TIDMTW.
RNS Number : 9920X
Taylor Wimpey PLC
28 February 2017
28 February 2017
Taylor Wimpey plc
Full year results for the year ended 31 December 2016
Pete Redfern, Chief Executive, commented:
"In 2016 we delivered an excellent performance set against an
uncertain political and economic environment that stabilised in the
final quarter. The outlook for 2017 is for ongoing stability and
incremental price growth, which is a healthy backdrop for our
business and our customers."
Good progress made towards all medium term targets for the
period 2016-2018
-- Target total of GBP1.3 billion of dividends to be paid in
cash to shareholders over the period
- GBP355.9 million paid in 2016 (2015: GBP308.4 million)
- c.GBP450 million declared for 2017 (subject to shareholder
approval)
-- Target average annual return on net operating assets** of 30%
- 30.7% in 2016 (2015: 27.1%)
-- Target average operating profit* margin of c.22%
- 20.8% in 2016 (2015: 20.3%)
2016 Group financials
-- Completed a total of 14,112 homes, including Spain, up 4.8%
(2015: 13,470), excluding joint ventures
-- 10.9% increase in UK total average selling price to GBP255k
(2015: GBP230k), excluding joint ventures
2016 2015 Change
----------------------------------- -------- -------- -------
Revenue GBPm 3,676.2 3,139.8 17.1%
----------------------------------- -------- -------- -------
Operating profit* GBPm 764.3 637.0 20.0%
----------------------------------- -------- -------- -------
Profit before tax and exceptional
items GBPm 733.4 603.8 21.5%
----------------------------------- -------- -------- -------
Profit for the year GBPm 589.3 489.8 20.3%
----------------------------------- -------- -------- -------
Adjusted basic earnings
per share pence 18.1 14.9 21.5%
----------------------------------- -------- -------- -------
Basic earnings per share
pence 18.1 15.1 19.9%
----------------------------------- -------- -------- -------
Tangible net asset value
per share pence 88.6 83.5 6.1%
----------------------------------- -------- -------- -------
Net cash GBPm 364.7 223.3 63.3%
----------------------------------- -------- -------- -------
UK current trading and outlook
We have made a very good start to 2017 and are encouraged by
robust trading and levels of demand. The UK housing market
fundamentals remain good with strong customer confidence in our
core geographies.
The market is underpinned by a competitive mortgage market and
low interest rates. Customer interest remains high, with website
visits solid and customers continuing to register interest in
forthcoming developments and progress their home purchase plans.
Whilst the wider London market remains robust, prime central London
is softer, as previously highlighted, however, house prices are
stable, and there are good levels of underlying demand.
The net private sales rate for the year to date (w/e 19 February
2017) has increased to a very strong 0.91 (2016 equivalent period:
0.77).
We continue to focus on building a strong order book for the
future. As at 19 February 2017, we were c.49% forward sold for
private completions for 2017, with a total order book value of
GBP1,978 million (2016 equivalent period: GBP2,030 million),
excluding joint ventures. This order book represents 8,573 homes
(2016 equivalent period: 8,409). 58% of Central London private
completions for 2017 are forward sold, as at 19 February 2017 (2016
equivalent period: 76%).
We expect underlying build cost increases during 2017 to be at a
similar level to 2016, at around 3-4%.
The publication of the Housing White Paper in February 2017
recognises the importance of housing to the UK and the part all
housebuilders can play in the economy. Whilst some of the detail is
of course to be finalised, we welcome the measures set out in the
White Paper which are balanced and aim to sustainably increase the
delivery of much needed homes.
The early signs of stability and resilience of the market
following the EU Referendum, which were encouraging, continued and
we believe the risk of material impact from this in the short term
has significantly reduced. In line with our strategy, we will
continue to closely monitor market risks, particularly around long
term mortgage cost. However we believe that a cautiously regulated
market and low interest rate environment is likely to prolong the
period of stability that we are seeing in the UK housing
market.
We have a clear strategy and a strong focus on where we can add
further value to the business. In this way, we are confident that
we can adapt to all market conditions from a position of strength
and perform well, underpinning our value proposition to
shareholders and other stakeholders. We remain fully committed to
the Dividend Policy set out in May 2016 and our objective to
provide a consistent and reliable income stream for investors. Our
focus remains on adding value and steady, sustainable growth as we
maximise efficiency through operational excellence and discipline
on our sites and throughout our business.
* Operating profit is defined as profit on ordinary activities
before net finance costs, exceptional items and tax, after share of
results of joint ventures.
** Return on net operating assets is defined as 12-month rolling
operating profit divided by the average of the opening and closing
net operating assets, which is defined as net assets less net cash
less net tax balances, excluding any accrued dividends.
*** Return on capital employed is defined as a 12-month rolling
operating profit divided by the average of the opening and closing
capital employed.
**** Operating cash flow is defined as cash generated by
operations before tax, interest paid, and exceptional cash flows on
a rolling 12-month basis.
Tangible net assets per share is defined as net assets before
any accrued dividends excluding goodwill and intangible assets
divided by the number of ordinary shares in issue at the end of the
period.
Adjusted basic earnings per share represents earnings attributed
to the shareholders of the parent, excluding exceptional items and
tax on exceptional items, divided by the number of shares in issue
during the period.
* Net operating asset turn is defined as total revenue divided
by the average of opening and closing net operating assets. Based
on rolling 12-months.
Note: Performance of the Group is monitored internally using a
variety of statutory and alternative performance measures.
Alternative performance measures are used where they are considered
to provide more clarity of underlying trading or in monitoring
performance against strategy. Definitions of the alternative
performance measures and a reconciliation to the equivalent
statutory measure are detailed on page 41.
- Ends -
A presentation to analysts will be hosted by Chief Executive
Pete Redfern and Group Finance Director Ryan Mangold at 9am on
Tuesday 28 February 2017. This presentation will be webcast live on
our website: www.taylorwimpey.co.uk/corporate
An archived version of the webcast will be available on our
website in the afternoon of 28 February 2017.
For further information please contact:
Taylor Wimpey plc Tel: +44 (0) 7826 874461
Tel: +44 (0) 7823 419000
Pete Redfern, Chief Executive
Ryan Mangold, Group Finance Director
Debbie Sempie, Investor Relations
Finsbury Tel: +44 (0) 20 7251 3801
Faeth Birch
Anjali Unnikrishnan
Notes to editors:
Taylor Wimpey plc is a UK-focused residential developer,
operating at a local level from 24 regional businesses across the
UK. We also have operations in Spain.
For further information please visit the Group's website:
www.taylorwimpey.co.uk/corporate
Follow us on Twitter @TaylorWimpeyplc
Managing through the cycle - Group strategy and returns
We operate in a cyclical market, where factors such as customer
confidence and mortgage cost inevitably have a direct impact on the
short term outlook. We believe that a long term view and a
proactive and flexible approach is needed to manage through the
cycle. Our strategy is built on this and so seeks to protect
shareholder value whilst mitigating future downside risk and
affords us the flexibility to take advantages of opportunities and
drive further value from the business.
Our ability to buy good-quality land, at the right time in the
cycle, enhance it through planning, and realise value through
building and selling homes, remains the biggest value driver for
the business, despite the relatively positive land market of the
last six years. We have been very successful in this area -
building and optimising a short term landbank of 76,234 plots, of
which 65% is strategically sourced. This has given us the
flexibility to be very selective when purchasing land and focus on
delivery through increased cash generation.
During 2016, we reviewed our strategy as part of a wider process
and confirmed that it remains the right one for the future. Given
the strength of the business, we believe we can deliver further
continual improvement in every area of the business, particularly
in long term value added programmes - from employee recruitment,
development and engagement through to investment in research and
development, customer service and product quality.
We are confident that because of this strategy, alongside a
strong, well-capitalised balance sheet and strategic land pipeline,
Taylor Wimpey is optimally positioned for the future, enabling us
to perform well through all market conditions and take advantage of
opportunities as they arise.
Medium term targets
We are pleased to report good progress against each of the
enhanced medium term targets announced in May 2016 in their first
year of operation. These targets sit within our long term strategy,
ensuring we are focused on operational efficiency as well as
strategic investments. Whilst the targets are stretching, we
believe these to be the best medium term measures of performance
for our business, and they remain appropriate management goals,
targeting further improvement across three key areas in the period
from 2016 to 2018.
Medium term targets (2016-2018) 2016 actual 2016-2018
target
--------------------------------- ------------ ----------
An average annual return on
net operating assets** 30.7% 30%
--------------------------------- ------------ ----------
An average operating profit* 20.8% c.22%
margin
--------------------------------- ------------ ----------
Total dividends to be paid GBP355.9m GBP1.3bn
in cash to shareholders over
the period
--------------------------------- ------------ ----------
Dividends
A key part of our investment proposition is our commitment to a
reliable dividend stream for our investors through the cycle. We
remain confident that we can continue to be significantly cash
generative, enabling shareholders to benefit from the success of
our strategy in all stages of the cycle by sustaining a significant
ordinary dividend to shareholders on an annual basis, including
through a 'normal downturn', and an additional special dividend to
be paid at appropriate times in the cycle.
During 2016 we significantly enhanced our ordinary dividend and
announced further special dividends. Therefore, subject to
shareholder approval each year, the Company will pay an ordinary
dividend of approximately 5% of Group net assets and which will be
at least GBP150 million per annum. This is intended to provide a
reliable minimum annual return to shareholders throughout the
cycle. This Ordinary Dividend Policy was subject to prudent and
comprehensive stress testing against various downside scenarios,
which also included a reduction of 20% in average selling prices
and a 30% reduction in volumes. After the economic uncertainty of
the latter half of 2016, we remain very confident in this
policy.
The payment of ordinary dividends will continue to be
supplemented by additional significant special dividends at
appropriate times in the cycle. Our Special Dividend Policy will
pay out to shareholders the free cash generated by the Group after
land investment, all working capital, taxation and other cash
requirements of the business in executing our strategy in the
medium term, and once the Group's ordinary dividends have been
met.
In 2016 shareholders received total dividends (including
ordinary and special dividends) of GBP355.9 million (or 10.91 pence
per share).
As previously announced, and subject to shareholder approval at
the 2017 Annual General Meeting, we intend to pay c.GBP300 million
to shareholders in July 2017 by way of a special dividend.
Accordingly, subject to shareholder approval at the 2017 Annual
General Meeting, in 2017 shareholders will receive a total dividend
of c.GBP450 million (c.13.8 pence per share), comprising an
ordinary dividend of c.GBP150 million (c.4.6 pence per share) and a
special dividend of c.GBP300 million (9.2 pence per share).
Target of GBP1.3bn in 2016 actual 2017 announced
the period 2016-18 (A) paid (B)
------------------------ ------------ ---------------
Ordinary dividend GBPm 55.8 c.150.0
------------------------ ------------ ---------------
Special dividend GBPm 300.1 c.300.0
------------------------ ------------ ---------------
Total dividend GBPm 355.9 c.450.0
------------------------ ------------ ---------------
(A) All ordinary and special dividends are subject to
shareholder approval
(B) In line with previously announced Policy
The Board confirms its intention to keep the mechanics of how
the Company will pay special dividends, including the merits of
undertaking a share buyback at some point in the future should it
become appropriate to do so, under regular review.
Operational review
Taylor Wimpey plc is a UK-focused residential developer which
also has operations in Spain. Our operational review is for the UK
only as the majority of metrics are not comparable in our Spanish
business. A short summary of the Spanish business follows. The
financial analysis is presented at Group level, which includes
Spain, unless otherwise indicated.
Joint ventures are excluded from the operational review and
Group financial review, unless stated otherwise. For the purpose of
clarity, joint ventures are separated out in the Group financial
review.
Our key performance indicators (KPIs)
UK 2016 2015 Change
------------------------------------- ------- ------- ---------
Contribution per legal completion
GBPk 65.5 59.4 10.3%
------------------------------------- ------- ------- ---------
Forward order book as a %
of completions (as at 31
December) 54.8% 56.6% (1.8)ppt
------------------------------------- ------- ------- ---------
Owned and controlled plots
with planning or resolution
to grant 76,234 75,710 0.7%
------------------------------------- ------- ------- ---------
Strategic land pipeline conversion
plots 9,519 8,660 9.9%
------------------------------------- ------- ------- ---------
% of completions from strategically
sourced land 51% 47% 4.0ppt
------------------------------------- ------- ------- ---------
Customer satisfaction % 85% 86% (1.0)ppt
------------------------------------- ------- ------- ---------
Health and Safety Annual
Injury Incidence Rate (per
100,000 employees and contractors) 211 175 20.6%
------------------------------------- ------- ------- ---------
Employee turnover % (voluntary) 13.9% 13.3% 0.6ppt
------------------------------------- ------- ------- ---------
Sales, completions and pricing
Despite the wider uncertainty following the UK's vote to leave
the EU, there was strong demand throughout 2016 in our core
geographies and the UK housing market remained resilient.
As previously highlighted, whilst the wider London market
remained robust and in line with the rest of the UK, the central
London market slowed during 2016 at the upper end of the market,
with prices softening slightly in the second half of the year. We
traded on an average of eight Central London schemes in 2016, of
which the average size was 126 plots.
