Final Results
29 February 2012
Taylor Wimpey plc
Results for the year ended 31 December 2011
Focus on margin improvement delivers strong growth in profits
Highlights
· UK operating margin* increased to 9.7% (2010: 6.4%*)
· Group Return on Net Operating Assets** increased to 9.8% (2010: 5.3%*)
· Tangible net asset value per share*** 57.3p (2010: 56.9p)
· Group operating profit* increased by 811% to £159.5m
· Propose a final dividend of 0.38 pence per share (2010: nil)
· Significant improvement in operational performance in the UK:
· Double digit operating margin target achieved ahead of 2012 target (H2 2011: 10.1%)
· 11,756 new plots approved for purchase (2010: 8,713 plots)
· Ongoing success in acquiring and obtaining planning for strategic land
· Strong growth in both private and affordable order book to £983m at 26 February 2012
· Customer satisfaction increased to 92.1% (2010: 87.1%)
· 32% reduction in reportable injury frequency rate
· 18% reduction in waste generated per 1,000ft2 built
· Completed sale of North America in July 2011, final stage of major restructuring
· Bought back £85.4 million of the 10.375% Senior Notes due 2015
Financial Summary
|
Continuing operations |
FY 2011 |
FY 2010 |
|
Revenue £m |
1,808.0 |
1,767.7 |
|
Operating profit* £m |
159.5 |
88.31 |
|
Profit/(loss) before tax and exceptional items £m |
89.9 |
(27.9)1 |
|
Exceptional items before tax £m |
(11.3) |
(138.9) |
|
Profit/(loss) for the year £m |
65.7 |
(59.2)1 |
|
Adjusted basic earnings/(loss) per share p |
2.1 |
(1.5) |
|
|
|
|
|
Total Group |
|
|
|
Basic earnings per share p |
3.1 |
8.1 |
|
Net debt £m |
116.9 |
654.5 |
* Operating profit is defined as profit on ordinary activities from continuing operations before finance costs and exceptional items, after share of results of joint ventures.
** Return on net operating assets is defined as operating profit divided by the average of the opening and closing net operating assets, which is defined as capital employed plus intangibles less tax balances.
*** Tangible net assets per share is defined as net assets excluding goodwill and intangible assets divided by the number of shares in issue at the period end.
1 The 2010 comparatives exclude the one-off pension curtailment credit of £12.0 million in the UK.
Pete Redfern, Chief Executive, said:
"Our performance is the result of a continued focus on driving value by prioritising a further improvement in margins and return on capital. In 2011, we saw significant progress in our operational performance and I am pleased that we have reached our double digit operating margin target ahead of schedule.
While wider economic conditions remain uncertain, the UK has seen a period of continued stability in the underlying housing market and strong growth across a number of areas as shown by our order book. We feel well-positioned to deliver further improvement through our value-driven strategy."
-ends-
A presentation to analysts will be made at 9.00am on 29 February 2012. This presentation will be broadcast live on http://pres.taylorwimpey.com/tw028/default.asp
For further information please contact:
Taylor Wimpey plc Tel: +44 (0) 7816 517 039
Pete Redfern, Chief Executive
Ryan Mangold, Group Finance Director
Jonathan Drake, Investor Relations
RLM Finsbury Tel: +44 (0) 20 7251 3801
Andrew Dowler
Notes to editors:
Taylor Wimpey plc is a UK-focused residential developer which also has operations in Spain. Our vision is to become the UK's leading residential developer for creating value and delivering quality.
For further information, please visit the Group's website:
Group overview
Group revenue from continuing operations in 2011 increased by 2.3% to £1,808.0 million in 2011 (2010: £1,767.7 million) from continuing Group completions of 10,289 (2010: 10,098). The small increases in revenue and completions are reflective of the continuing stability in market conditions in the UK during 2011 and our strategic focus on quality of earnings ahead of volume.
Group operating profit* from continuing operations increased by £71.2 million, or 80.6%, to £159.5 million (2010: £88.3 million1) and Group operating margin* increased to 8.8% (2010: 5.0%).
Following the successful sale of our North American business, we have finalised our strategy to optimise our UK residential development business. We intend to become the UK's leading residential developer for creating value and delivering quality, and the key elements of our strategy are:
· Prioritisation of both short and long term margin performance ahead of volume growth;
· Development of our extensive strategic land portfolio in combination with targeted short term land acquisitions;
· A comprehensive focus on improving returns from both our existing land portfolio and newly acquired sites through our value management process; and
· Ongoing proactive management of the Group's capital structure, operating structure and level of land investment to maximise performance across the housing market cycle.
Outlook
In the UK, while it remains too early to judge the market for the year as a whole, the early weeks of trading in 2012 have followed the encouraging patterns of the second half of 2011, with good visitor levels, healthy reservations and low cancellations. We believe that our ever improving portfolio of sales outlets is well positioned in our local markets, with aspirational products and achievable prices for our target customers.
Our priorities remain value creation and margin improvement ahead of volume growth, and we are achieving further improvement in the margin on sales in our order book. Having delivered double digit operating margins in the UK in the second half of 2011, ahead of target, we continue to expect to deliver further steady improvement providing that current stable market conditions continue.
Given the balance between a stable UK housing market and widespread economic uncertainty, we continue to maintain a positive but cautious view of the short term trading environment. In addition to creating value in an improving market, our value-focused strategy, high quality land portfolio, increased order book, and strong balance sheet give us a strong defensive position should conditions weaken during 2012.
UK Housing
Financial and operational performance
|
|
2011 |
2010 |
% change |
|
Completions |
10,180 |
9,962 |
2.2% |
|
Average Selling Price £k |
171 |
171 |
- |
|
Revenue £m |
1,779.4 |
1,736.6 |
2.5% |
|
Operating profit* £m |
173.2 |
111.0 |
56.0% |
|
Operating margin* % |
9.7 |
6.4 |
3.3ppt |
|
Return on net operating assets** % |
10.4 |
6.7 |
3.7 ppt |
|
Contribution per legal completion |
28.6 |
22.9 |
24.9% |
|
Forward order book as a % of completions |
53.1 |
47.2 |
5.9ppt |
|
Owned and controlled plots with planning |
65,264 |
63,556 |
2.7% |
|
Customer satisfaction % |
92.1 |
87.1 |
5.0ppt |
|
Health and safety injury frequency rate (per 100,000 employees and contractors) |
378 |
557 |
(32.1)% |
|
Waste generated per 1,000 ft2 built (tonnes) |
3.44 |
4.18 |
(17.7)% |
We have made further significant progress in 2011 and this is reflected in our strong financial performance. Revenue has increased slightly to £1,779.4 million (2010: £1,736.6 million), primarily driven by an increase in home completions. It is therefore very pleasing to report growth of 56% in operating profit* to £173.2 million (2010: £111.0 million1) as we continue to prioritise margin performance ahead of volume growth.
This resulted in a sharp increase in operating margin to 9.7% for the full year (2010: 6.4%1), with our target of reaching double digit operating margins by 2012 achieved during the second half of 2011.
Net operating assets** in the UK were £1,721.5 million (2010: £1,628.6 million), with a return on net operating assets** for the year of 10.4% (2010: 6.7%1).
Sales, completions and pricing
Market conditions in 2011 exceeded our expectations, with pricing stable and levels of both visitors and reservations above the prior year. We experienced a more normal autumn selling pattern and a stronger end to the year, particularly contrasted with the weaker finish to 2010. Our net private reservation rate for the year as a whole was 0.54 homes per outlet per week (2010: 0.51) with cancellation rates below the long term average at 15.8% (2010: 18.2%).
We opened 128 new active selling outlets in 2011 and entered 2012 with 314 outlets (December 2010: 301). Our primary goals with new outlets continue to be to optimise planning consents and to value-engineer sites prior to opening.
Home completions increased by 2% to 10,180 (2010: 9,962) of which 8,075 were private completions (2010: 8,103), 2,048 were affordable homes (2010: 1,824) and 57 were our share of joint venture completions (2010: 35). The overall average selling price for these completions was unchanged at £171k, with a small increase in the average selling price of private completions to £185k (2010: £184k) and the average selling price of affordable homes unchanged at £116k.
Our sales focus in the final quarter of the year was on maximising both the quality and scale of our order book. We ended 2011 with a total order book value of £835 million (2010: £715 million), an increase of 17%. Within this total, the value of the order book for private housing is up by 22% and the value of the affordable housing order book has been increased by 9%. The total number of homes within the year end order book is up by 15% to 5,379 homes (2010: 4,684 homes), and the margin in the order book is also ahead of both the equivalent point in 2010 and the margin achieved on completions in 2011.
Selecting land
We view our landbank as an investment portfolio that we manage actively to create value for shareholders. In line with this approach, we consider it appropriate to hold a longer land portfolio at this stage of the cycle and the strength of our land portfolio enables us to target our activity in the land market to only the best opportunities. We continue to be highly selective with regard to the type of sites that we buy in terms of location, product mix, anticipated returns and level of risk. We undertake a series of thorough reviews of each opportunity at all stages of the acquisition process. Only those opportunities that meet our requirements, including return on capital, operating profit and risk profile, are submitted for approval.
We increased our financial return criteria for land purchased during 2011, maintaining our consistent, disciplined approach to land acquisition in order to maximise the quality of our portfolio in a land market offering an increased number of attractive opportunities. Consistent with our guidance at the start of 2011, we approved the purchase of 11,756 new plots on 106 sites during 2011. We continue to limit the use of deferred payment terms, given our very low marginal cost of borrowing, enabling us to drive the best land value.
We held 65,264 plots in our UK short term land portfolio, representing owned or controlled land with planning, or a resolution to grant planning at 31 December 2011 (2010: 63,556). This is equivalent to 6.4 years of supply at current completion levels (2010: 6.4 years). The average cost per owned plot in the short term land portfolio was £33k at 31 December 2011 on the basis of allocating previous land write downs against land value (2010: £31k). 39% of our short term owned and controlled land portfolio is previously impaired, 15% acquired prior to the downturn and unimpaired, 19% acquired since we re-entered the land market in September 2009 and 27% originally sourced through our strategic land portfolio.
Our current land strategy remains weighted towards both the south (63% of owned and controlled short term land portfolio plots) and houses (81% of owned and controlled short term land portfolio plots). However, we continue to believe that a long term strategy with a sensible mix of sites for all consumer groups, including first time buyers, and in all areas where there is significant housing need will deliver the best long term returns.
We have also made significant progress with our strategic land portfolio during 2011. We have added 12,868 new potential plots to the strategic land portfolio in 2011, including a land sale and partnership agreement with Harworth Estates, the property development division of UK Coal plc, and an option covering approximately 224 acres at Syston in Leicestershire. In addition, we have achieved planning consents on circa 4,000 plots from our strategic land portfolio including sites in Crewe and Church Crookham.
Managing the planning and community engagement process
We aim to become the industry leader in managing the planning process across our business, and see the current changes in the planning system as an opportunity to develop a competitive advantage, through adapting more quickly and more effectively.
