WATES GROUP LIMITED Annual Accounts & Reports 2020 2 Cover photo: Maria Joyce - Regional Commercial Director, Construction Group Akbar Khan - Assistant Planner, Construction Group ** stated on page 86includesshare oftaxation ofjointventures andassociates. * Inclusive ofshare ofjointventures andassociates (excludes share oftaxation ofjoint ventures andassociates). WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 (construction sites) hours worked 26.8 million in focus 2020 94% (at December 2020) 3,578 across 2020 site efficiency average average people

Statutory PBT** Net assets £1.45bn Strategic report onpage 66. More information ontheGroup’s alternative performance measures can befound inthe under construction under construction 5,449 c.500,000 in social housingsector

£1.7m (underlying: £13.1m) (underlying: £26.1m) £14.7m 323 (at December 2020) 713 Facilities managed in sites under construction commercial buildings new homes Profit (PBT*) £142.0m Turnover* EBITDA* £0.8m homes maintained homesmaintained

start ofpandemic– start Value ofwork won since Net cash (52% increase) up Forward order book Cash

13.5% £215.9m £161.6m to £6.6bn

£1.8bn

2016 to 9in2020 injuries over 5years from 18in 9 7 9 50% Low numberofincidents: RIDDOR AFRdropped Accident Incidence Rate safety performance – Leading health and 67% 2016 to 0.038 in2020 over 5years from 0.060in industry average Lost timeinjuries

High potential incidents RIDDORS

reduction inRIDDOR

below construction £106.9m £7.6m tax contribution social enterprises value generated £15.2m 56% since 2019 energy (kWh)

saving in saving in

spent with spent with

37% social social

total total

Group five-year summary Accounts andnotes to theaccounts Independent auditors’ report in respect ofthefinancial statements Statement ofdirectors’ responsibilities Directors’ report Corporate governance report Strategic report Directors andadvisors Governance andaccounts Wates Executive Committee Wates Group Board Wates Family Enterprise Trust Streamlined energy andcarbon report on Climate-related Financial Disclosures Commitment andprogress onthe Task Force reportSustainability Wates Developments Wates Residential Needspace? Wates Smartspace Wates Facilities Management Wates LivingSpace Wates Property Services SES EngineeringServices Wates Construction People COVID-19 andtheGroup’s response Chief Executive’s Review Chairman’s statement 2020 infocus Contents

distancing andother requirements, andare indicated withthissymbol. These photographs were taken before theimposition ofCOVID-19 social pictured withinclose proximity ofanother person orwithoutface coverings. There are anumberofimages throughout thisreport where colleagues are

2020 infocus Pa 60 86 66 84 58 117 28 65 56 44 26 ge 38 54 36 8 2 34 7 6 3 81 18 16 41 8 6 6 4 4 2 2 3 3 3 Chairman’s statement

Chairman’s statement

The whole built environment sector advantage of opportunities in the market. I am grateful to all my colleagues for their In one of the most challenging years in our 124-year history, responded positively to the pandemic and All of which will require our focus and hard work and commitment. They have was able to continue meeting the country’s determination going forward. not only coped with adversity, but shone. I am pleased to report that the Wates Group’s performance needs throughout 2020. The sector’s I am impressed with their continued In recent years, owing to the Brexit development of special Site Operating energy in supporting charitable causes decision and the lengthy withdrawal in 2020 was strong. The COVID-19 pandemic created Procedures enabled construction sites to in the community. negotiations, we have had to navigate remain open whilst adhering to strict public a turbulent political environment, and Our staff’s efforts have been rewarded difficulties for everyone, with disruption to nearly every health guidelines. Working in a collaborative whilst much of the uncertainty is now with some major new business wins, such spirit, customers, contractors and the behind us, we will need to continue to as the £600m regeneration work in Harrow, supply chain pushed forward to deliver aspect of life, but the flexibility and professionalism of make changes to adapt to no longer Northwest London. Our appointment to increased capacity for the NHS, including being a member of the European Union. the Government’s £3bn Modern Methods construction of the Nightingale hospitals. our teams stood us in good stead, and we are proud of of Construction framework was a testament Vital infrastructure work on energy, road to our teams’ ability to grasp the nettle and rail projects continued, supporting the the remarkable performance they delivered. I am grateful to our of change and find new ways of working. economy in the short and the long term. staff for their hard In closing, I would like to thank the Board I am proud that the Wates Group played and Executive Committee. There were no its own part in the pandemic response, work and commitment. changes to the Board in 2020, but to take delivering renovation work that increased They have not only advantage of a new business environment the capacity of The Royal London Hospital. following the spring lockdown and an This work required huge changes to coped with adversity, explicit commitment from the government normal working patterns, including 24-hour but shone. to ‘Build, Build, Build’, the Executive site operations. And in implementing Committee was restructured in July, and these changes, we have learned so much they have responded in their new roles about how we can make best use of our Such change is nothing new. The Wates with great energy, commitment and skill. offices, IT and supply chain relationships. business has faced some big challenges Notwithstanding the difficulties of 2020 The future holds more change for the in its history – from World Wars to and continued challenges posed by the sector and the Wates Group alike. We economic crises. Through all those coronavirus, I am confident of our must continue to look for better ways challenges, we have always stayed true to prospects. of working. This means doing more work our purpose and the family business ethos offsite, being more collaborative with – that business done well is a force for our customers and supply chain, and good in society. Our Guiding Framework reducing the carbon footprint of our proved its value in testing times, work and the buildings we create. We translating our long-held Wates Family urgently need to improve the diversity principles into the behaviours we are of our workforce at every level, and our determined to demonstrate. ‘We care’, inclusion strategy shows us the way. We ‘We are fair’ and ‘We look for a better Sir James Wates CBE will need to continue to be flexible in way’ are not just slogans; they guide Chairman how we structure ourselves and where decisions in the context of a world in we focus our resources to take which companies succeed only if they serve as progressive, sustainable and trusted members of an ecosystem.

4 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 5 Chief Executive’s review

Diversity and inclusion In 2019 our diversity and inclusion strategy signalled our intention to lead the industry in making our sector fairer and more representative of society. During 2020, we began implementing it. In March we announced industry-leading family leave policies. In July, having Chief reflected on the social crisis that followed George Floyd’s death, we initiated our anti-racism plan, which expresses our commitment to make Wates an actively and consistently anti-racist organisation Executive’s and our zero-tolerance approach to racist behaviour of any sort. The plan established The industry responded enthusiastically interact with colleagues virtually. During listening groups, reciprocal mentoring to the Prime Minister’s rallying cry to the second half of the year, I hosted arrangements and race and ethnicity Review ‘Build Back Better’. During 2020, almost all virtual business briefings for thousands of employee networks. In October, we major contractors worked together in a colleagues. Feedback was overwhelmingly celebrated our first ever ‘Inclusion Month’ spirit of collaboration and supportiveness, positive, with most delegates being content with a wide range of activities and learning including through industry forums such as to accept the loss of physical networking opportunities for everyone in the business. Build UK and the Construction Leadership opportunities in exchange for the Council (CLC). The CLC’s new Site increased convenience and travel time Collectively, these activities revealed some uncomfortable truths about the way our These Annual Accounts and Reports Testing the Guiding Framework The Group’s commitment to housing was Operating Procedures (SOPs) gave hugely savings of a virtual event. valuable confidence to the public and society and parts of our industry operate. celebrate and record the remarkable reflected in the appointment of Helen So, we have learned that working flexibly We began 2020 with enormous optimism, the people working on our sites and They encouraged many of my colleagues efforts and achievements of everyone Bunch as Executive Managing Director of has great benefits. We have also learned having just achieved the highest level of contracts that work could continue to be and me to learn much more about racism. at Wates in a year like no other. They Wates Residential, which became a that it has its limits. There is no substitute profits the Group had generated for almost undertaken safely whilst observing social We will continue our journey to become attest to the incredible resilience, standalone division. Wates Smartspace for human contact and face-to-face a decade and a record order book. Within distancing. Wates’ swift and effective a truly inclusive, increasingly diverse and adaptability and togetherness of this joined the Wates Property Services division, collaboration. We have seen how fear, three months, the pandemic had left us implementation of the SOPs minimised actively anti-racist organisation in 2021, 124-year-old Group; to the long-term with the aims of offering a greater range isolation and stress can take its toll on facing a battle for survival. The habits and the delivery time that was lost as a result becoming a better, more effective commitment of our shareholders; and of services to our public sector customers colleagues’ health and wellbeing. We need norms of our lives fell away in just a of the pandemic, to the delight of many business with each step we take. to the trust our customers, partners and creating valuable cost efficiencies. to adopt the best of what we have learned handful of days. of our customers. and suppliers continue to place in us. Wates Integrated Construction Services during 2020 as we push for improvements I’m full of respect for what each of my Our response was shaped by our Guiding was created to accelerate the development in productivity, whilst also finding new Sailing in a storm that isn’t over colleagues did to keep our business of our distinctive capabilities in design, Framework, which articulates our purpose On the cusp of a productivity ways to attend to the needs and Over the last 12 months, Wates has operating successfully in 2020. Our offsite manufacturing and the self-delivery and our goals of making our business more preferences of our colleagues. adapted to new ways of working, health and safety performance was of key trades. revolution sustainable, progressive and trusted. The restructured our business to ensure its excellent. We increased the financial The introduction of the SOPs and the Guiding Framework also sets out three Despite the pandemic, the Group long-term sustainability and became a strength of the business. We acquired requirement for most non-site staff Changing our habits for a target behaviours: ‘We care’, ‘We are fair’ delivered another excellent health and leaner, fitter organisation. We improved new skills, discovered new flexibilities to work from home brought about an and ‘We look for a better way’. Our safety performance1 in 2020. This success sustainable future productivity and implemented flexible and made important changes that will almost instant and fundamental change commitment to each of these behaviours strengthens our belief that every Wates The built environment sector has a huge working patterns that might otherwise make our business more sustainable, in our ways of working. The Group’s was tested as we took the tough decisions workplace can and must be a zero-harm responsibility to address climate change. have taken a decade to introduce. We diverse, anti-racist and productive in response to these changes demonstrated necessary to safeguard the Group and the environment. We will continue to strive With this responsibility comes significant took radical steps to be more inclusive the future. that it was possible for us to do more interests of our customers. towards this goal in 2021. opportunity. Through initiatives such as and diverse and we have generated more with less and that flexible working could By encouraging our sector to keep the development of our ‘Adapt 3’ schools social value in the communities we serve The early implementation of the furlough The financial strength of our business be managed efficiently and effectively. operating throughout the pandemic, solution and the creation of Wates than ever before. scheme and of pay reductions (for April, increased during the year. Turnover for the Government highlighted more The social distancing requirements on Integrated Construction Services, the May and June) was followed a few weeks the year was £1.45bn* (£185m or 11.3% lower The Group weathered the storm of clearly than ever before that what we sites resulted in a 42% drop in the Group is committed to offering more later by a redundancy programme. These than in 2019) and the Group delivered 2020 brilliantly and we begin 2021 do matters: creating and looking after workforce at the end of the first quarter sustainable methods of construction measures protected the business and it is pre-tax profits of £1.7m*. Year-end cash confident that we can prosper, despite the fabric of the communities in which of 2020. However, the corresponding and more efficient buildings and services a source of real satisfaction that we have of £215.9m was £73.8m up on last year. the difficulties with which the UK started we live; and keeping the economy reduction in productivity was less than to our customers. been able already to reimburse the pay The Group secured £2.4bn of new work, the year, and thrive as never before once going by providing jobs and income half this figure (in part because of our reductions for all of our colleagues who creating a record year-end order book In January 2020 the Group launched its those difficulties are behind us. for millions of people. That we played increased use of offsite manufacturing). worked through the crisis and are still of £6.6bn. As a result, primarily, of Wates five-year environmental strategy, which our part in justifying the faith the Across the Group, productivity never employed by the business. Construction and Wates Residential’s established our ambition to generate Government placed in the sector is a dipped below 50% of pre-pandemic levels work-winning efforts, the Group placed zero carbon and zero waste from our source of real pride for all of us at and by the end of December, parts of the fifth in a leading industry ranking2 of total operations. In November, we launched Wates. We’re looking forward to Continued resilience Group were achieving productivity levels work won during 2020 (and second if the Wates Energy Services, offering zero- building on the achievements and in excess of 100%. As productivity improved and the public civil engineering contracts for which the carbon retrofitting services to customers lessons of 2020 as we target the health situation stabilised in the summer, Group doesn’t compete are excluded): For much of 2020, it was difficult to meet in the social housing sector. As our exciting opportunities that lie ahead we simplified the structure of the Group, encouraging evidence of the strength with customers and colleagues across the ‘Streamlined energy carbon report’ (on in 2021 and beyond. intensifying our focus on the key sectors of our proposition and of the trust our country. I have missed these meetings and page 56) suggests, 81% of all our electricity David Allen in which we operate: construction, customers continue to place in us. the human connections they promote now comes from renewable sources. Chief Executive property services, public sector housing very much. It has, however, been great to and private sector development. * Inclusive of share of joint ventures and associates (excludes share of taxation of joint ventures and 1 See p.3 for health and safety performance metrics associates). 2 Construction Enquirer – Top 100 Contractors: Year to December (ranked by total value of work won in rolling 12 months) 6 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 7 COVID-19 and the Group’s response

Across the Group, COVID-19 teams came together, supporting each other and the Group’s through a period of intense personal and response professional pressure.

Wates began 2020 in a position of The gathering storm Meeting virtually and much more financial strength, with an industry- frequently than normal, the Board and Empowering local teams leading safety record and a clear, In the second half of March 2020, the the Executive Committee worked to shared commitment to making our growing sense that the coronavirus crisis mitigate the new risks facing the business On 23 March, the Prime Minister business more sustainable, trusted would be problematic was replaced by and to maintain alignment across the ordered people to stay in their and progressive. When the COVID-19 something much more immediate and Group as the business adapted to homes to slow the rate of infection. pandemic began to affect daily life and challenging. changing government guidance and In response, Wates shut all its the operations of the business in ways As other European countries implemented regulations. In the early stages of the non-site offices and paused site and that had previously been unimaginable, lockdowns, it was unclear what restrictions pandemic, the Board convened outside contract operations for 48 hours. Wates acted swiftly and effectively to would be implemented in the UK, how of the regular meeting schedule on 14 Each Wates team was asked to safeguard its people, protect its long they might last or how they would occasions and the Executive Committee decide whether their site or contract customers and ensure the continuity eventually be relaxed. The extent, nature met on 20 additional occasions. could reopen safely after the and long-term sustainability of the and duration of the likely economic In March, the Group created a Crisis 48-hour pause and to share with business. It succeeded because of the damage were equally unclear. In this Management Team, which met on at their business unit leadership teams resilience, determination, ingenuity and uncertain context, carefully developed least a weekly basis to ensure that the plans they had developed with adaptability of its incredible team. plans were re-set and the business’ focus information and advice was being shared their supply chain partners for turned to survival, with staff safety, across the business, and to monitor the implementing the SOPs (and, for operational continuity, cash management number of staff affected by the virus sites in London, avoiding travelling and cost control as the immediate (data that was recorded in a new on the Tube). Teams were told that priorities. Sites and contracts kept self-isolation reporting system). the executive team would support working safely but were asked to prepare them fully if they decided not to for a potential pause in operations. Wates was also involved actively in the reopen. Every team in the Group huge and effective efforts made by the chose to keep working. Construction Leadership Council (CLC) and Build UK to coordinate and lead the Doing so was not easy. Despite sector’s response to the pandemic. clear government advice that the As part of this effort, the CLC, working construction sector should continue with the Government and a number of working, there was significant contractors (including Wates), developed pressure from the public, the media a set of Site Operating Procedures (SOPs), and from some politicians to shut to enable construction sites to keep the sites. Living Space colleagues operating in a safe, hygienic and socially protected and reassured residents distanced manner. whose homes needed emergency repairs. Across the Group, teams came together, supporting each other through a period of intense personal and professional pressure.