In 2016, total UK home completions (excluding joint ventures)
increased by 4.5% to 13,808 (2015: 13,219). During 2016, we
delivered 2,663 affordable homes (2015: 2,509), equating to 19.3%
of total completions (2015: 19.0%). Our net private reservation
rate for the year was 0.72 homes per outlet per week (2015:
0.73).
Whilst we saw a small increase in the average cancellation rate
immediately following the EU Referendum, this remained low compared
to long term historic norms and quickly returned to pre-Referendum
levels. Overall cancellation rates for the year as a whole remained
low at 13% (2015: 12%).
Average selling prices on private completions increased by 12.6%
to GBP286k (2015: GBP254k), once again benefiting from our focus on
better quality locations and the improvement of specification in
line with product and location. Our total average selling price
increased by 10.9% to GBP255k (2015: GBP230k). We estimate that
market-led house price growth for our regional mix was c.5% in the
12 months to 31 December 2016 (2015: 6%).
First time buyers accounted for 38% of total sales in 2016
(2015: 36%). Investor sales continued to be at a very low level
versus historic norms at 3% (2015: 7%).
Help to Buy continued to be a differentiator for new build
housing, and remained popular with our customers. During 2016
approximately c.39% of total sales used the Help to Buy scheme, and
we worked with c.5,393 households to take the first step to home
ownership or to move up the housing ladder (2015: c.37% and
c.5,200). Approximately 77% of sales through Help to Buy in 2016
were to first time buyers (2015: 77%). During the year c.14% of
sales in the London market used Help to Buy London, which launched
in February 2016.
We believe that quality of location is a key determinant of a
home purchase and that this remains true through all market
conditions. During 2016 we opened 105 new high-quality outlets
(2015: 123) in locations in villages, towns and cities where people
want to live, and which are supported by strong demographics and
local economies. As at 31 December 2016 we were operating from 285
outlets (31 December 2015: 297).
As at 31 December 2016 our order book represented 7,567 homes
(31 December 2015: 7,484 homes) with a value of GBP1,682 million
(31 December 2015: GBP1,779 million), excluding joint ventures.
Brand
As part of our strategy review process, we took the opportunity
to challenge our thinking on brand strategy to ensure it fully
reflects our culture today as well as aspirations for the
future.
During 2016 we worked with employees across the business,
customers and other stakeholders to determine our new vision of:
'Working together to build your dreams'. We believe that this
resonates strongly with our customers as it recognises that we are
building them more than just a house or apartment; we are building
them a home. This Working Together approach is fully aligned to our
strategy and underpinned by our values as it challenges us to drive
continual improvement in all of our business areas by creating
great places which inspire and delight. Importantly, it also
addresses our key stakeholders. We believe this approach will
continue to strengthen Taylor Wimpey's reputation as a company
which people want to buy a home from, work for, partner with and
invest in.
Customers
We have continued to make good progress in rolling out our new
customer approach across the business. During 2016 we introduced a
number of customer service related changes throughout the business,
including the appointment of a newly created role of Head of
Customer Service in each of our 24 regional businesses and the
introduction of our new Home Quality Inspection (HQI) process on
all of our sites. Our new customer service approach is an area that
will take time to fully embed and will continue to remain a
priority as we focus on delivering a consistent standard, engaging
contractors and suppliers and managing customer expectations. To
date we have received good feedback from customers and employees on
our new approach and we have seen a positive trend in customer
satisfaction scores during the year.
During 2016 we achieved a customer satisfaction score of 85%
(2015: 86%), reflecting the number of customers who were satisfied
with the quality of their Taylor Wimpey home, based on the Home
Builders Federation (HBF) survey. The survey is conducted by the
National House-Building Council (NHBC) at eight weeks after
completion to monitor our performance and identify areas for
improvement.
We have a number of further customer improvements planned for
2017 including a pilot of our new online Customer Portal, which
will guide customers through their Taylor Wimpey Customer Journey.
It will provide personalised information for each customer about
their new home, inform them of build progress and enable them to
select options for their home. Our customers will also be able to
use the portal to log any issues or concerns, enabling us to
deliver a more personalised service and be more responsive to our
customers' individual needs.
Reflecting the success of our academy based approach in other
key areas of the business, our new Academy of Customer Excellence
(ACE) will be launched in 2017. It aims to build the skills of our
Customer Service, Production and Sales Teams and develop further
their knowledge of our product range, ensuring consistent customer
service delivery across our regional businesses.
In the final quarter of 2016, concern was expressed by some
customers about certain leasehold houses and apartments which are
subject to leases with doubling ground rent clauses used on some of
our developments started between 2007 and 2011. Whilst the clauses
are clearly outlined in the lease and customers received
independent legal advice, we note the reports of the potential
impact of these clauses for our customers. We are therefore in the
process of reviewing this matter and working with these
customers.
Land and planning
The land that we acquire, together with the planning potential
that we work with local authorities and communities to create, is
key to defining products, locations, target customer base and
prices and underpins our confidence in our future financial
performance.
Our short term landbank stands at c.76k plots, equating to c.5.5
years of supply at current completion levels as at 31 December
2016. Given the strength and quality of the landbank, we are
focused on delivering value and maximising returns from our
investments. We have been operating on a broadly replacement basis
in the short term landbank for approximately two years and are
extremely selective with a targeted approach to further land
investment, and a preference for 'land light' structures and active
management as we continue to drive a higher return on capital
employed***.
During 2016 we acquired 6,355 plots (2015: 6,971 plots) at
anticipated contribution margins of around 26% and return on
capital employed*** of c.31%.
In the year we achieved a 2.5 percentage points margin upside on
completions from land acquired since 2009, compared with the
expected margin at the point of acquisition.
The average cost of land as a proportion of average selling
price within the short term owned landbank remains low at 15.4%
(2015: 16.3%). The average selling price in the short term owned
landbank in 2016 increased by 5.7% to GBP259k (2015: GBP245k).
A key strength for Taylor Wimpey is our strategic pipeline. This
land, which has no residential planning permission at the time we
take a commercial interest, affords significant protection of
future returns with a high embedded margin and, importantly,
enhances our short term landbank when converted. We have the
largest strategic pipeline in the sector which stood at c.108k
potential plots as at 31 December 2016 (31 December 2015: c.107k
potential plots). During 2016 we converted a further 9,519 plots
from the strategic pipeline to the short term landbank (2015: 8,660
plots). With a significantly lower cost and greater control over
the planning permissions we create, we continue to seek new
opportunities and added a net 10.8k new potential plots to the
strategic pipeline in 2016 (2015: 5.8k). In the year, a record 51%
of our completions were sourced from the strategic pipeline (2015:
47%).
Build costs, efficiency and product
During 2016 underlying build cost per unit increased to
GBP137.2k (2015: GBP121.9k), reflecting the change in mix of
product, higher proportion of homes delivered from strategically
sourced sites with higher related infrastructure costs, and changes
we have made in specification during 2016. In the period the
improved market resulted in underlying build cost increases
(excluding house type mix impact) of c.4% year on year (2015:
c.5%), with the majority of cost pressures coming from labour. The
availability of materials has largely kept pace with the growth of
the industry. Whilst we expect to see some impact on input prices
from the weaker sterling exchange rate following the EU Referendum
result, we do not expect this to be significant due to the low
level of direct imports.
During 2016 we achieved an average annual return on net
operating assets** of 30.7% (2015: 27.1%) which is ahead of our
medium term target of 30% as set out in May 2016.
We have improved our UK net operating asset turn * to 1.46 times
(2015: 1.34 times), benefitting from a low land cost as a
percentage of average selling price in the short term owned
landbank, as a result of higher margin land acquired in recent
years and increased strategic conversion, particularly in our
Central and South West Division. The higher proportion of strategic
land conversion results in higher work in progress spend, due to
these sites generally requiring greater infrastructure
investment.
Following a detailed review of our standard product
specification, during 2016 we introduced a number of changes to our
base specification in order to reflect our customer lifestyles and
expectations and the quality locations in which we are building.
Whilst this resulted in a small increase in build cost, this was
offset by a higher average selling price achieved on completions.
We also extended our standard house type range in 2016 to include a
number of options for larger houses.
Following the success of our standard house type range, which is
in place on over 70% of Taylor Wimpey sites, we will be introducing
a range of standard apartment types to planning applications in
2017.
During 2016 we launched an open design competition with the
Royal Institute of British Architects (RIBA), as part of our long
term initiative, Project 2020. Project 2020 aims to explore and
evaluate the potential trends of future homes. The competition
attracted 120 entries from 14 countries. The winning team, which
has now been selected, will work with us to enhance and improve the
existing typology, helping to build a prototype.
We strengthened our quality assurance processes during 2016 to
ensure we consistently achieve a high-quality build and get things
right first time for our customers. It is expected that this will
increase customer satisfaction and save time and money for the
business in getting the home delivery right first time. There are
also sustainability benefits associated with achieving high-quality
standards, including greater durability, less waste and fewer
resources used for repairs and maintenance.
Health and safety
The health and safety of individuals on our sites will always be
our number one priority and continues to be the first item
discussed at every plc Board and regional board meeting. We are
committed to providing a safe place in which our employees and
subcontractors can work and our customers can live, and we will not
compromise in ensuring that everyone leaves our sites safe and
well. We have a comprehensive Health, Safety and Environmental
(HSE) Strategy and a fully integrated HSE Management System in
place which is regularly reviewed at all levels.
Our Annual Injury Incidence Rate (AIIR) for reportable injuries
per 100,000 employees and contractors was 211 in 2016, against a
record low of 175 in 2015, with the rate in the second half of the
year at a similar level to 2015. Our AIIR for major injuries per
100,000 employees and contractors was 53 in 2016 (2015: 18). Whilst
our AIIR has increased, it remains below both the HBF Home Builder
Average and Health and Safety Executive Construction Industry
Average, and we are committed to reducing it further.
People and skills
Individually, and by working together, our employees are crucial
to driving our success. We aim to be the employer of choice in the
housebuilding industry, attracting and retaining the best people to
establish a culture that gives all individuals the opportunity and
support to develop to their full potential, regardless of market
conditions or their background.
During 2016 we directly employed, on average, 4,697 people
across the UK (2015: 4,299) and provided opportunities for a
further 12,390 operatives on our sites. Our voluntary employee
turnover rate remained low at 13.9% (2015: 13.3%).
We have made a significant investment in, and commitment to, the
recruitment of our next generation of future leaders, including
extending our trainee schemes and investing in the skills and
development of our employees across the business, to ensure that
Taylor Wimpey attracts and retains the best people in the industry
through the cycle. During 2016, we recruited 147 apprentices
(including 54 site management apprentices), 30 management trainees
and 20 graduates, whilst improving our apprenticeship and trainee
schemes across a number of areas (2015 total: 139).
We want to ensure that all staff are recognised and rewarded for
their contribution and commitment. Following feedback in 2016, we
introduced an improved flexible benefits package for all employees
and a new approach to flexible working, with maternity, paternity
and adoption policies significantly enhanced.
In April 2016, our Senior Management Team presented an update on
our business strategy via a series of roadshow sessions across the
country, available to all of our employees. Over 4,200 employees
attended the sessions, which provided an update on our strategy,
progress made and priorities for the future, particularly our
commitment to discipline in all market conditions and driving
continuous business improvement. These presentations also had an
emphasis on how everyone can play a part in our future success.
We are pleased to report that Taylor Wimpey was once again
recognised in the National House-Building Council's (NHBC) Pride in
the Job Awards, achieving a total of 57 Quality Awards (2015: 63),
16 Seals of Excellence Awards (2015: 20) and two Regional Awards in
2016 (2015: three). Our West Scotland Site Manager, Paul Cunningham
was also named the runner-up in the large builder category at the
Supreme Awards, the final stage of the Pride in the Job Awards
2016.
Management changes
After 28 years of outstanding service to the company, Fergus
McConnell, Divisional Chairman North, retired from the business at
the end of 2016. Fergus has been replaced by Daniel McGowan,
previously Divisional Managing Director (DMD) of the Midlands.
Daniel joined the company in 1999 as Sales and Marketing Director,
before moving into a strategic role at Head Office. Daniel was then
promoted to the role of Managing Director (MD) at our North
Midlands regional business, a position he held for two years,
before the role of DMD.
We would like to take the opportunity to thank Fergus for his
commitment and contribution to the North Division over the years,
as well as his contribution to the wider business.
Ingrid Osborne, MD of our Central London regional business, was
also promoted to the new post of DMD for Central and East London in
2017.
Local communities
We aim to be the industry leader in all aspects of planning and
to secure the right planning consents that enable us to respond to
a changing market, reflect the desires of our customer base and
deliver the quality homes we want to build, whilst meeting our
financial objectives.
Whilst we have a national presence, we are proud to operate as a
local homebuilder with 24 regional businesses across the country.
We continually explore ways in which we can work more closely with
local communities. We are committed to working with local people
and other stakeholders throughout the planning process and seek to
engage, consult and work in partnership with communities and all
interested stakeholders, both before we submit a planning
application and throughout the life of our developments. In this
way we can listen to their concerns and, where possible,
incorporate these within our plans.
In 2016, we contributed GBP363 million to the local communities
in which we build across the UK via planning obligations,
providing, for example, local infrastructure, affordable homes,
public transport and education facilities (2015: GBP335
million).
Sustainability
We are committed to being a responsible homebuilder and are
continuing to integrate sustainability into our business practices.
This helps us to create better homes and communities and a stronger
business for the long term.