We believe that the underlying principle of the Localism Act, of ensuring that planning decisions involve the local people whom they affect, is the right one and welcome the strong presumption in favour of sustainable development contained within the draft National Planning Policy Framework.
We have completed the initial phase of a significant programme of internal training to enhance the required communication and engagement skills across our regional teams. We have also completed the development and roll-out of a comprehensive framework of processes to position our business to take advantage of the opportunities that the proposed new system will provide. In addition, we have produced an 'About Taylor Wimpey' brochure and associated web site, http://about.taylorwimpey.co.uk, to provide greater transparency on our approach to the planning and community engagement process.
Product range
We continue to offer a wide range of homes from apartments to five bedroom houses, with prices ranging from under £100k to above £500k. As in recent years, the majority of our home completions during 2011 were priced within a range from £100k to £200k.
The proportion of apartments in our private completions was unchanged at 26%. The average square footage of our private completions also remained broadly the same at 1,012 square feet (2010: 1,015 square feet).
We have now completed the roll-out of our new housetype range. These homes are designed to be high quality, extremely energy efficient and straightforward, cost effective and safe to build. They are also extremely flexible with different internal layouts and exteriors that can be varied easily to complement local landscapes and streetscapes.
The housetypes are designed to meet specific space standards and comply with Secured by Design principles (the nationwide initiative intended to reduce crime through home and scheme design). They are also capable of achieving Lifetime Homes standards of accessibility and adaptability for changing lifestyles, where appropriate.
Getting the homebuilding basics right
Although our business model is fundamentally about land development, all areas of our business have a role to play in delivering the value that we create through the active management of our land portfolio. We cannot achieve our financial objectives without efficient homebuilding operations.
Health and safety
Health and safety remains our non-negotiable top priority. We have a formal, comprehensive and fully integrated health, safety and environmental (HSE) management system in place in the UK. We update this system and associated procedures frequently to reflect changes in legislation and best practice. Our aim is to continually improve our HSE management year on year.
We have changed the basis of our Health and Safety key metric during the year to the incident rate per 100,000 employees and contractors to enable easier comparatives with industry benchmark data. The previous basis was incident frequency rate per 100,000 hours worked.
During 2011 we recorded an Annual Injury Rate (AIIR) of 378 in the UK (2010: 557), which is significantly below the 2010/11 'All Home Builder Rate' of 552 declared by the Home Builders Federation and the 'Construction Sector Rate' 2010/11 of 536 declared by the Health and Safety Executive (HSE). We also recorded a reduction of our number of reportable RIDDOR (Reporting of Injuries, Diseases and Dangerous Occurrences Regulations) injuries by 23% when compared to 2010.
There were no HSE Enforcement Notices issued to any of our sites within the UK for non-compliance with health and safety legislation.
Build costs and efficiency
Having achieved our target of a 10% reduction in private build costs per square foot between the first half of 2009 and the first half of 2010, we have retained our focus on build cost efficiency. We have achieved further savings in 2011, with the full year average private build cost per square foot reduced to £102 (2010: £106).
The majority of these savings relate to greater efficiency on site and increased standardisation, with the underlying build cost environment remaining broadly flat.
In line with our focus on increasing our return on net operating assets, we continue to control work in progress tightly. We aim to match our build rate on each outlet to the sales rate being achieved and control this through a management sign off process for the release of each plot to construction. This focus continues to deliver benefits and the average value of work in progress per outlet at 31 December 2011 reduced to £2.2 million (2010: £2.4 million).
Environment
Reducing waste is not only a responsible course of action in terms of protecting the environment, it also contributes towards reducing our build costs. Our approach is to focus on keeping waste to a minimum through the design of the products used when building homes, separating and recovering as much material from the site as possible (reuse and recycling or treatment), carefully considering options when there are excess materials on a site, and keeping the amount of materials that are sent to landfill to a minimum. We are committed to continual improvement in waste reduction and have further reduced the level of waste generated per 1,000 square feet built to 3.44 tonnes (2010: 4.18 tonnes). We have reduced the amount of waste going to landfill by 18% from 2010 and 53% since 2007.
We are also committed to improving the water efficiency of the homes that we build, for example using water-efficient fittings and appliances as standard. From 2012 we will measure the water use of our sites, offices and home plots before sale in order to monitor and identify ways to further increase water efficiency.
In 2011, we built 1,158 homes to Code for Sustainable Homes (CfSH) level three (2010: 570) and 75 homes to Code level four (2010: nil). In addition we built 1,037 homes to EcoHomes standards (the standard that has now been replaced by CfSH) (2010: 923) including 114 to EcoHomes Good (2010: 191), 463 to Very Good (2010: 524) and 460 to Excellent (2010: 208). We are working in partnership to build around 780 homes at Code level four at our Waterside Park regeneration scheme in East London.
Quality
We remain committed to delivering high quality homes for all of our customers.
We have made further progress on this commitment as measured through our performance in the 2011 National House-Building Council (NHBC) Pride in the Job Awards, which are based on build quality. Our UK site managers won 65 Quality Awards (2010: 55), 18 Seals of Excellence (2010: 17) and two Regional Awards. For the second year running, Mike Crawford, site manager of Warleigh Village in Plymouth was the runner up in the large builder category of the Supreme Awards for the UK's best site manager.
Caring about our customers
Buying a home is a significant financial and emotional investment. We aim to make buying, moving into and living in a Taylor Wimpey home as easy as possible for our customers.
Sales and marketing
Sales strategy continues to be a key element of delivering value. We set prices locally and make use of a range of targeted customer incentives to deliver competitive offers in each local market.
Financing remains a key consideration for many of our customers, as mortgage availability remains restricted. We support the government's FirstBuy initiative and have completed 173 homes under this scheme in 2011. Our remaining funding allocation will allow us to deliver approximately 1,100 further completions under the scheme. We remain sparing in our use of other shared equity incentives and welcome the development of the government and housebuilder-backed NewBuy mortgage indemnity guarantee scheme and MI New Home scheme in Scotland. Although details have yet to be finalised, these schemes have the potential to have a significant positive impact on the level of new home sales if sufficient funds are made available at competitive interest rates.
We continue to offer a wide range of other products to assist first time buyers, such as our 'Friends & Family Advantage' product and 'Deposit Match' scheme. The ongoing success of our approach is reflected in the consistently high proportion of our sales that are made to first time buyers, with a further increase to 30% in 2011 (2010: 29%).
Our potential customers are increasingly using the internet to research their home purchasing decisions before visiting an outlet and our marketing strategy reflects this ongoing trend. We continue to refocus our marketing spend towards online rather than traditional media and have doubled the organic traffic to our web site through enhanced search engine optimisation.
The use of our online appointment system, which we launched in August 2010, has grown over the course of 2011 and a total of 13,000 appointments were booked online during the year. We continue to develop our use of social media such as Facebook and Twitter and plan to launch our new web site during 2012.
Customer satisfaction
Our aim is to offer homes that are aspirational for our target customers, appropriately priced for each local market and to ensure that our processes deliver the high standards of service that our customers rightly expect. It is therefore extremely pleasing to report that our externally measured customer satisfaction scores have increased to 92.1% (2010: 87.1%).
Optimising value
We have delivered significant value recovery and improvement over the last four years through initiatives such as targeted build cost savings and value engineering of sites. We have learned a lot through these initiatives and have embedded this knowledge into our everyday operations. Our focus going forward is to continue the momentum in identifying and capturing enhanced value at all stages of the development cycle, from planning to construction.
Our standard methodology is documented within our Operating Framework, which enables us to deliver enhanced operating efficiencies within a strong control environment. It also provides a consistent base for the ongoing implementation of our new IT system. This system is expected to deliver significant savings through the retirement of a number of legacy systems, as well as supporting our focus on value improvement through improved management information, reporting and analysis.
We review every site, both old and new, on a quarterly basis to ensure that expected margins are being delivered and identify opportunities for further improvement. These opportunities are then quantified, actions identified and implemented, and the resulting margin improvement monitored. These opportunities range from replanning of sites, reducing build costs from foundation design to landscaping, and adding value to our homes through selective enhancements to our specification.
We continue to manage our land portfolio actively. Although we have completed our initial replanning programme, we are continuing to review the planning consents that we have across our land portfolio to ensure that they deliver an optimal mix of homes to meet local market demand and that the site is optimised for safe, efficient, cost effective and considerate development. We undertake land sales where we feel that the price achieved delivers value and the land does not fit our strategy or is excess to our requirements in a particular local market. Revenue from land sales totalled £23.4 million in 2011 (2010: £11.4 million) with an operating profit* of £6.3 million (2010: £6.7 million).
Simply the best people
Our people are critical to our success and we ran 14 presentations around the country in the second half of 2011 to communicate our strategy to and receive feedback from our employees.
We continue to focus strongly on learning and development, updating our Taylor Wimpey induction programme and extending our sales induction programme during 2011. In addition, we continued our Circle Management Training programme, which aims to improve the leadership skills of our middle and senior managers. Over the course of the year we recruited eight new graduates for our graduate programme (2010: 6), 16 management trainees (2010: 8) and 40 new apprentices (2010: 19).
We continue to support the UK construction industry's Construction Skills Certification Scheme (CSCS), which was set up to improve quality, reduce accidents and provide evidence of workers' occupational competence. A total of 98.2% of our workforce, including sub-contractors, were CSCS carded at the end of December 2011 (2010: 98.6%).
We operate in diverse communities and believe that embracing this diversity will enable us to succeed through a workforce that is inclusive, creative and innovative. We introduced a new Diversity Policy in 2011 and have also been reviewing our recruitment practices with a view to developing an increasingly diverse workforce.
We saw a slight increase in employee turnover to 10% during 2011 (2010: 9%).
Current trading and outlook
The underlying housing market remains stable with robust homebuyer confidence and an ongoing undersupply of new housing. The introduction of the NewBuy mortgage guarantee scheme in the coming weeks has the potential to improve the availability of mortgages for first time buyers, although the Stamp Duty exemption for first time buyers on properties valued at up to £250k is scheduled to end on 24 March.
The early weeks of trading in 2012 have followed the encouraging patterns of the second half of 2011 and, as at 26 February 2012, our order book had increased by 18% to £983 million (31 December 2011: £835 million).
Spain Housing
Performance
As previously reported, we completed our exit from our Gibraltar business in 2010, with no home completions from this market in 2011.
Market conditions remained tough throughout 2011, with mortgage availability remaining restricted. This was of greater significance for local purchasers, as overseas purchasers looking to buy a second home typically require lower levels of mortgage finance.
We completed 109 homes in Spain in 2011 (2010: 136) at an average selling price of £238k (2010: £214k). The increase in our average selling price reflects the exit from the Gibraltar market, where our final completions had been lower priced apartments.
Revenue in 2011 was £28.6 million (2010: £31.1 million), primarily driven by the reduced number of completions. However, despite the tough market conditions, we delivered an operating profit* of £0.2 million, in comparison to an operating loss* of £3.6 million in 2010.