8 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 9 COVID-19 and the Group’s response

Establishing safe, Average site efficiency COVID-secure productivity

As teams adjusted to and refined the 140% new ways of working, productivity fell at the end of March and in April 120% before beginning a steady recovery to 100% 100% 98% 100% 97% 94% pre-lockdown levels in the final months 100% 89% 90% of the year. With fewer operatives on 84% 75% site and some traditionally site-based 80% 68% roles being performed largely at home, 60% the focus on planning daily activities 60% was more intense than ever. Excitingly, Site efficiency is an internal the Group’s performance in 2020 40% measure of productivity that suggests that even higher levels of takes into account critical path adherence, site turnover productivity can be achieved once 20% and activity counts. restrictions are eased. 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Range of eciency for individual businesses Overall site eciency

Looking after our customers Securing the Group’s future Pipeline of future work The close relationships the Group The trust between the Group and needed to be resolved together; £billion developed with its customers during the its customers has been strengthened collaborating in the service of The Royal London Hospital 5 pandemic bore fruit in an exceptionally by the extraordinary success of our maintaining safe and efficient Wates was proud to support the nation’s response strong work-winning performance. teams in keeping projects and services productivity; successfully minimising 4 to the pandemic by creating three new Intensive £2.4bn of new work was secured during going safely. As many customers lost time and cost increases. Care Unit wards with total of 176 new beds on 2020, leaving the Group with a £4.4bn have acknowledged, Wates stood Needspace? gave its customers 3 two unused floors at The Royal London Hospital. pipeline of future work. shoulder to shoulder with them discounts to maintain occupancy, The project was completed in just five weeks by a from the start of the crisis, treating rather than insist on collecting licence 2 team of up to 600 people working 24 hours a day the restrictions as an issue that fees in full from every customer. in two 12-hour shifts (see full case study on p.20). 1

0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Building even greater Cash financial resilience The Group has maintained high levels £250m of cash and financial resilience throughout the pandemic and ended the year with £215.9m of cash (and net cash of £161.6m). £200m The average daily cash balance for 2020 was £166.9m. £150m In March, the business drew the balance £100m of its Revolving Credit Facility (RCF) on a precautionary basis. The entire £120m of £50m this RCF was repaid by the end of October. It remained available but undrawn at 31 December. At the end of October, the £0m Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Group accessed £50m of Coronavirus Large Business Interruption Loan Scheme (CLBILS) funding from its existing lenders. This loan will be repaid in full by October 2023.

10 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 11 COVID-19 and the Group’s response

Working from home: a step change in flexible working Working flexibly In late March, colleagues who were not As restrictions eased in the summer, based on site were asked to work from non-site offices opened on a home. The significant investments the COVID-secure basis. The return to Group has made in technology over the non-site offices was characterised last few years and the professionalism by one-way systems, hand sanitiser of its IT team enabled everyone to stations, reduced use of communal transition to home working without spaces, restricted numbers of missing a beat. socially distanced desks, temperature checks and a requirement to book Guidance and support were provided to attendance in advance so that help colleagues work from home effectively numbers could be controlled. whilst looking after their mental health Employees were invited to decide and wellbeing. A ‘Working from Home’ on a daily basis whether they wanted grant was provided to help colleagues to work at home or in the office. cover the cost of essential home working equipment, such as desks, chairs or lamps. A staff survey in August indicated To date, £40K has been claimed. that most colleagues would like their jobs to contain a mix of home and site or office-based work in the future. This preference has informed the development of the Group’s Average occupancy (attendance at office vs desk availability*) new flexible working policy, which is intended to support Wates’ effort to create a more inclusive culture. 100%

As the number of COVID-19 cases * Calculated using reduced once again started to rise, the number of desks implemented 80% as part of distancing measures. Government implemented a tiering system. The Group’s non-site Making difficult decisions fairly and with care offices that were situated within the highest tier were closed, with 60% As the first lockdown reduced activity operate efficiently and to offer best value Approximately 800 staff were put at risk the rest shutting once again when levels across the Group, colleagues who to all its customers, the Group needed to and the number of agency contractors a lockdown was announced at the were not directly involved in the effort reduce its cost base, primarily by scaling engaged by the Group was reduced by start of 2021. 40% to keep projects and services operating down the team. more than 200. Wates was the first major safely for our customers were furloughed construction and property business to On 20 May, the Group announced the using the Government’s Coronavirus Job implement a crisis-related redundancy start of a consultation process through 20% Retention Scheme (CJRS). programme. which 268 colleagues would ultimately The pay of all furloughed staff was leave the business by the end of October. topped up by the business to a minimum 0% Jul Aug Sep Oct Nov 70% of their full salary. At its peak in Staff headcount mid-April, there were 1,354 employees Leatherhead (HQ) Group average on furlough. Roles were reviewed on a weekly basis. By October, everyone was 4,000 back. In total, the Group received £7.7m of funding from the CJRS. 3,900 The Group also implemented pay cuts 3,800 from 1 April to 30 June for all except the most junior staff and those based on site. The reductions varied according to pay 3,700 grade, with the biggest reductions (of 35%) being applied to the directors’ pay. 3,600

Despite these steps (which were 3,500 supplemented by a recruitment freeze and the cessation of all non-critical 3,400 spend), it was clear that revenues in 2020 and 2021 would be lower as a result of 3,300 the pandemic and that, to continue to Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

12 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 13 15 COVID-19 and the Group’s response Group’s the and COVID-19 lockdown restrictions are being lifted. being lifted. are restrictions lockdown people and some reopening Schools are their workplaces. to returning are the last, the restrictions long However perseverance skill, compassion, courage, demonstrated change to and willingness will in 2020 team Wates the entire by the from emerge to the business enable more trusted, more crisis a better, progressive and more sustainable than before. organisation

2021 and beyond 2021 to how learned the Group During 2020, the restrictions to successfully adapt the coronavirus. by and risks created a for continue to likely With disruptions adaptions these part of 2021, substantial teams Site constantly. being refined are authority of local making use now are are coverings Face programmes. testing settings. workplace in most being worn coverings face is providing The Group At the time of when commuting. use for the UK have 20 million across writing, over and COVID-19 against been vaccinated

Communicate, communicate, communicate, Communicate, communicate and uncertainty of real In a period a constant maintained the Group stress, its with all of communication drumbeat up kept were Employees stakeholders. Bulletin’, a ‘Coronavirus through date to other every issued was which initially during the second then weekly (and day informed The bulletin of 2020). half regulations to about changes employees to adapting was the business and how topics with them. It highlighted comply whilst on furlough, such as volunteering and and wellbeing, health mental updates, the latest included links to on the Group’s and guidance videos which had hub’, ‘coronavirus dedicated intranet. up on the Group’s been set thank you Saying full pay reinstated the Group In July, for employees. non-furloughed all of their in recognition October, In allthe crisis, during efforts remarkable day an additional given were employees December, By you. thank say to of leave confident sufficiently was the Board and performance about the Group’s it would announce to prospects cuts the pay 2021 in February reimburse employees all been applied to had that and were been furloughed not who had the business. by still employed WATES’ RESPONSE WATES’ communication internal First & suppliers customers to public statement First on intranet hub launched Coronavirus formed Team Crisis Management colleagues for launched tool Self-isolation closed All offices CLC by launched Procedures Operating Site operations in site 48-hour pause cuts implemented Pay commenced scheme Furlough begun process consultation Redundancy cuts stopped Pay launched Home grant from Working reopened Offices returned all employees Furloughed announced day ‘Thank you’ (RCF) Facility Credit Repaid Revolving drawn CLBILS facility cuts of pay repayment Announced closed offices Non-site 11 13 31 21 19 01 18 23 03 03 02 02 30 24 24 20 20 20 04 04 DATE

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN

MONTH 2020 2021

31 12 19 01 01 23 23 23 02 30 29 04 08 DATE Local lockdowns Local Firebreak (Wales) Firebreak Restrictions eased Wales in lockdown Wales New restrictions (Wales) restrictions New Local restrictions (Scotland) restrictions Local GOVERNMENT ACTION GOVERNMENT Four-week lockdown (England) lockdown Four-week National lockdown announced lockdown National Restrictions tightened (Scotland) Restrictions tightened

England and Scotland in lockdown and Scotland England

Tiered system implemented (England) implemented system Tiered

Strengthened tier system implemented tier system Strengthened

Mass vaccination of vulnerable groups began groups of vulnerable vaccination Mass ANNUAL ACCOUNTS AND REPORTS 2020 AND REPORTS LIMITED ANNUAL ACCOUNTS GROUP WATES 14 People

Careers Wates has always maintained a strong Wates is a committed member of the support the attraction, development commitment to its apprenticeship and 5% Club, an alliance of companies aiming and retention within the sector of trainee programmes. That commitment to bring young people into the workforce talented people. was more important than ever in 2020. by pledging that a minimum of 5% of As with the ongoing training of current employees should be participating in Trainees, whether still working or employees, diversity and inclusion is a formal apprenticeship or graduate furloughed, were helped to continue central to our hiring policies. With this in training programme. With c.250 trainees progressing towards their qualifications mind, a six-month programme has been or apprentices, the Group is on track during lockdown whilst colleges and piloted in the construction business that to exceed this commitment in the universities adjusted to virtual delivery. will see it adopt balanced candidate coming years. pools, anonymised CVs and a managed There are currently 85 trainees in the Recruitment activity inevitably reduced referral process. The pilot started in business, a quarter of whom are women. in 2020, reflecting market conditions. October 2020. A further 42 trainees were promoted off New opportunities are starting to emerge, the scheme during the year. Although the with the Group currently working on 2020 intake for September was deferred, filling around 200 vacancies. Wates is 42 new trainees started in January 2021, People also a registered participant in the new of which half were women. Wates is Talent Retention Scheme, set up by the recruiting another 27 trainees for its Construction Leadership Council to September 2021 intake.

Now, more than ever, there is no more Inclusion and diversity Learning and development valuable resource at Wates than its people. The coronavirus crisis has done nothing to Despite the pandemic, the Group has ...new opportunities dampen Wates’ passion and determination maintained its commitment to the to become a truly inclusive and diverse learning and development of its people. are starting to A unique challenge workplace. There is a long way to go, but At the start of the crisis, all but the during 2020 the business made important The coronavirus pandemic has affected most essential training was paused, with emerge. The Group improvements in its processes and culture. every part of the business profoundly. critical Health and Safety training being The Group is incredibly proud of the 200 managers took part in the pilot of delivered online. is currently working our digital ‘iLead’ inclusive leadership work our teams have done to mitigate Since then, a broad range of virtual programme. to fill approximately the impact of the virus on the people learning programmes has been developed and communities it works with and for. In October, the business celebrated its as it remains difficult to deliver face-to- 200 vacancies. Although the pandemic was, naturally, first ‘Inclusion Month’. This involved online face training safely. the primary focus for much of 2020, the development activities and masterclasses These included the online delivery of the business remains passionately committed aimed at raising awareness of diversity Group’s Drive the Change! and Lead the to achieving its long-term goal of being a and inclusion issues both within Wates Change! Health and Safety programmes. more inclusive and diverse organisation. and beyond. The launch of the online ‘iLearn’ portal Wates is committed to being actively and allowed employees to access a wide range Coronavirus response consistently anti-racist. To start turning of bite-sized courses, providing accessible this commitment into action, the Group On 2 April, just 10 days after the UK learning for everyone, even at the height has a comprehensive anti-racism plan. went into lockdown, the Group used of lockdown. the Government’s Coronavirus Job It includes the introduction of listening Retention Scheme to furlough a groups, a reciprocal mentoring programme, Inevitably, the number of training days substantial number of colleagues. At the and an employee network focusing on provided in 2020 was affected by the same time, a programme of temporary race and ethnicity. The Group has also pandemic. The furloughing programme, salary reductions for all but the most established partnerships with a number combined with a shift in focus to business junior staff and those working on our sites of external diversity and inclusion groups. critical training, meant that matching 2019’s performance of c. 6,750 training and contracts was implemented. In late Wates aims to become a place where no days and c. 20,000 e-learning outcomes May, the Group announced a redundancy one must decide between caring for their was unachievable. Nevertheless, c.3,000 process that resulted in the departure of family and developing their career. To that training days and a further c.6,000 268 colleagues. end, an updated suite of family-friendly e-learning outcomes were delivered in policies was launched at the start of 2020. None of these decisions were easy. the most difficult of circumstances. They were taken to ensure the long-term This includes industry-leading initiatives success and prosperity of the business. such as offering eight weeks’ paternity/ Colleagues right across the Group made partner leave, equal shared parental leave, difficult personal sacrifices to help the and enhanced bereavement and career business remain resilient through the crisis. leave provisions.

16 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 17 Wates Construction Group

Work winning and new sectors Wates Construction won new contracts with an aggregate value of more than £500m during the months of the pandemic. This included five Wates schools under the new £3bn DfE Offsite Framework (MMC1). One of the highlights of 2020 was the project to extend The Royal London Hospital to Construction provide 176 Intensive Care Unit beds for COVID-19 patients. In what would turn out to be a proof of concept like no other, undertaken in the Wates Construction is a national Coronavirus and a most pressured of situations, the Group business working with a wide range ‘productivity revolution’ mobilised its offsite manufacturing of customers, across the public and facility, Prism; its M&E specialist SES The unprecedented challenge of COVID-19 private sectors. The business is a Engineering Services (SES); as well as proved a defining moment for Wates Construction, partner on 65% of the UK’s leading Wates Building Services (WBS). Everyone accelerating a process of change which had been central and local government worked together as one team to deliver underway for some time. This process has been frameworks. These include national an essential primary health project in based on improvements in efficiency and frameworks for the Crown record time at a moment of real need. productivity, embracing digital technology and Commercial Services, the The lessons learned will be instrumental offsite manufacturing, and continuing to pursue Department for Education (DfE), in shaping the future of the business. Homes England, the Ministry of new and better ways of working. Justice, the Ministry of Defence Wates was one of the few major contractors and Scape Procure, for which it to keep its sites open throughout the lockdown, Looking ahead has completed major projects such pausing only briefly for site teams to implement as the carbon-neutral Braywick the government-approved Site Operating In 2021, Wates Construction will focus “This year has been as challenging as any of us can remember. Leisure Centre in Maidenhead and Procedures, which included social distancing on exploiting the potential of WICS I am immensely proud of the way our colleagues have both Nottingham College’s new landmark and enhanced safety and hygiene measures. By to drive innovation, efficiency and City Hub campus. maintaining close dialogues with our customers increased use of offsite manufacturing. individually and collectively navigated the coronavirus crisis. The business has an established and supply chain, the business continued working It will continue to focus on meeting Their hard work has allowed us not only to continue to deliver presence in the residential sector, on all but two of its projects. Every site was needs of its private sector customers an outstanding service for our customers, but also to build whilst maintaining high levels of notably high-density city housing, operational by the autumn. our pipeline for the future. We have improved our productivity student accommodation and Better use of workplace technology and digital performance on its strategic public senior living. It is a recognised leader conferencing platforms, holding briefings and sector frameworks, and increasing its by embracing new ways of working, making even better use in the design and construction of inductions outside and adjusting shifts to make presence in the health sector. It will of real-time data, technology and offsite manufacturing. Our Restructuring achieve this by, amongst other things, schools, colleges and universities, it easier to implement distancing consistently, strategy for growth over the next five years will enable us and has a growing presence in the meant that productivity levels held at around July saw series of organisational changes, encouraging an inclusive environment construction of health, science 75% throughout the crisis, rising to almost 98% which included the creation of Wates to help attract and build a diverse to achieve a productivity revolution, maximise the potential and technology facilities. by the end of the year. Integrated Construction Services (WICS), workforce of complementary talents of our fantastic people and collaborate in new ways with all bringing SES, WBS, Wates Drylining and expertise. our partners. Services and Prism under one umbrella. Whilst each business will retain its It is a great testament to everyone at Wates and the work 23 projects completed under unique capabilities and brand, WICS they have done over the past 12 months that we are able to COVID-19 Site Operating Procedures will make it easier to share resources efficiently and to share expertise, look to the future with such confidence.” improving operational effectiveness Paul Chandler, Executive MD, Wates Construction Group Productivity rising to 98% by Dec and speeding up the adoption of modern methods of construction. >£500m new contracts secured Recent projects such as Lillie Square during pandemic and 7/8 Wellington Place have shown how offsite manufacturing can improve For more info on Wates Construction productivity, performance, quality 176-bed ICU facility completed in five weeks and customer satisfaction. go to wates.co.uk/construction

