issues, including
noise and air quality, have been identified and best practice
in these areas has been researched.
— Developed a strategic partnership with the Royal Society
for the Prevention of Accidents (RoSPA). Through this
partnership, we are supporting the creation of a ‘Safer
by Design’ standard.
Progress in 2019
— Researched how we can deliver low carbon energy and
heat in new developments, in the context of changing
energy policies and uncertainty around the carbon
intensity of gas and electricity within the grid.
— Became a programme partner in the UKGBC’s Advancing
Net Zero work, to help inform our thinking.
— Used findings to develop and trial Low Carbon Transition
Plans for three of our sites. These help us understand the
long-term energy solutions that will enable our customers
to live low carbon lifestyles. Through the trials, we have
identified key considerations for enabling homes to transition
to low carbon, including: energy infrastructure of the site; the
available technology; and the cost to our customers.
Priorities for 2020
— Create a first version of our healthy home design
framework, and trial it on new developments.
Following this, we intend to launch the framework
formally within the business.
— Continue to support RoSPA’s ‘Safer by Design’ standard.
Priorities for 2020
— Share the learnings and guidance from trial sites across
the business.
— Develop Low Carbon Transition Plans for all
new developments.
— Continue to support UKGBC’s Advancing Net
Zero programme.
In addition to progressing work under our headline commitments, we have been taking steps to deliver our other 2018–2020
commitments, which are to:
— Undertake post occupancy evaluation to understand the in-
use performance of our buildings
— Enable connected homes
— Specify sustainable materials in accordance with our
Sustainable Specification and Procurement Policy
— Install internal recycling facilities in new homes
— Install water efficient fittings, so that new homes achieve an
internal water use of less than 105 litres per person per day
— Install energy efficient lighting in new homes
— Meet Berkeley minimum fire ratings and energy efficiency
standards for domestic appliances, which are over and above
the Government guidelines
40
Berkeley Group2019 Annual Report Solar canopy and balustrade as part of the
Future Energy Home, Kidbrooke Village
Our Vision in action
Case study
Future Energy Home at Kidbrooke Village
We want sustainable living to be second nature to our customers,
and have been collaborating with E.ON to provide the tools
to make it happen. The Future Energy Home collaboration at
Kidbrooke Village will help to make living more efficiently more
convenient for residents, who will be able to control their home
through a simple hub. Customers can choose from a range of
whole-house energy options, including:
— Smart thermostat and radiator valves, enabling room
temperatures to be independently programmed and
adjusted using a smart scheduling application
— Smart light switches and plug sockets, allowing residents
to amend lighting and appliance use remotely
— The opportunity to add a clean tariff bolt-on, based on
a customer’s monthly fuel usage. This upgrade allows
E.ON to source 100% renewable electricity in the UK
and support worldwide projects contributing to carbon
emissions reductions
— E.ON home energy management software, which combines
data from all connected electrical devices in the home on a
single, accessible tablet-based platform.
Equipped with a solar canopy on the roof and solar balustrades
around the roof garden, we have also been exploring how the
Future Energy Home can allow residents to generate and store
electricity in a battery, helping to cut bills, to make use of in-built
renewable sources to charge electric vehicles, and to relieve
pressure on the power grid at times of high demand.
These initiatives will give residents practical control over their
energy use and the ability to power their own homes.
41
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Business Strategy: Our Vision – Places
Create strong communities where residents
can live an enjoyable, sustainable life
Our approach
We believe in putting people at the heart of placemaking.
We work in partnership to create well-designed, beautiful,
high quality, safe and sustainable places which will endure as
settled, vibrant communities long into the future. They include
sustainable infrastructure and amenities, and are designed to
be resilient to the effects of climate change.
Location and appraisal
Our experienced land teams focus on investing in the right
locations where there is strong demand for new homes,
good transport links and the scope to create successful new
places where people aspire to live. We undertake a rigorous
evaluation of the opportunities and risks of each potential
acquisition. This and our strong financial position ensure that
we deliver on our offers, fostering trust and underpinning
enduring relationships.
Building communities
By approaching each development in a spirit of partnership,
and by working in collaboration with local authorities and
communities, we strive to establish a true sense of community
on our developments at every stage of the development
process. During design and planning, we engage with the
community and wider stakeholders to understand their needs
and sensitivities, reflecting these in our designs. We use our
toolkit, Creating Successful Places, as a framework for new
developments to ensure that the right facilities and mechanisms
are implemented to create a fantastic place to live and to realise
a shared vision. As a result, no two Berkeley developments are
the same.
Read more online:
www.berkeleygroup.co.uk/about-berkeley-group/
our-vision/places
Concert in the Park at Beaufort Park, Barnet
Fostering communities
As customers move in, we build relationships to understand
what initiatives and activities we can help facilitate to deliver
thriving communities. A key mechanism for achieving this
is the production of community plans, which we have on
a variety of developments to explore structured ways
to build community, foster community governance and
encourage placekeeping. 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. We think hard about the role of the managing agent
to ensure that the right level of community governance, facility
and development management skills exist to support the
community long after the completion of the development.
We remain committed to exploring and implementing excellent
estate management practices.
Sustainable infrastructure
We want our developments to deliver a positive impact
and to enable our customers to live sustainable lifestyles.
Providing public realm and facilities, such as schools and places
to eat and exercise, can be key to this. New developments are
designed to achieve a net biodiversity gain, which means there
should be more nature afterwards than before we began. We also
design our developments with infrastructure that enables and
promotes sustainable travel, including pedestrian routes, cycle
storage and electric vehicle charging points.
Truly sustainable places are great places now, but also stand
the test of time. We incorporate a number of features into the
design of our developments to increase resilience to future
climate change impacts, such as flooding, overheating and
water shortages. These include sustainable drainage systems,
rainwater harvesting and green infrastructure such as trees,
parks, gardens and living roofs.
42
Berkeley Group2019 Annual Report
2019 Awards, highlights and performance
First
Implementation of a calculated net
biodiversity gain at Kidbrooke Village
87%
Developments under construction
regenerating brownfield land
>3,800
Electric car charging points being
provided on sites under construction
8
Additional developments committed
to deliver a net biodiversity gain,
with over 25 new sites since
May 2017 to have more nature
afterwards than before
>47,000
Cycle storage spaces being provided
on sites under construction
Sunday Times British
Homes Awards 2018
Best Garden/Landscaping Design
Fitzroy Gate, Isleworth
Best Placemaking
Kidbrooke Village
CIRIA BIG Biodiversity
Challenge Awards 2018
Client Award for our approach
to net biodiversity gain
Net biodiversity gain
Approach implemented by
Berkeley cited in the Government's
consultation on making net gain
mandatory for new developments
Royal Institution of Chartered Surveyors
(RICS) Awards 2018 Grand Final
UK Project of the Year
Woodberry Down, Finsbury Park
43
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Business Strategy: Our Vision – Places continued
2018–2020 Headline commitment overview
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.
What we are looking to achieve
We seek to further embed our approach to building
communities, in addition to exploring how we quantify
and explain the benefits that our developments generate for
local communities, the local economy, and the environment.
What we are looking to achieve
Through understanding our customers’ needs and
expectations, as well as how the transport mix is likely
to change over time, we seek to ensure that we put the
right infrastructure and services in place to meet customer
expectations and promote sustainable travel.
Progress in 2019
— Continued to develop an approach to building
communities by engaging the local community in
the design of new developments and by undertaking
a community assessment.
— Continued to develop community plans on
existing developments.
— Worked with the Social Value Portal to select and trial
a set of independently verified, industry-wide indicators
and values that can be applied to our developments to
measure social impact.
Progress in 2019
— Reviewed the current utilisation of car parking, cycle
parking and electric vehicle spaces on a number of
existing developments, and reviewed travel plans to
identify best practice.
— Researched how the transport mix is likely to change
over time, making us well placed to anticipate future
travel patterns and design accordingly.
— Continued to ensure that developments under
construction provide future residents with sustainable
travel options; over 47,000 cycle storage spaces and
over 3,800 electric car charging points are being
provided on sites under construction.
Priorities for 2020
— Ensure that every site has an approach to
building communities.
— Continue to identify key indicators to quantify the social
value that we generate.
Priorities for 2020
— Develop key recommendations and guidance for each
of our developments to follow, based on the research
findings obtained in 2019.
In addition to progressing work under our headline commitments, we have been taking steps to deliver our other 2018–2020
commitments, which are to:
— Achieve net biodiversity gain on all new developments
— Install living roofs on all suitable residential apartment
— Develop an approach to integrated water management
roof spaces
— Explore temporary meanwhile uses during construction works
— Achieve BREEAM® Very Good on all commercial space,
student accommodation and senior living housing
— Review the performance of managing agents and the
durability of schemes
44
Berkeley Group2019 Annual Report Our Vision in action
Case study
Wetlands project at
Kidbrooke Village
Berkeley and the London Wildlife Trust have been working
together to enhance biodiversity at Kidbrooke Village by
transforming the parkland, delivered as part of the early
phases of the project, into a wetland area that will attract
wildlife and people. The completed landscape enhancements
provide Berkeley’s first implementation of net biodiversity
gain, as calculated using our Biodiversity Toolkit.
A series of events have also been undertaken to connect the
local community with the green space on their doorstep.
The community engagement strategy ‘Wild About Kidbrooke
Village’ has reached over 600 people from the development,
local schools, and the surrounding area. The aim is to encourage
community spirit and pride, ensuring that Kidbrooke Village
remains loved and well managed in the long-term.
More broadly, Berkeley has been sharing its net biodiversity
gain experiences with Natural England and the Greater London
Authority to help inform future policy. We are delighted that
our approach has been nationally recognised and shared
in the Government’s consultation on biodiversity net gain.
The Government has since announced that net biodiversity
gain will be mandatory for new developments. Berkeley is well
placed to meet the requirements, having committed to achieve
net biodviversity gain on new developments since May 2017.
Computer generated image: Oval Village
45
Kidbrooke Village
Case study
Calculating social value at
Oval Village
In 2018, Berkeley started working with the Social Value Portal
to develop a way of measuring, capturing and quantifying the
contribution that we make to society through our activities
on site. This led to the creation of an agreed list of economic,
social and environmental outcomes which a development
project can be measured against. These range from supporting
an apprentice on site, through to hours volunteered with local
community organisations, with each having a monetary value.
Our Oval Village project was chosen to trial this new approach.
Over the next few years, Berkeley will transform the brownfield
site into a vibrant new destination, creating areas of new
public realm and providing space for creative employment
opportunities and community engagement.
The project team has already generated social value, even
prior to works starting on site, through apprenticeship events,
work experience placements, mentoring and careers talks.
Targets have now been set for each of the social value outcomes
and progress will be tracked against these for the lifetime of the
Oval Village development.
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Business Strategy: Our Vision – Operations
Make the right long-term decisions, run the business
efficiently and work collaboratively with our supply chain
Our approach
Running our operations effectively and considerately is
fundamental to the long-term success of the business.
Each of our developments is led by a dedicated project team
responsible for all aspects of design and delivery, including
the co-ordination of professional teams of consultants and
contractors; the discussion and incorporation of innovative
ideas; and the environmentally efficient and socially considerate
conduct of our day-to-day activities. We continue to work with
our supply chain, to ensure that the necessary skills, quality
services and materials are available to help us deliver the
pipeline of work.
Supply chain
Effective communication and engagement with our supply chain
is critical to the success of our business and the delivery of high
quality developments. We communicate our requirements at the
earliest stages of the tender process through our online Supply
Chain Portal and are committed to procuring contractors on
best overall value, rather than cost alone. We continue to engage
regularly throughout each project and at wider supplier days and
conferences. Our Supply Chain Taskforce holds trade-specific
meetings and internal senior sponsors have been allocated
for key trades. We recognise that ensuring prompt payment is
imperative to our supply chain.
Read more online:
www.berkeleygroup.co.uk/about-berkeley-group/
our-vision/operations
Snow Hill Wharf, Birmingham
Considerate and sustainable activities
Managing our sites and offices with consideration of our
workforce, the local community and the environment is
imperative. Each of our operating companies is supported
by a dedicated sustainability professional who provides advice
and training, and completes formal sustainability assessments.
By registering each of our sites to the Considerate Constructors
Scheme (CCS), our performance is also regularly assessed by
independent monitors against the Code of Considerate Practice.
We have a Sustainable Specification and Procurement Policy to
help ensure the responsible selection and sourcing of products,
including a requirement for timber to be certified to the Forest
Stewardship Council (FSC) or Programme for the Endorsement
of Forest Certification (PEFC) schemes. We take action to
improve resource efficiency and prevent waste production, and
are proud to have zero environmental prosecutions. Berkeley
is a partner of the Supply Chain Sustainability School, through
which we support the provision of consistent messaging on
sustainability to the supply chain.
Innovative build solutions
Innovation occurs continually on a project-by-project basis.
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. 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.
Build quality
Each of our sites and homes has strict procedures to ensure a
high quality of build. We support the work on industry’s Get
It Right Initiative (GIRI) which aims to increase productivity
significantly by reducing error and its associated consequences.
46
Berkeley Group2019 Annual Report
2019 Awards, highlights and performance
Better Society Awards 2019
Carbon Reduction or Offset
Programme of the Year
150,000 sq ft
Factory building constructed to
house Berkeley Modular's advanced
precision manufacturing facility
30
Days taken to pay suppliers on
average, in line with the period
outlined as part of the Construction
Supply Chain Payment Charter
Carbon positive
Achieved for the second year by
purchasing renewable energy and
offseting more than our remaining
operational emissions through
verified projects
95%
Construction waste reused or recycled
PARTNER
Supply Chain
Sustainability
School Partner
Considerate Constructors Scheme (CCS)
National Site Awards 2019
Considerate
Constructors Scheme
(CCS) Partner
43/50
Average Considerate
Constructors Scheme (CCS)
score, compared with the
industry average of 36/50
26
Berkeley sites received an award,
equating to 50% of those which
were eligible compared with just
11% nationally
47
Most Considerate Site (>£50m)
One Blackfriars
Most Considerate Site Runner-up
(>£50m)
South Quay Plaza
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Business strategy: Our Vision – Operations continued
2018–2020 Headline commitment overview
Off-site manufacture
Deliver the Berkeley Modular facility and ensure that 30%
of construction value is delivered through off-site assembly
by 2020.
Waste and plastics
Work with our supply chain to develop a zero waste
strategy, focusing on key wastes including plastics.
What we are looking to achieve
Through this commitment we will be delivering the Berkeley
Modular facility and developing an approach to considering
both volumetric off-site manufacture and the use of off-site
components within the homes of all future projects.
What we are looking to achieve
We seek to better understand the waste streams produced by
our activities. Working with our supply chain, we will identify
opportunities to improve, and will take action to address
key waste issue areas through design, procurement and
behavioural change.
Progress in 2019
— Constructed 150,000 sq ft factory building in Northfleet,
Kent, to house Berkeley Modular’s advanced precision
manufacturing facility.
— Circulated a definition of volumetric and component
off-site manufacture to the business for consistent
understanding and capture.
Progress in 2019
— Conducted additional analysis on 2018 waste data to
identify key waste streams and trades to collaborate in
order to reduce these.
— Reviewed Designing Out Waste workshop materials for
design teams, introduced and trialled by one operating
company to date.
— Updated Berkeley’s Commercial Benchmark Report to
formally capture costs in relation to off-site assembly
during 2020.
— Engaged with two key stationery suppliers to identify
alternative products that are recycled and/or recyclable,
in addition to containing zero or minimal plastic.
Priorities for 2020
— Fit-out and test the Berkeley Modular facility to support
Priorities for 2020
— Invite prevalent contractors to a workshop discussion on
production commencement.
— Ensure that volumetric and off-site components are
considered at the earliest stages of design to enable
requirements to be included within relevant packages.
waste reduction barriers and opportunities, to help define
a zero waste strategy.
— Evolve format and output of Designing Out
Waste workshops.
— Increase general awareness around waste, along with
available reuse and recycling facilities.
In addition to progressing work under our headline commitments, we have been taking steps to deliver our other 2018-2020
commitments, which are to:
— Reduce carbon emissions per person by 14% and evolve our
— Undertake office sustainability reviews and site
carbon positive programme
sustainability assessments
— Use and provide feedback from our Tender Scoring Matrix
— Sign up to the Considerate Constructors Scheme and achieve
for procuring on best overall value
— Reduce water use per person by 6%
a minimum score of 40/50 in every audit
— Enhance procedures for build quality and quality assurance
— Use paper efficiently and source it sustainably
— Source materials responsibly, including certified timber
48
Berkeley Group2019 Annual Report Our Vision in action
One Blackfriars' award-winning project team
Plug-in hybrid electric vehicle at Southall Waterside
Case study
One Blackfriars named Most
Considerate Site
In addition to delivering a stunning building that is a highlight
of the London skyline, the One Blackfriars project team has
demonstrated industry leading performance, achieving the
accolade of Most Considerate Site (>£50m) at the Considerate
Constructors Scheme (CCS) National Site Awards 2019.
A number of initiatives led to this result, including fitting a Public
Recycling Zone within the hoarding inspired by the media focus
on limiting plastic waste, along with adding a USB charging point
so that passers-by could charge their phones while relaxing on
the seating provided.
An innovative approach was also taken to ensure that cyclist
and pedestrian routes were maintained. Working in close
collaboration with TfL, the team used the central reservation as
a Cycle Superhighway with specialist bollards installed so that
cyclists remained segregated from other traffic. A public cycle
repair station was also available to some 3,000 daily cyclists
using the route.
To support Pride in London and LGBT workers, hoarding was
rebranded during the celebrations, with hard hat stickers with
the One Blackfriars logo shown in Pride in London colours and
multi-coloured boot laces provided.
“Winning the coveted title of 'Most Considerate
Site' is an incredible achievement. The team's
efforts have clearly shown what can be achieved by
working hard to raise their standards of considerate
construction to the highest levels."
Edward Hardy, Chief Executive, Considerate
Constructors Scheme
Case study
Committed to having carbon
positive operations
The development of new homes and places involves highly
carbon intensive site activities. This is particularly true for the
large-scale regeneration schemes undertaken by Berkeley;
transforming brownfield sites requires heavy plant and
machinery to demolish existing structures that are no longer
fit for purpose and to extensively remediate and move soils,
especially on our sites which historically housed gas works.
This year we have seen an increase in our carbon emissions,
as a number of regeneration sites commence production,
including Hartland Village and Clarendon.
Taking action to reduce our emissions remains a priority, with
our project teams implementing a variety of initiatives to
achieve reductions. These have included the installation of solar
photovoltaic panels at London Dock, the use of plug-in hybrid
electric vehicles at Southall Waterside and the introduction of
more thermally efficient site cabins at Highwood Village.
Berkeley acknowledges that the cyclical nature of our
business, along with the need to significantly change
behaviours, procedures, technology and equipment, mean
that fundamentally reducing carbon emissions will be an
ongoing process over a number of years. We therefore look to
procure renewable energy and are committed to voluntarily
supporting verified projects in realising carbon emissions
reductions elsewhere.
We are proud to have become the first housebuilder to
have carbon positive operation, by offsetting more than our
operational carbon emissions for the first time in 2018 and
continuing to do so in 2019. This achievement was recognised
at the Better Society Awards 2019, with Berkeley winning the
Carbon Reduction or Offset Programme of the Year category.
Read more online:
www.berkeleygroup.co.uk/about-us/sustainability/
reports-and-case-studies
49
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Business Strategy: Our Vision – Our People
Develop highly skilled teams that work together in a safe, healthy
and supportive environment and contribute to wider society
Our approach
Our people are key to the development process, from the
identification and purchase of land through to the sale of our
homes and ongoing customer service. We are committed
to supporting our teams and contributing to wider society.
Attracting, developing and retaining a highly skilled, diverse,
inclusive and motivated workforce is crucial to our approach.
Health, safety and wellbeing are key areas of focus across all
of our operations. We aim to have a positive impact on society
both directly and through the Berkeley Foundation.
Attracting, developing and retaining talent
We have in the region of 2,600 direct employees working in
a range of roles across our construction sites, sales suites and
offices. Our talented employees are our strongest resource; it
is important that we attract, develop and retain talented teams
at every level. There are multiple routes into employment at
Berkeley, including a Graduate Scheme and apprenticeship
programmes. Our operating companies run talent management
programmes to foster future talent and we look to support the
supply chain in providing employment, apprenticeships and
training. We celebrate the success of our direct and supply
chain apprentices at our annual Apprentice Awards.
Read more online:
www.berkeleygroup.co.uk/about-berkeley-group/
our-vision/our-people
Diversity and inclusion
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 people from a broad range
of backgrounds. Our Equality and Diversity Policy sets out
our goal of promoting diversity and inclusion, ensuring that all
employees, potential employees and other individuals receive
equal treatment and are respected and appreciated for what
makes them different.
Responsible employment
We are committed to paying at least the Living Wage
Foundation’s Living Wage and also encourage our contractors
to pay this, going beyond the Government’s mandatory
national living wage. Our Gender Pay Gap Report is published
on our website, with information also found in our Directors'
Remuneration Report (see pages 104-105). On a broader level,
we continue to take action to ensure that our business and
supply chain are free of modern slavery (see our Modern
Slavery Statement on our website for more detail).
Health, safety and wellbeing
The health, safety and wellbeing of our people and contractors
is paramount. Working with our supply chain we aim to
achieve industry-leading performance, demonstrate clear and
unequivocal leadership to others in the construction sector,
and never knowingly compromise on health, safety and
wellbeing. Each operating company has dedicated resource
to drive performance, supported by weekly Director-level
visits to each site and status reviews at each Board meeting.
Berkeley Foundation
We encourage employees to have a positive impact on
society both directly and through the support of the Berkeley
Foundation, a registered charity aimed at helping young people,
their families and communities (see pages 26-27).
Employees at Woodberry Down, Finsbury Park
50
Berkeley Group2019 Annual Report
2019 Awards, highlights and performance
1.14
Annual Injury Incidence Rate (AIIR),
compared with the Health and
Safety Executive’s (HSE's)
industry average of 3.58
West London
Construction Academy
Launched in partnership with West
London College as a purpose-built
construction academy to tackle
the skills shortage
33%
People across our Main Board and
Senior Management are female
9
Winners at the third Berkeley Group
Apprentice Awards in 2018
Royal Society for
the Prevention of
Accidents (RoSPA)
Health and Safety
Awards 2019
Sector Award for
Berkeley St Edward
Best Exteriors Apprentice
and Overall Apprentice
Akisam Mugezi
80
Direct employees trained
as Mental Health
First Aiders
>500
Apprentices worked across our
sites and offices, including more
than 150 direct apprentices
Learning Management
System and
Berkeley Academy
Launched to provide improved access
to Group-wide learning and training
Build UK client
group member
Board
of Directors
Senior
Management
Reporting
to Senior
Management
Total
employees
Female Male
Total
4
4
12
4
16
8
48
195
243
1,025
1,639 2,664
As at 30 April 2019
Payroll Giving
Diamond Award
2018
32%
Employees involved with Give As
You Earn (GAYE)
51
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Business Strategy: Our Vision – Our People continued
2018–2020 Headline commitment overview
Industry image
Engage with young people, education providers and
employers to transform perceptions of careers in the
built environment.
Diversity and inclusion
Implement a programme to create an inclusive environment
where employees can reach their full potential, irrespective
of their identity or background.
What we are looking to achieve
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 want to
develop a programme of engagement and encourage
employees to act as role models and mentors.
What we are looking to achieve
We aim to attract and retain a diverse workforce to realise
the benefits of varying views, skills and perspectives.
To help achieve this, we look to develop guiding principles
for diversity and inclusion, to be applied by each of our
operating companies.
Progress in 2019
— Developed a video highlighting the available roles
within Berkeley and our supply chain, in addition to
demonstrating that modern apprenticeships offer varied
and rewarding careers.
— Enabled people to be inspired by going behind the scenes
of 12 of our live construction sites as part of Open Doors.
— Continued to work with industry partners such as Build UK
to help progress discussions and action in this area.
— Two operating companies have run construction learning
programmes in collaboration with local schools (read more
on page 53).
Progress in 2019
— Operating companies have started to implement measures
to create a more diverse and inclusive workforce, including:
— Diversity and inclusivity training for management teams
— Unconscious bias awareness training
— Staff workshops to provide an overview of the topic
— An anonymous staff survey to obtain feedback on
perceptions around diversity and inclusion
— Independent third party face-to-face discussions
with staff, using information obtained to
provide recommendations.
Priorities for 2020
— Develop a Group-wide programme for school and further
Priorities for 2020
— Review the different initiatives in place across Berkeley
education engagement.
and lessons learnt from these.
— Encourage employees from all roles and levels to act as
— Use the work already undertaken to inform the
industry ambassadors and mentors.
development of a Group-wide diversity and inclusion
programme, which sets out guiding principles to be
applied across the business.
In addition to progressing work under our headline commitments, we have been taking steps to deliver our other 2018-2020
commitments, which are to:
— Develop and implement a strategy for mental health
— Raise awareness of modern slavery
— Maintain programmes for healthy workplaces
— Pay the Living Wage Foundation’s Living Wage to
— Ensure that each employee has opportunities for learning
direct employees
and development
— Undertake weekly Director health and safety visits
— Target 5% of our direct employees to be apprentices, sponsored
— Aspire to operate incident and injury free, targeting
students or graduates on formalised training schemes
an AIIR of 2.75
— Promote apprenticeships and training to our supply chain
— Encourage support of the Berkeley Foundation
52
Berkeley Group2019 Annual Report Our Vision in action
One of our Mental Health First Aiders
at Berkeley Eastern Counties
Students of Bay House School's Enterprise Academy gaining hands-on
construction experience
Case study
Improving mental health awareness
and support
Berkeley recognises that poor mental health is a challenge to
be addressed, particularly as suicide rates in the construction
industry are four times greater than the national average.
Case study
Inspiring the next generation of
built environment professionals
Improving the image of the industry and engaging with people
from an early age are key to attracting our future workforce,
with a number of initiatives aimed at achieving this in place
across the business.
There is often a stigma and misunderstanding attached to
mental ill health which can be a barrier to people getting timely
support. Awareness raising can help to reduce this. Berkeley is
therefore developing a Mental Health Strategy, with a focus
on creating a culture that encourages people to talk about
mental health.
An initial element to this has been the introduction of a Mental
Health First Aid (MHFA) training course. In the same way that
traditional First Aiders are on hand to support with physical
injury, our network of Mental Health First Aiders are on hand
to support colleagues both on site and in offices. In the year,
80 Mental Health First Aiders have been trained across the
business via the two-day course. Attendees are taught to spot
the symptoms of mental ill health, offer initial help and guide a
person towards professional support. Mental Health First Aiders
learn how to listen, reassure and respond, even in a crisis.
Mental Health Supporter training is also available and has
been undertaken by a number of line managers to develop an
understanding of how a healthier workforce can be created
and maintained. General awareness across the workforce has
started to be raised through workshops and briefings, with
plans to supplement these through the introduction of an
e-learning module.
Berkeley Southern has partnered with Bay House School in
Gosport to develop, fund and deliver a new construction skills
course. The school’s Enterprise Academy has been set up to
provide hands-on experience in construction skills to pupils
who are keen to progress in non-curriculum activities. The first
intake involves 12 students from Year 10 aiming towards a BTEC
Level 1 Extended Certificate in Construction through a 30 week
course including practical modules such as carpentry, plastering,
bricklaying and health and safety, along with careers workshops
from the team at Berkeley’s Royal Clarence Marina development.
Since September 2018, Berkeley East Thames has run a
structured programme with Year 8 students at Thomas Tallis
School. The accredited learning programme, Design Engineer
Construct! ® (DEC) applies pure academic subjects to the
latest construction industry practices through a project based
approach. The Berkeley team has provided the whole year
group with knowledge and insight into real life construction
with a site visit and tour of a show home at Kidbrooke Village.
53
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Sustainable Development Goals
Supporting the United Nations’
Sustainable Development Goals
Berkeley is committed to helping to achieve the United Nations’ (UN) Sustainable Development
Goals (SDGs). We recognise that although all the SDGs and the targets that underpin these are
important and interconnected, it is imperative to focus our efforts on those that are most material
to our business and that we have the greatest ability to deliver meaningful positive impact. In 2019,
we further reviewed the SDGs and underlying targets, identifying four that are most relevant to our
business activities and that we have the greatest opportunity to contribute to the achievement of,
particularly through the Our Vision business strategy.
SDG
Relevance to Berkeley
Contribution through our business activities and Our Vision
Berkeley supports around 29,250 jobs annually
directly and through our supply chain, and has
contributed over £13.5 billion to UK GDP in the last
5 years. Our people are key to the success of our
business and we recognise the benefits of ensuring
that diverse views and skills are represented. It is
important to ensure decent work for all, and equal
pay for work of equal value (in line with target 8.5).
The skills crisis presents a significant risk to our
industry, so it is vital that we encourage new people
into employment and promote opportunities
for training.
— Attract and retain a diverse workforce and create an
inclusive environment.
— Provide a variety of routes through which people seeking
to improve their skills can join the business, including
through apprenticeships, industrial placements and our
Graduate Scheme.
— Provide the right environment and support to enable
employees to fulfil their potential.
— Take action to ensure that modern slavery and human
trafficking does not take place within our business and
supply chain.
— Pay at least the Living Wage Foundation’s Living Wage.