We remain very cautious in our approach to new land purchases and have reduced the number of plots in our land portfolio further in 2011 to 1,668 (2010: 1,783). The Spanish business made a positive contribution to the cash flows of the Group in 2011.
Our year end order book was £10.4 million (2010: £10.8 million).
In addition to the improved financial performance during the year, we delivered improvements in both customer satisfaction and our health and safety performance.
Current trading
Given the ongoing economic uncertainty in Spain and the wider Euro zone, we expect 2012 to be another year of challenging market conditions. However, 2011 saw an increase in the number of tourists visiting Spain and this has the potential to benefit second home sales.
Group financial review
Group revenue from continuing operations in 2011 increased by 2.3% to £1,808.0 million in 2011 (2010: £1,767.7 million) from Group completions of 10,289 (2010: 10,098). The small increases in revenue and completions are reflective of the continuing stability in market conditions in the UK during 2011 and our strategic focus on quality of earnings ahead of volume.
Gross profit from continuing operations of £287.7 million (2010: £229.8 million) is up by 25.2% and reflects our continual focus on prioritising margin ahead of volume growth. The gross profit from continuing operations includes a positive contribution of £99.6 million (2010: £103.5 million), relating to realisation of written-down inventory above its originally estimated net realisable value, where the combination of slightly higher selling prices and cost improvements through replans and cost reduction initiatives have exceeded our original market assumptions. These amounts are stated before the allocation of overhead excluded from the Group's net realisable value exercise.
Group operating profit* from continuing operations increased by £71.2 million, or 80.6%, to £159.5 million (2010: £88.3 million1) and Group operating margin* rose to 8.8% (2010: 5.0%1) as a result of the improved trading performance and a decrease in overheads following the sale of North America and the Group becoming a UK focussed business. Group asset turn increased to 1.11 times in 2011 (2010: 1.06 times), although we continue to hold a longer than normal land portfolio at this stage of the market cycle, in line with our strategy. This results in an increase in the Group's return on net operating assets** of 4.5 percentage points to 9.8% (2010: 5.3%1).
Disposal of North American business
In July 2011, the Group completed the sale of its North American business for £731.9 million. The North American business generated a profit after tax of £24.5 million, with a corresponding increase in net assets, and contributed £8.9 million to the Group's net operating cash flows in 2011 up to the disposal date. The disposal realised a total profit from discontinued operations of £43.1 million after taking into account an impairment of net assets of £24.0 million, transaction costs of £16.5 million and recycling of foreign exchange reserves for North America recorded in the cumulative translation reserves of £59.1 million.
Net finance costs
Pre-exceptional finance costs from continuing operations totalled £69.6 million (2010: £116.2 million), net of £3.7 million of interest receivable (2010: £3.4 million).
Interest on borrowings was £52.3 million (2010: £85.2 million) with the reduction reflecting the lower average net debt level of the Group during 2011 of £540.9 million (2010: £667.5 million) due to disposal of our North American business in July and lower cost of borrowing following the refinancing completed in December 2010.
Other items included in finance costs from continuing operations are a net pension interest charge of £14.1 million (2010: £23.0 million), a mark-to-market and foreign exchange gain on derivatives of £1.0 million (2010 loss: £2.4 million), and a total imputed interest charge for land creditors and other payables of £7.9 million (2010: £9.0 million).
Exceptional items
The 2011 pre-tax exceptional items of £11.3 million include £5.5 million relating to the premium to par value for the repurchase of £85.4 million of the £250 million 10.375% Senior Notes due 2015 in 2011. We repurchased £82.4 million of the Senior Notes as part of the tender offer in September 2011 at a premium to par of 6.0% and a further £3.0 million over the remainder of the year at an average premium of 6.8%.
An exceptional charge of £5.8 million has been provided for the Enhanced Transfer Value (ETV) exercise for the George Wimpey Staff Pension Scheme (GWSPS), representing the enhancement and costs related to the exercise that has completed in February 2012.
Tax
The Group incurred a pre-exceptional tax charge on continuing operations of £24.2 million (2010: £31.3 million) which equates to an underlying tax rate of 26.9% and recorded an exceptional tax credit of £1.5 million due to the impact of the ETV costs incurred. During 2011 the UK government reduced the corporation tax rate by 2% which resulted in a deferred tax asset write-off of £22.2 million which was offset by recognition of additional deferred tax assets of £22.1 million relating to previously unrecognised tax losses following another year of profitability (2010: £300.0 million).
Earnings per share
The pre-exceptional basic earnings per share for continuing operations are 2.1 pence (2010: 1.5 pence loss per share). The basic earnings per share after exceptional items are 3.1 pence (2010: 8.1 pence).
Dividend
Following the sale of our North American business in 2011, Taylor Wimpey's financial position is now significantly improved and, with net debt of £116.9 million as at 31 December 2011, the Group's balance sheet is strong. This strength enables the Group to selectively acquire the high-quality land necessary to deliver our stated strategy and to drive value.
A key element of this strategy is the ongoing management of the Group's capital structure, operating structure and level of land investment to maximise performance across the housing market cycle. The Directors are committed to a more active approach to managing the housing market cycle, in particular with respect to the Group's capital structure and balance sheet capacity. This strategy intends to balance the capital requirements of the business and returning excess capital to shareholders, whilst at all times maintaining balance sheet strength and flexibility.
We intend shareholder returns to be in the form of both regular maintenance dividend payments through the cycle and additional special returns where appropriate. The regular maintenance dividend payments will be calculated with reference to the net asset value of the Group. These dividends would be declared at the half year results and the full year results in an approximate one-third/two-thirds split respectively. It would be the intention of the Group to make additional returns to shareholders based on the prevailing market conditions and the returns available on alternative uses of the capital.
Given the current outlook in the UK housing market, and the strength of the Group's asset base, the Directors believe that it is appropriate to commence dividend payments to shareholders at this time. This will consists of a maintenance, final dividend of 0.38 pence per share. This represents the final portion of a total dividend representing 1% of Net Asset Yield.
Balance sheet and cash flow
Net assets at 31 December 2011 were £1.8 billion (2010: £1.8 billion) which equates to a tangible net asset value per share of 57.3 pence (2010: 56.9 pence). Gearing (including land creditors) at the year end is 23% (2010: 56%) which is below our long term expectations of 30% to 40% through the cycle.
Land creditors were £306.4 million at 31 December 2011 (2010: £369.2 million), with the decrease being due to the disposal of the North American business. The use of land creditors remains a useful tool for financing land purchases, however we continue to use them selectively due to our very low marginal cost of borrowings.
In total the Group has recognised deferred tax assets of £342.8 million (2010: £371.6 million) of which £289.8 million (2010: £300.0 million) relate to losses and £52.7 million (2010: £68.3 million) relate to retirement obligations.
The Group has unrecognised potential deferred tax assets as at 31 December 2011 in the UK of £67.6 million (2010: £78.6 million) and £24.7 million in other jurisdictions (2010: £29.8 million).
As at 31 December 2011, the Group had mortgage debtors of £66.5 million (2010: £54.9 million), the majority of which relates to shared equity. We continue to use this as a selective selling tool.
The Group generated a cash outflow from operating activities of £34.8 million in 2011 (2010: cash inflow £87.9 million) with the outflow partly due to the £32.5 million one-off pensions contributions as part of the disposal of the North American business. In the UK, net land investment was £12.7 million (2010: net land sales of £160.8 million). Work in progress remains tightly controlled with an average of £2.2 million gross work in progress per outlet (2010: £2.4 million).
The Group acquired £10.0 million of its own shares for future vesting of share awards (2010: nil), representing 28.9 million shares.
Year end net debt levels reduced from £654.5 million in 2010 to £116.9 million in 2011, a decrease of £537.6 million. This improvement was mainly achieved by net proceeds from the sale of the North American business of £562.3 million.
Treasury management and funding
All our debt facilities were refinanced in December 2010 and we entered 2011 with £1.3 billion of committed funding. Following the disposal of our North American business we reduced our revolving credit facility by £350 million, to £600 million and in September 2011 we successfully launched an open tender offer and purchased £82.4 million of our £250 million 10.375% Senior Notes at a premium of 6.0% to nominal. A further £3.0 million was purchased in December 2011 at an average premium to par of 6.8%.
The Group has three sources of borrowings: £600 million of bank financing currently at a margin of 2.25%; a £100 million term facility at a margin of 4.5%; and £164.6 million of 10.375% Senior Notes due 2015. The average maturity across these sources of borrowings is 3.2 years.
Taking into account term borrowings and committed revolving credit facilities, the Group has access to committed funding of £864.6 million as at 31 December 2011 (2010: £1.3 billion), with the first £600 million of revolving credit facilities maturing in November 2014.
The Group's preference is to manage market risks without the use of derivatives, but derivatives will be used where necessary and appropriate to reduce the levels of volatility to both income and equity. The use of such derivatives is strictly controlled and they are not permitted to be used for speculative or trading purposes.
Derivatives and foreign currency borrowings are used to hedge our foreign investments selectively in order to protect their Sterling value. Interest rate derivatives, while not satisfying the strict requirements for hedge accounting, continue to provide an economic hedge to the volatility of interest costs.
The Group is operating well within its financial covenants and limits of available funding. The Group does not require any additional funding in the near future.
Pensions
The IAS19 deficit, which appears on the Group's balance sheet, is £208.2 million at 31 December 2011 (2010: £248.5 million). The Company contributed a total of £84.9 million via deficit recovery contributions including a one off payment of £32.5 million following the sale of the North American business.
The changes in actuarial assumptions resulted in a loss of £47.0 million in the year, due to the decrease in discount rate of 0.50% per annum leading to an increase in the liabilities, offset partially by the decrease in the inflation assumption of 0.40% per annum for RPI and by 0.50% per annum for CPI.
Formal actuarial valuations of both of the Company's main pension schemes, the Taylor Woodrow Group Pension & Life Assurance Fund (TWGP&LAF) and the George Wimpey Staff Pension Scheme (GWSPS), as at 31 March 2010, were completed during February 2011. The results of these valuations are a deficit of £264 million relating to the TWGP&LAF (previous deficit £163 million) and a deficit of £259 million relating to the GWSPS (previous deficit £215 million).
Following the completion of the triennial valuation, the Group's deficit reduction payments in respect of the TWGP&LAF are £22 million per annum and the deficit reduction payments to the GWSPS are £24 million per annum. Both schemes are now closed to future accrual.
We continue to review and implement options to manage the volatility of the pension deficit actively. Each proposal is reviewed with the respective pension trustees on behalf of the members prior to consultation with the members.
Implementation of the investment strategy, as agreed between the Trustees and the Company, through the established joint investment sub-committee is continuing. There has been an increase in the allocation of Alternatives (opportunistic credit, active commodities and emerging market debt), a restructuring of the equity portfolio and the appointment of an LDI manager for the implementation of liability hedging and to release capital from bond assets to fund new Alternative mandates. The basis of the hedging framework decreases the interest and inflation sensitivity relative to each scheme's liabilities.