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RESIDENTIAL HEALTHCARE CASE STUDY: EDUCATION CASE STUDY: CASE STUDY: The Royal London Hospital extension Stowmarket Lillie Square ‘delivering the impossible’ High School development

The mission to convert two floors of success was based on smart logistics and Delivered as part of a batch of schools As well as providing careers and a live hospital into fully functioning an innovative, circular communication “Our patients live in one within the Priority Schools Building mentoring opportunities for people wards in five weeks seemed implausible. structure, involving all parties with of the most highly deprived, Programme 2, Stowmarket is a £16.9m in the community, the project has To do it in the midst of a national minimal hierarchy. Day-one engagement densely-urbanised and new-build, three-storey high school in established close links with local schools. health crisis felt almost impossible. set the tone and six-hourly design hyper-diverse parts of the Stowmarket, Suffolk. When complete, During the project, nine former pupils meetings, day and night, allowed it will accommodate 1,125 pupils, visited the site to hear about the Site conditions at The Royal London country, with the highest rates everyone to support each other. including 150 Sixth Formers. project from the team and to share Hospital were extremely difficult. Access of COVID-19. They deserve the Completed 13 days ahead of schedule, their memories of the old school. The for a total of 700 workers and materials best critical care services the This project adopted Wates’ under extreme pressures, this project visitors were some of the first pupils was via just two lifts, with two-metre standardised Adapt model, which will leave a legacy long after this crisis NHS can provide. These new who joined the intake of 450 pupils grids laid out across the site floor to reduced time on site, improved quality is over. wards will be used for many when the original school was opened maintain social distancing. Ever-evolving and reduced defects. The project years to come, both during in 1956. knowledge of the coronavirus meant • Customer: Barts Health NHS Trust this pandemic and to meet incorporated dining and kitchen facilities, hospital requirements changed daily. a main hall, drama studio, activity hall • Customer: Education and Skills • 12 key supply chain partners other health needs of our In the final 36 hours of the project, and Special Educational Needs facilities. Funding Agency (now ESA) local population.” 12 renal beds were requested – meaning • Offsite manufacturing The new school, which is based on the Part of the Earl’s Court regeneration, • £16.9m value installation of pipework, tanks and Alwen Williams, footprint of the former 1950s building, these new-build apartments and • Restricted access requiring innovative drainage. The project’s extraordinary Barts Health NHS Trust CEO also provides extensive sports facilities, • 1,125 pupils penthouses used Wates’ offsite logistics solutions which will be available for use by the manufacturing facility, Prism, to local community. manufacture all service risers and service cupboards, guaranteeing a high quality of product, and 3D sequencing to improve our control of the programme. Close collaboration with the customer’s project team also added an early works contract for subsequent phases, whilst a thorough design investigation during the pre-construction services agreement period resulted in the fan cooling units being redesigned, avoiding delays on site. The use of 3D sequencing for the build process resulted in a more seamless installation of the various prefabricated elements within the apartments. • 10,000 hours of work taken offsite • Just three days to install risers

“This new facility is Duration: going to save lives, it’s 33 days as simple as that. I’ve been so impressed and 24/7 working inspired by the hard work from the brilliant 64,800 hours worked team that have made this possible. You truly bed stations created are the best for 176 London”. Sadiq Khan, Mayor of London

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SCAPE FRAMEWORK “The Scape framework is a SCAPE CASE STUDY: SCAPE CASE STUDY: world-class public sector procurement hub. It has become a strong driver of growth for Braywick Leisure Centre Nottingham our business. The collaborative As an important strategic partner to Wates, the Scape public sector framework is and dynamic way in which the (leisure) designed to embed efficiency and social value into construction projects. Wates has framework operates fits perfectly City Hub been a delivery partner on the framework for four years, supported by an extensive with our Guiding Framework. local supply chain. Each project is managed to ensure delivery to an industry-leading (higher education) Being part of Scape has made standard with a focus on supporting the local economy. To date, Wates has completed Nottingham College campus opened in 56 feasibilities, has £310m amount of projects either on site or completed and has us a better business.” January 2021, providing 2,000 student places in spent more than £0.9m with social enterprises. Steve Beechey, Group Public Sector Director a state-of-the-art teaching space. The £58.5m project, which started on site in 2018, is the first to be completed by Wates through the Major Works UK framework, and is the result of a partnership between the college, the SCAPE CASE STUDY: council, and the local enterprise partnership (LEP). It forms part of the council’s economic regeneration of the city’s Broadmarsh area. Teesside University (student accommodation) Social value generated: • 10 social enterprises engaged • 80% local spend Through the Scape Venture framework, • 95% SMEs (Small and Medium which focuses on supporting public/ Enterprises) engaged “The Cornell Quarter Project • 87% local labour private partnerships and charitable • 143 new jobs created • Seven National Vocational Qualifications illustrates perfectly the benefits organisations, Wates carried out (NVQs) delivered of the Scape Venture framework. • 6 HNC/degree qualifications feasibility works for urgently needed By bringing together the very best “Braywick Leisure Centre • 24 NVQs attained accommodation for 300 students at • 100% cardboard and plastic recycled of public and private procurement offers a once in a lifetime • 98% of waste diverted from landfill Teesside University for September 2020. expertise, the student • 46/50 Considerate Constructors Scheme opportunity to provide The resulting development, Cornell (CCS) score accommodation and facilities residents in Maidenhead Quarter, is one of the largest schemes will be delivered with efficiency • 98% of waste diverted from landfill with a state-of-the-art procured under the Scape Venture and value for money, whilst hub for sport, the arts framework to date and only took 24 being rigorously performance and a wide range of weeks from initial inception (with a managed throughout.” feasibility assessment) to work starting cultural events.” Mark Robinson, on site. Samantha Rayner, Chief Executive, Scape Group Cabinet Member for Culture and Communities, Royal Borough of Windsor & Maidenhead 24 weeks from feasibility inception to starting on site Braywick is a major new leisure Social value generated: “The building is spectacular both centre for Maidenhead, with the local inside and out and I know that spent with social • 75% of workforce employed locally £55.8k community at the heart of its design. staff and students can’t wait to enterprises • £13.9m spent with local SMEs start using it. This is a major Delivered in 94 weeks with a contract investment in education and skills value of £32m, the centre has a total • £60,180 donated to local charities in Nottingham by the college, local spend area of 9,700m2, incorporating a 10-lane, 92% • 100 trees planted, offsetting 250 tonnes the local enterprise partnership 25m swimming pool; four squash courts; of carbon dioxide and the city council. These an eight-court main sports hall; fitness local labour state-of-the-art teaching facilities 87% studio; health spa and cultural hall, will inspire generations of students as well as a host of other facilities. and equip them with the skills 20 new jobs created Braywick will be 70% more efficient than the previous sporting hub, the Magnet and knowledge they need to meet Centre, and is a carbon-neutral project the needs of local, national and that showcases Wates’ commitment international employers, helping to sustainable construction. them and their city to thrive.” Carole Thorogood, Chair of Governors at Nottingham College

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CASE STUDY: SES Newcastle District Energy Centre

Engineering The Newcastle District Energy Centre The energy centre is a technically complex is part of a ground-breaking joint project and a superb example of how SES venture between Newcastle City can create value for multiple stakeholders. Council and ENGIE – a 40-year Key factors in the successful delivery Services partnership to tackle climate change in of the scheme included: SES’ early Newcastle Upon Tyne by implementing appointment; the collaborative approach new and innovative energy solutions of all stakeholders; and the use of BIM across the city. SES was appointed by (Building Information Modelling). The ENGIE as main contractor to design and technology and plant that have been install complex mechanical, electrical installed will provide reliable and SES Engineering Services (SES) is a pandemic and ensuring that projects (RoSPA) Awards, including Gold awards and plumbing (MEP) solutions at the sustainable water cooling and energy design-led mechanical and electrical could be progressed in a safe and for London and the South East, and also energy centre. generation. engineering (M&E) provider, delivering sustainable way. In the second half of for the Midlands, and South West. bespoke solutions for a wide range of the year, some of that focus shifted to Located on Newcastle Helix, a 24-acre Using BIM and adopting an offsite The year was crowned by winning projects across the construction industry. driving the business into emerging sectors, sustainable development in the heart of approach ensured that SES was able Contractor of the Year at the North SES is a leader in the use of offsite concentrating on quality of earnings the city centre, the £10m energy centre accurately to predict both labour costs Insider Property Awards, with SES manufacturing techniques, making whilst working with existing and new has been designed to deliver heating, and time-savings for the complex becoming the first M&E company to extensive, valuable use of its offsite customers, and maintaining SES’ cooling and electricity through a services installation, and to reduce win in the awards’ history. production facility, Prism, in Coventry. reputation as one of the UK’s leading distribution network to 10 buildings and on-site labour activities by 70%. The approximately 500 homes planned on project won the infrastructure category specialist contractors. “The amazing RICS award During 2020, SES has been focused the site. It will provide carbon emission at the prestigious Royal Institution of primarily on protecting the business and SES has continued its pursuit of win not only recognises the “I’m proud of the SES team’s savings of 30,650 tonnes over 40 years, Chartered Surveyors Social Impact North building resilience for the future. In March, technological innovation to revolutionise built environment’s positive or 766 tonnes per year. The energy East Awards. Lessons learned from this several projects were cancelled or delayed, design and drive improved installation performance through these contribution to society, but uncertain times. Despite the centre is a key component of the city’s project will be implemented on all SES’ which reduced turnover. In response, and operational performance for all its also recognises a collaborative energy masterplan and will be a future energy schemes. challenges of 2020, we have SES trimmed its overheads, reduced its customers. approach from our partners significant contributor to achieving operating costs and de-risked its strategy. built a strong business, which to helping meet Newcastle’s Newcastle City Council’s green is working towards building its In July 2020, Steve Joyce was appointed Performance highlights net zero carbon ambition.” ambitions, including its target of net as Managing Director and his first priority and industry awards capability and capacity in new, zero carbon emissions by 2030. emerging markets. With the Lee Francis, was dealing with the coronavirus Regional Managing Director at ENGIE Despite the challenges faced this year, appointment of Steve Joyce SES has already secured £100m of work to the position of Managing for 2021 and preferred bidder status on a Director, after his many years further £150m. Meanwhile, the business of experience in the business, has continued to deliver innovative 2 we can look forward to the energy centre projects for existing customers. During 732m future with confidence, not the year, SES was proud to have been involved in the design and build of only increasing the amount 10MW of heating and COVID-19 wards at The Royal London of work we do on technically Hospital and supported in the complex projects, for which 5MW of cooling provided construction of the Nightingale Hospital SES is rightly renowned, but North East in Sunderland. doing so safely and in an 30,650 tonnes of carbon inclusive environment.” Twelve major projects were completed emission savings over 40 years and handed over to customers despite Paul Chandler, pandemic restrictions. Executive Managing Director, Wates Construction Group. Winner of the infrastructure SES continued its industry-leading category at the RICS Social Impact health and safety performance, meeting challenging Zero Harm targets. In the North East Awards 2020 first year of entering, SES won four Royal Society for the Prevention of Accidents

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For more info on Wates Property Services go to wates.co.uk/property-services

Wates 1,500 property services professionals Maintained Property >500,000 homes Commercial fit-out 176 new colleagues and refurbishment Services transferred under TUPE Wates Smartspace is a national business, delivering high-quality fit-out, Retained refurbishment and property upkeep 100% projects to enhance its customers’ of FM customers operating environments. Key sectors Wates Property Services (WPS) is Social housing maintenance Facilities management include commercial offices, broadcasting, a leader in the delivery of planned accidents for pharmaceuticals, retail, property “After a great performance across and responsive housing repairs for Wates Living Space (WLS) is one of the Wates FM has established itself as a key Zero development, banking, distribution and Wates Property Services in 2019, public sector landlords and housing UK’s leading providers of planned and partner in the UK facilities management three years in Wates FM public sector premises, with project 2020 has thrown up considerable associations, as well as in the fit-out, responsive maintenance services in (FM) sector, providing self-delivered values ranging from £20k to £25m. challenges for everyone in the refurbishment and management of social housing, maintaining over 500,000 mechanical, electrical and total FM Smartspace project business. From those challenges have The impact of the pandemic on WPS commercial and business properties homes every year. It provides a broad services to an impressive customer list values ranging from was significant, with numerous contracts come some great, lasting positives. across the UK. range of services, supporting the across the public and private sectors. regeneration of disadvantaged During 2020, the team retained 100% £20k to £25m paused because of the lockdown and We maintained excellent levels of The business, which employs around communities and improving living of its customers and achieved an social-distancing restrictions, but it also customer satisfaction as a result of 1,500 property services professionals, standards for residents by renewing exemplary, incident-free health and helped accelerate a planned restructure, continuing to deliver quality services comprises three specialist business tower blocks which has created a business with the existing housing stock. safety performance. 200 against the backdrop of uncertainty units: Wates Living Space, Wates FM potential to turn over £500m per in WLS fire safety and and concern caused by COVID-19. (Facilities Management) and, since cladding portfolio annum. By the end of 2020, a new senior September 2020, Wates Smartspace. leadership team had been appointed The impact of the pandemic was at Wates Smartspace, led by new felt particularly hard in WPS because Managing Director, Scott Camp, who much of our work is carried out in was promoted to replace Helen Bunch, offices and people’s homes. I am who moved across to lead the Wates immensely proud of how our teams Residential business. have handled the pressure.

2020 may not have been the year many of us had hoped for, but we ended it on a high and look forward to 2021, during which we will build on the strength and resilience our teams have shown to push the business forward.” David Morgan. Executive Managing Director, Wates Property Services

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For more info on Wates Living Space go to wates.co.uk/living-space

Focus for year ahead The Group’s environmental strategy, with customers and supply chain and With productivity at the end of the released in January 2020, committed joint venture partners to ensure the UK’s year approaching pre-pandemic levels, Wates to generating zero carbon from housing stock meets the Government’s the business is confident 2021 will be its operations within the next five years. environmental target of achieving an EPC a success. Its strategic focus will be Wates This is a commitment to which WLS is (Energy Performance Certificate) Band C on delivering planned and reactive dedicated. A key strategic focus has by 2030. WLS will continue to provide its maintenance, fire safety compliance been to support the housing sector in zero-carbon retrofit solutions to owners work and on supporting customers in meeting its regulatory and environmental of existing housing stock to help them their journey towards zero-carbon Living Space obligations. WLS is working collaboratively meet this commitment. housing.

Wates Living Space (WLS) is one of the extension with Tamworth Borough UK’s leading providers of planned and Council and adding new high-rise schemes responsive maintenance services in into the contract with the Guinness social housing, maintaining around Partnership. This brings the Wates fire “With productivity at the end of 500,000 homes every year. safety and cladding portfolio to over the year approaching pre-pandemic 200 tower block projects nationwide. It provides a broad range of services levels, the business is confident for partners, supporting the regeneration Despite the challenges presented by of disadvantaged communities and COVID-19, the business continued to 2021 will be a success.” improving living standards for residents perform well, with the mobilisation of by renewing existing housing stock. multi-year maintenance contracts worth The business is also a leading provider £350m with Barnsley, Crawley and of Fire Risk Assessment works for local Lancashire Borough Councils, and social housing tenants informed and authorities and housing associations, as Stonewater Housing Association. All WLS’ reassured about how operatives would well as undertaking the refurbishment work was performed whilst adhering operate within their homes and follow and protection of dangerous structures. meticulously to social-distancing government safety guidelines. As part of requirements. this effort, the business produced a video Following an impressive 2019 performance, for local authority partners to use when 2020 began well, signing a 10-year contract communicating with tenants. The challenge of COVID-19 Compliance with social distancing The onset of the pandemic not only made the mobilisation of four major impacted the business, but also its maintenance contracts more complex, customers and the many thousands of particularly as these involved the transfer tenants whose homes WLS is privileged of over 175 colleagues from previous to look after. The business focused on employers. Virtual communication – ensuring services were maintained in a rather than more traditional face-to-face COVID-secure way, and stringent new methods – enabled the business to safety and hygiene measures were engage with all affected personnel implemented for operatives and residents. successfully, as well as organising a new WLS worked with its customers to keep branded fleet of vans. Throughout 2020, WLS remained focused on its commitment to providing exceptional repairs and maintenance services for housing association and local authority partners across the UK. It has expanded its offering into new markets, including government frameworks, and built on its growing expertise in fire safety and the removal and installation of cladding.