Over the last five years, we have built 19,660 homes
across London and the South of England. The nature
of our business provides the opportunity to have
a positive impact on the places where we operate.
We recognise the importance of creating homes
and places with reduced environmental impact (in
line with target 11.6) and spaces that are inclusive,
accessible and resilient (in line with target 11.7).
Berkeley has a global supply chain and uses a range
of products and services that have the potential
to lead to negative impacts. We seek to minimise
these impacts and have a positive influence where
possible (in line with target 12.2). Raising awareness
and encouraging residents to use resources
responsibly and live sustainable lifestyles (in line
with target 12.8) is also key.
— Develop complex brownfield sites that carry high
operational risk, which others are usually not willing
or able to take on.
— Create well-designed, high quality, safe and sustainable
homes and places that are resilient to climate change and
have more nature after than before we started developing.
— Implement a coherent approach to building communities
and look to understand the social value generated by
new development.
— Incorporate features into homes and places that make it
easier for residents to live a sustainable lifestyle and that
contribute to their wellbeing.
— Procure contractors based on overall value, rather than
cost alone, through the use of our Tender Scoring Matrix.
— Target reduced energy and water consumption, and
waste production.
— Register all development sites with the Considerate
Constructors Scheme (CCS).
— Apply our Sustainable Specification and Procurement
Policy, including a requirement for certified timber.
— Provide customers with information on sustainability
features relevant to their home and community.
Berkeley consumes significant quantities of
energy, particularly during the operation of
our construction sites. We have a role to play
in mitigating climate change by taking steps to
reduce energy consumption and using less carbon
intensive options. We can also help our residents
use energy and water responsibly.
It is fundamental that Berkeley builds homes where
people can live comfortably both now and in the
future, strengthening resilience to climate-related
risks (in line with target 13.1) such as flooding, water
shortage and overheating.
— Reduce operational carbon emissions and continue to be
carbon positive.
— Install low carbon and renewable technologies within
homes and developments, and enable our developments
to achieve zero operational carbon emissions in the future.
— Design features into our developments to increase
resilience to climate change impacts, including rainwater
harvesting, low water use fittings and measures to ensure
thermal comfort.
— Incorporate green infrastructure into our developments,
such as open space and living roofs.
54
Berkeley Group2019 Annual Report
Non-Financial Reporting Statement
The following table summarises where our non-financial information can be found in our Annual Report.
Reporting
requirement
Environmental
matters
Relevant policies in place that govern our approach
Where to read more in this report to understand the impact on
the business, and the outcome of applying our policies
— Sustainability Policy
— Sustainable Places Policy
— Sustainable Business Policy
— Climate Change Policy
— Sustainable Specification and
Procurement Policy
— Our Vision: Homes, Places and Operations, pages 38
to 49
— Increasing Nature and Reducing Carbon, pages 16 to 17
— Sustainable Development Goals, page 54
Employees
— Employee Policy
— Our Vision: Our People, pages 50 to 53
— Apprenticeships and Skills
Development Policy
— Equality and Diversity Policy
— Health and Safety Policy
— Delivering For All Stakeholders, pages 56 to 57
— Sustainable Development Goals, page 54
Respect for
human rights
— Modern Slavery Statement
— Equality and Diversity Policy
— Directors' Report, page 115
— Corporate Governance Rerport, page 87
— Whistleblowing Policy
— Delivering For All Stakeholders, pages 56 to 57
— Sustainable Specification and
— Our Vision: Operations and Our People, pages 46 to 53
Procurement Policy
Social matters
— Sustainable Places Policy
— Our Vision: Places and Our People, pages 42 to 45
— Apprenticeships and Skills
Development Policy
and 50 to 53
— Delivering For All Stakeholders, pages 56 to 57
— Sustainable Specification and
— A people-centred approach, page 9
Procurement Policy
— Climate Change Policy
— Berkeley Foundation, pages 26 to 27
Anti-bribery and
anti-corruption
How we
manage risk
Business model
Non-financial KPIs
— Anti-Bribery and Corruption Policy
— Corporate governance; Bribery Act and Anti-Money
— Business Ethics Policy
— Corporate Hospitality and Promotional
Expenditure Policy
— Whistleblowing Policy
— Anti-Facilitation of Tax Evasion Policy
Laundering Regulations, page 87
— Our external and internal risks, including climate change,
sustainability, and health and safety can be found on
pages 60 to 69.
— Our business model and its links to our strategy and
stakeholders can be found on pages 28 to 29.
— Our non-financial KPIs can be found on page 30.
In addition to these non-financial KPIs, Berkeley monitors
and reports on business performance through a host
of other data, highlights and awards. Some of these are
detailed within the Our Vision business strategy sections
of this report on pages 32 to 53.
A copy of all our policies can be found on our website:
www.berkeleygroup.co.uk/about-us/sustainability/governance-and-management/policies
55
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Stakeholder Engagement
Delivering For All Stakeholders
By undertaking our core business activities in a responsible way with a long-term focus
and open channels of communication, we deliver value for all of our stakeholders.
Customers
Placing the customer
at the heart of
every decision
Communities and
Local Government
Making a positive
contribution to
the communities
in which we work
Employees
Promoting
health, wellbeing
and inclusion
How we listen and engage
How we listen and engage
How we listen and engage
Our customers receive a personal
service, tailored purchase information
and a dedicated point of contact to
guide them through their purchase.
Our online platform, MyHome Plus,
enables customers to interact with
us when convenient for them and
contains all key information about
their purchase in one easy-to-
navigate place.
We collect regular customer feedback
during the customer journey and a
detailed independent survey takes
place post completion (Net Promoter
Score). Customer focus groups are also
run on some developments.
We complete sales and marketing
suite exit interviews with potential
customers who choose not to purchase
a property, to better understand
purchaser expectations and priorities.
We conduct and commission consumer
research and test our products in
workshop conditions to ensure that
we continue to understand and meet
evolving buyer expectations.
Our Customer Service Committee,
drawn from across the Group, reviews
customer feedback and identifies areas
for improvement which inform our
future developments.
Engagement starts at the pre-planning
stage. We listen carefully to local
people, elected members and planning
officers and collaborate to shape
bespoke masterplans.
During development we continue to
communicate, engage and collaborate
with all local partners. We get to know
people, meet face-to-face, and use
a mix of meetings, newsletters, open
days, notice boards, websites and digital
channels to keep everyone informed.
We contribute to community life in
many ways, including hosting and
supporting local events, markets,
school visits, skills and careers days,
biodiversity learning days, youth
engagement projects, cultural events
and volunteering programmes.
We test each masterplan against
an evidence-based Community
Assessment framework to ensure
it can meet local needs and support
community wellbeing.
Once residents move in we deliver
Community Plans to encourage healthy
social links and integration with the
wider community.
Every site is registered with the
Considerate Constructors Scheme and
independently assessed against the
Code of Considerate Practice.
We consider long-term estate
stewardship at the start of development
and work with residents and managing
agents to create sustainable systems
of community governance.
Our engagement programmes
include staff surveys, breakfast
briefings, and lunch & learns. We are
trialing two-way digital engagement
platforms, including Hubbub. We hold
informal staff events like sports
days, pub quizzes and a range of
group fundraising events for the
Berkeley Foundation.
Our operating companies host annual
staff conferences to provide business
updates and to encourage open group
discussions and feedback on a range
of issues.
Group wide performance updates
are issued to employees, including
a newsletter outlining progress and
case studies under Our Vision.
Each of our operating companies
has developed a talent management
programme, including training
assessments and personal
development reviews.
Graduates on our structured Graduate
Scheme have dedicated Director-level
mentors from a different operating
company to which they work, to
provide support.
Each of our Committees meet at least
quarterly to share lessons learnt, best
practices and to collaborate on key
projects. Committee meeting packs
and outcomes are made available to
all employees.
How we deliver
How we deliver
How we deliver
See Customers on pages 34 to 37
See Places on pages 42 to 45
See Our People on pages 50 to 53
56
Berkeley Group2019 Annual Report Supply chain
Ensuring responsible
procurement and
collaborative delivery
Investors
Delivering sustainable
financial returns
Regulators, Government
and Industry
Working together
in the spirit
of partnership
How we listen and engage
How we listen and engage
How we listen and engage
Directors attend the Annual General
Meeting, affording retail shareholders
in particular, the opportunity to hear
from the Board and make enquiries.
Investor roadshows and analyst
briefings are held following the interim
and year end results announcements,
giving stakeholders the opportunity
to make specific enquiries
of management.
One to one meetings and conference
calls are held with management,
as appropriate.
Site visits with senior management
provide investors the opportunity to
view the operations of the business,
as appropriate.
Shareholder consultations are
undertaken on key governance
related matters, such as the
Remuneration Policy.
We provide regulatory reporting,
including the Annual Report, and
participate in external indices,
benchmarks and accreditations.
Berkeley has a pragmatic and positive
approach to planning, working
collaboratively to shape proposals
that work for everyone and engaging
with local authorities throughout the
development process.
We respond to the Government's
consultations where relevant, to
provide our views on and help shape
future policy.
We work in partnership to research,
trial and develop innovative solutions to
key public policy challenges, including
net biodiversity gain, net zero carbon
homes, modular housing delivery and
green transport development.
We contribute to the public debate
around housing delivery and meet
with regulators and policy makers at
regional and national levels to share
insights into key business and market
related matters.
We participate in the development of
Local Plans and Neighbourhood Plans.
We are active members of the UK
Green Building Council, Build UK, the
Construction Leadership Council, the
Considerate Constructors Scheme and
Supply Chain Sustainability School, to
help discuss and drive improvements
across the built environment industry.
We communicate our Group-
wide standards early in the tender
process, using our Supply Chain
Portal to ensure that those tendering
are aware of requirements, in
particular our health and safety, and
sustainability standards.
We communicate throughout the
tender process and we are committed
to collaborative delivery. We engage
to ensure full compliance and buy-in
around our site safety, quality, ethics,
human rights and environmental
standards and behaviours.
We develop long-term, collaborative
supply chain partnerships which
ensure that we can make full use of
the expertise and specialist skills of
our suppliers.
Pre-start meetings ensure that key
areas are discussed prior to initiating
any activities, with site inductions
provided to each contractor operative.
Standards are reinforced through
regular site meetings, signage and
toolbox talks.
In addition to supplier days and
conferences, our Supply Chain
Taskforce holds trade specific meetings
and internal senior sponsors have been
allocated for key trades, to ensure that
feedback is addressed.
As a partner of the Supply Chain
Sustainability School, we are an active
participant of the Homes Leadership
Group, assisting in determining the
direction and priority topics for supply
chain resources.
How we deliver
How we deliver
How we deliver
See Operations on pages 46 to 49
See financial KPIs on page 30
See Our Vision on pages 32 to 53
57
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements How We Manage Risk
The assessment of risk and embedding risk management throughout Berkeley
is a key element of setting and delivering the Group's strategy.
Risk appetite
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:
Cyclical market
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.
Operational complexity
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.
Autonomy and values
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.
Financial strength
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 provisions of the UK Corporate Governance
Code, the Directors have carried out a robust assessment of
the principal risks facing the Group, including those that would
threaten its business model, future performance, solvency
or liquidity.
Risk management framework
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 86.
The principal operating risks and our approach to mitigating
them are described in more detail on pages 60 to 69.
Exposure to financial risks
The financial risks to which Berkeley is exposed include:
Liquidity risk
The risk that the funding required for the Group to pursue its
activities may not be available.
Market credit risk
The risk that counterparties (mainly customers) will default on
their contractual obligations, resulting in a loss to the Group.
The Group’s exposure to credit risk is comprised of cash and
cash equivalents and trade and other receivables.
Market interest rate risk
The risk that Group financing activities are affected by
fluctuations in market interest rates.
Other financial risks
Berkeley contracts all of its sales and the vast majority of its
purchases in sterling, and so has no significant exposure to
currency risk, but does recognise that its credit risk includes
receivables from customers in a range of jurisdictions who are
themselves exposed to currency risk in contracting in sterling.
58
Berkeley Group2019 Annual Report Management of financial risks
Berkeley adopts a prudent approach to managing these
financial risks.
Treasury policy and central overview
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.
Low gearing
The Group is currently financing its operations through
shareholder equity, supported by £975 million of net cash
on the balance sheet. This in turn has mitigated its current
exposure to interest rate risk.
Headroom provided by bank facilities
The Group has £750 million of committed credit facilities
maturing in November 2023, after the Group exercised the
second 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. Berkeley has a strong working
partnership with the six banks that provide the facilities listed
on page 155 and is key to Berkeley’s approach to mitigating
liquidity risk.
Forward sales
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 £1.83 billion at
30 April 2019. It also helps mitigate market credit risk by virtue
of customers’ deposits held from the point of unconditional
exchange of contracts with customers.
Land holdings
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.
Detailed appraisal of spending commitments
A culture which prioritises an understanding of the impact of
all decisions on the Group’s spending commitments and hence
its balance sheet, alongside weekly and monthly reviews of
cash flow forecasts at operating company, divisional and Group
levels, recognises that cash flow management is central to the
continued success of Berkeley.
Viability statement
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 2019 to 30 April 2022. 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 60 to 69 of the
Strategic Report. The majority of risks to the Group are
operational in nature due to the Group’s focus on long-term
complex regeneration sites 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 pages 28 to 29
of the Strategic Report, recognises these operational risks,
and that the property market is inherently cyclical, and
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 2019.
59
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Residual
risk rating
High
High
High
How We Manage Risk continued
External risks
Economic
outlook
Risk description and impact
Approach to mitigating risk
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.
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.
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.
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.
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.
Political outlook
Regulation
Significant political events, including the
impact of the vote to leave the EU and
the continued uncertainty over the timing
and form of Brexit, 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.
Adverse changes to Government policy
on areas such as taxation, housing and
the environment could restrict the ability
of the Group to deliver its strategy.
Failure to comply with laws and
regulations could expose the Group to
penalties and reputational damage.
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.
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.
Berkeley is primarily focused geographically on
London, Birmingham and the South East of England,
which limits our risk when understanding and
determining the impact of new regulation across
multiple locations and jurisdictions.
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.
60
Likelihood change
during year
Impact change
during year
Commentary and developments if any during the year
Volatility in the UK economy has been prolonged beyond
the previously anticipated period, primarily due to the
ongoing uncertainty over Brexit coupled with the weaker
global economy.
Inflation has remained relatively stable and employment
rates are at record highs.
Equity and foreign exchange markets remain susceptible to
volatility associated with Brexit, the US/China trade dispute
and other global factors.
The Bank of England increased interest rates to 0.75% during
the year. Further increases are likely but the timing and level
of any increases are uncertain.
See pages 8 to 9 and 18 to 20
The political environment remains highly unstable and the risks
of a disruptive or "no deal" Brexit, alongside the possibility of
a General Election, are well documented.
The uncertainty over Brexit also affects the critical issues of
access to EU labour, with over half of London's construction
labour coming from the EU, and volatility of material availability
and cost from tariffs and currency fluctuations.
See pages 8 to 9 and 18 to 20
Following a number of consultations in the last two years,
we continue to await final Government recommendations on
housing delivery, ground rents, leasehold reform and cladding.
The General Data Protection Regulation (GDPR) came into
force this year controlling the use of personal data. Whilst
this has had a significant impact on the business, we have
implemented procedures and undertaken training to ensure
focus and compliance with this legislation.
See pages 8 to 9 and 18 to 20
Berkeley Group2019 Annual Report
Residual
risk rating
High
Economic
outlook
Risk description and impact
Approach to mitigating risk
As a property developer, Berkeley’s
Recognition that Berkeley operates in a cyclical
business is sensitive to wider economic
market is central to our strategy and maintaining
factors such as changes in interest
a strong financial position is fundamental to our
rates, employment levels and general
business model and protects us against adverse
consumer confidence.
changes in economic conditions.
Some customers are also sensitive to
Land investment in all market conditions is
changes in the sterling exchange rate in
carefully targeted and underpinned by demand
terms of their buying decisions or ability
fundamentals and a solid viability case, respecting
to meet their obligations under contracts.
the cyclical nature of the property industry.
Changes to economic conditions in the
Levels of committed expenditure are carefully
UK, Europe and worldwide may lead
to a reduction in demand for housing
which could impact on the Group’s
monitored against forward sales secured, cash
levels and headroom against our available bank
facilities, with the objective of keeping financial
ability to deliver its corporate strategy.
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.
Political outlook
Significant political events, including the
Whilst we cannot directly influence political
impact of the vote to leave the EU and
events, the risks are taken into account when
High
the continued uncertainty over the timing
setting our business strategy and operating model.
and form of Brexit, may impact Berkeley’s
In addition, we actively engage in the debate on
business through, for instance, the
policy decisions.
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.
Regulation
High
Adverse changes to Government policy
Berkeley is primarily focused geographically on
on areas such as taxation, housing and
London, Birmingham and the South East of England,
the environment could restrict the ability
which limits our risk when understanding and
of the Group to deliver its strategy.
determining the impact of new regulation across
multiple locations and jurisdictions.
regulations could expose the Group to
The effects of changes to Government policies
Failure to comply with laws and
penalties and reputational damage.
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.
Key
Increase risk
No change
Decrease risk
Likelihood change
during year
Impact change
during year
Commentary and developments if any during the year
Volatility in the UK economy has been prolonged beyond
the previously anticipated period, primarily due to the
ongoing uncertainty over Brexit coupled with the weaker
global economy.
Inflation has remained relatively stable and employment
rates are at record highs.
Equity and foreign exchange markets remain susceptible to
volatility associated with Brexit, the US/China trade dispute
and other global factors.
The Bank of England increased interest rates to 0.75% during
the year. Further increases are likely but the timing and level
of any increases are uncertain.
See pages 8 to 9 and 18 to 20
The political environment remains highly unstable and the risks
of a disruptive or "no deal" Brexit, alongside the possibility of
a General Election, are well documented.
The uncertainty over Brexit also affects the critical issues of
access to EU labour, with over half of London's construction
labour coming from the EU, and volatility of material availability
and cost from tariffs and currency fluctuations.
See pages 8 to 9 and 18 to 20
Following a number of consultations in the last two years,
we continue to await final Government recommendations on
housing delivery, ground rents, leasehold reform and cladding.
The General Data Protection Regulation (GDPR) came into
force this year controlling the use of personal data. Whilst
this has had a significant impact on the business, we have
implemented procedures and undertaken training to ensure
focus and compliance with this legislation.
See pages 8 to 9 and 18 to 20
61
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements
How We Manage Risk continued
Internal risks
Land availability
Risk description
and impact
Approach to
mitigating risk
Residual
risk rating
Likelihood change
during year
Impact change
during year
Commentary and developments if any during the year
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.
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, Birmingham and the South
East of England, markets in which it believes that
the demand fundamentals are strong.
Medium
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.
High
Medium
Planning process 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.
Retaining people An inability to attract, develop, motivate
and retain talented employees could have
an impact on the Group’s ability to deliver
its strategic priorities.
Failure to consider the retention and
succession of key management could
result in a loss of knowledge and
competitive advantage.
62
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 14 new sites in the year,
including two in St William and two in St Edward.
See page 73
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.
Whilst we have secured a number of planning consents in the
year, these have taken a long time to obtain and there remains
hurdles before starting on site. These include areas such as
utilities, remediation, easements, compulsory purchase orders
and the discharge of planning conditions, which are all added
impediments to increased delivery.
See page 73
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 remained stable this year as a result of
the ongoing focus on talent management, career progression
opportunities, training and health and wellbeing initiatives.
See page 50
Berkeley Group2019 Annual Report
Risk description
and impact
Approach to
mitigating risk
Residual
risk rating
Likelihood change
during year
Impact change
during year
Commentary and developments if any during the year
Key
Increase risk
No change
Decrease risk
Land availability
An inability to source suitable land to
Understanding the markets in which we operate is
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.
central to Berkeley’s strategy and, consequently,
land acquisition is primarily focused on Berkeley’s
core markets of London, Birmingham and the South
East of England, markets in which it believes that
the demand fundamentals are strong.
Medium
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.
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.
Planning process Delays or refusals in obtaining commercially
viable planning permissions could result
The Group’s strategic geographical focus and
expertise places it in the best position to conceive
High
in the Group being unable to develop its
and deliver the right consents for the land acquired.
land holdings.
This could have a direct impact on the
performed and monitored for each site without
Group’s ability to deliver its product
planning permission, both before and after purchase.
Full detailed planning and risk assessments are
and on its profitability.
Retaining people An inability to attract, develop, motivate
and retain talented employees could have
We have developed a series of commitments within
Our Vision, our plan for the business, to ensure
Medium
an impact on the Group’s ability to deliver
that we retain and develop the best people to
its strategic priorities.
Failure to consider the retention and
succession of key management could
result in a loss of knowledge and
competitive advantage.
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.
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 14 new sites in the year,
including two in St William and two in St Edward.
See page 73
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.
Whilst we have secured a number of planning consents in the
year, these have taken a long time to obtain and there remains
hurdles before starting on site. These include areas such as
utilities, remediation, easements, compulsory purchase orders
and the discharge of planning conditions, which are all added
impediments to increased delivery.
See page 73
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 remained stable this year as a result of
the ongoing focus on talent management, career progression
opportunities, training and health and wellbeing initiatives.
See page 50
63
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements
How We Manage Risk continued
Risk description
and impact
Approach to
mitigating risk
Residual
risk rating
Likelihood change
during year
Impact change
during year
Commentary and developments if any during the year
Internal risks continued
Securing sales
An inability to match supply to demand
in terms of product, location and price
could result in missed sales targets and/or
high levels of completed stock which
in turn could impact on the Group’s ability
to deliver its corporate strategy.
Medium
Low
Medium
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.
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.
Transaction levels have remained stable this year, but 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 18, 34 and 56
The Group has £750 million of committed credit facilities
maturing in November 2023 after the Group exercised the
second 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.
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 £975 million of net
cash on the Balance Sheet.
See page 155
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.
Liquidity
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.
Mortgage
availability
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.
64
Berkeley Group2019 Annual Report
Risk description
and impact
Approach to
mitigating risk
Residual
risk rating
Likelihood change
during year
Impact change
during year
Commentary and developments if any during the year
Key
Increase risk
No change
Decrease risk
Securing sales
An inability to match supply to demand
Detailed market demand assessments of each site
in terms of product, location and price
are undertaken before acquisition and regularly
could result in missed sales targets and/or
during delivery of each scheme to ensure that
high levels of completed stock which
supply is matched to demand in each location.
Medium
in turn could impact on the Group’s ability
to deliver its corporate strategy.
Liquidity
Reduced availability of the external
The Board approves treasury policy and senior
financing required by the Group to pursue
management control day-to-day operations.
its activities and meet its liabilities.
Relationships with banks and cash management
Failure to manage working capital may
are coordinated centrally as a Group function.
constrain the growth of the business
The treasury policy is intended to maintain an
and ability to execute the business plan.
appropriate capital structure to manage the Group’s
Low
Mortgage
availability
An inability of customers to secure
Berkeley has a broad product mix and customer
sufficient mortgage finance now or in
base which reduces the reliance on mortgage
the future could have a direct impact
availability across its portfolio.
on the Group’s transaction levels.
Medium
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.
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.
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.
Transaction levels have remained stable this year, but 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 18, 34 and 56
The Group has £750 million of committed credit facilities
maturing in November 2023 after the Group exercised the
second 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.
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 £975 million of net
cash on the Balance Sheet.
See page 155
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.
65
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements
Internal risks continued
Climate change
How We Manage Risk continued
Risk description
and impact
Approach to
mitigating risk
Residual
risk rating
Likelihood change
during year
Impact change
during year
Commentary and developments if any during the year
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 is a key theme within our business
strategy, Our Vision, with commitments to both
mitigate and adapt to climate change.
By taking action under our operational carbon
emissions reduction target our sites, offices and
sales suites are identifying and investing in energy
efficiency measures. We also look to reduce the
impact of our homes and places when in use and
are taking action to contribute to a zero carbon
built environment.
To build resilience into our homes and
developments, we consider climate change
risks and incorporate measures to reduce these.
This includes undertaking an overheating risk
assessment pre-planning and incorporating
relevant measures to improve thermal comfort.
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
Health and
Safety
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.
The strategic direction for sustainability is set at
a Group level and is integrated within our business
stategy, Our Vision. We have specific commitments
to enhance environmental and social sustainability
considerations in the operation of our business and
the delivery of our homes and places.
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.
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.
Berkeley’s operations have a direct impact
on the health and safety of its people,
contractors and members of the public.
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.
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.
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.
66
Medium
Medium
Medium
We monitor the actions taken to reduce carbon emissions
across our activities and report the greenhouse gas emissions
for which we are responsible. Following our leading approach
in 2018, we continue to achieve carbon positive operations on
an annual basis, 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. As part of our net zero carbon homes commitment,
Berkeley has developed Low Carbon Transition Plans for three
developments in 2019 to trial the approach and identify key
considerations for enabling homes to operate at net zero
carbon by 2030.
A number of extreme weather events took place in 2019 both
in the UK and globally. With the exception of some sites closing
for a short period during severe winter weather, these did not
have an impact on Berkeley’s activities.
Berkeley continues to report qualitatively on the governance,
strategy and risk management components of the TCFD
recommendations on our website. We are aware of the
Government’s new Streamlined Energy and Carbon Reporting
(SECR) policy and are taking action to meet our obligations in
this area in 2020.
See pages 17, 38 to 49 and 54 and 116
In these areas of continually evolving risks, the Group continues
to focus on commitments and initiatives that enable the
long-term success of our business and developments, and
that differentiate Berkeley.
This year, the Government announced that net biodiversity
gain will be mandatory for new developments. Berkeley is
well placed to meet the new Government requirements
having committed to create a net biodiversity gain on its
new developments since May 2017.
See pages 16 to 17, 32 to 49 and 54 and 115
High levels of production continued during the year, with an
average of approximately 11,500 people on our sites every day.
Health and safety remains an operational priority for Berkeley
and our Annual Injury Incidence Rate (AIIR) has decreased by a
further 20% this year to stand at 1.14 at the year end, well below
our target of 2.75 and remains one of the best in the industry.
See pages 50 to 53
Berkeley Group2019 Annual Report
Risk description
and impact
Approach to
mitigating risk
Residual
risk rating
Likelihood change
during year
Impact change
during year
Commentary and developments if any during the year
Key
Increase risk
No change
Decrease risk
Climate change
Medium
The effects of climate change could
directly impact Berkeley’s ability to
The Group Sustainability Team identifies strategic
climate change risks and opportunities facing the
deliver its product through disruptions
business through the regular review of issues and
to programme and supplies of materials.
trends, along with active collaboration with external
Our customers and communities could be
experts. These are shared with the Chief Executive
adversely affected through overheating,
and Board Director Responsible for Sustainability.
water shortages or flooding.
Climate change is a key theme within our business
There is also an increased level of
strategy, Our Vision, with commitments to both
interest in disclosures on climate change
mitigate and adapt to climate change.
management. Failure to report in line
with regulations or key recommendations
could expose Berkeley to penalties and
reputational damage.
By taking action under our operational carbon
emissions reduction target our sites, offices and
sales suites are identifying and investing in energy
efficiency measures. We also look to reduce the
impact of our homes and places when in use and
are taking action to contribute to a zero carbon
built environment.
To build resilience into our homes and
developments, we consider climate change
risks and incorporate measures to reduce these.
This includes undertaking an overheating risk
assessment pre-planning and incorporating
relevant measures to improve thermal comfort.
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
Health and
Safety
Berkeley is aware of the environmental
The strategic direction for sustainability is set at
and social impact of the homes and
places that it builds, both throughout
the development process and during
a Group level and is integrated within our business
stategy, Our Vision. We have specific commitments
to enhance environmental and social sustainability
occupation and use by customers and the
considerations in the operation of our business and
wider community.
the delivery of our homes and places.
Failure to address sustainability issues
Operational procedures and processes are regularly
could affect the Group’s ability to acquire
reviewed to ensure high standards and legal
land, gain planning permission, manage
compliance are maintained.
sites effectively and respond to increasing
customer demands for sustainable homes
and communities.
Dedicated sustainability teams are in place in each
business and at Group, providing advice, monitoring
performance and driving improvement.
Berkeley’s operations have a direct impact
Berkeley considers this to be an area of critical
on the health and safety of its people,
importance. Berkeley’s health and safety strategy is
contractors and members of the public.
set by the Board. Dedicated health and safety teams
are in place in each division and at Head Office.
A lack of adequate procedures and
systems to reduce the dangers inherent in
Procedures, training and reporting are all regularly
the construction process increases the risk
reviewed to ensure high standards are maintained
of accidents or site-related catastrophes,
and comprehensive accident investigation
including fire and flood, which could result
procedures are in place. Insurance is held to cover
in serious injury or loss of life leading to
the risks inherent in large-scale construction projects.
reputational damage, financial penalties
and disruption to operations.
The Group continues to implement initiatives to
improve health and safety standards on-site.
Medium
Medium
We monitor the actions taken to reduce carbon emissions
across our activities and report the greenhouse gas emissions
for which we are responsible. Following our leading approach
in 2018, we continue to achieve carbon positive operations on
an annual basis, 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. As part of our net zero carbon homes commitment,
Berkeley has developed Low Carbon Transition Plans for three
developments in 2019 to trial the approach and identify key
considerations for enabling homes to operate at net zero
carbon by 2030.