During the second half of 2011 the Group announced an Enhanced Transfer Value (ETV) exercise for the GWSPS. The purpose of this exercise is to allow deferred members of the GWSPS to transfer their accrued pension liabilities and assets to another pension scheme. To facilitate the transfer the Group offered a 15% incentive to the participants of the GWSPS, of which a maximum of 5% could be taken in cash. Approximately 14% of deferred members of the GWSPS accepted the ETV offer, at a cost of £5.8 million to the Group, with a net reduction in the funding deficit of £8.0 million. We are currently reviewing the launch of an ETV exercise for the TWGP&LAF scheme in 2012 subject to regulatory guidance.
Existing employees of the Company are offered a Defined Contribution (DC) pension called the Taylor Wimpey Personal Choice Plan (PCP). During 2011 this DC scheme was awarded the Pensions Quality Mark Plus by the NAPF, acknowledging that the PCP contribution levels, governance and communication meet the industry's highest standard.
The Group is planning for auto-enrolment in the UK and is comfortable with its progress to date, with the Staging Date forecast to be August 2013. The Group has begun the communication process with senior management and with regional employees, and is in the process of engaging a prospective supplier.
Going concern
The Directors remain of the view that, whilst the economic and market conditions continue to be challenging and not without risk, the Group's financing provides both the necessary facility and covenant headroom to enable the Group to operate within its terms for at least the next 12 months. Accordingly, the consolidated financial statements are prepared on a going concern basis.
Corporate responsibility
We remain committed to being a responsible company and to playing our part in building increasingly sustainable homes and communities.
As Chief Executive, Pete Redfern takes ownership of the corporate responsibility agenda at the Board level and oversees the work of our Sustainability Steering Group. Pete also continues to sit on the Confederation of British Industry's Climate Change Board, enabling us to benefit from best practice across a wide range of industries.
As a residential developer, we are well aware of the undersupply of new homes in the UK and the issue of homelessness. We are proud to be supporting Centrepoint, a charity that provides emergency accommodation, support, information and training for homeless young people as our national charity for 2011 and 2012. In addition we remain a patron of CRASH, the construction and property industries' homelessness charity.
Further information about our approach to corporate responsibility is available in our annual Corporate Responsibility Report which is available on our web site at http://plc.taylorwimpey.co.uk/CorporateResponsibility/
Shareholder information
The Company's 2012 Annual General Meeting will be held at 11:00am on Thursday 26 April 2012 at the British Medical Association, BMA House, Tavistock Square, London WC1H 9JP.
Subject to shareholder approval at the AGM, the final dividend of 0.38 pence will be paid on 22 May 2012 to shareholders on the register at the close of business on 20 April 2012.
This dividend will be paid as a conventional cash dividend, but shareholders are once again being offered the opportunity to reinvest some or all of their dividend under the Dividend Re-Investment Plan, details of which will be made available to shareholders in due course.
Copies of the 2011 Annual Report and Accounts will be available from 16 March 2012 on the Company's web site http://plc.taylorwimpey.co.uk. Hard copy documents will be posted to shareholders who have elected to receive them on 23 March 2012 and will also be available from the registered office at Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR from that date.
A copy of the 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 for the year ending 31 December 2011. Certain parts thereof are not included within this announcement.
We confirm to the best of our knowledge:
· the financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit 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 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 28 February 2012 and is signed on its behalf by:
Kevin Beeston, Chairman
Pete Redfern, Group Chief Executive
Principal risks and uncertainties
As with any business, Taylor Wimpey faces a number of risks and uncertainties in the course of its day to day operations. It is only by effectively identifying and managing these risks that we are able to deliver on our strategic objectives of improving operating margins, return on net operating assets and net asset value.
|
|
Relevance to strategy |
Potential impact on KPIs |
Mitigation |
Impact of economic environment on mortgage availability
Mortgage providers have been impacted by the financial crisis and the resulting requirement to increase capital (such as Basel III), reducing their ability to provide mortgages.
|
The majority of the homes that we build are sold to individual purchasers who take on significant mortgages to finance their purchases. In particular the ability of first time buyers and investors to purchase homes has decreased due to reduced mortgage availability at the higher loan to value levels and hence significant deposits are required.
|
Credit availability remains below normal historic levels. As a result the level of effective demand for new homes is below historic trends, which could negatively impact on both profitability and cash generation. This would have an adverse effect on return on net operating assets and net debt.
|
We use a range of sales incentives like "Easy Mover" and "Deposit Match". We also offer, on certain sites, the government backed shared equity product "First Buy" to reduce customer up-front costs and the level of finance required. We are working with the main mortgage providers and the government on the NewBuy mortgage indemnity guarantee scheme for new build homes.
|
Government regulations and planning policy
The Localism Act and the National Planning Policy Framework have introduced significant change in the planning system, which potentially increases the time to obtain planning consents. |
Our ability to obtain the planning permission required to develop communities is dependent on our ability to meet the relevant regulatory and planning requirements. The new planning system could result in extended timescales for gaining planning consents or increased legal challenges as the powers within the new processes are clarified and tested. These factors increase uncertainty and increase the commercial risk of projects. |
Inability to obtain suitable consents, or unforeseen delays, could impact on the number or type of homes that we are able to build. We could also be required to fund higher than anticipated levels of planning obligations, or incur additional costs to meet increased regulatory requirements. All of these would have a detrimental impact on the contribution per plot. |
We have responded to the changes in planning policy by developing a comprehensive Community Led Planning strategy. Our aim is to improve communication between our regional businesses, communities and local authorities in order to deliver local requirements in the most appropriate way. We consult with the UK government on upcoming legislation, both directly and indirectly as a member of industry groups to highlight potential issues and to understand any proposed changes to regulations. |
Impact of market environment on demand
Significant economic uncertainty in Europe, government austerity measures, flat economic growth and the potential for increased unemployment could suppress demand for housing. |
Due to economic conditions and, in particular, increasing unemployment, consumer confidence remains low. This has an impact on demand for new homes as individuals are more uncertain about their financial future. |
Effective demand for new homes below normal levels could negatively impact on both profitability and cash generation. This has an adverse effect on return on net operating assets and net debt. |
Our local teams select the locations and home designs that best meet the needs of the local community and customer demand in the present and future. We evaluate new outlet openings on the basis of local market conditions and regularly review the pricing and incentives that we offer. We minimise the level of speculative build that we undertake and strive to reduce build costs, while maintaining quality, through operational efficiencies and price reductions. We continuously optimise our marketing web site to increase the conversion rate of visitors to customers. |
Land purchasing
The purchase of land of poor quality or at too high a price could impact future profitability. |
Land is the major 'raw material' for the Group and the limited availability of good quality land at an attractive price leads to significant competition. Purchasing land of the appropriate quality on attractive terms will enhance the Group's ability to deliver strong profit growth as housing markets recover. |
Purchasing poor quality or mis-priced land would have a detrimental impact on our profitability and returns. Purchasing insufficient land would reduce the Group's ability to manage its portfolio actively and create value for shareholders. |
Our local land teams select and appraise each site. Our appraisal process ensures each project is financially viable, consistent with our strategy and appropriately authorised, dependent on the proposed scale of expenditure. Our strategic land teams work alongside regional businesses to identify and secure land with the potential for future development and promote it through the planning system. |
Site and product safety
Building sites are inherently dangerous places. Unsafe practices by our employees or sub-contractors have the potential to cause serious injury or death. |
The success of our operations requires a large number of people, ranging from employees and sub-contractors to customers and their families, to visit our sites each day. We want all of these people to go home at the end of the day safe and uninjured.
|
In addition to the potentially tragic personal impact of an accident on site, there is potential for legal proceedings, financial penalties, reputational damage and delay to the site's progress.
|
We have a comprehensive health, safety and environmental management system, which is integral to our business. This is supported by our policies and procedures to ensure that we live up to our intention of providing a safe and healthy working environment and build houses that comply with the required regulations.
|
Material costs and availability of sub-contractors
Supply of labour and materials has reduced as industry volumes declined over recent years. However, as market conditions recover, there will be greater demand and competition for key skills and materials which could lead to increased prices. |
In order to optimise our build cost efficiency, whilst retaining the flexibility to commence work on new sites as market conditions allow, the vast majority of work carried out on site is performed by sub-contractors. Some sub-contractors and suppliers have gone out of business as a result of the downturn, with others reducing prices to secure orders. As demand increases labour and material prices could increase.
|
If the availability of sub-contractors or materials is insufficient to meet demand this could lead to increased build times, increased costs and, therefore, reduced profitability. Lack of skilled sub-contractors could also result in higher levels of waste being produced from our sites and lower build quality.
|
We maintain regular contact with suppliers regarding volume requirements and negotiate contract pricing and duration as appropriate. As part of subcontractor selection process key competencies are considered particularly in relation to health and safety, quality, previous site performance and financial stability. We also work to address the skills shortage in the industry through apprenticeship schemes and the Construction Industry Training Board.
|
Ability to attract and retain high calibre employees
|
Our value cycle requires significant input from skilled people to deliver quality homes and communities for our customers. The challenging market conditions in recent years have meant that we have had to reduce the number of employees across the Group.
|
Not having the right teams in place could lead to delays, quality issues, reduced sales levels, poor customer care and reduced profitability.
|
We monitor employee turnover levels on a monthly basis and conduct exit interviews, as appropriate, to identify any areas for improvement. We benchmark our remuneration against the industry, have succession plans in place for key roles within the Group and hold regular development reviews to identify training requirements.
