Results for the year ended 31 December 2012
1 March 2013
Taylor Wimpey plc
Results for the year ended 31 December 2012
Strong performance in 2012 allows significant investment for the future
Highlights
· Progress against each of our key financial objectives:
• UK operating profit margin* increased to 11.5% (2011: 9.0%**)
• Group return on net operating assets*** increased to 13.6% (2011: 9.8%)
• Tangible net asset value per share† 61.5p (2011: 57.3p)
· 44% increase in Group operating profit* to £230.1 million (2011: £159.5 million)
· 124% increase in adjusted basic earnings per share to 4.7p (2011: 2.1p)
· Significant improvement in UK operational performance:
• 44% increase in operating profit* to £228.8 million (2011: £159.3 million)
• Completed 10,886 homes at an average selling price of £181k (2011: 10,180 homes at £171k)
• Extensive strategic landbank of 100,340 plots (2011: 86,236)
• Total order book value increased by 14% to £948 million at 31 December 2012 (2011: £835 million)
• Customer satisfaction increased to 93.2% (2011: 92.1%)
• Reduction in waste generated per 1,000ft2 built to 3.36 tonnes (2011: 3.44 tonnes)
• Contributed over £175 million to our local communities via Section 106 and Section 75 planning obligations (2011: £161 million)
• Continue to compare favourably with the construction industry with an Annual Injury Incidence Rate (AIIR) of 389 versus the 2011/12 'Construction Sector Rate' of 589
· Reduction in net debt to £59.0 million (31 December 2011: £116.9 million) with further improved debt efficiencies
· Agreed in principle to merge the two pension schemes as part of ongoing pension exposure management using £100 million Pension Funding Partnership backed by market value show homes
· Dividend policy remains unchanged - final dividend of 0.43p proposed (2011 final: 0.38p)
Group Financial Summary
|
Continuing operations |
FY 2012 |
FY 2011 |
Change |
|
Revenue £m |
2,019.0 |
1,808.0 |
11.7% |
|
Operating profit* £m |
230.1 |
159.5 |
44.3% |
|
Profit before tax and exceptional items £m |
185.3 |
89.9 |
106.1% |
|
Exceptional profit/ (loss) items before tax £m |
22.4 |
(11.3) |
N/A |
|
Profit for the year £m |
149.3 |
65.7 |
127.3% |
|
Adjusted basic earnings per share p |
4.7 |
2.1 |
123.8% |
|
Basic earnings per share p |
7.3 |
3.1 |
135.5% |
|
Net debt £m |
59.0 |
116.9 |
(49.5%) |
|
Final dividend per share p |
0.43 |
0.38 |
13.2% |
Pete Redfern, Chief Executive, commented:
"During 2012, we've continued our consistent approach and focus on margin and returns, delivering a significant increase in profits. These results show the benefit of our short term land and strategic land asset choices, along with our sharpened focus on capital efficiency."
* Operating profit is defined as profit on ordinary activities from continuing operations before finance costs and exceptional items, after share of results of joint ventures.
** 2011 comparatives have been restated to consolidate the UK Housing and Corporate segment, as the Group now only reports two operating segments.
*** Return on net operating assets is defined as operating profit divided by the average of the opening and closing net operating assets, which is defined as capital employed plus intangibles less tax balances.
† Tangible net assets per share is defined as net assets excluding goodwill and intangible assets divided by the number of shares in issue at the period end.
[ends]
A presentation to analysts will be made at 9.00am on 1 March 2013. This presentation will be broadcast live on http://pres.taylorwimpey.com/tw033/default.asp
For further information please contact:
Taylor Wimpey plc Tel: +44 (0) 7826 874461
Pete Redfern, Chief Executive
Ryan Mangold, Group Finance Director
Debbie Sempie, Investor Relations
RLM Finsbury Tel: +44 (0) 20 7251 3801
Andrew Dowler
Sarah Heald
Notes to editors:
Taylor Wimpey plc is a UK-focused residential developer which also has operations in Spain. Our vision is to become the UK's leading residential developer for creating value and delivering quality.
For further information, please visit the Group's Web site: http://plc.taylorwimpey.co.uk
Group overview of continuing operations
2012 has been a year of significant progress for Taylor Wimpey, where we have delivered a strong financial performance and continued to develop our business for the future.
Group revenue in 2012 increased by £211.0 million to £2,019.0 million (2011: £1,808.0 million) from Group completions of 10,944 (2011: 10,232), excluding joint ventures, against a backdrop of a stable UK housing market. The gross profit in the year has increased 23.8% to £356.3 million (2011: £287.7 million). The gross profit for the year includes £85.1 million (2011: £99.6 million) of positive contribution, on completions from sites with previously impaired inventory. Group operating profit* increased significantly by £70.6 million, or 44.3%, to £230.1 million (2011: £159.5 million) resulting in a Group operating margin* of 11.4% (2011: 8.8%). Group asset turn†† increased to 1.19 times in 2012 (2011: 1.11 times), benefitting from a greater proportion of sales from higher quality sites, resulting in Group return on net operating assets*** increasing substantially by 3.8 percentage points to 13.6% (2011: 9.8%).
The impact of our strategy has continued to gain momentum and we are pleased to report that we continue to deliver progress across a number of areas and against each of our strategic objectives. Our vision is to become the UK's leading residential developer for creating value and delivering quality for customers and other stakeholders. We are confident of achieving this by concentrating on our key drivers of value:
· Absolute commitment that a strong margin performance is the way to drive the best sustainable returns
· Margin underpinned by timing and quality of short term acquisitions and enhanced by extensive strategic land
· Continual improvement philosophy with a relentless focus on adding value to every existing and new site
· Significant ongoing investment in great quality people and processes
· Increasing focus on asset efficiency and maximising the returns on our land investments
· Active management of investments and structure over the housing cycle, to reduce risk and maximise returns over the long term
Our landbank is an investment portfolio which is critical to our success and underpins the future performance of our business. We have continued to enhance the quality of our short term landbank by actively managing our portfolio: taking advantage of the attractive opportunities we are currently seeing at this point in the cycle and continuously adding value to our existing landbank. As at 31 December 2012, our short term owned and controlled landbank comprised 65,409 plots across our 24 regional businesses (31 December 2011: 65,264). The strength of our strategic landbank, which stands at 100,340 plots (including pipeline) (2011: 86,236) reflects the investment we have made over the last few years and further builds on our confidence in delivering sustainable returns through the cycle.
We have continued to strengthen our balance sheet and to reduce net debt. During 2012, we repurchased a total of £15.2 million of 10.375% Senior Notes due 2015, reducing the amount outstanding as at 31 December 2012 to £149.4 million and in turn reducing our interest charge.
†† Total revenue divided by the average of opening and closing net operating assets.
Net debt reduced to £59.0 million as at 31 December 2012 (31 December 2011: £116.9 million), due to the timing of land payments and our strong operational performance. We consider land creditors, which stood at £375.0 million at 31 December 2012 (31 December 2011: £306.4 million), together with debt, in the context of overall balance sheet strength. Adjusted gearing including land creditors as at 31 December 2012 was 21.8% (2011: 23.1%).
Current trading and outlook
We have continued to build on our excellent order book position, which stood over £1,076 million as at 24 February 2013 (26 February 2012: £982 million). We are around 50% forward sold for 2013 completions. Sales rates and visitor trends have improved in recent weeks, particularly in the South and Midlands, and we have seen a noticeable increase in the number of NewBuy reservations in the first eight weeks of the year.
It is too early to predict the market for the year and we believe that mortgage availability will remain the key constraint on the market, although we have seen improvement over the last few months and hope that this will continue. This combined with a tentative improvement in consumer confidence, gives us grounds for cautious optimism in the short term.
Our strategy focuses on building and applying our key competencies: margin performance; land investment and management; continuously adding value; people; and an active approach to managing the market cycle to maximise returns. Our results already show the benefit of the successful implementation of our strategy while our high quality land portfolio, increased order book and strong balance sheet give us confidence to target further progress in 2013 and beyond.
UK Housing
|
|
2012 |
2011** |
% change |
|
|
Completions (including joint ventures) |
10,886 |
10,180 |
|
|
|
Average Selling Price £k |
181 |
171 |
5.8% |
|
|
Revenue £m |
1,987.0 |
1,779.4 |
11.7% |
|
|
Operating profit* £m |
228.8 |
159.3 |
43.6% |
|
|
Operating margin* % |
11.5 |
9.0 |
2.5 ppt |
|
|
Return on net operating assets*** % |
14.0 |
10.2 |
3.8 ppt |
|
|
Contribution per legal completion £k |
33.9 |
28.6 |
18.5% |
|
|
Forward order book as a % of completions |
55.3 |
53.1 |
2.2 ppt |
|
|
Owned and controlled plots with planning |
65,409 |
65,264 |
0.2% |
|
|
Customer satisfaction % |
93.2 |
92.1 |
1.1 ppt |
|
|
Health and safety injury frequency rate (per 100,000 employees and contractors) |
389 |
378 |
2.9% |
|
|
Waste generated per 1,000ft2 built (tonnes) |
3.36 |
3.44 |
(2.3%) |
UK financial and operational performance
2012 has been a year of strong growth and operational performance. Revenue has increased by 11.7% to £1,987.0 million (2011: £1,779.4 million), primarily driven by an improved mix and quality of locations, resulting in higher sales prices and an increase in home completions. It is therefore very pleasing to report growth of 43.6% in operating profit* to £228.8 million (2011: £159.3 million**) as we continue to prioritise margin performance from new and old land. This value focus resulted in an increase in operating margin to 11.5% for the full year (2011: 9.0%**).
Net operating assets in the UK were £1,667.2 million (2011: £1,607.2 million) with a strong increase in our return on net operating assets*** for the year to 14.0% (2011: 10.2%**).
UK market and cycle
Different stages in the housing and economic cycle require different actions in order to deliver value and returns across the cycle. While it is impossible to judge the peaks and troughs exactly right, a fundamental part of our strategy is to take a more active approach to managing the cycle than has been undertaken in the business historically.
2012 market conditions were stable throughout the year and underlying market prices were flat. We would consider a more normalised market environment to be one where market sales prices move at least in line with general inflation and annual average sales rates are around 0.70. Mortgage availability remained the key constraint on the market for another year. In 2012, the total value of mortgage approvals for home purchases was £91,139 million (2011: £82,454 million) according to Bank of England data. During 2012, private industry housing starts decreased slightly to 78,120 (2011: 78,250) according to the National House Building Council (NHBC).