We strive to be an open, transparent and responsive company for
all our stakeholders and to work with them to understand and
address the wider social, economic and environmental impacts
resulting from our operations. During 2016 we carried out a
materiality assessment to review the current social, economic and
environmental priorities both for our business and our
stakeholders, to help us better understand stakeholder views on key
topics and to identify emerging risks and opportunities. This has
shown us that we are largely focused on the right issues but there
are also opportunities to do more in key areas and to continue to
play an active part in addressing major challenges like access to
housing and climate change. We will be using the materiality
assessment findings to review and strengthen our approach to
sustainability during 2017.
As previously highlighted, during 2015 we reviewed our charity
policy to ensure that it is fully aligned to our values as a
business and that we continue to make a difference to the charities
that we work with by actively contributing financially, with our
time, energy or through leadership. In 2016 we continued to support
selected charities at both a national and regional level with a
focus on projects which promote aspiration and education in
disadvantaged areas and intervening to help tackle homelessness for
economically disadvantaged groups in the UK. At the end of 2016 we
introduced a new framework which provides employees with two full
days or four half-days paid time off to support our network of
charities or local community projects as volunteers. This will
benefit our charity partners and provide development opportunities
for our people.
During 2016, we continued our partnership with our national
charities as well as local charity partners across the UK. Our six
national charities include the Youth Adventure Trust, End Youth
Homelessness, Crisis, Crash, St Mungo's and Foundations Independent
Living Trust. Our national charity partners are selected by our
Charity Committee, with regional charities selected by our regional
businesses.
In total, during 2016 we donated and fundraised over GBP875k for
registered charities (2015: over GBP746k), in addition to c.GBP159k
for other organisations, such as scout groups and other local
community causes (2015: c.GBP112k). More information about our
local sponsorships and charity partnerships can be found within our
Sustainability Report, which will be published on our website
www.taylorwimpey.com/corporate in March 2017.
Spain
The Spanish housing market remained positive throughout 2016.
Whilst the weak sterling exchange rate has impacted British buyers,
with a diverse customer base we continued to achieve a healthy
private sales rate through 2016. We completed 304 homes in 2016
(2015: 251) at an average selling price of EUR358k (2015: EUR315k).
The total order book as at 31 December 2016 was 293 homes (31
December 2015: 270 homes).
The Spanish business delivered a significantly improved
operating profit* of GBP20.6 million for 2016 (2015: GBP10.0
million) and an operating profit* margin of 22.0% (2015: 17.2%).
Looking ahead, we remain cautiously optimistic, whilst conscious of
the potential implications of the wider macro European economic
environment.
Group financial review of operations
Performance of the Group is monitored internally using a variety
of statutory and alternative performance measures as outlined
below. Alternative performance measures are used where they are
considered to provide more clarity of underlying trading or in
monitoring performance against strategy. Definitions of the
alternative performance measures discussed below and a
reconciliation to the equivalent statutory measure are detailed on
page 41.
Income statement
Group revenue increased by 17.1% to GBP3,676.2 million in 2016
(2015: GBP3,139.8 million) from 14,112 completions (2015: 13,470).
The increase was driven by improved selling prices in the UK, up
10.9% to GBP255k (2015: GBP230k), and UK volume growth of 4.5% to
13,808 completions (2015: 13,219). Average selling prices on
private completions increased by 12.6% to GBP286k (2015: GBP254k)
in the UK, with this increase being a result of both our underlying
shift to better quality locations and by capturing market sales
price increases.
The UK land cost per unit sold, at GBP45.4k, is higher than the
prior year (2015: GBP42.4k) due to the continued shift to better
quality locations and a higher relative proportion of private sales
from the London and South East region where the land cost per plot
is higher. Total UK land cost per completion as a percentage of
selling prices was 17.8% (2015: 18.4%).
Underlying build cost per unit in the UK increased to GBP137.2k
(2015: GBP121.9k), driven by marginal build cost inflation, the
impact of higher infrastructure costs due to a higher proportion of
strategic sites and specification improvements. Other direct costs
and selling expenses per unit increased marginally to GBP6.2k
(2015: GBP6.0k), but at 2.4% of total revenue (2015: 2.6%) resulted
in better recovery of selling expenses in the year.
UK contribution per completion increased by 10.3% to GBP65.5k
for the period (2015: GBP59.4k), continuing to benefit from
improved land mix from completions in the period and improved sales
prices partially offset by build cost increases.
Gross profit of GBP939.9 million (2015: GBP787.4 million),
increased by 19.4% and included positive contribution of GBP13.1
million (2015: GBP8.9 million) and an exceptional charge of GBP0.5
million (2015: GBP0.6 million). Positive contribution represents
previously written down inventory allocated to a plot which has
subsequently resulted in a gross profit on completion. This can be
due to revenue outperformance, cost efficiencies or product mix
improvements. These amounts are stated before the allocation of
overheads which are excluded from the Group's net realisable value
exercise.
In 2016, 5% (2015: 6%) of the Group's UK completions were from
sites that had been previously impaired. In Spain, 65 plots (2015:
53) were completed that had previously been impaired. The Group
anticipates that c.4% of UK 2017 completions will come from sites
that have been previously impaired.
During the year, completions from joint ventures were 73 (2015:
122). The total order book value of joint ventures as at 31
December 2016 was GBP52 million (31 December 2015: GBP60 million),
representing 100 homes (31 December 2015: 118). Our share of
results of joint ventures in the period was GBP1.2 million (2015:
GBP4.9 million), which declined mainly due to the timing of the
East London schemes.
Operating profit* increased by 20.0% to GBP764.3 million (2015:
GBP637.0 million), delivering an operating profit* margin of 20.8%
(2015: 20.3%), which includes c.GBP10 million charge recognised in
the first half of the year as additional one-off remedial costs in
relation to certain legacy sites.
On a divisional basis the three UK operating divisions delivered
a combined increase of 16.3% in operating profit* to GBP811.1
million (2015: GBP697.4 million). The North Division generated an
11.6% increase in operating profit* to GBP280.0 million (2015:
GBP251.0 million), delivering a return on net operating assets** of
34.4%, 260 basis points above prior year (2015: 31.8%). The Central
and South West Division increased operating profit* by 15.4% to
GBP280.7 million (2015: GBP243.2 million), improving the return on
net operating assets** by 500 basis points to 39.1% (2015: 34.1%).
The London and South East Division saw strong operating profit*
growth of 23.2% to GBP250.4 million (2015: GBP203.2 million),
delivering growth of 230 basis points in return on net operating
assets** to 24.7% (2015: 22.4%).
Net finance costs for the period were GBP30.9 million (2015:
GBP33.2 million). Interest on overdraft, bank and other loans
decreased by GBP0.7 million year on year and benefitted from lower
average net debt of GBP87.4 million (2015: GBP94.8 million) and the
impact of the early redemption of the GBP100 million loan notes in
November 2016. Unwind of the discount on land creditors was GBP17.7
million (2015: GBP15.9 million) with the movement due to higher
average land creditors year on year. The notional interest on the
pension deficit of GBP6.1 million (2015: GBP6.0 million) stayed
broadly flat year on year.
Pre-exceptional profit before tax for the year from operations
increased by 21.5% to GBP733.4 million (2015: GBP603.8 million).
The pre-exceptional tax charge was GBP143.7 million (2015: GBP121.5
million) with an underlying tax rate of 19.6% (2015: 20.1%) that
largely reflects the statutory tax rate in the UK.
This resulted in a profit, before exceptional items, for the
year of GBP589.7 million (2015: GBP482.3 million), 22.3% up on the
prior year due to the improvement in the operational result and
lower net finance costs.
The review of land and work in progress net realisable values
resulted in a net charge of GBP0.5 million against previously
impaired sites. This has been recognised as an exceptional item in
the period.
Basic earnings per share was 18.1 pence (2015: 15.1 pence). The
adjusted basic earnings per share was 18.1 pence (2015: 14.9
pence), up 21.5%.
Balance sheet
Net operating assets were GBP2,539.6 million (31 December 2015:
GBP2,442.6 million), reflecting a net investment of GBP113.3
million (2015: GBP269.1 million) year on year in land and work in
progress, funded mostly by increased profitability. Return on net
operating assets** increased by 360 basis points to 30.7% (2015:
27.1%), reflecting improved profitability while maintaining balance
sheet discipline. Net operating asset turn * increased to 1.48
times (2015: 1.33 times).
As at 31 December 2016, the UK held short term owned land valued
at GBP2.3 billion (2015: GBP2.4 billion), representing 57,287 plots
(2015: 61,186). The total controlled short term landbank
represented 18,947 plots (31 December 2015: 14,524). The value of
long term owned land increased by 22.7% to GBP135 million (2015:
GBP110 million), representing 27,826 plots (2015: 28,118), with a
total controlled strategic pipeline of 80,190 plots (31 December
2015: 78,582). Total potential revenue in the landbank increased to
GBP42 billion in the period (31 December 2015: GBP40 billion).
Average work in progress (WIP) per UK outlet at 31 December 2016
increased by 21.6% to GBP4.5 million (2015: GBP3.7 million),
reflecting the high proportion of strategic land conversions which
require a greater level of infrastructure investment, combined with
build cost inflation, and our focus on delivering a consistent
standard to our customers that has added, on average, two weeks to
our production programmes. UK WIP turn reduced marginally to 3.00
times (2015: 3.10 times).As at the balance sheet date, the Group
held certain land and work in progress that had been written down
to net realisable value of GBP138.3 million (31 December 2015:
GBP175.9 million) of which the balance in the UK was GBP119.6
million (31 December 2015: GBP151.6 million). As at 31 December
2016, the associated write-downs were GBP147.0 million (31 December
2015: GBP167.7 million) of which the balance in the UK was GBP96.8
million (31 December 2015: GBP124.2 million) and principally
related to 14 locations.
As at 31 December 2016, in the UK, 3% of our short term owned
and controlled land was impaired (31 December 2015: 4%), with 82%
of the short term owned and controlled landbank purchased after
2009, 65% of which was sourced through our strategic pipeline,
resulting in a land cost to average selling price in the short term
owned landbank of 15.4% (31 December 2015: 16.3%).
We continue to use land creditors as a way of funding land
acquisitions where this makes the most commercial sense and is
value-enhancing for the business. Land creditors decreased to
GBP599.8 million (31 December 2015: GBP629.8 million) and, combined
with net cash, resulted in adjusted gearing of 8.1% (31 December
2015: 14.9%). GBP286.4 million is expected to be paid within 12
months and GBP178.7 million between one and two years from balance
sheet date. Included within the land creditor balance is GBP130
million of UK land overage commitments (31 December 2015: GBP109
million).
The mortgage debtor balance was GBP78.0 million at 31 December
2016 (31 December 2015: GBP94.6 million), with the decrease due to
redemption receipts of GBP21.1 million (31 December 2015: GBP11.3
million), offset by gains (including fair value adjustment) of
GBP0.8 million and interest income of GBP3.7 million.
Our net deferred tax asset relates principally to our pension
deficit and increased to GBP57.4 million in the period (31 December
2015: GBP55.7 million). GBP8.2 million of this asset relates to the
temporary differences of our Spanish business, including brought
forward trading losses.
Net assets at 31 December 2016 increased by 19.6% to GBP3,256.2
million, before dividends paid in the period and by 6.5% overall
year on year to GBP2,900.3 million (31 December 2015: GBP2,723.3
million). The net asset increase from 31 December 2015 was driven
by profitability in the period offset by the GBP355.9 million
dividend paid in the year and the pension actuarial assumptions
increasing the pension deficit year on year.
Pensions
Retirement benefit obligations of GBP234.1 million at 31
December 2016 (31 December 2015: GBP178.4 million) comprise a
defined benefit pension liability of GBP232.7 million (31 December
2015: GBP177.1 million) and a post-retirement healthcare liability
of GBP1.4 million (31 December 2015: GBP1.3 million). The GBP200
million buy-in completed at the end of 2014, coupled with c.75%
liability hedging against interest rates and inflation risk
exposure, reduced the volatility of the scheme liabilities over the
period. The main drivers for the movement in the deficit since 31
December 2015 were contributions in the period more than offset by
actuarial assumptions, most notably a reduction in the discount
rate and an increase in inflation. In 2016 we contributed GBP23.1
million in pension contributions (2015: GBP23.1 million).
We will be engaging with the Pension Trustees on the next
triennial valuation of the pension scheme with an effective date of
31 December 2016 over the coming months. The triennial valuation is
expected to be concluded during 2017.
Cash flow
Net cash increased to GBP364.7 million at 31 December 2016 from
GBP223.3 million at 31 December 2015, despite returning GBP355.9
million to shareholders by way of dividends in the year. This
improvement in net cash is largely as a result of strong
performance in underlying trading and maintaining balance sheet
discipline.
Net land spend, net of movement in land creditors, was GBP583.2
million (2015: GBP556.3 million).
The sum of GBP2,269.8 million has been invested in work in
progress in the period (2015: GBP2,006.4 million). In 2016, we paid
GBP13.5 million in interest costs (2015: GBP14.5 million) and
GBP355.9 million in dividends (2015: GBP308.4 million). GBP10.6
million was spent during the year to acquire shares for satisfying
future share scheme awards (31 December 2015: GBP2.0 million).
In the 12 months to 31 December 2016 we converted 81.4% of
operating profit* into operating cash flow**** (2015: 67.0%).
