Final Results

RNS Number : 2377C

Taylor Wimpey PLC

03 March 2011

3 March 2011

Taylor Wimpey plc

Results for the year ended 31 December 2010

Highlights

· Significant improvement in profitability driven by prioritising margin over volume

- Group operating margin* of 7.5% (2009: 1.7%)

- UK operating margin of 7.1% (2009: 0.8%)

- North America operating margin of 11.2% (2009: 5.8%)

· Land acquisitions driven by quality and value

- UK short-term land portfolio in excess of 6 years' supply

- Over 8 years' supply of strategic land

· Continued focus on operational improvement

- Replanning successfully achieved on 63% of suitable sites

- Close engagement with government on Localism Bill and future planning policy

· Net asset value per share increased to 57p (2009: 47p)

· Strong cash generation throughout the year, with net debt reduced to £654.5m (2009: £750.9m)

· Economic uncertainty continues but underlying market in the UK expected to remain stable through 2011

· Margin in the UK order book significantly higher than last year

· Simplified debt structure now in place, providing greater operational flexibility

· Pension deficit reduced to £248.5m (2009: £406.4m)

· Evaluating proposals for our North American business

Financial Summary

	FY 2010	FY 2009	% change
Revenue £m	2,603.3	2,595.6	0.3%
Operating profit* £m	194.1	43.3	348.3%
Profit/(loss) before tax and exceptional items £m	75.1	(96.1)	178.1%
Exceptional items before tax £m	(146.4)	(603.8)	(75.8)%
Profit/(loss) for the year £m	259.3	(640.6)	140.5%
Adjusted earnings/(loss) per share p	0.6p	(4.3)	114.0%
Earnings/(loss) per share p	8.1	(25.1)	132.3%
Tangible net assets per share p**	57	47	21.3%

* Operating profit is defined as profit on ordinary activities before finance costs, exceptional items and amortisation of brands, after share of results of joint ventures. The 2010 operating profit includes a one-off pension curtailment credit of £12.6 million, £12.0 million of which was reported at the half year.

** 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.

Pete Redfern, Group Chief Executive, said:

"The significant improvement in our performance during 2010 reflects our disciplined focus on margin ahead of volume growth. We have continued to improve the quality of our landbank and add value to our existing sites through replans and operational efficiency. We now have the financing in place to enable us to continue that progress towards our aim of achieving double digit margins in 2012."

-ends-

A presentation to analysts will be made at 9.00am on 3 March 2011. This presentation will be broadcast live on http://pres.taylorwimpey.com/tw022/default.asp

In addition, a conference call will be held at 3:00pm for holders of the Company's £250 million 10.375% Senior Notes due 2015. Dial in details for the call are available from Kimberley Richardson of Finsbury on +44 (0)20 7251 3801.

For further information please contact:

Taylor Wimpey plc Tel: +44 (0) 7816 517 039

Pete Redfern, Group Chief Executive

Ryan Mangold, Group Finance Director

Jonathan Drake, Investor Relations

Finsbury Tel: +44 (0) 20 7251 3801

Andrew Dowler

Faeth Birch

Notes to editors:

Taylor Wimpey plc develops communities in the UK, North America and Spain. It aims to be the developer of choice for customers, employees, shareholders and communities.

For further information, please visit the Group's website:

www.taylorwimpeyplc.com

Group overview

The Group generated revenue of £2,603.3 million in 2010 (2009: £2,595.6 million) from total completions of 14,272 homes (2009: 15,166). We remain focused on prioritising margin ahead of volume growth and, although home completions fell in both the UK and North America, this was offset by growth in average selling prices.

Group operating profit* was £194.1 million (2009: £43.3 million), representing a Group operating margin* of 7.5% (2009: 1.7%). Financial performance has been strong across all of our main markets, with operating profit* growth achieved in the UK, US and Canada. £79.3 million of the Group's operating profit* was delivered in the first half of the year and £114.8 million was recorded in the second half.

In the UK, we have seen a positive start to 2011 with some price increases achieved. We expect the underlying market to remain relatively flat over the course of 2011, although we are likely to continue to see some volatility in the national house price indices from month to month as economic uncertainty continues and mortgage lending remains restricted.

The significant long term undersupply of new housing in the UK persists and we are committed to working with the UK Government to deliver a planning system that is capable of supporting an increased level of supply, whilst recognising the likelihood of reduced supply during the transition stage. We will also continue to work with the mortgage industry to identify innovative ways of increasing mortgage supply, such as our recently launched 'Take 5' product that uses an insurance-backed guarantee to provide an affordable 95% mortgage.

In North America, markets appear to have stabilised and there are signs of increasing consumer confidence. Affordability levels remain at record highs and, this combined with gradually reducing foreclosure levels provides the potential for a strong recovery as confidence returns.

We are evaluating proposals for our North American business and will update the market as appropriate in due course.

With a simplified debt structure in place, we now have significantly greater operational flexibility and an enhanced ability to deliver our strategic priorities, including further margin improvement.

UK Housing

Financial and operational performance

	2010	2009	% change
Completions	9,962	10,186	(2.2)%
Average Selling Price	£171k	£160k	6.9%
Revenue	£1,736.6m	£1,700.4m	2.1%
Operating profit*	£123.0m	£14.3m	760.1%
Operating margin*	7.1%	0.8%	6.3ppt
Contribution per legal completion	£22.9k	£12.6k	81.7%
Forward order book as a % of completions	47.2%	53.6%	(6.4)ppt
Owned and controlled plots with planning	63,556	66,089	(3.8)%
Customer satisfaction	87.1%	87.1%	-
Health and safety injury frequency rate (per 100,000 hours worked)	0.235	0.226	4.0%
Waste generated per home (tonnes)	4.35	4.69	(7.2%)

Revenue from UK Housing was £1,736.6 million (2009: £1,700.4 million), with a higher average selling price outweighing the impact of a slight reduction in the number of home completions. Operating profit* was £123.0 million, a significant increase on the £14.3 million achieved in 2009 and the operating margin has risen sharply, from 0.8% in 2009 to 7.1% in 2010.

There are no exceptional items relating to the UK Housing business during the year (2009: £452.8 million).

Net operating assets in the UK were £1,628.6 million (2009: £1,693.1 million).

Sales, completions and pricing

Market conditions in the UK were broadly flat in comparison to those experienced in 2009, albeit we saw some softness in the market around the time of the general election in May and again at the time of the Comprehensive Spending Review in October.

We achieved a net private sales rate per outlet of 0.51 for the year as a whole (2009: 0.55) and cancellations remained in line with the long term average at 18.2% (2009: 18.7%). We increased our number of outlets to 301 at the year end from a low point of 271 in September 2010 and expect to deliver further growth in outlet numbers during 2011.

We completed a total of 9,962 homes in 2010 (2009: 10,186), of which 8,103 were private completions (2009: 8,432), 1,824 were affordable homes (2009: 1,709) and 35 were our share of completions arising from joint ventures (2009: 45). The overall average selling price for these completions was £171k, an increase of 7% over the 2009 equivalent of £160k of which around two-thirds was mix-related. The average selling price for private completions increased to £184k (2009: £171k) and the affordable average selling price rose to £116k (2009: £108k).

Our year end order book was 4,684 homes (2009: 5,431), reflecting a slower sales rate in the second half and our ongoing strategy of prioritising margin. The success of this approach is illustrated by the margins in our order book, which are significantly higher than the 2009 comparative.

Strategy

In the current market conditions, we continue to focus on maximising the value achieved from each home completion rather than looking to grow volumes ahead of underlying improvements in market conditions.

Selecting land

We have a landbank with planning consent that is equivalent to more than six years of completions at current levels and a further 77,060 plots in our strategic landbank. We view this as an investment portfolio that we manage actively to create value for shareholders.

Looking back over the last housing market cycle in the UK, it is clear that the industry shifted towards a strategy of growing profits through growing volumes as the market picked up from the mid-1990s through to 2007. This led to land strategies based on achieving volume targets and increased the risks inherent in a cyclical business. The strength of our existing 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 types 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 levels during the acquisition process. Only those opportunities that meet our requirements, including level of return on capital, operating profit and risk profile, are submitted for approval.

Having re-entered the land market during the second half of 2009, we remained active in 2010. We have seen an improvement in the availability of attractive opportunities during the second half of 2010 and have maintained our consistent, disciplined approach to land acquisition. During the year, we have approved a total of 8,713 new plots on 86 new sites with limited use of deferred payment terms (2009: 3,003 plots on 22 sites).

Our UK short term land portfolio, representing owned or controlled land with planning, or a resolution to grant planning, stood at 63,556 plots at 31 December 2010 (2009: 66,089 plots). The average cost per plot in the land portfolio was £31k at 31 December 2010 on the basis of allocating all net realisable value provisions against land value (2009: £30k).

We plan to retain our national coverage, selecting the best opportunities in each region to deliver the best returns. Our current land strategy is weighted towards both the south and houses. However, we 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 long term returns.

We continue to promote our strategic land through the planning process and are pleased to have received planning in principle for 1,500 homes at Cambuslang near Glasgow. 22% of our short term land portfolio was originally sourced without a planning consent and we expect to deliver further planning consents from our strategic portfolio during 2011. At the end of 2010, 55% of the land within our short term landbank was fully consented (2009: 57%), which compares favourably with long term averages.