Sales, completions and pricing
The best way to deliver sustainable returns for our shareholders is by focusing on delivering strong margin performance. Our average selling prices on private sales increased by 6.5% to £197k (2011: £185k) against a backdrop of broadly flat house prices in the wider market. This increase has been driven primarily by the enhanced quality of our locations. Our overall average selling price has increased to £181k (2011: £171k). During 2012, we completed 10,886 homes (2011: 10,180 homes), of which 8,842 were private homes (2011: 8,075), 1,946 were affordable (2011: 2,048) and 98 joint venture completions (2011: 57). The average selling price of affordable completions was slightly lower at £112k (2011: £116k). During 2012 we were selling from an average of 311 outlets (2011: 305). Our net private reservation rate for the full year was 0.58 homes per outlet per week (2011: 0.54) with cancellation rates remaining low at 15.2% (2011: 15.8%).
We achieved an increase of 14% in order book value, ending the year with a total of £948 million (31 December 2011: £835 million), and an increase of 11% in volume ending the year at 5,966 homes (31 December 2011: 5,379 homes). We have not compromised on our focus on driving margin and we are pleased to report further improvement in the margin on sales in the order book, with the growth driven by the strength of the private order book. Private average selling price in the order book stands at £203k (31 December 2011: £189k), again primarily the result of better quality locations. We entered 2013 with 327 active outlets (31 December 2011: 312).
Underscoring the importance of homebuilding to the UK economy, the Government implemented several initiatives during 2012, including NewBuy and extending FirstBuy. We have welcomed these initiatives and during 2012 supported 1,203 customers to purchase homes using FirstBuy and 546 homes using NewBuy and MI NewHome.
Selecting land
With land, location is of course critical. We are first and foremost a local business. We have a network of 24 businesses, which are located across the country in most key markets. Our completions and land buying are approximately weighted 60% to the South and 40% to the North. We have a strong presence in the South East and in London, with 19 active sites and a further 31 landbank sites in the capital. Each land purchase we make, regardless of geography, is tested against our strict evaluation criteria, which includes margin, return on capital, market demand and site specific risk assessment.
During 2012, we approved the purchase of 14,172 new plots on 112 new sites at an average contribution margin of c. 23% (2011: 11,756 plots on 106 sites). Total land spend including land creditors was £427 million (2011: £398 million). As we have set out, our strategy is to manage the business in line with the cycle, to maximise returns. We continue to see a number of attractive opportunities in the land market and we have been able to capitalise on the current reduced level of competition to invest in land that will deliver strong financial returns. At this point in the cycle, this offers the best return proposition for our shareholders. We continue to monitor the land market and other macro factors carefully and we are committed to the principle of returning cash to our shareholders when the number of attractive land opportunities decreases as competition in the land market heats up and we reach what we believe is optimal scale.
A key focus in 2012 was to maintain and develop our land partnerships and relationships across the business with the aim to become the land buyer that vendors and local communities want to deal with. We were delighted to be selected with London and Quadrant to build the first residential phase of Queen Elizabeth Olympic Park, Chobham Manor.
As at 31 December 2012, our short term owned and controlled landbank stood at 65,409 plots, representing 6.1 years of supply (31 December 2011: 65,264, 6.4 years). The strength of our landbank reinforces our ability to maintain a disciplined approach to new land investment and make investments only where we see value.
We are driven by returns and we will undertake land sales where we feel the price achieved delivers value and the land does not fit our strategy or is excess to our requirements in a particular local market. Revenue from land sales totalled £16.2 million in 2012 (2011: £23.4 million) with a gross profit* of £3.5 million (2011: £6.3 million**).
The short term landbank only tells part of the story. The on-going quality of the short term landbank is protected by the strength of our strategic landbank that stood at 100,340 plots as at 31 December 2012 (including pipeline plots), an increase of 16% (31 December 2011: 86,236). Throughout 2012, we have continued to add to our strategic land portfolio, both by the promotion of existing sites through the planning process and by the targeted addition of new potential plots. Our short term landbank comprises 43% of strategically sourced land (2011: 41%) and 24% of our 2012 completions (2011: 17%) were on strategically sourced land. We aim to increase this percentage to 30% of completions from strategically sourced land over the next three years, which underpins our confidence in future margin progression.
Managing the planning and community engagement process
A year on from the release of the National Planning Policy Framework and the enactment of the Localism Act, we have changed our business significantly to embrace the principle of community engagement. A key element of our strategy is to become the industry leader in managing the planning process across our business, recognising the value this adds both to our local communities and Taylor Wimpey. We aim to engage with communities and all interested stakeholders before we submit a planning application and during the life cycle of the site. In this way we can listen to their concerns and incorporate these within our plans where possible.
We have made significant strides during 2012 and are further encouraged by the success that we have achieved to date, which we believe has resulted from being very early to adapt our approach. We were also pleased to receive external recognition of our progress by being ranked in joint first place in the 'Impact on Society and Economy' section of the 2012 NextGeneration benchmark.
Getting the homebuilding basics right
In order to achieve our objectives and maximise our returns, consistency and efficiency of process in everything that we do is key, from health and safety through to build cost control.
Health and safety
Health and safety at Taylor Wimpey is a non negotiable top priority - we will not compromise in ensuring that everyone leaves our sites safe and well. We have a formal, comprehensive and fully integrated health, safety and environmental management program in place across our business.
We continue to compare favourably with the UK construction industry in terms of site safety, but remain committed to reducing our incident rates further. In 2012, the UK Health and Safety Executive (HSE) changed the definition of reportable injuries from a three day period of absence from work to a seven day period. Given the timing of the industry collection, 2011/12 industry figures are reported using the previous three day classification where we recorded an Annual Injury Incidence Rate (AIIR) of 389 in the UK (2011: 378). This is significantly below the 2011/12 'All Home Builder Rate' of 493 declared by the Home Builders Federation and the 'Construction Sector Rate' 2011/12 of 589 declared by the HSE. Taylor Wimpey's AIIR on the new basis is 311 (2011: 222). We recorded 44 RIDDOR (Reporting of Injuries, Diseases and Dangerous Occurrences Regulations) injuries against 30 in 2011, using the new basis of definition. There was one HSE Enforcement Notice (2011: nil) issued on one UK site for dust nuisance, which was quickly rectified.
The health and safety of our customers is of paramount importance to us and we were made aware of an incident of suspected exposure to carbon monoxide at our Grand Union Village (GUV) development in Northwest London which occurred in January 2012. The apartment had a type of boiler system which uses what is known as an 'Extended Gas Flue' (EGF), where the pipes transporting exhaust gases from the boiler pass through and are concealed within a void in order to reach the outside wall. Such systems have been widely used by the gas industry since around 2000 and are installed and certified by independent Gas Safe registered engineers.
We responded with a prioritised program of flue inspections of properties with EGFs at the development and extended our existing nationwide program of EGF inspections, which we had instigated in line with revised gas industry safety guidance issued in June 2007. We also took the decision to write to around 150,000 homes built since 2000 in order to highlight the risks of carbon monoxide, the importance of regular boiler servicing and to offer to supply audible carbon monoxide alarms free of charge. Audible carbon monoxide alarms are now fitted as standard in all new Taylor Wimpey properties with a gas appliance.
We also believe we should play our part in educating our site teams about how to stay safe on site and during 2012 we ran a very successful campaign to improve plant awareness on site.
Our commitment to health and safety is reflected by the fact that it continues to form part of all senior managers' business objectives.
Build costs and efficiency
We have made significant targeted savings in the last four years. During 2012, we have continued to implement and improve our house type portfolio. These homes are designed to be high quality, extremely energy efficient and straightforward, cost effective and safe to build. They are also extremely flexible with different internal layouts and exteriors that can be varied easily to complement local landscapes and streetscapes. The housetypes are designed to meet specific space standards and comply with Secured by Design principles, the nationwide initiative intended to reduce crime through home and scheme design. They are also capable of achieving Lifetime Homes standards of accessibility and adaptability for changing lifestyles, where appropriate. As at January 2013, these housetypes were plotted on approximately 150 sites. This will continue to have a positive impact on build efficiencies, and costs, mitigating build cost inflation.
We also take steps to ensure our supply chain is efficient. Our scale affords us the benefit of strong purchasing power and we achieve significant cost savings across our regional businesses with national agreements with a number of suppliers.
Product range
We continue to offer a wide range of homes from apartments to five bedroom houses, with prices ranging from under £100k to above £750k.
In 2012, the proportion of apartments in our private completions was 24% (2011: 26%). The average square footage of our private completions also remained broadly the same at 1,013 square feet (2011: 1,012 square feet).
Environment
We continue to focus on waste management and the reduction of waste produced from our sites. This is not only the responsible thing to do, but it also makes a positive contribution to site efficiency and reduced build costs. We continue to work with Waste Resources and Action Programme (WRAP) and have achieved a 74% reduction in construction waste to landfill per home completed since 2007 under WRAP's 'Halving Waste to Landfill' commitment. We further reduced the construction waste produced as a result of our activities to 3.36 tonnes in 2012 per 1,000ft2 built (2011: 3.44 tonnes). This has been achieved by careful planning of operations and giving due consideration to eliminating, reducing or reusing all potential waste wherever possible. In 2012, our ReUSE programme was 'Highly Commended' in the waste category of the Constructing Excellence National Awards 2012. ReUSE is designed to share suitable surplus soil and recycled aggregates between sites and between Taylor Wimpey regional business units.
We are committed to improving the water efficiency of the homes that we build, for example, using water-efficient fittings and appliances as standard. In 2012, we started to measure the water use of our sites, offices and home plots before sale in order to monitor and identify ways to further increase water efficiency. We will start to publish water use data from 2013.
We are changing our emissions measurement and methodology to ensure compliance with the UK Government mandatory carbon reporting requirements ahead of its introduction in 2013.
Quality
We are committed to delivering high quality homes for all of our customers. During 2012, Taylor Wimpey won a number of awards, recognising excellence across various areas of the business, including 'Housebuilder of the Year' and 'Best Product' for our innovative PresRoof at the Housebuilder Awards in November. We were particularly pleased to win 66 NHBC Pride in the Job Quality Awards (2011: 65), representing 21% of our active sites, 16 Seals of Excellence (2011: 18) and a further two (2011: two) Regional Awards, which are based on build quality and site management excellence..
Caring about our customers
Regardless of the size or price, every home we build is aspirational to our customer. We have been pleased that our efforts have not gone unnoticed and our customer satisfaction has continued to improve. During 2012, we achieved 93.2% on the externally measured customer service scale (2011: 92.1%) and were awarded the HBF 5 star rating in March 2012, the highest rating reflecting our commitment to our customers. Nine out of 10 of our customers said they were satisfied with the quality of their new home and would recommend us to a friend.
Buying a home is a significant financial and emotional investment for our customers. In everything we do, we try to make the process as easy as possible. We have a dedicated customer service Web site, which aims to make reporting problems easier and quicker. Our customer charter can be found on our Web site www.taylorwimpey.co.uk while our Customer Journey is a special set of procedures that we have designed to guide our customers through the process and is consistently applied on each site development.
Sales and marketing
Our approach to sales and marketing, like every other area of our business, is to drive value. Our prices are set locally and we use targeted customer incentives, on a site by site basis, knowing that our customers' circumstances vary.