Financing structure
Our committed borrowing facilities are currently GBP635.5
million with an average maturity of 3.6 years. Average net debt for
2016 was GBP87.4 million (2015: GBP94.8 million).
On 28 June 2016 we completed a Private Placement of EUR100
million loan notes fixed at 2.02% for seven years, which is used to
hedge the investment in our Spanish business. In November 2016 we
prepaid our GBP100 million term loan that was originally due to be
repaid in instalments by 2020. As a result, we expect to reduce our
financing interest costs in 2017 by at least GBP4 million.
Dividends
We remain fully committed to the enhancements to the Dividend
Policy we announced on 17 May 2016. From 2017, subject to
shareholder approval at the AGM, to be held on 27 April 2017, the
Company will pay an ordinary dividend of approximately 5% of Group
net assets and which will be at least GBP150 million per annum.
This is intended to provide a minimum annual return to shareholders
throughout the cycle, including through a 'normal downturn'. This
ordinary dividend will be paid equally as a final dividend (in May)
and as an interim dividend (in November) each year.
Subject to shareholder approval the 2016 final ordinary dividend
of 2.29 pence per share will be paid on 19 May 2017 to shareholders
on the register at the close of business on 18 April 2017 (2015
final dividend: 1.18 pence per share). In combination with the
interim dividend of 0.53 pence per share (2015 interim dividend:
0.49 pence per share) this gives a total ordinary dividend for the
year of 2.82 pence (2015 total dividend: 1.67 pence per share).
This dividend will be paid as a cash dividend, and shareholders
are once again being offered the opportunity to reinvest all of
their dividend under the Dividend Re-Investment Plan (DRIP),
details of which are available from our Registrar and on our
website. Elections to join the Plan must reach the Registrar by 24
April 2017 in order to be effective for this dividend. Further
details can be found on our website
www.taylorwimpey.co.uk/corporate
In addition, on 15 July 2016, we returned GBP300.1 million to
shareholders by way of a special dividend, equating to 9.20 pence
per ordinary share. As previously announced in May 2016, we intend
to return c.GBP300 million to shareholders in July 2017, equating
to 9.20 pence per ordinary share, subject to shareholder approval
at the 2017 AGM. This is proposed to be paid on 14 July 2017 as a
cash dividend to all shareholders on the register at close of
business on 2 June 2017. Shareholders will be offered the
opportunity to reinvest all of their 2017 cash dividend under the
DRIP, for which elections to join the Plan must reach the Registrar
by 19 June 2017.
Future special dividends will be announced on an annual basis at
the half year results and will be paid in the following July,
subject to shareholder approval. The next update will therefore be
at our 2017 half year results on 1 August 2017 for the 2018 special
dividend.
The Board confirms its intention to keep the mechanics of how
the Company will pay special dividends, including the merits of
undertaking a share buyback at some point in the future should it
become appropriate to do so, under regular review.
Going concern
The Directors remain of the view that the Group's financing
arrangements and balance sheet strength provide both the necessary
facilities and covenant headroom to enable the Group to conduct its
business for at least the next 12 months. Accordingly, the
consolidated financial statements are prepared on a going concern
basis.
Viability statement
In accordance with provision C2.2 of the 2014 revision of the UK
Corporate Governance Code, the Directors have assessed the
prospects of the Company over a longer period than the 12 months
required by the 'Going Concern' provision. The Board conducted
their review for a period of three years. The Company operates in a
market which is prone to cyclicality, tending to follow the UK
economic cycle. It is impacted by Government policy, planning
regulation and the mortgage market. However, the Board considers
that the Company has clear visibility over a three year time
horizon. This period aligns with the average build out time for a
development phase with implementable planning permission and all
pre-commencement conditions discharged. This period is also in line
with the Group's medium term targets and its operational planning
and risk management review periods.
This operational plan, including the Group's income statement,
balance sheet, cash flows, KPIs and debt covenants, considers the
potential impacts which may arise from the Principal Risks of the
business as described on pages 19 to 23. It includes macroeconomic
and industry wide projections as well as matters specific to the
Group.
To mitigate the risks inherent in forward-looking projections,
the operational plan is subject to sensitivity analysis on a series
of realistically possible changes to principal assumptions, as
outlined on page 5. This sensitivity analysis flexed a number of
principal assumptions to model a downside scenario, which reflected
the potential impact of declining customer confidence and
disposable incomes, as may be experienced as a secondary impact to
the Group from the UK leaving the EU. Based on the results of this
analysis, the Directors have a reasonable expectation that the
Company will be able to continue in operation and meet its
liabilities as they fall due over the three year period of their
assessment.
Shareholder information
The Company's 2017 Annual General Meeting (AGM) will be held at
11am on 27 April 2017 at the British Medical Association, BMA
House, Tavistock Square, London WC1H 9JP.
Copies of the 2016 Annual Report and Accounts will be available
from 17 March 2017 on the Company's website
www.taylorwimpey.co.uk/corporate Hard copy documents will be posted
to shareholders who have elected to receive them and will also be
available from our registered office at Gate House, Turnpike Road,
High Wycombe, Buckinghamshire, HP12 3NR from 20 March 2017.
A copy of the 2016 Annual Report and Accounts will be submitted
to the National Storage Mechanism and will be available for
inspection at: www.Hemscott.com/nsm.do
Directors' responsibilities
The responsibility statement below has been prepared in
connection with the Company's full Annual Report and Accounts for
the year ended 31 December 2016. Certain parts thereof are not
included within this announcement.
We confirm to the best of our knowledge that:
-- the financial statements, prepared in accordance with IFRS as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation taken as
a whole; and
-- the management report, which is incorporated into the
Strategic Report and Directors' Report, includes a fair review of
the development and performance of the business and the position of
the Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties they face.
This responsibility statement was approved by the Board of
Directors on 27 February 2017 and is signed on its behalf by:
Kevin Beeston, Chairman
Pete Redfern, Chief Executive
Principal risks and uncertainties
As with any business, Taylor Wimpey faces a number of risks and
uncertainties in the course of the day to day operations. It is
only by effectively identifying and managing these risks that we
are able to deliver on our medium term targets of an average
operating profit* margin of c.22%, an average annual return on net
operating assets** of 30% and a total of GBP1.3 billion of
dividends to be paid in cash to shareholders over the period.
In addition to the principal industry related risks set out
below, we also closely monitor a number of other key internal and
external factors. These include the impact on the Group from the
result of the EU Referendum, an emerging issue from some of our
customers regarding leasehold properties with certain historical
lease clauses as discussed on page 8, and those factors that are
likely to affect our reputation. We actively work with our
stakeholders to minimise the impact of new risks.
The table below summarises the Group's principal risks and
uncertainties. These are not listed by order of importance.
Management of these risks and uncertainties is the responsibility
of the Chief Executive and the Group Management Team, together with
the roles noted below. Further detail on the relevance of these
risks to our strategy, the potential impact on key performance
indicators, mitigation and responsibilities are provided in our
2016 Annual Report and Accounts, which will be available at
www.taylorwimpey.co.uk/corporate from 17 March 2017.
We also maintain a Sustainability and Climate Change Risk and
Opportunity Register to monitor other sustainability issues that
could affect the Group. In addition, our climate change related
risks and opportunities are available as part of our 2016 CDP
submission. For more information please visit
www.taylorwimpey.co.uk/corporate/sustainability
Relevance Potential Mitigation Progress
to strategy impact on in 2016
KPIs
--------------------------------------------- ---------------- ------------------------------------------------------------------------ --------------- ---------------
Government Our ability We operate Our customer
policy and to build * With the introduction of The Housing and Planning Act, within our and community
planning homes and we may be required to meet higher levels of planning comprehensive engagement
regulations communities obligations and we may incur additional costs to meet community strategy
The National is dependent increased regulatory requirements. led planning is embedded
Planning upon drawing strategy. and having
Policy Framework up site This improves a positive
(NPPF) and proposals communications effect.
the Localism which meet * Unforeseen delays or our inability to obtain suitable with all We have
Act are the needs consents, could impact on the number or type of homes parties, been
well established, and that we build. but especially successful
although affordability local in gaining
are insufficient of our communities, planning
to deliver customers, thereby consents
greater obtaining * The locally produced CIL charge schedules may enhancing throughout
housing planning increase costs, impacting the viability of current our ability the year
availability permissions developments. Where CIL charges are not in place, to deliver with
for the in acceptable there could be an impact on gaining planning consent developments particular
UK. Additional timeframes or Judicial Review challenge. that meet emphasis
initiatives and achieving local on the
and legislative other requirements. conversion
and regulatory regulatory We consult of the
amendments requirements * This could have a detrimental impact on the with strategic
have been and permits. contribution per plot. Government land pipeline.
signalled agencies
by the enactment There remains and opposition We continued
of The Housing a risk of parties our
and Planning delayed on housing participation
Act 2016 or refused policy, in the local
and The planning both directly Plans
Neighbourhood applications, and indirectly Management
Planning increased as a member Group (PMG),
Bill is timescales of industry via the
currently to the groups, HBF, to
progressing. discharge to highlight ensure local
These seek of planning potential plans are
changes conditions issues and robust and
to hasten and greater to understand CIL charge
progress complexity any proposed schedules
through around Section changes are
the planning 106 since to appropriate.
system and the regulations. We have
accelerate introduction met with
build. They of the Government
could also Community officials
signal potential Infrastructure and
financial Levy (CIL). contributed
considerations to the HBF
for some As all elements submissions
sections of the in respect
of our customer anticipated of The Housing
base. changes and Planning
from The Act and
The new Housing the Starter
Administration and Planning Homes
has published Act and initiative
a Housing the Housing in particular.
White Paper White Paper
in February are clarified,
2017, with there could
several be a change
months of in demand
consultation for specific
to follow. products
Both the at our planned
Housing sites. In
White Paper turn, this
and the may lead
Neighbourhood to changes
Planning to site
Bill could mixes, and
have a disruptive to extended
effect on timeframes
the planning to gaining
system, consent.
sales rates,
site mixes
and customer
behaviour.
In December
2016, the
Housing
and Planning
Minister
issued a
Written
Ministerial
Statement
negatively
impacting
on the provisions
of housing
land supply
set out
in the NPPF
in instances
where there
is a Neighbourhood
Plan. This
could reduce
the scale
of strategic
land conversion
in the near
term.
Responsibility
* UK Land Director
* Regional Managing Directors
--------------------------------------------- ---------------- ------------------------------------------------------------------------ --------------- ---------------
Impact of The majority Our local We continue
market environment of the homes * A reduction in demand for new homes below normal teams select to promote
on mortgage that we levels could negatively impact on both profit and the locations the Government
availability build are cash generation. This would have an adverse effect on and home backed Help
and demand sold to return on net operating assets and net debt. designs to Buy scheme
Mortgage individual that best and have
availability purchasers meet the seen strong
and affordability who take needs of interest
constrain on mortgages the local in the scheme
the demand to finance community amongst
for housing. their and customer our customers.
Sustained purchases. demand in
growth in A change the present Throughout
interest in business and future. 2016 we
rates and confidence, We evaluate have continued
low wage employment new outlet to develop
inflation opportunities openings good working
could challenge or significant on the basis relationships
mortgage changes of local with
affordability, in the base market established
leading rate may conditions mainstream
to lower impact on and regularly lenders
selling the demand review the and those
prices as for housing. pricing wishing
a result In particular, and incentives to increase
of falling the ability that we volume within
demand. for first offer. We the new
time buyers work closely build market.
Following and investors with the
the 2014 to purchase financial
Mortgage homes is services
Market Review, impacted industry
stricter by changes to ensure
guidelines in mortgage customers
were introduced availability receive
for lenders at the higher good advice
to assess loan-to-value on the
mortgage levels, procurement
affordability as it would of mortgage
in a rising impact on products.
interest the level
rate environment. of deposits
In 2015, required.
the Bank
of England's
Financial
Policy Committee
gained new
powers,
to set loan-to-value
and debt-to-income
limits for
residential
mortgages.
The Government
has extended
the Help
to Buy equity
loan scheme
to 2021.
There is
uncertainty
over the
impact when
the scheme
ends.
Responsibility
* UK Sales and Marketing Director
* Regional Sales and Marketing Directors
--------------------------------------------- ---------------- ------------------------------------------------------------------------ --------------- ---------------
Material We aim to We maintain Following
costs and commence * If the availability of subcontractors or materials is regular the recent
availability work on insufficient to meet demand, this could lead to contact growth in
of subcontractors new sites increased build times and costs, thereby reducing with suppliers housebuilding,
A continued as planning profitability and return on capital employed. and negotiate availability
increase consents contract and cost
in housing allow, to volume, of materials
production accelerate pricing has stabilised
may further build progress * Lack of skilled subcontractors could also result in and duration and meets
reduce the and optimise higher levels of waste being produced from our sites as current
availability return on and lower build quality. appropriate. demand.
of skilled capital We provide The supply
subcontractors employed. both of quality
and materials The vast high-level subcontractors
and put majority and site remains
pressure of work specific challenging.
on utility performed programme The Group
firms to on our sites information has agreed
keep up is to aid with product
with the subcontracted, demand lines and
pace of providing planning. volumes
installation. flexibility Competencies with key
Further, and supporting are considered suppliers
leaving our strategy. as part to mitigate
the EU could of our long lead
impact on subcontractor times and
the availability selection shortages.
of skilled process,
workers. particularly During the
Together, in relation year the
this could to health Group has
result in and safety, trialled
build programme quality, several
and completion previous different
delays and performance build methods
unexpected and financial as
cost increases. stability. alternatives
We are to
Responsibility assessing conventional
* Head of Procurement alternative brick and
build methods block.
to reduce
* Regional Commercial Directors reliance
on traditional
brick and
block
techniques
and resources.