Optimising development value

We continue to manage our land portfolio actively. We have made further progress on our replanning programme and have now successfully achieved improved consents on approximately two-thirds of sites that we had identified as being suitable for replanning. Successful replanning brings a wide range of benefits. For example, a change in the number or mix of plots can result in an increase in the overall sales value of the development with a minimal increase in build costs. Equally, it may be possible to reduce build cost through a more efficient layout of homes reducing infrastructure costs or increasing the efficiency of the build programme.

We will continue to review the planning consents that we have in our land portfolio. For instance, on longer term sites where we are building out the first phase we will look to incorporate feedback from our customers, other local residents and our own experience on site to refine the planning consents for future phases. Equally, as market conditions change, it may be appropriate to change the mix of homes in a community prior to commencing development.

We have focused a significant amount of time and attention to ensure that every new site is optimised before opening a sales outlet. This means having the right product, layout, cost base and sales presentation. This has started to add to margin improvement in late 2010 and early 2011.

We will increase volumes as market conditions allow and we are mindful of the need to address the substantial undersupply of new homes in the UK. However, we do not intend to return to a volume-driven strategy when market conditions improve. Our strategy will remain focused on margin ahead of volume and we will deliver volumes in a particular year on the basis of the land that we have available with optimised consents, rather than rushing land through the planning process in order to 'feed the machine'.

Therefore, a key consideration in our strategy going forward will be the new government's Localism Bill, which was published in December 2010 and is currently progressing through the parliamentary process. We welcome the government's intention to reform the planning system which, in its current form, is a brake on the much-needed supply of new homes. We also believe that the underlying principle of ensuring that planning decisions involve the local people who will be directly affected is the right one. However, there remains a significant likelihood that there will be an unintended reduction in the supply of new homes during the transition to the new regulations as planning authorities get to grips with the changing guidance. We are continuing to work with the government and with local authorities to deliver an implementable system that is capable of delivering higher levels of new homes, whilst recognising the challenges of transition.

We anticipate that, when the bill becomes law, there will be a greater requirement for the kind of consultation skills that we have a strong track record for at large sites such as Great Western Park, Didcot. As such, we have internal training and development programmes underway to enhance the required communication and consultation skills across our regional teams.

We continue to 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. For the year as a whole, land sales have generated revenue of £11.4 million (2009: £47.9 million) with an operating loss of £2.3 million (2009 loss: £4.1 million).

Product range

We continue to offer a wide range of products from apartments to five bedroom houses, with prices ranging from under £100,000 up to above £500,000. Once again during 2010, the majority of our homes were priced within a range from £100,000 to £200,000.

The number of apartments fell as a proportion of our overall completions from 33% in 2009 to 26% in 2010. This was reflected in a further increase in the average square footage of our private completions from 1,003 square feet in 2009 to 1,015 square feet in 2010.

We completed the construction of the prototypes for our new house type range during 2010. These prototypes were visited by representatives from all of our regional business units, as well as customer focus groups, and the feedback has been used to refine the designs. The majority of our new sites will now use the new house type range and we have already completed and sold a number of these homes. We expect to benefit from additional build cost savings as the proportion of completions from our new house types increases.

Getting the housebuilding basics right

Other areas of our business also remain important, with each having a key role to play in delivering the value that we create through our active management of the landbank.

Health and safety

Health and safety continues to be a non-negotiable top priority and we have retained our strong focus through the changing market conditions. The injury frequency rate has risen slightly to 0.235 injuries per 100,000 hours worked (2009: 0.226), although it remains below the rate of 0.296 in 2008. We continue to target further reductions in 2011.

Build costs and efficiency

We have made substantial progress on build cost savings. As previously reported, we substantially 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 are now focused on delivering further savings in conjunction with the ongoing work around optimising planning. We undertake a quarterly review of all sites, both those which are currently active and those which have not yet commenced construction, in order to identify opportunities for value engineering. These range from foundation design and the use of retaining walls to landscaping.

Cash management remains an important focus. We have made significant progress with regard to the level of work in progress on sites during the downturn and we intend to retain this discipline going forward.

Environment

Reducing waste is not only a responsible course of action in terms of protecting the environment, it also contributes towards lowering build costs. We monitor our performance in this area closely and have reduced the level of waste generated per home by 7% in 2010.

During 2010 we built 570 homes to level three of the Code for Sustainable homes. We also built 923 homes to EcoHomes standards in 2010, including 191 to EcoHomes Good, 524 to Very Good and 208 to Excellent.

All homes within our new house type range will be capable of achieving Code for Sustainable Homes levels three and four, and are designed to integrate renewable energy technologies where appropriate. We have also already planned the changes that will be needed to meet 2013 building regulations.

Quality

We remain committed to delivering high quality homes for all of our customers.

This is reflected in our performance in the 2010 NHBC (the National House-Building Council) Pride in the Job Awards, which are based on build quality. Our UK Site Managers won 55 Quality Awards, 17 Seals of Excellence and two Regional Awards (2009: 70 Quality Awards, 16 Seals of Excellence and two Regional Awards).

Caring about our customers

Sales and marketing

Sales strategy is also 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.

In an environment where mortgage availability remains constrained, financing a new home is a key consideration for many of our customers and, in particular, first time buyers. Although shared equity products (where we retain a stake in the customer's home which is repaid in the future) are popular with customers, we continue to use them sparingly. We prefer to use other products that assist first time buyers, such as our 'Friends and Family Advantage' product, which allows others to contribute towards a first time buyer's deposit and earn interest on their money. We have recently launched our 'Take 5' 95% mortgage product, which uses an insurance-backed guarantee to provide an affordable source of funding for first time buyers. The success of our approach is highlighted by the fact that 29% of our sales in 2010 were to first time buyers (2009: 30%).

We continue to develop our on-line capabilities and have introduced a number of new features to our web site (www.taylorwimpey.co.uk) including the ability to book appointments at any of our outlets. We also have a mobile version of the site available at m.taylorwimpey.co.uk.

Customer satisfaction

We continue to measure customer satisfaction using two surveys. The first is the National New Homes survey undertaken by NHBC on behalf of HBF (the Home Builders Federation). Each of our customers is sent a survey eight weeks after their legal completion date. The second survey is the NHBC's own survey measuring the same elements but sent to customers nine months after completion. During 2010, 87.1% of our customers were satisfied or very satisfied with the quality of their home (2009: 87.1%).

These surveys have become a key part of our Customer Service Management (CSM) system and are used to identify opportunities for further improvement.

Current trading and outlook

Constrained mortgage lending and the continuing uncertainty in the wider UK economic environment remain the greatest restrictions on the market and we continue to run the business cautiously. We expect to make further progress in 2011 with regard to build cost reduction and enhancing the value within our land portfolio. We have been encouraged by the enhanced sales rates, sales prices and margins that we are achieving on recent outlet openings, whether new acquisitions or from the existing land portfolio. Our focus remains on maximising margins rather than volume growth and we remain on track to achieve our target of double-digit operating margins in 2012, subject to continuing stable market conditions.

North America Housing

Financial and operational performance

	2010	2009	% change
Completions	4,140	4,755	(12.9)%
Average Selling Price	£200k	£171k	17.0%
Revenue	£835.6m	£824.3m	1.4%
Operating profit*	£93.8m	£48.1m	95.0%
Operating margin*	11.2%	5.8%	5.4ppt
Contribution per legal completion	£31.8k	£22.0k	44.5%
Forward order book as a % of completions	66.6%	67.6%	(1.0)ppt
Owned and controlled plots with planning	30,262	29,062	4.1%
Customer satisfaction	88	86.6	1.6%
Health and safety injury frequency rate (per 100,000 hours worked)	0.057	0.210	(72.9)%

Our North American Housing operations generated revenue of £835.6 million (2009: £824.3 million), with the reduction in home completions being offset by increased average selling prices driven by mix changes in the US and price growth in Canada.

Operating profit* was £93.8 million (2009: £48.1 million), with strong growth being delivered in both the US and Canada. The operating margin also rose sharply to 11.2% from 5.8% in 2009.

Exceptional items were £7.5 million (2009: £79.8 million). We conducted regular reviews of the carrying value of our land portfolio during 2010 and have recorded further write-downs of £7.5 million at the year end, primarily relating to a specific long-term site in California.

Net operating assets in North America were £612.7 million (2009: £558.1 million).

Sales, completions and pricing

We had an average of 149 active outlets during 2010 (2009: 172), with outlet numbers broadly stable since the start of the year after the reduction in 2009.

Net reservation rates for North America as a whole were 0.47 per outlet per week (2009: 0.60). Sales rates in Canada remain very strong, while in the US we saw improvements in the latter part of the year as the impact of the cessation of the Homebuyer Tax Credit diminished. The cancellation rate for North America as a whole was 15%, in line with the long term average (2009: 15%).

We completed a total of 4,140 homes in North America (2009: 4,755). Of this total, 2,570 completions were in the US (2009: 3,347) and 1,570 completions were delivered in Canada (2009: 1,408). We achieved an average selling price of US$274k (2009: US$255k) in the US and C$374k in Canada (2009: C$347k).

Our North America order book was 2,756 homes at the year end (2009: 3,216).

Strategy

Our operational strategy in North America remains unchanged. We remain focused on cost reductions and cash management, whilst enhancing the inherent value in our existing land positions and continuing our targeted programme of land acquisitions.

Selecting land

Locating and vetting suitable land positions is the most critical challenge for our business. We have adopted a portfolio management approach to our land investment decisions, allocating capital to each division on the basis of anticipated market and economic dynamics in each Divisional area and taking into account supply and demand in the targeted customer segments.