First time buyers account for 32% of our sales (2011: 30%). We continue to offer a wide range of products to assist first time buyers. Our Mortgage Myths and First Time Buyer Guide won the 'Highly Commended' award at the Housebuilder Awards 2012.
Our customers' communication preferences have changed over the last few years resulting in a greater use of the internet. We work to harness technology to make it easier for our customers and to allow us to communicate more effectively. In 2012, 16,196 appointments were made on our online booking system (2011: 13,064). In 2012, we developed our social media presence through Facebook and Twitter. We have created a blog to which our senior management team regularly contribute. Throughout 2012, we have been developing our new Web site and anticipate a launch in late 2013. This will provide a more user friendly experience for our customers, investors and other stakeholders.
Optimising value
We have the expertise to buy a good piece of land and make it great. Our ability to constantly increase efficiency and tightly control costs is part of the Taylor Wimpey culture and remains central to delivering enhanced returns.
We actively review every site, both new and old, through our value improvement meetings which are held quarterly and are tracked centrally. This allows us to benchmark our success and identify opportunities for further improvement, ranging from replanning of sites to redesign and selective enhancements to our specification.
Our primary goal with new outlets continues to be to optimise planning consents and value-engineer sites prior to opening and we will not compromise on this. We continue to deliver enhanced returns on newly acquired sites as we open them for home sales.
In 2012, we migrated 15 of our business units over to our COINS based Enterprise Resource Planning (ERP) system. We anticipate that we will complete this by the second half of 2013, by which time all 24 business units will be using the same system. This new IT system is expected to deliver significant savings through the retirement of a number of legacy systems, as well as supporting our focus on value improvement through improved management information, reporting and analysis.
Simply the best people
Our employees are critical to our success and provide us with a sustainable competitive advantage that can neither be easily, nor quickly, replicated. During 2012, we conducted our first employee survey for a number of years. We were particularly pleased to note that 99% of our employees agree we take health and safety seriously and 94% of our employees are proud to work for Taylor Wimpey. Following the roll out of our strategy to all employees in 2011, the survey also highlighted that 98% of employees understand how their work fits into Taylor Wimpey and 97% understand what Taylor Wimpey wanted to achieve in 2012. Importantly, this survey also highlighted areas for improvement and we intend to focus on these during 2013.
During 2012 97% of our salaried employees received training. We believe strongly in internal succession and believe that internal candidates make valuable business leaders because they understand our culture and approach. Our employee turnover rate for 2012 remained at 10% (2011: 10%).
In early 2012, we launched the Taylor Wimpey Sales Academy, a modular accreditation programme which aims to develop the most competent and knowledgeable sales and marketing teams in the industry. This has been highly successful and, as such, we will look to introduce similar programmes for other disciplines in the future, prioritising the skills that are important for our future business.
Throughout the downturn, we maintained our graduate programme, believing firmly in the importance of investing for the future. During 2012, we recruited seven individuals for our graduate programme, 13 management trainees and 34 apprentices. From 2013, each of our regional business units will be required to take on at least three apprentices per year. These groups are monitored throughout their career progression.
We continue to support the UK construction industry's Construction Skills Certification Scheme (CSCS) which was set up to improve quality, reduce accidents and provide evidence of workers' occupational competence. A total of 91.8% of our workforce, including sub-contractors, were CSCS carded at the end of December 2012 (December 2011: 98.2%).
In 2012, we went one step further and Taylor Wimpey entered into an innovative partnership with Buckinghamshire University Technical College, (BUTC) a Government funded college for students aged 14 to 19. Due to launch in 2013, BUTC will specialise in two areas - IT and Construction (with focus on heritage skills and sustainability in construction), where the greater part of the learning will revolve around real life work projects that we have put forward. We are one of the lead partners and are working with BUTC to shape the construction course specific curriculum, ensuring the programmes of study are relevant, current and progressive.
Current trading and outlook
Our proactive approach to managing the cycle and optimising our UK residential development business will stand us in good stead for the year ahead. We anticipate a natural growth in completions as our strong order book, recent land acquisitions and planning approvals on strategic sites will organically increase our outlet numbers during 2013 and will deliver further growth in completions, subject to ongoing stable market conditions.
Spain Housing
Financial and operational performance
The wider macro economic uncertainty has contributed to the challenging market conditions in Spain. Mortgage availability has remained restricted and there remains a surplus of homes in mainland Spain. Against this backdrop, we have been pleased to deliver an increase in homes completed to 156 homes (2011: 109) at an average selling price of €245k (2011: €275k ).The reduction in average selling price is primarily the result of mix changes, however with higher volumes, 2012 revenue increased to £32.0 million (2011: £28.6 million).
We achieved an operating profit* of £1.3 million (2011: £0.2 million) in spite of the challenging market conditions which is a testament to the strength of the operating team we have in Spain. Our Spanish housing business has also continued to contribute operational cash flow before land spend to the Group.
Our total landbank in Spain stands at 1,815 plots (2011: 1,668).
We are pleased to report that in 2012, 100% of our customers in Spain said they would recommend us to friends and family (2011: 100%).
Current trading and outlook
Conditions continue to be challenging, with the wider macro environment impacting on consumer confidence.
Group financial review of continuing operations
We have delivered a significant improvement in profit before exceptional items and tax, which has more than doubled to £185.3 million (2011: £89.9 million) driven by improved underlying operating performance and lower net debt finance costs.
Group revenue in 2012 increased by £211.0 million to £2,019.0 million (2011: £1,808.0 million) from Group completions of 10,944 (2011: 10,232), excluding joint ventures, against a backdrop of a stable housing market.
Gross profit of £356.3 million (2011: £287.7 million) is up by 23.8% and reflects our strategy of maximizing the value achieved from each home completion. The gross profit for the year includes £85.1 million (2011: £99.6 million) of positive contribution on completions from sites with previously impaired inventory. The positive contribution is the estimated difference between the realised value on completions compared to the value assumed in the net realisable value review. These amounts are stated before the allocation of overheads that are excluded from the Group's net realisable value exercise. In the year, 46% (2011: 63%) of the Group's completions in the UK were from sites that had been previously impaired. As at 31 December 2012, 26% (2011: 39%) of our short term UK owned and controlled land is impaired. Only 120 plots (2011: 89) were sold in Spain that had previously been impaired. This gross profit improvement was due to the combination of cost improvements through replans and cost reduction initiatives and higher mix driven selling prices. Gross profit is stated after a cost of £12.3 million in respect of our proactive program of Extended Gas Flue inspections, rectification work where required and supply of audible carbon monoxide alarms.
In the UK, contribution per completion increased to £33.9k (2011: £28.6k) benefitting from lower build cost and direct selling expenses, as well as selling from better quality locations and newly acquired sites.
Group operating profit* increased by £70.6 million, or 44.3%, to £230.1 million (2011: £159.5 million) and Group operating margin* rose to 11.4% (2011: 8.8%) as a result of the improved trading performance with gross margins increasing from 15.9% to 17.6%. The Group overheads have remained static year on year and, excluding the impact of inflation, overheads are, in real terms, £11.1 million below 2010 levels. We remain on track to deliver a further £10 million overhead saving by 2014 relative to 2010.
Group asset turn†† increased to 1.19 times in 2012 (2011: 1.11 times), benefitting from our investment in higher quality locations. This results in an increase in the Group's return on net operating assets*** of 3.8 percentage points to 13.6% (2011: 9.8%).
Our year end adjusted gearing, including land creditors, at 21.8% (31 December 2011: 23.1%), is comfortably below our indicative maximum working range of 30% to 40% for this point in the cycle.
Net finance costs
Pre-exceptional finance costs totalled £44.8 million (2011: £69.6 million), net of £1.2 million of interest receivable (2011: £3.7 million).
Interest on borrowings was £29.3 million (2011: £52.3 million) with the reduction in interest reflecting the lower average net debt level of the Group during 2012 of £228.3 million (2011: £540.9 million) and increased net debt efficiency following the repurchase of a further £15.2 million of the 10.375% Senior Notes due 2015 in 2012, reducing the amount outstanding to £149.4 million.
Other items included in finance costs are a net pension interest charge of £9.9 million (2011: £14.1 million), which is lower due to the impact of lower discount rates, a mark-to-market and foreign exchange loss on derivatives of £0.3 million (2011: £1.0 million gain), a premium of £1.7 million for the repurchase of £15.2 million of 10.375% Senior Loan Notes due 2015 and a total imputed interest charge for land creditors and other payables of £4.1 million (2011: £7.9 million).
Exceptional items
The 2012 exceptional credit relates to the release of tax associated accruals and provisions following the favourable resolution of an historic liability with HMRC. This is reflected in the pre-tax exceptional credit of £22.4 million (2011: charge £11.3 million) for an interest accrual release and £59.6 million (2011: £1.5 million) for the UK tax in respect of the historic potential tax liability.
Tax
The Group incurred a pre-exceptional tax charge of £36.0 million (2011: £24.2 million) which equates to an underlying tax rate of 19.4% (2011: 26.9%). This differed from the average tax rate for the year of 24.5%, mainly due to the recognition of additional deferred tax assets of £16.5 million (2011: £22.1 million) relating to previously unrecognised temporary differences in the UK following another year of profitability and utilisation of brought forward unrecognized losses of £11.7 million (2011: £nil) offsetting the impact of the UK Government reducing the corporation tax rate by 2% which resulted in a deferred tax asset write-off of £21.1 million (2011: £22.2 million).
Earnings per share
The pre-exceptional basic earnings per share increased 124% to 4.7p (2011: 2.1p). The basic earnings per share after exceptional items are 7.3p (2011: 3.1p).
Dividend
A key element of our strategy is the ongoing management of the Group's capital structure, operating structure and level of land investment to maximise performance across the housing market cycle.
We are committed to our strategy of actively managing the housing market cycle, in particular with respect to the Group's capital structure. This approach to managing capital during the housing market cycle is intended to balance the capital requirements of the business and returning excess capital to shareholders, whilst at all times maintaining balance sheet strength and flexibility.
Our dividend policy remains unchanged with our intention that shareholder returns will be in the form of both regular maintenance dividend payments through the cycle and additional returns where appropriate. The regular maintenance dividend payments will be calculated with reference to the net asset value of the Group. These dividends are declared at the Half Year Results and the Full Year Results in an approximate one-third/two-thirds split respectively. It is our intention to make additional returns to shareholders based on the prevailing market conditions and the returns available on alternative uses of the capital.
Given the current outlook in the UK housing market, and the strength of the Group's asset base, the Directors believe that it is appropriate to continue with dividend payments to shareholders on an unchanged basis of 1% of Net Asset Yield resulting in a final dividend of 0.43 pence per share (2011: 0.38 pence per share). Combined with the interim dividend of 0.19 per share, gives a 2012 total dividend of 0.62 pence per share.