|
Financial Statements
Consolidated Income Statement
for the year to 31 December 2011
|
£ million |
Note |
Before |
Exceptional |
Total |
Before |
Exceptional |
Total |
|
Continuing operations Revenue |
|
1,808.0 |
- |
1,808.0 |
1,767.7 |
- |
1,767.7 |
|
Cost of sales |
|
(1,520.3) |
- |
(1,520.3) |
(1,537.9) |
(17.3) |
(1,555.2) |
|
Gross profit/(loss) |
|
287.7 |
- |
287.7 |
229.8 |
(17.3) |
212.5 |
|
Net operating expenses |
3 |
(129.4) |
(5.8) |
(135.2) |
(129.2) |
(38.2) |
(167.4) |
|
Profit/(loss) on ordinary activities before finance costs |
|
158.3 |
(5.8) |
152.5 |
100.6 |
(55.5) |
45.1 |
|
Interest receivable |
|
3.7 |
- |
3.7 |
3.4 |
- |
3.4 |
|
Finance costs |
4 |
(73.3) |
(5.5) |
(78.8) |
(119.6) |
(83.4) |
(203.0) |
|
Share of results of joint ventures |
|
1.2 |
- |
1.2 |
(0.3) |
- |
(0.3) |
|
Profit/(loss) on ordinary activities before taxation |
|
89.9 |
(11.3) |
78.6 |
(15.9) |
(138.9) |
(154.8) |
|
Taxation (charge)/credit |
5 |
(24.2) |
1.5 |
(22.7) |
(31.3) |
360.8 |
329.5 |
|
Profit/(loss) for the year from continuing operations |
|
65.7 |
(9.8) |
55.9 |
(47.2) |
221.9 |
174.7 |
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
|
Profit for the year |
10 |
43.1 |
- |
43.1 |
67.0 |
17.6 |
84.6 |
|
Profit for the year |
|
108.8 |
(9.8) |
99.0 |
19.8 |
239.5 |
259.3 |
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
Equity holders of the parent |
|
|
|
99.0 |
|
|
259.3 |
|
Non-controlling interests |
|
|
|
- |
|
|
- |
|
|
|
|
|
99.0 |
|
|
259.3 |
|
|
Note |
|
|
2011 |
|
|
2010 |
|
Basic earnings per share - total Group |
6 |
|
|
3.1p |
|
|
8.1p |
|
Diluted earnings per share - total Group |
6 |
|
|
3.0p |
|
|
7.9p |
|
Basic earnings per share - continuing operations |
6 |
|
|
1.8p |
|
|
5.5p |
|
Diluted earnings per share - continuing operations |
6 |
|
|
1.7p |
|
|
5.3p |
|
Adjusted basic earnings/(loss) per share - continuing operations |
6 |
|
|
2.1p |
|
|
(1.5)p |
|
Adjusted diluted earnings/(loss) per share - continuing operations |
6 |
|
|
2.0p |
|
|
(1.4)p |
Financial Statements
Consolidated Statement of Comprehensive Income
for the year to 31 December 2011
|
£ million |
Note |
2011 |
2010 |
|
Exchange differences on translation of foreign operations |
|
1.8 |
33.9 |
|
Movement in fair value of hedging derivatives |
|
3.0 |
(3.6) |
|
Actuarial (loss)/ gain on defined benefit pension schemes |
9 |
(33.2) |
46.9 |
|
Tax credit/(charge) on items taken directly to equity |
7 |
4.8 |
(15.9) |
|
Other comprehensive (expense)/income for the year net of tax |
|
(23.6) |
61.3 |
|
Profit for the year |
|
99.0 |
259.3 |
|
Total comprehensive income for the year |
|
75.4 |
320.6 |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
Equity holders of the parent |
|
75.4 |
320.6 |
|
Non-controlling interests |
|
- |
- |
|
|
|
75.4 |
320.6 |
Financial Statements
Consolidated Balance Sheet
for the year to 31 December 2011
|
£ million |
Note |
2011 |
2010 |
|
Non-current assets |
|
|
|
|
Goodwill |
|
- |
2.4 |
|
Other intangible assets |
|
5.1 |
1.0 |
|
Property, plant and equipment |
|
5.0 |
7.6 |
|
Interests in joint ventures |
|
31.9 |
49.7 |
|
Trade and other receivables |
|
70.3 |
96.5 |
|
Deferred tax assets |
7 |
342.8 |
372.4 |
|
|
|
455.1 |
529.6 |
|
Current assets |
|
|
|
|
Inventories |
8 |
2,686.6 |
3,436.2 |
|
Trade and other receivables |
|
72.5 |
155.7 |
|
Tax receivables |
|
10.9 |
19.8 |
|
Cash and cash equivalents |
|
147.7 |
183.9 |
|
|
|
2,917.7 |
3,795.6 |
|
Total assets |
|
3,372.8 |
4,325.2 |
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
(697.8) |
(902.9) |
|
Tax payables |
|
(70.4) |
(162.7) |
|
Bank loans and overdrafts |
|
- |
(15.1) |
|
Provisions |
|
(76.6) |
(46.8) |
|
|
|
(844.8) |
(1,127.5) |
|
Net current assets |
|
2,072.9 |
2,668.1 |
|
Non-current liabilities |
|
|
|
|
Trade and other payables |
|
(199.7) |
(257.1) |
|
Debenture loans |
|
(164.6) |
(250.0) |
|
Bank and other loans |
|
(100.0) |
(573.3) |
|
Retirement benefit obligations |
9 |
(210.2) |
(250.5) |
|
Deferred tax liabilities |
7 |
- |
(0.8) |
|
Provisions |
|
(18.5) |
(42.9) |
|
|
|
(693.0) |
(1,374.6) |
|
Total liabilities |
|
(1,537.8) |
(2,502.1) |
|
|
|
|
|
|
Net assets |
|
1,835.0 |
1,823.1 |
|
|
|
|
|
|
Share capital |
|
287.7 |
287.7 |
|
Share premium account |
|
754.4 |
753.7 |
|
Own shares |
|
(8.4) |
(0.6) |
|
Other reserves |
|
46.7 |
101.4 |
|
Retained earnings |
|
753.1 |
679.4 |
|
Equity attributable to parent |
|
1,833.5 |
1,821.6 |
|
Non-controlling interests |
|
1.5 |
1.5 |
|
Total equity |
|
1,835.0 |
1,823.1 |
Financial Statements
Consolidated Statement of Changes in Equity
for the year to 31 December 2011
|
For the year to 31 December 2011 |
Share |
Share |
Own |
Other |
Retained earnings |
Total |
|
Balance as at 1 January 2011 |
287.7 |
753.7 |
(0.6) |
101.4 |
679.4 |
1,821.6 |
|
New share capital subscribed |
- |
0.7 |
- |
- |
- |
0.7 |
|
Own shares acquired |
- |
- |
(10.0) |
- |
- |
(10.0) |
|
Utilisation of own shares |
- |
- |
2.2 |
- |
- |
2.2 |
|
Share-based payment credit |
- |
- |
- |
- |
3.9 |
3.9 |
|
Cash cost of satisfying share options |
- |
- |
- |
- |
(1.2) |
(1.2) |
|
Exchange differences on translation of foreign operations |
- |
- |
- |
1.8 |
- |
1.8 |
|
Increase in fair value of hedging derivatives |
- |
- |
- |
3.0 |
- |
3.0 |
|
Actuarial loss on defined benefit pension schemes |
- |
- |
- |
- |
(33.2) |
(33.2) |
|
Deferred tax credit |
- |
- |
- |
- |
4.8 |
4.8 |
|
Transfer to retained earnings |
- |
- |
- |
(0.4) |
0.4 |
- |
|
Recycling of translation reserve on disposal of subsidiaries |
- |
- |
- |
(59.1) |
- |
(59.1) |
|
Profit for the year |
- |
- |
- |
- |
99.0 |
99.0 |
|
Equity attributable to parent |
287.7 |
754.4 |
(8.4) |
46.7 |
753.1 |
1,833.5 |
|
Non-controlling interests |
|
|
|
|
- |
1.5 |
|
Total equity |
|
|
|
|
|
1,835.0 |
|
For the year to 31 December 2010 |
Share |
Share |
Own |
Other |
Retained earnings |
Total |
|
Balance as at 1 January 2010 |
287.7 |
753.6 |
(5.0) |
76.7 |
385.5 |
1,498.5 |
|
New share capital subscribed |
- |
0.1 |
- |
- |
- |
0.1 |
|
Utilisation of own shares |
- |
- |
4.4 |
- |
(4.4) |
- |
|
Share-based payment credit |
- |
- |
- |
- |
2.8 |
2.8 |
|
Cash cost of satisfying share options |
- |
- |
- |
- |
(0.4) |
(0.4) |
|
Exchange differences on translation of foreign operations |
- |
- |
- |
33.9 |
- |
33.9 |
|
Decrease in fair value of hedging derivatives |
- |
- |
- |
(3.6) |
- |
(3.6) |
|
Actuarial gain on defined benefit pension schemes |
- |
- |
- |
- |
46.9 |
46.9 |
|
Deferred tax charge |
- |
- |
- |
- |
(15.9) |
(15.9) |
|
Transfer to retained earnings |
- |
- |
- |
(5.6) |
5.6 |
- |
|
Profit for the year |
- |
- |
- |
- |
259.3 |
259.3 |
|
Equity attributable to parent |
287.7 |
753.7 |
(0.6) |
101.4 |
679.4 |
1,821.6 |
|
Non-controlling interests |
|
|
|
|
|
1.5 |
|
Total equity |
|
|
|
|
|
1,823.1 |
Financial Statements
Consolidated Cash Flow Statement
for the year to 31 December 2011
|
£ million |
Note |
2011 |
2010 |
|
Net cash (used in)/from operating activities |
|
(34.8) |
87.9 |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Interest received |
|
6.3 |
0.8 |
|
Dividends received from joint ventures |
|
10.9 |
17.1 |
|
Proceeds on disposal of property, plant and investments |
|
0.8 |
0.1 |
|
Purchases of property, plant and investments |
|
(1.7) |
(3.7) |
|
Purchases of software |
|
(4.1) |
(1.0) |
|
Amounts invested in joint ventures |
|
- |
(1.0) |
|
Amounts repaid from/(loaned to) joint ventures |
|
2.5 |
(3.9) |
|
Disposal of subsidiaries |
10 |
562.3 |
- |
|
Net cash from investing activities |
|
577.0 |
8.4 |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Proceeds from sale of own shares |
|
0.7 |
- |
|
Cash cost of satisfying share options |
|
(1.2) |
(0.4) |
|
Purchase of own shares |
|
(7.9) |
- |
|
Repayment of debenture loans |
|
(85.4) |
(732.4) |
|
Increase in debenture loans |
|
- |
250.0 |
|
Repayment of overdrafts, bank and other loans |
|
(487.1) |
(348.7) |
|
Increase in bank and other loans |
|
- |
781.7 |
|
Net cash used in financing activities |
|
(580.9) |
(49.8) |
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents |
|
(38.7) |
46.5 |
|
Cash and cash equivalents at beginning of year |
|
183.9 |
132.1 |
|
Effect of foreign exchange rate changes |
|
2.5 |
5.3 |
|
Cash and cash equivalents at end of year |
|
147.7 |
183.9 |
Financial Statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2011
1. Basis of preparation
The financial information set out herein does not constitute the Group's statutory accounts for the years ended 31 December 2011 and 2010, but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the Company's annual general meeting to be held on 26 April 2012. The auditors have reported on those accounts; their 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, with the exception of the adoption of the following new and revised statements and interpretations, none of which have had any significant impact on amounts reported but may impact the accounting for future transactions and arrangements.
IAS 24 (amended) Related party disclosures. Clarifies and simplifies the definition of a related party and will require certain entities to make additional disclosures.
IAS 32 (amended) Financial instruments presentation. Classification of Rights issue, where offered for a fixed amount of foreign currency, these should be classified as equity.
IFRIC 14 (amended) Prepayments of a minimum funding requirement. These amendments correct an unintended consequence of IFRIC 14 where in some circumstances entities are not entitled to recognise as an asset some voluntary prepayments for minimum funding contributions. This was not intended when IFRIC 14 was issued.