We utilise the skills and local market knowledge of our Divisional teams in selecting the most appropriate land investments for our portfolio. Where opportunities are identified, we undertake a rigorous appraisal process, prioritising an appropriate margin to reflect the relative risk and timing of return of the project.

All land investment decisions are taken by Taylor Morrison's Investment Committee, with large-scale deals referred to the Group's Board for approval. We approved new land purchase commitments for 4,706 plots during 2010 (2009: 4,217 plots), focusing on longer term opportunities in attractive sub-markets.

We now own or control a total of 30,262 plots in North America (2009: 29,062) with an average cost per plot, excluding development costs, of US$15.3k (2009: US$15.1k).

Optimising development value

Our expertise in planning and developing large-scale communities in both the US and Canada, distinguishes us from our peer group. Our land development operations enable us to identify the plots in a community that best suit our homes and then sell the other plots as finished lots to other homebuilders. Managing the development also enables us to contain costs and deliver lots at the right time for the needs of our homebuilding operations and gives us greater control of our land pipeline.

The recent market downturn has resulted in a significant improvement in the entitlement, planning and development process as a result of the lower volume of applications. For entitlements, most regulatory and municipal agencies have shown a marked decrease in their review and processing times. In addition, agencies in the US have shown both flexibility and creativity in reviewing entitlement applications.

Equally, the lower level of activity in the land development industry has created similar benefits. The timelines associated with the main land development processes have reduced as a result of greater availability of sub-contractors and the costs have reduced significantly.

Of the 25,790 owned plots in our land portfolio, approximately 41% are now raw lots that we will develop prior to building homes (2009: 32%). A further 44% of our owned plots are now at the finished lot stage, with no further development work required (2009: 46%).

Product range

We continue to offer a wide range of homes to our customers in North America, ranging from entry level to luxury homes. Our product range includes high-rise condominiums, single family homes, townhomes and full service country club communities. At present our only active and upcoming high-rise projects are in the Canadian market.

We strive to maintain a wide range of products and price levels within our homebuilding activities, in order to expand our reach across a wide range of potential customers.

Our US homebuilding operations trade under the Taylor Morrison brand and our Canadian business trades under the long-standing Monarch brand.

Getting the homebuilding basics right

Health and safety

Health and safety continues to be a non-negotiable top priority. In 2010 Taylor Morrison was named runner up in the prestigious National Association of Homebuilders 2009 Safety Award for Excellence. During 2010, we reduced the total number of accidents by 37%, achieving an incident rate reduction from 0.210 to 0.057 per 100,000 hours worked. In addition, trade partner accidents reduced from 21 to 15 in 2010.

Build costs and efficiency

We are continually looking for ways to reduce build cost and increase efficiency. During 2010 we began providing our construction superintendents (the equivalent of a UK site manager) with handheld mobile devices for scheduling, which has improved efficiency. We have extended the roll-out of our 'lean manufacturing' approach to our Denver Division in 2010 and will complete the roll-out in 2011 when it is introduced in our West Florida Division. This approach focuses on identifying and eliminating construction waste in conjunction with our trade and supplier partners.

Quality

Importantly these initiatives are not at the expense of quality and we continue to strengthen the reputation of our business in North America, receiving further recognition during 2010. For example, Taylor Morrison was named Volume Builder of the Year in the Greater Houston Builders Association's Houston Best Awards Show and our Evergreen Community in Toronto won awards for building innovation and excellence at the EnerQuality Awards for Excellence.

Environment

Many of our communities are designed to co-exist with the natural habitat. This is particularly the case in areas such as Florida, where there are threatened species or fragile ecosystems that need protection.

Caring about our customers

Sales and marketing

Our approach to sales and marketing utilises a balanced approach of central support and local expertise to attract potential homebuyers to our communities. The central team provides a consistent marketing framework as well as comprehensive sales training to local teams. Our local teams utilise local media and marketing streams to deliver the unique message most relevant to the targeted customer group.

Our web sites, www.taylormorrison.com and www.monarchgroup.net are key elements of our sales and marketing activities. The ultimate purpose of these web sites is to direct those potential customers with a high probability of purchasing a home to the sales team at one of our communities. Customers are also able to make inquiries and receive a prompt response from one of our "Internet Home Consultants".

Customer satisfaction

During 2010, we developed 'Homeward Bound' a comprehensive guide to purchasing one of our homes, which is personalised for each customer.

Our customer surveys in 2010 were undertaken by AVID Advisors, a customer loyalty firm that works with homebuilders across the US and Canada. We are delighted to have improved our performance in 2010, both against our 2009 score and against the wider industry benchmark. We achieved a score of 88 with respect to total homebuyer satisfaction (2009: 86.6) against an industry average of 85 (2009: 83.8).

Monarch was ranked best housebuilder for customer satisfaction in Ottawa for the second year running by market research specialists JD Power.

Current trading and outlook

In the US, markets appear to have stabilised and there are signs of increasing consumer confidence. Affordability remains at excellent levels and, combined with gradually reducing foreclosure levels, provides the potential for a strong recovery as confidence grows.

Our combination of successful land investment, efficient build processes, tightly controlled overhead costs and strong customer focus positions us well for recovery in the US.

We expect market conditions in Canada to remain robust for the foreseeable future.

Spain and Gibraltar Housing

Performance

We have completed 136 homes in Spain and Gibraltar in 2010 (2009: 225), including the final home completions from our Gibraltar business.

The average selling price of our 2010 home completions was £214k (2009: £260k), reflecting the change in the mix of our Gibraltar completions.

Revenue was £31.1 million in 2010 (2009: £61.0 million), as a result of the reduction in both completions and average selling price. Operating loss* was £3.6 million (2009 loss: £1.4 million) as a result of the ongoing market weakness.

We have reduced the number of plots in our land portfolio over the course of the year as we remain cautious in our approach to new land purchases. We owned or controlled 1,783 plots at 31 December 2010 (2009: 1,901).

Our year end order book was 50 homes (2009: 45).

We have undertaken further reviews of the carrying value of our land portfolio in Spain and have recorded a further write down of £17.3 million (2009: £3.3 million).

We have now completed our exit from the Gibraltar market.

Current trading

We have seen an improved level of interest from overseas buyers during the early part of 2011, with increased levels of web site traffic, telephone enquiries and reservations. However, the local market remains weak, with reduced sales to Spanish buyers.

Market conditions are likely to remain challenging in Spain during 2011. We are reviewing our strategy for the business and we expect to take a more aggressive approach to driving sales rates.

Group financial review

The Group generated revenue of £2,603.3 million in 2010 (2009: £2,595.6 million) from total completions of 14,238 homes (2009: 15,166). We remain focused on prioritising margin ahead of volume growth and, although home completions fell in both the UK and North America, this was offset by growth in average selling prices.

Gross profit of £363.9 million (2009: £230.2 million) includes a positive contribution of £122.4 million (2009: £59.6 million), relating to realisation of written down inventory above its originally estimated net realisable value, where the combination of selling prices and cost, or mix improvements 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* was £194.1 million (2009: £43.3 million), representing a Group operating margin* of 7.5% (2009: 1.7%). Financial performance has been strong across all of our main markets, with profit growth achieved in the UK, US and Canada. £79.3 million of the Group's operating profit* was delivered in the first half of the year and £114.8 million was recorded in the second half.

The operating profit* for the year includes £12.0 million relating to a one-off pension curtailment credit arising from the closure of the UK George Wimpey Staff Pension Scheme to future accrual in August 2010. In addition, there is a £0.6 million pension curtailment credit arising in respect of the US pension scheme.

Net finance costs

Pre-exceptional finance costs totalled £119.0 million (2009: £139.4 million), net of £3.8 million of interest receivable (2009: £10.6 million).

The main component of this charge is interest on borrowings from financial institutions of £85.8 million (2009: £109.1 million). This reduction reflects the lower average net debt level of the Group during 2010 of £667.5 million (2009: £1,245.2 million), reflecting the cash generation of the business and the benefit of a full year impact of the 2009 Placing and Open Offer.

Other items included in finance costs are a net pension interest charge of £23.4 million (2009: £34.3 million), a mark-to-market loss on derivatives of £4.6 million (2009 gain: £11.8 million), and a total imputed interest charge for land creditors of £9.0 million (2009: £18.4 million).

Exceptional items

The majority of the Group's pre-tax exceptional items of £146.4 million relate to the costs associated with the refinancing of the Group's debt facilities in December 2010. We incurred exceptional interest breakage charges of £83.4 million (2009: £23.1 million) and exceptional bank and professional fees of £31.7 million (2009: £44.8 million).

The remaining charge is primarily related to write-downs arising from the Group undertaking a further review of the carrying value of its land and work in progress assets at the year end. We recorded further write-downs of £7.5 million in North America, relating to a specific long term site in California (2009: £78.7 million) and £17.3 million in Spain, where the market remains weak (2009: £3.3 million). There were no write-downs required in the UK (2009: £445.0 million).

Other exceptional items charged to profit before tax in 2010 were £6.5 million arising from a review of strategic options with regard to the North America Housing business (2009: £8.9 million relating to restructuring of the UK Housing business).