Balance sheet and cash flow
Net assets at 31 December 2012 were up £154.4 million in the year to £2.0 billion (31 December 2011: £1.8 billion) which equates to a tangible net asset value per share of 61.5p (31 December 2011: 57.3p), driven by profit in the period offset partially by the increased pension deficit, £18.2 million dividend payments and £10.0 million share purchases. Adjusted gearing (including land creditors) at the year end is 21.8% (31 December 2011: 23.1%).
The Group acquired £10.0 million of its own shares for future vesting of share awards (2011: £10.0 million), representing 20.9 million shares.
Land creditors were £375.0 million at 31 December 2012 (31 December 2011: £306.4 million), with the increase due to more land being acquired on deferred terms and the timing of land acquisitions around the year end. The use of land creditors remains a useful tool for financing land purchases, however we continue to use them selectively due to our very low marginal cost of borrowings.
In total, the Group has recognised deferred tax assets of £319.6 million (31 December 2011: £342.8 million) of which £248.0 million (31 December 2011: £289.8 million) relate to losses and £56.2 million (31 December 2011: £52.7 million) relate to deferred tax on retirement obligations.
The Group has unrecognised potential deferred tax assets as at 31 December 2012 in the UK of £34.1 million (31 December 2011: £67.6 million) and £28.1 million in other jurisdictions (31 December 2011: £24.7 million).
The work in progress spend is tightly controlled with an average of £2.2 million gross work in progress per outlet (31 December 2011: £2.2 million), resulting in a WIP turnover ratio of 2.8 times (31 December 2011: 2.4 times).
As at 31 December 2012, the Group had mortgage debtors of £91.4 million (2011: £66.5 million), the majority of which relates to shared equity which has increased over 2012 mainly due to the success of the Government backed FirstBuy scheme.
Year end net debt levels reduced from £116.9 million in 2011 to £59.0 million in 2012, a decrease of £57.9 million. This reduction in net debt is a result of the Group generating a cash inflow from operating activities of £78.4 million in 2012 (2011: cash outflow £34.8 million) with the inflow due to improved underlying operations result and working capital efficiency. Total land spend including land creditors was £436 million (2011: £403 million). £52.4 million (2011: £84.7 million) was paid to our pension funds in the year and £33.3 million (2011: £57.3 million) was paid in finance costs.
Treasury management and funding
The Group operates within policies and procedures approved by the Board. The Group has three sources of committed debt funding: a £600 million syndicated revolving credit facility; a £100 million term loan maturing June 2015; and £149.4 million remains outstanding in respect of 10.375% Senior Notes due 2015. We repurchased £15.2 million of our Senior Notes during the year (2011: £85.4 million). The average maturity across these sources of borrowings is 2.2 years. During the year the Group agreed an option to extend the maturity date of its £100 million term loan by over five years to mature in December 2020 which becomes effective following redemption of the 10.375% Senior Notes due 2015, that are callable on 31 December 2013 at 105.2.
Taking into account term borrowings and committed revolving credit facilities, the Group has access to committed funding of £849.4 million as at 31 December 2012 (31 December 2011: £864.6 million), with the first £600 million of revolving credit facilities maturing in November 2014.
The Group is operating well within its financial covenants and limits of available funding.
Pensions
The IAS19 pension deficit, which appears on the Group's balance sheet, is £242.5 million at 31 December 2012 (31 December 2011: £208.2 million). The Company contributed a total of £52.4 million over the year, including £46.0 million in deficit recovery contributions and the enhanced transfer value exercise completed in April 2012.
The changes in actuarial assumptions resulted in a loss of £156.4 million in the year, due to the decrease in discount rate of 0.60% per annum leading to an increase in the liabilities, offset partially by the decrease in the inflation assumption of 0.15% per annum for both RPI and CPI inflation. In addition, the schemes' assets outperformed expectations by £82.5 million.
Following the completion of the triennial actuarial funding valuations, in February 2011, the Group's deficit reduction payments in respect of the Taylor Woodrow Group Pension & Life Assurance Fund (TWGP&LAF) are £22 million per annum and the deficit reduction payments to the George Wimpey Staff Pension Scheme (GWSPS) are £24 million per annum. Both schemes are now closed to future benefit accrual.
We continue to review and implement options to manage the volatility of the pension deficit actively. Each proposal is reviewed with the pension trustees.
During the first quarter of 2012, the Group concluded the Enhanced Transfer Value (ETV) exercise for the GWSPS, which was in the process of being completed as at the previous year end 31 December 2011 with 764 members electing to transfer out.
We have agreement in principle with the Trustees to merge GWSPS and TWGP&LAF into a new scheme, the Taylor Wimpey Pension Scheme, and members have been informed of the merger that is expected to complete in the first half of 2013 subject to regulatory guidance. At the same time we are introducing a £100 million Pension Funding Partnership utilising show homes in a sale and leaseback structure.
This proposal will simplify scheme management, reduce administration costs by circa £0.8 million per annum and provide a way of managing future deficit repair contributions. The new Taylor Wimpey Pension Scheme will benefit from a contingent funding structure, backed principally by show homes, should the Group be unable to meet the cash payments under the funding agreement.
Existing employees of the Company are offered a Defined Contribution (DC) pension called the Taylor Wimpey Personal Choice Plan (PCP). During 2012 this DC scheme was awarded the Pensions Quality Mark Plus by the NAPF (National Association of Pensions Funds), acknowledging that the PCP contribution levels, governance and communication meet the industry's highest standard.
In response to the Government's decision to change pensions auto-enrolment Staging Dates in the UK for some companies, including Taylor Wimpey, the Group will now auto-enrol its employees from November 2013. All employees not currently in an existing pension provided by the Group will be auto-enrolled into the People's Pension provided by B&CE.
Going concern
The Directors remain of the view that, whilst the economic and market conditions continue to be challenging and not without risk, the Group's financing provides both the necessary facility and covenant headroom to enable the Group to operate within its terms for at least the next 12 months. Accordingly, the consolidated financial statements are prepared on a going concern basis.
Corporate responsibility
We want to create value and drive returns for our stakeholders but how we deliver this is just as important to us. With our scale and substance, comes social, environmental, economic and ethical responsibilities and a call to lead by example. We have a responsibility to do the right thing and whilst we do not get everything right, this is something we strongly embrace. Furthermore, the Board recognises that being a socially responsible company adds to and enhances the Company's overall value. We strive to make a positive difference to the communities in which we operate. This objective is set within a context of achieving a sustainable long term UK business. We are therefore delighted with our inclusion in the Dow Jones Sustainability Index, as well as the FTSE4Good index.
As Chief Executive, Pete Redfern takes ownership of the corporate responsibility agenda at the Board level and oversees the work of our Sustainability Steering Group.
As a business dedicated to building homes and creating communities, we care deeply about housing and homelessness issues. During 2012 we continued to support Centrepoint and also set up a unique network of regional charities, allowing each of our regional businesses to work with a charity within their area and for our employees to see the difference their fundraising makes. In conjunction with our network of regional charities, a total of 162 Taylor Wimpey employees took part in the first ever nationwide Sleep Out, a fundraising event which took place across eight UK locations in November 2012 and raised nearly £50,000 to support homeless young people. We are also a patron of CRASH, the construction and property industries' homelessness charity.
Further information about our corporate responsibility activities can be found within our dedicated Corporate Social Responsibility report and on our Web site http://plc.taylorwimpey.co.uk/corporateresponsibility
Shareholder information
The Company's 2013 Annual General Meeting will be held at 11am on 25 April 2013 at the British Medical Association, BMA House, Tavistock Square, London WC1H 9JP.
Subject to shareholder approval at the AGM, the final dividend of 0.43 pence will be paid on 21 May 2013 to shareholders on the register at the close of business on 19 April 2013 (2011 final dividend: 0.38p). In combination with the interim dividend of 0.19p (2011 interim dividend: nil) this gives a total dividend for the year of 0.62p (2011: 0.38p).
This dividend will be paid as a conventional cash dividend, but shareholders are once again being offered the opportunity to reinvest all of their dividend under the Dividend Re-Investment Plan, details of which will be made available to shareholders in due course.
Copies of the 2012 Annual Report and Accounts will be available from 15 March 2013 on the Company's Web site http://plc.taylorwimpey.co.uk Hard copy documents will be posted to shareholders who have elected to receive them on 22 April and will also be available from our registered office at Gate House, Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR from that date.
A copy of the Report and Accounts will be submitted to the National Storage Mechanism and will be available for inspection at: www.Hemscott.com/nsm.do
Directors' responsibilities
The responsibility statement below has been prepared in connection with the Company's full Annual Report for the year ending 31 December 2012. Certain parts thereof are not included within this announcement.
We confirm to the best of our knowledge:
· the financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and
· the management report, which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.
This responsibility statement was approved by the Board of Directors on 28 February 2013 and is signed on its behalf by:
Kevin Beeston, Chairman
Pete Redfern, Chief Executive
Principal risks and uncertainties
As with any business, Taylor Wimpey faces a number of risks and uncertainties in the course of the day to day operations. It is only by effectively identifying and managing these risks that we are able to deliver on our strategic objectives of improving operating margins, return on net operating assets and net asset value across the cycle.
|
|
Relevance to strategy |
Potential impact on KPIs |
Mitigation |
|
Impact of market environment on demand
Ongoing uncertainty in the wider economy, government austerity measures, flat economic growth and the potential for increased unemployment could suppress demand for housing.
|
Due to economic conditions and, in particular, increasing unemployment, consumer confidence remains low. This has an impact on demand for new homes as individuals are more cautious about their financial future and so less likely to take on major new financial commitments such as a mortgage. |
Effective demand for new homes below normal levels could negatively impact on both profitability and cash generation. This would have an adverse effect on return on net operating assets and net debt. |
Our local teams select the locations and home designs that best meet the needs of the local community and customer demand in the present and future.
We evaluate new outlet openings on the basis of local market conditions and regularly review the pricing and incentives that we offer.
We minimise the level of speculative build that we undertake and strive to reduce build costs, while maintaining quality, through operational efficiencies and price reductions.
We continuously look to optimise our marketing Web site to increase the conversion rate of visitors to customers. |
|
Impact of economic environment on mortgage availability
Whilst we have seen further incremental improvements in mortgage availability during 2012, the restricted availability of UK mortgage approvals remains the key constraint on the UK housing market.
|
The majority of the homes that we build are sold to individual purchasers who take on significant mortgages to finance their purchases. In particular the ability of first time buyers and investors to purchase homes has decreased since the financial downturn due to reduced mortgage availability at the higher loan to value levels and hence significant deposits are required. |
Credit availability remains below normal historic levels. As a result the level of effective demand for new homes is below historic trends, which could negatively impact on both profitability and cash generation. This would have an adverse effect on return on net operating assets and net debt.
|
We use a range of sales incentives like 'Easymover' and 'Deposit Match'. We also offer, on certain sites, the government backed FirstBuy and NewBuy (MI New Home In Scotland) products to reduce customer up-front costs and the level of finance required.