IFRIC 19 Extinguishing financial liabilities and equity instruments. Requires that where a debtor issues equity instruments to a creditor to settle all or part of a financial liability, these instruments should be deemed fully paid and measured at the fair value of the liability extinguished.
Improvements to IFRSs 2010 (amendments). This release incorporated amendments to seven International Financial Reporting Standards (IFRSs). This is part of the IASBs amendments issued under the annual improvements process, which is designed to make necessary, but non-urgent, amendments to IFRSs.
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 (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Group expects to publish full financial statements on 16 March 2012, 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.
The Group completed the disposal of its North American business in July 2011. These results have been presented as discontinued operations. In accordance with the requirements of IFRS 5 'Discontinued operations and assets held for sale' the results of the North American business have been restated for the income statement, cash flow and related notes.
The consolidated financial statements have been prepared on a going concern basis and on a historical cost basis. The Group has recorded profits in the current year and has significantly reduced financial borrowings, partly due to the disposal of the North American business and has prepared forecasts with certain sensitivities and whilst the economic conditions have stabilised there continues to be certain risks including mortgage availability and weakened demand due to market environment. However the Directors are satisfied that the Group will be able to continue to operate within the available financing facilities for at least the next 12 months. Accordingly the consolidated financial statements have been prepared on a going concern basis.
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenue and expenses during the reporting period. Actual results could vary from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Financial Statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2011
2. Operating segments
IFRS 8 Operating segments requires information to be presented in the same basis as it is reviewed internally. The Group's Board of Directors view the businesses on a geographic basis when making strategic decisions for the Group and as such the Group is organised into three operating divisions - Housing United Kingdom, Housing Spain, and Corporate.
The North American business has been presented as discontinued operations following its disposal on 13 July 2011. The prior year net assets of the North American business have been presented separately as discontinued operations.
Segment information about these businesses is presented below:
|
For the year to 31 December 2011 |
Housing |
Housing |
Corporate |
Consolidated |
|
Revenue: |
|
|
|
|
|
External sales |
1,779.4 |
28.6 |
- |
1,808.0 |
|
|
|
|
|
|
|
Result: |
|
|
|
|
|
Operating profit/(loss) before joint ventures and exceptional items |
172.0 |
0.2 |
(13.9) |
158.3 |
|
Share of results of joint ventures |
1.2 |
- |
- |
1.2 |
|
Profit/(loss) on ordinary activities before finance costs, exceptional items and after share of results of joint ventures |
173.2 |
0.2 |
(13.9) |
159.5 |
|
Exceptional items |
(5.8) |
- |
- |
(5.8) |
|
Profit/(loss) on ordinary activities before finance costs, after share of results |
167.4 |
0.2 |
(13.9) |
153.7 |
|
Finance costs, net (including exceptional finance costs) |
|
|
|
(75.1) |
|
Profit on ordinary activities before taxation |
|
|
|
78.6 |
|
Taxation (including exceptional tax) |
|
|
|
(22.7) |
|
Result from continuing operations: |
|
|
|
55.9 |
|
|
|
|
|
|
|
Result from discontinued operations: |
|
|
|
|
|
Profit for the year from discontinued operations |
|
|
|
43.1 |
|
Profit for the year - total Group |
|
|
|
99.0 |
|
At 31 December 2011 |
Housing |
Housing |
Corporate |
Consolidated |
|
Assets and liabilities: |
|
|
|
|
|
Segment operating assets |
2,761.9 |
76.1 |
1.5 |
2,839.5 |
|
Joint ventures |
31.7 |
0.2 |
- |
31.9 |
|
Segment operating liabilities |
(1,072.1) |
(14.9) |
(115.8) |
(1,202.8) |
|
Continuing Group net operating assets/(liabilities) |
1,721.5 |
61.4 |
(114.3) |
1,668.6 |
|
Net current taxation |
|
|
|
(59.5) |
|
Net deferred taxation |
|
|
|
342.8 |
|
Net debt |
|
|
|
(116.9) |
|
Net assets |
|
|
|
1,835.0 |
Financial Statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2011
|
For the year to 31 December 2010 (restated Note 1) |
Housing |
Housing |
Corporate |
Consolidated |
|
Revenue: |
|
|
|
|
|
External sales |
1,736.6 |
31.1 |
- |
1,767.7 |
|
|
|
|
|
|
|
Result: |
|
|
|
|
|
Operating profit/(loss) before joint ventures and exceptional items |
123.3 |
(3.6) |
(19.1) |
100.6 |
|
Share of results of joint ventures |
(0.3) |
- |
- |
(0.3) |
|
Profit/(loss) on ordinary activities before finance costs, exceptional items |
123.0 |
(3.6) |
(19.1) |
100.3 |
|
Exceptional items |
- |
(17.3) |
(38.2) |
(55.5) |
|
Profit/(loss) on ordinary activities before finance costs, after share of results |
123.0 |
(20.9) |
(57.3) |
44.8 |
|
Finance costs, net (including exceptional finance costs) |
|
|
|
(199.6) |
|
Loss on ordinary activities before taxation |
|
|
|
(154.8) |
|
Taxation (including exceptional tax) |
|
|
|
329.5 |
|
Result from continuing operations: |
|
|
|
174.7 |
|
|
|
|
|
|
|
Result from discontinued operations: |
|
|
|
|
|
Profit for the year from discontinued operations |
|
|
|
84.6 |
|
Profit for the year - total Group |
|
|
|
259.3 |
|
At 31 December 2010 (restated Note 1) |
Housing |
Housing |
Corporate |
Consolidated |
|
Assets and liabilities - continuing operations |
|
|
|
|
|
Segment operating assets |
2,719.4 |
82.6 |
10.3 |
2,812.3 |
|
Joint ventures |
33.7 |
0.2 |
- |
33.9 |
|
Segment operating liabilities |
(1,124.5) |
(12.9) |
(75.0) |
(1,212.4) |
|
Net operating assets/(liabilities) |
1,628.6 |
69.9 |
(64.7) |
1,633.8 |
|
Discontinued operations |
|
|
|
|
|
Operating assets |
|
|
|
900.5 |
|
Operating liabilities |
|
|
|
(287.8) |
|
|
|
|
|
612.7 |
|
|
|
|
|
|
|
Total net operating assets |
|
|
|
2,246.5 |
|
Goodwill |
|
|
|
2.4 |
|
Net current taxation |
|
|
|
(142.9) |
|
Net deferred taxation |
|
|
|
371.6 |
|
Net debt |
|
|
|
(654.5) |
|
Net assets |
|
|
|
1,823.1 |
Financial Statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2011
3. Net operating expenses and profit on ordinary activities before finance costs
|
£ million |
2011 |
2010 |
|
Administration expenses |
136.4 |
127.0 |
|
Net other (income)/expense |
(7.0) |
2.2 |
|
Exceptional items |
5.8 |
38.2 |
|
|
135.2 |
167.4 |
Net other income/(expense) includes profits on the sale of property, plant and equipment, VAT refunds and ground rents receivable.
|
Exceptional items: |
2011 |
2010 Note 1) |
|
Net land and work in progress write downs |
- |
17.3 |
|
Restructuring costs |
- |
6.5 |
|
Refinancing expenses |
- |
31.7 |
|
Pension enhanced transfer value offer |
5.8 |
- |
|
Exceptional items |
5.8 |
55.5 |
Market conditions have stabilised in the United Kingdom, however there continues to be uncertainty in a small number of sub-locations due to continued scarcity of mortgage finance, unemployment and a reduced buyer market. The Spanish market whilst stable continues to be challenging, however there have been no material market condition changes. The Group has completed its assessment on the carrying value of land and work in progress which has not resulted in further land and work in progress net write downs (31 December 2010: £17.3 million) to the lower of cost and net realisable value, nor any reversals of previous write downs (2010: £ nil million) as there is no clear evidence of a sustained change in the economic circumstances at the balance sheet date.
The current year exceptional costs of £5.8 million relates to the George Wimpey Staff Pension Scheme (GWSPS) enhanced transfer value exercise. Deferred members of the GWSPS have been offered enhanced transfer values in an exercise designed to reduce the volatility of the Group's future pension obligations.
In 2010 the Group incurred £6.5 million of costs predominantly in relation to actions relating to the Group's review of strategic options with regards to the North American business. Refinancing expenses of £31.7 million incurred in 2010 were predominantly fees payable to lenders and advisors in relation to the refinancing of the Group's debt facilities.
The Group paid a premium over nominal value of £5.5 million following the repurchase of £85.4 million of Senior Notes 10.375% due 2015 and this is presented as an exceptional finance charge (Note 4). In 2010 £83.4 million interest related breakage costs on the refinancing were included within exceptional finance costs in the Consolidated Income Statement.
|
Profit on ordinary activities before financing costs for continuing operations has been arrived at after charging: |
2011 |
2010 |
|
Cost of inventories recognised as expense in cost of sales, before write downs of inventories |
1,454.4 |
1,478.2 |
|
Write downs of inventories |
- |
17.3 |
|
Depreciation - plant and equipment |
0.8 |
2.4 |
|
Minimum lease payments under operating leases recognised in income for the year |
6.6 |
5.5 |
Financial Statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2011
4. Finance costs
|
Finance costs from continuing operations are analysed as follows: |
2011 |
2010 |
|
Interest on overdrafts, bank and other loans |
29.1 |
27.2 |
|
Interest on debenture loans |
23.2 |
58.0 |
|
Movement on interest rate derivatives and foreign exchange movements |
(1.0) |
2.4 |
|
|
51.3 |
87.6 |
|
Unwinding of discount on land creditors and other payables |
7.9 |
9.0 |
|
Notional net interest on pension liability (Note 9) |
14.1 |
23.0 |
|
|
73.3 |
119.6 |
|
Exceptional finance costs: |
|
|
|
Senior Note 10.375% due 2015 premium and bank loans and debenture fees and breakage fees |
5.5 |
83.4 |
|
|
78.8 |
203.0 |
The exceptional finance costs incurred in 2011 relate to the premium paid on the repurchase of £85.4 million of Senior Notes 10.375% due 2015 and the prior year costs relate to one-off interest related breakage payments following the early redemption of loan notes, debenture loans and certain arrangement fees.
5. Tax
|
Tax (charged)/ credited in the income statement for continuing operations is analysed as follows: |
2011 |
2010 |
|
|
Current tax: |
|
|
|
|
UK corporation tax: |
Current year |
- |
(0.8) |
|
|
Prior years |
6.0 |
60.8 |
|
Foreign tax: |
Current year |
- |
- |
|
|
Prior years |
(0.2) |
0.1 |
|
|
|
5.8 |
60.1 |
|
Deferred tax: |
|
|
|
|
UK: |
Current year |
(28.5) |
269.4 |
|
|
|
(28.5) |
269.4 |
|
|
|
(22.7) |
329.5 |
Corporation tax is calculated at 26.5% (2010: 28%) of the estimated assessable profit (2010: loss) 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 exceptional items of £1.5 million (2010: £360.8 million credit) in respect of UK tax. The 2010 credit in the UK related to the recognition of a deferred tax asset of £300.0 million relating to trading losses carried forward and the settlement of various issues with HM Revenue and Customs.