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CASE STUDY: CASE STUDY: CASE STUDY: Crawley Brent Housing Thurrock Council £9.5m local Borough Council economic benefit Wates Living Space provides internal generated Partnership mobilisation and external repairs, kitchen and bathroom renewals and roofing works Wates Living Space was awarded a across Thurrock Council’s housing stock, £6m spent with SMEs 10-year contract to perform housing as part of the authority’s four-year (small and medium planned maintenance framework. repairs for Crawley Borough Council enterprises) and successfully mobilised its team in In addition to the building work, WLS the middle of the pandemic using has used its position on the framework virtual communications to help maintain to have a significant, positive impact on £10k investment safe, effective social distancing. the local community. This includes in charities The contract involves the delivery of spending £6m with local small businesses responsive repairs, planned maintenance and investing £10k in local charities and community causes. 1,500 hours of work and the refurbishment of void training and employment properties. An estimated 9,400 properties Almost 1,500 hours of training and and 5,000 garages will be repaired over employment experience has been experience the lifetime of the contract. provided for residents, including via Working closely with the council, the the Wates Group’s acclaimed Building team implemented a range of innovative Futures programme. This enabled 13 young people from across Thurrock to methods to train staff and to prepare Scheme) cards, which it is hoped will vehicles and equipment, to enable participate in a two-week course to improve their employability, with practical inspire them to work in the construction housing repair work to take place across sector after completing the programme. the borough. trade taster sessions and workshops on topics such as CV writing and interview • £24m contract This approach was replicated across skills. Candidates were also coached and • Four-year framework WLS’ housing repairs contracts with supported through examinations for Barnsley Metropolitan Borough Council, CSCS (Construction Skills Certification West Lancashire Borough Council and Stonewater Housing Association, all of which faced COVID-19 related disruption. • 10-year programme • Maintenance of 9,400 properties In 2014 Wates Living Space (WLS) was The delivery team adopted a ‘whole- appointed to carry out responsive house delivery’ approach, using fewer • 5,000 garages to be repaired repairs and planned maintenance works supply chain members, to generate across Brent Housing Partnership’s operational efficiencies, cost savings portfolio of 10,000 properties. WLS and value for money securing volumetric was awarded the 10-year £15m per discounts with the supply chain in annum contract after a competitive exchange for certainty of work during tender process. the year. They then approached Wates’ central procurement team to use the As part of an agreed strategy and to full buying power of the Wates Group, re-invigorate the service, WLS assigned providing the customer with competitive, a new delivery team to the contract, fixed material prices for the year. followed by a subsequent, phased replacement of key team members. The • 10-year contract change had an immediate and positive • £15m per year impact on relationships, which enabled more collaborative working. • 10,000 properties At the beginning of Year Three of the • £840k in savings passed on 10-year contract, WLS worked with Brent to customer to plan the year ahead. As a result of the trust established with the customer, WLS was given full control of the programme for the next 12 months.

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For more info on Wates Facilities Management go to wates.co.uk/fm CASE STUDY: Canadian High Commission Wates (Canada House) The Canadian High Commission in London provides consular facilities for Facilities Canadians to renew passports and visas, and apply for emergency assistance. It incorporates a military liaison office and public affairs department, and is Management home to a number of key trade and political officers. The Grade II* listed Canada House building hosts special events, including conferences, receptions, lectures and lunches. Throughout the five-year partnership Wates FM (Facilities Management) has It delivers quality cleaning services “Our experience to date on the with the High Commission, Wates FM will established itself as a key partner in and provides energy management keep the buildings safe, secure and clean, outsourcing using the performance- the UK facilities management sector, consultancy, utilities procurement and to protect and support Canada’s image based contract approach is certainly providing self-delivered mechanical, bill validation. This work enables Canada’s and reputation. meeting our expectations. Although electrical and ‘total FM’ services to Department of Foreign Affairs, Trade this type of contract was seen as and Development to maintain appropriate customers across the public and Wates FM provides a total FM service, something new to the real property private sectors. including all mechanical and electrical accommodation standards, policies, industry in London, Wates was quick services, fabric maintenance and project and programmes. It also safeguards and 2020 was the business’ first year as part management at both Canada House and extends the performance of the building to research and understand the of Wates Property Services. During the the Commission’s adjoining offices on and has led to outstanding occupancy approach. Wates are working with us year, it retained 100% of its existing Cockspur Street. satisfaction levels, including those from towards achieving our high standards, customers and agreed extensions to visiting foreign diplomats and VIPs. as we all envisioned.” several key contracts in the legal, public, logistics, managing agent and multi-media John Sommerville, Canadian High Commission sectors, whilst also achieving an exemplary health and safety performance. Wates FM has recorded zero reportable accidents or incidents for almost four years, setting CASE STUDY: standards consistent with its ambition to be a zero-harm business.

Capabilities enhanced HM Revenue and Customs by the coronavirus Wates FM’s security-cleared engineering This has seen the merging of a number “We receive a real added-value service The pandemic offered Wates FM a unique team provides M&E services to four of of older properties and the development from Wates FM – from an extremely opportunity to showcase its ability to HMRC’s regional centres and 21 discrete of several new offices. Wates FM’s ability efficient team. We have been adapt and deliver a range of professional sites. Since starting in 2019, the scope to mobilise new sites at short notice to consistently impressed with how services in difficult circumstances. The of the contract has grown from four to ensure they were ready for business has services as an example of best practice a new public sector framework across Wates approaches mobilisation, business introduced new tools and 21 sites, with the potential to expand been invaluable. During site mobilisation, during the pandemic. the West Midlands, as well as expanding particularly in the face of a global techniques to improve performance and further over the five- to seven-year term. Wates FM collects asset information significantly its partnership with HM help customers continue to operate in a Despite the coronavirus, Wates FM won and conducts an asset validation process, pandemic. Lockdown didn’t faze the Revenue and Customs (HMRC). Wates FM adopted a business-as-usual COVID-secure way. new work in the legal, financial, education, the findings of which are uploaded to a team; they immediately took over approach as far as possible during the logistics and multi-media sectors. Wates FM’s ambition in 2021 is to be the computer-aided facilities management where we needed them to and set This new way of working has been pandemic and mobilised eight new sites most trusted FM partner across both system. This enables HMRC to identify up sites on very short notice. The praised by several customers, who have safely and in a COVID-secure manner the public and private sectors. The focus the nature and condition of their assets attitude to work and problem highlighted the professionalism of Wates Public sector growth during lockdown. This involved the TUPE on customer retention remains, and the and to plan for any necessary capital solving is amazing.” FM’s staff. The plaudits came from both transfer of four staff from one of HMRC’s The business won new contracts in the business is developing bespoke real-time expenditure. public and private sector contributors, South London sites. HMRC Estates Team public sector, building on Wates Property management information for customers including the Cabinet Office, which Wates FM has achieved a high level of Services’ long-established links with these as it continues to innovate to deliver Wates FM has worked closely with praised Wates FM’s deep cleansing customer satisfaction and has been customers. Wates FM secured a place on market-leading levels of service. HMRC, investing time and energy in awarded the maximum possible Net understanding the organisation’s new Promoter Score of 10 by HMRC. operational model.

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For more info on Wates Smartspace go to wates.co.uk/smartspace CASE STUDY: Crown House, Loughborough

Customer: Ministry of Justice Wates Value: £3m Duration: June 2019 – September 2020 Wates Smartspace completed a major Smartspace refurbishment and reconfiguration project at Crown House in Loughborough for one of its longstanding customers, the Ministry of Justice. The three-storey office building in the town centre was fully refurbished with a Category B Wates Smartspace is a national completing a number of high-profile the team’s ability to work under pressure. standard fit-out and replacement of all business, delivering high-quality projects for key customers, including As the pandemic continues, the business mechanical and electrical elements, fit-out, refurbishment and property HMRC and Lloyds Banking Group. is using its expertise to work with including roof plant. It also included upkeep projects, enhancing its customers to modify their buildings so Much of Smartspace’s success is based on reconfiguration of the working areas to customers’ physical assets and they are ready to encourage and support its longstanding customer relationships, increase the number of desk spaces operating environments. the new, different expectations staff and and the business is well positioned on from 186 to 200. customers will have as COVID-related Smartspace works for banks, retailers, several multi-year frameworks for public restrictions are relaxed. property developers, pharmaceutical and private sector customers. Recent and distribution businesses, broadcasters, appointments to help government As ever, Smartspace is committed to owners and occupiers of commercial departments reopen their premises on a helping its customers make best use of offices and public sector organisations. COVID-secure basis have demonstrated their estates. CASE STUDY: Project values range from £20k to £25m. The business has established a strong reputation for delivering projects to Department of Work tight timescales and in live environments, frequently working around business- and Pensions, Hastings critical equipment. A multi-disciplinary team of technical, engineering and mechanical experts 2020 was a challenging year for the Customer: DWP terraces to provide accessibility, upgrading worked through the challenges of the business, which was affected significantly Contract value: £5m reception and installing meeting and pandemic, adhering to new government- by the pandemic. The lockdown hit the conference facilities on the ground floor. Contract duration: 20 weeks approved Site Operating Procedures. business’ retail, banking, and commercial The team’s work has enabled the updated customers hard, resulting in a number As part of its four-year framework with “This is a fit-out for an building to achieve a BREEAM (Building of project delays and cancellations. The the Department of Work and Pensions exemplary new office for some Research Establishment Environmental business responded by decreasing its cost (DWP), which began in 2018, Wates Assessment Method) sustainability status base, primarily through a 22% reduction Smartspace was awarded a £5m contract 850 colleagues as we continue of ‘very good,’ meaning that the building in headcount. to fit out 57,000 sq ft of office space our Workplace Transformation as part of two office relocations in Programme. Existing staff will will support the wellbeing of its users. Hastings, Sussex. The 20-week fit-outs migrate from our Ashdown Restructuring The project is part of a £1 billion court of two contemporary office buildings, House campus into Lacuna and reform programme, through which HM In the summer, the business became Havelock Place and Lacuna Place, was Havelock House in the centre Courts & Tribunals Service is aiming to part of Wates Property Services, creating part of Hastings’ effort to create a new of Hastings, adjacent to the provide easier access to justice. opportunities for greater efficiency and Priory Quarter business district in the train station. This supports our town centre. to build on established relationships – green travel planning and will particularly in the public sector. The Lacuna Place refurbishment contribute to our sustainability The business’ Commercial Director, included upgrading the existing toilets targets, building back better, Scott Camp (pictured), was promoted to and amenities, creating a new open-plan greener and faster.” Managing Director. office environment, and upgrading a lift. Clive Anderson, The refurbishment work at Havelock Despite the enormous challenges of the Head of Real Estate Major Projects, Place involved replacing much of the pandemic, the Smartspace team adapted Department of Work and Pensions ceiling to enable improvements to the well to new Site Operating Procedures, building’s MEP systems, refurbishing

34 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 35 Needspace?

For more info on Needspace? go to needspace.co.uk CASE STUDY: CASE STUDY: WMR Waste Solutions Fit to Last

WMR is a joint venture business “Like most other businesses, with GRS Roadstone that supplies we closed our offices once the waste and recycling services to pandemic took hold. Hearing businesses in the leisure industry, from Needspace? shortly including holiday parks, golf clubs, afterwards that they were going hotels and restaurants. The to help us by lowering licence fledgling company moved into a Needspace? business centre in fees during lockdown was a Crawley in part because of its welcome relief, as saving monies Needspace? on our overheads was crucial. good transport links to London. And when it was time to return When WMR closed its office in to the offices, it was good to April because of the pandemic, know that this was only possible Needspace? supported the business by lowering licence fees. And when once Needspace? had carried Needspace? is Wates’ flexible of the pandemic on Needspace?’s lockdown was lifted and WMR out a full risk assessment of the workspace business, providing high- employees, its customers and their returned to the site, it quickly building, installing good signage quality managed office or workshop clients. As with all real estate businesses, became apparent that the office and antibacterial gel stations, space to small businesses in London the pandemic reduced occupancy rates was too small to allow the team to along with guidance on the use and the South East, giving them the and profits. After lockdown was imposed work in a COVID-secure manner. of shared facilities, such as the As a small gym offering a variety of classes scope to grow and achieve their in March, occupancy declined by 20%. Needspace? responded by offering kitchen, corridors, reception and personal training, Fit to Last needed to ambitions. It is a testament to the hard work of a choice of three alternative spaces, and the toilets.” find a flexible space when it was looking for The business has a portfolio of seven employees that following the closure all within the same building and all Mathew Major, its first permanent home five years ago. premises in Clerkenwell, Clapham, of the centres at the end of March, all within WMR’s budget. Director, WMR Waste Solutions Fit to Last prides itself on being friendlier Earlsfield, Hammersmith and Islington premises remained open to key workers than the average gym. Needspace?’s Clapham in London, and Crawley and Horsham throughout the first lockdown. The entire business centre proved to be the perfect in Sussex. portfolio reopened to customers, to a location for the business. Clapham’s flexibility COVID-secure standard, at the beginning has allowed Fit to Last to expand over the years of June. as it attracted new members, moving into a “This has been an enormously bigger studio space as the gym became more Supporting its customers challenging year for both the established. Gyms have been hit particularly Needspace? team and our small- hard by the pandemic, so when lockdown came Needspace? supported its SME customers business customers. I am so proud through lockdown by offering reductions in March, Needspace? made sure that Fit to Last of how our team has supported our in licence fees totalling nearly £500,000. was kept up to date and informed about all the The business helped mitigate this customers through lockdown and relevant government guidance. Upon reopening reduction in income by furloughing all beyond. Whether through the in June, staff in the centre ensured the gym was centre managers and sales managers financial support we offered in the equipped with appropriate supplies and signage, so that its members could train in safety. The plan for Needspace? in 2020 was to whilst the buildings were closed. form of licence fee reductions to grow the size of its portfolio. Although help keep our customers afloat, or Needspace? is now focused on attracting “Needspace? gave us peace of mind by it has been a hugely challenging year, in making sure our business centres new business in 2021 by providing keeping us informed throughout such a Needspace? nevertheless received COVID-secure work-spaces. were COVID-secure so that people difficult period. We’re really impressed with consent to add 2,200 sq ft at its space in could return to their workplaces as how Needspace? have supported us and Hammersmith. Meanwhile, applications During 2021 and beyond, Needspace? quickly and safely as possible, our fellow tenants through the pandemic.” have been lodged to create a new intends to: staff have moved mountains in standalone building at the front of the Ali Page, • Seek external funding to further expand support of the business. Looking Clapham site, adding 3,900 sq ft of space; Studio Manager/co-owner, the business; ahead to 2021, I believe there will Fit to Last and to add a floor on top of the Bastwick Street building, expanding • Rebuild occupancy to at least the 80% be significant opportunities to grow the property by 2,690 sq ft. level seen before the pandemic; and the business and meet the ever- increasing demand from SMEs and Whilst progress has been made in growing • Secure planning permission at Bastwick corporates for flexible workspaces.” the business’ footprint in these premium Street and for further development locations, the focus for the year has schemes in Clapham and Hammersmith. Charles Wates, Managing Director, Needspace? inevitably been on managing the impact

36 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 37 Wates Residential

“Our continued focus is on excellent We have established some great For more info on Wates Residential delivery for our partners and their relationships with partners such as go to wates.co.uk/residential communities. It is not just about Homes England, Havering, Orbit bricks and mortar for us. We are Housing and Be First and are looking building places that people can be forward to working with new proud to call home for generations partners like Harrow, Hounslow to come and we are working together and Winchester. with local people to support them 2021 is set to be an exciting year, socially and economically so that we with significant growth expected can build even stronger communities. for Wates Residential. We will be The pandemic has focused attention investing in our teams and working as never before on the need for to become a more attractive Wates high-quality local housing and that is a employer to a wider and more demand we are well-placed to meet. diverse range of people.” Helen Bunch Residential Executive Managing Director, Wates Residential