Tax

We incurred a pre-exceptional tax charge of £55.3 million, which includes two main components. Firstly, our Canadian operations continue to be profit making and therefore subject to cash tax. Secondly, there are tax charges arising from the significant movement in the UK pension deficit of which £30.6 million was charged to the profit and loss account and £15.9 million was adjusted through the Consolidated Statement of Comprehensive Income.

The exceptional tax credit was £385.9 million, of which £85.9 million relates to the release of provisions where we have made significant progress in relation to longstanding issues with HM Revenue and Customs in the UK and the Internal Revenue Service in the US and £300 million relates to the recognition of a trading loss deferred tax asset in the UK. The 2009 exceptional credit of £73.6 million consisted of a UK tax credit of £25.4 million relating to the reinstatement of the pension deferred tax asset and a US tax credit of £48.2 million relating to the five year net operating loss carryback.

In total, the Group has unrecognised potential deferred tax assets as at 31 December 2010 in the UK of £78.6 million (2009: £375.1 million), in the US of £268.8 million (2009: £267.0 million) and £29.8 million in other jurisdictions (2009: £21.4 million). The unrecognised deferred tax asset in the UK relates to losses where there is not sufficient certainty around the suitability of future profits in order to recognise the deferred tax asset in full.

Earnings per share

The pre-exceptional basic earnings per share was 0.6 pence (2009 loss per share:
4.3 pence). The basic profit per share after exceptional items is 8.1 pence
(2009 loss per share: 25.1 pence).

Dividends

The Board did not feel it appropriate to propose an interim dividend for 2010. The uncertainty in the wider economy has eased somewhat during the second half of 2010, however, we are not proposing a final dividend for 2010 (2009 full year dividend: nil). We will continue to review our dividend policy in the light of Taylor Wimpey's financial position and prevailing economic and market conditions in the future.

Balance sheet and cash flow

Net assets at 31 December 2010 were £1.8 billion (2009: £1.5 billion), which equates to a tangible net asset value per share of 57 pence (2009: 47 pence). Gearing stood at 35.9% at 31 December 2010 (2009: 50.0%).

The Group generated a cash inflow from operations of £87.9 million in 2010 (2009: £206.3 million) with the decrease partially attributable to the £75.0 million one-off pension deficit reduction payment which took place in December 2010. Year end net debt levels reduced from £750.9 million in 2009 to £654.5 million in 2010, a decrease of £96.4 million. This improvement was achieved despite the exceptional cash payments of £187 million relating to the refinancing completed in December 2010 as the Group benefited from strong trading performance and was able to return to more normal payment procedures upon exit of the Override Agreement.

Land creditors were £369.2 million at 31 December 2010 (2009: £325.7 million), with the increase due to the Group being more active in the land market during 2010.

Debt refinancing

We entered discussions with our banks during 2010 regarding an early refinancing of the Group's debt facilities, all of which were scheduled to fall due in July 2012. Having reached agreement with the banks on the terms of a new £950 million credit facility in November, we completed the refinancing in December 2010 following the agreement of a £100 million term facility and the successful issue of £250 million Senior Notes.

The new facilities provide the Group with a simplified £1.3 billion debt structure and an extended maturity profile of 3.5 years, as summarised below:

· £950 million revolving credit facility. £350 million of this facility matures in July 2012, with the remaining £600 million maturing in November 2014.

· £100 million term facility maturing in June 2015.

· £250 million Senior Notes maturing in December 2015.

The new facilities will result in a blended interest rate of around 7.5% based on average borrowings and current LIBOR levels. This is a significant improvement on the blended rate of the previous facilities, which stood at approximately 11% for the first half of 2010.

The terms and conditions, including covenants, contained in the new facilities are in line with normal commercial terms for the sector and remove a number of the operational restrictions of the previous facilities. This increases our flexibility with regard to future operational decisions significantly and, in particular, there is no longer a specific restriction on new land acquisitions.

Pensions

The IAS19 deficit, which appears on the Group's balance sheet, is £248.5 million at 31 December 2010 (2009: £406.4 million). The reduction in the deficit is due to the contributions made during the year, the benefit of the impact of the government announced switch from RPI to CPI reducing the future deferred member liabilities and the lower inflation assumption offset by lower discount rates and higher mortality assumption. The balance sheet also includes £2.0 million of post-retirement healthcare benefit obligations (2009: £2.9 million).

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 will be £22 million per annum (previously £20 million). The deficit reduction payments to the GWSPS will be £24 million per annum (previously £25 million). A one-off deficit reduction payment of £75 million was made in December 2010 following the completion of the Group's refinancing and was split equally between the schemes.

Both schemes are now closed to future accrual, with the GWSPS closed to future accrual on 31 August 2010.

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.

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 package is sufficiently robust as to the adequacy of both 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.

People

Our value cycle requires significant input from skilled people to deliver quality homes and communities for our customers. We continue to believe that the quality of our teams is a key differentiator for our business and is reflected in the strength of the performance that we have delivered together in 2010. We would like to record our thanks for their ongoing commitment and hard work, once again.

Corporate responsibility

Corporate responsibility is an integral part of corporate governance. We remain committed to being a responsible company and to playing our part in building increasingly sustainable homes and communities.

As Group 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 sits on the CBI's Climate Change Board, enabling us to benefit from best practice across a wide range of industries.

Details of our approach to corporate responsibility can be found in our Corporate Responsibility Report, which is available on our Web site at: www.taylorwimpeyplc.com/CorporateResponsibility/CRreports

Shareholder information

The Company's 2011 Annual General Meeting will be held at 11:00am on Thursday 21 April 2011 at the British Medical Association, BMA House, Tavistock Square, London WC1H 9JP.

Copies of the Report and Accounts 2010 will be available from 15 March 2011 on the Company's web site www.taylorwimpeyplc.com. Hard copy documents will be posted to shareholders who have elected to receive them on 23 March 2011 and will also be available from the registered office at 80 New Bond Street, London, W1S 1SB 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 2010. 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 2 March 2011 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. By effectively identifying and managing these risks, we are able to improve our returns, thereby adding value for shareholders.

Economic and market environment

Demand for our homes can be adversely affected by weakness in the wider economy. This includes factors such as unemployment levels, interest rates and the availability of credit, which are outside of the Group's control.

The majority of the homes that we build are sold to individual purchasers who take on significant mortgages to finance their purchases. As such, customer demand is extremely sensitive to economic conditions.

The global economy has exhibited some volatility during 2010 arising from concerns regarding the sovereign debt of some countries. Credit availability and consumer confidence remain below normal levels. As a result, the level of effective demand for new homes continues to be significantly reduced, impacting both profitability and cash generation.

Our local teams select the locations and home designs that best meet the needs of the local community and customer demand. We continue to evaluate new outlet openings on the basis of local market conditions and regularly review the pricing and incentives that we offer. We also minimise the level of speculative build that we undertake.

Government regulations and planning policy

Governments issue a wide variety of requirements for new housing, particularly in the UK, covering areas such as design, quality, sustainability and product mix.

The UK General Election in 2010 resulted in a change of government and new planning regulations are being progressed through Parliament.

In addition to our short term land portfolio we have a strategic land portfolio of 77,060 potential plots in the UK. Our ability to obtain the planning permission required to develop communities on this land is dependent on our ability to meet the relevant regulatory and planning requirements.

Inability to obtain suitable consents 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 consult with the UK government on upcoming legislation, both directly and as a member of industry groups, to highlight potential issues. At a local level, our land specialists work closely with the relevant planning authorities, consult with local communities and structure purchase agreements to mitigate such risk.

Compliance with financial and operational covenants

We completed a total refinancing in December 2010, which resulted in a standard set of financial and operational covenants for our sector. However, breach of our new covenants could, in certain circumstances, lead to a requirement to repay debt funding in its entirety.

Our new financial arrangements no longer have specific limits on the level of land spend, but do set limits on our maximum level of gearing and specify a minimum amount of interest cover by reference to either operating cash or EBITDA. These requirements, while not expected to constrain the business under reasonably foreseeable market conditions, could be compromised under extreme market conditions.

As our land portfolio is a relatively illiquid asset in adverse market conditions, any requirement to pay back debt at short notice under such conditions could lead to a requirement to sell land on unfavourable terms, or potentially cause the business to fail if sufficient funds cannot be raised.

We monitor our future and detailed cash requirements on a monthly basis, which takes into account land spend and projected site openings, together with headroom to cover contingencies and unforeseen requirements.

Land purchasing

Purchasing of land that is poor quality or mis-priced or purchasing land in insufficient quantity.

Land is the major 'raw material' for the Group, but the availability of good quality land at an attractive price is currently scarce. 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. Purchasing insufficient land would reduce the Group's ability to manage its portfolio actively and lead to a shortfall in anticipated performance.

We operate an investment appraisal process for land purchases, which ensures that such projects are subject to appropriate review and authorisation, dependent on the proposed scale of expenditure.

Availability of sub-contractors

The difficult operating environment over the last three years has resulted in the failure of some sub-contractors' businesses. In addition, reduced levels of homebuilding have led to some skilled tradesmen leaving the industry to take jobs in other sectors.

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

If our sub-contractors are not able to recruit sufficient numbers of skilled employees, the development of our communities may suffer from delays or quality issues, leading to reduced levels of customer satisfaction. Lack of skilled sub-contractors could also result in higher levels of waste being produced from our sites.

We vet all suppliers prior to working with them to ensure that they meet our requirements for environmental impact, health and safety, quality and financial stability. We also work to address the skills shortage in the industry through apprenticeship schemes and the Construction Industry Training Board.