The charge for the year includes an amount of £22.2 million relating to the impact on the deferred tax asset of the 2% reduction in UK corporation tax from 27% to 25%.
Financial Statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2011
|
The (charge)/credit for the year can be reconciled to the profit/(loss) per the income statement as follows: |
2011 |
2010 |
|
Profit/(loss) before tax |
78.6 |
(154.8) |
|
|
|
|
|
Tax at the UK corporation tax rate of 26.5% (2010: 28%) |
(20.8) |
43.3 |
|
Net over provision in respect of prior years |
5.8 |
60.8 |
|
Tax effect of expenses that are not deductible in determining taxable profit |
(0.3) |
(5.9) |
|
Non-taxable income |
- |
0.2 |
|
Losses not recognised |
(7.3) |
(45.2) |
|
Recognition of deferred tax asset relating to trading losses |
22.1 |
300.0 |
|
Current year impact of settlement with Tax Authorities |
- |
(23.7) |
|
Impact of 2% rate reduction on deferred tax |
(22.2) |
- |
|
Tax (charge)/credit for the year |
(22.7) |
329.5 |
6. Earnings per share
|
|
2011 |
2010 |
|
Basic earnings per share |
3.1p |
8.1p |
|
Diluted earnings per share |
3.0p |
7.9p |
|
|
|
|
|
Basic earnings per share - continuing operations |
1.8p |
5.5p |
|
Diluted earnings per share - continuing operations |
1.7p |
5.3p |
|
|
|
|
|
Basic earnings per share - discontinued operations |
1.4p |
2.6p |
|
Diluted earnings per share - discontinued operations |
1.3p |
2.6p |
|
|
|
|
|
Adjusted basic earnings/(loss) per share - continuing operations |
2.1p |
(1.5p) |
|
Adjusted diluted earnings/(loss) per share - continuing operations |
2.0p |
(1.4p) |
|
|
|
|
|
Weighted average number of shares for basic/adjusted earnings per share - million |
3,190.1 |
3,193.8 |
|
Weighted average number of shares for diluted basic/adjusted earnings/(loss) per share - million |
3,282.3 |
3,297.6 |
Adjusted basic and adjusted diluted earnings per share, which exclude the impact of exceptional items and the associated net tax charges, are shown to provide clarity 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.
|
£ million |
2011 |
2010 |
|
Earnings from continuing operations for basic profit per share and diluted earnings per share |
55.9 |
174.7 |
|
Adjust for exceptional items (Notes 3 and 4) |
11.3 |
138.9 |
|
Adjust for exceptional tax items (Note 5) |
(1.5) |
(360.8) |
|
Earnings/(loss) from continuing operations for adjusted basic and adjusted diluted earnings per share |
65.7 |
(47.2) |
Financial Statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2011
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.
|
£ million |
Losses |
Retirement benefit obligations |
Other |
Total |
|
At 1 January 2010 |
- |
114.7 |
4.1 |
118.8 |
|
Credit/(charge) to income(a) |
300.0 |
(30.6) |
(1.2) |
268.2 |
|
Charge to equity (a) |
- |
(15.9) |
- |
(15.9) |
|
Changes in exchange rates |
- |
0.1 |
0.4 |
0.5 |
|
At 31 December 2010 |
300.0 |
68.3 |
3.3 |
371.6 |
|
(Charge)/credit to income |
(10.2) |
(18.6) |
0.3 |
(28.5) |
|
Credit to equity |
- |
4.8 |
- |
4.8 |
|
Disposal of subsidiaries |
- |
(1.8) |
(3.3) |
(5.1) |
|
At 31 December 2011 |
289.8 |
52.7 |
0.3 |
342.8 |
(a) 2010 income statement movements have not been restated
Closing deferred tax on UK temporary differences has been calculated at the enacted rate of 25% (2010: 27%). The effect of the reduction in the UK corporation tax rate from 27% to 25% is a reduction in the net deferred tax asset at the end of 2011 of an amount of £26.4 million. Of this £26.4 million, £4.2 million has been charged directly to the Statement of Comprehensive Income.
The proposed reduction in the main rate of corporation tax by 1% per year to 23% by 2014 is expected to be enacted separately each year. Based on the level of deferred tax recognised at the balance sheet date a charge of £13.7 million for each 1% reduction would arise. The Group will assess the impact of the reduction in rate in line with its accounting policy in respect of deferred tax at each balance sheet date.
The net deferred tax balance is analysed into assets and liabilities as follows:
|
£ million |
2011 |
2010 |
|
Deferred tax assets |
342.8 |
372.4 |
|
Deferred tax liabilities |
- |
(0.8) |
|
|
342.8 |
371.6 |
The Group has not recognised potential deferred tax assets relating to tax losses and other temporary differences carried forward amounting to £67.6 million (2010: £78.6 million) in the UK and £24.7 million (2010: £29.8 million) in other jurisdictions.
At the balance sheet date, the Group has unused UK capital losses of £252.4 million (2010: £253.0 million), all of which are agreed as available for offset against future capital profits. In 2010 the Group conceded a significant proportion of capital losses as part of a wider settlement agreement with HM Revenue & Customs. No deferred tax asset has been recognised in respect of the remaining capital losses at 31 December 2011 because the Group does not believe that it is probable that these capital losses will be utilised in the foreseeable future.
Financial Statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2011
8. Inventories
|
£ million |
2011 |
2010 |
|
Raw materials and consumables |
1.2 |
1.7 |
|
Finished goods and goods for resale |
17.9 |
19.4 |
|
Residential developments: |
|
|
|
Land |
2,018.9 |
2,248.4 |
|
Development and construction costs |
643.8 |
1,159.6 |
|
Commercial, industrial and mixed development properties |
4.8 |
7.1 |
|
|
2,686.6 |
3,436.2 |
The Directors consider all inventories to be current in nature. The operational cycle is such that the majority of inventory will not be realised within 12 months. It is not possible to determine with accuracy when specific inventory will be realised, as this will be subject to a number of issues such as consumer demand and planning permission delays.
Continuing Group gross profit includes a positive contribution of £99.6 million (2010: £103.5 million), relating to realisation of written down inventory above its originally estimated net realisable value, where our market assumptions in previous net realisable value exercises have been exceeded. This has partly been due to actions taken by the Group in the re-plan of sites, the further utilisation of standard house types and continued value engineering driving build cost savings as well as other external factors. These amounts are stated before the allocation of overheads excluded from the Group's net realisable value exercise.
9. Retirement benefit schemes
Retirement benefit obligation comprises gross pension liability of £208.2 million (2010: £248.5 million) and gross post-retirement healthcare liability of £2.0 million (2010: £2.0 million).
The Group operates defined benefit and defined contribution pension schemes. In the UK, the Taylor Woodrow Group Pension and Life Assurance Fund (TWGP&LAF) and the George Wimpey Staff Pension Scheme (GWSPS) are funded defined benefit schemes and are managed by boards of Trustees. The TWGP&LAF merged with the Bryant Group Pension Scheme (BGPS) on 24 June 2002 and with the Wilson Connolly Holdings Pension Scheme (WCHPS), the Wainhomes Ltd Pension Scheme (WHLPS) and the Prestoplan Pension Scheme (PPS) on 27 August 2004. The TWGP&LAF was closed to future pension accrual with effect from 30 November 2006 and the GWSPS was closed to future accrual with effect from 31 August 2010. An alternative defined contribution arrangement, the Taylor Wimpey Personal Choice Plan (TWPCP), is offered to new employees and to members of the defined benefit schemes when they were closed to future accrual. Legacy George Wimpey staff were members of a UK Stakeholder arrangement and contributions to the arrangement ceased with effect from 31 August 2010. These members were offered membership of the TWPCP. The Group also operated a number of small overseas pension schemes including defined benefit schemes in the US and Canada, until 13 July 2011 when the business was disposed of. The Group made an additional payment of £16.25 million to each of the UK defined benefit schemes following the sale of the North American businesses in July 2011. Future revaluation of deferred member benefits in the UK defined benefit schemes will be based on the CPI in line with scheme rules. Pensioner increases will continue to be based on RPI.
The pension scheme assets of the Group's principal defined benefit pension schemes, TWGP&LAF and GWSPS, are held in separate trustee-administered funds to meet long term pension liabilities to past and present employees. The Trustees of the schemes are required to act in the best interests of the schemes' beneficiaries. The appointment of trustees is determined by each scheme's trust documentation. The Group has a policy that at least one-third of all trustees should be nominated by members of the scheme. The Trustees have agreed to hold Joint Trustee Board meetings to manage the schemes jointly, where appropriate, they have also implemented a Joint Investment Sub Committee to manage the investment of the combined defined benefit scheme assets. The Group and the Trustees have undertaken a review of the schemes' investment strategy, implementation of the investment changes started during 2011 and will be completed in 2012.
The most recent formal triennial valuations of the TWGP&LAF and the GWSPS were carried out as at 31 March 2010. The Group agreed revised funding schedules under which the Group will make annual funding contributions of £22.0 million per annum in respect of the TWGP&LAF over 10 years from the valuation date and £24.0 million per annum in respect of the GWSPS from the valuation date. Previously the Group was making annual funding contributions of £20.0 million per annum over eight years in respect of the TWGP&LAF and £25.0 million per annum over 10 years in respect of the GWSPS. Following the last valuation of the GWSPS, the ordinary contribution rate was set at 18% of pensionable salaries, which was applicable until the scheme was closed to future accrual in August 2010. The projected unit method was used in all valuations and assets were taken into account using market values.
Financial Statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2011
The results of the March 2010 valuations of the Group's pension schemes have been updated to 31 December 2011. The principal actuarial assumptions used in the calculation of the disclosure items are as follows:
|
|
|
United Kingdom |
|
|
|
|
2011 |
2010 |
|
As at 31 December |
|
|
|
|
Discount rate for scheme liabilities |
|
4.90% |
5.40% |
|
Expected return on scheme assets |
|
5.04%-5.43% |
5.55%-5.92% |
|
General pay inflation |
|
n/a |
n/a |
|
Deferred pension increases |
|
1.95% |
2.45% |
|
Pension increases |
|
2.00%-3.55% |
2.20%-3.65% |
The basis for the above assumptions are prescribed by IAS 19 and do not reflect the assumptions that may be used in future funding valuations of the Group's pension schemes.