We continue to work with the government and with the lenders in order to further improve mortgage availability.
|
|
Government regulations and planning policy
The introduction of the Localism Act, National Planning Policy Framework and the Community Infrastructure Levy (CIL) have introduced significant change in the planning system.
|
Our ability to obtain the planning permission required to develop communities is dependent on our ability to meet the relevant regulatory and planning requirements.
The new planning system is still in its infancy so could result in extended timescales for gaining planning consents or increased legal challenges as the powers within the new processes are clarified and tested. These factors increase uncertainty and increase the commercial risk of projects. |
Inability to obtain suitable consents, or unforeseen delays, could impact on the number or type of homes that we are able to build. We could also be required to fund higher than anticipated levels of planning obligations, or incur additional costs to meet increased regulatory requirements.
The locally produced CIL charge schedules could increase costs and therefore impact on the viability of current developments.
All of these would have a detrimental impact on the contribution per plot. |
We have responded to the changes in planning policy by developing a comprehensive Community Led Planning strategy. This has improved communications between our regional businesses, communities and local authorities, enhancing our ability to deliver developments that meet local requirements.
We consult with the UK government on upcoming legislation, both directly and indirectly as a member of industry groups, to highlight potential issues and to understand any proposed changes to regulations.
|
|
Site and product safety
Building sites are inherently dangerous places. Unsafe practices by our employees or sub-contractors have the potential to cause death or serious injury. |
The success of our operations requires a large number of people, ranging from employees and sub-contractors to customers and their families, to visit our sites each day. We want all of these people to go home at the end of the day safe and uninjured. |
In addition to the potentially tragic personal impact of an accident on site or after customer completion there is potential for legal proceedings, financial penalties, reputational damage and delay to the site's progress. |
We have a comprehensive health, safety and environmental management system, which is integral to our business. This is supported by our policies and procedures to ensure that we live up to our intention of providing a safe and healthy working environment and build houses that comply with the required regulations. All health and safety issues are reviewed by the Group Management Team and, where appropriate, action plans are put in place to rectify any issues. |
|
Land purchasing
The purchase of land of poor quality, at too high a price, or incorrect timing of land purchases in relation to the economic cycle could impact future profitability.
|
Land is the major 'raw material' for the Group and the limited availability of good quality land at an attractive price leads to significant competition.
Purchasing land of the appropriate quality on attractive terms at the right point in the economic cycle will enhance the Group's ability to deliver future profit growth as housing markets recover.
|
Purchasing poor quality or mis-priced land, or incorrectly timing land purchases would have a detrimental impact on our profitability and returns.
The purchasing of insufficient land would reduce the Group's ability to actively manage its land portfolio, and create value for shareholders. |
Our local land teams select and appraise each site. Our appraisal process ensures each project is financially viable, consistent with our strategy and appropriately authorised, dependent on the proposed scale of expenditure.
We strive to be the developer of choice by adopting a comprehensive approach encompassing landholders, land agents local councils and local communities.
Our strategic land teams work alongside regional businesses to identify and secure land with the potential for future development and promote it through the planning system. |
|
Pensions The volatility of the pension deficit has the potential to impact on the Group's share price, balance sheet and cash flow. The current economic uncertainty is driving discount rate volatility, resulting in increased liabilities and reduced investment returns, which have in turn led to an increased deficit and the potential for increased deficit recovery payments. |
Our strategic objective of growing net asset value by 10% per annum on average through the cycle will be impacted by any increase in the pension deficit eroding net asset value delivered through operational performance.
Cash contributed to the pension schemes in order to reduce the deficits is not available to the Company for operational uses such as land spend. |
Continuing economic uncertainty could lead to further reductions in the value of scheme assets and/or further reductions in the discount rate could result in further increases in scheme liabilities.
Improvements in the economic environment could have a beneficial effect on the value of assets and reduce the level of liabilities. |
We have regular meetings with pension trustees to discuss investment performance, regulatory changes and proposals to manage the deficit actively.
We continue to implement the agreed investment strategy for the schemes through the established joint investment sub-committee. |
|
Ability to attract and retain high caliber employees Recruiting employees with inadequate skills or in insufficient numbers, or not being able to retain key staff with the right skills for the future, could have a detrimental impact on our business. |
Our value cycle requires significant input from skilled people to deliver quality homes and communities for our customers.
The challenging market conditions and changing planning environment have meant that the retention of high quality trained employees continues to be key to achieving our strategic goals.
|
Not having the right teams in place could lead to delays, quality issues, reduced sales levels, poor customer service 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, and have succession plans in place for key roles within the Group. We hold regular development reviews within functional areas to identify training requirements. |
|
Material costs and availability of sub-contractors Supply of labour and materials has reduced as industry volumes declined over recent years. However, as markets recover, there will be greater demand and competition for key skills and materials which could lead to increased prices.
|
In order to optimise our build cost efficiency, whilst retaining the flexibility to commence work on new sites as planning consents and local market conditions allow, the vast majority of work carried out on site is performed by sub-contractors. Some sub-contractors and suppliers have gone out of business as a result of the downturn, with others reducing prices to secure orders. As demand increases labour and material prices could increase. |
If the availability of sub-contractors or materials is insufficient to meet demand this could lead to increased build times, increased costs and, therefore, reduced profitability.
Lack of skilled sub-contractors could also result in higher levels of waste being produced from our sites and lower build quality. |
We maintain regular contact with suppliers regarding volume requirements and negotiate contract pricing and duration as appropriate.
As part of our sub-contractor selection process key competencies are considered particularly in relation to health and safety, quality, previous site performance and financial stability.
We also work to address the skills shortage in the industry through apprenticeship schemes and the Construction Industry Training Board. |
|
Financial statements for the year to 31 December 2012 Consolidated Income Statement
|
|||||||
|
£ million |
Note |
Before exceptional |
Exceptional and 4) |
Total |
Before |
Exceptional |
Total |
|
Continuing operations Revenue |
|
2,019.0 |
- |
2,019.0 |
1,808.0 |
- |
1,808.0 |
|
Cost of sales |
|
(1,662.7) |
- |
(1,662.7) |
(1,520.3) |
- |
(1,520.3) |
|
Gross profit |
|
356.3 |
- |
356.3 |
287.7 |
- |
287.7 |
|
Net operating expenses |
3 |
(128.6) |
- |
(128.6) |
(129.4) |
(5.8) |
(135.2) |
|
Profit/(loss) on ordinary activities before finance costs |
|
227.7 |
- |
227.7 |
158.3 |
(5.8) |
152.5 |
|
Interest receivable |
|
1.2 |
- |
1.2 |
3.7 |
- |
3.7 |
|
Finance costs |
4 |
(46.0) |
22.4 |
(23.6) |
(73.3) |
(5.5) |
(78.8) |
|
Share of results of joint ventures |
|
2.4 |
- |
2.4 |
1.2 |
- |
1.2 |
|
Profit/(loss) on ordinary activities before taxation |
|
185.3 |
22.4 |
207.7 |
89.9 |
(11.3) |
78.6 |
|
Taxation (charge)/credit |
5 |
(36.0) |
59.6 |
23.6 |
(24.2) |
1.5 |
(22.7) |
|
Profit/(loss) for the year from continuing operations |
|
149.3 |
82.0 |
231.3 |
65.7 |
(9.8) |
55.9 |
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
|
Profit for the year |
|
- |
- |
- |
43.1 |
- |
43.1 |
|
Profit/(loss) for the year |
|
149.3 |
82.0 |
231.3 |
108.8 |
(9.8) |
99.0 |
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
Equity holders of the parent |
|
|
|
231.3 |
|
|
99.0 |
|
Non-controlling interests |
|
|
|
- |
|
|
- |
|
|
|
|
|
231.3 |
|
|
99.0 |
|
|
Note |
|
|
2012 |
|
|
2011 |
|
Basic earnings per share - total Group |
6 |
|
|
7.3p |
|
|
3.1p |
|
Diluted earnings per share - total Group |
6 |
|
|
7.1p |
|
|
3.0p |
|
Basic earnings per share - continuing operations |
6 |
|
|
7.3p |
|
|
1.8p |
|
Diluted earnings per share - continuing operations |
6 |
|
|
7.1p |
|
|
1.7p |
|
Adjusted basic earnings per share |
6 |
|
|
4.7p |
|
|
2.1p |
|
Adjusted diluted earnings per share |
6 |
|
|
4.6p |
|
|
2.0p |
|
Financial statements for the year to 31 December 2012 Consolidated Statement of Comprehensive Income
|
|
|
|
|
£ million |
Note |
2012 |
2011 |
|
Exchange differences on translation of foreign operations |
|
0.2 |
1.8 |
|
Movement in fair value of hedging derivatives |
|
- |
3.0 |
|
Actuarial loss on defined benefit pension schemes |
9 |
(76.8) |
(33.2) |
|
Tax credit on items taken directly to equity |
7 |
16.8 |
4.8 |
|
Other comprehensive expense for the year net of tax |
|
(59.8) |
(23.6) |
|
Profit for the year |
|
231.3 |
99.0 |
|
Total comprehensive income for the year |
|
171.5 |
75.4 |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
Equity holders of the parent |
|
171.5 |
75.4 |
|
Non-controlling interests |
|
- |
- |
|
|
|
171.5 |
75.4 |
|
Financial statements for the year to 31 December 2012 Consolidated Balance Sheet
|
|
|
|
|
£ million |
Note |
2012 |
2011 |
|
Non-current assets |
|
|
|
|
Other intangible assets |
|
5.2 |
5.1 |
|
Property, plant and equipment |
|
7.1 |
5.0 |
|
Interests in joint ventures |
|
31.5 |
31.9 |
|
Trade and other receivables |
|
102.0 |
70.3 |
|
Deferred tax assets |
7 |
319.6 |
342.8 |
|
|
|
465.4 |
455.1 |
|
Current assets |
|
|
|
|
Inventories |
8 |
2,788.8 |
2,686.6 |
|
Trade and other receivables |
|
96.0 |
72.5 |
|
Tax receivables |
|
9.7 |
10.9 |
|