A number of extreme weather events took place in 2019 both
in the UK and globally. With the exception of some sites closing
for a short period during severe winter weather, these did not
have an impact on Berkeley’s activities.
Berkeley continues to report qualitatively on the governance,
strategy and risk management components of the TCFD
recommendations on our website. We are aware of the
Government’s new Streamlined Energy and Carbon Reporting
(SECR) policy and are taking action to meet our obligations in
this area in 2020.
See pages 17, 38 to 49 and 54 and 116
In these areas of continually evolving risks, the Group continues
to focus on commitments and initiatives that enable the
long-term success of our business and developments, and
that differentiate Berkeley.
This year, the Government announced that net biodiversity
gain will be mandatory for new developments. Berkeley is
well placed to meet the new Government requirements
having committed to create a net biodiversity gain on its
new developments since May 2017.
See pages 16 to 17, 32 to 49 and 54 and 115
High levels of production continued during the year, with an
average of approximately 11,500 people on our sites every day.
Health and safety remains an operational priority for Berkeley
and our Annual Injury Incidence Rate (AIIR) has decreased by a
further 20% this year to stand at 1.14 at the year end, well below
our target of 2.75 and remains one of the best in the industry.
See pages 50 to 53
67
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements
How We Manage Risk continued
Internal risks continued
Product quality
and customers
Risk description
and impact
Approach to
mitigating risk
Residual
risk rating
Likelihood change
during year
Impact change
during year
Commentary and developments if any during the year
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.
Build cost and
programme
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.
Cyber and
data risk
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
Cyber Essentials Plus certification and 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.
68
Medium
Medium
Medium
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.
Good progress has been made in the year on the construction
of our modular factory, which will help deliver a significant
portion of construction value through offsite assembly
by 2020.
See page 34
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 on the ongoing supply of skilled labour from
the final agreed Brexit position remains uncertain.
During the year we opened one of the country's first purpose-
built construction academies at our Southall Waterside site,
delivered in partnership with West London College. A new
curriculum has been designed alongside trade partners.
See page 45
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.
Email based attacks remain a main risk and the Group has
implemented a leading email protection solution.
The Securty Operations Centre is fully operational and
continues to monitor and alert on unusual activity.
In the year the Group achieved the Government's Cyber
Essentials Plus certification for the third consecutive year.
Berkeley Group2019 Annual Report
Risk description
and impact
Approach to
mitigating risk
Residual
risk rating
Likelihood change
during year
Impact change
during year
Commentary and developments if any during the year
Key
Increase risk
No change
Decrease risk
Medium
Medium
Medium
Product quality
and customers
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
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
reputational damage, as well as reduced
on the handover of our homes, and feedback
sales and increased cost.
incorporated into the specification and design
of subsequent schemes.
Build cost and
programme
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
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.
could impact on our build programmes
Build cost reconciliations and build programme
and the profitability of our schemes.
dates are presented and reviewed in detail at
Cyber and
data risk
The Group acknowledges that it places
Berkeley’s systems and control procedures are
significant reliance upon the availability,
designed to ensure that data confidentiality and
accuracy and security of all of its
integrity are not compromised.
underlying operating systems and the
data contained therein.
The Group could suffer significant
financial and reputational damage
Our Information Security Programme focuses
primarily on stopping security breaches, and
ongoing monitoring and scanning are also
conducted. We also work closely with our
because of the corruption, loss or theft
suppliers and partners to improve the
of data, whether inadvertent or via a
understanding of security best practices.
deliberate, targeted cyber attack.
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.
An IT Security Committee meets monthly to
address all cyber security matters. The Group has
Cyber Essentials Plus certification and 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.
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.
Good progress has been made in the year on the construction
of our modular factory, which will help deliver a significant
portion of construction value through offsite assembly
by 2020.
See page 34
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 on the ongoing supply of skilled labour from
the final agreed Brexit position remains uncertain.
During the year we opened one of the country's first purpose-
built construction academies at our Southall Waterside site,
delivered in partnership with West London College. A new
curriculum has been designed alongside trade partners.
See page 45
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.
Email based attacks remain a main risk and the Group has
implemented a leading email protection solution.
The Securty Operations Centre is fully operational and
continues to monitor and alert on unusual activity.
In the year the Group achieved the Government's Cyber
Essentials Plus certification for the third consecutive year.
69
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements
Trading and Financial Review
Trading performance
Revenue of £2,957.4 million in the year (2018: £2,840.9 million)
arose primarily from the sale of new homes in London and the
South East. This included £2,797.0 million of residential revenue
(2018: £2,703.9 million), £nil million from the sale of ground rent
assets (2018: £28.4 million) and £160.4 million of commercial
revenue (2018: £108.6 million). There were no land sales in the
year (2018: £nil).
3,698 new homes (2018: 3,678) were sold across London
and the South East at an average selling price of £748,000
(2018: £725,000). 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 £160.4 million from commercial activities
(2018: £108.6 million) included the disposal of a 190-bed hotel
at 250 City Road, 71,000 sqft of office, retail and leisure space
at One Tower Bridge, an office building at Royal Wells Park
and further space across a number of developments including
London Dock, Fulham Reach, Corniche, Kidbrooke Village, Vista
and Woodberry Down. The £108.9 million of revenue last year
was from the sale of hotels at One Blackfriars and Royal Arsenal
as well as some 254,000 sq ft of office, retail and leisure space.
The gross margin percentage has decreased to 31.3% (2018: 34.6%),
reflecting the mix of properties sold in the year. Overheads of
£157.8 million (2018: £166.5 million) decreased by £8.7 million in
the year. This is principally due to a decrease in the charge to the
income statement for the Group’s share schemes. Consequently,
the Group’s operating margin has decreased to 26.0% from
28.8% last year.
Berkeley’s share of the results of joint ventures was a profit
of £8.8 million (2018: £162.7 million) which reflects the stage
of delivery of our joint venture sites. This year, sales were
predominantly from St Edward’s Green Park Village in Reading
and the Kensington development, offset by net costs in St
William which is in the very early stages of delivery, while
last year’s results included a large number of completions at
190 Strand.
The Group has remained cash positive on a net basis throughout
the year. Net finance costs totalled £2.0 million for the year
(2018: £2.7 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 27.9%, compared to 41.9%
last year. Basic earnings per share has decreased by 18.1% from
587.4 pence to 481.1 pence, which takes into account the issue
of a further 0.5 million shares in October 2018 to satisfy the net
share awards under the 2011 LTIP scheme as well as the buy-
back of 5.6 million shares at a cost of £198.9 million under the
Shareholder Returns programme.
30 April
2019
£’million
2,957.4
926.2
(157.8)
768.4
(2.0)
8.8
775.2
(147.8)
627.4
481.1p
40.6p
27.9%
31.3%
5.3%
26.0%
26.2%
19.1%
30 April
2018
£’million
2,840.9
983.5
(166.5)
817.0
(2.7)
162.7
977.0
(181.5)
795.5
587.4p
108.3p
41.9%
34.6%
5.9%
28.8%
34.4%
18.6%
Change
£’million
+116.5
-57.3
+8.7
-48.6
+0.7
-153.9
-201.8
+33.7
-168.1
-106.3p
-67.7p
-14.0%
Change
%
+4.1%
-5.8%
+5.2%
-5.9%
-20.7%
-21.1%
-18.1%
-62.5%
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
70
Berkeley Group2019 Annual Report Taxation
The Group has an overall tax charge of £147.8 million for the
year (2018: £181.5 million) and an effective tax rate of 19.1%
(2018: 18.6%). 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.page
Total Tax paid (year ended 30 April 2019)
£315m
Corporation tax
£178.8m
Employer's NI
SDLT
PAYE
Employees' NI
£31.2m
£14.4m
£77.8m
£12.6m
For the year ended 30 April 2019, the total tax contribution to the
UK Treasury was £315m; split between taxes borne by Berkeley of
£224m (corporation tax, employer's NIC and SDLT) and taxes borne
by our employees of £91m (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 31.
Abridged Cash Flow
for the Year Ended
Profit before tax
Decrease in inventory
Decrease in customer deposits
Other working capital movements
Net reduction in working capital
Net 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 in net cash
Opening net cash
Closing net cash
343.3
(79.9)
(134.5)
181.9
(208.9)
49.0
30 April
2019
£’million
775.2
22.0
(62.8)
(178.8)
(16.0)
539.6
(198.9)
(53.0)
287.7
687.3
975.0
30 April
2018
£’million
977.0
128.9
(184.7)
(238.0)
5.7
688.9
(140.4)
(146.7)
401.8
285.5
687.3
71
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Trading and Financial Review continued
Financial Position
Net assets increased over the course of the year by £0.4 billion,
or 14.4%, to £2,963.3 million (2018: £2,591.2 million). This is after
payment of £53.0 million of dividends and the £198.9 million of
share buy-backs. This equates to a net asset value per share of
2,305 pence, up 18.9% from 1,938 pence at 30 April 2018, given
the share buy-backs undertaken in the year.
Inventories have decreased by £181.9 million from
£3,296.6 million at 30 April 2018 to £3,114.7 million at 30 April
2019. Inventories include £395.2 million of land not under
development (30 April 2018: £337.7 million), £2,584.7 million
of work in progress (30 April 2018: £2,836.5 million) and
£134.8 million of completed stock (30 April 2018: £122.4 million).
Trade and other payables are £1,595.5 million at 30 April 2019
(30 April 2018: £1,727.4 million). These include £686.1 million
of on-account receipts from customers (30 April 2018: £895.0 million)
and land creditors of £92.6 million (30 April 2018: £105.2 million).
Provisions of £79.1 million (30 April 2018: £81.8 million) include
post-completion development obligations and other provisions.
The Group ended the year with net cash of £975.0 million
(30 April 2018: £687.3 million) which consists of cash holdings
of £1,275.0 million and a £300.0 million term loan drawn under
the Group’s banking facilities. This is an increase of £287.7 million
during the year (2018: £401.8 million) as a result of £767.2 million
of cash generated from operations (2018: £828.3 million) and a
net inflow of £22.0 million in working capital (2018: net inflow
of £128.9 million), before tax and other net cash outflows
of £249.6 million (2018: £268.3 million), share buy-backs of
£198.9 million (2018: £140.4 million) and dividends of
£53.0 million (2018: £146.7 million).
Abridged Balance Sheet as at
Non-current assets
— Investment in Joint Ventures
— Other non-current assets
Total non-current assets
Inventories
Debtors
30 April
2019
£’million
Change
£’million
30 April
2018
£’million
374.7
105.5
480.2
3,114.7
68.0
+62.8
-3.3
+59.5
-181.9
+24.9
311.9
108.8
420.7
3,296.6
43.1
(895.0)
(879.7)
(81.8)
1,903.9
687.3
2,591.2
1,938p
Deposits and on account receipts
(686.1)
+208.9
Other trade payables
Provisions
Capital employed
Net cash
Net assets
Net asset value per share
(909.4)
(79.1)
1,988.3
975.0
2,963.3
2,305p
-29.7
+2.7
+84.4
+287.7
+372.1
+367p
Banking
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 2023 after the Group exercised the final
option during the year to extend the facilities by a further year.
The Group’s cash holdings are currently placed on deposit with
its relationship banks.
Joint Ventures
Investments accounted for using the equity method have
increased from £311.9 million at 30 April 2018 to £374.7 million
at 30 April 2019. 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 £8.8 million and further funding into St William
of £54.0 million.
In St Edward, 255 homes were sold in the year at an average
selling price of £469,000 (2018: 372 at £1,669,000). These
completions were across two developments: Green Park in
Reading and Kensington, while the last home at 190 Strand
completed, with the volume mix now weighted towards out
of London. The acquisition of Hartland Village into the joint
venture occurred in the year and consequently the site has
been added to the land holdings and moved into production,
whilst a further site was contracted conditional on planning
in Queensway, Birmingham.
In total, 3,736 plots (30 April 2018: 1,835 plots) in Berkeley’s land
holdings relate to six St Edward developments, two in London
(Westminster and Kensington) and four outside the capital
(Reading, Fleet, Wallingford and Birmingham).
In St William, there are 9,812 plots (30 April 2018: 7,900 plots)
contracted in the joint venture across 16 developments which
are all included in Berkeley’s land holdings. During the year,
construction commenced at Clarendon in Hornsey where over
72
Berkeley Group2019 Annual Report Land Holdings as at
Owned
Contracted
Plots
Sales value
Average selling price (ASP)* Inventories
Average plot cost
Land cost (%)
Gross margin
GM%
30 April
2019
41,639
13,316
Change
+8,718
-630
54,955
+8,088
30 April
2018
32,921
13,946
46,867
£22,600m
+£1,297m
£21,303m
£472k
£51k
12.5%
-£35k
-£10k
-0.8%
£507k
£61k
13.3%
£6,247m
+£244m
£6,003m
27.6%
-0.6%
28.2%
1,700 homes will be delivered, as well as smaller developments in
Oxted and Watford. In addition, planning was obtained for King’s
Road Park in Fulham, where over 1,800 homes will be delivered,
and the site acquisition was completed with the site moving
into production shortly before financial year end. This means
there are now eight developments in production, with the
first St William homes completed in the year at Elmswater
in Rickmansworth.
The remaining eight sites are included in Berkeley’s conditional
land holdings. This includes the two new site acquisitions in
the year, at Lea Bridge in Leyton and in a further site in Bath.
A scheme in Sunninghill, Ascot has a detailed planning consent
for 76 homes but remains conditional, whilst shortly after year
end the development in Poplar received a resolution to grant
consent at Committee. This remains subject to concluding a
section 106 agreement, but in due course will enable the delivery
of up to 2,800 new homes. The other six sites all remain in
the planning process. Berkeley continues to work closely with
National Grid to identify sites from across its portfolio to bring
through into the joint venture.
Land
Berkeley’s land holdings comprise 54,955 plots at 30 April 2019
(30 April 2018: 46,867 plots), including joint ventures. Of these
land holdings, 41,639 plots (30 April 2018: 32,921) are on 84 sites
that are owned and included on the balance sheet of the Group
or joint ventures and 13,316 plots (30 April 2018: 13,946) are on
15 contracted sites, some of which do have a planning consent,
but remain conditional due to another 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 2019 have an estimated
future gross margin of £6,247 million (30 April 2018: £6,003 million),
which includes the Group’s 50% share of the anticipated margin on
any joint venture development.
Plots in the land bank have increased during the year, and this is
reflected in the gross margin. In total, Berkeley has acquired 14
new sites in the year, including two each into our joint ventures,
St William and St Edward, as set out in the joint ventures section
above; namely Bath and Leyton into St William, and Hartland
Village in Fleet and Queensway in Birmingham into St Edward.
The other ten sites are in locations with strong demand,
including two developments for a little over 1,000 homes
each in Slough and Watford, as well as sites in High Wycombe,
Paddock Wood, Reading (2), Horsham, Stratford-Upon-Avon
and London (2).
Berkeley has secured nine new planning consents this year, as
well as over 60 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, Kennington, Oval Gasworks, Grand
Union in Northfields, Stephenson Street and St William’s site at
Fulham, whilst four consents are outside the capital at Paddock
Wood, Fleet, Cranbrook and St William’s site at Ascot.
Of Berkeley’s 84 owned sites, 69 sites (plots: 33,001) have an
implementable planning consent and are in construction, whilst
a further nine sites (plots: 5,440) have a consent which is not
yet implementable; due to practical technical constraints and
challenges surrounding, for example, vacant possession, CPO
requirements or utilities provision. Berkeley has just six sites
(plots: 3,198) which it owns unconditionally that do not have a
planning consent.
Of the 15 contracted sites, two sites have a planning consent,
but they remain conditional on other factors, typically vacant
possession, whilst two sites have a resolution to grant which is
subject to a section 106 agreement. The remaining 11 sites are in
the planning process. Given the contracted nature of all of these
sites, there is low financial risk on balance sheets of the Group or
its joint ventures.
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.
ROB PERRINS
CHIEF EXECUTIVE
73
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements The disused paper mill site has been
brought to life with riverside homes,
restored heritage buildings, open
parkland, riverside walks, a new
footbridge across the Thames and a
waterfront restaurant, Roux by Skindles.
Find out more:
www.berkeleygroup.co.uk/taplowriverside
74
Berkeley Group2019 Annual Report Corporate Governance
76 Board of Directors
80 Governance at a Glance
82 Chairman’s Introduction to the
Corporate Governance Statement
83 The Board’s Focus Areas
84 Corporate Governance Report
88 Audit Committee Report
91 Nomination Committee Report
92 Directors’ Remuneration Report
114 Directors' Report
75
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Board of Directors
Tony Pidgley CBE
Chairman
Rob Perrins BSc (Hons)
FCA
Chief Executive
Richard Stearn BSc
(Hons) FCA
Group Finance Director
Karl Whiteman BSc
(Hons)
Executive Director
Date of appointment
to the Board:
1 May 2001
Date of appointment
to the Board:
13 April 2015
Date of appointment
to the Board:
10 September 2009
Committee memberships:
None
Committee memberships:
None
Committee memberships:
None
Skills, experience and
contribution:
Richard re-joined Berkeley on
13 April 2015 as Group 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,
serving as the company’s Finance
Director for most of that time.
Richard is responsible for the
Group’s finance, insurance,
treasury, tax and investor relations
functions. He also leads on
strategic risk management and
has oversight of the Group’s
IT function.
Richard has 16 years of direct
experience in the property and
development industry. Prior to
joining Berkeley, he trained and
practiced for 12 years as a
Chartered Accountant with
PricewaterhouseCoopers LLP,
auditing and advising a wide range
of clients.
Other appointments:
None
Skills, experience and
contribution:
Karl joined Berkeley in 1996 as a
Construction Director, before rising
to Divisional Managing Director
of Berkeley Homes East and West
Thames. He joined the Group Main
Board on 10 September 2009 as a
Divisional Executive Director.
Karl leads two of the country’s
most celebrated regeneration
projects – Kidbrooke Village and
Royal Arsenal Riverside. He is also
responsible for Southall Waterside,
another highly ambitious long-
term regeneration programme.
He is Managing Director of
Berkeley Modular where he is
leading the development of the
Group’s precision manufacturing
facility in Kent.
Karl oversees the delivery of
Our Vision, the Group’s business
strategy, which is driving
performance and innovation
across the business. He is also
responsible for the Group's
approach to sustainability, along
with the Group-wide health &
safety strategy and is Chairman of
the Health and Safety Committee.
Other appointments:
None
Skills, experience and
contribution:
Rob joined Berkeley in 1994
having qualified as a Chartered
Accountant with Ernst & Young
in 1991. He was appointed to the
Group Main Board in 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.
One year later Rob launched ‘Our
Vision’ which drives the Company
to deliver exceptional homes and
places, to maximise the social
benefits from every development
and to achieve high standards of
environmental sustainability.
Under his management Berkeley
has sustained leading customer
satisfaction scores, has become
the UK’s first carbon positive
homebuilder and has pioneered a
ground-breaking approach to net
biodiversity gain, which is being
applied to every new Berkeley site.
In 2011 Rob launched the Berkeley
Foundation, a registered charity
that has grown to support
thousands of disadvantaged
young people each year.
As Chair of Trustees, Rob
oversees the Foundation’s work
on homelessness, unemployment,
skills development and care.
Other appointments:
Council member, Aston University
Governor, Wellington College
Date of appointment
to the Board:
Co-founder of Berkeley in 1976
and led the business as Group
Managing Director for 33 years.
Appointed Group Chairman on
9 September 2009.
Committee memberships:
N
Skills, experience and
contribution:
Tony co-founded Berkeley in
1976 with Jim Farrer and led the
business as Group Managing
Director for 33 years. He was
appointed Group Chairman in
September 2009.
Tony has pioneered Berkeley’s
holistic approach to placemaking
and shaped a strong Company
culture centred on customer focus,
partnership working and relentless
attention to detail. These qualities
are the cornerstones of
Berkeley's success.
Tony has advised successive
Governments on housing,
regeneration and the development
of public sector land. He was
a member of Lord Heseltine's
Estate Regeneration Advisory
Panel, the Thames Estuary
2050 Growth Commission and
the Mayor of London’s Outer
London Commission.
He was the longest serving
President in the history of the
London Chamber of Commerce
and Industry and was awarded
a CBE in 2013 for services to the
housing sector and the community.
Other appointments:
Trustee, Sir Simon Milton
Foundation
Vice President, Wildfowl &
Wetlands Trust
Thames Estuary Commissioner
Trustee of Weybridge Youth
Centre
Advisory Board Member
for Public Practice
76
Berkeley Group2019 Annual Report Sean Ellis BSc (Hons)
Executive Director
Paul Vallone
Executive Director
Justin Tibaldi
Executive Director
Glyn Barker BSc (Hons)
FCA
Deputy Chairman and Senior
Independent Director
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, experience and
contribution:
Sean joined Berkeley in 2004 and
was appointed to the Main Group
Board on 9 September 2010, as a
Divisional Executive Director.
Sean is Chairman of St James
Group, Berkeley Homes (Eastern
Counties) and the joint venture
with National Grid, St William.
As the head of these businesses
he has overseen highly acclaimed
mixed use developments across
London and the South East,
including Riverlight, winner of the
RIBA National Award 2018.
As Chairman of St William, Sean
leads the long term regeneration
of former National Grid gas
infrastructure sites, which
require complex remediation and
placemaking strategies.
With St James, Sean is overseeing
the transformation of an 11
acre former warehousing site
in the White City Opportunity
Area – a long term regeneration
programme which will deliver more
than 1,400 homes.
Sean is Chairman of the Group’s
Land and Planning Committee
and is a regular contributor to the
national planning and housing
debate. He 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
Skills, experience and
contribution:
Paul joined Berkeley in 1990, with a
background in property sales and
marketing. He went on to become
a Managing Director before
joining the Main Group Board on
8 December 2017 as a Divisional
Executive Director.
Paul is Executive Chairman of
the St Edward joint venture with
Prudential, and is Divisional
Managing Director of Berkeley
Homes (Central and West London).
Paul is Chairman of the Group's
Sales and Marketing Committee,
the Group-wide Digital Steering
Group and Berkeley's international
office network.
Skills, experience and
contribution:
Justin joined Berkeley in 1999 as
a senior surveyor and went on
to hold board positions within
the Group’s London divisions.
He became Managing Director
of Berkeley Homes (Capital) in
2011 and joined the Main Group
Board on 8 December 2017, as a
Divisional Executive Director.
Justin is responsible for the
Group’s Estates Management
Committee and shapes Company
policy on placekeeping and
sustainable resident-led
stewardship. He also has
oversight of the Group’s
Commercial Committee.
His project portfolio includes
the long term regeneration of
Hackney’s Woodberry Down, one
of the country’s most successful
housing estate redevelopment
programmes. He also leads the
delivery of South Quay Plaza,
one of London’s tallest residential
buildings, and Goodman’s Fields,
where 2,000 homes are being built
around a popular public square
and commercial hub.
Other appointments:
None
Paul oversees a number of
projects in the Group which
include Oval Village, built on the
site of the historic Oval Gasworks;
the restoriation of the disused
Atkinson Morley Hospital as
part of the Wimbledon Hill Park
masterplan; and 9 Millbank,
a combination of newly-built
properties and the restoration
of a landmark building
He is also overseeing St Edward’s
Hartland Village, one of the
Group’s most ambitious long
term regeneration programmes
outside of London. This will see a
long derelict National Gas turbine
site transformed into a highly
sustainable new village.
Other appointments:
None
Date of appointment
to the Board:
3 January 2012 and as Deputy
Chairman and Senior Independent
Director on 18 April 2018
Committee memberships:
R
A
N
Skills, experience and
contribution:
Glyn is a Chartered Accountant
and has extensive experience as
a business leader and a trusted
advisor to FTSE 100 companies.
He has a deep understanding
of accounting and regulatory
issues together 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
Transaction Services business.
Other appointments:
Senior Independent Non-executive
Director, Aviva plc
Independent Non-executive
Director, Transocean Ltd
Chairman, Irwin Mitchell Holdings Ltd
Senior Advisor, Novalpina Capital LLP
Key to Committees
A Audit Committee
R Remuneration Committee
N Nomination Committee
Committee Chair
77
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements
Board of Directors continued
Sir John Armitt
Non-Executive Director
Andy Myers BEng
(Hons) ACA
Independent Non-executive
Director
Dame Alison Nimmo
Independent Non-executive
Director
Diana Brightmore-
Armour FCCA, MCT
Independent Non-executive
Director
Date of appointment
to the Board:
6 December 2013
Date of appointment
to the Board:
5 September 2011
Date of appointment
to the Board:
1 May 2014
Committee memberships:
Committee memberships:
Committee memberships:
A
R
A
N
Skills, experience and
contribution:
Andy qualified as a Chartered
Accountant with KPMG in 1990
and has extensive finance and
commercial experience. He is Chief
Financial Officer at SHL Group,
the global leader in talent
innovation. Previously he was
Chief Financial Officer at McLaren
Technology Group where he had
responsibility for Finance, IT and
Strategic Procurement.
Andy has also 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:
Chief Financial Officer, SHL Group
Skills, experience and
contribution:
Alison is a Chartered Surveyor and
Town Planner by training and is
currently Chief Executive of The
Crown Estate. Alison has extensive
experience in urban regeneration
and property. Prior to joining The
Crown Estate, she led the design
and delivery of the London 2012
Olympic and Paralympic Games
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 Institution
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. In 2019 Alison was awarded
a DBE for public service and
services to the Exchequer.
Other appointments:
Chief Executive, The Crown Estate
Member of Imperial College’s
Council and Chair of its White
City Syndicate
Trustee of the UK Green
Building Council
Chair of the CBI’s Economic
Growth Board
Skills, experience and
contribution:
Diana is a Fellow of the Association
of 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. She has 30
years’ international experience
in banking, corporate finance,
financial management, treasury
and audit.
Diana is a strong supporter of
talent development and gender
diversity through her involvement
with the 30% Club, City Women’s
Network and First Women Awards.
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
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, experience and
contribution:
Sir John is currently Chairman of
National Express Group PLC, City
& Guilds Group and the National
Infrastructure 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 he
was Chairman of John Laing plc’s
international and civil engineering
divisions. Sir John brings a wealth
of operational, commercial and
technical experience amassed
throughout his career.
Sir John received a knighthood in
2012 for services to engineering
and construction and he was
awarded a 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
Independent Non-executive
Director, Expo 2020
78
Berkeley Group2019 Annual Report
Rachel Downey ACA
Independent Non-executive
Director
Adrian Li MA (Cantab),
MBA, LPC
Independent Non-executive
Director
Peter Vernon FRICS
Independent Non-executive
Director
Veronica Wadley CBE
Independent Non-executive
Director
Date of appointment
to the Board:
8 December 2017
Date of appointment
to the Board:
2 September 2013
Date of appointment
to the Board:
6 September 2017
Date of appointment
to the Board:
3 January 2012
Committee memberships:
A
Skills, experience and
contribution:
Rachel brings extensive
regeneration expertise. She 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
Pathfinders programme.
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
Committee memberships:
None
Skills, experience and
contribution:
Adrian is currently 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.
The Bank of East Asia has
announced that with effect from
1 July 2019 Adrian will become
Co-Chief Executive 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.
In addition to his banking
experience, Adrian brings a global
and diverse perspective to Board
discussions 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
Committee memberships:
Committee memberships:
R
N
Skills, experience and
contribution:
Peter brings extensive experience
of complex real estate transactions.
He 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.
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 66,000
homes across London and the
South East.
He has been a Director of London
First, Deputy Chairman of the
West End Partnership, a member
of the British Property Federation
Policy Committee and of the RSA
Insurance Group London Regional
Board. He was a member of the
Government’s Montague Review
into the Private Rented Sector, a
Commissioner of the City Growth
Commission and a member
of the Government’s Estates
Regeneration Advisory Panel.
Other appointments:
Group Executive Director,
Grosvenor
Trustee of Peabody
Skills, experience and
contribution:
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 Advisor to the Mayor of
London from 2012 to 2016 during
which time Veronica oversaw the
delivery of youth volunteering and
employment programmes and
developed new strategy for business
relationships and sponsorship for
the Greater London Authority.
Through her involvement in such
mayoral schemes Veronica brings
an in-depth understanding of local
government and communities
in London.
In 2018 Veronica was awarded a
CBE for services to the arts.
Other appointments:
Independent Director, Times
Newspapers Holdings Ltd
Member of the City of London
Education Board
Royal College of Music Board
Governor of the Yehudi
Menuhin School
Co-Founder and Trustee
of the London Music Fund
Governor of Shoreditch
Park Academy
Key to Committees
A Audit Committee
R Remuneration Committee
N Nomination Committee
Committee Chair
79
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements
Governance at a Glance
Board composition
Non-Executive Director experience – areas of experience
International
Public sector/government
Media/Communication
1
Finance/banking
Development and construction
Other current PLC board experience
Recent relevant financial experience
All Directors appear in more than one category.
5
4
4
4
3
3
Chairman
Executive Director
Non-executive Director
6.25%
37.50%
56.25%
Compliance with the UK Corporate Governance Code 2016
Index of disclosures
Leadership
Providing effective leadership to ensure
the long-term success of the Company.
Read more page 84
Effectiveness
Ensuring that the Board and its
committees have an appropriate balance
of skills, experience, independence and
knowledge of the Company to enable
them to discharge their duties effectively.