Site safety

Building sites are inherently dangerous places and our management of health and safety issues is of paramount importance to us.

Our operations require 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.

Construction and cost management

Construction work can be subject to delays and additional cost for a variety of reasons. These include adverse ground conditions, environmental considerations and adverse weather conditions.

We build communities in the UK, the US, Canada and Spain on a wide variety of different sites. Potential issues range from hurricanes in Florida to extreme cold in Ontario and from ground contamination to the presence of protected wildlife species.

Construction delays can result in additional costs to get the build programme back on schedule, lead to quality issues and have an adverse impact on customer satisfaction. Additional costs arising from the construction process may have an adverse impact on profit.

We monitor both cost and risk closely throughout the life of a project, from initial viability assessment to post-completion review. This is achieved through the use of detailed risk registers and regular site valuations, which are reviewed and approved at the appropriate level.

Ability to attract and retain high calibre employees

Recruiting employees with inadequate skills or in insufficient numbers, or not being able to retain key staff.

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.

Consolidated Income Statement

for the year to 31 December 2010

£ million	Note	Before exceptional items 2010	Exceptional items (Note 3) 2010	Total 2010	Before exceptional items 2009	Exceptional items (Note 3) 2009	Total 2009
Revenue	2	2,603.3	-	2,603.3	2,595.6	-	2,595.6
Cost of sales		(2,239.4)	(24.8)	(2,264.2)	(2,365.4)	(527.0)	(2,892.4)
Gross profit/(loss)		363.9	(24.8)	339.1	230.2	(527.0)	(296.8)
Net operating expenses	3	(179.7)	(38.2)	(217.9)	(192.5)	(53.7)	(246.2)
Profit/(loss) on ordinary activities before finance costs		184.2	(63.0)	121.2	37.7	(580.7)	(543.0)
Interest receivable		3.8	-	3.8	10.6	-	10.6
Finance costs	4	(122.8)	(83.4)	(206.2)	(150.0)	(23.1)	(173.1)
Share of results of joint ventures		9.9	-	9.9	5.6	-	5.6
Profit/(loss) on ordinary activities before taxation		75.1	(146.4)	(71.3)	(96.1)	(603.8)	(699.9)
Taxation (charge)/credit	5	(55.3)	385.9	330.6	(14.3)	73.6	59.3
Profit/(loss) for the year		19.8	239.5	259.3	(110.4)	(530.2)	(640.6)

Attributable to:
Equity holders of the parent				259.3			(640.4)
Non-controlling interests				-			(0.2)
				259.3			(640.6)

	Note	2010	2009
Basic earnings/(loss) per share	6	8.1p	(25.1p)
Diluted earnings/(loss) per share	6	7.9p	(25.1p)
Adjusted basic earnings/(loss) per share	6	0.6p	(4.3p)
Adjusted diluted earnings/(loss) per share	6	0.6p	(4.3p)

Consolidated Statement of Comprehensive Income

for the year to 31 December 2010

£ million	Note	2010	2009
Profit/(loss) for the year		259.3	(640.6)
Exchange differences on translation of foreign operations		33.9	(5.0)
Movement in fair value of hedging derivatives		(3.6)	11.5
Actuarial gain/(loss) on defined benefit pension schemes	9	46.9	(141.8)
Tax on items taken directly to equity		(15.9)	87.6
Other comprehensive income/(expense) for the year net of tax		61.3	(47.7)
Total recognised income/(expense) for the year		320.6	(688.3)

Attributable to:
Equity holders of the parent		320.6	(688.1)
Non-controlling interests		-	(0.2)
		320.6	(688.3)

Consolidated Balance Sheet

at 31 December 2010

£ million	Note	2010	2009
Non-current assets
Goodwill		2.4	2.4
Other intangible assets		1.0	-
Property, plant and equipment		7.6	8.2
Interests in joint ventures		49.7	51.9
Trade and other receivables		96.5	65.0
Deferred tax assets	7	372.4	119.6
		529.6	247.1
Current assets
Inventories	8	3,436.2	3,603.3
Trade and other receivables		155.7	130.5
Tax receivables		19.8	61.0
Cash and cash equivalents		183.9	132.1
		3,795.6	3,926.9
Total assets		4,325.2	4,174.0
Current liabilities
Trade and other payables		(902.9)	(760.0)
Tax payables		(162.7)	(242.6)
Bank loans and overdrafts		(15.1)	(12.7)
Provisions		(46.8)	(47.8)
		(1,127.5)	(1,063.1)
Net current assets		2,668.1	2,863.8
Non-current liabilities
Trade and other payables		(257.1)	(278.6)
Debenture loans		(250.0)	(721.9)
Bank and other loans		(573.3)	(148.4)
Retirement benefit obligations	9	(250.5)	(409.3)
Deferred tax liabilities	7	(0.8)	(0.8)
Provisions		(42.9)	(51.0)
		(1,374.6)	(1,610.0)
Total liabilities		(2,502.1)	(2,673.1)

Net assets		1,823.1	1,500.9

Equity
Share capital		287.7	287.7
Share premium account		753.7	753.6
Own shares		(0.6)	(5.0)
Merger relief reserve		-	-
Other reserves		101.4	76.7
Retained earnings		679.4	385.5
Equity attributable to parent		1,821.6	1,498.5
Non-controlling interests		1.5	2.4
Total equity		1,823.1	1,500.9

Consolidated Statement of Changes in Equity

for the year to 31 December 2010

For the year to 31 December 2010 £ million	Share capital	Share premium	Own shares	Merger relief reserve	Other reserves	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 treasury 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 asset	-	-	-	-	-	(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

For the year to 31 December 2009 £ million	Share capital	Share premium	Own shares	Merger relief reserve	Other reserves	Retained earnings	Total
Balance as at 1 January 2009	289.6	753.6	(275.7)	-	64.7	838.3	1,670.5
New share capital subscribed	21.3	-	-	488.8	-	-	510.1
Cancellation and utilisation of treasury shares	(23.2)	-	270.7	-	-	(247.5)	-
Share-based payment credit	-	-	-	-	-	1.0	1.0
Other financing costs	-	-	-	-	-	(0.5)	(0.5)
Issue of equity instruments	-	-	-	-	5.5	-	5.5
Exchange differences on translation of foreign operations	-	-	-	-	(5.0)	-	(5.0)
Increase in fair value of hedging derivatives	-	-	-	-	11.5	-	11.5
Actuarial loss on defined benefit pension schemes	-	-	-	-	-	(141.8)	(141.8)
Deferred tax asset recognised	-	-	-	-	-	87.6	87.6
Transfer to retained earnings	-	-	-	(488.8)	-	488.8	-
Loss for the year	-	-	-	-	-	(640.4)	(640.4)
Equity attributable to parent	287.7	753.6	(5.0)	-	76.7	385.5	1,498.5
Non-controlling interests							2.4
Total equity							1,500.9

Consolidated Cash Flow Statement

for the year to 31 December 2010

£ million	Note	2010	2009
Net cash from operating activities	10	87.9	206.3

Investing activities
Interest received		0.8	10.0
Dividends received from joint ventures		17.1	9.6
Proceeds on disposal of property, plant and investments		0.1	1.5
Purchases of property, plant and investments		(3.7)	(2.5)
Purchases of software		(1.0)	-
Amounts invested in joint ventures		(1.0)	(0.2)
Amounts loaned to joint ventures		(3.9)	(2.0)
Acquisition of subsidiaries		-	(2.8)
Net cash from investing activities		8.4	13.6

Financing activities
Proceeds from sale of own shares		-	510.1
Cash cost of satisfying share options		(0.4)	-
Other financing activities		-	(0.5)
Repayment of debenture loans		(732.4)	(200.4)
Increase in debenture loans		250.0	-
Repayment of overdrafts, bank and other loans		(348.7)	(1,124.9)
Increase in bank and other loans		781.7	-
Net cash used in financing activities		(49.8)	(815.7)

Net increase/(decrease) in cash and cash equivalents		46.5	(595.8)
Cash and cash equivalents at beginning of year		132.1	752.3
Effect of foreign exchange rate changes		5.3	(24.4)
Cash and cash equivalents at end of year	10	183.9	132.1

Notes to the Condensed Consolidated Financial Statements

for the year to 31 December 2010

1. Basis of preparation

The financial information set out herein does not constitute the Group's statutory accounts for the years ended 31 December 2009 and 2010, but is derived from those accounts. Statutory accounts for 2009 have been delivered to the Registrar of Companies and those for 2010 will be delivered following the Company's annual general meeting to be held on 21 April 2011. 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. IFRS1 (revised) First-time Adoption of International Financial Reporting Standards, IAS 39 (Amendment) Eligible hedged items, IFR3 (revised) Business Combinations, IAS 27 (revised) Consolidated and Separate Financial Statements, IAS 28 (revised) Investments in Associates, IAS 32 (Amendment) Financial Instruments: Presentation, IAS1 Presentation of Financial Statements, IFRIC17 Distributions of Non-cash Assets to Owners, IFRIC18 Transfer of assets from customers, IFRS2 (amendment) Share-based Payment, IAS 17 (Amendment) Leases, IAS 39 (Amendment), Financial Instruments: Recognition and Measurement.

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 15 March 2011, 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 consolidated financial statements have been prepared on a going concern basis and on a historical cost basis except as otherwise stated below.