Wates Residential is one of the leading Dagenham; the Winnall Flats scheme in What do Construction Workers Do?. developers and contractors in London, Winchester; and the Grahame Park Almost 2,000 copies were distributed the South and Wales, delivering mixed development in Barnet. The business to London schools. CASE STUDY: tenure housing schemes in partnership completed the Stag House scheme for with the public sector. Wandsworth Council and began a new Working through the project for the council at Kersfield Estate. The team believes that everyone deserves Construction also began at Havering pandemic a great place to live and is committed to Havering 12 estates regeneration Council’s Napier and New Plymouth addressing the UK’s urgent need for new, As the full impact of the pandemic House in Rainham, and a significant became evident in March, Wates high-quality housing. Wates Residential’s joint venture with Havering In 2020, the joint venture partners estates to be developed – Napier planning application was submitted Residential sites paused all operations Council will transform 12 estates across the submitted the largest council estate and New Plymouth House in Rainham Wates Residential places the needs during the year for 371 new homes on for 48 hours. All sites then continued borough to provide 3,500 new homes for local regeneration planning application in and Solar, Serena and Sunrise of local people at the heart of every the Waterloo Road estate in Romford. to operate throughout lockdown, people over the next 12 to 15 years. This is one London for the Waterloo Estate. Court in Hornchurch. This allowed scheme it delivers, which is central to the and productivity steadily rose over of the most ambitious housing regeneration This will see 1,380 high-quality new construction to begin on a new business’ ambition to create sustainable the subsequent months to 100% of Restructuring schemes in London and will double the amount homes developed for private sale 175-home retirement village and communities. By engaging with key pre-lockdown levels. stakeholder groups early in the planning In July, Wates Residential became a of affordable housing in the borough. The right and affordable rent in the heart of 197 affordable new homes, all of process, the team can discuss design standalone business, led by Executive As well as adhering to the new safety, to return is guaranteed to every resident on the Romford. Demolition has already which are designed with local preferences and aspirations to ensure Managing Director Helen Bunch. The hygiene and social-distancing standards, existing estates. been completed at the first two people in mind. that local needs play a critical part in the number of full-time employees working the teams adapted to other new ways configuration and development of each in the business grew by 20%. of working. Virtual site tours and virtual scheme. The business also concentrates Q&A sessions were held with local on leaving a positive legacy in the schools and colleges to ensure educational engagement programmes communities in which it operates by “2021 is set to be targeting local procurement, creating local could continue. House sales continued training and employment opportunities, an exciting year of via virtual home tours and socially and investing in local charitable growth for Wates distanced appointments. Sales targets organisations and community groups. for the year were met by October, Residential.” despite the temporary closure of sales outlets during the first lockdown. Work winning in 2020 Despite the challenges posed by the Looking ahead coronavirus crisis, the Residential business performed well during 2020, accounting Providing social value In 2021 and beyond, Wates Residential for 60% of all new work won across the to communities will seek to harness new technologies and everything it has learned from Group during the year. This included a Social value is intrinsic to Wates major £600m estate regeneration project working flexibly throughout the Residential’s business. This was recognised pandemic. At the end of 2020 there in Harrow; the next two phases of its by a Royal Institute of Chartered Surveyors 10-year ‘Cardiff Living’ partnership with were more than 5,000 homes in the Social Impact Award for the Cardiff Living, development pipeline, with 1,700 further Cardiff Council, which will deliver 1,250 Silvervale Park scheme. The team new homes; new developments in homes to be created through build-only continued to promote careers in the projects for public sector customers. Hounslow; the second phase of work at built environment with young people, the Gascoigne Estate, in Barking and commissioning a new book for children,

38 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 39 Wates Developments

For more info on Wates Developments go to wates.co.uk/developments CASE STUDY: Encouraging the builders of the future

Wates Residential’s commitment to community investment includes lots of engagement with local schools. This is Wates intended to encourage young people to consider a career in construction and to improve diversity in the sector. Developments Wates Residential worked with a children’s author, Emma Juhasz, to commission an illustrated book, What Do Construction Workers Do?. The book is intended to show children the wide range of jobs Wates Developments specialises in land, available in the construction industry and planning and residential development. was inspired by the idea that ‘you can’t The business focuses on securing land be what you can’t see’. and delivering planning consents in As well as commissioning the book, sustainable town and country locations Wates Residential also arranged for in which there is high demand. almost 2,000 copies to be distributed to Wates Developments made important Key Stage 2 pupils at schools near to its planning progress throughout 2020, with construction sites. key planning applications, appeals and local plan allocations. The business has now built a portfolio of 13 sites at all stages of planning. These CASE STUDY: £95m scheme sites could produce more than 11,800 homes. A further 1,700 homes are being Park East, Erith 320 new homes created through a series of joint ventures. 80% affordable rent Wates Residential is working in The same partnership has already partnership with housing association delivered the award-winning Erith Park Orbit and Bexley Council on the £95m development (opposite Park East), 20% shared Over 11,800 new homes in the pipeline, of which Park East regeneration scheme in Erith. which has helped to reduce crime in ownership 3,839 homes across 13 sites are seeking planning consent The project will create 320 new homes: the community by 80% since it was 80% for affordable rent; 20% for shared completed. tower blocks homes in active joint ventures ownership. Work is expected to be Three 1,700 Wates Residential and Orbit are completed by 2023. The demolition of demolished committed to providing employment three 13-storey 1960s tower blocks and new homes sold in 2020 and training opportunities for local 374 several low-rise buildings has cleared people to help boost the local economy The business also succeeded in accessing through joint ventures the way for a new mixed tenure and combat the industry’s skills shortage. new sites across the south east of England community. Two free construction and employment including Sussex, Hampshire, Dorset, skills training courses have been hosted Cambridgeshire and Oxfordshire. the first lockdown. In the second half of pandemic from increased interest from in Bexley to help unemployed adults gain It was encouraging that the market for the year, the strength and resilience of the buyers seeking to leave urban centres. the valuable practical experience they selling consented land recovered in the housing market saw the business secure need to kick-start their careers. The Many economic commentators reference fourth quarter. sales at pre-lockdown prices. This success partnership has also pledged to hire at the ending of government support for is reflective of Wates Developments’ least 31 apprentices and 25 full-time New home sales through house builder the housing market in April 2021 as critical long-term strategy to secure quality, employees from the local area. joint ventures amounted to 374 across in assessing likely future demand and includes the donation of laptops to the edge-of-settlement locations. These 11 live sites. These results reflect a huge pricing trends. The partnership has also supported the Active Horizons community centre, to locations have always been popular but effort to recover from site closures during local community through donations, help young people who do not have have benefited since the start of the volunteering and charity work. This access to computers or WIFI at home.

40 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 41 Wates Developments

CASE STUDY: Ford Airfield

‘The Landings’ is a ground-breaking retail units; significant open space; neighbourhood-plan-led development allotments; new football pitches at the former Ford Airfield, West Sussex. complementing the Arun Sports Arena; and a children’s ‘Flying Fortress’ play During the year Wates Developments facility. and its partner – Redrow Homes – took a crucial step forward, submitting an outline The 900+ acre site currently includes planning application to ‘create a new heart a mixture of agricultural land and the to Ford’, including 1,500 new homes. historic Ford airbase, which was a Battle of Britain airfield in WW2 and a base for Working with the Neighbourhood Plan The complex site aims to deliver RAF Hunter jets. The business is hopeful Group and Ford Parish Council over the much-needed new homes, important of securing a planning consent in 2021, last seven years, this became the largest community benefits, new jobs, significant following which Redrow and Wates will neighbourhood plan allocation in England open spaces, extensive planting and deliver infrastructure and create serviced at the time, bringing forward a single The planning system suffered delays as raw concept at land stage through to new trees. land parcels for development. “2020 began with a strong, positive allocation of 1,500 new homes that has local authorities adjusted to remote planning, delivery and completion with market response to the clear result since been adopted into a District Plan Proposals also include: a new primary Wates plans to develop over 300 new working and virtual planning committees. pre-sold land and building contracts. of the general election. That bounce (Arun District Council Plan). school; a care home; a local centre with homes on the site. A reduction in the supply of consented Its purpose is to secure private land proved short-lived as the pandemic land is anticipated throughout 2021 and and fulfil our customers’ investment struck in March, pausing activity on 2022, and is expected to sustain land requirements with pre-packaged our house builder joint venture sites values in 2021 and beyond. development schemes. Delivery will, and disrupting the planning process The Government’s ambition to improve in general, be achieved through across the country. CASE STUDY: the performance of the planning sector collaboration with other Wates was evidenced by the launch of its Group businesses. It is to the immense credit of our Planning White Paper in August and its talented team that we transitioned Wates Partnerships will further build intention to push local authorities to rapidly and successfully to home on Wates’ relationships with housing Crowborough boost housing supply (to enable the UK working. associations, private rented sector to reach the target of building 300,000 investors and senior living operators, new homes a year). As we emerge from the pandemic, covering respective markets for each. our strategy will remain focused on sites in saleable locations and New businesses to Wates Development Agency Services aims to provide outsourced development investment in quality joint ventures enhance offering services across the full range of residential with leading house builder partners. project design, marketing and sales. It will During 2020, two new complementary At this stage, the planning process businesses were created to enhance the meet a recognised void where customers has not returned to pre-pandemic Group’s offering to the residential sector: have a development ambition but lack levels of performance. Many local Wates Partnerships and Wates some of the requisite capabilities. Development Agency Services. plans, individual applications and These services are primarily focused planning appeals have been delayed. Wates Partnerships has been established on customers such as local authorities to facilitate the provision of completed and housing associations which have an During 2020 the business experienced ‘turnkey’ residential developments, from identified need for new homes. a number of disappointing planning decisions. Some quality schemes were refused despite unequivocal support from local planning officers. We expect several of these sites to achieve consent in 2021 and are looking forward to the year with Wates Developments submitted a The scale of housing need in this 2020 and will now deliver 150 new homes, planning application to Wealden location is such that the business of which 35% will be affordable. optimism.” District Council for new homes on proposed a fast-tracked planning Progressing housing schemes at speed can David Brocklebank land to the south east of Crowborough, application on an unallocated site that be extremely challenging and the team Executive Managing Director, East Sussex, which was secured under includes the partial redevelopment of has worked relentlessly to respond to the Wates Developments contract late in 2019 and was not a riding school and a garage. concerns of local people, engaging with allocated for housing at that stage. The proposition received support from local councillors throughout. the planning committee in December The site will be sold in early 2021.

42 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 43 Sustainability report

In an Ipsos Mori poll conducted in June 2020, 66% of the UK population said that HEALTH AND SAFETY climate change is as serious as the COVID-19 Sustainability health and economic crisis. The Group remains committed to the environmental objectives it published at the start of 2020 and, during the year, secured 81% of energy Managing safety and wellbeing report from renewable sources, reduced CO2 Wates has maintained one of the emissions by 42% and diverted 99% of leading health and safety records waste from landfill. in the industry with an Accident Incidence Rate (AIR) of 86 – around Social value 57% below the average for BuildUK Putting people and the members and 67% below the Through its community, social enterprise planet first construction industry average.1 For more info on sustainability (SE), and education and employability Wates’ Guiding Framework commits go to wates.co.uk/sustainability programmes, the Wates Group created Across the industry, the first lockdown the business to acting responsibly for over £15.2m of social value in support of saw a higher number of workplace people and the planet, and to ensuring local communities. In January 2020 it accidents and high potential incidents. that our impacts on health, happiness recognised the milestone of having spent Data from the Office of National operational efficiency throughout 2020 and the environment are positive. a total of £20m with SEs – a target set in Statistics revealed that workers in the whilst concentrating on social distancing, 2015 and which was attained in December construction trades were among the Although the year was dominated by the enhanced hygiene measures, avoiding 2019 – with a lunch attended by Social worst hit occupations and, in June, the pandemic, 2020 was also characterised by shortages in Personal Protective Enterprise UK Chair, Lord Victor Adebowale. Health and Safety Executive reported an intensifying focus on climate change, Equipment (PPE) and material supplies, that the annual average of fatal injuries biodiversity loss, social and economic and dealing with the personal and Following this success, in November, across the sector had increased from inequality, and racism: issues the Group societal impact of the pandemic. the Group launched its five-year social 37 to 40. is determined to address. value strategy, ‘Creating Opportunities’, The Group’s continued commitment to Wates site teams adapted to working in supporting the drive to develop creating zero-harm working environments difficult circumstances whilst keeping a Zero Harm sustainable communities by tackling saw a 28% reduction in total injuries, focus on delivering high-quality work, inequality, inspiring and educating young and a combined Lost Time Injury Rate In January 2020, Wates celebrated a major safely. The implementation of Wates people, and supporting growth in the of 0.068 (comfortably within its Zero milestone in its ‘Zero Harm’ journey a Standard Operating Procedures and social enterprise sector. Harm target of 0.100). year early, reaching a Lost Time Injury Rate the training of site COVID-19 marshals (LITR) of 0.050 against a target of 0.100. enabled the business to maintain It also launched its environmental strategy, “Throughout our sustainability report setting out how it aims to become a zero we reference a number of the United carbon, zero waste, and nature positive Nations’ Sustainable Development organisation by 20251. COVID-secure measures “The fact that Wates achieved its Goals (SDGs). The UN is committed target of a £20m spend with social UNITED NATIONS’ Wates maintained its trajectory towards The company responded to the pandemic to achieving these 17 goals by 2030, enterprises early demonstrates their SUSTAINABLE 67% below the HSE Industry average becoming a sustainable zero-harm with a communications strategy and with a view towards ending all forms DEVELOPMENT genuine commitment to helping the of poverty, fighting inequalities, working environment. The total number campaign to support colleagues’ mental GOAL (SDG) of RIDDOR-reportable injuries reduced health and wellbeing; it provided employees communities where they work. Social and tackling climate change. Our 57% below the Build UK average by 10% from 2019 (although the Accident working from home with financial support enterprises make a real difference to sustainability strategies are linked to Incidence Rate was marginally higher than to help them make their homes safer and people’s lives. This commitment from and shaped by the SDGs, with the aim Total Injuries down by 28% in 2019 because fewer hours were worked more comfortable places to work in; and one of the UK’s biggest firms to helping being that Wates should play its part as a result of the pandemic). The Group’s made offices and sites ‘COVID-secure’, us improve lives and communities is in helping to meet these shared goals. overall performance was 67% below the ensuring workplaces were safe. not only an endorsement of what we Combined LTIR (all RIDDOR HSE construction industry average for are trying to achieve, but also shows In 2021, we will continue to balance and Lost Time Injuries) 2019/20 and 57% below the Build UK A renewed environmental focus how companies can bring about and respond to the shifting priorities average2. lasting change.” and challenges the pandemic and 0.068 The pandemic has created a political and Wates evolved its long-term approach global climate crisis brings; including industry imperative to ‘build back better’. Lord Adebowale to mental health and wellbeing to focus further investment in health and Accident Incidence Rate Many people are increasingly focused on Chair of Social Enterprise UK on eradicating absence due to work- safety to protect our people; reducing reducing waste and energy consumption. (based on RIDDOR injuries related stress, empowering colleagues our use of single-use plastic; helping per 100,000 Workers) to find a better work–life balance and people back into training and involving colleagues and communities employment; and encouraging 86 in wellbeing-related initiatives. This was greater use of sustainable technology particularly relevant in the context of so we really can create the places, the pandemic, which put extraordinary communities, and businesses of pressures on colleagues and the 1 Def: see page 48 for explanation of tomorrow.” communities in which they work. environmental targets 2 Based on HSE and Build UK’s last reporting John Dunne periods (1 April 2019 to 31 March 2020) Group Director, Sustainability 1 Based on their most recent figures to April 2020.