Read more pages 84 to 86
Accountability
Presenting a fair, balanced and
understandable assessment of the
Company’s position and prospects and
maintaining sound risk management
and internal control systems.
Read more pages 86 to 87
Remuneration
Ensuring transparency in its
remuneration reporting
Read more pages 92 to 113
Relations with shareholders
Ensuring that a satisfactory dialogue
with its shareholders is maintained.
Read more pages 57 and 87
Gender split
Compliance with the Code
Berkeley is committed to complying
with the main principles of the
UK Corporate Governance Code,
listed opposite.
It is the Board’s view that it has
been fully compliant with the Code
throughout the 2018/19 financial year.
Female
Male
25%
75%
Non-Executive Director tenure
UK Corporate Governance
Code 2018
The UK Corporate Governance
Code applies to the Company’s
2019/20 financial year. While we are
not required to comply with the UK
Corporate Governance Code 2018
in the year being reported on, the
Board has given consideration to the
alignment of its new Remuneration
Policy with the UK Corporate
Governance Code 2018 as detailed
in the table on page 95. The Board
looks forward to reporting on
compliance with the UK Corporate
Governance Code 2018 in more detail
in next year’s Annual Report.
0–3 years
3–6 years
7–9 years
9+ years
22.22%
33.33%
33.33%
11.11%
80
Berkeley Group2019 Annual Report Governance structure
Executive and Chairman's Committees
Key responsibilities include:
— business planning
— reviewing the financial and
operating performance
of all Group divisions
and companies
— risk management
— cash management
— delivery of Group strategy
— legal and regulatory matters
— brand and reputation
— relationships with
Local Authority and
Government stakeholders
— people
Divisional and Operating
Company Boards
Key responsibilities include:
— health and safety
— sales and marketing
— land and planning
— people retention
and development
— regulatory matters
— production
— assessing the impact
of the economic and
political environment
— site-specific matters
— customer service
In addition we have Operational Committees drawn from across the Group’s autonomous companies and teams where information, experience
and best practice are shared. These Committees, which report to the Executive Committee, cover the following areas:
— Health and Safety
— IT
— Commercial and Technical
— Sales and Marketing
— Production
— Customer Service
— Our Vision/Sustainability
Board of Directors
Key responsibilities include:
— overall management of the Group, its strategy and long-term objectives
— approval of corporate plans
— approval of all material corporate transactions
— changes to the Group’s capital structure
— approval of the Group’s Treasury Policy
— approval of the Group’s interim and annual results, dividend policy and shareholder distributions
— reviewing the Group’s risks and system of internal control
— changes to the Board and other senior executive roles
— Corporate Governance arrangements and the Board evaluation
— approval of policies in key areas including Sustainability, Health and Safety, Business Ethics, Equality,
Modern Slavery and Share Dealing
Audit Committee
Remuneration Committee
Nomination Committee
Key responsibilities include:
— 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
— leading the process for identifying
and nominating candidates for
Board vacancies
Key responsibilities include:
— monitoring the integrity of the
financial reporting
— reviewing significant financial reporting
matters and accounting policies
— reviewing the adequacy and
effectiveness of the Group’s risk
management and internal
control systems
— monitoring the effectiveness
of the Group’s internal audit function
— overseeing the relationship with the
external auditor, including appointment,
removal and fees
— ensuring the auditor’s independence
and the effectiveness of the
audit process
Key responsibilities include:
— determining and agreeing 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
— determining the performance
conditions for the Bonus Plan operated
by the Company and approving the
total annual payments made under
this Plan
— determining all share incentive plans for
approval by the Board and shareholders
— taking into account the views of
shareholders when determining plans
under the Remuneration Policy
— ensuring that the contractual terms
on termination, and any payments
made, are fair to the individual and
the Company and that failure is
not rewarded
— noting annually the remuneration
trends and any major changes in
employee benefit structures across
the Company or Group
81
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Chairman’s Introduction to the
Corporate Governance Statement
A W Pidgley CBE
Executive Chairman
Dear Shareholder
I am delighted to introduce the Corporate Governance
Statement for the 2018/19 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 2018/19 financial year. A copy of the
Code is available on the Financial Reporting Council’s website
www.frc.org.uk.
During the year the Board received updates on changes to
corporate governance and best practice. This included a briefing
on the UK Corporate Governance Code 2018 (the '2018 Code')
and the associated Guidance on Board Effectiveness which
will apply to the Company’s financial year ending 30 April
2020 and onwards, the GC100’s revised guidance on Directors'
Duties under s172 of the Companies Act 2006 issued in light of
the changes brought in by the 2018 Code and The Companies
(Miscellaneous Reporting) Regulations 2018.
The Board has carried out a number of key governance activities
this year including:
— Integrating the four new Board directors appointed
during the prior year and continuing to review Board
succession planning;
— Considering shareholder concerns regarding the number of
directorships held by Adrian Li;
— Reviewing the Company’s approach to Diversity and Inclusion
and reviewing and approving the Board’s Diversity Policy;
— Reviewing the Company’s Remuneration Policy in light of
the Group’s evolving strategy and Shareholder Returns
programme, culminating in proposals for a new Remuneration
Policy as set out on pages 100 to 102;
— Reviewing and approving the Company’s Tax Policy;
— Reviewing the Company’s risk appetite in the context of the
prevailing operating environment;
— Reviewing the Company’s approach to Cyber Security and
GDPR; and
— Reviewing the Company’s Whistleblowing policy.
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 2019 AGM.
On page 81 we have set out a summary of our governance
structure and on page 83 we have summarised details of the
Board’s activities during the financial year ended 30 April 2019.
Looking forward to 2019/20, the Board will continue to monitor
the Corporate Governance agenda and best practice in the UK.
In closing, I would like to thank all Board members for their
service during the year.
A W PIDGLEY CBE
EXECUTIVE CHAIRMAN
82
Berkeley Group2019 Annual Report The Board’s Focus Areas
The Governance structure on page 81 sets out the key responsibilities of the Board of Directors. These key responsibilities are met
through a number of standing agenda items for which reports are presented and debated covering, for example, health and safety,
customer service, ESG related matters, the housing and sales market and investor relations amongst others.
In addition, the Board holds some meetings at key sites, which included Southall Waterside and One Blackfriars in the last year,
which facilitates a presentation by executive management on the progress of the development.
Aside from the standing reports and presentations, there were a number of specific areas in focus during the year which the Board
considered, encompassing:
Health and safety incidents
The Board reviewed the status of
investigations into health and safety
related incidents on the Group’s
developments in the year.
Berkeley Foundation
Following the publication of the next
phase of the Foundation’s strategy
during the year, the Board received an
update on the Foundation’s vision for
the future and how it plans to deepen
the impact of its work.
Fire Safety
The Board continued to receive updates on
the regulatory developments related to fire
safety for buildings. In particular, the Board
considered the principal recommendations
made in the Hackitt Independent Review of
Building Regulations.
Planning Status of
Future Developments
The Board received updates at each
meeting on the status of key sites
without a planning consent, covering
the development plans, community
engagement activities and the
planning milestones.
Skills, Graduates
and Apprentices
Following the opening of the West
London Construction Skills Academy
on the Southall Waterside development
in October 2018, the March 2019 Board
meeting was held in the academy
enabling Board members to see the
new facility first hand and gain a deeper
understanding of Berkeley's commitment
in this area.
Brexit
The Board debated the Group’s actions
taken during the year in anticipation of
the UK’s planned departure from the EU,
principally on its engagement with its
supply chain and the risks to the supply
and costs of both EU sourced labour
and materials.
Modular Factory
The Board received regular updates on
the progress of the construction of the
Berkeley Modular factory in Kent.
Our Vision Commitments
Following the launch of the 10 new Our
Vision commitments in May 2018, a
report on the new commitments and
plans to achieve them were presented
in the Board papers. Regular updates
covering the status of each commitment
are provided to the Board.
Business Strategy
In advance of the interim results released
in December 2018, the CEO presented
a review of the operating environment,
the Group’s risk appetite and strategy for
capital allocation alongside the long-term
business plan.
This culminated in the Board’s strategy
update announced in the interim results
which set a target for a long-term,
sustainable pre-tax return on equity of 15%,
in conjunction with the extension of the
£280 million per annum Shareholder Return
from 2021 to September 2025.
83
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Corporate Governance Report
Leadership
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. Key areas of responsibility
can be found in the table on page 81.
Effectiveness
Composition and Independence
At the date of this report the Board comprises sixteen Directors:
the Chairman, six Executive Directors and nine independent
Non-executive Directors. The biographies of these Directors
are set out on pages 76 to 79.
The Board has put in place the succession planning that all
successful organisations require and, as explained in the
Nomination Committee Report on page 91, the composition
of the Board continues to be reviewed on a regular basis.
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 76 to 79, brings complementary
talents and experience which we believe 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.
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.
The Board recognises that Sir John Armitt's tenure as an
independent Non-executive Director has exceeded nine years
which may lead some investors to consider his independence.
The Board has considered this matter and concluded that Sir
John continues to maintain and contribute an independent
view in all Board deliberations. Furthermore, his knowledge
of Berkeley and his extensive construction expertise and
experience continue to be of value to the Board.
In both 2017 and 2018 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.
As explained in the Public Statement made in January 2019,
which can be found on our website, the Board strongly believes
that Adrian is a valuable and effective independent member
of the Board; a view supported by 68.6% of shareholders who
voted at the 2018 AGM. Specifically:
— Adrian is an active member of the Board. He brings legal and
financial professional qualifications as well as a truly global
and diverse perspective to Board discussions;
— Adrian provides invaluable insights into Far Eastern and
emerging markets and supply chains that would be difficult to
replace at a similar cost due to his day to day experience on
the ground across the region;
84
— Adrian makes himself available whenever Berkeley executives
visit the Far East (an important sales region for Berkeley)
and through his extensive experience in the market, provides
introductions to relevant local contacts;
— Since 2017, Adrian has relinquished one position at Sino Hotels
(Holdings) Ltd. Two of his remaining 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;
— Adrian has attended all scheduled Board meetings since his
appointment in 2013. He devotes significant time to Berkeley
outside of Board meetings including whenever an ad hoc
issue has arisen. The Company has no reason to believe that
this should change in the near future. Accordingly the Board
is satisfied that he has sufficient time to dedicate to Berkeley
even in the event of unforeseen circumstances which may
demand more of his time.
The Board understands the concerns raised by some
shareholders regarding the level of director time commitments
but strongly believes that Adrian, like all Non-executive
Directors, has fully demonstrated his availability and value
to Berkeley.
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 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
2019 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.
Berkeley Group2019 Annual Report 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.
The Board performed well against these goals. The new
Directors brought additional areas of expertise and challenge
to the Board and their contribution to the meetings was greatly
valued by their colleagues. The increased size of the Board
did not hamper the level of debate and all Board members
confirmed they had been free to contribute and challenged as
they wished.
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 6 September 2019.
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.
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, during the year,
Directors 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 advisors
respectively to ensure they remain up to date with current
regulations and developments.
All Directors have access to advice from the Company Secretary
and independent professional 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. The Board evaluations
undertaken in 2015, 2016 and 2017 were externally facilitated.
As in 2018, the 2019 evaluation was conducted by the Group’s
Head of Legal, Wendy Pritchard, who undertook one to one
meetings with each Director. The discussions were far ranging
and Directors were encouraged to reflect on progress made
since the previous evaluation and their objectives for the
coming year.
The goals set in 2018/2019 were:
— to embed the new Directors appointed in early 2018 and
to ensure that the dynamic of open and discursive, free
ranging debates continued notwithstanding a Board that
had increased in size by 30%;
— continually to re-assess risk in an uncertain macro
environment; and
— further to develop on diversity and inclusion throughout
the business to ensure all persons of talent are recognised
and supported.
The uncertain macro environment continued to be challenging
and risk was constantly re-assessed as challenges increased.
Revitalisation of some of the businesses gave fresh opportunities
to make diverse and inclusive appointments and the opening of
the Academy at Southall created new training opportunities to
attract the industry leaders of the future from various disciplines
and backgrounds.
In the coming year, the Board’s major aims are to:
— ensure that the Group’s culture is embedded throughout
the Company combining regulatory observance with an
entrepreneurial approach;
— continually re-assess risk in a difficult and uncertain
macro environment;
— progress research and development into modern forms
of construction;
— encourage greater biodiversity through the Group’s
development commitments; and
— continue to encourage diversity of every sort in the workplace
by creating opportunities and support for a mixed and diverse
work force;
all against a backdrop of maintaining a strong Balance Sheet.
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 2019 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.
85
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Corporate Governance Report continued
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 and Chairman’s Committees
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, K Whiteman and
A J Dowsett, Managing Director of St William.
The Chairman's Committee, chaired by A W Pidgley CBE, meets
monthly and comprises the Group Chief Executive, the Group
Finance Director and the Group's Head of Legal. This Committee
reviews strategic and regulatory matters impacting the Group
and its operations.
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. A Myers, who chairs the Audit Committee, and
G Barker are both considered to have recent and relevant
experience as demonstrated by their biographies on pages 77
to 78. All members of the Committee have competence relevant
to the residential development sector. Details of membership,
meetings and attendance can be found in the table on page 88.
An explanation of the role and activities of the Audit Committee
during the year is contained in the Audit Committee report on
pages 88 to 90.
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.
Details of membership, meetings and attendance can be
found in the table on page 92.
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.
The principles and details of Directors’ remuneration are
contained in the Directors’ Remuneration Report on pages 92
to 113.
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.
Details of membership, meetings and attendance can be found
in the table on page 91.
Key areas of responsibility of the Nomination Committee can
be found in the table on page 81.
Accountability
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 2019 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 effectiveness of the system of internal control as part
of its year end procedures. The key features of the system
of internal control include:
Clear organisational structure
The Group operates through autonomous divisions
and operating companies, each with its own Board.
Operating company Boards meet on a weekly basis and
divisional Boards on a monthly basis, and comprehensive
information is prepared for such meetings on a standardised
basis to cover all aspects of the business. Formal reporting
lines and delegated levels of authority exist within this
structure and the review of risk and performance occurs
at multiple levels throughout the operating companies,
divisions and at 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.
86
Berkeley Group2019 Annual Report 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.
Remuneration
The principles and details of Directors’ remuneration
are contained in the Directors’ Remuneration Report
on pages 92 to 113.
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.
Relations With Shareholders
The Company encourages active dialogue with its current and
prospective shareholders through ongoing meetings or calls
with institutional investors. During 2018/19 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 6 September 2019 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
to shareholders so as to allow at least 20 working days for
consideration prior to the AGM.
The Company complies with the requirements of the Code
regarding the separation of resolutions and the attendance of
the Chairmen of the Board Committees. At the AGM, voting on
all resolutions is conducted by way of a poll and the results of
the AGM are announced to the Stock Exchange shortly after
the close of the meeting. They are also made available on the
Company's website.
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.
87
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements A Myers
Chairman, Audit Committee
Audit Committee Report
The Board of Directors presents its Audit Committee Report
for the year ended 30 April 2019 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 2016,
Schedule 8 of the Large and 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 76 to 79
and details of the number of meetings of the Committee are
reported in the table.
Membership, meetings and attendance
Committee member
Andy Myers (Chairman)*
Glyn Barker
Dame Alison Nimmo
Rachel Downey
*Chairman of the Audit Committee since 1 September 2014
Date of appointment to Committee
Meeting attendance
6 December 2013
5 September 2011
5 September 2012
18 April 2018
3/3
3/3
3/3
3/3
Meeting
Items discussed
June 2018
— draft financial results for the year ended 30 April 2018
— KPMG's audit report
— risk management and internal control, in particular the Viability Assessment and Fraud Risk Assessment
— internal audit report
— auditor's independence and non-audit fees and services
— draft 2018 Annual Report
December 2018
— draft interim results for the 6 months ended 31 October 2018
— KPMG's audit plan and approach for the 2019 audit
— KPMG's report on the interim review period
— internal audit report
— auditor's independence and non-audit fees and services
March 2019
— annual review of Risk Management and Internal control framework
— internal audit report
— auditor's independence and non-audit fees and services
— corporate reporting in the event of a 'no-deal' Brexit
88
Berkeley Group2019 Annual Report Role and responsibilities of the Audit Committee
The Committee has formal Terms of Reference which set
out its role and the authority delegated to it by the Board.
The Terms of Reference were reviewed during 2018/19 together
with the policy on the Independence of External Auditors,
and no changes were made following the amendments made
in the previous financial year as previously set out, 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.
Financial reporting
At each of the Committee meetings, the Finance Director
presented, and the Committee debated, the financial results,
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
2018/19 financial year included:
— Carrying value of inventories and margin recognition
Inventories comprise land not under development, work
in progress and completed units, which are held in the
Balance Sheet at the lower of cost and net realisable value.
This requires a periodic assessment by management of each
of the Group'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 half
year and 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 and estate related liabilities.
The basis for determining these provisions was presented
to the Committee for its 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 year is included in note 2.15
to the Consolidated Financial Statements.
Since the adoption of IFRS 15 'Revenue from Contracts with
Customers' at the start of the current financial year, the point of
revenue recognition has been at legal completion, this being the
point at which control of the property rests with the customer.
The Committee notes that there is a lower level of judgement
under this new policy compared to the previous accounting
policy under International Accounting Standard (IAS) 18 when
properties were treated as sold and profits were recognised
when contracts were exchanged and the building work was
physically complete. Accordingly, the Committee no longer
considered revenue recognition as a significant matter during
the 2018/19 financial year.
Risk assessment and management and
internal control
The Committee undertook its annual review of the Group’s Risk
Management and 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 86 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, covering
financial, operational and compliance controls, 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 to 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.
89
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Audit Committee Report continued
The Committee was satisfied that the scope, extent and
effectiveness of the internal audit function are appropriate
for the Group.
Where the Committee considers it is right for the external
auditor to undertake such non-recurring transactional work,
the Committee will ensure:
The Committee reviewed the assumptions and methodology
behind the Group's Viability Statement, the period that the
assessment covered and the sensitivity analysis undertaken.
The Committee was satisfied that the Viability Statement was
appropriate and recommended its approval to the Board.
The Viability Statement can be found on page 59 of this
Annual Report.
External audit
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 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 auditor has open recourse to the Non-executive
Directors should they consider it necessary. There is private
dialogue between the Chairman of the Committee and the
external auditors prior to each Committee meeting and, after
each meeting, the opportunity for the Committee to meet
with the external auditor 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
auditor. 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 2019 was 0.0:1, well within this limit. Audit and non-
audit fee disclosures are set out in note 2.4 to the Consolidated
Financial Statements.
Any departure from this ratio will only be as a consequence of
transactional work and only where such transaction work Is
non-recurring.
i) that the nature of the work and the basis for using the
external auditor shall be disclosed in the Annual Report;
ii) that the work does not pose any threat to the independence
and objectivity of the external auditors; and
iii) there is a presumption In favour of using other firms to
provide transactional advice unless such advice can only
be provided by the external auditor on grounds that:
— it is proprietary to them;
— they have pre-existing knowledge and experience of a
situation which precludes the use of alternative firms;
— the nature of the transaction is such that the Group’s auditor
is the only practical appointment; and
— at the discretion of the Chairman of the Audit Committee.
Non-audit work carried out by all accounting firms, including the
external 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 auditor is 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 2019 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
19 June 2019
90
Berkeley Group2019 Annual Report Nomination Committee Report
A W Pidgley CBE
Chairman, Nomination Committee
Membership, meetings and attendance
Committee member
Tony Pidgley CBE
(Chairman)*
9 September 2009
Glyn Barker
18 April 2018
Diana Brightmore-
Armour
Veronica Wadley
CBE
15 October 2015
13 June 2012
Date of appointment
to Committee
Meeting attendance
2/2
2/2
2/2
2/2
* Chairman of the Nomination Committee since 9 September 2009
Meeting
Items discussed
December 2018
— Board and Committees composition
— Integration of new Board members
— UK Corporate Governance Code
2018 and requirements in regard to
workforce engagement
— Diversity levels across the Group
— Talent management
April 2019
— Board and Committees composition
— The recommendations of the Hampton
Alexander-Review
— The UK Corporate Governance
Code 2018
— Shareholder concerns regarding
the number of directorships held by
Adrian Li
The Board of Directors presents its Nomination Committee
Report for the year ended 30 April 2019.
Details of the membership, meetings and attendants of the
Nomination Committee are reported in the table.
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 the Board.
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.
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. There have been no appointments during
the year ended 30 April 2019.
Board Equality and 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.
Female representation on the Board is at 25%, just below the
target set by the Hampton-Alexander Review. Appointments
to the Board are made on the basis of merit and capability
and in the best interests of the Group. The recommendations
of the Hampton-Alexander and Parker Reviews were key
considerations during the last Board recruitment process and
will be again when a Board vacancy next arises.
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
19 June 2019
91
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Directors’ Remuneration Report
Annual Statement of the Chair of
the Remuneration Committee
“As Berkeley enters a new phase of its strategy, our focus for 2018/19
has been on ensuring that the remuneration framework continues to
drive long-term sustainable performance”
Key responsibilities
of the Committee
— Determine and agree with the Board the broad policy
for the remuneration of the Executive Directors and
senior management.
— Review pay policies for the wider workforce.
— Determine performance conditions for the incentive plans
operated by the Company and approve the total annual
payments made under them.
— Determine all share incentive plans for approval by the
Board and shareholders.
— Take into account the views of shareholders and the
wider workforce when determining plans under the
Remuneration Policy.
— Ensure that the contractual terms on termination, and any
payments made, are fair to the individual and the Company
and that failure is not rewarded.
— Note annually the remuneration trends and any major
changes in employee benefit structures across the
Company or Group.
The Committee’s Terms of Reference sets out its full remit and
can be downloaded from the section dealing with Investor
Relations on the Berkeley website (www.berkeleygroup.co.uk).
Who supports 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. The Company Secretary attended each
meeting as Secretary to the Committee.
PricewaterhouseCoopers LLP (PwC) is 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.
Glyn Barker
Chairman, Remuneration Committee
Remuneration Committee membership
Committee member
Date of
appointment to
Committee
Meeting
attendance
Glyn Barker, Chairman*
13 June 2012
Andy Myers
Peter Vernon
1 May 2014
18 April 2018
2/2
2/2
2/2
*Chairman of the Remuneration Committee since 14 June 2013.
Contents of the Directors Remuneration Report
Annual Statement of the Chair of the
Remuneration Committee
Berkeley’s Remuneration Philosophy
Remuneration at a Glance
How the Remuneration Policy was operated in 2018/19
and how the new Remuneration Policy will operate
in 2019/20
Additional context on Berkeley Executive Directors’ pay
Employment at Berkeley
Annual Report on Remuneration
92
92
96
97
100
103
104
108
Berkeley Group2019 Annual Report Financial highlights of 2018/19
The Company had a strong year reflected in the following components of performance:
— Net cash of £975.0 million (2018: £687.3 million) after making shareholder return payments of £251.9 million (2018: £287.1 million)
— Pre-tax return on shareholders’ equity of 27.9% (2018: 41.9%)
— Net asset value per share increased by 18.9% to £23.05 (2018: £19.38)
— Forward sales of £1.83 billion (2018: £2.19 billion)
— Future anticipated gross margin in the land bank up 4.1% to £6,247 million (2018: £6,003 million)
— Profit before tax of £775.2 million (2018: £977.0 million)
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 10 years
illustrates the relative performance of the Company.
Long-term Company performance
Return on Equity
Berkeley’s Return on Equity compared with the sector over the last 10 years illustrates the relative performance of the Company:
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
Berkeley
Sector highest
13.3%
13.3%
15.3%
15.3%
21.2%
22.4%
27.5%
35.1%
30.8%
21.2%
22.4%
27.5%
35.1%
30.8%
41.1%
41.1%
Sector lowest
(44.2%)
(6.2%)
(0.4%)
3.4%
3.5%
12.2%
16.0%
15.7%
2017/18
Restated
2018/19
41.9%
27.9%
41.9%
11.0%
34.1%
15.9%
Sector average*
(excluding Berkeley)
(18.1%)
1.0%
4.8%
8.5%
11.4%
18.2%
22.3%
24.2%
23.3%
24.9%
*Sector includes Barratt Developments, Bovis Homes, Redrow, Taylor Wimpey, Bellway and Persimmon.
Impact on remuneration
The strong performance of the Company set out above has resulted in the following remuneration outcomes for the Executive Directors:
— Maximum bonus contributions being earned for the financial year.
— The vesting of the relevant tranche of the award under the 2011 LTIP.
Governance
The key governance highlights for the year were as follows:
— Strong support for remuneration report at the 2018 AGM (92.2% voted FOR).
— Committee has responded to changes proposed by the FRC to the UK Corporate Governance Code.
— Reviewed the Committee’s Terms of Reference and assessed its effectiveness.
— Continued engagement with our shareholders.
Decisions made during the year
The Committee determined the following during the year:
— Salary rise for 2019/20 below level of general employee rises. Similar rise awarded for 2018/19 but not taken by the Executive Directors.
— Bonus targets for 2018/19 and the level of bonus earned for achieving these targets.
— Vesting of the 2011 LTIP tranche in September 2018.
— The design of a new Remuneration Policy to be put to shareholders at the 2019 Annual General Meeting (AGM). Full details of this
Policy are contained in the Notice of AGM.
Compliance statement
This Report, prepared by the Committee on behalf of the Board, has been prepared in accordance with the provisions of the
Companies Act 2006 (the Act), the Listing Rules of the Financial Conduct Authority and the Large and Medium-sized Companies
and Groups (Financial Statements and Reports) (Amendment) Regulations 2013. The Act requires the Auditor to report to the
Company’s shareholders on the audited information within this report and to state whether, in their opinion, those parts of the
report have been prepared in accordance with the Act. The Auditor’s opinion is set out on pages 120 to 127 and those aspects
of the report that have been subject to audit are clearly marked. It is considered that throughout the year under review the
Company has complied with the governance rules and best practice provisions applying to UK-listed companies.
93
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Directors’ Remuneration Report continued
Annual Statement of the Chair of
the Remuneration Committee continued
Dear Shareholder,
I am pleased to introduce our Directors’ Remuneration Report for the year ended 30 April 2019. I want to begin by saying the
Committee is very mindful of the external focus on Executive remuneration and is committed to ensuring there is a strong
alignment between pay and performance at Berkeley.
Contents of the report
This year we have taken the opportunity to make some changes to the format of our Remuneration Report. We are committed
to transparency and want to ensure the report is accessible to all stakeholders. We have included more detail on Berkeley’s
remuneration principles, refreshed our ‘at a glance’ section and provided a detailed report on our approach to pay fairness and
wider workforce considerations.
Revised strategy and link to Remuneration Policy
Strategy link
The Company has always been able to draw a direct link between the corporate strategy and the reward strategy. This was
evidenced in February 2016 when the 2011 LTIP was amended (to the detriment of the participants) to reflect the increase in the
dividend payable over the performance period. The LTIP was also amended to tranche vesting based on annual dividend payments
of £2 as part of the Company’s strategy to give shareholders greater visibility and certainty over their income from holding Berkeley
shares. In February 2017 the 2011 LTIP was amended to allow share buy-backs to be included in meeting the performance conditions
(not in reducing the exercise price) to align with the Board’s view that share buy-backs should be part of the corporate strategy.
Governance link
The Remuneration Committee has proactively managed on an ongoing basis the remuneration of the Executive Directors to ensure
that the Company anticipated evolving shareholder sentiment and made changes to the remuneration in advance. The key changes
made to the 2011 LTIP by the Committee during this active management were:
— February 2016 – global cap on the maximum value that could be paid under the 2011 LTIP at £35 per share.
— February 2016 – increase in the performance conditions by £3.34.
— February 2017 – introduction of LTIP Cap and Total Remuneration Cap.
Shareholder support
The Committee believes that its approach has been endorsed by shareholders based on the voting on the remuneration resolutions
as seen most recently by the 2018 AGM vote on the Annual Report on Remuneration which was passed with over 92% support
(all votes since 2011 have been passed by an 80%+ majority).
2017 Remuneration Policy
2018 Annual Report on Remuneration
Votes For
Votes Against
97.2%
2.8%
Votes For
Votes Against
92.2%
7.8%
The Committee believes that part of the reason for continued shareholder support has been:
— The effective communication of the link between the implementation of the strategy and the reward provided to the
Executive Directors.
— Shareholders have felt that there has been a strong link between the performance of the Company and the reward provided
to the Executive Directors.
— No material concerns have been raised by shareholders over the corporate governance surrounding the operation of the
Company’s remuneration in practice.
The Notice of the AGM sets out the new Remuneration Policy following the new strategy announced to shareholders in December 2018.
94
Berkeley Group2019 Annual Report Wider workforce considerations
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 104.
The Committee has taken steps to implement the corporate governance changes which have come into effect at the beginning of
2019 and the expansion of our remit. We have set out specific details below of how we are responding to aspects of the new Code.
Compliance with the 2018 UK Corporate Governance Code
Our Remuneration Policy review was carried out with consideration to the 2018 UK Corporate Governance Code which applies for
financial years beginning on or after 1st January 2019. While we are not required to comply with the new Code for the year being
reported on, we have worked to ensure that our Policy is fit for purpose:
Key remuneration element of the 2018 UK
Corporate Governance Code
Alignment with our proposed Remuneration Policy
Five year period between the date of grant and realisation
for equity incentives.