We work
to address
the skills
shortage
with
apprenticeship
schemes
and the
Construction
Industry
Training
Board.
--------------------------------------------- ---------------- ------------------------------------------------------------------------ --------------- ---------------
Ability Our business We closely In 2016,
to attract model requires * Not filling critical roles or having a significantly monitor we acted
and retain significant changing work force could lead to delays in build, employee on a
high-calibre input from quality issues, reduced sales levels, poor customer turnover comprehensive
employees skilled service and reduced profitability. levels on staff survey,
Recruiting people to a monthly responding
employees deliver basis and to the views
with inadequate quality conduct and
skills or homes and exit perspectives
in insufficient communities. interviews, of our
numbers, There continues as employees.
or not being to be appropriate, We further
able to competition to identify developed
retain key amongst any areas our training
staff with employers for capability
the right in the improvement. and span,
skills for housebuilding We benchmark by launching
the future, and our an
could have construction remuneration NVQ-accredited
a detrimental industries to ensure Production
impact on for we are Academy,
our business. sector-specific competitive additional
staff. within the customer
Responsibility Shortages industry. service
* Group HR Director exist across Clear training
the industry succession and delivered
in the main plans are a range
* Every employee managing people manual trades in place of development
and in certain for key courses
managerial roles within for new
and the Group. managers
professional Our renewed through
occupations. approach to the more
This could to succession experienced
impact our planning leader.
ability enabled We enhanced
to achieve more internal our careers
our strategic candidates website
goals. to be promoted to include
to senior a wider
roles. We range of
hold regular testimonials
development and content,
reviews highlighting
to identify the range
training of diverse
requirements. career
opportunities
in the
business.
Lastly,
having
extended
our
performance
review
approach,
we are
confident
that all
staff will
undergo
a meaningful
review to
support
development
and
progression.
--------------------------------------------- ---------------- ------------------------------------------------------------------------ --------------- ---------------
Land purchasing Land is Our Land The short
The purchase the major * Purchasing poor-quality or mispriced land, or teams select term land
of land 'raw material' incorrectly timing land purchases would have a and appraise market
of poor for the detrimental impact on our profitability and return on each site, remained
quality, Group. The capital employed. with the benign
at too high limited appraisal throughout
a price, availability process 2016. We
or incorrect of good-quality ensuring continued
timing of land at * Acquiring insufficient land would reduce our ability that each to invest
land purchases an attractive to actively manage the land portfolio and create project in
in relation price value for shareholders. is financially value-creating
to the economic throughout viable, land
cycle could the housing consistent opportunities,
impact future cycle, leads with our although
profitability. to significant strategy adapted
competition. and our approach
Responsibility The disciplined appropriately immediately
* Divisional Managing Directors purchasing authorised. following
of land We strive the EU
of the to be the referendum
* Regional Managing Directors appropriate developer where, due
quality, of choice, to market
on attractive through uncertainty,
* Regional Land and Planning Directors terms at a all land
the right comprehensive opportunities
time and approach proceeding
* Strategic Land Managing Directors scale in encompassing were carefully
the economic land vendors, reassessed.
cycle, will land agents, Going forward,
enhance local councils we are mindful
the Group's and local of external
ability communities. factors
to deliver Our Strategic and continue
sustainable Land teams to critically
margins work alongside assess
and return regional opportunities
on capital businesses, for robustness
employed to identify in changing
through and secure circumstances.
the cycle. land with The landbank
the potential is now in
for future the optimal
development size range
and to promote to deliver
it through our strategy.
the planning Together
system. with the
strong
conversion
of the
strategic
pipeline,
our reliance
on purchasing
short term
land is
diminished,
providing
some
insulation
from land
price
increases.
--------------------------------------------- ---------------- ------------------------------------------------------------------------ --------------- ---------------
Site and Our operations A We continue
product involve, * In addition to the potentially tragic personal impact comprehensive to compare
safety and interface of an accident on site or after customer completion, health, favourably
Building with, a there is potential for legal proceedings, financial safety and with the
sites are large number penalties, reputational damage and delay to the environmental UK
inherently of people. site's progress. (HSE) housebuilding
dangerous People range management and
places. from employees system is construction
Unsafe practices and embedded industry
by our employees subcontractors, throughout in terms
or subcontractors to customers the business. of site
have the and their This is safety.
potential families, supported We have
to cause who live by our continued
death or on or visit policies to keep
serious our sites and procedures our Annual
injury. each day. to ensure Injury
We want that we Incidence
Responsibility all of these live up Rate (AIIR)
* Director of Health, Safety and Environ people to to our for reportable
ment go home intention injuries
at the end to provide at the lower
of the day a safe and end of the
* Every employee and subcontractor safe and healthy normal range
uninjured. working for the
environment industry.
and that 2016 saw
we build a slight
homes that increase
comply with of AIIR
the required for reportable
regulations. injuries
We provide at 211 per
extensive 100,000
HSE training employees
for our from 36
employees, injuries
providing (2015: 175
regular from 29
site toolbox injuries),
talks for as a result
our of an increase
contractors in accidents
and operatives involving
and HSE slips, trips
induction and falls
courses. and material
The 'Creating handling.
a Site Team These also
Approach' account
initiative for the
released increase
in 2016 in the number
is designed of injuries
to embed in 2016
and train being classed
the support as major
'Blue Hat' (18 in 2015
team to to 53 in
assist our 2016). During
Site Managers 2017, there
to communicate will be
the HSE increased
ethos, thereby focus on
supporting addressing
a safe site. housekeeping
All HSE on site
issues are to mitigate
reviewed such injuries.
by the GMT
and actions We continued
put in place our safety
to rectify supervisory
issues or training,
help prevent training
a recurrence. over 3,200
contractors'
ground works
supervisors
and progressed
the HSE
training
element
of our
'Creating
a Site Team
Approach'
initiative
to our Blue
Hat support
workers.
--------------------------------------------- ---------------- ------------------------------------------------------------------------ --------------- ---------------
Cautionary note concerning forward looking statements
This report contains certain forward looking statements. These
statements are made by the Directors in good faith based on the
information available to them up to the time of their approval of
this report, and such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying such forward looking information.
Financial statements
Consolidated Income Statement
for the year to 31 December 2016
Before Before
exceptional Exceptional exceptional
items
items 2016 Total items Exceptional Total
items
2015
(Note (Note
3 and 3 and
GBP million Note 2016 5) 2016 2015 5) 2015
========================= ==== ============= =========== ========= ============= =========== =========
Revenue 3,676.2 - 3,676.2 3,139.8 - 3,139.8
Cost of sales (2,735.8) (0.5) (2,736.3) (2,351.8) (0.6) (2,352.4)
========================= ==== ============= =========== ========= ============= =========== =========
Gross profit
before positive
contribution 927.3 (0.5) 926.8 779.1 (0.6) 778.5
Positive contribution
from written
down inventory 13.1 - 13.1 8.9 - 8.9
========================= ==== ============= =========== ========= ============= =========== =========
Gross profit 940.4 (0.5) 939.9 788.0 (0.6) 787.4
Net operating
expenses 3 (177.3) - (177.3) (155.9) - (155.9)
========================= ==== ============= =========== ========= ============= =========== =========
Profit on
ordinary activities
before finance
costs 763.1 (0.5) 762.6 632.1 (0.6) 631.5
Interest receivable 4 0.7 - 0.7 0.7 - 0.7
Finance costs 4 (31.6) - (31.6) (33.9) - (33.9)
Share of results
of joint ventures 1.2 - 1.2 4.9 - 4.9
========================= ==== ============= =========== ========= ============= =========== =========
Profit on
ordinary activities
before taxation 733.4 (0.5) 732.9 603.8 (0.6) 603.2
Taxation (charge)/credit 5 (143.7) 0.1 (143.6) (121.5) 8.1 (113.4)
========================= ==== ============= =========== ========= ============= =========== =========
Profit for
the year 589.7 (0.4) 589.3 482.3 7.5 489.8
------------------------- ---- ------------- ----------- --------- ------------- ----------- ---------
Attributable
to:
Equity holders
of the parent 589.3 490.1
Non-controlling
interests - (0.3)
========================= ==== ============= =========== ========= ============= =========== =========
589.3 489.8
========================= ==== ============= =========== ========= ============= =========== =========
Note 2016 2015
========================== ==== ===== =====
Basic earnings per share 6 18.1p 15.1p
Diluted earnings per
share 6 17.9p 14.9p
Adjusted basic earnings
per share 6 18.1p 14.9p
Adjusted diluted earnings
per share 6 18.0p 14.7p
-------------------------- ---- ----- -----
Financial statements
Consolidated Statement of Comprehensive Income
for the year to 31 December 2016
GBP million Note 2016 2015
======================================= ==== ====== =====
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translation
of foreign operations 6.3 (1.5)
Movement in fair value of hedging
derivatives and loans (5.0) 1.5
Items that will not be reclassified
subsequently to profit or loss:
Actuarial loss on defined benefit
pension schemes 9 (69.3) (8.6)
Tax credit/(charge) on items
taken directly to other comprehensive
income 7 10.7 (0.7)
======================================= ==== ====== =====
Other comprehensive expense for
the year net of tax (57.3) (9.3)
======================================= ==== ====== =====
Profit for the year 589.3 489.8
======================================= ==== ====== =====
Total comprehensive income for
the year 532.0 480.5
======================================= ==== ====== =====
Attributable to:
Equity holders of the parent 532.0 480.8
Non-controlling interests - (0.3)
======================================= ==== ====== =====
532.0 480.5
======================================= ==== ====== =====
Financial statements
Consolidated Balance Sheet
at 31 December 2016
GBP million Note 2016 2015
=============================== ==== ========= =========
Non-current assets
Intangible assets 3.5 2.7
Property, plant and equipment 21.0 20.0
Interests in joint ventures 50.3 27.1
Trade and other receivables 87.2 95.4
Deferred tax assets 7 57.4 55.7
=============================== ==== ========= =========
219.4 200.9
=============================== ==== ========= =========
Current assets
Inventories 8 3,984.0 3,891.2
Trade and other receivables 91.4 114.0
Tax receivables 0.2 1.7
Cash and cash equivalents 450.2 323.3
=============================== ==== ========= =========
4,525.8 4,330.2
=============================== ==== ========= =========
Total assets 4,745.2 4,531.1
=============================== ==== ========= =========
Current liabilities
Trade and other payables (988.1) (1,093.4)
Tax payables (61.6) -
Provisions (28.0) (31.1)
=============================== ==== ========= =========
(1,077.7) (1,124.5)
=============================== ==== ========= =========
Net current assets 3,448.1 3,205.7
=============================== ==== ========= =========
Non-current liabilities
Trade and other payables (442.5) (402.0)
Bank and other loans (85.5) (100.0)
Retirement benefit obligations 9 (234.1) (178.4)
Provisions (5.1) (2.9)
=============================== ==== ========= =========
(767.2) (683.3)
=============================== ==== ========= =========
Total liabilities (1,844.9) (1,807.8)
=============================== ==== ========= =========
Net assets 2,900.3 2,723.3
=============================== ==== ========= =========
Equity
Share capital 288.4 288.3
Share premium account 762.9 762.9
Own shares (12.2) (3.2)
Other reserves 43.2 41.9
Retained earnings 1,817.3 1,632.7
=============================== ==== ========= =========
Equity attributable to parent 2,899.6 2,722.6
Non-controlling interests 0.7 0.7
=============================== ==== ========= =========
Total equity 2,900.3 2,723.3
=============================== ==== ========= =========
Financial statements
Consolidated Statement of Changes in Equity
for the year to 31 December 2016
For the year to 31
December 2016 Share Share Own Other Retained
GBP million capital premium shares reserves earnings Total
============================= ======== ======== ======= ========= ========= =======
Balance as at 1 January
2016 288.3 762.9 (3.2) 41.9 1,632.7 2,722.6
============================= ======== ======== ======= ========= ========= =======
Exchange differences
on translation of foreign
operations - - - 6.3 - 6.3
Movement in fair value
of hedging derivatives
and loans - - - (5.0) - (5.0)
Actuarial loss on defined
benefit pension schemes - - - - (69.3) (69.3)
Tax credit on items
taken directly to other
comprehensive income - - - - 10.7 10.7
============================= ======== ======== ======= ========= ========= =======
Other comprehensive
income/(expense) for
the year net of tax - - - 1.3 (58.6) (57.3)
Profit for the year - - - - 589.3 589.3
============================= ======== ======== ======= ========= ========= =======
Total comprehensive
income for the year - - - 1.3 530.7 532.0
New share capital subscribed 0.1 - - - - 0.1
Own shares acquired - - (10.6) - - (10.6)
Utilisation of own
shares - - 1.6 - - 1.6
Cash cost of satisfying
share options - - - - 0.7 0.7
Share-based payment
credit - - - - 9.8 9.8
Tax charge on items
taken directly to statement
of changes in equity - - - - (0.7) (0.7)
Dividends approved
and paid - - - - (355.9) (355.9)
============================= ======== ======== ======= ========= ========= =======
Equity attributable
to parent 288.4 762.9 (12.2) 43.2 1,817.3 2,899.6
Non-controlling interests 0.7