Cash and cash equivalents |
|
190.4 |
147.7 |
|
|
|
3,084.9 |
2,917.7 |
|
Total assets |
|
3,550.3 |
3,372.8 |
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
(772.6) |
(697.8) |
|
Tax payables |
|
(8.7) |
(70.4) |
|
Bank loans and overdrafts |
|
- |
- |
|
Provisions |
|
(84.4) |
(76.6) |
|
|
|
(865.7) |
(844.8) |
|
Net current assets |
|
2,219.2 |
2,072.9 |
|
Non-current liabilities |
|
|
|
|
Trade and other payables |
|
(190.8) |
(199.7) |
|
Debenture loans |
|
(149.4) |
(164.6) |
|
Bank and other loans |
|
(100.0) |
(100.0) |
|
Retirement benefit obligations |
9 |
(244.2) |
(210.2) |
|
Deferred tax liabilities |
|
- |
- |
|
Provisions |
|
(10.7) |
(18.5) |
|
|
|
(695.1) |
(693.0) |
|
Total liabilities |
|
(1,560.8) |
(1,537.8) |
|
|
|
|
|
|
Net assets |
|
1,989.5 |
1,835.0 |
|
|
|
|
|
|
Share capital |
|
288.0 |
287.7 |
|
Share premium account |
|
758.8 |
754.4 |
|
Own shares |
|
(15.9) |
(8.4) |
|
Other reserves |
|
44.6 |
46.7 |
|
Retained earnings |
|
912.6 |
753.1 |
|
Equity attributable to parent |
|
1,988.1 |
1,833.5 |
|
Non-controlling interests |
|
1.4 |
1.5 |
|
Total equity |
|
1,989.5 |
1,835.0 |
|
Financial statements for the year to 31 December 2012 Consolidated Statement of Changes in Equity
|
|
|
|||||||
|
For the year to 31 December 2012 |
Share |
Share |
Own |
Other |
Retained earnings |
Total |
|
||
|
Balance as at 1 January 2012 |
287.7 |
754.4 |
(8.4) |
46.7 |
753.1 |
1,833.5 |
|
||
|
Exchange differences on translation of foreign operations |
- |
- |
- |
0.2 |
- |
0.2 |
|
||
|
Actuarial loss on defined benefit pension schemes |
- |
- |
- |
- |
(76.8) |
(76.8) |
|
||
|
Deferred tax credit |
- |
- |
- |
- |
16.8 |
16.8 |
|
||
|
Other comprehensive income/(expense) for the year net of tax |
- |
- |
- |
0.2 |
(60.0) |
(59.8) |
|
||
|
Profit for the year |
- |
- |
- |
- |
231.3 |
231.3 |
|
||
|
Total comprehensive income for the year |
- |
- |
- |
0.2 |
171.3 |
171.5 |
|
||
|
New share capital subscribed |
0.3 |
4.4 |
- |
- |
- |
4.7 |
|
||
|
Own shares acquired |
- |
- |
(10.0) |
- |
- |
(10.0) |
|
||
|
Utilisation of own shares |
- |
- |
2.5 |
- |
- |
2.5 |
|
||
|
Share-based payment credit |
- |
- |
- |
- |
4.8 |
4.8 |
|
||
|
Cash cost of satisfying share options |
- |
- |
- |
- |
(0.7) |
(0.7) |
|
||
|
Transfer to retained earnings |
- |
- |
- |
(2.3) |
2.3 |
- |
|
||
|
Dividends approved and paid |
- |
- |
- |
- |
(18.2) |
(18.2) |
|
||
|
Equity attributable to parent |
288.0 |
758.8 |
(15.9) |
44.6 |
912.6 |
1,988.1 |
|
||
|
Non-controlling interests |
|
|
|
|
|
1.4 |
|
||
|
Total equity |
|
|
|
|
|
1,989.5 |
|
||
|
For the year to 31 December 2011 |
Share |
Share |
Own |
Other |
Retained earnings |
Total |
|
Balance as at 1 January 2011 |
287.7 |
753.7 |
(0.6) |
101.4 |
679.4 |
1,821.6 |
|
Exchange differences on translation of foreign operations |
- |
- |
- |
1.8 |
- |
1.8 |
|
Movement in fair value of hedging derivatives |
- |
- |
- |
3.0 |
- |
3.0 |
|
Actuarial gain on defined benefit pension schemes |
- |
- |
- |
- |
(33.2) |
(33.2) |
|
Deferred tax credit |
- |
- |
- |
- |
4.8 |
4.8 |
|
Other comprehensive income/(expense) for the year net of tax |
- |
- |
- |
4.8 |
(28.4) |
(23.6) |
|
Profit for the year |
- |
- |
- |
- |
99.0 |
99.0 |
|
Total comprehensive income for the year |
- |
- |
- |
4.8 |
70.6 |
75.4 |
|
New share capital subscribed |
- |
0.7 |
- |
- |
- |
0.7 |
|
Own shares acquired |
- |
- |
(10.0) |
- |
- |
(10.0) |
|
Utilisation of own shares |
- |
- |
2.2 |
- |
- |
2.2 |
|
Share-based payment credit |
- |
- |
- |
- |
3.9 |
3.9 |
|
Cash cost of satisfying share options |
- |
- |
- |
- |
(1.2) |
(1.2) |
|
Transfer to retained earnings |
- |
- |
- |
(0.4) |
0.4 |
- |
|
Recycling of translation reserve on disposal of subsidiaries |
- |
- |
- |
(59.1) |
- |
(59.1) |
|
Equity attributable to parent |
287.7 |
754.4 |
(8.4) |
46.7 |
753.1 |
1,833.5 |
|
Non-controlling interests |
|
|
|
|
- |
1.5 |
|
Total equity |
|
|
|
|
|
1,835.0 |
|
Financial statements for the year to 31 December 2012 Consolidated Cash Flow Statement
|
|
|
|
|
£ million |
|
2012 |
2011 |
|
Net cash from/(used in) operating activities |
|
78.4 |
(34.8) |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Interest received |
|
0.9 |
6.3 |
|
Dividends received from joint ventures |
|
0.4 |
10.9 |
|
Proceeds on disposal of property, plant and investments |
|
0.7 |
0.8 |
|
Purchases of property, plant and investments |
|
(3.5) |
(1.7) |
|
Purchases of software |
|
(0.8) |
(4.1) |
|
Amounts invested in joint ventures |
|
- |
- |
|
Amounts repaid from joint ventures |
|
2.1 |
2.5 |
|
Disposal of subsidiaries |
|
- |
562.3 |
|
Net cash (used in)/from investing activities |
|
(0.2) |
577.0 |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Proceeds from sale of own shares |
|
4.7 |
0.7 |
|
Cash cost of satisfying share options |
|
(0.7) |
(1.2) |
|
Purchase of own shares |
|
(7.7) |
(7.9) |
|
Repayment of debenture loans |
|
(15.2) |
(85.4) |
|
Increase in debenture loans |
|
- |
- |
|
Repayment of overdrafts, bank and other loans |
|
- |
(487.1) |
|
Dividends paid |
|
(18.2) |
- |
|
Net cash used in financing activities |
|
(37.1) |
(580.9) |
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
|
41.1 |
(38.7) |
|
Cash and cash equivalents at beginning of year |
|
147.7 |
183.9 |
|
Effect of foreign exchange rate changes |
|
1.6 |
2.5 |
|
Cash and cash equivalents at end of year |
|
190.4 |
147.7 |
Financial statements for the year to 31 December 2012
Notes to the Condensed Consolidated Financial Statement
1. Basis of preparation
The financial information set out herein does not constitute the Group's statutory accounts for the years ended 31 December 2012 and 2011, but is derived from those accounts. Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered following the Company's annual general meeting to be held on 24 April 2013. The external 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.
Amendment to IFRS 7 'Disclosure - Transfer of Financial Assets'. IFRS 7 has been amended such that enhanced disclosures are required for transactions involving the transfer of financial assets. The Group has not transferred any financial assets during the current year and accordingly no additional disclosures have been included in these financial statements.
Amendments to IAS 12 'Income taxes'. The amendment provides a practical solution to the application of these requirements in relation to investment property under IAS 40 'Investment Property', introducing a presumption that recovery of the carrying amount of an investment property will normally be through sale.
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 18March 2013, 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.
The Group continues to be profitable and has significantly reduced debt and has a strengthened balance sheet. The markets in which the Group operates in have remained stable, although certain risks remain. The Group has prepared detailed forecasts with certain sensitivities, taking into account the principal risks.
Based on these forecasts, the Directors are satisfied that the Group will be able to continue to operate within the available financing facilities for at least the next 12 months. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenue and expenses during the reporting period. Actual results could vary from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
2. Operating segments
IFRS 8 'Operating segments' requires information to be presented in the same basis as it is reviewed internally. The Group's Board of Directors view the businesses on a geographic basis when making strategic decisions for the Group and as such the Group is organised into two operating divisions - Housing United Kingdom and Housing Spain.
Previously the Group reported a Corporate segment which has been consolidated into the Housing United Kingdom segment. The 2011 results and position have been restated to reflect the two segments.
The results of the North American business have been presented as discontinued operations in 2011, in accordance with IFRS 5 'Non-current assets held for sale and discontinued operations'.
Segment information about these businesses is presented below:
|
For the year to 31 December 2012 |
Housing |
Housing |
Consolidated |
|
Revenue: |
|
|
|
|
External sales |
1,987.0 |
32.0 |
2,019.0 |
|
|
|
|
|
|
Result: |
|
|
|
|
Profit on ordinary activities before joint ventures, finance costs and exceptional items |
226.4 |
1.3 |
227.7 |
|
Share of results of joint ventures |
2.4 |
- |
2.4 |
|
Profit on ordinary activities before finance costs, exceptional items and after share of results of joint ventures |
228.8 |
1.3 |
230.1 |
|
Exceptional items |
22.4 |
- |
22.4 |
|
Profit on ordinary activities before finance costs, after share of results |
251.2 |
1.3 |
252.5 |
|
Finance costs, net (including exceptional finance costs) |
|
|
(44.8) |
|
Profit on ordinary activities before taxation |
|
|
207.7 |
|
Taxation (including exceptional tax) |
|
|
23.6 |
|
Profit for the year - total Group |
|
|
231.3 |
|
At 31 December 2012 |
Housing |
Housing |
Consolidated |
|
Assets and liabilities: |
|
|
|
|
Segment operating assets |
2,922.6 |
76.5 |
2,999.1 |
|
Joint ventures |
31.3 |
0.2 |
31.5 |
|
Segment operating liabilities |
(1,286.7) |
(16.0) |
(1,302.7) |
|
Continuing Group net operating assets |
1,667.2 |
60.7 |
1,727.9 |
|
Net current taxation |
|
|
1.0 |
|
Net deferred taxation |
|
|
319.6 |
|
Net debt |
|
|
(59.0) |
|
Net assets |
|
|
1,989.5 |
|
For the year to 31 December 2011 (restated) |
Housing |
Housing |
Consolidated |
|
Revenue: |
|
|
|
|
External sales |
1,779.4 |
28.6 |
1,808.0 |
|
|
|
|
|
|
Result: |
|
|
|
|
Profit on ordinary activities before joint ventures, finance costs and exceptional items |
158.1 |
0.2 |
158.3 |
|
Share of results of joint ventures |
1.2 |
- |
1.2 |
|
Profit on ordinary activities before finance costs, exceptional items |
159.3 |
0.2 |
159.5 |
|
Exceptional items |
(5.8) |
- |
(5.8) |
|
Profit on ordinary activities before finance costs, after share of results |
153.5 |
0.2 |
153.7 |
|
Finance costs, net (including exceptional finance costs) |
|
|
(75.1) |
|
Loss on ordinary activities before taxation |
|
|
78.6 |
|
Taxation (including exceptional tax) |
|
|
(22.7) |
|
Result from continuing operations: |
|
|
55.9 |
|
|
|
|
|
|
Result from discontinued operations: |
|
|
|
|
Profit for the year from discontinued operations |
|
|
43.1 |
|
Profit for the year - total Group |
|
|
99.0 |
|
At 31 December 2011 (restated) |
Housing |
Housing |
Consolidated |
|
Assets and liabilities - continuing operations: |
|
|
|
|
Segment operating assets |
2,763.4 |
76.1 |
2,839.5 |
|
Joint ventures |
31.7 |
0.2 |
31.9 |
|
Segment operating liabilities |
(1,187.9) |
(14.9) |
(1,202.8) |
|
Net operating assets |
1,607.2 |
61.4 |
1,668.6 |
|
|
|
|
|
|
Net current taxation |
|
|
(59.5) |
|
Net deferred taxation |
|
|
342.8 |
|
Net debt |
|
|
(116.9) |
|
Net assets |
|
|
1,835.0 |
3. Net operating expenses and profit on ordinary activities before finance costs
|
£ million |
2012 |
2011 |
|
Administration expenses |
138.1 |
136.4 |
|
Net other income |
(9.5) |
(7.0) |
|
Exceptional items |
- |
5.8 |
|
|
128.6 |
135.2 |
Net other income includes profits on the sale of property, plant and equipment, VAT refunds and ground rents receivable.