The LTIP exceeds this requirement, by extending the performance
period to a total of seven years.
Phased release of equity awards.
The LTIP ensures the phased release of equity awards through annual
rolling vesting.
Discretion to override formulaic outcomes.
The Remuneration Policy contains the ability to override formulaic
outcomes and apply discretion where deemed necessary.
Post-cessation shareholding requirement.
We have introduced a two year post-cessation shareholding requirement.
Pension alignment.
Extended malus and clawback.
We have lowered pension entitlement for new Executive Directors to
6%, to be in line with eligibility for the majority of the wider workforce.
The current malus and clawback provisions already exceed the best
practice suggested in relation to the new Code.
In conclusion
The new Remuneration Policy will be subject to a binding vote, and the Annual Report on Remuneration, together with this letter,
will be subject to an advisory shareholder vote at the forthcoming AGM in September 2019.
I would like to thank the shareholders who have engaged with us and supported us during the year. I would also like to thank
my fellow Committee members for their support during the year.
I look forward to receiving your support for the resolution seeking approval of the new Remuneration Policy and Annual Report
on Remuneration at our forthcoming AGM. If you have any questions on our new 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
19 June 2019
95
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Directors’ Remuneration Report continued
Berkeley’s Remuneration Philosophy
Our remuneration philosophy
We have developed a clear set of principles which embed our strategy into how we deliver remuneration to our Executive Directors.
Remuneration principle
Details
Fixed pay should be aligned to the market
and the individual’s experience.
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.
Variable pay should be linked to the
long term performance of the company.
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.
Executives should be rewarded for
long term sustainable performance.
Our new Remuneration Policy delivers all variable pay in the form of long
term incentives.
Executives should hold substantial
equity holdings.
Executive remuneration should not
be excessive.
The long term incentives, which now extend to 2025, 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 is focused on executing our capital
allocations strategy and generating long term sustainable value for shareholders.
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.
We have introduced a two year post-cessation holding period to further enhance this
and align with emerging best practice.
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.
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.
TSR performance since the introduction of the 2011 LTIP
Berkeley
FTSE 250 Index
FTSE 100 Index
FTSE All Share Index
2011
2012
2013
2014
2015
2016
2017
2018
2019
450
400
350
300
250
200
150
100
50
0
96
Berkeley Group2019 Annual Report Remuneration at a Glance
What we paid Executive Directors in the year
LTIP
Total Remuneration
Executive Director
£’000
Salary
2019
Pension
2019(1)
Annual
bonus
2019(2)
Cap(3)
Actual(4)
Cap(5)
Actual(6)
Benefits
2019(7)
Total
2019
Total
2018
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi(8)
P Vallone(8)
200
545
370
355
355
355
355
—
92
55
53
53
53
53
—
8,000
8,000
8,200
8,200
1,635
5,500
5,500
8,000
740
2,000
2,000
2,000
2,000
3,250
3,250
3,750
3,750
5,000
1,150
1,150
1,150
1,150
2,400
2,400
710
781
710
710
7,772
3,165
3,118
4,939
2,268
2,268
57
37
21
29
21
14
18
8,257
7,809
3,186
3,147
4,960
2,282
2,286
8,256
7,806
3,185
3,142
4,960
450
451
Notes
1. 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 2019, who instead received payments in lieu of a pension contribution from the
Company (2018/19: percentages of salary 17%, 15%, 15%, and 15% respectively).
2. 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 110.
3. 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.
4. This represents the third tranche of the 2011 LTIP that vested on 1 October 2018 at a share price of £36.38 subject to the operation of the LTIP Cap
(see table on page 111 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.
5. 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.
6. The Total Remuneration Cap operated for the 2018/19 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.
7. Benefits, which are not included in calculating the Remuneration Cap, include a fully expensed company car or cash allowance alternative and
medical insurance.
8. J Tibaldi and P Vallone became Executive Directors on 8 December 2017. The comparative single figure for 2017/18 includes their remuneration
since joining the Board.
The following table sets out the total fixed pay and total variable pay in 2018/19 and 2017/18:
£’000
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
Total Fixed
Total Variable
2019
257
674
446
437
429
422
426
2018
256
671
445
432
429
168
169
2019
2018
8,000
8,000
7,135
2,740
2,710
4,531
1,860
1,860
7,135
2,740
2,710
4,531
282
282
97
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Directors’ Remuneration Report continued
Remuneration at a Glance continued
Annual Bonus outcome
The following table shows the basis of the calculation of the annual bonus earned in respect of 2018/19:
Return on Equity
Net Asset Value Growth
Executive
Director
A W Pidgley(1)
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
Maximum
Annual Bonus
(% of salary)
Maximum
Target
Actual
Maximum
Target
Actual
Annual Bonus
Contribution to
Plan Account
for 2018/19 % of
maximum
Annual Bonus
Contribution to
Plan Account for
2018/19 £’000
–
300%
200%
200%
220%
200%
200%
27.5%
27.9%
5.0%
14.3%
100%
–
1,635
740
710
781
710
710
Note
1. Under the Remuneration Policy that took 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.
The Committee did not adjust the formulaic outcome from the bonus believing it accurately reflected the underlying business and
personal performance.
LTIP
The third tranche of the 2011 LTIP award vested in the year as follows. The number of options released from the Plan is limited to the
value of the LTIP Cap for each individual:
Percentage of
options capable
of vesting
Performance
measure and
outcome
Options
capable of
vesting
Value of gain
on vested
options(1)
LTIP Cap
(and value
vested)(2)
Number
of options
vested (after
application
of Cap)(3)
Value above
the LTIP
Cap(4)
Executive
Director
Options granted
under 2011 LTIP
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
J Tibaldi
P Vallone
2,250,000
300,000
300,000
25.0%
£556.1m of
shareholder
returns from
1 October 2016
to
30 September
2018 – 100%
achieved
670,000 19,195,835
8,000,000
279,227
11,195,835
670,000 19,195,835
5,500,000
191,968
13,695,835
127,879
3,663,797
2,000,000
69,806
1,663,797
134,000
3,839,167
2,000,000
69,806
1,839,167
301,500
8,638,126
3,750,000
130,887
4,888,126
75,000
2,148,788
1,150,000
40,138
998,788
75,000
2,148,788
1,150,000
40,138
998,788
Notes
1. The value of gain on the options at vesting is calculated using the opening share price of £36.38 on 1 October 2018 (the date the options vested and
became exercisable) less the exercise price of £7.7295 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. The LTIP Cap operated for the 2018/19 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 1 October 2018 and could 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.
The Committee did not adjust the level of option vesting as a result of share price growth over the performance period. It was an
inherent feature of the 2011 LTIP that management and shareholders’ interests were aligned based on total shareholder returns
(including share price growth) over the performance period.
98
Berkeley Group2019 Annual Report Directors’ shareholdings and share interests
It is a core facet of Berkeley’s current and proposed new 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 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 (both as a percentage of salary). Full details on the Directors’ share interests can be found
in the Annual Report on Remuneration.
% 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
400%
400%
200%
200%
200%
200%
200%
85,786%
30,051%
9,375%
1,523%
3,045%
3,126%
336%
284%
11,028%
3,100%
3,386%
7,619%
1,895%
1,895%
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.
99
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Directors’ Remuneration Report continued
How the Remuneration Policy was operated in 2018/19 and how
the new Remuneration Policy will be operated in 2019/20
Element and key features of
current Remuneration Policy
Proposed changes in the
new Policy
How the current Remuneration
Policy was implemented in
2018/19
How we plan to implement the
proposed new Remuneration
Policy in 2019/20
No change.
The salaries for 2018/19 are set
out below:
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
£000’s
200
545
370
355
355
355
355
The Remuneration Committee
proposed to increase salaries
for 2018/19 by between 2.7%
and 2.8%, but these were
not taken by the Executive
Directors. In reviewing the
salaries of the Executive
Directors for 2018/19, the
Committee took account of
the employment conditions
and salary increases awarded
to employees throughout
the Group, which were on
average 4.4%.
Base salary levels for
2019/20 will be increased
by between 2.7% and 2.8% as
follows:
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
£000’s
200
560
380
365
365
365
365
In reviewing the salaries of
the Executive Directors for
2019/20, the Committee
has also taken account of
the employment conditions
and salary increases awarded
to employees throughout
the Group, which were on
average 4.1%.
No change.
Normal company
benefit provision.
Normal company
benefit provision.
For current Executive
Directors, the maximum
pension contribution will
remain at their current level.
The pension contributions for
2018/19 were as follows:
% salary
For future appointments
the maximum pension
contribution will be capped
at 6% of salary. This is in line
with the level provided to the
wider workforce.
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
0%
17%
15%
15%
15%
15%
15%
No change for existing
Executive Directors but see
proposed changes in relation
to future appointments which
will be in line with wider
workforce level of 6% of salary.
Base salary
Set on appointment and
reviewed annually (effective
from 1 May each year) or when
there is a change in position
or responsibility.
Determined taking into
account a number of external
and internal factors.
Benefits
Benefits include a fully
expensed car or car
allowance alternative,
and medical insurance.
Additional benefits may be
offered such as relocation
allowances on recruitment.
Pension
The Company provides either
a contribution to a pension
arrangement or a payment
in lieu of pension.
100
Berkeley Group2019 Annual Report Element and key features of
current Remuneration Policy
Proposed changes in the
new Policy
How the current Remuneration
Policy was implemented in
2018/19
How we plan to implement the
proposed new Remuneration
Policy in 2019/20
Not applicable – there will be
no replacement bonus plan for
the new Remuneration Policy
period.
There will be no further bonus
contributions to the Bonus
Plan after the financial year
ended 30 April 2019.
There will be no replacement
bonus plan after the financial
year ending 30 April 2021.
The accrued deferred balances
in participant Bonus Plan
accounts will continue to
pay-out as normal under the
current Remuneration Policy.
The maximum bonus potential
for 2018/19 was:
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
% salary
–
300%
200%
200%
220%
200%
200%
Bonus
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.
LTIP
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.
Currently the LTIP ends in
2021. Shares earned but
banked at 30 September
2021 may be released to
participants in September
2022 and 2023, subject to
the LTIP cap but no further
performance condition.
Changes are proposed to
the operation of the LTIP
such that shares earned but
not vested at 30 September
2021 have to be re-earned by
management over four years
in equal instalments to 2025
subject to £2 of additional
return being provided to
shareholders each year.
Details of how the above
change will work are set
out in the Notice of the AGM.
Total Remuneration Cap
Individual caps will limit the
amount of total remuneration
that can be paid in respect of
the financial year.
Removal of the separate LTIP
Cap as no longer required with
the removal of the Bonus Plan.
The Total Remuneration Cap
will remain unchanged.
The third vesting of options
under the 2011 LTIP occurred
on 1 October 2018.
Details of the operation of the
2011 LTIP for 2019/20 are set
out in the Notice of the AGM.
The maximum level of
options capable of vesting
was 13.4% of the total grant
(25% for Tibaldi and Vallone)
provided that £555 million of
shareholder returns plus £2 for
each share issued or reissued
in the period 1 October
2016 to 29 September 2018,
was provided through a
combination of dividends
and share buy-backs.
This performance condition
was met in full and therefore
the maximum level of
options vested.
Further details on the
operation of the 2011 LTIP
in the year 2018/19 are set
out on page 111.
The Total Remuneration Caps
for 2018/19 were as follows:
The Total Remuneration Caps
remain unchanged.
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
Total cap p.a.
(£000)
8,200
8,000
3,250
3,250
5,000
2,400
2,400
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Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Directors’ Remuneration Report continued
How the Remuneration Policy was operated in 2018/19 and how
the new Remuneration Policy will be operated in 2019/20 continued
Element and key features of
current Remuneration Policy
Proposed changes in the
new Policy
How the current Remuneration
Policy was implemented in
2018/19
How we plan to implement the
proposed new Remuneration
Policy in 2019/20
No change.
The Committee has introduced
a further post-cessation
shareholding requirement for
Executive Directors.
For two years following
cessation of employment,
Executive Directors are
required to hold shares to
the value of the shareholding
guideline that applied
at the cessation of their
employment; or, in cases
where the individual has not
had sufficient time to build up
shares to meet their guideline,
the actual level of shareholding
at cessation.
No change.
Minimum shareholding
requirement
The Committee operates
a system of shareholding
guidelines to encourage long
term share ownership by the
Executive Directors.
This should be achieved within
five years of appointment for
Executive Directors.
Post-cessation shareholding
requirement
To ensure that Executive
Directors continue to be
aligned with shareholders’
interests post their cessation
of employment with
the Group.
NED fee policy
All Non-executive Directors
have specific terms of
engagement and their
remuneration is determined by
the Board within the limits set
by the Articles of Association.
Each Non-executive Director
receives a fee which relates to
membership of the Board and
additional fees are paid for
Committee Chairmanship.
The minimum
shareholding requirement
remain unchanged.
In the case of the Group
Chairman and Chief Executive
Officer this is 400% of base
salary, for other Executive
Directors 200% of base
salary. The Committee retains
the discretion to increase
shareholding requirements.
Not applicable.
See above for shareholding
guidelines for the
Executive Directors.
Non-executive Director
fee levels for 2018/19 were
as follows:
Non-executive Director fee
levels for 2019/20 will be
increased by 3% as follows:
— Deputy Chairman and SID
— Deputy Chairman and SID
fees: £119.5k;
— Basic fee: £66k;
— Additional fee for
chairmanship of
Committee: £13k.
fees: £123.1k;
— Basic fee: £68k;
— Additional fee for
chairmanship of Committee:
£13k (no change).
Fees were increased by 3%.
The average employee rise in
salaries was 4.4%.
The average employee rise in
salaries was 4.1%.
Key elements of Berkeley's proposed new Remuneration Policy for 2019/20
Policy elements Purpose
19/20
20/21
21/22
22/23
23/24
24/25
Base salary
To recruit and retain Executive Directors of the
appropriate calibre and experience to achieve the
Company’s business strategy
Benefits
To provide competitive levels of employment benefits
Pension
To provide competitive levels of employment benefits
LTIP
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
Shareholding
requirement
To ensure that Executive Directors’ interests are aligned with
those of shareholders over a longer time horizon
102
Total remuneration cap varies by each Executive Director
Berkeley Group2019 Annual Report Additional context on Berkeley’s Executive
Directors’ pay
Our Remuneration positioning philosophy
The current Remuneration Policy is to set the main elements of the Executive Directors’ remuneration package against two
benchmarks: the FTSE 100; and a Company comparator group.
Base salary
Experience & role
Pension
Lower quartile
Benefits
Market practice
Incentives
Upper decile
The comparator group of companies for the 2018/19 financial year comprised:
— Persimmon
— Taylor Wimpey
— Countryside Properties
— Bovis Homes
— Barratt Developments
— Crest Nicholson Holdings
— Bellway
— Redrow
— Kier Group
— Galliford Try
— Balfour Beatty
— McCarthy and Stone
Our Policy quantum compared to the FTSE 100
The following table shows the relative position of base salary and target total remuneration under the current Remuneration Policy
for our Executive Directors compared to the FTSE 100.
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
Base
salary
Target total
remuneration
Base
salary
Target total
remuneration
Base
salary
Target total
remuneration
Base
salary
Target total
remuneration
S Ellis
J Tibaldi
P Vallone
Base
salary
Target total
remuneration
Base
salary
Target total
remuneration
Base
salary
Target total
remuneration
Key
100%
e
l
i
t
n
e
c
r
e
P
0
0
1
E
S
T
F
75%
50%
25%
0%
Berkeley
The above charts show clearly the Remuneration Committee’s policy of providing comparatively modest salaries in combination with
a leveraged approach to incentivisation.
103
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements
Directors’ Remuneration Report continued
Employment at Berkeley
The Remuneration Committee’s remit
This year, the Committee has expanded its remit to include responsibility for setting and managing the remuneration of Berkeley’s
senior management, in addition to Executive Directors. The Committee’s focus is on determining the remuneration policy and
practices to ensure that the incentives operated by the Company align with its culture and strategy.
The Committee also has oversight of wider workforce pay and policies and incentives, which enables it to ensure that the approach
to Executive remuneration is consistent with those workforces. The Committee is provided with additional information from the
Company in order to carry out these responsibilities.
In order for the Committee to carry out its oversight review of wider workforce pay and policies and incentives, a specific process is
being developed. The Committee will receive an annual summary setting out the key details of remuneration changes for Berkeley’s
senior management and the wider workforce.
The Committee is aware that clearly the level and type of remuneration offered will vary across employees depending on
the employee’s level of seniority and nature of his or her role. The Committee is not looking for a homogeneous approach to
remuneration; however, when conducting its review, it pays particular attention to:
— whether the element of remuneration is consistent with the Company’s remuneration philosophy;
— if there are differences, they are objectively justifiable; and
— whether the approach seems fair and equitable in the context of other Berkeley’s senior management and Berkeley’s
wider workforce.
The first report, as described above, is due to be considered by the Committee later in 2019/20. Details of the findings on
the alignment of pay across the Group will be communicated to employees and reported on in next year’s Annual Report
on Remuneration.
Fairness, diversity and wider workforce considerations
The Committee seeks to ensure that pay is fair throughout the Company and makes decisions in relation to the structure of Executive
pay in the context of the cascade of pay structures throughout the business.
Remuneration across the Company
— Salary – 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.
— Pension – 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; the average is 6% which is now aligned with our new Remuneration Policy.
— Benefits – We offer a range of benefits to our employees, including medical insurance.
— Bonus – Each business operates a bonus scheme for its employees. For senior employees (other than Executive Directors)
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. Executive Directors are no longer eligible for bonuses.
— Medium term incentives – In addition, medium term incentive schemes are in place for all levels of staff below Executive Director,
with currently over one third of all employees receiving awards under these schemes.
Gender pay gap reporting
The median pay gap for the Group is 38.9% 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, and more women occupying junior, lower paid roles. The shape of
our workforce also impacts our bonus gap, with our senior executives participating in the Company's Long Term Incentive Plans.
How we are improving diversity, fairness and equality across our organisation
Berkeley is committed to paying for performance equally and fairly and rewarding and retaining our best people. We are already
taking steps that will increase the proportion of women within the organisation as a whole, recognising the desire in the Group to
promote from within and therefore providing increased opportunities for career progression for those of all backgrounds within
the organisation, and to more senior roles over the long-term.
Central to this is to recruit and retain a high calibre workforce and in May 2018 we launched two new 2018-2020 commitments
within Our Vision, Berkeley's long-term strategy, to help achieve this.
Industry image
One of the greatest barriers for young people, especially women, joining our industry is the perception of the roles within the
industry. We are committed to undertaking 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. In addition we will
encourage our employees, across all roles and levels, to act as role models and mentors for the industry.
Diversity and inclusion
There is a historic lack of diversity in our industry 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. We have committed to focusing on
104
Berkeley Group2019 Annual Report diversity and inclusion by developing guiding principles applied by each of our autonomous companies. This is supplemented
by a range of additional activities, which include a wider review of our policies, processes and procedures to ensure we create an
inclusive environment.
Our graduate scheme targets a balanced intake each year, aiming to identify the next generation of leaders within the organisation.
This will naturally take a period of time but we are investing for the long-term. We are also focused on providing apprenticeships,
through recruitment and for existing employees, in order to improve skills within both Berkeley and the wider industry.
Alongside these initiatives, we remain focused on retaining our best people within the organisation over the long-term, by focusing
on training and development through our talent management programme, and a health and wellbeing programme.
We are also conscious that there has historically been a lack of investment in training facilities across the industry which has resulted
in a shortage of high quality training facilities that provide the right courses for students and ultimately employers.
To address this, Berkeley is working with training providers and has teamed up with West London College to launch a joint-venture,
the West London Construction Academy (WLCA), where students receive training that focuses on employability in modern,
aspirational surroundings.
This facility was opened in October 2018 and one of its purposes is to demonstrate the fantastic and diverse career opportunities
that exist within the Built Environment and construction sectors to meet the aspirations of today's young people. Berkeley believes
there is a role for everyone within the industry.
The WLCA facility also recently held an event as part of Women in Construction week to provide women with the opportunity to find
out more about the construction industry and how they can build a successful career in it.
Pay comparisons
Chief Executive pay ratio
Our Chief Executive to employee pay ratio for 2018/19 is 109:1.
This is measured as the ratio of the Chief Executive single figure remuneration in the year to the average employee remuneration for
all staff and Directors below the Main Board. This ratio is intended to provide a early indication of our relative internal positioning.
In next year's Directors’ Remuneration Report we will provide Chief Executive ratios in accordance with the requirements under the
new reporting regulations.
In addition to the all-employee ratio, we also present below the ratio of total single figure remuneration across the entire Berkeley
senior Executive team (excluding the Chairman) with that of the Chief Executive. This demonstrates broadly consistent ratios across
the team reflecting the consistent nature of the pay structures for these individuals.
Executive Director
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
Chief Executive pay ratio
2.5:1
2.5:1
1.6:1
3.4:1
3.4:1
Shareholders expect the Chief Executive to have a significant proportion of his pay based on performance and paid in shares. It is
this element of his package which will provide any observed volatility in his remuneration when comparing on a year-to-year basis to
the wider employee population. The Committee is comfortable that the underlying picture is not one of a greater divergence of the
Chief Executive’s remuneration from employees, i.e. excluding the volatility of the LTIP, the relationship will be consistent. There is
likely to be significant volatility in this ratio year-on-year, and we believe that this is likely to be caused by the following factors:
— Our Chief Executive’s pay is made up of a higher proportion of incentive pay than that of our employees, in line with the
expectations of our shareholders. This introduces a higher degree of variability in his pay each year, which will affect the ratio.
— The value of long term incentives is disclosed in pay in the year it vests, which increases the Chief Executive’s pay in that year,
again impacting the ratio for that year.
— Long term incentives are provided in shares, and therefore an increase in share price magnifies the impact of a long term incentive
award vesting in a year.
— We recognise that the ratio is driven by the different structure of the pay of our Chief Executive versus that of our employees, as
well as the make-up of our workforce. This ratio varies between businesses even in the same sector. What is important from our
perspective is that this ratio is influenced only by the differences in structure, and not by divergence in fixed pay between the
Chief Executive and the wider workforce.
— Where the structure of remuneration is similar, as for the Executive Directors and the Chief Executive, the ratio will be much more
stable over time.
105
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Directors’ Remuneration Report continued
Employment at Berkeley continued
External pay comparisons
Our Policy compared to peers
On page 103 we have compared our Remuneration Policy quantum to the FTSE 100.
Comparison of Chief Executive total remuneration and Total Shareholder Return against the market
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 the Regulations.
To give context to the total single figure levels of the Chief Executive we have also included the single figure historical outcomes from
the table below onto the chart in order to demonstrate the clear alignment between shareholder returns and the Chief Executive’s
single figure pay that results from the nature of the remuneration structure in place.
600
500
400
300
200
100
0
)
d
e
s
a
b
e
r
(
n
r
u
t
e
R
r
e
d
o
h
e
r
a
h
S
l
l
a
t
o
T
30,000
25,000
20,000
15,000
10,000
5,000
0
’
)
0
0
0
£
(
n
o
i
t
a
r
e
n
u
m
e
R
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19
Chief Executive Single Figure
Berkeley Group Holdings plc
FTSE 250 Index
FTSE 100 Index
FTSE All Share Index
Chief Executive / Chairman pay in the last 10 years
The table below shows the remuneration of the Chairman and Chief Executive for each of the financial years shown in the graph
above. Given the nature of the roles of A W Pidgley and R C Perrins, the table below provides information on both individuals.
Single total figure of remuneration (£’000)(1)
Executive Director
A W Pidgley
Chairman
R C Perrins
Chief Executive
Annual bonus pay-out (as %
maximum opportunity)(2)
Multi-year incentive vesting
awards (as % maximum
opportunity)
2018/19
2017/18
2016/17
2015/16
2014/15
2013/14
2012/13
2011/12
2010/11
2009/10
8,257
8,256
29,192
21,489
23,296
3,757
3,638
2,799
2,033
2,406
7,809
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%
100%
100%/See Note 8
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 and deferred awards that were released during the
year under the Bonus Plan.
8. 2018/19 Multi-year vesting represents the 2011 LTIP third tranche that vested during the year (see table on page 111 for details) and deferred awards
that were released during the year under the Bonus Plan (see table on page 110 for details).
106
Berkeley Group2019 Annual Report
Percentage change in Chief Executive’s remuneration
The following table compares the Chief Executive’s pay (including salary, taxable benefits and annual bonus) between 2017/18 and
2018/19 with the wider employee population. The Company considers the full-time employee population, excluding the Main Board,
to be an appropriate comparator group and the most stable point of comparison:
Base salary
Taxable benefits
Annual bonus
2017/18 to 2018/19
year on year change (%)
R C Perrins
Chief Executive
Group
employees
0.0%
11.0%
0.0%
4.4%
0.8%
2.4%
The Committee considers the year on year change in salary between the Chief Executive and the employees as a clear indication
that there is not a divergence in the rate of fixed pay. Further, there is a correlation between the bonus earned by the Chief Executive
and the wider workforce demonstrating that success is shared throughout the Company.
107
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Directors’ Remuneration Report continued
Annual Report on Remuneration
This section of the Remuneration Report contains details of how the Company’s Remuneration Policy, approved by shareholders at the
EGM on 23 February 2017, was implemented for Executive Directors during the financial year that ended on 30 April 2019. An advisory
resolution to approve this report (including the Chairman’s Statement) will be put to shareholders at the AGM in September 2019.
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 2018/19
financial year. The components of the single figure for 2018/19 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.
LTIP
Total Remuneration
Executive Director £’000
Salary
2019
Pension
2019
Annual
bonus
2019(1)
Cap(2)
Actual(3)
Cap(4)
Actual(5)
Benefits
2019(6)
Total
2019
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
200
545
370
355
355
355
355
—
92
55
53
53
53
53
—
8,000
8,000
8,200
8,200
1,635
5,500
5,500
8,000
740
2,000
2,000
2,000
2,000
3,250
3,250
7,772
3,165
3,118
3,750
3,750
5,000
4,939
1,150
1,150
1,150
1,150
2,400
2,400
2,268
2,268
710
781
710
710
57
37
21
29
21
14
18
8,257
7,809
3,186
3,147
4,960
2,282
2,286
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 110.
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.
3. This represents the third tranche of the 2011 LTIP that vested on 1 October 2018 at a share price of £36.38 subject to the operation of the LTIP Cap
(see table on page 111 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.
5. The Total Remuneration Cap operated for the 2018/19 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.
Comparative figures for 2017/18, as disclosed in last year’s Directors’ Remuneration Report, are set out in the table below.
LTIP
Total Remuneration
Executive Director £’000
Salary
2018
Pension
2018
Annual
bonus
2018(1)
Cap(2)
Actual(3)
Cap(4)
Actual(5)
Benefits
2018(6)
Total
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
55
53
53
21
21
—
8,000
8,000
8,200
8,200
1,635
5,500
5,500
8,000
740
710
781
282
282
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
7,772
3,165
3,118
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..
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.
3. This represents the second tranche of the 2011 LTIP that vested on 2 October 2017 at a share price of £37.52 subject to the operation of the LTIP
Cap. 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.
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.
108
Berkeley Group2019 Annual Report 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(2)
A Nimmo
G Barker
V Wadley
A Li
A Myers
D Brightmore-Armour
P Vernon(3)
R Downey(4)
Basic fees
Additional fees(1)
Total fees
2019
80.0
66.0
119.5
66.0
66.0
66.0
66.0
66.0
66.0
2018
116.0
64.0
64.0
64.0
64.0
64.0
64.0
41.8
25.3
2019
2018
–
–
–
–
–
–
–
13.0
–
–
13.0
13.0
–
–
–
–
–
–
2019
80.0
66.0
119.5
66.0
66.0
79.0
66.0
66.0
66.0
2018
116.0
64.0
77.0
64.0
64.0
77.0
64.0
41.8
25.3
Notes
1. Additional fees represent fees paid for the role of Committee Chairmanship.
2. J Armitt stepped down from his role as Deputy Chairman and Senior Independent Director in 2017/18. He receives a base fee of £80,000
to reflect his experience and pre-eminent standing in construction and infrastructure, and the value he continues to add to the Board.