The ability of the Taylor Wimpey plc group ("the Group") to continue as a going concern is reliant upon the continued availability of external debt financing. The Group renegotiated and signed its new financing agreements on 14th December 2010. The Group has met all interest and other payment obligations on time from debt resources available to it, and after reviewing forecasts and certain relevant sensitivities for a period of at least 12 months from the date of signing these financial statements, the Directors are satisfied that, whilst the economic and market conditions continue to be challenging and not without risk, the refinancing package is sufficiently robust as to adequacy of both 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 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, and 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.

2 Operating segments

An analysis of the Group's revenue is as follows:

£ million	2010	2009
Housing	2,583.1	2,527.4
Land sales	20.2	58.3
Other revenues (including Construction)	-	9.9
Consolidated revenue	2,603.3	2,595.6
Interest receivable	3.8	10.6
Total Group	2,607.1	2,606.2

Housing revenue includes £128.0 million (2009: £114.5 million) in respect of the value of properties accepted in part exchange by the Group.

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 four operating divisions - Housing United Kingdom, Housing North America, Housing Spain and Gibraltar, and Corporate.

In 2009, the results and net assets of a minor residual construction operation, which was disposed of in April 2009, are presented within the 'Corporate' segment.

Segment information about these businesses is presented below:

For the year to 31 December 2010 £ million	Housing United Kingdom	Housing North America	Housing Spain and Gibraltar	Corporate	Consolidated
Revenue:
External sales	1,736.6	835.6	31.1	-	2,603.3
Result:
Operating profit/(loss) before joint ventures and exceptional items	123.3	83.6	(3.6)	(19.1)	184.2
Share of results of joint ventures	(0.3)	10.2	-	-	9.9
Profit/(loss) on ordinary activities before finance costs, exceptional items and after share of results of joint ventures	123.0	93.8	(3.6)	(19.1)	194.1
Exceptional items	-	(7.5)	(17.3)	(38.2)	(63.0)
Profit/(loss) on ordinary activities before finance costs, after share of results of joint ventures	123.0	86.3	(20.9)	(57.3)	131.1
Finance costs, net (including exceptional finance costs)					(202.4)
Loss on ordinary activities before taxation					(71.3)
Taxation (including exceptional tax)					330.6
Profit for the year - total Group					259.3

As at 31 December 2010 £ million	Housing United Kingdom	Housing North America	Housing Spain and Gibraltar	Corporate	Consolidated
Assets and liabilities:
Segment operating assets	2,719.4	884.7	82.6	10.3	3,697.0
Joint ventures	33.7	15.8	0.2	-	49.7
Segment operating liabilities	(1,124.5)	(287.8)	(12.9)	(75.0)	(1,500.2)
Continuing group net operating assets/(liabilities)	1,628.6	612.7	69.9	(64.7)	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

2009 segment information about these businesses is presented below:

For year to 31 December 2009 £ million	Housing United Kingdom	Housing North America	Housing Spain and Gibraltar	Corporate	Consolidated
Revenue:
External sales	1,700.4	824.3	61.0	9.9	2,595.6

Result:
Operating profit/(loss) before joint ventures and exceptional items	15.3	41.5	(1.4)	(17.7)	37.7
Share of results of joint ventures	(1.0)	6.6	-	-	5.6
Profit/(loss) on ordinary activities before finance costs, exceptional items and after share of results of joint ventures	14.3	48.1	(1.4)	(17.7)	43.3
Exceptional items	(452.8)	(79.8)	(3.3)	(44.8)	(580.7)
Loss on ordinary activities before finance costs, after share of results of joint ventures	(438.5)	(31.7)	(4.7)	(62.5)	(537.4)
Finance costs, net (including exceptional finance costs)					(162.5)
Loss on ordinary activities before taxation					(699.9)
Taxation (including exceptional tax)					59.3
Loss for the year - total Group					(640.6)

As at 31 December 2009 £ million	Housing United Kingdom	Housing North America	Housing Spain and Gibraltar	Corporate	Consolidated
Assets and liabilities:
Segment operating assets	2,865.4	805.4	124.5	11.6	3,806.9
Joint ventures	30.0	21.7	0.2	-	51.9
Segment operating liabilities	(1,202.3)	(269.0)	(21.2)	(54.1)	(1,546.6)
Net operating assets/(liabilities)	1,693.1	558.1	103.5	(42.5)	2,312.2
Goodwill					2.4
Net current taxation					(181.6)
Net deferred taxation					118.8
Net debt					(750.9)
Net assets					1,500.9

3. Net operating expenses and profit on ordinary activities before finance costs

£ million	2010	2009
Administration expenses	185.2	198.9
Net other income	(5.5)	(6.4)
Exceptional items	38.2	53.7
	217.9	246.2

Net other income includes profits on the sale of property, plant and equipment and broker fees from mortgage origination services.

Exceptional items: £ million	2010	2009
Net land and work in progress write downs	24.8	527.0
Restructuring costs	6.5	8.9
Refinancing expenses	31.7	44.8
Exceptional items	63.0	580.7

Market conditions have stabilised in our major geographic locations, however there continues to be uncertainty in a small number of sub-locations due to continued scarcity of mortgage finance, unemployment and a significantly reduced buyer market. The Group has completed its assessment on the carrying value of land and work in progress which has resulted in further land and work in progress net write downs of £24.8 million (31 December 2009: £527.0 million) to the lower of cost and net realisable value. During the year the Group reversed £1.3 million of write downs (2009: £29.8 million) where management's estimates of the recoverable value for certain land and work in progress had improved. This reversal is treated as exceptional income and netted off the exceptional charge.

Restructuring costs of £6.5 million are 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 (31 December 2009: £44.8 million) were predominantly fees payable to lenders and advisors in relation to the refinancing of the Group's debt which was completed on 14 December 2010. Refinancing interest related breakage costs of £83.4 million (31 December 2009: £23.1 million) are included within exceptional finance costs in the Income Statement.

Profit on ordinary activities before financing costs for continuing operations has been arrived at after charging/(crediting): £ million	2010	2009
Cost of inventories recognised as expense in cost of sales, before write downs of inventories	2,129.9	2,244.1
Write downs of inventories	26.1	556.8
Reversal of specific write downs of inventories	(1.3)	(29.8)
Depreciation - plant and equipment	4.3	4.7
Minimum lease payments under operating leases recognised in income for the year	8.1	7.5

4. Finance costs

Finance costs from continuing operations are analysed as follows: £ million	2010	2009
Interest on overdrafts, bank and other loans	27.8	46.5
Interest on debenture loans	58.0	62.6
Movement on interest rate derivatives and foreign exchange differences	4.6	(11.8)
	90.4	97.3
Unwinding of discount on land creditors and other payables	9.0	18.4
Notional net interest on pension liability (Note 9)	23.4	34.3
	122.8	150.0
Exceptional finance costs:
Bank loans and debenture fees and interest	83.4	23.1
	206.2	173.1

The exceptional finance costs incurred in 2010 relate to one-off interest related breakage payments following the early redemption of our loan notes, bonds and certain arrangement fees associated with the new facilities.

The 2009 exceptional finance costs include £5.5 million in relation to the fair value of 57.8 million warrants issued to the Group's lenders as part of the debt refinancing and £15.5 million of one-off interest payments payable to the Group's lenders as a consequence of early repayment of a portion of the Group's debt, following the equity raise.

5. Tax

Tax credited/(charged) in the income statement for continuing operations is analysed as follows:

£ million		2010	2009
Current tax:
UK corporation tax:	Current year	(0.8)	(1.1)
	Prior years	60.8	5.5
Foreign tax:	Current year	(22.7)	32.0
	Prior years	25.1	(2.4)
		62.4	34.0
Deferred tax:
UK:	Current year	269.4	25.4
Foreign:	Current year	(1.2)	(0.4)
	Prior years	-	0.3
		268.2	25.3
		330.6	59.3

Corporation tax is calculated at 28% (2009: 28%) of the estimated assessable loss (2009: loss) for the year in the UK. Taxation outside the UK is calculated at the rates prevailing in the respective jurisdictions.

The tax credit for the year includes an amount in respect of exceptional items of £385.9 million (2009: £73.6 million credit). This is made up of a credit of £360.8 million (2009: £25.4 million) in respect of UK tax and a credit of £25.1 million (2009: £48.2 million charge) in respect of US tax. The credit in the UK relates to the recognition of a deferred tax asset of £300 million relating to trading losses carried forward, and the settlement of various issues with HM Revenue & Customs. The credit in respect of the US relates to progress made in relation to open issues with the Internal Revenue Service.

Deferred tax recognised in the Group's statement of comprehensive income is due to actuarial losses on post-retirement liabilities at the prevailing rate in the relevant jurisdiction and in 2009 the reinstatement of the deferred tax asset relating to post-retirement liabilities.