44 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 45 Sustainability report

WELLBEING CASE STUDY: The question that Workplace wellbeing and Suicide – the ‘s’ word mental health During 2020, Wates launched a company- saved a life The lockdowns presented challenges wide campaign to raise awareness of to workplace wellbeing, with colleagues’ suicide among people in the construction Kerry, a Safety, Health and Environment Kerry immediately got in touch and health impacted both physically and industry and to support the message: Advisor, applied to become a volunteer connected Katy with one of its helpline mentally. ‘It’s OK to ask for help; it’s OK to talk about suicide’. Mental Health First Aider (MHFA) in 2017. professionals. Together with Papyrus’ During the 12-month period from support, Kerry helped Katy to find “I saw first-hand in my job some of the January 2020, Wates recorded 628 days Suicide claims one construction worker’s somewhere safe to stay and got her an mental health issues people were suffering absenteeism as a result of COVID-19 life every day in the UK; a rate that is emergency appointment with her GP with but were not comfortable speaking (not including furlough) and 3,987 days three times higher than the national the next day. about. I wanted to reduce the stigma (2019: 3,270 days) as a result of mental average, with men aged 45 to 50 being around mental health in the workplace,” health issues. most at risk. Whilst suicide rates have been increasing at an alarming rate over the she says. “That 24-hours bought The Group introduced a £150 Working from last 10 years, a report by the Association Early in 2020 Kerry, who was already Home grant to help with the provision of enough time to get her of Physicians in Great Britain warned that providing support for up to 10 people a appropriate home-office furniture. people are at an elevated risk of suicide year in the workplace, was able to use her the immediate help as a result of the psychological effects of MHFA skills outside of the workplace to needed to prevent her the pandemic, and that this will be the Supporting colleagues’ save a young girl from suicide. suicide.” mental health case for a long time. Wates’ campaign has encouraged The company continued to invest in Working together to create a Suicide Safe employees, delivery partners, family Mental Health First Aider (MHFA) training, Community, Kerry, Papyrus and Katy’s GP and friends to make time to have a with seven employees gaining Applied worked to help secure Katy a home and conversation about suicide and to not Suicide Intervention Skills Training (ASIST). to receive the specialist counselling she be afraid to discuss how they are feeling These Suicide Prevention Officers are needed. Six months later, Katy – who was or to seek help. Supporting this campaign, providing a critical role in supporting diagnosed with borderline personality Wates has developed a partnership with a 297-strong MHFA network through its disorder – is managing her mental health, over the peak furlough period between colleague. Their skills have been used to the suicide prevention charity Papyrus partnership with Papyrus, the national she has joined a gym and is now in a job April and September. Overall, the network support not only Wates staff but also its to help break down the stigma of talking suicide prevention charity. which she loves. has supported 1,600 people, either supply chain and customers as well as about mental health and suicide. The Over the course of 2020 the MHFA requesting help directly or to advise other residents and other members of the local campaign is supported by videos, posters, “Had I not been trained through Wates network saw a three-fold increase in calls employees who are concerned about a communities in which it works. webinars, discussion panels and the sharing as a Mental Health First Aider, and of experiences by colleagues who have The network ran daily ‘Virtual Drop-In’ without the help of Papyrus, I am in no been affected by suicide. sessions throughout the furlough period, doubt that Katy would have died that which then continued after people night,” says Kerry. 30% fewer days lost due to returned to their COVID-secure working “We have been working with Wates A few days after Kerry’s intervention, musculoskeletal conditions* environments. During this time, Wates for the last two years since one of she was able to turn to Wates’ MHFA rolled out a new mental health app, its employees became a Papyrus network to seek the support she herself “I noticed that the behaviour of a young ‘EveryMind’, to all employees, giving access Champion following the death of then needed. Mental Health First Aiders to a range of coping tools and support to girl who worked at my local stables, Katy, 297 his son to suicide. His trail-blazing help them deal with challenges they might was different; she was sad. When I asked “Being a Mental Health First Aider is so work in suicide prevention includes Employees trained in be facing. This included self-help, advice if she was OK, she just put her head rewarding, but it can be mentally and Seven for helping others, or guidance and delivering awareness sessions to down and said she was fine. Walking away, emotionally exhausting. The Wates Applied Suicide Intervention Skills information for colleagues to educate colleagues, making Papyrus resources I knew something wasn’t quite right. My team was there to help me through this themselves on a variety of topics. available at most construction sites, training taught me a very simple technique, experience and to give me the strength and engaging Wates to invest in which is to ask, and ask again. So, I did; to continue to support and help others.” £150 employee Working from Despite the challenges of working Applied Suicide Intervention Skills three times, before she eventually broke At the peak of the pandemic, when Home grant introduced remotely, Wates’ annual Fitness Fortnight down. I was then able to ask the question saw its biggest take-up to date, with Training. As a result, lives are being the greatest number of Wates staff saved as people gain the confidence as to whether she was self-harming or were furloughed, Kerry was dealing teams embracing technology to come was at risk of harm. It was then that she to ask the question: ‘Are you having with around two phone calls a day from together to enjoy tea and talk, quizzes, revealed that she had been storing pills thoughts of suicide?’” colleagues and managers concerned virtual yoga, salsa aerobics sessions, and a and that night was going to take her series of webinars covering sleep, fatigue, for others. She remains in touch with Joanna Hitchen, own life.” Katy, and with the twelve colleagues burnout, mindfulness and nutrition. Papyrus Katy was just 18 years old at the time. she has helped this year. Knowing about Papyrus through Wates, * Figures reflect the impact of COVID-19 and the reduction in hours worked due to the furloughing of some Wates staff.

46 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 47 Sustainability report

ENVIRONMENT SUSTAINABLE INNOVATION SDGS Changing Our Habits to Changing Our Habits Innovation key for Wates Sustainable Technology Services WSTS has a portfolio of 41 Innovation mitigate the climate crisis sustainable buildings (WSTS) – now in its fifth year of supporting Partners. In 2020 WSTS delivered bespoke A key focus for the Group in 2020 10,420 Wates and its customers – identify, trial and ‘Green Dragons’ Den’ events to a number was to raise awareness of its strategy trees planted Demand is increasing for ducts and implement suitable sustainable innovations of key customers, connecting them to so that the actions to meet the in two years services that enable sustainable in response to increasing customer demand our Innovation Partners. This has resulted targets could be mapped out with building design and offer better ways for products and services that can improve in 10 trials and 14 product implementations, customers, supply chain partners and of improving and analysing building their building’s energy efficiency and to creating significant environmental and employees. This included a series of 81% efficiency. meet their environmental targets. operational savings. webinars, blogs, industry conference of energy panel discussions and training videos. demand The Group’s ‘Changing Our Habits’ provided from campaign, which focuses on behavioural change and the need to renewable work in a more sustainable way, was sources featured in the press, on social media, on project sites and in offices, and on 8,036 all internal communication channels. tonnes of Environmental performance CO2 emissions (Scope 1 and 21) Some early improvements were In January 2020, guided by, amongst achieved in 2020, with 99% of other things, the views of customers waste diverted from landfill and a 99% and employees, Wates launched its significant reduction in the Group’s of waste environmental strategy and an average CO2 emissions from 264 engagement campaign to encourage grams per kilowatt hour (g/kWh) to diverted from everyone at Wates to ‘Change our 94g/kWh. By the end of 2020, 87% landfill Habits’. The strategy sets out the of Wates sites were using Wates’ company’s ambitious five-year single energy provider (Planet First plan to: Energy). This has resulted in a 81% increase in the procurement of Achieve zero waste from its renewable energy, putting the Group operations by 2025; eliminating well on track to achieve its goal of waste produced as a result of 100% of electricity supplies sourced materials bought and / or used from REGO-backed (renewable in the process of delivering its energy guarantees of origin) by 2021. Innovation Partner portfolio projects. 41 Despite the pandemic, the company managed to meet its objective of customer trials of sustainable innovations (2020) Achieve zero carbon from Wates planting 5,000 trees during the year, 10 operations and operational part of its ‘Treeathlon’ commitment vehicles by 2025; based on to plant 15,000 trees by the end of 14 customer implementations of sustainable Scope 1 and 2 emissions1. 2021. Since the campaign was innovations (2020) launched in 2018, a total of 10,420 Have a positive impact on trees have been planted. value of product nature from all operations by Circa £120,000 2025; increasing the value and implementations (2020) community benefit of nature in all areas where Wates operates, including project sites and offices. 1 Scope 1 – direct emissions from our place of work and owned assets, such as from a diesel generator on site. Scope 2 – from purchased electricity used to power works on site and in offices. These are indirect emissions. Scope 3 – also indirect emissions but from the supply / value chain. This includes business travel, transport emissions from deliveries, and embodied carbon from purchased goods and services.

48 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 49 Sustainability report

CASE STUDY: SOCIAL VALUE CASE STUDY: Helping customers Banking on reducing energy to net zero Creating social value In 2020, Wates Group created social for a greener future Working with sustainable innovation value of £15.2m through its education partners from WSTS, Wates FM is finding and employability programmes, its new ways to support its customers on community development projects and their journey to net zero. its work with social enterprises (SEs). MKL Innovation, a digital facilities When data from our site and contract built environment and encourage personal Further achievements during the year management company that provides digital teams is added via the Group’s Social development, have a real focus on under- included the upskilling of over 800 compliance and Internet of Things solutions, Value Portal, the figure climbs to over represented groups. At the summer people through Wates’ pre-employment became a WSTS Innovation Partner in 2019. £24m. In November, the Group launched programme, over 70% came from BAME programmes, such as ‘Construct a Career’, In early 2020, after a successful pilot with a its five-year social value strategy, backgrounds and 35% were female. 59% which complements the Building Futures major global engineering management and ‘Creating Opportunities’, including a increased their understanding about the Programme and aims to get adults back development company, facilitated by WSTS, range of undertakings underpinning its sector whilst 44% of the delegates who into work after long periods of MKL installed an energy management continued commitment to delivering completed the programme said they unemployment. system (Renegade) with Mott MacDonald, social value. would feel more confident handling new a customer of Wates FM. Despite postponing some programmes situations in the future. Living wage This is now enabling Mott MacDonald to due to the pandemic, Wates continued Following the success in 2019 in attaining track live energy and carbon emission data to engage with young people through Supporting social enterprise effectively at its office in Leeds. They can its Build Yourself education programmes, accreditation for the Wates FM business see, control and manage their operational which reached over 11,000 participants In 2020, Wates spent £7.6m with SEs. as a Recognised Service Provider (RSP) energy and data from anywhere in the during the year. This includes the Whilst some of these saw record online with the Living Wage Foundation, in 2020 world, without the need to be on site. pre-lockdown launch of the Wates Build sales because of the lockdown, others Wates Residential was accredited as a Yourself Junior programme for primary- were affected very negatively by the Recognised Service Provider, and Wates Developments was certified as a Living Boiler plant room at one of the bank’s EndoTherm installations. aged children, in which 2,085 pupils took pandemic. As a founding partner of the part. 95 more attended its COVID-19- ‘Buy Social Corporate Challenge’, Wates Wage Employer. The commitment for all parts of the Group to be Living Wage Wates Sustainable Technology secure summer programme. continues to lead the way in using SEs to RSPs by 2025 is outlined in its social Services (WSTS) is supporting Lloyds “It is a privilege to work with deliver social value, and has integrated a number of SEs into its supply chain. The value strategy. Banking Group’s efforts to tackle an energetic team and alliance Inspiring young people commitment to supporting the SE sector, climate change by helping to reduce which draws from such wealth its carbon footprint through These programmes, which are designed helping it to recover and expand is a key of experience. We all have to inspire young people to work in the objective for 2021 and beyond. sustainable innovation (SI). the power to improve and MKL’s installation (shown as the black box) Selecting and implementing SIs is influence the process of how at Mott McDonald. complex without professional guidance, our projects and buildings support and collaboration. Lloyds has interact with and impact our £7.6m spent with social enterprises been working with WSTS to identify MKL’s solution is entirely tech agnostic, environment. Sustainability which means it can scale and grow, giving potential SIs that can reduce energy and innovation is at the very use and carbon emissions, and support a long-term solution to providing valuable £15.2m social value created heart of how we design, environmental targets. data that ensures Mott MacDonald can improve, construct, commission meet their carbon targets and create WSTS organised four ‘Green Dragons’ and maintain our properties. operational efficiencies. MKL Innovation Over 11,000 young people on Wates Den’ style events; providing a platform WSTS and its Green Dragons’ intends to roll out the energy Build Yourself programme including... to connect and engage the bank’s key Den approach is an influential management system across the 2,085 primary-aged children on Wates’ decision-makers with sustainable initiative which highlights remaining 31 customer sites. innovations. new Build Yourself Junior some amazing technologies “In today’s market, customers place Using a structured value-based that can make a difference.” more emphasis on added value in decision framework, WSTS helped people upskilled through Christopher Houlding FM. They are looking for sustainable Over 800 Lloyds identify 20 SIs and products Sustainability, Engineering innovation solutions and partners Wates pre-employment programmes that met the bank’s compliance and and Resilience Manager, who can deliver them. In supporting environmental objectives. To date, Lloyds Banking Group 18 of these SIs have been selected. our business and our customers, One of these currently being trialled WSTS is helping the sector to across 14 sites is EndoTherm, an energy overcome ever more complex saving additive that reduces energy environmental challenges.” costs by up to 15%. James Gregg, Managing Director, Wates FM

50 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 51 Sustainability report

CASE STUDY: QUALITY CASE STUDY: The virtual reality of Delivering COVID-secure Quality matters summer camps Underpinning all Wates’ activities is building aspirations and skills a focus on quality. The central Quality Team is responsible for the Group’s Operating Framework, for driving best “I have learnt a great deal about practise, and for assurance, external what the workplace is like and certification audits and compliance the important skills and qualities checks. required to build myself as a During 2020, major revisions to the person and within my career. Group’s Operating Framework included I have also gained knowledge a complete redevelopment of its on paths which I never knew Prism Operating Framework, which was existed before, such as a degree delivered within a challenging timeframe apprenticeship. The CV during the furlough period. Other major presentation that was conducted changes to the Group’s suite of Operating was also very valuable to me Frameworks included the processes relating to temporary works, GDPR as it showed me how to come (General Data Privacy Regulations), mental across to employers and the health and wellbeing, family leave policy, ways I need to upskill myself.” gas installation, BIM (Building Information R.W., VWEX Student Modelling) and coordinated working drawings, temporary agency workers, tender review services, and electrical “I have learnt a lot about the installation controls. construction industry, breaking Wates delivered a series of summer Due to furlough, a number of external down previous misconceptions. transition camps in 2020 across “The Wates Building Project certification audits were delayed, resulting Overall, this experience has been four schools in London. Three of brought something new to in 22 of a targeted 25 audits being incredibly helpful for me and I completed by the year end. Despite the camps were aimed at young the students during the have gained more skills, such as the challenges of 2020, the company The pandemic brought immense challenge. As well as building employability people transitioning from primary pandemic. It was challenging presenting and teamwork, from to secondary school and one camp successfully met its non-compliance ratio challenges to the education sector and personal skills, the experience helped and exciting; many had not and impacted on the training and to broaden aspirations and provide an before I started. I have grown as worked with vulnerable young target of 1.0 with a result of 0.8. been involved in a project employability opportunities for young opportunity to learn about the varied a person from this short period people. In total, 95 young people of this scale that built During the year Wates was successfully people, with those furthest from the careers in the construction industry. of time and I have opened my attended, of whom 35% were young recertificated to ISO 9001, ISO 14001, workforce most disadvantaged. The women, with 70% coming from understanding, confidence, VWEX has made work experience eyes to more possibilities.” and ISO 45001. SES (Engineering Services) Sutton Trust’s ‘COVID-19’s: Access to BAME communities. resilience, and social skills. more accessible to people from diverse and Prism Offsite Manufacturing continue the Workplace’ report suggests that L.A., VWEX Student Young people were taken backgrounds and locations across the The camps created a safe and fun to be certificated to their respective 61% of employers have cancelled some out of their comfort zone UK, as well as building valuable skills in environment in which to learn and, standards. Additionally, Wates has or all of their work experience or and left the camps feeling interacting in professional virtual partnering with LMP Action, provided achieved certification to ISO 44001 internship placements for the environments; a skill that will be vital in a pathway back into education accomplished and extremely Collaborative Business Relationship foreseeable future. their future careers. As a result of the following lockdown whilst offering positive. Many commented Management Systems for its work on Wates responded to having to cancel success of these events, Wates engaged support to young people in an that they did not ever the Scape Framework. its Build Yourself internships and work in six further VWEX events, supporting already anxious time of transitioning anticipate achieving such a experience placements with the launch more than 150 students. It also delivered to secondary school. They included good building/outcome.” of its Build Yourself Virtual Work a virtual career insights day to more than workshops based on the STEM Amy Lalla, Director of LMP Action Experience (VWEX) event. 550 participants, including many adults curriculum, designed to encourage furthest from the workforce, which creativity and provide an insight into Partnering with Speakers for School, showcased different Wates businesses the built environment. This helped a VWEX week was held during the and shared employability skills such as students to adjust to their return to summer holiday, supporting 24 students application and interview tips. Wates school, introduced them to the idea aged 14–19 years. The week engaged will continue to deliver virtual work of a career in construction, and built students in the world of work and experience and employability events confidence, resilience and self-esteem. construction and involved a range of but is aiming to resume in-person virtual activities where delegates were engagement in 2021. set individual tasks and a group