3. P Vernon was appointed to the Board as a Non-executive Director on 6 September 2017.
4. R Downey was appointed to the Board as a Non-executive Director on 8 December 2017.
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 2018/19 is set out below:
Return on Equity
Net Asset Value Growth
Maximum
Annual Bonus
(% of salary)
Maximum
Target
Actual
Maximum
Target
Actual
Annual Bonus
Contribution to
Plan Account
for 2018/19 %
of maximum
Annual Bonus
Contribution to
Plan Account for
2018/19 £’000
–
300%
200%
200%
220%
200%
200%
27.5%
27.9%
5.0%
14.3%
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
P Vallone
Note
1. Under the Remuneration Policy that took 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.
109
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Directors’ Remuneration Report continued
Annual Report on Remuneration continued
Further details of the matrix of targets against which performance has been assessed for the year ended 30 April 2019 is set
out below:
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%
3.0%
70%
0%
35%
42%
49%
56%
63%
70%
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%
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 2018/19 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, 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.
a. Plan account
brought forward
b. Plan account
brought
forward(1)
c. Contribution
into plan account
for the financial
year 2018/19(2)
d. Plan account
balance
following
contribution for
financial year
2018/19
e. Amount
paid following
contribution for
financial year
2018/19 (50% of
column d)
f. Plan account
carried forward
g. Plan account
carried forward(3)
Executive
Director
A W Pidgley(4)
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
Total
Shares
32,227
39,598
17,928
17,188
18,907
8,718
8,718
£’000
1,223
1,503
681
653
718
331
331
£’000
-
1,635
740
710
781
710
710
£’000
1,223
3,138
1,421
1,363
1,499
1,041
1,041
£’000
(612)
(1,569)
(710)
(681)
(749)
(521)
(521)
£’000
612
1,569
710
681
749
521
521
Shares
16,287
41,777
18,912
18,138
19,952
13,857
13,857
143,284
5,440
5,286
10,726
(5,363)
5,363
142,780
Notes
1. Converted at a share price of £37.56 at 30 April 2019 plus £0.333 dividend paid on 14 September 2018 and £0.0712 dividend paid on
16 January 2019.
2. Contribution into the plan account for the year is the amount disclosed in the single figure table for 2018/19.
3. Converted at a share price of £37.56 at 30 April 2019.
4. Under the 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. All amounts are rounded to the nearest £’000.
110
Berkeley Group2019 Annual Report
Long term incentives (Audited)
The third vesting of options under the 2011 LTIP occurred on 1 October 2018. The maximum level of options capable of vesting
was 13.4% (25% for Tibaldi and Vallone) of the total grant provided that £556.1 million of shareholder returns had been made from
1 October 2016 to 30 September 2018, through a combination of dividends and share buy-backs. This performance condition was
met in full and therefore the maximum number of options capable of vesting vested.
The table below sets out the number 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.
Options
granted
under 2011
LTIP
Percentage
of options
capable of
vesting
Performance
measure and
outcome
Options
capable of
vesting
Value of gain
on vested
options(1)
LTIP Cap
(and value
vested)(2)
Number
of options
vested (after
application
of Cap)(3)
Value above
the LTIP
Cap(4)
Banked
options(5)
Cumulative
Banked
options(6)
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
P Vallone
300,000
J Tibaldi
300,000
25.0%
£556.1m of
shareholder
returns from
1 October
2016 to
30 September
2018 – 100%
achieved
670,000 19,195,835 8,000,000
279,227
11,195,835 390,773
782,318
670,000 19,195,835 5,500,000
191,968 13,695,835 478,032
956,594
127,879
3,663,797 2,000,000
69,806
1,663,797
58,073
116,339
134,000
3,839,167 2,000,000
69,806
1,839,167
64,194
128,580
301,500
8,638,126
3,750,000
130,887
4,888,126
170,613
341,587
75,000
2,148,788
1,150,000
40,138
998,788
34,862
34,862
75,000
2,148,788
1,150,000
40,138
998,788
34,862
34,862
Notes
1. The value of gain on the options at vesting is calculated using the opening share price of £36.38 on 1 October 2018 (the date the options vested and
became exercisable) less the exercise price of £7.7295 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. The LTIP Cap operated for the 2018/19 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 1 October 2018 and could 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. This is the cumulative banked options including options banked in prior years.
7. Each Executive Director exercised all the options that vested on 1 October 2018. 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.
111
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Directors’ Remuneration Report continued
Annual Report on Remuneration continued
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
£37.56 on 30 April 2019, 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
P Vallone
Obligation
(% base salary)
Actual
Shareholding as
% base salary at
30 April 2019
Achievement at
30 April 2019
400%
400%
200%
200%
200%
200%
200%
85,786%
9,375%
1,523%
3,045%
3,126%
336%
284%
Non-executive Director(2)
(% NED net fees)
% net fees
J Armitt
A Nimmo
G Barker
V Wadley
A Li
A Myers
D Brightmore-Armour
P Vernon
R Downey
Notes
1. To be achieved within five years of appointment.
2. To be achieved within three years of appointment.
Executive Director
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
Non-executive Director
J Armitt
A Nimmo
G Barker
V Wadley
A Li
A Myers
D Brightmore-Armour
P Vernon
R Downey
100%
100%
100%
100%
100%
100%
100%
100%
100%
692%
215%
737%
414%
2,148%
268%
107%
65%
–
N/a
N/a
Beneficially
owned shares(1)
2011 LTIP Option
interests subject
to conditions(2)
Total
interests held
4,567,939
1,360,283
150,074
287,770
295,494
31,732
26,825
8,112
2,000
12,422
4,000
20,000
3,000
1,000
609
–
2,010,000
2,010,000
383,641
402,000
904,500
225,000
225,000
–
–
–
–
–
–
–
–
–
6,577,939
3,370,283
533,715
689,770
1,199,994
256,732
251,825
8,112
2,000
12,422
4,000
20,000
3,000
1,000
609
–
Notes
1. Beneficial interests include shares held directly or indirectly by connected persons.
2. The third tranche of the 2011 LTIP awards vested and were exercised during the year by the Executive Director participants (see page 111 for details).
112
Berkeley Group2019 Annual Report Summary table
The following table sets out where in the Remuneration Committee Report the following information can be found:
Element
Taxable benefits (Audited)
Total pension entitlements (Audited)
Payments to past Directors (Audited)
Payments for loss of office (Audited)
Directors’ shareholding and share interests (Audited)
Statement of the Implementation of the new Remuneration Policy for 2019/20
Relevant in Year
Yes
Yes
No payments
No payments
Yes
Yes
Page
100
100
–
–
112
100-102
Relative importance of spend on pay
The table below sets out the relative importance of spend on pay in the 2017/18 and 2018/19 financial years compared with
distributions to shareholders.
Remuneration of Group employees (including Directors)
Distributions to shareholders
2018/19
(£m)
2017/18
(£m)
214
252
208
287
% change
3%
(12%)
Service contracts
Details of the service contracts or letters of appointment for the current Directors are as follows:
Executive Director
of appointment Expiry date
Date of contract/letter
Notice period by
Company or Director
A W Pidgley
R C Perrins
R J Stearn
K Whiteman
S Ellis
J Tibaldi
P Vallone
Non-executive Director
J Armitt
A Nimmo
G Barker
V Wadley
A Li
A Myers
24 June 1994 Rolling service contract with no fixed expiry date
15 July 2002 Rolling service contract with no fixed expiry date
3 October 2014 Rolling service contract with no fixed expiry date
15 January 1996 Rolling service contract with no fixed expiry date
5 May 2004 Rolling service contract with no fixed expiry date
30 June 1999 Rolling service contract with no fixed expiry date
25 September 1990 Rolling service contract with no fixed expiry date
1 October 2007 Renewable annually on 1 May
5 September 2011 Renewable annually on 1 May
3 January 2012 Renewable annually on 1 May
3 January 2012 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
12 months
12 months
12 months
12 months
12 months
12 months
12 months
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.
113
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Directors' Report
Articles of Association
The Articles of Association ('the Articles') set out the basic
management and administrative structure of the Company.
They regulate the internal affairs of the Company and cover
such matters as the issue and transfer of shares, Board
and shareholder meetings, powers and duties of Directors
and borrowing powers. In accordance with the Articles of
Association, Directors can be appointed or removed by
shareholders in a general meeting.
The Articles may only be amended by special resolution
at a general meeting of shareholders. Copies are available
by writing to the Company Secretary and are also open to
inspection at Companies House.
Directors
The Directors of the Company and their profiles are detailed
on pages 76 to 79. All of these Directors served throughout
the year under review.
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
Code 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 99 and 112. At 30 April 2019 each of the Executive
Directors were deemed to have a non-beneficial interest in
437,358 (2018: 443,062) ordinary shares held by the Trustee 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 2.24 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.
Directors’ indemnities
The Company’s practice has always been to indemnify its
Directors in accordance with the Company’s Articles 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 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.
The Directors submit their report together with the audited
Consolidated and Company Financial Statements for the year
ended 30 April 2019.
Principal activities and review of the business
The Company is the UK holding company of a Group engaged in
residential-led property development focusing on 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 73 of the Annual Report
and 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
58 to 69 of the Strategic Report.
Trading results and dividends
The Group’s consolidated profit after taxation for the financial
year was £627.4 million (2018: £795.5 million). The Group’s
joint ventures contributed a profit after taxation of £8.8 million
(2018: £162.7 million).
An interim dividend of 33.30 pence per share was paid to
shareholders on 14 September 2018 and a further interim
dividend of 7.12 pence per share was paid to shareholders on
16 January 2019. A further interim dividend is proposed to be
paid as part of the £139.7 million Shareholder Return to be
provided by 30 September 2019 through a combination of
dividends and share buy-backs. The amount to be paid as a
dividend will be announced on 15 August 2019, taking account
of any share buy-backs undertaken as part of the Shareholder
Returns programme. The dividend will be paid on 13 September
2019 to shareholders on the register on 23 August 2019.
Post balance sheet event
There are no post balance sheet events that require disclosure.
Share capital
The Company had 140,157,183 ordinary shares in issue at
30 April 2019 (2018: 140,157,183). During the year to 30 April 2019
and in accordance with the authority provided by shareholders
at the 2017 and 2018 Annual General Meetings, the Company
has purchased 5,591,370 ordinary shares with a nominal value
of £279,569 which equated to 4.17% 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 £198.9 million. As at 30 April 2019 the Company held
11,141,900 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
2018 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 2.17 to the Consolidated Financial Statements.
Information on the Group’s share option schemes is set out in
note 2.5 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 92 to 113.
114
Berkeley Group2019 Annual Report Sustainability
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 that sustainability is incorporated into daily activities.
Substantial shareholders
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 2019:
Number of
ordinary
shares held(i)
% of
voting
rights(i)
Nature of
holdings
BlackRock Inc.
11,698,607
8.72
Indirect
First Eagle Investment
Management LLC(ii)
A W Pidgley CBE
10,071,368
4,567,939
7.81
3.54
Indirect
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 has notified the Company that it holds
5,013,920 ordinary shares which is 3.89% of voting rights.
This holding is included in the indirect interests of 7.81% held
by First Eagle Investment Management LLC.
Between 30 April 2019 and 19 June 2019 the Company was
not notified of any changes to substantial interests, pursuant
to Rule 5 of the DGTR.
Donations
The Group made no political donations (2018: £nil) during
the year.
Employment policies
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 or civil partnership,
pregnancy or maternity, race, religion or belief (including lack
of belief), sex or 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 51.
The Group has implemented Human Rights, Modern Slavery
and Child Labour policies in support of human rights which
are 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.
115
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Directors' Report continued
Greenhouse gas emissions
Scope 1 (tCO2e)
Scope 2 (tCO2e)
Scope 3 (tCO2e)
Total (tCO2e)
Emissions intensity (tCO2e/person)
2019
3,399 A
5,896 A
17,713 A
27,008 A
2.50
2018
2,553
7,402
14,326
24,281
2.15
2019 ( A ) information has been separately subject to limited assurance
by PricewaterhouseCoopers LLP. For further details of the assurance
provided in 2019 and prior years, see the independent assurance reports
found at www.berkeleygroup.co.uk/about-us/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’ Report) 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; and
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.
Takeover directive – agreements
Pursuant to the Companies Act 2006, the Company is required
to disclose whether there are any significant agreements that
take effect, alter or terminate upon a change of control.
Change of control provisions are included as standard in
many types of commercial 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.
Independent Auditor and disclosure of
information to the Auditor
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 auditor is 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 auditor is aware of that information.
Emissions include 50% of those resulting from the Group’s joint
ventures on the basis of its equity share.
This confirmation is given and should be interpreted in accordance
with the provisions of Section 418 of the Companies Act 2006.
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, in sales suites or
on development sites of Berkeley’s joint ventures.
The UK Government Environmental Reporting Guidance 2013,
UK Government 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.
A resolution to re-appoint KPMG LLP as auditor to the Company
will be proposed at the Annual General Meeting.
Annual General Meeting
The Annual General Meeting of the Company is to be held at
the Woodlands Park Hotel, Woodlands Lane, Stoke D’Abernon,
Cobham, Surrey KT11 3QB at 11.00am on 6 September 2019.
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.
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.
Share capital structure
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 114.
Note that emissions reported outside of this Directors' Report
are based on the Group's operational reporting boundary.
They include 100% joint venture emissions. Further details on our
reporting boundaries, our established reporting criteria and the
methodology adopted for the overall calculations can be found
at www.berkeleygroup.co.uk/about-us/sustainability/reports-
and-case-studies.
116
Berkeley Group2019 Annual Report Statement of Directors’ responsibilities in respect
of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report
and the Group and parent Company financial statements in
accordance with applicable law and regulations.
Directors’ responsibility statement
Each of the Directors, whose names and functions are
listed on pages 76 to 79 confirm that, to the best of each
person’s knowledge:
a. the Group financial statements, which have been prepared
in accordance with IFRSs 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.
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 70 to 73.
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 Company
has adequate resources to continue its operational existence
for the foreseeable future period, and not less than 12 months
from the date of approval of these Financial Statements. 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
19 June 2019
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 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 comply 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.
117
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements One Blackfriars includes 274 homes,
a 162 bedroom hotel and a ground
level public square with shops, a café
and restaurant. The development was
named ‘Most Considerate Site’ at the
Considerate Constructors Scheme
(CCS) National Site Awards 2019.
Find out more:
www.berkeleygroup.co.uk/oneblackfriars
118
Berkeley Group2019 Annual Report Financial Statements
120 Independent Auditors’ Report
128 Consolidated Income Statement
128 Consolidated Statement of
Comprehensive Income
129 Consolidated Statement of
Financial Position
130 Consolidated Statement of Changes
in Equity
131 Consolidated Cash Flow Statement
132 Notes to the Consolidated
Financial Statements
165 Company Balance Sheet
166 Company Statement of Changes
in Equity
167 Notes to the Company
Financial Statements
171 Five Year Summary
172 Financial Diary and Registered Office
and Advisors
119
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Independent Auditors’ Report
to the members of The Berkeley Group Holdings PLC
1. Our opinion is unmodified
We have audited the financial statements of The Berkeley
Group Holdings plc (“the Company”) for the year ended
30 April 2019 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 C1.
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 2019 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 first appointed as auditor by the Directors on
27 November 2013. The period of total uninterrupted
engagement is for the six financial years ended 30 April 2019.
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
£27.0m (2018:£35.0m) 3.5%
(2018: 3.7%) of group profit
before tax
Coverage
97% (2018:93%) of group
profit before tax
Key audit matters
vs 2018
Event Driven
New: Brexit uncertainty
Recurring risks
Carrying value of
inventories and
profit recognition
Post completion
development provisions
Carrying value of Parent
Company investments
2. Key audit matters: including our assessment
of risks of material misstatement
Key audit matters are those matters that, in our professional
judgment, 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 arriving at our
audit opinion above, together with our key audit procedures
to address those matters and, as required for public interest
entities, our result 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.
We continue to perform procedures over revenue recognition.
However, following the Company’s adoption of IFRS 15 Revenue
from Contracts with Customers revenue is now recognised
at legal completion rather than build completion under the
previously applicable standard. This reduces the risks associated
with revenue recognition at year end due to a lower level of
judgement, and accordingly we have not assessed this as one
of the most significant risks in our current year audit and,
therefore it is not separately identified in our report this year.
120
Berkeley Group2019 Annual Report The impact of
uncertainties due to
the UK exiting the
European Union on
our audit
Refer to page 58
(principal risks),
page 59 (viability
statement),
pages 88-90 (Audit
Committee Report).
The risk
Our response
Unprecedented levels of uncertainty:
All audits assess and challenge the
reasonableness of estimates, in
particular as described in carrying
value of inventories and profit
recognition, post completion
development provisions and related
disclosures and the appropriateness of
the going concern basis of preparation
of the financial statements (see below).
All of these depend on assessments
of the future economic environment
and the Group’s future prospects
and performance.
In addition, we are required to consider
the other information presented in the
Annual Report including the principal
risks disclosure and the viability
statement and to consider the directors’
statement 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.
Brexit is one of the most significant
economic events for the UK and at
the date of this report, its effects are
subject to unprecedented levels of
uncertainty of outcomes, with the full
range of possible effects unknown.
We developed a standardised firm-wide approach to the
consideration of the uncertainties arising from Brexit in
planning and performing our audits. Our procedures included:
— Our Brexit knowledge: We considered the directors’
assessment of Brexit-related sources of risk for the Group’s
business and financial resources compared with our own
understanding of the risks. We considered the directors’
plan to take action to mitigate the risks;
— Sensitivity analysis: When addressing the carrying
value of inventory and profit recognition, post completion
development provisions and other areas that depend
on forecasts, we compared the directors’ analysis to
our assessment of the full range of reasonably possible
scenarios resulting from Brexit uncertainty and, where
forecast cash flows are required to be discounted,
considered adjustments to discount rates for the level
of remaining uncertainty; and
— Assessing transparency: As well as assessing individual
disclosures as part of our procedures on the carrying
value of inventory and profit recognition and post
completion development provisions, we considered all
of the Brexit related disclosures together, including those
in the strategic report, comparing the overall picture
against our understanding of the risks.
Our results
— As reported under carrying value of inventory and profit
recognition and post completion development provisions,
we found the resulting estimates and related disclosures of
the allowance of risk within longer term sites and disclosures
in relation to going concern to be acceptable. However, no
audit should be expected to predict the unknowable factors
or all possible future implications for a company and this is
particularly the case in relation to Brexit.
121
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Independent Auditors’ Report continued
The risk
Carrying value of
inventories and
profit recognition
(£3,114.7 million;
2018: £3,296.6 million
as restated)
Refer to page 89 (Audit
Committee Report),
note 2.11 on page 146
(accounting policy and
financial disclosures).
Subjective estimate:
The Group recognises profit on each
unit sold by reference to the overall
site margin, which is the forecast
profit percentage for a site that may
comprise multiple phases and can be
completed over 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
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 future market
uncertainties 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.
The effect of these matters is that,
as part of our risk assessment, we
determined that the carrying value of
inventory and profit recognition has a
high degree of estimation uncertainty,
with a potential range of reasonable
outcomes greater than our materiality
for the financial statements as a whole ,
and possibly many times that amount.
The financial statements (note 2.11)
disclose the sensitivity estimated by
the Group in respect of the approach
taken for profit recognition for the
long-term regeneration developments
in the portfolio.
Our response
Our procedures included:
— Control observation: We attended a selection of the
Group’s build cost meetings, which included assessing
whether the appropriate individuals attended the meetings,
assessing that the site forecast costs for developments
were discussed and the site forecast costs forecasts were
updated as appropriate;
We inspected whole site forecasts, on a sample basis, and
challenged management’s inputs and assumptions by
performing the following procedures:
— Historical comparisons: Agreed a sample of site forecast
costs to purchase contracts, supplier agreements or tenders
and agreed a sample of costs incurred in the year to invoice
and/or payment;
— 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;
— Benchmarking assumptions: Compared forecast sales
prices against recent prices achieved in the local market,
historical sales prices, and considered factors that may
impact the achievable price on future sales forecast sales;
— Our sector experience: Utilised the team’s experience,
supported as appropriate by the firm’s property experts, to
consider the appropriateness of the forecast assumptions;
— 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; and
— Assessing transparency: We have also considered the
adequacy of the group’s disclosures in note 2.11 to the
financial statements regarding the degree of judgement,
estimation uncertainty, and sensitivity to key assumptions
involved in arriving at the forecast site margins, resultant
profit, and carrying value of inventory.
Our results
— We found the resulting estimates in determining the
carrying value of inventories and profit recognition
to be acceptable (2018: acceptable).
122
Berkeley Group2019 Annual Report Post completion
development provisions
(£74.2 million;
2018: £74.2 million)
Refer to page 89 (Audit
Committee Report),
note 2.15 on page 148
(accounting policy and
financial disclosures).
The risk
Subjective estimate:
The Group holds post completion
development 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.
The identification and estimate
of amounts for post completion
development provisions is
judgemental by its nature and there is
a risk that the estimate is incorrect and
the provision is materially misstated.
The effect of these matters is that,
as part of our risk assessment, we
determined that post completion
development provisions has a high
degree of estimation uncertainty,
with a potential range of reasonable
outcomes greater than our materiality
for the financial statements as a whole,
and possibly many times that amount.
Carrying value of Parent
Company investments
(£1,421.7 million;
2018: £1,417.6 million)
Refer to note C2.4 on page
168 (accounting policy and
financial disclosures).
Low risk, high value:
The carrying amount of the parent
company’s investments in subsidiaries
represents 85.2% (2018: 95.4%)
of the company’s total assets.
Their recoverability is not at 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.
Our response
Our procedures included:
— Personnel interviews: We enquired of Group and
divisional Directors and inspected board minutes to
identify potential claims arising;
— Test of detail: When a provision has been made for
significant known issues and claims, we inspected the
Group’s calculation of the provision held and considered
internal cost assessments and third party evidence,
where available;
— Benchmarking assumptions: Where past events
indicated an obligation may arise, we evaluated risk
assessments performed in respect of known issues
and or settled issues and considered any differences in
the development portfolio over time, 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 post completion development provisions
recorded; and
— Assessing transparency: We have also considered
the adequacy of the group’s disclosures in note 2.15
to the financial statements regarding the degree of
judgement, estimation uncertainty, and sensitivity to
key assumptions involved in arriving at the recorded
post completion development provisions.
Our results
— We found the resulting estimates in determining post
completion development provisions to be acceptable
(2018: acceptable).
Our procedures included:
— Test 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 Group’s assessment of the recoverability
of the investment in subsidiaries to be acceptable
(2018: acceptable).
123
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Independent Auditors’ Report continued
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 £27.0 million (2018: £35.0 million), determined with
reference to a benchmark of group profit before tax of
£775.2 million (2018: Group profit before tax of £934.9 million
as previously stated), of which it represents 3.5% (2018: 3.7%).
Materiality for the parent company financial statements as a
whole was set at £24.3 million (2018: £31.5 million), determined
with reference to a benchmark of company total assets of
£1,667.9 million (2018: £1,485.7 million), of which it represents
1.5% (2018: 2.2%).
Group revenue
Group profit before tax
17
3
7
100%
(2018 83%)
97%
(2018 93%)
83
100
93
97
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £1.35 million
(2018: £1.75 million), in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Of the Group’s 18 (2018: 18) reporting components, we subjected
10 (2018: 11) to full scope audits for group purposes and 8
(2018: 7) 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.
Group total assets
18
13
82%
(2018 87%)
The components within the scope of our work accounted
for the percentages illustrated opposite.
87
82
There are no residual components in 2019 (2018: no
residual components).
Profit before taxation
£775.2m (2018: £934.9m as previously stated)
Group materiality
£27.0m (2018: £35.0m)
Full scope for group audit
purposes 2019
Specified risk-focused audit
procedures 2019
Full scope for group audit
purposes 2018
Specified risk-focused audit
procedures 2018
£27.0m
Whole financial statements materiality
(2018: £35.0m)
£21.0m
Range of materiality at 10 components (£1.0m – £21.0m)
(2018: £1.2m to £21.9m)
Profit before taxation
Group materiality
£1.35m
Misstatements reported to the audit committee
(2018: £1.75m)
124
Berkeley Group2019 Annual Report 4. We have nothing to report on going concern
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the
Company or the Group or to cease their operations, and as they
have concluded that the Company’s and the Group’s financial
position means that this is realistic. They have also concluded
that there are no material uncertainties that could have cast
significant doubt over their ability to continue as a going
concern for at least a year from the date of approval of the
financial statements (“the going concern period”).
Our responsibility is to conclude on the appropriateness of the
Directors’ conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this
audit report. However, as we cannot predict all future events or
conditions and as subsequent events may result in outcomes
that are inconsistent with judgements that were reasonable at
the time they were made, the absence of reference to a material
uncertainty in this auditor's report is not a guarantee that the
Group and the Company will continue in operation.
In our evaluation of the Directors’ conclusions, we considered
the inherent risks to the Group’s and Company’s business model
and analysed how those risks might affect the Group’s and
Company’s financial resources or ability to continue operations
over the going concern period. The risks that we considered
most likely to adversely affect the Group’s and Company’s
available financial resources over this period were:
— Increases in build costs and/or delays in build programmes;
— Changes in government regulation and policy regarding
stamp duty and land tax and foreign investors in the UK
property market;
— Uncertainty in macro political and economic factors including
the impact of Brexit.
As these were risks that could potentially cast significant doubt
on the Group’s and the Company's ability to continue as a going
concern, we considered sensitivities over the level of available
financial resources indicated by the Group’s financial forecasts
taking account of reasonably possible (but not unrealistic)
adverse effects that could arise from these risks individually
and collectively and evaluated the achievability of the actions
the Directors consider they would take to improve the position
should the risks materialise. We also considered less predictable
but realistic second order impacts, such as the impact of Brexit
and the erosion of customer or supplier confidence, which could
result in a rapid reduction of available financial resources.
Based on this work, 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 Note 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
— the related statement under the Listing Rules set out on
page 117 is materially inconsistent with our audit knowledge.
We have nothing to report in these respects, and we did not
identify going concern as a key audit matter.
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 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
— in our opinion those reports have been prepared in
accordance 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.
125
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Independent Auditors’ Report continued
5. We have nothing to report on the other
information in the Annual Report continued
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 59 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
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.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent
with judgments that were reasonable at the time they were
made, the absence of anything to report on these statements
is not a guarantee as to the Group’s and Company’s longer-
term viability.
Corporate governance disclosures
We are required to report to you if:
— 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; or
— a corporate governance statement has not been prepared
by the company.
We are required to report to you if the Corporate Governance
Statement 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:
— with respect to the Corporate Governance Statement
disclosures about internal control and risk management
systems in relation to financial reporting processes and
about share capital structures:
— we have not identified material misstatements therein; and
— the information therein is consistent with the financial
statements; and
— in our opinion, the Corporate Governance Statement has
been prepared in accordance with relevant rules of the
Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority.
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
— certain disclosures of directors’ remuneration specified
by law are not made; or
— we have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects.
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 117,
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.
126
Berkeley Group2019 Annual Report 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 general commercial and sector
experience, through discussion with the Directors and other
management (as required by auditing standards and discussed
with the directors and other management the policies and
procedures regarding compliance with laws and regulations.
We communicated identified laws and regulations throughout
our team and remained alert to any indications of non-
compliance throughout the audit.
The potential effect of these laws and regulations on the financial
statements varies considerably.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-
compliance with laws and regulations (irregularities) is from the
events and transactions reflected in the financial statements, the
less likely the inherently limited procedures required by auditing
standards would identify it. In addition, as with any audit, there
remained a higher risk of non-detection of irregularities, as
these may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. We are
not responsible for preventing non-compliance and cannot be
expected to detect non-compliance with all laws and regulations.
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.
MICHAEL HARPER
(SENIOR STATUTORY AUDITOR)
FOR AND ON BEHALF OF KPMG LLP,
STATUTORY AUDITOR
Firstly, the Group is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation (including related companies legislation), distributable
profits legislation, and taxation legislation and we assessed the
extent of compliance with these laws and regulations as part of
our procedures on the related financial statement items.
Chartered Accountants
15 Canada Square
London
E14 5GL
19 June 2019
Secondly, the Group is subject to many other laws and
regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures in the
financial statements, for instance through the imposition of
fines or litigation or the loss of the Group’s licence to operate.
We identified the following areas as those most likely to have
such an effect: health and safety, anti-bribery, anti-money
laundering and sanctions checking. Auditing standards limit
the required audit procedures to identify non-compliance
with these laws and regulations to enquiry of the directors
and other management and inspection of regulatory and legal
correspondence, if any. Through these procedures we became
aware of actual or suspected non-compliance and considered
the effect as part of our procedures on the related financial
statement items. The actual or suspected non-compliance was
not sufficiently significant to our audit to result in our response
being identified as a key audit matter.
127
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Consolidated Income Statement
For the year ended 30 April
Notes
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 share (pence):
Basic
Diluted
2019
£m
2018
(Restated*)
£m
2,957.4
2,840.9
(2,031.2)
(1,857.4)
926.2
(157.8)
768.4
10.7
(12.7)
8.8
775.2
(147.8)
627.4
983.5
(166.5)
817.0
6.6
(9.3)
162.7
977.0
(181.5)
795.5
2.3
2.3
2.10
2.6
2.7
2.7
481.1
469.9
587.4
574.3
* Results for the year ended 30 April 2018 have been restated to reflect the adoption of IFRS 15 with effect from 1 May 2018. See note 2.25.
Consolidated Statement of Comprehensive Income
For the year ended 30 April
Profit after taxation for the year
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss
Actuarial gain/(loss) recognised in the pension scheme
2.5
Deferred tax on actuarial loss recognised in the pension scheme
Total items that will not be reclassified to profit or loss
Other comprehensive income/(expense) for the year
2019
£m
627.4
2018
(Restated*)
£m
795.5
1.6
—
1.6
1.6
(0.6)
0.1
(0.5)
(0.5)
Total comprehensive income for the year
629.0
795.0
* Results for the year ended 30 April 2018 have been restated to reflect the adoption of IFRS 15 with effect from 1 May 2018. See note 2.25.