The credit for the year can be reconciled to the loss per the income statement as follows: £ million	2010	2009
Loss before tax	(71.3)	(699.9)

Tax at the UK corporation tax rate of 28% (2009: 28%)	20.0	196.0
Over provision in respect of prior years	85.9	3.4
Tax effect of expenses that are not deductible in determining taxable profit	(5.9)	(8.0)
Non-taxable income	0.4	3.7
Effect of higher rates of tax of subsidiaries operating in other jurisdictions	2.4	6.9
Losses not recognised	(41.6)	(186.0)
Reinstatement of pension deferred tax asset	-	29.6
Recognition of deferred tax asset relating to trading losses	300.0	-
Current year impact of settlement with Tax Authorities	(23.7)	-
Temporary differences not recognised	(6.9)	13.7
Tax credit for the year	330.6	59.3

6. Earnings per share

	2010	2009
Basic earnings/(loss) per share	8.1p	(25.1p)
Diluted earnings/(loss) per share	7.9p	(25.1p)

Adjusted basic earnings/(loss) per share	0.6p	(4.3p)
Adjusted diluted earnings/(loss) per share	0.6p	(4.3p)

Weighted average number of shares for basic earnings/(loss) per share - million	3,193.8	2,551.8
Weighted average number of shares for diluted earnings/(loss) per share - million	3,297.6	2,551.8
Weighted average number of shares for adjusted diluted earnings/(loss) per share - million	3,297.6	2,551.8

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	2010	2009
Earnings/(loss) for basic loss per share and diluted earnings per share	259.3	(640.4)
Add exceptional items (Notes 3 and 4)	146.4	603.8
Deduct exceptional tax items (Note 5)	(385.9)	(73.6)
Earnings/(loss) for adjusted basic and adjusted diluted earnings per share	19.8	(110.2)

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	Capital allowances	Short term timing differences	Retirement benefit obligations	Total
At 1 January 2009	-	(1.3)	6.6	-	5.3
Credit/(charge) to income	-	0.1	(1.9)	27.1	25.3
Credit to equity	-	-	-	87.6	87.6
Disposal of subsidiaries	-	0.4	-	-	0.4
Changes in exchange rates	-	-	0.2	-	0.2
At 31 December 2009	-	(0.8)	4.9	114.7	118.8
Credit/(charge) to income	300.0	-	(1.2)	(30.6)	268.2
Charged to equity	-	-	-	(15.9)	(15.9)
Changes in exchange rates	-	-	0.4	0.1	0.5
At 31 December 2010	300.0	(0.8)	4.1	68.3	371.6

In 2009 the Group reinstated the deferred tax asset relating to the pension deficit, including £47.2 million written off in the prior year, on the basis that the deficit is a long term liability of circa 15 years that will be satisfied from future profitability.

Closing deferred tax on UK temporary differences has been calculated at the substantively enacted rate of 27% (2009: 28%). The effect of the reduction in the UK corporation tax rate from 28% to 27% is a reduction in the net deferred tax asset at the end of 2010 of an amount of £2.4million. Of this £2.4 million, £0.4 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 24% is expected to be enacted separately each year. 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	2010	2009
Deferred tax assets	372.4	119.6
Deferred tax liabilities	(0.8)	(0.8)
	371.6	118.8

At the balance sheet date, the Group has unused UK capital losses of £253.0 million (2009: £409.2 million), of which £253.0 million (2009: £271.7 million) are agreed as available for offset against future capital profits. During the year 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 2010 because the Group does not believe that it is probable that these capital losses will be utilised in the foreseeable future. In addition, some of the capital losses would be further restricted as to offset dependent on the source within the Taylor Wimpey Group of any gains and previous losses.

The Group has not recognised potential deferred tax assets relating to inventory charges and tax losses carried forward amounting to £78.6 million (2009: £375.1 million) in the UK , £268.8 million (2009: £267.0 million) in the US and £29.8 million (2009: £21.4 million) in other jurisdictions. Local tax legislation permits losses to be carried forward 20 years in the US, 15 years in Spain and indefinitely in the UK. Unrecognised deferred tax assets relating to tax losses were also utilised as part of the settlement negotiations with HM Revenue & Customs during the period.

8. Inventories

£ million	2010	2009
Raw materials and consumables	1.7	1.6
Finished goods and goods for resale	19.4	12.1
Residential developments:
Land	2,248.4	2,341.8
Development and construction costs	1,159.6	1,242.8
Commercial, industrial and mixed development properties	7.1	5.0
	3,436.2	3,603.3

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.

Non-refundable land option payments of £79.0 million (2009: £81.2 million) are recorded within 'Residential developments: Land'.

Gross profit includes a positive contribution of £122.4 million (2009: £59.6 million), relating to realisation of written down inventory above its originally estimated net realisable value, where the combination of selling prices and cost, or mix improvements have exceeded our original market assumptions. These amounts are stated before the allocation of overhead excluded from the Group's net realisable value exercise.

9. Retirement benefit schemes

Retirement benefit obligation comprises gross pension liability of £248.5 million (2009: £406.4 million) and gross post-retirement healthcare liability of £2.0 million (2009: £2.9 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 Group's defined benefit schemes are closed to new entrants. 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 operates a number of small overseas pension schemes including defined benefit schemes in the US and Canada. Of the defined benefit pension scheme net deficit of £248.5 million (2009: £406.4 million) at 31 December 2010, £244.0 million (2009: £401.4 million) related to the TWGP&LAF and GWSPS schemes in the UK and £4.5 million (2009: £5.0 million) related to defined benefit schemes in the US and Canada. 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 Company made an additional payment of £37.5 million to each of the UK defined benefit schemes following the refinancing agreement in December 2010.

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 implemented a Joint Investment Sub Committee to manage the investment of the combined defined benefit scheme assets. The Company and the Trustees have undertaken a review of the scheme investment strategy, implementation of the investment changes will occur during 2011.

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 ten 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.

Contributions of £4.1 million (2009: £10.6 million) were charged to income in respect of defined contribution schemes.

The main financial assumptions, which were used for the triennial funding valuation and are all relative to the inflation assumption, are as set out below:

Assumptions	TWGP&LAF	GWSPS
RPI inflation	3.60%	3.85%
Discount rate - pre/post-retirement	6.85%-5.10%	6.75%-4.75%
General pay inflation	-	-
Real pension increases	0.00%	0.00%

Valuation results	TWGP&LAF	GWSPS
Market value of assets	£758m	£694m
Past service liabilities	£1,022m	£953m
Scheme funding levels	74%	73%

There have been two significant post valuation events, the future revaluation of deferred member benefits to be based on CPI from 1 January 2011, which will reduce liabilities by £20.0 million for the TWGP&LAF and £19.0 million for the GWSPS and the additional Company payment to each scheme of £37.5 million has increased assets for both schemes. Annual funding contributions take into account these post valuation events.

The results of the March 2010 valuations of the Group's pension schemes have been updated to 31 December 2010 and the position of overseas schemes has been included within the IAS 19 disclosures. The principal actuarial assumptions used in the calculation of the disclosure items are as follows:

	United Kingdom		North America
	2010	2009	2010	2009
As at 31 December
Discount rate for scheme liabilities	5.40%	5.70%	5.25%-5.37%	5.94%-6.00%
Expected return on scheme assets	5.55%-5.92%	5.90%-6.20%	6.50%-7.00%	6.50%-8.00%
General pay inflation	n/a	4.30%	3.00%-3.50%	3.00%-3.50%
Deferred pension increases	2.45%	3.30%	0.00%	0.00%
Pension increases	2.20%-3.65%	2.30%-3.20%	0.00%-3.00%	0.00%-3.00%

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 current life expectancies (in years) underlying the value of the accrued liabilities for the main UK plans are:

	2010		2009
Life expectancy	Male	Female	Male	Female
Member currently age 65	86	90	86	89
Member currently age 45	88	92	87	90

The life expectancies have been derived using mortality assumptions that were based on the results of a recent investigation in to the mortality experience of the schemes. The base tables used are the PA92 series tables with appropriate age rating adjustments. Future improvements in life expectancy are allowed for in the form of the medium cohort projections, with a 1% p.a. underpin to future improvements in life expectancy.

The fair value of assets and present value of obligations of the Group's defined benefit pension schemes are set out below:

	Expected rate of return % p.a	United Kingdom £ million	North America £ million	Total plans £ million	Percentage of total plan assets held
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)
31 December 2009
Assets:
Equities	7.90%	527.9	9.8	537.7	38%
Bonds	5.70%	294.0	5.4	299.4	21%
Gilts	4.40%	444.8	-	444.8	32%
Other assets	3.30%-7.90%	129.7	0.7	130.4	9%
		1,396.4	15.9	1,412.3	100%
Present value of defined benefit obligations		(1,797.8)	(20.9)	(1,818.7)
Deficit in schemes recognised as non-current liability		(401.4)	(5.0)	(406.4)

To develop the expected long term rate of return on assets assumption, the Group considered the current level of expected returns on investments (particularly government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class were then weighted based on the asset allocation to develop the expected long term rate of return on assets assumption for the portfolio.

The expected return on scheme assets is based on market expectations at the beginning of the financial period for returns over the life of the related obligation. The expected yield on bond investments with fixed interest rates can be derived exactly from their market value. Some of these bond investments are issued by the UK Government. The risk of default on these is very small. The trustees also hold bonds issued by public companies. There is a more significant risk of default on these which is assessed by various rating agencies.

The trustees also have a substantial holding of equity investments. The investment return related to these is variable, and they are generally considered 'riskier' investments.

It is generally accepted that the yield on equity investments will contain a premium, 'the equity risk premium', to compensate investors for the additional risk of holding this type of investment. There is significant uncertainty about the likely size of this risk premium.