52 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 53 XxxxxxxxxxxxTCFD

The Group aims to be carbon neutral by 2025, by eliminating its direct carbon Commitment emissions (Scope 1 and 2, operations and progress on and operational vehicles). the Task Force on Climate-related Financial Disclosures

As an official supporter, Wates is As a construction and engineering this target is recorded in the ‘Streamlined committed to implementing the business and an owner and manager energy and carbon report’ (SECR) which recommendations of the Task Force of property, the Group is exposed to follows this chapter. The Group has on Climate-related Financial both risk and opportunity from climate achieved certification from the Disclosures (TCFD). The business views change. This TCFD update has been Carbon Trust for energy and carbon STRATEGY the recommendations not only as a included alongside the ‘Streamlined management methodology since 2016. Environmental risks, including climate reference point for reporting on energy and carbon report’ (SECR) The Group’s commitment to align change and resource scarcity are included climate-related financial impacts, chapter in this document to give a financial disclosures with the TCFD and analysed within the Group’s strategic risk but also as a framework for reviewing full picture of our progress on GOVERNANCE recommendations focuses on four report, and year-on-year trends are reported. and updating the Group’s risk and environmental sustainability reporting. thematic areas: governance, strategy, The Group’s Sustainability Committee meets on a quarterly In addition, the Group’s environmental strategy opportunity management processes. Climate change is one of the most risk, and metrics and targets, as basis to oversee and guide the actions through which Wates aims to address carbon emissions, biodiversity complex risks that will affect human represented in the illustration on the is becoming more sustainable. This includes activities that loss and waste generation within the company. life in the future. It has the potential next page. aim to address waste, energy use and climate change. Specific climate change-related financial risks to harm ecosystems, human health, The Sustainability Committee reports to the Group and opportunities will be identified in As work progresses in this area, infrastructure, food and water supply Board. The Head of Environment provides a 2021. Risk scenarios will be used to information will continue to be disclosed by, amongst other things, increasing monthly report to the Executive Committee inform the strategic development in the Annual Accounts and Reports the frequency and severity of natural where environmental matters and risks that TCFD and management of the within the SECR and in the strategic disasters. are relevant to the business are discussed business. report (principal risks and certainties). and progress against targets is analysed. framework of In June 2017, the Financial Stability Board’s Task Force for Climate-related recommendations Financial Disclosures published a report recommending that climate-related risks and opportunities should be RISK ASSESSMENT METRICS AND TARGETS incorporated into companies’ risk Wates tracks environmental risk The Group has a target to be carbon management and strategic planning in the company financial risk neutral by 2025 across its operations. processes. The task force also register. The risk register is managed recommended that these risks and SECR and integrated reporting are prepared and discussed each month by the opportunities should be quantified annually, where progress is recorded using key Executive Committee (as mandated and reported on. performance indicators, including: by the Board). The Group aims to be carbon neutral • Energy intensity and absolute energy by 2025, by eliminating its direct carbon consumption from multiple fuel sources emissions (Scope 1 and 2, operations and • Percentage of energy demand operational vehicles). Progress towards from renewable sources • Carbon intensity and Scope 1 and 2 carbon emissions in accordance with the Greenhouse Gas Protocol

54 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 55 SECR

Energy performance results Carbon performance results

Energy Energy Footprint 2016 2019 2020 Footprint 2016 2019 2020 MWh Baseline year Comparative year Reporting year t/CO2e Baseline year Comparative year Reporting year Transport 28,988 42,995 17,660 Scope 1 7,984 8,936 5,911 Gas oil 13,843 12,805 7,887 Scope 2 5,784 4,903 2,124 Electricity 14,038 6,713 1,745 Scope 3 4,224 4,054 2,244 Non-renewable Streamlined Total 17,992 17,893 10,279 Electricity 0 12,470 7,359 Renewable energy and Natural Gas 3,184 10,808 3,295 Intensity ratio Total 60,053 85,791 37,946 Intensity Ratio 2016 2019 2020 t/CO2e/£m Baseline year Comparative year Reporting year carbon report Location-based 9.0 8.9 5.2 Market-based 9.0 6.9 4.1

Wates’ Guiding Framework commits the Energy and carbon strategy Energy and carbon performance commentary business to becoming more sustainable. In 2019, the Group chose to prepare a Wates takes its responsibility to reduce Operational trends Energy efficiency and carbon reduction energy consumption and CO2 emissions achievements since 2016 streamlined energy and carbon report The Group has made excellent progress seriously. (SECR) a year before it became a legal in measuring and developing its CO2 • The Group’s single energy provider, requirement to do so. Wates intends to support the UK reduction programme during 2020. Planet First Energy, has produced about government’s goal of achieving net zero £1.6m of savings since its inception in This report builds on the achievements • Absolute CO2 emissions have reduced carbon by 2050 and has made its own 2016 via buying gains and cost of 2019 to give an updated picture of by 43% from the baseline year of 2016, commitment to be zero carbon by 2025. avoidance measures. where the company stands on its journey from 17,993 t/CO2 to 10,279 t/CO2. To help reduce operational CO2 emissions, to zero carbon. • The construction business took delivery Wates will increase its clean energy • The market-based CO2 emission of its first HVO (Hydrotreated Vegetable spending for heat, power and transport intensity ratio has fallen from an Oil) fuel at one site, replacing the use of Reporting period fuels. The Group’s aim is to ensure that initial rate of 9 t/CO2/£m in 2016 to gas oil to power generators and mobile 100% of its electricity supply is from 4.1 t/CO2/£m for the year ended 2020. Wates is reporting for the calendar year plant. The Group aims to eliminate gas oil renewable sources by 2025. 2020, providing 2019 as a comparison year • 81% of all electricity used by the Group for all plant across the business by 2025. and 2016 as a baseline year. closely with Wates’ 2025 environmental Measurement methodology has been procured from renewable • Several electric vehicle charging points strategic targets, especially the Group’s sources – a total of 7,359 MWh. From Wates used an operational control have been installed across the Group’s goal to reach net zero emissions. a baseline of having zero electricity Environmental indicators approach for this report, employing a sites. The Group is planning to transition Wates also intends to eliminate the procured from renewable sources in Wates operates an environmental location-based and market-based the entire fleet to low- or zero-carbon production of non-hazardous waste from 2016, the Group is making progress management system compliant to ISO methodology. The Group’s carbon vehicles. materials bought and used in delivering towards its target of 100% renewable 14001 standards for all companies that footprint covers Scope 1, 2 and selected electricity production. • The Group has offset 7,244 t/CO2 since our projects by 2025. Scope 31 emissions for each calendar operate as part of Wates Construction 2016 through a wide range of certified year. The footprint is calculated in • The Group’s transport fuel emissions Limited. The Group’s management system schemes. ensures that it meets environmental Reporting boundary accordance with the Greenhouse Gas were reduced by 41% due to fuel standards and legislative requirements (GHG) Protocol. Outputs are reported efficiency measures and low The statutory entities included in Wates’ across all the SECR key environmental in kWh and CO2e (Carbon dioxide emission fuels. CO2 reporting boundary for this report impacts. equivalent), using the most recent are Wates Construction Limited, SES available conversions factor from the The framework of the SECR allows (Engineering Services) Limited, Wates Department for Business, Energy & companies to report voluntarily on one or Property Services Limited, Wates Industrial Strategy. more of several environmental indicators. Developments Limited, G Purchase Wates has chosen to focus this report Construction Limited, Wates Maintenance on CO2 emissions, waste and water Services Limited, Wates Group Services indicators. These indicators align most Limited and Wates Construction Services Limited.

1 Scope 1 emissions are direct emissions produced by the burning of fossil fuels by Wates. Scope 2 emissions are indirect emissions generated by the electricity consumed and purchased by Wates. Scope 3 emissions (limited to business travel) are indirect emissions produced by Wates activity but owned and controlled by a different emitter.

56 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 57 Wates Family Enterprise Trust

For more info on Wates Family Enterprise Trust go to wfet.org.uk

Wates Family Enterprise Trust

The Wates Family Enterprise Trust (WFET) Trust decided instead to run a standalone Construction Manager Gary McComb with to good causes since 2008 is an independent, UK registered charity campaign allowing employees to put a project producing and distributing visors £14.3m set up by the Wates family in 2008, with forward a group they supported for a to NHS and care home staff at the height an ambition to build communities and one-off £500 grant. Through the ‘100 for of pandemic. £825k contributed by Wates Group in 2020 improve lives beyond tomorrow. Since 500: Let’s Get Giving!’ campaign, Wates Aside from its work through Wates Giving, its inception it has donated £14.3m to Giving has contributed £48,000 so far to the Trust also made 15 awards totalling Wates people raised over , charitable activities. causes chosen by its people. £1.5m £83,000 to organisations identified by supporting 2,000+ organisations Outside of this campaign, events business units throughout the year. Independent status undertaken by Wates employees in 2020 These awards have helped projects up included a relay marathon, run by Vicki £48k donated to 96 good causes through The independent status of WFET ensures and down the country, from setting up a Thomas from the Wates Family Office in ‘100 for 500: Let’s Get Giving!’ campaign it always strives to deliver the greatest the extra mile to raise money for causes community bakery to upskill refugees in her back garden to raise money for NHS impact and public benefit from its work. in which they believe. Middlesbrough, to furnishing flats for young Charities Together, and a swim across the In 2020, the Wates Group made care leavers in Southwark,South London. English Channel by Tim Garnett and five contributions totaling £825,000 to Helping Wates’ people help friends, which raised more than £20,000 This year, two of these awards were made support the Trust’s charitable giving. people for Aspire, a charity that supports people to projects dealing specifically with the Since 2018, WFET has focused on three The pandemic has made 2020 a uniquely with spinal cord injuries. response to the initial coronavirus crisis principal areas: life opportunities for and the spring lockdown. The Trust worked challenging year for fundraising. But despite By the end of the third quarter, WFET young people; housing and homelessness; with Let Me Play to set up a fund to provide the challenges, Wates Giving will have had also made contributions totalling and sustainability. More details of the laptops or tablets to disadvantaged students awarded more than £80,000 to local groups more than £15,784 to match Give as You Trust’s work in these areas can be found who would otherwise have been unable and charities identified by Wates employees. Earn donations made by Wates’ staff, on its website – www.WFET.org.uk to study because of school closures. further demonstrating its commitment Meanwhile, in Wales, the Trust provided to communities and causes close to the “Wates could not be prouder that, much needed funding to support the Wates Giving hearts of employees. in a year when times have been sudden increase in demand at the Outside of this work, the Trust’s other tough for everyone, our people The Trust was also proud to support Cardiff Foodbank. key ambition is to foster active citizenship. have continued to give up their Wates employees in their volunteering To this end, it runs the Wates Giving time and energy to causes they efforts to help those most in need. The Conservation Volunteers programme, which provides grants for care about. They have used their Christopher Dawes from Wates projects in the communities where Wates imagination and generosity to Construction applied to Wates Giving The pandemic has not shifted the Trust’s staff live and work. Since it was established, make a difference wherever they to assist with funding for the purchase of focus from environmental issues and Wates employees have raised over £1.5m climate change. This year, a grant of £10,000 have been able to do so.” a hospital bed at East Anglia’s Children’s to support more than 2,000 organisations, Hospice’s new facility, ‘The Nook’, where was made to support The Conservation with Wates Giving boosting this Andy Wates he is a regular volunteer. The application Volunteers in its partnership with Wates contribution through matched funding. Chairman, Wates Family Enterprise Trust was fully funded for £2,525. Group. This award will enable the purchase of 5,000 trees to be planted by Wates Including Group awards, matched funding, employees in spring 2021 as part of both awards to community projects and sports In any normal year, Wates Giving funds Support during the pandemic the Trust’s and the overall Group’s sponsorship, this year’s awards total at least 100 employee-sponsored events, COVID-19 was, inevitably, a focus of many commitment to help build a greener, £167,129, demonstrating the continued helping boost colleagues’ fundraising of employees’ efforts this year. The Trust more sustainable world. commitment of Wates people to going efforts. After realising the effect that lockdown was having on fundraising, the awarded £1,500 to assist MEP Lead

58 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 59 Wates Group Board

SENIOR INDEPENDENT Jeremy Newsum NON-EXECUTIVE DIRECTOR Governance Jeremy Newsum joined the Wates Chair of the Urban Land Institute; Group Board on 1 September 2018. President of the British Property structure A Fellow of the Royal Institute of Federation; and council member of Chartered Surveyors, Jeremy retired Imperial College, London. Jeremy in 2016 after spending over 25 years became the Wates Group’s Senior leading the executive team of the Independent Director on 1 October The Group Board is comprised of the Chairman; Grosvenor Estate. He holds non- 2019 and is a member of the Chief Executive; Chief Financial Officer; Executive executive roles at Trinity College, Remuneration and Nominations Cambridge and Cambridge Ahead. Committees. Managing Director of the Construction Group Previous non-executive roles include: (consisting of Wates Construction and Wates Integrated Construction Services); three independent Wates Non-executive Directors; and four family Directors. Jonathan Oatley | INDEPENDENT NON-EXECUTIVE DIRECTOR Its primary responsibility is to promote the long-term success of the Group so it can create sustainable value Jonathan (Joe) Oatley was appointed to Non-executive Director at Carclo plc, Group Board for its shareholders. The Board seeks to achieve this by, the Board as a Non-executive Director an international manufacturer serving amongst other things, being clear about the company’s in July 2017. He was formerly Chief the medical sector and Centurion purpose and by ensuring that its goals, strategy and Executive at Cape plc – a global FTSE Group Ltd, an international oil and gas behaviours align with that purpose. listed company specialising in the services business. Prior to this, Joe spent provision of critical industrial services most of his career in the engineering to the energy and natural resources sector in a broad range of roles, sectors – for six years until 2018. Joe including Managing Director, strategy was previously Chief Executive of development and acquisitions. Joe Sir James Wates CBE | CHAIRMAN Hamworthy plc, a global oil and gas was appointed Chair of the Wates engineering business, which he joined Remuneration Committee on 1 October in 2007 and led until its takeover by 2019 and is a member of the Audit Sir James Wates has worked for the large private companies (the so-called Wärtsilä in 2012. Joe is also a Committee. company since 1983 and has been ‘Wates Principles’). Chairman since 2013. He was first He has also served in the past as appointed to the Wates Group Board Chairman of the CBI Construction INDEPENDENT NON-EXECUTIVE DIRECTOR in 1997. He is chairman of the Council, Co-chair of Infrastructure Susan Harris | Nominations Committee. Exports: UK, President of the Chartered Susan (Sue) Harris was appointed to Finance Director Retail Bank; Group Outside of the company, James is Institute of Building, Chairman of the the Board as Non-executive Director Financial Control Director and Group Chairman of the BRE (Building Research Construction Industry Training Board, in October 2019 and is Chair of the Audit Director for Lloyd’s Banking Establishment) Trust, Chairman- and Co-chair of Build UK. Audit Committee and member of Group. Since 2013, Sue has built up an designate of the Institute for Family Sir James feels passionately that good the Sustainability Committee. extensive portfolio of non-executive Business, and a Non-executive Director business, well done, is a force for good Sue is a qualified accountant and roles, currently at Cooperative Bank, of Argent Services LLP. In 2018 he was for society. In 2012 he was awarded Schroders and Co., FNZ (UK), Barclays appointed by the Government to former chair of the Audit and Assurance the CBE and in 2019 was knighted for council of the Financial Reporting UK Retirement Fund, more recently chair the coalition group developing services to business and to charity. Clarksons PLC and previously at the corporate governance principles for Council. She has held senior executive positions across the retail and banking Bank of Ireland UK and Abcam PLC. sectors, including Marks and Spencer as She had a 10-year association with Group Treasurer and Head of Corporate MENCAP, where she gained experience Development; Managing Director of social housing – a key component Finance at Standard Life, where she of Wates’ residential and property led the company’s flotation process; services offering. David Allen | CHIEF EXECUTIVE CFO of Cheltenham & Gloucester;

David Allen was appointed Prior to entering the construction Chief Executive in April 2018, industry in 2004, David worked in Timothy Wates | DIRECTOR having joined Wates as Chief Accenture’s Strategy Consulting Financial Officer in January 2016. practice and HSBC Investment Timothy (Tim) Wates joined Wates Judge Business School and is a Deputy in 1993 and has served on the Board Lieutenant of Surrey. He is a Non- Before arriving at Wates, David Bank’s Corporate Finance & from 2006 to 2008 and since 2011. He is Executive Director of Tampopo Limited was Crossrail’s Finance Director. Advisory Division. Chairman of the Wates Family Council – and Pedder Property. For six years he He had joined Crossrail in March David began his career with the Family Shareholder forum – and is was Chairman of the Coast to Capital 2009 from Laing O’Rourke, where Arthur Andersen’s Tax Practice, is a member of the Audit Committee. Local Enterprise Partnership, completing he was Finance Director for its a Chartered Accountant and holds He is also a Trustee of various Wates his two terms in July 2020. He is also a European Construction business. a degree in Modern History from Family charities. trustee of The Clink Charity. He has an St Peter’s College, Oxford. Prior to joining the Wates Group, Tim MBA from the University of Cambridge. started his career at Cazenove & Co. Tim has particular interest in housing Outside of the company, he serves on and regeneration issues, as well as the Advisory Board of the Cambridge facilitating the effective management of public–private partnerships.