128
Berkeley Group2019 Annual Report Consolidated Statement of Financial Position
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
Current tax assets
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
2019
£m
2018
(Restated*)
£m
2017
(Restated*)
£m
2.8
2.9
2.10
2.16
2.11
2.12
2.13
2.23
2.14
2.15
17.2
42.5
374.7
45.8
480.2
17.2
25.9
311.9
65.7
420.7
17.2
22.8
127.2
74.9
242.1
3,114.7
3,296.6
3,639.9
65.5
2.5
1,275.0
4,457.7
4,937.9
43.1
—
3.1
—
987.3
585.5
4,327.0
4,228.5
4,747.7
4,470.6
(300.0)
(300.0)
(300.0)
(40.5)
(59.1)
(62.6)
(68.0)
(69.2)
(73.0)
(399.6)
(430.6)
(442.2)
2.14
(1,555.0)
(1,664.8)
(1,809.2)
—
2.15
(20.0)
(47.3)
(13.8)
(117.6)
(26.9)
(1,575.0)
(1,725.9)
(1,953.7)
(1,974.6)
(2,156.5)
(2,395.9)
2,963.3
2,591.2
2,074.7
2.17
2.17
2.18
2.18
2.18
7.0
49.8
24.5
7.0
49.8
24.5
7.0
49.8
24.5
(961.3)
(961.3)
(961.3)
3,843.3
2,963.3
3,471.2
2,591.2
2,954.7
2,074.7
* Results for the year ended 30 April 2018 and 30 April 2017 have been restated to reflect the adoption of IFRS 15 with effect from 1 May 2018. See note 2.25.
The financial statements on pages 128 to 164 were approved by the Board of Directors on 19 June 2019 and were signed on its behalf by:
R J STEARN
FINANCE DIRECTOR
129
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements
Consolidated Statement of Changes in Equity
At 1 May 2018 — originally
reported
Impact of IFRS 15
At 1 May 2018 — restated*
Profit after taxation for the year
Other comprehensive income
for the year
Purchase of own 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 2019
Notes
2.25
2.5
2.17
2.5
2.16
2.19
At 1 May 2017 — originally
reported
Impact of IFRS 15
2.25
At 1 May 2017 — restated*
Profit after taxation for the year
— restated*
Other comprehensive expense
for the year
Purchase of own 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
At 30 April 2018 — restated*
2.17
2.5
2.16
2.19
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Other
reserve
£m
Retained
earnings
£m
Total
equity
£m
7.0
—
7.0
—
—
—
—
—
—
49.8
—
49.8
24.5
—
24.5
(961.3)
3,500.0
2,620.0
—
(28.8)
(28.8)
(961.3)
3,471.2
2,591.2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
627.4
627.4
1.6
1.6
(198.9)
(198.9)
(3.9)
(3.9)
(1.1)
(1.1)
(53.0)
(53.0)
7.0
49.8
24.5
(961.3)
3,843.3
2,963.3
7.0
—
7.0
—
—
—
—
—
—
7.0
49.8
—
49.8
24.5
—
24.5
(961.3)
3,016.9
2,136.9
—
(62.2)
(62.2)
(961.3)
2,954.7
2,074.7
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
795.5
795.5
(0.5)
(0.5)
(140.4)
(140.4)
4.2
4.4
4.2
4.4
(146.7)
(146.7)
49.8
24.5
(961.3)
3,471.2
2,591.2
* Results for the year ended 30 April 2018 and 30 April 2017 have been restated to reflect the adoption of IFRS 15 with effect from 1 May 2018. See note 2.25.
130
Berkeley Group2019 Annual Report Notes
2019
£m
2018
£m
2.22
789.2
957.2
Consolidated Cash Flow Statement
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
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 associated with settlement of share options
Purchase of own shares
Dividends paid to Company’s shareholders
Net cash flow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the start of the financial year
10.7
(8.8)
(178.8)
612.3
(19.5)
0.3
(54.0)
(73.2)
0.5
(198.9)
(53.0)
(251.4)
287.7
987.3
2.09
2.10
2.17
2.19
Cash and cash equivalents at the end of the financial year
2.22
1,275.0
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
131
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements
Notes to the Consolidated Financial Statements
1 Basis of preparation
1.1 Introduction
These Consolidated Financial Statements have been prepared in accordance with European Union endorsed International Financial
Reporting Standards (IFRSs), the IFRS Interpretations Committee (IFRICs) 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.
Critical accounting judgements and key sources of uncertainty
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 within the relevant notes on pages 133 to 148.
Group accounting policies
The significant Group accounting policies are included within the relevant notes to the Consolidated Financial
Statements on pages 133 to 164.
1.2 Going concern
The Group has significant financial resources and the Directors have assessed the future funding requirements of the Group and
compared these 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 in operational existence for the foreseeable future period, and not less than
12 months from the date of these financial statements. For this reason it continues to adopt the going concern basis of accounting
in preparing its Consolidated Financial Statements.
1.3 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, unless otherwise stated in note 2.26.
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.
1.4 Adoption of new and revised standards
The following new standards, amendments to standards and interpretations are applicable to the Group and are mandatory for
the first time for the financial year beginning 1 May 2018:
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 has been
implemented by the Group from 1 May 2018. See note 2.25 for details of the restatement.
132
Berkeley Group2019 Annual Report 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. This standard has not had a significant
impact on the results of the Group for the year.
Amendment to IFRS 2 ‘Share-based Payment’, 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, have not had a significant impact
on the results of the Group for the year.
1.5 Impact of standards and interpretations in issue but not yet effective
The Group has considered the impact of IFRS 16 ‘Leases’, 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’ which will be applicable to the Group for the financial year beginning 1 May 2019.
These standards are not expected to have a significant impact on the results of the Group.
2 Results for the year
2.1 Revenue
The Group’s revenue derives principally from the sale of residential homes and commercial properties across mixed
use developments.
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
at the point control of the unit is passed to the customer, which has been determined as the point of legal completion.
Ground rent assets are treated as sold when contracts are exchanged, all material conditions precedent to the sale have
been satisfied and control of the ground rent assets have passed to the customer.
2.2 Segmental disclosure
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.
For the purpose of monitoring segment performance and allocating resources between segments, all assets are considered to be
attributable to residential-led mixed use property development.
2.3 Net finance costs
Finance income
Finance costs
Interest payable on bank loans and non-utilisation fees
Amortisation of facility fees
Other finance costs
Net finance costs
2019
£m
10.7
(8.6)
(1.8)
(2.3)
(12.7)
(2.0)
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.
2018
£m
6.6
(7.5)
(1.8)
—
(9.3)
(2.7)
133
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.4 Profit before taxation
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 inventories note 2.11 for further disclosures
on the key estimates and judgements around cost recognition.
Profit before taxation is stated after charging the following amounts:
Staff costs (note 2.5)
Depreciation on property, plant and equipment (note 2.9)
Loss 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
2019
£m
267.3
2.4
0.2
3.8
0.6
0.1
0.1
2018
£m
279.3
2.7
—
3.4
0.5
0.1
0.1
The value of inventories expensed and included in the cost of sales is £1,836.0 million (2018 restated: £1,703.0 million).
Fees paid in the year to the Group’s current auditor for audit related assurance services relate to the interim review.
In addition to the above services, the Group’s current auditor has acted as auditor to the Berkeley Final Salary Plan. The appointment
of auditors to the Group’s pension scheme and the fees paid in respect of the audit are agreed by the Trustees of the scheme, who
act independently of the management of the Group. The fees paid to the Group’s auditor for audit services to the pension scheme
during the year were £8,500 (2018: £8,500).
2.5 Directors and employees
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
The average monthly number of persons employed by the Group during the year was 2,673 (2018: 2,617).
2019
£m
213.7
29.0
7.4
8.9
8.3
2018
£m
208.1
31.3
15.6
17.3
7.0
267.3
279.3
134
Berkeley Group2019 Annual Report 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
2019
£m
2.8
13.2
0.1
16.1
2018
£m
2.4
19.4
0.1
21.9
The Directors’ Remuneration Report includes disclosure of the gains made by Directors on the exercise of share options during the
year, which was £23.6 million (2018: £21.3 million) in aggregate.
Equity settled share based payments
Where the Company operates equity settled share based compensation plans, the fair value of the employee services
received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over
the vesting period is determined by reference to the fair value of the options granted, 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.
The Group operates one (2018: 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 (LTIP) was
£7.4 million (2018: £14.8 million). The charge to the Income Statement attributable to key management is £7.6 million (2018: £13.1 million).
The charge to the reserves during the year in respect of employee share schemes was £3.9 million (2018: £4.2 million credit),
resulting from the non-cash IFRS 2 charge for the year as reflected in the cash flow statement,
There were nil exercisable share options at the end of the year (2018: 44,319). During the year 2,176,115 options vested under the
2011 LTIP (2018: 2,042,825).
2011 Long Term Incentive Plan
As part of a strategic review of the business, the Company announced in June 2011, 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 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 10 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. In the prior year, the introduction of individual participant caps
was approved by shareholders; and
— 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 the vesting dates, beginning in September 2016 with five annual vestings
thereafter, provided the exercise price cannot be less than zero.
135
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.5 Directors and employees continued
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 in 2011, 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 (pence)
Exercise price (pence)
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 no new additional options were granted (2018: 533,000) and 100,500 options lapsed (2018: none). As at
30 April 2019 there were 6,401,340 options outstanding (2018: 8,677,955).
Cash settled share based payments
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.
Bonus Banking Plan
Under the Bonus Banking Plan, detailed in the Directors’ Remuneration Report on page 99, 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, 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 2019 was £5.6 million (2018: £6.3 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 £6.1 million (2018: £7.0 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 2019 was £3.3 million (2018: £11.9 million).
The total carrying amount of liabilities for share appreciation rights at the end of the year was £22.8 million (2018: £38.8 million),
recorded in accruals and deferred income.
136
Berkeley Group2019 Annual Report 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.
Pension contributions under defined contribution schemes are charged to the Income Statement as they fall due.
Defined contribution plan
Contributions amounting to £7.0 million (2018: £5.8 million) were paid into the defined contribution schemes during the year.
Defined benefit plan
As at 30 April 2019 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 15 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 (2018: £0.6 million).
A High Court judgement handed down in October 2018, relating to defined benefit pension schemes, held that the Guaranteed
Minimum Pension (GMP) element of pension accrued by men and women should be comparable and any additional obligation
required to equalise the members’ benefits must be allowed for in the scheme liabilities. The additional obligation is considered
a past service cost and recognised through the Income Statement in accordance with IAS 19. As at 30 April 2019 the Group has
estimated that the additional obligation required to equalise benefits accrued under the Group’s defined benefit pension scheme
is £0.6 million The impact of future changes in estimates and assumptions related to the equalisation of GMP will be accounted
for as scheme experience and recognised in other comprehensive income.
For the purpose of IAS 19, the 2016 valuation was updated for 30 April 2019.
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; and
— 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.
137
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.5 Directors and employees continued
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 in the Statement of Financial Position
2019
£m
(20.9)
22.5
1.6
—
1.6
2018
£m
(19.4)
21.5
2.1
(2.1)
—
Defined benefit obligations
Fair value plan assets
Net defined benefit asset
Balance at 1 May
Included in Income Statement
Past service costs
Net interest
Included in other comprehensive income
Re-measurements:
Actuarial (loss)/gain arising from:
— Demographic assumptions
— Financial assumptions
Return on plan assets
Other
Contributions by the employer
Benefits paid out
Balance at 30 April
2019
£m
(19.4)
(0.6)
(0.5)
—
(1.0)
—
—
0.6
2018
£m
(20.5)
—
(0.5)
0.3
0.5
—
—
0.8
(20.9)
(19.4)
2019
£m
21.5
—
0.6
—
—
0.4
0.6
(0.6)
22.5
2018
£m
21.0
—
0.5
—
—
0.2
0.6
(0.8)
21.5
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 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
2019
£m
2.1
(0.6)
0.1
—
(1.0)
0.4
0.6
—
1.6
2019
£m
(7.3)
(0.6)
2.1
(5.8)
2018
£m
0.5
—
—
0.3
0.5
0.2
0.6
—
2.1
2018
£m
(6.7)
1.0
(1.6)
(7.3)
138
Berkeley Group2019 Annual Report The fair value of the assets was 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
2019
Long-term
value
£m
30 April
2018
Long-term
value
£m
1.1
5.3
1.9
1.7
7.2
1.2
—
2.4
1.5
0.2
1.0
4.8
1.8
2.0
5.0
1.1
1.9
2.3
1.5
0.1
22.5
21.5
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.
History of asset values
Fair value of plan assets
Present value of defined benefit obligations
Net surplus in the plan
30 April
2019
£m
30 April
2018
£m
30 April
2017
£m
30 April
2016
£m
30 April
2015
£m
22.5
(20.9)
1.6
21.5
(19.4)
2.1
21.0
(20.5)
0.5
18.1
(15.9)
2.2
18.1
(16.6)
1.5
Actuarial assumptions
The major assumptions used by the actuary for the 30 April 2019 valuation were:
Valuation at:
Discount rate
Inflation assumption (RPI)
Inflation assumption (CPI)
Rate of increase in pensions in payment post 1997 (Pre 1997 receive 3% p.a. increases)
30 April
2019
%
30 April
2018
%
2.40
3.60
2.70
3.60
2.60
3.40
2.50
3.40
The mortality assumptions are the standard S2PA CMI_2017_X [1.0%]) (2018: S2PA CMI_2017_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
(2018: 21.8 and 23.7 years respectively). The life expectancy of male and female deferred pensioners (now aged 45) retiring at
age 65 after the balance sheet date is 22.9 years and 25.0 years respectively (2018: aged 45, 22.8 and 24.9 years respectively).
139
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.5 Directors and employees continued
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
+3.9%
+2.7%
+3.9%
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 2020, albeit it has no
obligation to do so.
2.6 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.
The tax charge for the year is as follows:
For the year ended 30 April
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 re-measurements of the net defined benefit asset/liability (note 2.16)
Tax on items recognised directly in equity is as follows:
Deferred tax in respect of employee share schemes (note 2.16)
Current tax in respect of employee share schemes (note 2.16)
140
2019
£m
2018
(Restated)
£m
(132.4)
(177.8)
0.3
9.4
(132.1)
(168.4)
(15.0)
(0.7)
(15.7)
(147.8)
2019
£m
—
2019
£m
(1.1)
(3.1)
(4.2)
(10.5)
(2.6)
(13.1)
(181.5)
2018
£m
0.1
2018
£m
4.4
(0.6)
3.8
Berkeley Group2019 Annual Report The tax charge assessed for the year differs from the standard rate of UK corporation tax of 19.0% (2018: 19.0%). The differences are
explained below:
For the year ended 30 April
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 2.16)
Other
Tax charge
2019
£m
775.2
147.3
0.8
0.3
0.5
(0.3)
(0.8)
147.8
2018
(Restated)
£m
977.0
185.6
0.6
(0.2)
(6.8)
1.2
1.1
181.5
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
reflect 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 the Finance (No 2) Act 2015 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
rates and are based on when the assets are expected to be realised.
2.7 Earnings per ordinary share
Basic earnings per share (EPS) are calculated as the profit for the financial year attributable to shareholders of the Group divided
by the weighted average number of shares in issue during the year.
For the year ended 30 April
Profit attributable to shareholders (£m)
Weighted average no. of shares (millions)
Basic earnings per share (pence)
2019
627.4
130.4
481.1
2018
(Restated)
795.5
135.4
587.4
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 2019 the Group had two (2018: two) categories of potentially dilutive ordinary shares: 2.9 million (2018: 2.9 million) share
options under the 2011 LTIP and 22,000 (2018: 9,000) share options under the 2015 Bonus Banking Plan.
A calculation is undertaken 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.
For the year ended 30 April
Profit used to determine diluted EPS (£m)
Weighted average no. of shares (millions)
Adjustments for:
Share options — 2011 LTIP
Shares used to determine diluted EPS (millions)
Diluted earnings per share (pence)
2019
627.4
130.4
3.1
133.5
469.9
2018
(Restated)
795.5
135.4
3.1
138.5
574.3
141
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.8 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.
Cost:
At 1 May 2018 and 30 April 2019
Accumulated impairment:
At 1 May 2018 and 30 April 2019
Net book value:
At 1 May 2018 and 30 April 2019
Cost:
At 1 May 2017 and 30 April 2018
Accumulated impairment:
At 1 May 2017 and 30 April 2018
Net book value:
At 1 May 2017 and 30 April 2018
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:
— cash flows beyond a five year period are not extrapolated; and
— a pre-tax discount rate of 8.98% (2018: 7.91%) 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.
142
Berkeley Group2019 Annual Report 2.9 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 as follows:
Freehold buildings
25 – 50 years
Fixtures, fittings & equipment
3 – 12 years
Motor vehicles
4 years
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 de-recognised. 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.
Cost:
At 1 May 2018
Additions
Disposals
At 30 April 2019
Accumulated depreciation:
At 1 May 2018
Charge for the year
Disposals
At 30 April 2019
Net book value:
At 1 May 2018
At 30 April 2019
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
Freehold
property
£m
Fixtures, fittings
& equipment
£m
Motor
vehicles
£m
21.5
10.9
—
32.4
1.5
0.3
—
1.8
20.0
30.6
17.4
4.1
—
21.5
1.2
0.3
—
1.5
16.2
20.0
12.6
8.1
(1.9)
18.8
8.5
1.7
(1.8)
8.4
4.1
10.4
12.1
1.4
(0.9)
12.6
7.5
1.9
(0.9)
8.5
4.6
4.1
3.4
0.5
(1.1)
2.8
1.6
0.4
(0.7)
1.3
1.8
1.5
3.7
0.6
(0.9)
3.4
1.7
0.5
(0.6)
1.6
2.0
1.8
Total
£m
37.5
19.5
(3.0)
54.0
11.6
2.4
(2.5)
11.5
25.9
42.5
33.2
6.1
(1.8)
37.5
10.4
2.7
(1.5)
11.6
22.8
25.9
143
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.10 Investments in 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.
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 2.24 and 2.26.
At 1 May
Profit after tax for the year
Net increase in loans to joint ventures
At 30 April
The Group’s share of joint ventures’ net assets, income and expenses is comprised as follows:
2019
£m
11.0
146.3
217.5
(0.1)
374.7
2019
£m
311.9
8.8
54.0
374.7
2018
(Restated)
£m
11.0
92.3
208.7
(0.1)
311.9
2018
(Restated)
£m
127.2
162.7
22.0
311.9
St Edward
£m
St William
£m
Other
£m
299.7
158.7
458.4
(89.2)
(104.9)
264.3
62.0
(41.0)
21.0
0.2
21.2
(0.2)
21.0
11.3
332.6
343.9
(118.6)
(115.0)
110.3
5.2
(14.9)
(9.7)
(2.5)
(12.2)
—
(12.2)
0.1
—
0.1
—
—
0.1
—
—
—
—
—
—
—
Total
£m
311.1
491.3
802.4
(207.8)
(219.9)
374.7
67.2
(55.9)
11.3
(2.3)
9.0
(0.2)
8.8
2019
Cash and cash equivalents
Other current assets
Current assets
Current liabilities
Non-current financial liabilities
Revenue
Costs
Operating profit/(loss)
Interest charges
Profit/(loss) before tax
Tax charge
Share of post tax profit/(loss) of joint ventures
144
Berkeley Group2019 Annual Report 2018
Cash and cash equivalents
Other current assets
Current assets
Current liabilities
Non-current financial liabilities
Revenue
Costs
Operating profit/(loss)
Interest charges
Profit/(loss) before tax
Tax charge
Share of post tax profit/(loss) of joint ventures
St Edward
£m
St William
£m
Other
£m
Total
(Restated)
£m
285.1
87.7
372.8
(79.6)
(49.5)
243.7
321.2
(145.2)
176.0
1.5
177.5
(0.3)
177.2
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
—
—
—
—
—
—
—
293.3
238.7
532.0
(146.1)
(74.0)
311.9
321.2
(157.8)
163.4
(0.4)
163.0
(0.3)
162.7
145
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.11 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.
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 10 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.
As at 30 April 2019 the greater proportion of whole-site costs recognised in either the current or previous financial
years during the earlier stages of the development for the Group’s particularly complex, long-term sites amounted to
9% (2018: 7%) of the future estimated revenue for the specific sites. As with all judgements involving estimation over
a long-term horizon, the outcome of future events may affect the eventual accounting outcome.
Land not under development
Work in progress: Land cost
Total land
Work in progress: Build cost
Completed units
Total inventories
146
2019
£m
395.2
806.7
1,201.9
1,778.0
134.8
3,114.7
2018
(Restated)
£m
337.7
737.2
1,074.9
2,099.3
122.4
3,296.6
Berkeley Group2019 Annual Report 2.12 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. Expected credit losses are based on the difference between the contracted cash flows due in
accordance with the contract and all the cash flows that the Group expects to receive, discounted on an approximation
of the original effective interest rate. For trade receivables the Group does not track changes in credit risk, but instead
recognises a loss allowance based on lifetime expected credit losses at each reporting date. 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 not collectible, 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.
Trade receivables
Other receivables
Prepayments and accrued income
Further disclosures relating to trade receivables are set out in note 2.23.
2.13 Cash and cash equivalents
2019
£m
38.3
18.4
8.8
65.5
2018
(Restated)
£m
18.7
13.3
11.1
43.1
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.
Cash and cash equivalents
2.14 Trade and other payables
2019
£m
1,275.0
2018
£m
987.3
New property deposits and on account contract receipts are held within current 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.
Current
Trade payables
Deposits and on account contract receipts
Other taxes and social security
Accruals and deferred income
Non-current
Trade payables
Total trade and other payables
2019
£m
2018
£m
(620.7)
(686.1)
(31.5)
(216.7)
(589.3)
(895.0)
(48.6)
(131.9)
(1,555.0)
(1,664.8)
(40.5)
(62.6)
(1,595.5)
(1,727.4)
All amounts included above are unsecured. The total of £31.5 million (2018: £48.6 million) for other taxes and social security includes
£12.7 million (2018: £14.7 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 2.23.
147
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.15 Provisions for liabilities and charges
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.
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.
The Group continually reviews the identified risks that they are aware of for the Group's portfolio of developments
to ensure the amount of the provision remains appropriate.
At 1 May 2018
Utilised
Released
Charged to the Income Statement
At 30 April 2019
At 1 May 2017
Utilised
Released
Charged to the Income Statement
At 30 April 2018
Analysis of total provisions:
Non-current
Current
Total
Post
completion
development
provisions
Other
provisions
(74.2)
7.3
23.5
(30.8)
(74.2)
(7.6)
0.2
3.0
(0.5)
(4.9)
Post
completion
development
provisions
Other
provisions
(80.1)
(19.8)
11.6
26.1
(31.8)
(74.2)
9.6
3.7
(1.1)
(7.6)
2019
£m
(59.1)
(20.0)
(79.1)
Total
£m
(81.8)
7.5
26.5
(31.3)
(79.1)
Total
£m
(99.9)
21.2
29.8
(32.9)
(81.8)
2018
£m
(68.0)
(13.8)
(81.8)
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 property developments which are expected
to be incurred in the ordinary course of business, based on historical 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 completion.
148
Berkeley Group2019 Annual Report 2.16 Deferred tax
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.
The movement on the deferred tax account is as follows:
Accelerated
capital
allowances
£m
Retirement
benefit
obligations
£m
Short-term
timing
differences
£m
At 1 May 2018 (restated)
Adjustments in respect of previous years
Charged to the Income Statement in year
Adjustment in respect of change of tax rate from 19% to 17% (note 2.6)
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 2.6)
At 30 April 2019
0.7
—
(0.1)
—
(0.1)
—
—
—
0.6
0.1
—
(0.1)
—
(0.1)
—
—
—
—
64.9
(0.7)
(15.1)
0.3
(14.8)
(1.1)
(3.1)
(4.2)
Total
£m
65.7
(0.7)
(15.3)
0.3
(15.0)
(1.1)
(3.1)
(4.2)
45.2
45.8
At 1 May 2017 (restated)
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 2.6)
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 2.6)
At 30 April 2018 (restated)
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
74.0
(2.6)
(9.2)
(1.1)
(10.3)
4.4
(0.6)
3.8
64.9
Total
£m
74.9
(2.6)
(9.3)
(1.2)
(10.5)
4.5
(0.6)
3.9
65.7
149
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.16 Deferred tax continued
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 (2018: 19/17%). There is no unprovided deferred tax
(2018: £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 2019
is £45.8 million (2018: £65.7 million).
Deferred tax assets of £32.6 million (2018: £45.6 million) are expected to be recovered after more than one year.
The deferred tax credited to equity during the year was as follows:
Deferred tax on remeasurement of the net defined benefit asset/liability (note 2.6)
Deferred tax in respect of employee share schemes (note 2.6)
Movement in the year
Cumulative deferred tax credited to equity at 1 May
Cumulative deferred tax credited to equity at 30 April
2.17 Share capital and share premium
2019
£m
—
(4.2)
(4.2)
24.9
20.7
2018
£m
0.1
3.8
3.9
21.0
24.9
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.
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
2019
No ’000
2018
No ’000
140,157
140,157
—
—
140,157
140,157
2019
£m
7.0
—
7.0
2018
£m
7.0
—
7.0
2019
£m
49.8
—
49.8
2018
£m
49.8
—
49.8
Each ordinary share of 5 pence 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 2018, 0.5 million ordinary shares (2018: 0.4 million) were allotted and issued to the Employee Benefit Trust (EBT).
On 1 October 2018, 0.5 million ordinary shares (2018: 0.4 million) were transferred from the EBT to Executive Directors to satisfy
the exercise of options under the 2011 LTIP.
At 30 April 2019 there were 0.4 million shares held in trust (2018: 0.4 million) by the EBT the market value of these shares at
30 April 2019 was £16.4 million (2018: £18.0 million).
During the 2019 financial year, shares were repurchased for a total consideration of £198.9 million, excluding transaction costs
(2018: £140.4 million). These shares have not been cancelled.
At 30 April 2019 there were 11.1 million (2018: 6.0 million) treasury shares held by the Group. The market value of the shares at
30 April 2019 was £417.0 million (2018: £244.3 million).
150
Berkeley Group2019 Annual Report 2.18 Reserves
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 (2018: 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 2018, the Company issued and transferred to the Company’s EBT 0.5 million ordinary shares (2018: 0.4 million
ordinary shares). On 1 October 2018, 0.5 million ordinary shares were transferred from the EBT to Executive Directors to satisfy
the exercise of options under the 2011 LTIP (2018: 0.4 million ordinary shares).
2.19 Dividends per share
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.
Amounts recognised as distributions to equity shareholders
during the year:
September 2017
March 2018
September 2018
January 2019
Total dividends
2019
Dividend
per share
p
—
—
33.30
7.12
2018
Dividend
per share
p
51.76
56.75
—
—
£m
—
—
43.8
9.2
53.0
£m
70.4
76.3
—
—
146.7
2.20 Contingent liabilities
Certain companies within the Group have given performance and other trade guarantees on behalf of other members of the Group
in the ordinary course of business. The Group has performance agreements in the ordinary course of business of £20.5 million which
are guaranteed by third parties (2018: £16.9 million). The Group considers that the likelihood of an outflow of cash under these
agreements is low and that no provision is required.
2.21 Operating leases — minimum lease payments
Payments and receipts under operating lease agreements are charged or credited against profit on a straight line basis
over the life of the lease.
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
2019
£m
3.8
5.0
2.4
11.2
2018
£m
2.7
5.0
1.2
8.9
151
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.22 Notes to the consolidated cash flow statement
Reconciliation of profit after taxation for the year to cash generated from operations:
Profit for the financial year
Adjustments for:
— Taxation
— Depreciation
— Loss on sale of PPE
— Finance income
— Finance costs
— Share of results of joint ventures after tax
— Non-cash charge in respect of pension deficit
— Non-cash charge in respect of share awards
Changes in working capital:
— Decrease in inventories
— Increase in trade and other receivables
— Decrease 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
Increase in borrowings
Movement in net cash in the financial year
Opening net cash
Closing net cash
Net cash as at 30 April:
Cash and cash equivalents
Borrowings
Net cash
2019
£m
627.4
147.8
2.4
0.2
(10.7)
12.7
(8.8)
0.6
(4.4)
181.9
(20.9)
(138.4)
(0.6)
789.2
287.7
—
287.7
687.3
975.0
2018
(Restated)
£m
795.5
181.5
2.7
—
(6.6)
9.3
(162.7)
—
8.6
343.3
(40.2)
(173.6)
(0.6)
957.2
401.8
—
401.8
285.5
687.3
1,275.0
987.3
(300.0)
(300.0)
975.0
687.3
2.23 Capital management, financial instruments and financial risk management
The Group finances its operations by a combination of shareholders’ funds, working capital and, where appropriate, borrowings.
The Group’s objective when managing capital is to maintain an appropriate capital structure in the business to allow management
to focus on creating sustainable long-term value for its shareholders, with flexibility to take advantage of opportunities as they
arise in the short and medium term. This allows the Group to take advantage of prevailing market conditions by investing in land
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 £13.00 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 19, ensures that 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 2019
was £1,988.3 million (2018 restated: £1,903.9 million). The increase in capital employed in the year of £84.4 million reflects an
increase in net assets during the year (2018 restated: £114.7 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.