|
Exceptional items: |
2012 |
2011 |
|
Refinancing expenses |
- |
- |
|
Pension enhanced transfer value offer |
- |
5.8 |
|
Exceptional items |
- |
5.8 |
Market conditions in the United Kingdom continue to remain stable, however mortgage finance availability and unemployment continue to impact wider economic confidence. The Spanish market has not materially changed in the year and continues to be challenging. The Group has completed its assessment on the carrying value of inventory which has not resulted in further inventory write-downs (2011: £nil million) to the lower of cost and net realisable value, nor any reversals of previous write-downs (2011: £nil million) as there is no clear evidence of a sustained change in the economic circumstances at the balance sheet date.
The prior year exceptional charge of £5.8 million was for the enhanced transfer value exercise for the George Wimpey Staff Pension Scheme.
|
Profit on ordinary activities before financing costs for continuing operations has been arrived at after charging: |
2012 |
2011 |
|
Cost of inventories recognised as expense in cost of sales, before write-downs of inventories |
1,589.9 |
1,454.4 |
|
Depreciation - plant and equipment |
1.2 |
0.8 |
|
Minimum lease payments under operating leases recognised in income for the year |
6.4 |
6.6 |
4. Finance costs
|
Finance costs from continuing operations are analysed: |
2012 |
2011 |
|
Interest on overdrafts, bank and other loans |
13.6 |
29.1 |
|
Interest on debenture loans |
18.1 |
23.2 |
|
Movement on interest rate derivatives and foreign exchange movements |
0.3 |
(1.0) |
|
|
32.0 |
51.3 |
|
Unwinding of discount on land creditors and other payables |
4.1 |
7.9 |
|
Notional net interest on pension liability (Note 9) |
9.9 |
14.1 |
|
|
46.0 |
73.3 |
|
Exceptional finance items: |
|
|
|
Tax liability interest credit |
(22.4) |
- |
|
Senior Note 10.375% due 2015 on repurchase |
- |
5.5 |
|
|
23.6 |
78.8 |
In 2012 interest on debenture loans includes a £1.7 million premium paid on the repurchase of £15.2 million of Senior Notes 10.375% due 2015. In the prior year the Group reported an exceptional charge of £5.5 million premium on repurchase of £85.4 million of Senior Notes 10.375% due 2015.
In the year the Group released £22.4 million of accrued interest relating to a historic potential tax liability for which favourable resolution was reached.
5. Tax
|
Tax credited/(charged) in the income statement for continuing operations is analysed as follows: |
2012 |
2011 |
|
|
Current tax: |
|
|
|
|
UK corporation tax: |
Current year |
- |
- |
|
|
Prior years |
63.6 |
6.0 |
|
Foreign tax: |
Current year |
- |
- |
|
|
Prior years |
- |
(0.2) |
|
|
|
63.6 |
5.8 |
|
Deferred tax: |
|
|
|
|
UK: |
Current year |
(39.7) |
(28.5) |
|
|
Prior year |
(0.3) |
- |
|
|
|
(40.0) |
(28.5) |
|
|
|
23.6 |
(22.7) |
Corporation tax is calculated at 24.5% (2011: 26.5%) of the estimated assessable profit for the year in the UK. Taxation outside the UK is calculated at the rates prevailing in the respective jurisdictions.
The tax charge for the year includes a credit in respect of exceptional items of £59.6 million (2011: £1.5 million credit) in respect of UK tax. The 2012 exceptional tax credit of £59.6 million relates to the favourable resolution of a historic potential tax liability. No tax charge has arisen on the associated exceptional interest release due to the utilisation of unrecognised losses.
The credit for the year includes a charge of £21.1 million (2011: £22.2 million) relating to the impact on the deferred tax asset of the 2% reduction in UK corporation tax from 25% to 23% (2011: 27% to 25%).
|
The credit/(charge) for the year can be reconciled to the profit per the income statement as follows: |
2012 |
2011 |
|
Profit before tax |
207.7 |
78.6 |
|
|
|
|
|
Tax at the UK corporation tax rate of 24.5% (2011: 26.5%) |
(50.9) |
(20.8) |
|
Net over provision in respect of prior years |
63.3 |
5.8 |
|
Tax effect of expenses that are not deductible in determining taxable profit |
(1.4) |
(0.3) |
|
Unrecognised temporary differences utilised |
17.2 |
- |
|
Losses not recognised |
- |
(7.3) |
|
Recognition of deferred tax asset relating to trading losses |
16.5 |
22.1 |
|
Impact of 2% rate reduction on deferred tax |
(21.1) |
(22.2) |
|
Tax credit/(charge) for the year |
23.6 |
(22.7) |
6. Earnings per share
|
|
2012 |
2011 |
|
Basic earnings per share |
7.3p |
3.1p |
|
Diluted earnings per share |
7.1p |
3.0p |
|
|
|
|
|
Basic earnings per share - continuing operations |
7.3p |
1.8p |
|
Diluted earnings per share - continuing operations |
7.1p |
1.7p |
|
|
|
|
|
Basic earnings per share - discontinued operations |
- |
1.4p |
|
Diluted earnings per share - discontinued operations |
- |
1.3p |
|
|
|
|
|
Adjusted basic earnings per share - continuing operations |
4.7p |
2.1p |
|
Adjusted diluted earnings per share - continuing operations |
4.6p |
2.0p |
|
|
|
|
|
Weighted average number of shares for basic/adjusted earnings per share - million |
3,186.4 |
3,190.1 |
|
Weighted average number of shares for diluted basic/adjusted earnings per share - million |
3,262.4 |
3,282.3 |
Adjusted basic and adjusted diluted earnings per share, which exclude the impact of exceptional items and any 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 |
2012 |
2011 |
|
Earnings from continuing operations for basic profit per share and diluted earnings per share |
231.3 |
55.9 |
|
Adjust for exceptional items (Note 3 and 4) |
(22.4) |
11.3 |
|
Adjust for exceptional tax items (Note 5) |
(59.6) |
(1.5) |
|
Earnings from continuing operations for adjusted basic and adjusted diluted earnings per share |
149.3 |
65.7 |
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 |
Share- based payments |
Capital Allowances |
Losses |
Retirement benefit obligations |
Other |
Total |
|
At 1 January 2011 |
- |
- |
300.0 |
68.3 |
3.3 |
371.6 |
|
Credit/(charge) to income |
- |
- |
(10.2) |
(18.6) |
0.3 |
(28.5) |
|
Credit to equity |
- |
- |
- |
4.8 |
- |
4.8 |
|
Disposal of subsidiaries |
- |
- |
- |
(1.8) |
(3.3) |
(5.1) |
|
At 31 December 2011 |
- |
- |
289.8 |
52.7 |
0.3 |
342.8 |
|
Credit/(charge) to income |
2.4 |
8.1 |
(41.8) |
(10.8) |
2.1 |
(40.0) |
|
Credit to equity |
2.5 |
- |
- |
14.3 |
- |
16.8 |
|
At 31 December 2012 |
4.9 |
8.1 |
248.0 |
56.2 |
2.4 |
319.6 |
Closing deferred tax on UK temporary differences has been calculated at the enacted rate of 23% (2011: 25%). The effect of the reduction in the UK corporation tax rate from 25% to 23% is a reduction in the net deferred tax asset at the end of 2012 of an amount of £26.0 million. Of this £26.0 million, £4.9 million has been charged directly to the Statement of Comprehensive Income.
The proposed reduction in the main rate of corporation tax by 2% by 2014 is expected to be enacted in Finance Act 2013. Based on the level of deferred tax recognised at the balance sheet date a charge of £13.9 million for each 1% reduction would arise.
The net deferred tax balance is analysed into assets and liabilities as follows:
|
£ million |
2012 |
2011 |
|
Deferred tax assets |
319.6 |
342.8 |
|
Deferred tax liabilities |
- |
- |
|
|
319.6 |
342.8 |
The Group has not recognised temporary differences relating to tax losses carried forward and other temporary differences amounting to £148.3 million (2011: £270.3 million) in the UK and £93.8 million (2011: £82.2 million) in Spain. The UK losses have not been recognised as they are predominantly non trading in nature and sufficient uncertainty exists as to their utilisation. The losses in Spain have not been recognised due to uncertainty of sufficient taxable profits existing against which to utilise the losses.
At the balance sheet date, the Group has unused UK capital losses of £252.8 million (2011: £252.4 million), all of which are agreed as available for offset against future capital profits. No deferred tax asset has been recognised in respect of the remaining capital losses at 31 December 2012 because the Group does not believe that it is probable that these capital losses will be utilised in the foreseeable future.
8. Inventories
|
£ million |
2012 |
2011 |
|
Raw materials and consumables |
0.8 |
1.2 |
|
Finished goods and goods for resale |
29.2 |
17.9 |
|
Residential developments: |
|
|
|
Land |
2,051.0 |
2,018.9 |
|
Development and construction costs |
704.9 |
643.8 |
|
Commercial, industrial and mixed development properties |
2.9 |
4.8 |
|
|
2,788.8 |
2,686.6 |
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.
In the year 46% (2011: 63%) of the Group's completions in the UK were from sites that had been previously impaired. As at 31 December 2012, 26% (2011: 39%) of our UK short term owned and controlled land is impaired. Only 120 plots (2011: 89) were sold in Spain that had previously been impaired.