A summary of the target asset allocations of the major defined benefit schemes are shown below:

	TWGP&LAF	GWSPS
UK Equities	17%	18%
Non-UK Equities	30%	12%
Index-Linked Gilts	15%	25%
Fixed-Interest Gilts	10%	16%
Other UK bonds	25%	24%
GTAA	-	5%
Property	3%	-

£ million	2010	2009
Amount charged against income:
Current service cost	(3.7)	(4.1)
Curtailment gain	12.6	-
Operating income/(cost)	8.9	(4.1)
Expected return on scheme assets	74.9	61.2
Interest cost on scheme liabilities	(98.3)	(95.5)
Finance charges	(23.4)	(34.3)
Total charge	(14.5)	(38.4)

The actual return on scheme assets was a gain of £145.7 million (2009: £41.5 million).

£ million	2010	2009
Actuarial gains in the statement of other comprehensive income:
Difference between actual and expected return on scheme assets	70.8	102.7
Experience (losses)/gains arising on scheme liabilities	(9.7)	29.1
Changes in assumptions	(14.2)	(273.6)
Total gain/(loss) recognised in the statement of other comprehensive income:	46.9	(141.8)

The cumulative amount of actuarial losses recognised in the statement of other comprehensive income is £168.7 million loss (2009: £215.6 million loss).

£ million	2010	2009
Movement in present value of defined benefit obligations
1 January	1,818.7	1,557.7
Changes in exchange rates	0.7	(1.6)
Service cost	3.7	4.1
Curtailment gain	(12.6)	-
Benefits paid and expenses	(81.0)	(83.1)
Contributions - employee	0.9	1.6
Interest cost	98.3	95.5
Actuarial gains	23.9	244.5
31 December	1,852.6	1,818.7

£ million	2010	2009
Movement in fair value of scheme assets
1 January	1,412.3	1,280.5
Changes in exchange rates	0.7	(0.7)
Expected return on scheme assets and expenses	74.9	61.2
Contributions - employer and employee	126.4	51.7
Benefits paid	(81.0)	(83.1)
Actuarial gains	70.8	102.7
31 December	1,604.1	1,412.3

£ million	2010	2009	2008	2007	2006
History of experience gains and losses:
Fair value of scheme assets	1,604.1	1,412.3	1,280.5	1,434.2	749.7
Present value of defined benefit obligations	(1,852.6)	(1,818.7)	(1,557.7)	(1,650.6)	(955.6)
Deficit in the scheme	(248.5)	(406.4)	(277.2)	(216.4)	(205.9)
Difference between actual and expected return on scheme assets:
Amount	70.8	102.7	(210.4)	(12.7)	24.2
Percentage of scheme assets	4.4%	7.3%	16.4%	1.0%	3.0%
Experience adjustments on scheme liabilities:
Amount	(9.7)	29.1	(22.1)	26.7	0.2
Percentage of scheme liabilities	0.5%	1.6%	1.4%	2.0%	0.0%

The estimated amounts of contributions expected to be paid to the TWGP&LAF during 2011 are £22.0 million, 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 Company liability.

Assumption	Change in assumption	Impact on scheme liabilities
Discount rate	Increase by 0.1% p.a.	Decrease by £28.3m
Rate of inflation	Increase by 0.1% p.a.	Increase by £22.6m
Rate of mortality	Members assumed to live 1 year longer	Increase by £58.8m

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 2010 (2009: £2.9 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.

The cost is calculated assuming a discount rate of 3.6% per annum (2009: 3.6%) and an increase in medical expenses of 10% per annum (2009: 10.0%). The premium cost to the Group in respect of the retired long-service employees for 2010 was £0.2 million (2009: £0.2 million).

10. Notes to the cash flow statement

£ million	2010	2009
Profit/(loss) on ordinary activities before finance costs	121.2	(543.0)
Non-cash exceptional items:
Impairment of fixed assets	-	0.5
Inventories write downs	24.8	527.0
Adjustments for:
Depreciation of plant and equipment	4.3	4.2
Pensions curtailment	(12.6)	-
Share-based payment charge	2.8	1.0
Loss on disposal of property and plant	-	0.2
Decrease in provisions	(10.4)	(3.1)
Operating cash flows before movements in working capital	130.1	(13.2)
Decrease in inventories	168.8	735.0
(Increase)/decrease in receivables	(42.5)	25.4
Increase/(decrease) in payables	91.9	(432.6)
Pension contributions in excess of charge	(119.1)	(44.7)
Cash generated by operations	229.2	269.9
Income taxes received	25.7	109.1
Interest paid	(167.0)	(172.7)
Net cash from operating activities	87.9	206.3

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 equivalents	Overdrafts, bank and other loans	Debenture loans	Total net debt
Balance 1 January 2009	752.3	(1,312.5)	(969.1)	(1,529.3)
Cashflow	(595.8)	1,124.9	200.4	729.5
Business disposals*	-	4.1	-	4.1
Foreign exchange	(24.4)	22.4	46.8	44.8
Balance 31 December 2009	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)

* In April 2009 the Group disposed of its residual construction operations to existing local management for £1. At the point of disposal the business had bank loans of £4.1million.

Financial Statements

Five Year Review

£ million	2010	2009	2008⁽¹⁾	2007⁽¹⁾	2006⁽¹⁾
Income statement
Revenue - continuing	2,603.3	2,595.6	3,467.7	4,142.8	3,572.1
Profit on ordinary activities before exceptional items, finance costs and tax	184.2	37.7	86.3	435.5	447.7
Share of results of joint ventures	9.9	5.6	7.6	23.4	22.1
Exceptional items	(63.0)	(580.7)	(1,884.5)	(379.7)	-
Net finance costs, including exceptional finance costs	(202.4)	(162.5)	(179.1)	(112.8)	(64.2)
(Loss)/profit for the financial year	(71.3)	(699.9)	(1,969.7)	(33.6)	405.6
Taxation, including exceptional taxation	330.6	59.3	76.6	(173.4)	(115.0)
Profit for the year from discontinued operations		-	53.1	10.3	-
Profit/(loss) for the financial year	259.3	(640.6)	(1,840.0)	(196.7)	290.6

Profit/(loss) for financial year before tax and exceptional items	75.1	(96.1)	(74.7)	346.1	405.6

Balance sheet
Other fixed assets	7.6	8.2	15.5	39.0	25.5
Interests in joint ventures	49.7	51.9	67.7	59.9	56.2
Non-current loans and receivables	96.5	65.0	47.9	76.4	56.0
Deferred tax asset	372.4	119.6	6.6	117.7	95.4
Non-Current Assets	526.2	244.7	137.7	293.0	233.1
Inventories	3,436.2	3,603.3	4,890.6	6,017.8	2,946.5
Other current assets (excluding cash and debt)	175.5	191.5	271.7	408.1	314.6
Trade and other payables	(902.9)	(760.0)	(1,170.7)	(1,540.3)	(926.0)
Other current liabilities (excluding cash and debt)	(209.5)	(290.4)	(252.6)	(202.6)	(74.1)
Net-current assets (excluding cash and debt)	2,499.3	2,744.4	3,739.0	4,683.0	2,261.0
Trade and other payables	(257.1)	(278.6)	(343.4)	(418.2)	(1203.9)
Retirement obligations	(250.5)	(409.3)	(279.8)	(219.1)	(208.6)
Provisions	(43.7)	(51.8)	(51.0)	(38.4)	(27.9)
Non-current creditors (excluding debt) and provisions	(551.3)	(739.7)	(674.2)	(675.7)	(360.4)
Capital employed	2,474.2	2,249.4	3,202.5	4,300.3	2,133.7
Goodwill and intangibles	3.4	2.4	-	820.3	363.1
Net debt	(654.5)	(750.9)	(1,529.3)	(1,415.4)	(391.3)
Net Assets	1,823.1	1,500.9	1,673.2	3,705.2	2,105.5

Statistics
Adjusted earnings/(loss) per share - total Group⁽²⁾	0.6p	(4.3p)	(7.2p)	29.5p	50.5p
Tangible net worth per share⁽²⁾	56.9p	46.9p	119.8p	249.1p	293.2p
Number of shares in issue at year end (millions) ⁽²⁾	3,197.2	3,196.9	1,526.0	1,158.3	594.2
Return on capital employed ⁽³⁾	8.2%	1.5%	2.6%	14.8%	44.0%
Operating margin	7.5%	1.7%	2.6%	11.1%	13.2%
Net gearing ratio ⁽⁴⁾	35.9%	50.0%	91.4%	38.2%	18.6%

UK short term land bank (units) ⁽⁵⁾	63,566	66,089	74,917	86,155	34,827
NA short term land bank (units) ⁽⁵⁾	30,262	29,062	29,178	40,603	31,353
ASP UK £'000	171	160	171	191	193
ASP NA £'000	200	171	175	182	233
Completions UK (units)	9,962	10,186	13,394	14,862	8,294
Completions NA (units)	4,140	4,755	5,421	5,197	4,492
Total inventory / net debt	5.3	4.8	3.2	4.3	7.5

(1) The results of the construction business which was disposed of on 9 September 2008 are included within profit for the year from discontinued operations for 2008 and 2007, and within continuing operations for 2006.

(2) 2008 has been restated to reflect the increase in shares related to the open offer as part of the equity raise on 1 June 2009.

(3 ) Return on capital employed is calculated as profit on ordinary activities before amortisation of brands, exceptional items, finance costs and tax but including share of results of joint ventures, divided by the average of opening and closing capital employed. In 2008 and 2007 the results of the Construction division, of £2.1 million and £13.4 million respectively, were also included.

(4) Net gearing ratio is net debt divided by net assets.

(5) The total number of plots that we either own or control, with some form of planning consent.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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