152
Berkeley Group2019 Annual Report 2.23 Capital management, financial instruments and financial risk management continued
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 counter-party 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
2019
£m
2018
(Restated)
£m
38.3
1,275.0
1,313.3
18.7
987.3
1,006.0
Trade receivables are non-interest bearing. Of the current trade receivables balance of £38.3 million (30 April 2018: £18.7 million)
none of the balance was overdue by more than 30 days.
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
Accruals and deferred income
Non-current
Trade payables
Borrowings
Total trade and other payables
All amounts included above are unsecured.
2019
£m
2018
£m
(620.7)
(216.7)
(837.4)
(40.5)
(300.0)
(340.5)
(589.3)
(131.9)
(721.2)
(62.6)
(300.0)
(362.6)
(1,177.9)
(1,083.8)
Current bank loans have term expiry dates within 12 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.
The maturity profile of the Group’s non-current financial liabilities, all of which are held at amortised cost, is as follows:
Amounts due:
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
The carrying amounts of the Group’s financial assets and financial liabilities approximate their fair value.
2019
£m
2018
£m
(25.7)
(314.8)
—
(340.5)
(15.2)
(322.9)
(24.5)
(362.6)
153
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.23 Capital management, financial instruments and financial risk management continued
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. 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:
Amounts due:
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
2019
£m
2018
£m
(837.5)
(26.0)
(315.2)
—
(721.3)
(15.4)
(323.5)
(26.5)
(1,178.7)
(1,086.7)
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 2019, profit
after tax for the year would have been £2.4 million higher (2018: £1.2 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 2019.
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 (2018: £nil), nor are there any material provisions held against
trade receivables (2018: £nil), and £nil million trade receivables are past their due date (2018: £nil).
The credit risk on cash and cash equivalents is limited because counter-parties are leading international banks with long-term A
credit ratings assigned by international credit agencies.
154
Berkeley Group2019 Annual Report 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.
The Group has committed borrowing facilities as follows:
Issued
Term loan
Revolving credit facility
2019
2018
Available
£m
Drawn
£m
Undrawn
£m
Termination
£m
Available
£m
Drawn
£m
Undrawn
£m
Termination
£m
300
450
750
(300)
—
Nov-23
—
(300)
450
450
Nov-23
300
450
750
(300)
—
Nov-22
—
(300)
450
450
Nov-22
The Group’s committed banking facilities currently total £750 million and expire in November 2023, after the Group exercised the
final option to extend the facilities by a further year.
At 30 April 2019 the total drawn down balance of the facility was £300.0 million (2018: £300.0 million). In addition, at 30 April 2019
there were bank bonds in issue of £5.0 million (2018: £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, all of which the Group is in compliance.
2.24 Related party transactions
The Group has entered into the following related party transactions:
Transactions with Directors
During the year Mr A W Pidgley paid £225,188 (2018: £73,317) and Mr R C Perrins paid £90,981 (2018: £14,577), Mr S Ellis paid
£107,039 (2018: £nil) and Mr P Vallone paid £490,576 (2018: £nil) 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. There were no balances outstanding
at the year end.
Director property purchases previously disclosed, which have all received shareholder approval, are:
— Mr K Whiteman: purchase of an apartment at Royal Arsenal Riverside for £650,000 in 2016. During the year Mr Whiteman legally
completed on the purchase of the apartment. All contractual amounts have been paid to the Group.
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 (2018: £nil) and there were no outstanding balances at the year end (2018: £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 year there were no transactions with joint ventures other than movements in loans. The outstanding loan
balances with joint ventures at 30 April 2019 total £156.7 million (30 April 2018: £102.7 million).
155
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.25 Prior year restatement from the impact of IFRS 15 ‘Revenue from Contracts with Customers’
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 has been implemented by the
Group from 1 May 2018.
Under IFRS 15, revenue and profit on the sale of units is 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 had not legally completed at the financial year end.
The comparative results have been restated using the full retrospective transition method. The impact on the Group’s primary
financial statements is as follows:
Year ended
30 April 2018
as previously
stated
£m
Adjustment
£m
Year ended
30 April 2018
as restated
£m
2,703.7
137.2
2,840.9
(1,757.6)
(99.8)
(1,857.4)
946.1
(166.5)
779.6
6.6
(9.3)
158.0
934.9
(172.8)
762.1
37.4
—
37.4
—
—
4.7
42.1
(8.7)
33.4
983.5
(166.5)
817.0
6.6
(9.3)
162.7
977.0
(181.5)
795.5
562.7
550.2
24.7
24.1
587.4
574.3
Year ended
30 April 2018
as previously
stated
£m
Adjustment
£m
Year ended
30 April 2018
as restated
£m
762.1
33.4
795.5
(0.6)
0.1
(0.5)
(0.5)
—
—
—
—
(0.6)
0.1
(0.5)
(0.5)
761.6
33.4
795.0
Impact on Consolidated Income Statement
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 share (pence):
Basic
Diluted
Impact on Consolidated Statement of Changes in Equity
Profit after taxation for the year
Other comprehensive expense
Items that will not be reclassified to profit or loss
Remeasurement of the net defined benefit asset/liability
Deferred tax on remeasurement of the net defined benefit asset/liability
Total items that will not be reclassified to profit or loss
Other comprehensive expense for the year
Total comprehensive income for the year
156
Berkeley Group2019 Annual Report Impact on Consolidated Balance Sheet
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments accounted for using the equity method
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Non-current liabilities
Borrowings
Trade and other payables
Provisions for other liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Provisions for other liabilities
Total liabilities
Total net assets
EQUITY
Shareholders' equity
Share capital
Share premium
Capital redemption reserve
Other reserve
Retained profit
Total equity
Year ended
30 April 2018
as previously
stated
£m
Adjustment
£m
Year ended
30 April 2018
as restated
£m
17.2
25.9
315.0
58.9
417.0
—
—
(3.1)
6.8
3.7
17.2
25.9
311.9
65.7
420.7
3,239.9
56.7
3,296.6
132.3
987.3
4,359.5
4,776.5
(89.2)
—
(32.5)
(28.8)
43.1
987.3
4,327.0
4,747.7
(300.0)
(62.6)
(68.0)
(430.6)
(1,664.8)
(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
—
—
—
—
—
—
—
—
—
(300.0)
(62.6)
(68.0)
(430.6)
(1,664.8)
(47.3)
(13.8)
(1,725.9)
(2,156.5)
(28.8)
2,591.2
—
—
—
—
(28.8)
(28.8)
7.0
49.8
24.5
(961.3)
3,471.2
2,591.2
157
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.25 Prior year restatement from the impact of IFRS 15 ‘Revenue from Contracts with Customers’ continued
Year ended
30 April 2017
as previously
stated
£m
Adjustment
£m
Year ended
30 April 2017
as restated
£m
17.2
22.8
135.0
59.4
234.4
—
—
(7.8)
15.5
7.7
17.2
22.8
127.2
74.9
242.1
3,483.4
156.5
3,639.9
229.5
585.5
4,298.4
4,532.8
(226.4)
—
(69.9)
(62.2)
3.1
585.5
4,228.5
4,470.6
(300.0)
(69.2)
(73.0)
(442.2)
(1,809.2)
(117.6)
(26.9)
(1,953.7)
(2,395.9)
—
—
—
—
—
—
—
—
—
(300.0)
(69.2)
(73.0)
(442.2)
(1,809.2)
(117.6)
(26.9)
(1,953.7)
(2,395.9)
2,136.9
(62.2)
2,074.7
7.0
49.8
24.5
(961.3)
3,016.9
2,136.9
—
—
—
—
(62.2)
(62.2)
7.0
49.8
24.5
(961.3)
2,954.7
2,074.7
Impact on Consolidated Balance Sheet
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments accounted for using the equity method
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Non-current liabilities
Borrowings
Trade and other payables
Provisions for other liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Provisions for other liabilities
Total liabilities
Total net assets
EQUITY
Shareholders' equity
Share capital
Share premium
Capital redemption reserve
Other reserve
Retained profit
Total equity
158
Berkeley Group2019 Annual Report 2.26 Subsidiaries and joint ventures
(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 2019 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 principle 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 (North East London)
Limited
Ely Business Park Limited
Agents of Berkeley (Central London)
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 Homes (Oxford & Chiltern)
Limited
Berkeley Homes (South East London)
Limited
Thirlstone Homes Limited
Agents of St George Central
London Limited
Castle Court Putney Wharf Limited
Imperial Wharf (Block C) Limited
Berkeley Homes (South London) Limited
Imperial Wharf (Block J) Limited
Berkeley Homes (Southern) Limited
Berkeley Homes (Surrey) Limited
Berkeley Homes (Thames Gateway)
Limited
Imperial Wharf (Riverside Tower)
Residential Limited
Agents of St George plc
St George Central London Limited
Berkeley Homes (Thames Valley) Limited
St George City Limited
Berkeley Homes (Three Valleys) Limited
St George Developments Limited
Berkeley Homes (Urban Developments)
Limited
Berkeley Homes (Urban Living) Limited
Berkeley Homes (Urban Renaissance)
Limited
Berkeley Forty-Five Limited(i)
Berkeley Homes (West London) Limited
Berkeley Forty-Four plc
Berkeley Homes (Western) Limited
Berkeley Gateway Limited
Berkeley Homes (West Thames) Limited
Berkeley Homes (Barn Elms) Limited
Berkeley Ninety-One Limited
Berkeley Homes (Capital) plc
Berkeley Partnership Homes Limited
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 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
Berkeley Homes (Hampshire) Limited
Agents of Berkeley Twenty Limited
Berkeley Homes (Home Counties) plc
Thirlstone Homes (Western) Limited
St George Kings Cross Limited
St George North London Limited
St George South and Central
London Limited
St George South London Limited
St. George West London Limited
Agents of St George South
London Limited
Battersea Reach Estate
Company Limited
Kensington Westside No. 2 Limited
Putney Wharf Estate Limited
Riverside West (Block C)
Commercial Limited
Riverside West (Block C)
Residential Limited
Riverside West (Block D)
Commercial Limited
Riverside West (Block D)
Residential Limited
Riverside West Car Park Limited
St George Wharf (Block B) Limited
St George Wharf (Block C) Limited
St George Wharf (Block D)
Commercial Limited
159
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.26 Subsidiaries and joint ventures continued
(a) Subsidiaries continued
St George Wharf Car Park Limited
Berkeley First Limited
Berkeley Ninety-Eight Limited
Agents of St John Homes Limited
Berkeley Five Limited
Berkeley Ninety-Five Limited
Berkeley Sixty-Six Limited
Berkeley Forty Limited
Berkeley Ninety-Nine Limited
Non-Agency Companies(v)
Berkeley Forty-Eight Limited
Berkeley Ninety-Seven Limited
Ancestral Homes Limited
Berkeley Forty-Nine Limited
Berkeley Ninety-Six Limited
Berkeley (Inner-City Partnerships) Limited
Berkeley Forty-Seven Limited
Berkeley Number Four Limited
Berkeley (SQP) Limited
Berkeley Forty-Six Limited
Berkeley (Virginia Water) Limited(i)
Berkeley Forty-Three Limited
Berkeley Number Seven Limited
Berkeley Number Six Limited
Berkeley Affordable Homes Limited
Berkeley Forty-Two Limited
Berkeley Asset MSA Limited
Berkeley Fourteen Limited
Berkeley College Homes Limited
Berkeley Group Pension Trustees 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
Berkeley Group Services 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 Festival Development Limited
Berkeley Homes Group Limited
Berkeley Festival Hotels Limited
Berkeley Festival Investments Limited
Berkeley Festival Limited
Berkeley Fifty Limited
Berkeley Homes (Hertfordshire
& Cambridgeshire) Limited
Berkeley Homes (Kent) Limited
Berkeley Homes (North Western)
Limited(i)
Berkeley Fifty-Eight Limited
Berkeley Homes (PCL) Limited
Berkeley Fifty-Five Limited
Berkeley Homes plc(iii)
Berkeley Fifty-Four Limited
Berkeley Homes (South) Limited
Berkeley Fifty-Nine Limited
Berkeley Homes (Southall) Limited
Berkeley Fifty-One Limited
Berkeley Homes (Stanmore) Limited
Berkeley Fifty-Seven Limited
Berkeley London Residential Limited
Berkeley Fifty-Three Limited
Berkeley Manhattan Limited
Berkeley Fifty-Two Limited
Berkeley Modular Limited
Berkeley One Hundred
and Eight Limited
Berkeley One Hundred
and Eighteen 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 Fifty-Five Limited
Berkeley One Hundred
and Fifty-Four Limited
Berkeley One Hundred
and Fifty Limited
Berkeley One Hundred
and Fifty-Nine Limited
Berkeley One Hundred
and Fifty-One Limited
Berkeley One Hundred
and Fifty-Seven Limited
Berkeley One Hundred
and Fifty-Six Limited
160
Berkeley Group2019 Annual Report 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 One Hundred
and Ninety-Six 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 Seven Limited
Berkeley One Hundred
and Seventeen 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 Seventy 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 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 One Hundred
and Twenty 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 Twenty-Six 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 Portsmouth Waterfront 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)
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)
161
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
2.26 Subsidiaries and joint ventures continued
(a) Subsidiaries continued
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 Twenty 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
Berkeley Two Hundred
and Twenty-Six Limited
Berkeley Two Hundred
and Twenty-Three Limited
Berkeley Two Hundred
and Twenty-Two Limited
Berkeley Two Hundred and Two Limited
Berkeley Two Hundred and Five Limited
Berkeley Two Hundred Limited
Berkeley Two Hundred
and Fourteen Limited
Berkeley Ventures Limited
BH (City Forum) Limited
Berkeley Two Hundred and Nine Limited
Boardcable 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
Retirement Homes 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
Royal Clarence Yard (Phase H) Limited
Royal Clarence Yard (Phase I) Limited
Royal Clarence Yard (Phase K)
Management Company Limited
Berkeley Two Hundred
and Nineteen Limited
Berkeley Two Hundred and One Limited(i)
Berkeley Two Hundred
and Seven Limited
Berkeley Two Hundred
and Seventeen 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
162
Bromyard House (Car Park) Limited
Royal Clarence Yard Estate Limited
Bromyard House (Freehold) Limited
Sandgates Developments Limited
Bromyard House (North) Limited
Sitesecure Limited
Bromyard House Limited
SJC (Highgate) Limited
BWW Management Limited
Charco 143 Limited(i)
Chelsea Bridge Wharf (Management
Company) Limited
South Quay Plaza Management Ltd
(62.5%)(vi)
St Edward Limited
St George (Crawford Street) Limited
Chelsea Bridge Wharf Car Park Limited
St George (Queenstown Place) Limited
Community Housing Action Limited
St George Blackfriars Limited
Community Villages Limited
St. George Commercial Limited
CPWGCO 1 Limited
St George Ealing Limited
Drummond Road (Number 1) Limited
St. George Eastern Limited
Drummond Road (Number 2) Limited
St. George Inner Cities Ltd
Exchange Place No 2 Limited
St. George Investments Ltd
Fishguard Bridge Limited
St. George London Limited
Berkeley Group2019 Annual Report St George Northfields Limited
Tabard Square (Building A) Limited
Thirlstone Commercial Limited
St. George Partnerships Limited
Tabard Square (Building B) Limited
Thirlstone plc
St George plc(iv)
Tabard Square (Car Park) Limited
Woodside Road Limited
St. George Project Management Limited
TBG (1) 2009 Limited
St. George Properties Limited
St George Real Estate Limited
St George Regeneration Limited
St. George Southern Limited
St. George Western Limited
TBG (3) 2009 Limited
TBG (4) Limited
TBG (5) LLP(vii)
The Berkeley Festival Waterfront
Company Limited
St George Wharf Hotel Limited
The Berkeley Group plc
St. George's Hill Property
Company Limited
St James Group Limited
St James Homes (Grosvenor Dock)
Limited
The Millennium Festival Leisure
Company Limited
The Oxford Gateway Development
Company Limited
The Tower, One St George Wharf Limited
St James Homes Limited
Thirlstone (JLP) 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 principal
to agency agreements but are not
agents themselves
(vi) Registered office is 83 The Avenue,
Sunbury-On-Thames, Middlesex, TW16 5HZ
(vii) Partnership with no share capital
+ Dissolved 1 March 2019
Country of
Incorporation
Registered office
Aragon Investments Limited(iii)
Jersey
28 Esplanade Jersey JE2 3QA
Berkeley (Carnwath Road) Limited
Isle of Man
First Floor, Jubilee Buildings, Victoria Street, Douglas, IM1 2SH,
Isle of Man
Berkeley (Hong Kong) Limited
Hong Kong
3806 Central Plaza, 18 Harbour Road, Wanchai, Hong Kong
Berkeley Homes Special Contracts plc(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
Jersey
Kleinwort Benson House, Po Box 76, Wests Centre, St Helier,
Jersey, JE4 8PQ
BRP Investments No. 1 Limited
BRP Investments No. 2 Limited
Jersey
Jersey
28 Esplanade, Jersey, JE2 3QA
28 Esplanade, Jersey, JE2 3QA
Comiston Properties Ltd
Bahamas
Shirlaw House, PO Box SS-19084, Shirley Street, Nassau, Bahamas
Real Star Investments Limited(ii)(iii)
Silverdale One Limited(iii)
St George Battersea Reach Limited
TBG (Jersey) 2009 Limited
Jersey
Jersey
Jersey
Jersey
(i) Ordinary, A Deferred and B Deferred shares
(ii) Agency company of St James Group Limited
(iii) Non UK Nominee Company
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
163
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Consolidated Financial Statements continued
(b) Joint Ventures
At 30 April 2019 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)
St William Four Limited*
Berkeley Carlton Holdings Limited(i)
Berkeley Sutton Limited(ii)
St William Fourteen Limited*
St William Holdings Limited*
Community Housing Initiatives Limited**
St William Nine 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 Nineteen Limited*
St William One Limited*
St William Seven Limited*
St William Seventeen Limited*
St William Six Limited*
St William Sixteen Limited*
St William Ten Limited*
St Edward Homes Number Five Limited***
St William Thirteen Limited*
St Edward Homes Number Four Limited***
St William Three Limited*
St Edward Homes Number One Limited***
St William Twelve Limited*
St Edward Homes Number Three Limited***
St William Twenty Limited*
St Edward Homes Number Two Limited***
St William Twenty-Eight Limited*
St Edward Homes Partnership Freeholds Limited
St William Twenty-Five Limited*
St Edward Strand Partnership Freeholds Limited
St William Twenty-Four Limited*
St George Little Britain (No 1) Limited(ii)
St William Twenty-One Limited*
St George Little Britain (No 2) Limited(ii)
St William Twenty-Seven Limited*
St Katharine Homes LLP(v)
STKM Limited
St William Twenty-Six Limited*
St William Twenty-Three Limited*
Strand Property Unit Trust (unregistered)+
St William Twenty-Two Limited*
St William Homes LLP*(v)
St William Eight Limited*
St William Eighteen Limited*
St William Eleven Limited*
St William Five Limited*
St William Fifteen Limited*
St William Two Limited*
The St Edward Homes Partnership (unregistered)(v)
The St Edward (Strand) Partnership (unregistered)(v)
Thirlstone Centros Miller Limited(ii)
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
(v) Partnerships with no share capital
* Accounting date of 31 March
** Accounting date of 31 December
*** 100% owned by St Edward Homes Limited
+
Principal place of business is 19 Portsmouth Road, Cobham,
Surrey, KT11 1JG
164
Berkeley Group2019 Annual Report Company Balance Sheet
As at 30 April
Fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Current liabilities
Creditors (amounts falling due within one year)
Net current liabilities
Total assets less current liabilities and net assets
Capital and reserves
Called-up share capital
Share premium account
Capital redemption reserve
Profit and loss account
Total shareholders’ funds
Notes
C2.4
C2.5
C2.6
C2.7
C2.7
2019
£m
2018
£m
1,421.7
1,421.7
245.3
0.9
246.2
1,417.6
1,417.6
67.2
0.9
68.1
(773.6)
(527.4)
894.3
(746.8)
(678.7)
738.9
7.0
49.8
24.5
813.0
894.3
7.0
49.8
24.5
657.6
738.9
The financial statements on pages 165 to 170 were approved by the Board of Directors on 19 June 2019 and were signed on its
behalf by:
R J STEARN
FINANCE DIRECTOR
165
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements
Company Statement of Changes in Equity
At 1 May 2018
Profit after taxation for the year
Purchase of ordinary shares
Credit in respect of employee share schemes
Deferred tax in respect of employee share schemes
Dividends to equity holders of the Company
At 30 April 2019
At 1 May 2017
Profit after taxation for the year
Purchase of ordinary shares
Credit in respect of employee share schemes
Deferred tax in respect of employee share schemes
Dividends to equity holders of the Company
Called-up
share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Profit and loss
account
£m
Total
shareholders’
funds
£m
7.0
49.8
24.5
—
—
—
—
—
7.0
7.0
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
49.8
24.5
49.8
24.5
—
—
—
—
—
—
—
—
—
—
657.6
406.0
738.9
406.0
(198.9)
(198.9)
1.1
0.2
(53.0)
813.0
635.1
299.9
1.1
0.2
(53.0)
894.3
716.4
299.9
(140.4)
(140.4)
8.8
0.9
8.8
0.9
(146.7)
(146.7)
At 30 April 2018
7.0
49.8
24.5
657.6
738.9
166
Berkeley Group2019 Annual Report Notes to the Company Financial Statements
C1 Basis of preparation
C1.1 Introduction
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 in the notes to the Consolidated Financial Statements on pages 132 to 164.
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
— disclosure 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.
C1.2 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 70 to 73.
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 period, not less than 12 months from the date of approval of
these financial statements, notwithstanding its net current liability position of £527.4 million (2018: £678.7 million). For this reason
they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
C2 Notes to the Company accounts
C2.1 Profit on ordinary activities before taxation
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.
Profit on ordinary activities before taxation is stated after charging the following amounts:
Auditor’s remuneration
2019
£m
0.1
2018
£m
0.1
No disclosure of other non-audit services has been made as this is included within note 2.4 of the Consolidated Financial Statements.
167
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Company Financial Statements continued
C2.2 Directors and employees
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.
Pension contributions under defined contribution schemes are charged to the profit and loss account as they fall due.
Staff costs:
Wages and salaries
Social security costs
Share based payments — Equity settled
Share based payments — Cash settled
2019
£m
3.0
1.9
3.4
2.8
11.1
2018
£m
2.5
3.3
9.8
3.6
19.2
The average monthly number of persons employed by the Company during the year was 10, all of whom are Directors (2018: 10).
Directors
Details of Directors’ emoluments are set out in the Remuneration Report on pages 92 to 113.
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 2.5 of the Consolidated Financial Statements. Contributions amounting to
£nil (2018: £nil) were paid into the defined contribution scheme during the year.
Share based payments
The charge to the profit and loss account 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 LTIP was £3.4 million (2018: £9.8 million). The charge to the profit and loss
account in respect of cash settled share based payments under the Bonus Banking Plan was £2.8 million (2018: £3.6 million). The credit
to the reserves during the year in respect of employee share schemes was £1.1 million (2018: £8.8 million credit) which includes the
corresponding entry to the cost of investment of £4.1 million (2018: £3.7 million) detailed in note C2.4. The offsetting entry within
reserves results from the non-cash IFRS 2 charge for the year. Further information on the Company’s share incentive schemes are
included in the Remuneration Report on pages 93 to 113 as well as note 2.5 to the Consolidated Financial Statements.
C2.3 The Berkeley Group Holdings plc profit and loss account
The profit for the year in the Company is £406.0 million (2018: £299.9 million).
C2.4 Investments
Investments in subsidiary undertakings are included in the Balance Sheet at cost less provision for any impairment.
Investments at cost:
Investments in shares of subsidiary undertaking at 1 May
Additions
Investment in shares of subsidiary undertaking at 1 April
168
2019
£m
2018
£m
1,417.6
4.1
1,421.7
1,413.9
3.7
1,417.6
Berkeley Group2019 Annual Report 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 LTIP 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 2.26 of the Consolidated Financial Statements.
C2.5 Debtors
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.
Current:
Amounts owed from subsidiary undertakings
Deferred tax
All amounts owed from subsidiary undertakings are unsecured, bear no interest and are repayable 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
2019
£m
229.2
16.1
245.3
2019
£m
18.7
(0.6)
(2.0)
16.1
2018
£m
48.5
18.7
67.2
2018
£m
20.5
(1.4)
(0.4)
18.7
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 (2018: 19/17%). Accordingly, all temporary differences have
been calculated. There is no unprovided deferred tax (2018: £nil) at the balance sheet date.
The deferred tax asset of £16.1 million relates to short term timing differences (2018: £18.7 million).
C2.6 Creditors: amounts falling due within one year
Creditors are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost
using the effective interest method.
Current
Amounts owed to subsidiary undertakings
Other taxation and social security
Accruals and deferred income
2019
£m
(760.4)
(8.9)
(4.3)
2018
£m
(731.1)
(10.3)
(5.4)
(773.6)
(746.8)
All amounts included above are unsecured. The interest rate on £760.4 million (2018: £731.1 million) of the balance owed to subsidiary
undertakings is 4.0% (2018: 4.0%), with no fixed repayment date.
169
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Notes to the Company Financial Statements continued
C2.7 Called-up share capital
Each ordinary share of 5 pence 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
2019
No ‘000
2018
No ‘000
140,157
140,157
—
—
140,157
140,157
2019
£m
7.0
—
7.0
2018
£m
7.0
—
7.0
2019
£m
49.8
—
49.8
2018
£m
49.8
—
49.8
On 28 September 2018, 0.5 million ordinary shares (2018: 0.4 million) were allotted and issued to the EBT.
On 1 October 2018, 0.5 million ordinary shares (2018: 0.4 million) were transferred from the EBT to Executive Directors to satisfy
the exercise of options under the 2011 LTIP.
At 30 April 2019 there were 0.4 million shares held in trust (2018: 0.4 million) by the EBT. The market value of these shares at
30 April 2019 was £16.4 million (2018: £18.0 million).
During the 2019 financial year, shares were repurchased for a total consideration of £198.9 million, excluding transaction costs
(2018: £140.4 million). These shares have not been cancelled.
At 30 April 2019 there were 11.1 million (2018: 6.0 million) treasury shares held by the Group. The market value of the shares
at 30 April 2019 was £417.0 million (2018: £244.3 million).
The movements in the year are disclosed in notes 2.17 and 2.18 of the Consolidated Financial Statements.
C2.8 Dividends per share
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.
Amounts recognised as distributions to equity shareholders
during the year:
September 2017
March 2018
September 2018
January 2019
Total dividends
2019
2018
Dividend per
share
pence
Dividend per
share
pence
£m
—
—
33.30
7.12
—
—
43.8
9.2
53.0
51.76
56.75
—
—
£m
70.4
76.3
—
—
146.7
C2.9 Related party transactions
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. Discosure of transactions with wholly owned members of The Berkeley Group Holdings plc are
exempt under FRS 101 with reduced disclosure.
170
Berkeley Group2019 Annual Report Five Year Summary
Consolidated Income Statement
Revenue from operations
Operating profit
Share of results of joint ventures
Net finance costs
Profit before taxation
Taxation
Profit for the year
Basic earnings per share
Consolidated 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)
Cash due on forward sales(6)
Gross margin on land holdings(7)
2019
£m
2018
(* Restated)
£m
2017
(* Restated)
£m
2016
£m
2015
£m
2,957.4
768.4
8.8
(2.0)
775.2
(147.8)
627.4
481.1p
1,988.3
975.0
2,963.3
2,305p
39.5%
22.6%
27.9%
3,698
£1,831m
£6,247m
2,840.9
2,626.8
2,047.5
2,020.2
817.0
162.7
(2.7)
977.0
(181.5)
795.5
737.1
63.0
(7.6)
792.5
(163.4)
629.1
501.9
36.5
(7.5)
530.9
(126.8)
404.1
587.4p
456.2p
295.8p
1,903.9
1,789.2
1,705.4
687.3
2,591.2
1,938p
285.5
2,074.7
1,511p
44.2%
34.1%
41.9%
3,678
42.8%
32.8%
41.3%
3,802
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
£2,193m
£2,743m
£3,259m
£2,959m
£6,003m
£6,378m
£6,146m
£5,272m
*Figures amended to reflect the adoption of IFRS 15. See note 2.25.
(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.
(6) Cash due from customers during the next three finanial years under unconditional contracts for sale.
(7) The measure of expected value in the Group's land holdings in the event the Group successfully sells and delivers the developments planned for.
171
Berkeley Group 2019 Annual ReportStrategic ReportCorporate GovernanceFinancial Statements Financial Diary
Annual General Meeting and Trading Update
Half year end
Interim Results Announcement for the six months ending 31 October 2019
Trading Update
Year end
Announcement of Results for the year ending 30 April 2020
Publication of 2020 Annual Report
6 September 2019
31 October 2019
December 2019
March 2020
30 April 2020
June 2020
August 2020
Registered Office and Advisors
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
172
Berkeley Group2019 Annual Report Printed in England by Pureprint Group
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This is made from 100% post consumer
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It is manufactured at a mill that is certified
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Consultancy, design and production
www.luminous.co.uk
Design and production
www.luminous.co.uk
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The Berkeley Group Holdings plc
Berkeley House
19 Portsmouth Road
Cobham
Surrey KT11 1JG UK
T +44(0)1932868555
F +44(0)1932868667
www.berkeleygroup.co.uk