============================= ======== ======== ======= ========= ========= =======
Total equity 2,900.3
============================= ======== ======== ======= ========= ========= =======
For the year to 31
December 2015 Share Share Own Other Retained
GBP million capital premium shares reserves earnings Total
----------------------------- -------- -------- ------- --------- --------- ---------
Balance as at 1 January
2015 288.3 762.9 (10.8) 41.9 1,451.9 2,534.2
----------------------------- -------- -------- ------- --------- --------- ---------
Exchange differences
on translation of foreign
operations - - - (1.5) - (1.5)
Movement in fair value
of hedging derivatives
and loans - - - 1.5 - 1.5
Actuarial loss on defined
benefit pension schemes - - - - (8.6) (8.6)
Tax charge on items
taken directly to other
comprehensive income - - - - (0.7) (0.7)
----------------------------- -------- -------- ------- --------- --------- ---------
Other comprehensive
income for the year
net of tax - - - - (9.3) (9.3)
Profit for the year - - - - 490.1 490.1
----------------------------- -------- -------- ------- --------- --------- ---------
Total comprehensive
income for the year - - - - 480.8 480.8
New share capital subscribed - - - - - -
Own shares acquired - - (2.0) - - (2.0)
Utilisation of own
shares - - 9.6 - - 9.6
Cash cost of satisfying
share options - - - - (7.2) (7.2)
Share-based payment
credit - - - - 7.3 7.3
Tax credit on items
taken directly to statement
of changes in equity - - - - 8.3 8.3
Dividends approved
and paid - - - - (308.4) (308.4)
Equity attributable
to parent 288.3 762.9 (3.2) 41.9 1,632.7 2,722.6
Non-controlling interests 0.7
----------------------------- -------- -------- ------- --------- --------- ---------
Total equity 2,723.3
----------------------------- -------- -------- ------- --------- --------- ---------
Financial statements
Consolidated Cash Flow Statement
for the year to 31 December 2016
GBP million Note 2016 2015
================================= ==== ======= =======
Net cash from operating
activities 10 537.7 406.9
================================= ==== ======= =======
Investing activities:
Interest received 0.7 0.6
Dividends received from
joint ventures - 0.8
Proceeds on disposal of
property, plant and investments 0.3 0.7
Purchases of property,
plant and equipment (3.1) (5.6)
Purchases of software (2.0) (1.5)
Amounts (invested in)/repaid
by joint ventures (22.0) 15.6
Net cash (used in)/generated
from investing activities (26.1) 10.6
================================= ==== ======= =======
Financing activities:
Repayment of bank loans (100.0) -
Proceeds from other loans 83.0 -
Proceeds from sale of own
shares 0.1 -
Cash received on exercise
of share options 2.3 2.4
Purchase of own shares (10.6) (2.0)
Dividends paid (355.9) (308.4)
================================= ==== ======= =======
Net cash used in financing
activities (381.1) (308.0)
================================= ==== ======= =======
Net increase in cash and
cash equivalents 130.5 109.5
Cash and cash equivalents
at beginning of year 323.3 212.8
Effect of foreign exchange
rate changes (3.6) 1.0
================================= ==== ======= =======
Cash and cash equivalents
at end of year 450.2 323.3
================================= ==== ======= =======
Financial statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2016
1. Basis of preparation
The financial information set out herein does not constitute the
Group's statutory accounts for the years ended 31 December 2016 and
2015, but is derived from those accounts. Statutory accounts for
2015 have been delivered to the Registrar of Companies and those
for 2016 will be delivered following the Company's Annual General
Meeting to be held on 27 April 2017. The external auditor has
reported on those accounts; its reports were unqualified, did not
draw attention to any matters by way of emphasis without qualifying
their report and did not contain statements under s498(2) or (3)
Companies Act 2006 or equivalent preceding legislation.
The statutory accounts have been prepared on the basis of the
accounting policies as set out in the previous annual financial
statements.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRS), this announcement does not itself contain
sufficient information to comply with IFRS. The Group expects to
publish full financial statements on 17 March 2017 that comply with
both IFRS as adopted for use in the European Union and IFRS as
compliant with the Companies Act 2006 and Article 4 of the EU IAS
Regulations.
Going concern:
The Group has prepared forecasts, including certain
sensitivities taking into account the principal risks identified.
Having considered these forecasts, the Directors remain of the view
that the Group's financing arrangements and capital structure
provide both the necessary facilities and covenant headroom to
enable the Group to conduct its business for at least the next 12
months.
Accordingly the consolidated financial statements have been
prepared on a going concern basis.
2. Operating segments
IFRS 8 'Operating segments' requires information to be presented
in the same basis as it is reviewed internally.
The Group operates in two countries, being the United Kingdom
and Spain.
The United Kingdom is split into three geographical operating
segments, each managed by a Divisional Chairman who sit on the
Group Management Team. In addition there is an operating segment
covering the Corporate functions, Major Developments and Strategic
Land.
As such the segmental reporting for 2016 is:
- Housing United Kingdom
- North
- Central and South West
- London and South East (including Central London)
- Corporate
- Housing Spain
Financial statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2016
2. Operating segments (continued)
Segment information about these businesses is presented
below:
Central
For the year to 31 & South London
December 2016 North West & South
GBP million Division Division East Division Corporate Spain Total
---------------------------- --------- --------- -------------- --------- ------ ---------
Revenue
External sales 1,239.4 1,204.5 1,137.0 1.7 93.6 3,676.2
Result
Profit/(loss) on ordinary
activities before
joint ventures, finance
costs and exceptional
items 279.9 280.7 249.3 (67.4) 20.6 763.1
Share of results of
joint ventures 0.1 - 1.1 - - 1.2
---------------------------- --------- --------- -------------- --------- ------ ---------
Profit/(loss) on ordinary
activities before
finance costs, exceptional
items and after share
of results of joint
ventures 280.0 280.7 250.4 (67.4) 20.6 764.3
Exceptional items - 2.2 - - (2.7) (0.5)
---------------------------- --------- --------- -------------- --------- ------ ---------
Profit on ordinary
activities before
finance costs, after
share of results of
joint ventures and
exceptional items 280.0 282.9 250.4 (67.4) 17.9 763.8
Net finance costs (30.9)
---------------------------- --------- --------- -------------- --------- ------ ---------
Profit on ordinary
activities before
taxation 732.9
Taxation (including
exceptional tax) (143.6)
---------------------------- --------- --------- -------------- --------- ------ ---------
Profit for the year 589.3
Assets and liabilities
At 31 December 2016
Segment operating
assets 1,155.1 1,241.0 1,451.9 215.4 123.7 4,187.1
Joint ventures 2.6 3.3 43.2 1.2 - 50.3
Segment operating
liabilities (341.7) (514.4) (459.9) (304.9) (76.9) (1,697.8)
---------------------------- --------- --------- -------------- --------- ------ ---------
Group net operating
assets 816.0 729.9 1,035.2 (88.3) 46.8 2,539.6
Net current taxation (61.4)
Net deferred taxation 57.4
Net cash 364.7
---------------------------- --------- --------- -------------- --------- ------ ---------
Net assets 2,900.3
---------------------------- --------- --------- -------------- --------- ------ ---------
Financial statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2016
2. Operating segments (continued)
Central London
For the year to 31 & South & South
December 2016 North West East
GBP million Division Division Division Corporate Spain Total
------------------------- --------- --------- --------- --------- ----- -----
Other information
Property, plant and
equipment additions 0.9 0.9 1.0 0.3 - 3.1
Software development
additions - - - 2.0 - 2.0
Depreciation - property,
plant and equipment (0.3) (0.7) (0.2) (0.9) - (2.1)
Software amortisation - - - (1.2) - (1.2)
------------------------- --------- --------- --------- --------- ----- -----
Central London
For the year to 31 & South & South
December 2015 North West East
GBP million Division Division Division Corporate Spain Total
---------------------------- --------- ----------- ------------- --------- ------ ---------
Revenue
External sales 1,093.8 1,075.4 911.6 0.9 58.1 3,139.8
Result
Profit/(loss) on ordinary
activities before
joint ventures, finance
costs and exceptional
items 251.1 243.2 198.2 (70.4) 10.0 632.1
Share of results of
joint ventures (0.1) - 5.0 - - 4.9
---------------------------- --------- ----------- ------------- --------- ------ ---------
Profit/(loss) on ordinary
activities before
finance costs, exceptional
items and after share
of results of joint
ventures 251.0 243.2 203.2 (70.4) 10.0 637.0
Exceptional items (0.5) 2.0 (2.1) - - (0.6)
---------------------------- --------- ----------- ------------- --------- ------ ---------
Profit on ordinary
activities before
finance costs, after
share of results of
joint ventures and
exceptional items 250.5 245.2 201.1 (70.4) 10.0 636.4
Net finance costs (33.2)
---------------------------- --------- ----------- ------------- --------- ------ ---------
Profit on ordinary
activities before
taxation 603.2
Taxation (including
exceptional tax) (113.4)
---------------------------- --------- ----------- ------------- --------- ------ ---------
Profit for the year 489.8
Assets and liabilities
At 31 December 2015
Segment operating
assets 1,198.0 1,273.8 1,417.0 148.0 86.5 4,123.3
Joint ventures 2.2 3.0 21.4 0.3 0.2 27.1
Segment operating
liabilities (387.2) (571.7) (444.2) (260.6) (44.1) (1,707.8)
---------------------------- --------- ----------- ------------- --------- ------ ---------
Group net operating
assets 813.0 705.1 994.2 (112.3) 42.6 2,442.6
Net current taxation 1.7
Net deferred taxation 55.7
Net cash 223.3
---------------------------- --------- ----------- ------------- --------- ------ ---------
Net assets 2,723.3
---------------------------- --------- ----------- ------------- --------- ------ ---------
Financial statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2016
2. Operating segments (continued)
Central London
For the year to 31 & South & South
December 2015 North West East
GBP million Division Division Division Corporate Spain Total
------------------------- --------- --------- --------- --------- ----- -----
Other information
Property, plant and
equipment additions 0.1 2.8 - 2.6 0.1 5.6
Software development
additions - - - 1.5 - 1.5
Depreciation - property,
plant and equipment (0.1) (0.5) (0.3) (1.0) (0.1) (2.0)
Software amortisation - - - (1.3) - (1.3)
------------------------- --------- --------- --------- --------- ----- -----
3. Net operating expenses and profit on ordinary activities
before finance costs
Profit on ordinary activities before financing costs has been
arrived at after charging/(crediting):
GBP million 2016 2015
======================== ====== ======
Administration expenses 189.2 172.1
Other expense 9.5 6.5
Other income (21.4) (22.7)
Exceptional items 0.5 0.6
======================== ====== ======
Net other income includes profits on the sale of property, plant
and equipment, revaluation of certain shared equity mortgage
receivables.
Exceptional items:
GBP million 2016 2015
====================================== ==== ====
Net addition to inventory impairments 0.5 0.6
====================================== ==== ====
Exceptional items charged to cost of
sales 0.5 0.6
====================================== ==== ====
The Group has seen sustained improvement in the UK housing
market and improvement in confidence in the wider economy, driven
by continued low interest rates, improved mortgage availability and
Government incentives, including the 'Help to Buy' scheme.
This has resulted in a net UK release of GBP2.2 million (2015:
GBP0.6 million addition) to the provision. This net reversal
consists of GBP7.7 million of releases (2015: GBP6.6 million) and
additional write-downs on previously impaired sites, due to site
specific rather than market factors of GBP5.5 million (2015: GBP7.2
million). An additional write-down of GBP2.7 million to a
previously impaired site in Spain has also been made (2015: GBPnil)
resulting in a total net addition of GBP0.5 million (2015: GBP0.6
million) for the Group.
Profit on ordinary activities before financing costs has been
arrived at after charging/(crediting):
GBP million 2016 2015
============================================ ======= =======
Cost of inventories recognised as expense
in cost of sales, before write-downs
of inventories 2,633.3 2,261.8
Reversal of inventory impairment provisions (7.7) (6.6)
Impairment of inventories 8.2 7.2
Depreciation - property, plant and
equipment 2.1 2.0
Net foreign exchange (credit)/charge (1.6) 0.7
Gain on disposal of property, plant
and equipment (0.3) (0.5)
Amortisation of intangible assets 1.2 1.3
Payments under operating leases 1.7 2.0
============================================ ======= =======
Financial statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2016
4. Finance costs and interest receivable
Interest receivable
GBP million 2016 2015
-------------------------------------------------------- ----- ----
External interest receivable 0.7 0.7
-------------------------------------------------------- ----- ----
0.7 0.7
-------------------------------------------------------- ----- ----
Finance costs are analysed as follows:
GBP million 2016 2015
-------------------------------------------------------- ----- ----
Interest on overdrafts, bank and other loans 10.9 11.6
Foreign exchange movements (1.6) 0.7
-------------------------------------------------------- ----- ----
9.3 12.3
Unwinding of discount on land creditors and other items 16.2 15.6
Notional net interest on pension liability (Note 9) 6.1 6.0
-------------------------------------------------------- ----- ----
31.6 33.9
-------------------------------------------------------- ----- ----
5. Taxation
Tax (charged)/credited in the income statement is analysed as
follows:
GBP million 2016 2015
----------------------------------- ------- -------
Current tax:
UK corporation tax: Current year (136.5) (11.2)
Prior years 2.5 (0.8)
Foreign tax: Current year (2.3) (0.7)
Prior years - -
-------------------- ------------- ------- -------
(136.3) (12.7)
---------------------------------- ------- -------
Deferred tax:
UK: Current year (5.7) (107.8)
Prior years (0.4) (0.9)
Foreign tax: Current year (1.2) 8.0
Prior years - -
(7.3) (100.7)
---------------------------------- ------- -------
(143.6) (113.4)
---------------------------------- ------- -------
Corporation tax is calculated at 20% (2015: 20.25%) of the
estimated assessable profit for the year in the UK. Taxation
outside the UK is calculated at the rates prevailing in the
respective jurisdictions.