The gross profit for the year includes £85.1 million (2011: £99.6 million) of positive contribution, on completions from sites with previously impaired inventory. The positive contribution is the estimation difference between the realised value on completions compared to the value assumed in the net realisable value review. These amounts are stated before the allocation of overheads that are excluded from the Group's net realisable value exercise.
This is due to the actual selling prices and or costs on these completions being favourable to the estimates and market assumptions used in the net realisable value review. This estimation difference is due to a combination of actions taken by the Group including cost reductions through replans, the implementation of standard house types and slightly higher selling prices.
Whilst market conditions have stabilised in the United Kingdom, the Spanish market has not materially changed in the year and continues to be challenging. The Group has not recorded any additional write-downs or reversals of previous write-downs to net realisable value as there is no clear evidence of a sustained change in the housing market and wider economic circumstances at the balance sheet date.
At the balance sheet date the Group had inventory that had been written down to net realisable value of £834.4 million (2011: £1,129.2 million).
9. Retirement benefit schemes
Retirement benefit obligation comprises defined benefit pension liability of £242.5 million (2011: £208.2 million) and post-retirement healthcare liability of £1.7 million (2011: £2.0 million). The Group operates defined benefit and defined contribution pension schemes. In the UK, the Taylor Woodrow Group Pension and Life Assurance Fund (TWGP&LAF) and the George Wimpey Staff Pension Scheme (GWSPS) are funded defined benefit schemes and are managed by boards of Trustees. The TWGP&LAF 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 all new and existing monthly paid employees. Future revaluation of deferred member benefits in the UK defined benefit schemes will be based on the Consumer Price Index in line with scheme rules. Pensioner increases will continue to be based on Retail Price Index.
The pension scheme assets of the Group's defined benefit pension schemes, TWGP&LAF and GWSPS, are held in separate trustee-administered funds to meet long term pension liabilities to past and present employees. The Trustees of the schemes are required to act in the best interests of the schemes' beneficiaries. The appointment of trustees is determined by each scheme's trust documentation. The Group has a policy that at least one-third of all trustees should be nominated by members of the scheme. The Trustees have agreed to hold Joint Trustee Board meetings to manage the schemes jointly, and where appropriate, they have also implemented a Joint Investment Sub Committee to manage the investment of the combined defined benefit scheme assets. The Group and the Trustees have undertaken a review of the schemes' investment strategy, implementation of the investment changes started during 2011 and monitoring of these changes is ongoing.
The most recent formal triennial valuations of the TWGP&LAF and the GWSPS were carried out as at 31 March 2010. The Group agreed revised funding schedules under which the Group will make annual funding contributions of £22.0 million per annum in respect of the TWGP&LAF over 10 years from the valuation date and £24.0 million per annum in respect of the GWSPS over 10 years from the valuation date. The projected unit method was used in all valuations and assets were taken into account using market values.
The Company has an agreement in principle with the Trustees to merge GWSPS and TWGP&LAF into a new scheme, the Taylor Wimpey Pension Scheme, and members have been informed of the merger that is expected to complete in first half 2013 subject to regulatory guidance. At the same time we are introducing a £100 million Pension Funding Partnership utilising show homes in a sale and leaseback structure.
This proposal will simplify scheme management, reduce administration costs by circa £0.8 million per annum and provide a way of managing future deficit repair contributions. The new Taylor Wimpey Pension Scheme will benefit from a contingent Pension Funding Partnership structure, backed principally by show homes, should the Group be unable to meet the cash payments under the funding agreement.
Contributions of £7.1 million (2011: £6.6 million) were charged to income in respect of defined contribution schemes.
The results of the March 2010 valuations of the Group's pension schemes have been updated to 31 December 2012 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 |
|
|
|
2012 |
2011 |
|
As at 31 December |
|
|
|
Discount rate for scheme liabilities |
4.30% |
4.90% |
|
Expected return on scheme assets |
5.13%-5.70% |
5.04%-5.43% |
|
General pay inflation |
n/a |
n/a |
|
Deferred pension increases |
1.80% |
1.95% |
|
Pension increases |
1.90%-3.50% |
2.00%-3.55% |
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.
|
£ million |
2012 |
2011 |
|
Amount charged against income: |
|
|
|
Settlement loss(a) |
- |
(4.0) |
|
Operating loss |
- |
(4.0) |
|
Expected return on scheme assets |
79.0 |
82.3 |
|
Interest cost on scheme liabilities |
(88.9) |
(96.4) |
|
Finance charges |
(9.9) |
(14.1) |
|
Total charge |
(9.9) |
(18.1) |
(a) The settlement for 2011 is in relation to an enhanced transfer value exercise.
The actual return on scheme assets was a gain of £161.5 million (2011: £96.1 million).
|
£ million |
2012 |
2011 |
|
Actuarial gains in the Statement of Comprehensive Income: |
|
|
|
Difference between actual and expected return on scheme assets |
82.5 |
13.8 |
|
Experience losses arising on scheme liabilities |
(2.9) |
- |
|
Changes in assumptions |
(156.4) |
(47.0) |
|
Total loss recognised in the Statement of Comprehensive Income |
(76.8) |
(33.2) |
The cumulative amount of actuarial losses recognised in the Statement of Comprehensive Income is £278.7 million loss (2011: £201.9 million loss).
|
£ million |
2012 |
2011 |
|
Movement in present value of defined benefit obligations |
|
|
|
1 January |
1,888.8 |
1,852.6 |
|
Disposal of subsidiary |
- |
(24.2) |
|
Curtailment gain |
- |
1.8 |
|
Benefits paid and expenses |
(124.0) |
(84.8) |
|
Interest cost |
88.9 |
96.4 |
|
Actuarial losses |
159.3 |
47.0 |
|
31 December |
2,013.0 |
1,888.8 |
|
£ million |
2012 |
2011 |
|
Movement in fair value of scheme assets |
|
|
|
1 January |
1,680.6 |
1,604.1 |
|
Disposal of subsidiary |
- |
(19.7) |
|
Expected return on scheme assets and expenses |
79.0 |
82.3 |
|
Contributions |
52.4 |
84.9 |
|
Benefits paid |
(124.0) |
(84.8) |
|
Actuarial gains |
82.5 |
13.8 |
|
31 December |
1,770.5 |
1,680.6 |
The estimated amounts of contributions expected to be paid to the TWGP&LAF during 2013 are £22.0 million and to the GWSPS are £24.0 million, in respect of deficit repair contributions, and £2.7 million in respect of expenses and PPF levies and are expected to be paid post the merger, as well as a return on the Pension Funding Partnership structure, until the new schemes initial valuation, that is expected to be as at 31 December 2013.
The Group liability is the difference between the scheme liabilities and the scheme assets. Changes in the assumptions may occur at the same time as changes in the market value of scheme assets. These may or may not offset the change in assumptions. For example, a fall in interest rates will increase the scheme liability, but may also trigger an offsetting increase in the market value of the assets so there is no net effect on the Group liability.
|
Assumption |
Change in assumption |
Impact on scheme liabilities |
|
Discount rate |
Increase by 0.1% p.a. |
Decrease by £34.2m |
|
Rate of inflation |
Increase by 0.1% p.a. |
Increase by £29.7m |
|
Rate of mortality |
Members assumed to live 1 year longer |
Increase by £69.2m |
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 post-retirement liability also includes £1.7 million at 31 December 2012 (2011: £2.0 million) in respect of continuing post-retirement healthcare insurance premiums for retired long-service employees. The liability is based upon the actuarial assessment of the remaining cost by a qualified actuary on a net present value basis at 31 December 2008.
10. Notes to the cash flow statement
|
£ million |
2012 |
2011 |
|
Profit on ordinary activities before finance costs |
|
|
|
Continuing operations |
227.7 |
152.5 |
|
Discontinued operations |
- |
34.6 |
|
Adjustments for: |
|
|
|
Depreciation of buildings, plant and equipment |
1.3 |
1.7 |
|
Amortisation of software development |
0.7 |
- |
|
Pensions curtailment |
- |
1.8 |
|
Share-based payment charge |
4.8 |
3.9 |
|
Profit on disposal of property and plant |
(0.1) |
(0.2) |
|
Decrease in provisions |
- |
(11.9) |
|
Operating cash flows before movements in working capital |
234.4 |
182.4 |
|
Increase in inventories |
(104.2) |
(7.1) |
|
Increase in receivables |
(50.7) |
(12.9) |
|
Increase/(decrease) in payables |
81.6 |
(38.8) |
|
Pension contributions in excess of charge |
(52.4) |
(84.7) |
|
Cash generated by operations |
108.7 |
38.9 |
|
Income taxes received/(paid) |
3.0 |
(16.4) |
|
Interest paid |
(33.3) |
(57.3) |
|
Net cash generated from/(used in) operating activities |
78.4 |
(34.8) |
Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short term highly liquid investments with an original maturity of three months or less.
Movement in net debt
|
£ million |
Cash and cash |
Overdrafts, banks and |
Debenture loans |
Total |
|
Balance 1 January 2011 |
183.9 |
(588.4) |
(250.0) |
(654.5) |
|
Cash flow |
(38.7) |
487.1 |
85.4 |
533.8 |
|
Foreign exchange |
2.5 |
1.3 |
- |
3.8 |
|
Balance 31 December 2011 |
147.7 |
(100.0) |
(164.6) |
(116.9) |
|
Cash flow |
41.1 |
- |
15.2 |
56.3 |
|
Foreign exchange |
1.6 |
- |
- |
1.6 |
|
Balance 31 December 2012 |
190.4 |
(100.0) |
(149.4) |
(59.0) |
On 13 July 2011 the Group disposed of its North American business. At the point of disposal the business had cash and cash equivalents of £199.3 million and overdrafts, bank and other loans of £46.2 million.
11. Dividends
|
£ million |
2012 |
2011 |
|
Amounts recognised as distributions to equity holders |
|
|
|
Paid |
|
|
|
2011 Final: 0.38p per 1p share |
12.1 |
- |
|
2012 Interim: 0.19p per 1p share |
6.1 |
- |
|
|
18.2 |
- |
|
Proposed |
|
|
|
2011 Final: 0.38p per 1p share |
- |
12.1 |
|
2012 Interim: 0.19p per 1p share |
6.1 |
- |
|
2012 Final: 0.43p per 1p share |
13.9 |
- |
|
|
20.0 |
12.1 |
The Directors are recommending a final dividend for the year ended 31 December 2012 of 0.43 pence subject to shareholder approval at the Annual General Meeting, with a resultant total dividend of £13.9 million (2011: £12.1 million).
In accordance with IAS 10 'Events after the balance sheet date' the proposed dividend has not been accrued as a liability as at 31 December 2012. The dividend will be paid on 21 May 2013 to all shareholders registered at the close of business on 19 April 2013.
This information is provided by RNS
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