The fair value of assets and present value of obligations of the Group's defined benefit pension schemes are set out below:
|
|
Expected rate |
United |
North |
Total plans |
Percentage of total plan assets held |
|
31 December 2011 |
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
Equities |
7.45% |
641.8 |
- |
641.8 |
38% |
|
Bonds |
4.70% |
428.3 |
- |
428.3 |
26% |
|
Gilts |
2.95% |
459.2 |
- |
459.2 |
27% |
|
Other assets |
2.80%- 7.45% |
151.3 |
- |
151.3 |
9% |
|
|
|
1,680.6 |
- |
1,680.6 |
100% |
|
Present value of defined benefit obligations |
|
(1,888.8) |
- |
(1,888.8) |
|
|
Deficit in schemes recognised as non-current liability |
|
(208.2) |
- |
(208.2) |
|
|
31 December 2010 |
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
Equities |
7.65% |
587.3 |
10.0 |
597.3 |
37% |
|
Bonds |
5.40% |
324.9 |
7.0 |
331.9 |
21% |
|
Gilts |
4.15% |
481.0 |
- |
481.0 |
30% |
|
Other assets |
3.20%-7.65% |
191.2 |
2.7 |
193.9 |
12% |
|
|
|
1,584.4 |
19.7 |
1,604.1 |
100% |
|
Present value of defined benefit obligations |
|
(1,828.4) |
(24.2) |
(1,852.6) |
|
|
Deficit in schemes recognised as non-current liability |
|
(244.0) |
(4.5) |
(248.5) |
|
Financial Statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2011
|
£ million |
2011 |
2010 (Restated Note 1) |
|
Amount charged against income: |
|
|
|
Current service cost |
- |
(3.2) |
|
Settlement (loss)/curtailment gain (a) |
(4.0) |
12.0 |
|
Operating (cost)/income |
(4.0) |
8.8 |
|
Expected return on scheme assets |
82.3 |
73.8 |
|
Interest cost on scheme liabilities |
(96.4) |
(96.8) |
|
Finance charges |
(14.1) |
(23.0) |
|
Total charge |
(18.1) |
(14.2) |
(a) The settlement for 2011 is in relation to an enhanced transfer value exercise, and the curtailment for 2010 is in respect of the closure of the GWSPS to future accrual.
The actual return on scheme assets was a gain of £96.1million (2010: £145.7 million).
|
£ million |
2011 |
2010 (Restated Note 1) |
|
Actuarial gains in the Statement of Comprehensive Income: |
|
|
|
Difference between actual and expected return on scheme assets |
13.8 |
70.7 |
|
Experience losses arising on scheme liabilities |
- |
(8.6) |
|
Changes in assumptions |
(47.0) |
(12.8) |
|
Actuarial loss associated with discontinued operations |
- |
(2.4) |
|
Total (loss)/gain recognised in the Statement of Comprehensive Income |
(33.2) |
46.9 |
The cumulative amount of actuarial losses recognised in the Statement of Comprehensive Income is £201.9 million loss (2010: £168.7 million loss).
|
£ million |
2011 |
2010(a) |
|
Movement in present value of defined benefit obligations |
|
|
|
1 January |
1,852.6 |
1,818.7 |
|
Disposal of subsidiary |
(24.2) |
- |
|
Changes in exchange rates |
- |
0.7 |
|
Service cost |
- |
3.7 |
|
Settlement loss/curtailment (gain) |
1.8 |
(12.6) |
|
Benefits paid and expenses |
(84.8) |
(81.0) |
|
Contributions - employee |
- |
0.9 |
|
Interest cost |
96.4 |
98.3 |
|
Actuarial losses |
47.0 |
23.9 |
|
31 December |
1,888.8 |
1,852.6 |
|
£ million |
2011 |
2010(a) |
|
Movement in fair value of scheme assets |
|
|
|
1 January |
1,604.1 |
1,412.3 |
|
Disposal of subsidiary |
(19.7) |
- |
|
Changes in exchange rates |
- |
0.7 |
|
Expected return on scheme assets and expenses |
82.3 |
74.9 |
|
Contributions - employer and employee |
84.9 |
126.4 |
|
Benefits paid |
(84.8) |
(81.0) |
|
Actuarial gains |
13.8 |
70.8 |
|
31 December |
1,680.6 |
1,604.1 |
(a) 2010 income statement movements have not been restated
Financial Statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2011
The estimated amounts of contributions expected to be paid to the TWGP&LAF during 2012 are £22.0 million and to the GWSPS are £24.0 million.
The Group liability is the difference between the scheme liabilities and the scheme assets. Changes in the assumptions may occur at the same time as changes in the market value of scheme assets. These may or may not offset the change in assumptions. For example, a fall in interest rates will increase the scheme liability, but may also trigger an offsetting increase in the market value of the assets so there is no net effect on the Group liability.
|
Assumption |
Change in assumption |
Impact on scheme liabilities |
|
Discount rate |
Increase by 0.1% p.a. |
Decrease by £30.0m |
|
Rate of inflation |
Increase by 0.1% p.a. |
Increase by £26.3m |
|
Rate of mortality |
Members assumed to live 1 year longer |
Increase by £61.5m |
The projected liabilities of the defined benefit scheme are apportioned between members' past and future service using the projected unit actuarial cost method. The defined benefit obligation makes allowance for future earnings growth.
The gross post-retirement liability also includes £2.0 million at 31 December 2011 (2010: £2.0 million) in respect of continuing post-retirement healthcare insurance premiums for retired long-service employees. The liability is based upon the actuarial assessment of the remaining cost by a qualified actuary on a net present value basis at 31 December 2008.
10. Discontinued operations
On 13 July 2011, Taylor Wimpey plc disposed of its North American business the results of which have been presented as discontinued operations. The Group received net proceeds of £731.9 million for the net assets of the North American business. The transaction costs of the disposal were £16.5 million and the Group realised £59.1 million of translation reserves associated with the North American business.
The net cash proceeds from the disposal of the North American business of £562.3 million are taken as proceeds of £731.9 million less net cash of £153.1 million and transaction costs of £16.5 million.
During the period, North America contributed £8.9 million (2010: £77.1 million) to the Group's net operating cash flows, received £10.0 million (2010: £15.7 million) in respect of investing activities and £31.9 million (2010: £2.9 million) in respect of financing activities.
|
£ million |
2011 |
2010 |
|
Revenue |
364.3 |
835.6 |
|
Cost of sales |
(302.0) |
(701.5) |
|
Exceptional inventory write downs |
- |
(7.5) |
|
Cost of Sales |
(302.0) |
(709.0) |
|
Gross profit |
62.3 |
126.6 |
|
Net operating expenses |
(27.7) |
(50.5) |
|
Profit on ordinary activities before finance costs and tax |
34.6 |
76.1 |
|
Interest receivable |
0.7 |
0.4 |
|
Finance costs |
(3.6) |
(3.2) |
|
Share of results of joint ventures |
4.6 |
10.2 |
|
Profit on ordinary activities before exceptional items and taxation |
36.3 |
91.0 |
|
Exceptional items |
- |
(7.5) |
|
Profit on ordinary activities before taxation |
36.3 |
83.5 |
|
Taxation charge |
(11.8) |
(24.0) |
|
Exceptional tax credit |
- |
25.1 |
|
Taxation (charge)/credit |
(11.8) |
1.1 |
|
Profit after tax from discontinued operations |
24.5 |
84.6 |
|
|
|
|
|
Impairment |
(24.0) |
- |
|
Transaction costs |
(16.5) |
- |
|
Recycling of translation reserves |
59.1 |
- |
|
Profit from discontinued operations |
43.1 |
84.6 |
Financial Statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2011
The Group disposed of the net assets of the North American business on 13 July 2011. The net assets were impaired by £24.0 million prior to disposal to reflect their fair value less costs to sell.
|
£ million |
13 July 2011 |
|
|
Goodwill |
2.4 |
2.4 |
|
Property, plant and equipment |
2.0 |
2.2 |
|
Interests in joint ventures |
11.8 |
15.8 |
|
Inventories |
753.2 |
755.6 |
|
Trade and other receivables |
117.4 |
126.9 |
|
Cash and cash equivalents |
199.3 |
111.9 |
|
Trade and other payables |
(230.3) |
(239.1) |
|
Overdrafts bank and other loans |
(46.2) |
(15.0) |
|
Retirement benefit obligation |
(4.1) |
(4.4) |
|
Provisions |
(40.4) |
(44.3) |
|
Current taxation liability |
(12.6) |
(17.5) |
|
Deferred taxation asset |
3.4 |
5.0 |
|
Impairment |
(24.0) |
- |
|
Net assets of discontinued operations |
731.9 |
699.5 |
Financial Statements
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2011
11. Notes to the cash flow statement
|
£ million |
2011 |
2010 (Restated Note 1) |
|
Profit on ordinary activities before finance costs |
|
|
|
Continuing operations |
152.5 |
45.1 |
|
Discontinued operations |
34.6 |
76.1 |
|
Non-cash exceptional items: |
|
|
|
Inventories write downs |
- |
24.8 |
|
Adjustments for: |
|
|
|
Depreciation of plant and equipment |
1.7 |
4.3 |
|
Pensions settlement loss/curtailment (gain) |
1.8 |
(12.6) |
|
Share-based payment charge |
3.9 |
2.8 |
|
Profit on disposal of property and plant |
(0.2) |
- |
|
Decrease in provisions |
(11.9) |
(10.4) |
|
Operating cash flows before movements in working capital |
182.4 |
130.1 |
|
(Increase)/decrease in inventories |
(7.1) |
168.8 |
|
Increase in receivables |
(12.9) |
(42.5) |
|
(Decrease)/increase in payables |
(38.8) |
91.9 |
|
Pension contributions in excess of charge |
(84.7) |
(119.1) |
|
Cash generated by operations |
38.9 |
229.2 |
|
Income taxes (paid)/received |
(16.4) |
25.7 |
|
Interest paid |
(57.3) |
(167.0) |
|
Net cash (used in)/generated from operating activities |
(34.8) |
87.9 |
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 debt
|
£ million |
Cash and cash |
Overdrafts, banks and |
Debenture loans |
Total net debt |
|
Balance 1 January 2010 |
132.1 |
(161.1) |
(721.9) |
(750.9) |
|
Cashflow |
46.5 |
(433.0) |
482.4 |
95.9 |
|
Foreign exchange |
5.3 |
5.7 |
(10.5) |
0.5 |
|
Balance 31 December 2010 |
183.9 |
(588.4) |
(250.0) |
(654.5) |
|
Cashflow |
(38.7) |
487.1 |
85.4 |
533.8 |
|
Foreign exchange |
2.5 |
1.3 |
- |
3.8 |
|
Balance 31 December 2011 |
147.7 |
(100.0) |
(164.6) |
(116.9) |
On 13 July 2011 the Group disposed of its North American business. At the point of disposal the business had cash and cash equivalents of £199.3 million and overdrafts, bank and other loans of £46.2 million.
12. Dividends
The Directors believe that it is appropriate to commence dividend payments to shareholders at this time and are recommending a final dividend of 0.38 pence subject to shareholder approval at the Annual General Meeting, with a resultant total dividend of £12.1 million (2010: £nil).
In accordance with IAS 10' Events after the balance sheet date' the proposed dividend has not been accrued as a liability as at 31 December 2011. The dividend will be paid on 22 May to all shareholders registered at the close of business on 20 April 2012.
This information is provided by RNS
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