The tax charge for the year includes a credit in respect of
movements in the exceptional impairment provision of GBP0.1 million
(2015: GBP0.1 million charge). In 2015 the Group recognised an
GBP8.0 million credit in relation to the recognition of Spanish
temporary differences.
The income statement charge for 2016 includes a charge of GBPnil
(2015: GBP0.6 million) relating to the impact on the deferred tax
asset of the 1% reduction in UK corporation tax from 18% to 17%
(2015: 2% reduction from 20% to 18%).
Financial statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2016
5. Taxation (continued)
The charge for the year can be reconciled to the profit per the
income statement as follows:
GBP million 2016 2015
----------------------------------------------------------------------------- ------- -------
Profit before tax 732.9 603.2
----------------------------------------------------------------------------- ------- -------
Tax at the UK corporation tax rate of 20.00% (2015: 20.25%) (146.6) (122.1)
Net over provision in respect of prior years 2.1 0.5
Tax effect of expenses that are not deductible in determining taxable profit 0.2 0.3
Unrecognised temporary differences utilised - 2.0
Impact of corporate tax rate reduction on deferred tax - (0.6)
Recognition of deferred tax asset relating to Spanish business 1.1 8.0
Other rate impacting adjustments (0.4) (1.5)
----------------------------------------------------------------------------- ------- -------
Tax charge for the year (143.6) (113.4)
----------------------------------------------------------------------------- ------- -------
6. Earnings per share
2016 2015
------------------------------------------------------------------------------------------ ------- -------
Basic earnings per share 18.1p 15.1p
Diluted earnings per share 17.9p 14.9p
Adjusted basic earnings per share 18.1p 14.9p
Adjusted diluted earnings per share 18.0p 14.7p
Weighted average number of shares for basic/adjusted earnings per share - million 3,259.7 3,247.3
Weighted average number of shares for diluted basic/adjusted earnings per share - million 3,283.2 3,278.8
------------------------------------------------------------------------------------------ ------- -------
Adjusted basic and adjusted diluted earnings per share, which
exclude the impact of exceptional items and any associated net tax
charges, are presented to provide a better measure on the
underlying performance of the Group. A reconciliation of earnings
attributable to equity shareholders used for basic and diluted
earnings per share to that used for adjusted earnings per share is
shown below.
GBP million 2016 2015
---------------------------------------------------------------------- ----- -----
Earnings for basic and diluted earnings per share 589.3 490.1
Adjust for exceptional net addition of inventory write-downs (Note 3) 0.5 0.6
Adjust for tax on exceptional items (Note 5) (0.1) (0.1)
Adjust for exceptional deferred tax credit (Note 5) - (8.0)
Earnings for adjusted basic and adjusted diluted earnings per share 589.7 482.6
---------------------------------------------------------------------- ----- -----
Financial statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2016
7. Deferred tax
The following are the major deferred tax assets and liabilities
recognised by the Group and movements thereon during the current
and prior reporting year.
Other
Retirement benefit temporary
GBP million Share- based payments Capital allowances Losses obligations differences Total
---------------------- --------------------- ------------------ ------ -------------------- ------------ -------
At 1 January 2015 7.6 4.5 110.2 35.5 (0.3) 157.5
(Charge)/Credit to
income - (0.5) (98.8) (2.8) 1.4 (100.7)
(Charge)/Credit to
equity (0.4) - - (0.7) - (1.1)
---------------------- --------------------- ------------------ ------ -------------------- ------------ -------
At 31 December 2015 7.2 4.0 11.4 32.0 1.1 55.7
Credit/(charge) to
income 0.6 (0.6) (3.9) (2.7) (0.7) (7.3)
(Charge)/Credit to
equity (3.0) - - 10.7 - 7.7
Foreign exchange - - 1.3 - - 1.3
---------------------- --------------------- ------------------ ------ -------------------- ------------ -------
At 31 December 2016 4.8 3.4 8.8 40.0 0.4 57.4
---------------------- --------------------- ------------------ ------ -------------------- ------------ -------
Closing deferred tax on UK temporary differences has been
calculated at the tax rates that are expected to apply for the
period when the asset is realised or the liability is settled.
Accordingly, the temporary differences have been calculated at
rates between 20% and 17% (2015: 20% and 18%). The effect of the
reduction in the UK corporation tax rate from 18% to 17% is GBPnil
(2015: GBP0.6 million) in the income statement and GBP3.2 million
(2015: GBP2.5 million)in the statement of comprehensive income and
statement of changes in equity.
The net deferred tax balance is analysed into assets and
liabilities as follows:
GBP million 2016 2015
------------------------- ----- -----
Deferred tax assets 58.7 57.1
Deferred tax liabilities (1.3) (1.4)
------------------------- ----- -----
57.4 55.7
------------------------- ----- -----
The Group has not recognised temporary differences relating to
tax losses carried forward and other temporary differences
amounting to GBP3.0 million (2015: GBP3.5 million) in the UK and
GBP70.0 million (2015: GBP68.4 million) in Spain. The UK temporary
differences have not been recognised as they are predominantly
non-trading in nature and insufficient certainty exists as to their
future utilisation. The temporary differences in Spain have not
been recognised due to uncertainty of sufficient taxable profits in
the future against which to utilise these amounts.
At the balance sheet date, the Group has unused UK capital
losses of GBP269.5 million (2015: GBP264.3 million). No deferred
tax asset has been recognised in respect of the capital losses at
31 December 2016 because the Group does not believe that it is
probable that these capital losses will be utilised in the
foreseeable future.
8. Inventories
GBP million 2016 2015
-------------------------------------------------------- ------- -------
Raw materials and consumables - -
Finished goods and goods for resale 20.9 17.1
Residential developments:
Land 2,652.5 2,743.7
Development and construction costs 1,307.8 1,128.3
Commercial, industrial and mixed development properties 2.8 2.1
-------------------------------------------------------- ------- -------
3,984.0 3,891.2
-------------------------------------------------------- ------- -------
Financial statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2016
8. Inventories (continued)
The Group has seen sustained improvement in the UK housing
market and improvement in confidence in the wider economy, driven
by continued low interest rates, improved mortgage availability and
Government incentives, including the 'Help to Buy' scheme.
This has resulted in a net UK release of GBP2.2 million (2015:
GBP0.6 million addition) to the provision. This net reversal
consists of GBP7.7 million of releases (2015: GBP6.6 million) and
additional write-downs on previously impaired sites, due to site
specific rather than market factors of GBP5.5 million (2015: GBP7.2
million). An additional write-down of GBP2.7 million to a
previously impaired site in Spain has also been made (2015: GBPnil)
resulting in a total net addition of GBP0.5 million (2015: GBP0.6
million) for the Group
In the year 5% (2015: 6%) of the Group's UK completions were
from pre-2009 impaired sites.
At the balance sheet date the Group held inventory in the UK
that had been written down to net realisable value of GBP119.6
million (2015: GBP151.6 million) with associated impairments of
GBP96.8 million (2015: GBP124.2 million).
The UK net realisable value assessment of inventory is highly
sensitive to small changes in judgements and the table below
provides an indication of the impact to the inventory held on the
balance sheet of 1% movements in selling prices and build
costs.
+1%
-1% selling build
GBP million +1% selling price price cost -1% build cost
----------------- ----------------- ----------- ------ --------------
31 December 2016 6.0 (8.1) (8.4) 3.1
----------------- ----------------- ----------- ------ --------------
31 December 2015 10.9 (11.4) (11.1) 9.2
----------------- ----------------- ----------- ------ --------------
There has been continued improvement in the Spanish housing
market during the year. However, this improvement has been on newer
sites which have been acquired in better locations. Sales rates and
prices on sites which have been previously impaired remain low. In
the year, 65 plots (2015: 53) were completed in Spain that had
previously been impaired. In Spain, there was inventory written
down to net realisable value of GBP18.7 million as at 31 December
2016 (2015: GBP24.3 million), with associated impairments of
GBP50.2 million (2015: GBP43.5 million).
The table below details the movements recorded on the
write-downs on impaired inventory through the income statement in
the year.
Inventory Write-downs
GBP million 2016 2015
---------------------- ------ ------
1 January 167.7 206.2
Utilised (28.3) (35.6)
Net addition 0.5 0.6
Foreign exchange 7.1 (3.5)
---------------------- ------ ------
31 December 147.0 167.7
---------------------- ------ ------
9. Retirement benefit obligations
Retirement benefit obligations comprise a defined benefit
pension liability of GBP232.7 million (2015: GBP177.1 million) and
a post-retirement healthcare liability of GBP1.4 million (2015:
GBP1.3 million).
The Group operates the Taylor Wimpey Pension Scheme (TWPS), a
defined benefit pension scheme, which is closed to both new members
and to future accrual. The Group also operates defined contribution
pension arrangements in the UK, which are available to new and
existing UK employees.
Financial statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2016
9. Retirement benefit obligations (continued)
Defined benefit pension schemes
The Group's defined benefit pension scheme in the UK is the
TWPS. The TWPS is a funded defined benefit pension scheme which
provides benefits to beneficiaries in the form of a guaranteed
level of pension payable for life. The level of benefits provided
depends on members' length of service and their salary in the final
years leading up to retirement or date of ceasing active accrual if
earlier. Pension payments are generally increased in line with
inflation.
The Group operates the TWPS under the UK regulatory framework.
Benefits are paid to members from a Trustee-administered fund and
the Trustee is responsible for ensuring that the scheme is
sufficiently funded to meet current and future benefit payments.
Scheme assets are held in trust.
The TWPS Trustees' other duties include managing the investment
of scheme assets, administration of scheme benefits and exercising
of discretionary powers. The Group works closely with the Trustees
to manage the TWPS. The Trustees of the TWPS owe fiduciary duties
to the TWPS' beneficiaries. The appointment of the Trustees is
determined by the TWPS trust documentation.
The Trustees must agree a funding plan with the Group such that
any funding shortfall is expected to be met by additional
contributions and investment outperformance. In order to assess the
level of contributions required, triennial valuations are carried
out using prudent assumptions. The first funding valuation of the
TWPS was performed during 2014, with an effective date of 31
December 2013. Subsequently, the Group agreed to make contributions
of GBP18.0 million, including reimbursement in respect of
administrative costs of the scheme. The next triennial valuation is
currently being undertaken with an effective date of 31 December
2016.
In 2013, the Group introduced a GBP100.0 million Pension Funding
Partnership utilising show homes, as well as seven offices which
are owned, in a sale and leaseback structure. This provides an
additional GBP5.1 million of annual funding for the TWPS. The
assets held within this scheme do not affect the IAS 19 figures as
they remain assets of the Group, and are not assets of the TWPS. As
at 31 December 2016, there was GBP101.4 million of property and
GBP9.6 million of cash held within the structure (2015: GBP91.1
million of property and GBP19.9 million of cash).
The Group continues to work closely with the Trustee in managing
the pension exposure.
Accounting assumptions:
The assumptions used in calculating the accounting costs and
obligations of the TWPS, as detailed below, are set by the
Directors after consultation with independent, professionally
qualified actuaries. The basis for these assumptions is prescribed
by IAS 19 and they do not reflect the assumptions that may be used
in future funding valuations of the TWPS.
TWPS
------------------------
Accounting valuation assumptions 2016 2015
------------------------------------- ----------- -----------
As at 31 December
Discount rate for scheme liabilities 2.70% 3.70%
General pay inflation n/a n/a
Deferred pension increases 2.25% 1.95%
Pension increases 2.15%-3.70% 2.05%-3.55%
------------------------------------- ----------- -----------
Financial statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2016
9. Retirement benefit obligations (continued)
The table below shows the impact to the liability of movement in
key assumptions.
Impact on defined benefit Impact on defined benefit obligation (%)
Assumption Change in assumption obligation (GBP million)
------------------- --------------------------- -------------------------- ----------------------------------------
Discount rate Decrease by 0.1% p.a. Increase by GBP41m 1.7
Rate of inflation* Increase by 0.1% p.a. Increase by GBP29m 1.2
Life expectancy Members live 1 year longer Increase by GBP125m 5.3
------------------- --------------------------- -------------------------- ----------------------------------------
* Assumed to affect deferred revaluation and pensioner increases
in payment.
The table below details the movements in the TWPS pension
liability and assets recorded through the income statement and
other comprehensive income.
Present value Fair value Asset/ (liability) recognised on
of obligation of scheme assets balance sheet
At 1 January 2016 (2,066.2) 1,889.1 (177.1)
Current service cost - - -
Administration expenses - (3.3) (3.3)
Interest (expense)/income (74.4) 68.3 (6.1)
---------------------------------------- -------------- ----------------- -------------------------------------
Total amount recognised in income
statement (74.4) 65.0 (9.4)
---------------------------------------- -------------- ----------------- -------------------------------------
Return on scheme assets not included in
income statement - 271.7 271.7
Change in demographic assumptions 71.2 - 71.2
Change in financial assumptions (431.4) - (431.4)
Experience gains 19.2 - 19.2
Total remeasurements in other
comprehensive income (341.0) 271.7 (69.3)
---------------------------------------- -------------- ----------------- -------------------------------------
Employer contributions - 23.1 23.1
Employee contributions - - -
Benefit payments 112.8 (112.8) -
At 31 December 2016 (2,368.8) 2,136.1 (232.7)
---------------------------------------- -------------- ----------------- -------------------------------------
Financial statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2016
9. Retirement benefit obligations (continued)
Present value Fair value Asset/ (liability) recognised on
of obligation of scheme assets balance sheet
At 1 January 2015 (2,186.2) 2,003.8 (182.4)
Current service cost - - -
Administration expenses - (3.2) (3.2)
Interest (expense)/income (74.3) 68.3 (6.0)
---------------------------------------- -------------- ----------------- -------------------------------------
Total amount recognised in income
statement (74.3) 65.1 (9.2)
---------------------------------------- -------------- ----------------- -------------------------------------
Return on scheme assets not included in
income statement - (72.5) (72.5)
Change in demographic assumptions - - -
Change in financial assumptions 49.2 - 49.2
Experience gains 14.7 - 14.7
Total remeasurements in other
comprehensive income 63.9 (72.5) (8.6)
---------------------------------------- -------------- ----------------- -------------------------------------
Employer contributions - 23.1 23.1
Employee contributions - - -
Benefit payments 130.4 (130.4) -
At 31 December 2015 (2,066.2) 1,889.1 (177.1)
---------------------------------------- -------------- ----------------- -------------------------------------
10. Notes to the cash flow statement
GBP million 2016 2015
-------------------------------------------------------------------- ------- -------
Profit on ordinary activities before finance costs 762.6 631.5
Adjustments for:
Depreciation of buildings, plant and equipment 2.1 2.0
Net addition of inventory write-downs 0.5 0.6
Amortisation of software development 1.2 1.3
Pension contributions in excess of charge to the income statement (20.1) (19.9)
Share-based payment charge 9.8 7.3
Profit on disposal of property and plant (0.3) (0.5)
Decrease in provisions (0.9) (7.4)
-------------------------------------------------------------------- ------- -------
Operating cash flows before movements in working capital 754.9 614.9
Increase in inventories (113.3) (269.1)
Decrease in receivables 42.3 13.0
(Decrease)/Increase in payables (61.7) 68.1
Cash generated by operations 622.2 426.9
Income taxes paid (71.0) (5.5)
Interest paid (13.5) (14.5)
-------------------------------------------------------------------- ------- -------
Net cash from operating activities 537.7 406.9
-------------------------------------------------------------------- ------- -------
Financial statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2016
10. Notes to the cash flow statement (continued)
Cash and cash equivalents (which are presented as a single class
of assets on the face of the balance sheet) comprise cash at bank
and other short term highly liquid investments with an original
maturity of three months or less.
Movement in net cash/(debt)
Total
Cash and cash Overdrafts, banks and net (debt)/
GBP million equivalents other loans cash
------------------------- ------------- --------------------- ------------
Balance 1 January 2015 212.8 (100.0) 112.8
Cash flow 109.5 - 109.5
Foreign exchange 1.0 - 1.0
------------------------- ------------- --------------------- ------------
Balance 31 December 2015 323.3 (100.0) 223.3
Cash flow 130.5 17.0 147.5
Foreign exchange (3.6) (2.5) (6.1)
------------------------- ------------- --------------------- ------------
Balance 31 December 2016 450.2 (85.5) 364.7
------------------------- ------------- --------------------- ------------
11. Dividends
GBP million 2016 2015
==================================== ===== =====
Proposed
Interim dividend 2016: 0.53p
(2015: 0.49p) per ordinary
share of 1p each 17.3 15.9
Final dividend 2016: 2.29p
(2015: 1.18p) per ordinary
share of 1p each 74.9 38.6
==================================== ===== =====
92.2 54.5
==================================== ===== =====
Amounts recognised as distributions
to equity holders
Paid
Final dividend 2015: 1.18p
(2014: 1.32p) per ordinary
share of 1p each 38.5 42.9
Interim dividend 2016: 0.53p
(2015: 0.49p) per ordinary
share of 1p each 17.3 15.9
Special dividend 2016: 9.20p
(2015: 7.68p) per ordinary
share of 1p each 300.1 249.6
==================================== ===== =====
355.9 308.4
==================================== ===== =====
The Directors recommend a final dividend for the year ended 31
December 2016 of 2.29 pence per share subject to shareholder
approval at the Annual General Meeting, with an equivalent final
dividend charge of GBP74.9 million (2015: GBP38.6 million). The
final dividend will be paid on 19 May 2017 to all shareholders
registered at the close of business on 18 April 2017.
The Directors additionally recommend a special dividend of
c.GBP300.0 million subject to shareholder approval at the Annual
General Meeting. The special dividend will be paid on 14 July 2017
to all shareholders registered at the close of business on 2 June
2017.
In accordance with IAS 10 'Events after the balance sheet date'
the proposed final or special dividends have not been accrued as a
liability as at 31 December 2016.
Alternative Performance Measures
The Group uses a number of alternative performance measures
which are not defined within IFRS. The Directors use these measures
in order to assess the underlying operational performance of the
Group and, as such, these measures should be considered alongside
the IFRS measures. The following Alternative Performance Measures
are referred to throughout the full year results.
Profit before taxation and exceptional items and Profit for the
year before exceptional items
The Directors consider the removal of exceptional items from the
reported results provide more clarity on the performance of the
Group. They are reconciled to profit before tax and profit for the
year respectively, on the face of the Consolidated Income
Statement.
Operating profit and operating profit margin
Within the highlights and throughout, operating profit is used
as one of the main measures of performance, with operating profit
margin (defined below) being a Key Performance Indicator. Operating
profit is defined as profit on ordinary activities before net
finance costs, exceptional items and tax, after share of results of
joint ventures. The Directors consider this to be an important
measure of underlying performance of the Group. Operating profit
margin is calculated as operating profit divided by total Group
revenue. The Directors consider this to be a metric which reflects
the underlying performance of the business.
Operating profit to profit before
interest and tax reconciliation
2016 2016 2016 2015 2015 2015
GBPm GBPm % GBPm GBPm %
Profit Revenue Margin Profit Revenue Margin
Profit before
interest and
tax 762.6 3,676.2 20.7 631.5 3,139.8 20.1
------- -------- ------- ------- -------- -------
Adjusted for:
Share of results
of joint ventures 1.2 - 0.1 4.9 - 0.2
Exceptional
items 0.5 - - 0.6 - -
Operating profit 764.3 3,676.2 20.8 637.0 3,139.8 20.3
------- -------- ------- ------- -------- -------
Net operating assets
Net operating assets is defined as net assets less net cash and
tax balances and is used to calculate return on net operating
assets which the Directors consider to be an important measure of
the underlying operating efficiency and performance of the
Group.
Return on net operating assets
Return on net operating assets, one of the Group's operational
targets, is defined as 12-month operating profit divided by the
average of the opening and closing net operating assets.
Capital employed
Capital employed is defined as net assets less net cash and
intangible assets and is used to calculate return on capital
employed. The Directors consider this to be an important measure of
the underlying operating efficiency and performance of the
Group.
Return on capital employed
Return on capital employed is a measure used to appraise the
sites ahead of purchase and is defined as 12-month operating profit
divided by the average of the opening and closing capital
employed.
Net operating assets and capital
employed
2016 2015 2014
GBPm GBPm GBPm
Basic net assets 2,900.3 2,723.3 2,535.3
-------- -------- --------
Average basic net
assets 2,811.8 2,629.3
-------- -------- --------
Adjusted for:
Cash (450.2) (323.3) (212.8)
Borrowings 85.5 100.0 100.0
Taxation 4.0 (57.4) (157.5)
Net operating assets 2,539.6 2,442.6 2,265.0
-------- -------- --------
Average net operating
assets 2,491.1 2,353.8
-------- -------- --------
Adjusted for:
Taxation (4.0) 57.4 157.5
Intangible assets (3.5) (2.7) (2.5)
Capital employed 2,532.1 2,497.3 2,420.0
-------- -------- --------
Average capital employed 2,514.7 2,458.7
-------- -------- --------
Return on net operating assets
and capital employed
2016 2016 2016 2015 2015 2015
Return
Average Return Average on
net on net net net
assets Profit assets assets Profit assets
GBPm GBPm % GBPm GBPm %
Basic net
assets 2,811.8 762.6 27.1 2,629.3 631.5 24.0
Adjusted for:
Average Cash (386.8) - 4.3 (268.1) - 3.0
Average Borrowings 92.8 - (1.0) 100.0 - (1.1)
Average Taxation (26.7) - 0.3 (107.4) - 1.2
Share of results
of joint ventures - 1.2 - - 4.9 -
Exceptional
items - 0.5 - - 0.6 -
Net operating
assets 2,491.1 764.3 30.7 2,353.8 637.0 27.1
-------- ------- -------- -------- ------- --------
Average taxation 26.7 - (0.3) 107.4 - (1.2)
Average intangibles (3.1) - - (2.5) - -
Capital employed 2,514.7 764.3 30.4 2,458.7 637.0 25.9
-------- ------- -------- -------- ------- --------
Net operating asset turn
This is defined as total Group revenue divided by the average of
opening and closing net operating assets. The Directors consider
this to be good indicator of how efficiently the Group is utilising
their assets to generate value for the shareholders.
Net operating asset
turn
2016 2016 2016 2015 2015 2015
Average Average
net Net net Net
assets Revenue asset assets Revenue asset
GBPm GBPm turn GBPm GBPm turn
Basic net
assets 2,811.8 3,676.2 1.31 2,629.3 3,139.8 1.19
Adjusted for:
Average Cash (386.8) - 0.21 (268.1) - 0.13
Average Borrowings 92.8 - (0.05) 100.0 - (0.05)
Average Taxation (26.7) - 0.01 (107.4) - 0.06
Net operating
assets 2,491.1 3,676.2 1.48 2,353.8 3,139.8 1.33
-------- -------- ------- -------- -------- -------
Tangible net assets per share
This is calculated as net assets before any accrued dividends
excluding goodwill and intangible assets divided by the number of
ordinary shares in issue at the end of the period. The Directors
consider this to be a good measure of the value intrinsic within
each ordinary share.
Tangible net assets
per share
2016 2016 2016 2015 2015 2015
Net
Ordinary assets Ordinary Net
Net shares per Net shares assets
assets in issue share assets in issue per share
GBPm GBPm pence GBPm GBPm pence
Basic net
assets 2,900.3 3,270.3 88.7 2,723.3 3,258.6 83.6
Adjusted
for:
Intangible
assets (3.5) - (0.1) (2.7) - (0.1)
Tangible
net assets 2,896.8 3,270.3 88.6 2,720.6 3,258.6 83.5
-------- ---------- -------- -------- ---------- -----------
Net cash
Net cash is defined as total cash less total financing. This is
considered by the Directors to be the best indicator of the
financing position of the Group. This is reconciled in note 10.
Cash conversion
This is defined as cash generated from operations divided by
operating profit. The Directors consider this measure to be a good
indication of how efficiently the Group is turning profit into
cash.
Cash conversion
2016 2016 2016 2015 2015 2015
Cash Cash
generated generated
from Cash from
Profit operations conversion Profit operations Cash conversion
GBPm GBPm % GBPm GBPm %
Profit before
interest
and tax 762.6 622.2 81.6 631.5 426.9 67.6
Adjusted
for:
Share of
results of
joint ventures 1.2 - (0.1) 4.9 - (0.5)
Exceptional
items 0.5 - (0.1) 0.6 - (0.1)
Operating
profit 764.3 622.2 81.4 637.0 426.9 67.0
------- ------------ ------------ ------- ------------ ----------------
Adjusted gearing
This is defined as net cash plus land creditors divided by net
assets. The Directors consider this to be a more representative
measure of the Group's gearing levels.
Adjusted gearing
2016 2015
GBPm GBPm
Net assets 2,900.3 2,723.3
-------- --------
Cash 450.2 323.3
Bank loans (85.5) (100.0)
-------- --------
Net cash 364.7 223.3
Land creditors (599.8) (629.8)
Adjusted net debt (235.1) (406.5)
-------- --------
Adjusted gearing 8.1% 14.9%
-------- --------
Adjusted basic earnings per share
This is calculated as earnings attributed to the shareholders,
excluding exceptional items and tax on exceptional items, divided
by the number of shares in issue at the end of the period. The
Directors consider this provides an important measure of the
underlying earning capacity of the Group. Note 6 shows a
reconciliation from basic earnings per share to adjusted basis
earnings per share.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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