60 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 61 Wates Executive Committee

Andrew Wates | DIRECTOR Andrew (Andy) Wates joined the Wates Group in Outside of the company, Andy is active in 1995. He was appointed to the Board in 2011 and is the Institute for Family Business (IFB), serving as Governance currently a member of the Remuneration Committee. a member of the National Policy committee He is Chairman of the Wates Family Enterprise Trust and Chair of the IFB South East Region. He has structure and chairs the Wates Investment Partnership, which recently served as Chairman of the Construction is the family’s long-term investment portfolio. He has Youth Trust, founded in 1961 to support young also served as Managing Director of Wates Interiors. people who are facing significant barriers to Andy chairs the Wates Foundation, an independent education, training and employment. grant-making family trust that has been supporting the In 2018 he was elected to the Court of The charitable and voluntary sector for almost 50 years. Clothworkers’ Company. He holds an MBA Before joining Wates, Andy spent six years with from Roffey Park Business School. Wates Costain Construction and John Shreeves & Partners. Executive Charles Wates | DIRECTOR Charles (Charlie) Wates joined the Wates Group commercial property sector with firms in 2005. He is founder and joint Managing including Jones Lang LaSalle. David Allen* Director of Needspace?, the company’s managed Committee Outside of the company, he is a member of CHIEF EXECUTIVE workspace division, which now comprises a the British Council of Offices and the British portfolio of seven properties across London and Property Federation. He is on the Board of the South East. He joined the Board in 2011 and is Management, Estates Committee and also Chairman of the Next Generation Committee. Finance Committee of the Royal Alexandra Before joining Wates, he was a chartered & Albert School, and he is a governor of surveyor with over 10 years’ experience in the the Emanuel School.

Jonathan Wates | DIRECTOR Jonathan ( Jonny) Wates was appointed to the Wates Business Network International; an Advisory Board Group Board in 2008, having previously served as Member for the Centre for Climate Change and Group Head of Strategy and Sales Director of Wates Social Transformations; a member of the Advisory Homes Ltd. He is a Trustee of the Wates Family Council of Commonland; a Trustee of Forum for Enterprise Trust and the William Wates Memorial the Future; an Associate at Leaders’ Quest; and an Stephen Beechey David Brocklebank Helen Bunch Trust. He chairs the Board Sustainability Committee Ambassador of the World Benchmarking Alliance. GROUP PUBLIC SECTOR DIRECTOR EXECUTIVE MANAGING DIRECTOR, EXECUTIVE MANAGING DIRECTOR, WATES DEVELOPMENTS WATES RESIDENTIAL and champions sustainability at a strategic and an He has an MBA from the Cranfield University operational level. School of Management and a master’s degree in Previously, Jonny was Founder and Chairman of the Sustainability and Leadership from the University renewable energy start up Myriad Cleaner Energy of Cambridge. Generation, and he began his career as brand manager He is passionate about encouraging biodiversity in the at International Distillers & Vintners (now Diageo). city to raise awareness of climate change, promoting Outside of the company, Jonny holds a range of community cohesion and creating a harmonious positions including: Vice Chair of Polaris – Family relationship between humanity and nature.

Philip Wainwright CHIEF FINANCIAL OFFICER AND COMPANY SECRETARY

Philip Wainwright joined Wates as Chief as a chartered accountant with Ernst & Young. Paul Chandler* John Dunne David Morgan Financial Officer in December 2018 and sits He has over 20 years’ experience in the EXECUTIVE MANAGING DIRECTOR, GROUP SAFETY, HEALTH, EXECUTIVE MANAGING DIRECTOR, on both the Group Board and the Executive construction industry and has held senior WATES CONSTRUCTION GROUP ENVIRONMENT & QUALITY WATES PROPERTY SERVICES Committee. Philip has a degree in mechanical roles in Willmott Dixon, Laing O’Rourke, DIRECTOR engineering and began his career as a graduate National Grid and the Man Group. engineer with Balfour Beatty, before qualifying

Paul Chandler | EXECUTIVE MANAGING DIRECTOR, WATES CONSTRUCTION GROUP Paul Chandler joined Wates in 2017 as Managing landmark projects, such as the Gherkin and Heron Director of the Construction Group and joined the Tower in London, as well as the Apple Campus in Group Board in 2018. He was appointed Executive California. Managing Director in 2020, with accountability for Paul is focused on bringing in the next generation Construction and Wates Integrated Construction of talent to help mould the future of the industry Services. and believes passionately that to do so the sector Before joining Wates, Paul was Executive Vice must showcase its impressive expertise and Simon Potter Paul Rowan Philip Wainwright* President at Skanska, having spent 35 years of his capabilities as it moves with the times. GROUP COMMERCIAL DIRECTOR GROUP HUMAN RESOURCES CHIEF FINANCIAL OFFICER career there. During that time, he was involved in DIRECTOR

62 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 *Directors of Wates Group Ltd 63 Directors and advisors

Governance and accounts

Wates Group Limited

ANNUAL ACCOUNTS AND REPORTS FOR THE YEAR ENDED 31 DECEMBER 2020

Contents Page Directors and advisors 65 Directors and advisors Strategic report Principal risks and uncertainties 66 Analysis of financial key performance indicators 70 Section 172 Companies Act 2006 statement 72 Directors Sir James G. M. Wates, CBE Independent BDO LLP (Chairman) auditors Chartered Accountants Corporate governance report 76 David O. Allen and Statutory Auditors 55 Baker Street Directors’ report 81 (Chief Executive) London Philip M. Wainwright Statement of directors’ responsibilities in respect of the financial statements 83 W1U 7EU (Chief Financial Officer) Independent auditors’ report 84 Paul Chandler Bankers HSBC UK Bank plc Consolidated profit and loss account 86 (Executive Managing Director, Wates Construction Group) 1 Centenary Square Birmingham Consolidated statement of comprehensive (expense)/income 87 Susan E. Harris B1 1HQ Consolidated balance sheet 88 Jeremy H. M. Newsum

Jonathan M. Oatley Company balance sheet 89 Registered office Wates House Andrew E. P. Wates Consolidated statement of changes in equity 90 and business Station Approach Charles W. R. Wates head office Leatherhead Company statement of changes in equity 91 Jonathan G. M. Wates Surrey United Kingdom Consolidated cash flow statement 91 Timothy A. D. Wates KT22 7SW Notes to the accounts 92 Telephone 01372 861000 Company Philip M. Wainwright Subsidiary undertakings 116 secretary Website www.wates.co.uk Group five-year summary 117

64 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 65 Strategic report

Strategic report PRINCIPAL RISKS AND UNCERTAINTIES

RISK AND MITIGATION 2020 ACTIVITIES RISK AND MITIGATION 2020 ACTIVITIES A. The Group is involved in activities and environments that have the The overall trends in health C. The Trade & Cooperation Agreement (TCA) came into effect The Group’s plans have been Health and potential to cause serious injury to its stakeholders, or to damage and safety incidents have been Brexit on 31 December 2020 and establishes the commercial and developed to reflect lessons learned safety property, the environment or the Group’s reputation. It is reliant on consistently good. COVID-19 transition regulatory arrangements between the EU and the UK from during 2020. This has included a largely subcontracted workforce to operate to its high standards has clearly had a significant health impact the end of the Brexit transition period. The TCA provides for rehearsing the potential impacts of a range and procedures. and the Group has adopted Site Operating movement of goods between the UK and EU to be tariff- and of Brexit-related disruptions. The Group has Procedures (SOPs) in line with government quota-free. However, ‘rules of origin’ must apply where those prepared effectively to operate within the The health and safety of all stakeholders is the Group’s number guidance. See ‘COVID-19 and the Group’s goods are of EU/UK origin. The new Agreement also requires terms of the TCA. one priority. In order to control risk and prevent harm, the Group response’ on page 8 for further details. new customs procedures, VAT reporting and additional is focused on demonstrating the highest standards of health and Other actions have continued to address documentation. It is too early to assess with confidence the safety management. This is achieved by establishing robust health areas of risk, including additional implementation of the TCA and its ramifications. There is and safety procedures and ensuring that effective leadership, working-at-height risk assessments, height a risk many of these arrangements may lead to delays in the culture and organisational arrangements are in place. The Group protection plan reviews, manager briefings shipment of goods across the UK’s borders with the EU. monitors significant health concerns, maintaining contingency plans and toolbox talks. There have also been to manage its operations and respond proportionately to any The Group continues to monitor the impact of the TCA and wider leadership briefings at various levels emerging risks, whilst always ensuring the health of all its the implications for its businesses. It has developed robust across the organisation. The Group stakeholders with whom it interfaces. plans to respond to a range of potential scenarios. This continues to monitor mental health risks, included the impact of a ‘no deal’ at the end of the transition wellbeing and fatigue. period. These scenario plans cater for changes in market conditions, complications with the movement and availability B. Demand for the services of the Group is cyclical and may be Economic and market conditions of the workforce, pressure on the supply chain, delays in the Economic and vulnerable to sudden economic downturns, a lack of confidence continue to be challenging due delivery of materials and components, changes in exchange market risk in the housing market (impacting house prices and sales volumes) to COVID-19. The Group rates and pricing impact of increased tariff and commodity and the broader economy, reductions in government and private continues to monitor the potential impact costs. The Group has included specific Brexit protection sector spending, unemployment, regulatory developments that COVID-19 will have on the economy, clauses in its contracts where this has been possible. The Group (including building and fire regulations) and increases in costs. including any consequential impact on has analysed the forward-order book and does not at present house prices, unemployment and public The Group’s strategic focus is on those market sectors in which a see a significant impact on current or future projects. Where sector spending. competitive advantage can be maintained and that have the most necessary, it carries significant inventories on projects to potential for profitable growth. To limit the impact of exposure to The business maintains close monitoring of mitigate potential delays in supplies and has a clear line of any one sector, the Group has diversified its product and service the markets in which it operates. Currently, sight of its subcontractors’ supply chain. The Group does not offering across different market sectors. Members of its leadership there is a particular focus on completing deliver any contract, projects or services to any other country team participate in political, economic and regulatory forums to second stage bids successfully. The Group in the EU. maintain effective working relationships with the Government and works for a wide range of public sector regulatory authorities. customers. This alignment to public sector D. The construction sector is highly competitive with low margins. Competitive intensity has increased organisations increases the resilience of the Competition If it does not compete effectively in its market sectors, the with some competitors accepting Group’s pipeline of future work and Group runs the risk of losing market share or trading COVID-19 related risks to chase cash continues to provide opportunities for unprofitably. Whilst service quality, capability, reputation and at the expense of margins. The duration of future growth. Specific opportunities have experience are considered in customer decisions, price often COVID-19 government support measures has been identified in market sectors such as remains one of the determining factors in contract awards. been extended and the withdrawal of these Residential. Other sectors such as property measures may increase competitive pressures The Group mitigates competitive risk by seeking to target maintenance have become more in 2021 by pushing down margins. The Group projects where it has a competitive advantage and can manage challenging. continues to be selective in the work it bids effectively both costs and risks. The risk profile of every bid is for and takes on. assessed at the estimation stage to determine whether it is in line with the strategic objectives of the Group. The Group is highly selective at bid stage and will only take on work that it can deliver effectively and profitably.

Arrows indicate changes to risk profile as a result of COVID-19.

66 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 67 Strategic report

RISK AND MITIGATION 2020 ACTIVITIES RISK AND MITIGATION 2020 ACTIVITIES E. Execution of projects involves professional judgement in Since COVID-19, project delivery is H. The Group carries a funding obligation for a defined benefit Investment strategies were Project estimating, planning, design and construction, often in operating at a new level of ‘normal’, Pension fund pension scheme. The pension fund liabilities could increase configured to limit the impact delivery complex environments. Each project could encounter with a focus on safe productivity, liabilities significantly, leading to increased pension deficit payments and, of increases in the liabilities difficulties that lead to cost and time overruns, lower drawing carefully on the experience that has been (financial risk) consequently, a reduction in capital to invest in the Group. from events such as COVID-19 and are well revenues, litigation or disputes. accumulated since the first wave of COVID-19. In diversified, ensuring a reasonable balance of The performance, risks and funding arrangements of some areas this has highlighted opportunities to risk and return. COVID-19 had some limited The Group’s activities are guided by an Operating the pension scheme are assessed regularly by the Group Board improve efficiency. Customers continue to act impacts on investment value but only a Framework that mandates rigorous policies and and the independent trustees of the pension scheme and their pragmatically when collaborating with the Group modest impact on long-term gilt yields, procedures throughout the project lifecycle. These, advisors. Investment strategies aim to limit the impact of to manage the commercial impact of necessary which are substantially hedged. combined with comprehensive management oversight, increases in the liabilities and are well diversified, ensuring a project extensions. There is an increased focus on the risk management process, project reviews, reasonable balance of risk and return. The Group has traditional risk areas such as quality. independent internal and external audits, peer reviews committed to deficit funding payments to reduce the deficit. and customer feedback, help mitigate the risk to successful project delivery. There is close scrutiny of the A loss of the Group’s key systems through a lack of resilience Although the cyber threat level financial judgements made on projects and the Group I. Systems, data, or an information security breach or attack, could impact has increased, with a high level takes a prudent view on the recognition of revenue and the successful delivery of its projects and lead to a loss of of phishing attacks during the profit. It monitors significant external issues that could cyber security and GDPR confidential data, damaging its reputation and brand. pandemic, the Group’s systems, processes impact project delivery, such as Brexit, and maintains and controls have been robust to withstand Robust controls and procedures are in place to monitor the appropriate contingency plans. these threats. The security operations centre performance of the Group’s systems and to identify and (SOC) continues to provide an additional level mitigate external threats. The Group is continually developing Liquidity risk is the risk that the Group will not be able to When the pandemic began, the Group of monitoring and support. The Group has F. and upgrading its IT infrastructure, software and cyber threat meet its financial obligations as they fall due and could maintained, but did not significantly strengthened its IT infrastructure and made Liquidity and assessment capabilities. The Group continues to develop affect its ability to invest, win work or pay staff and increase, its investment profile. Since significant investments in its systems. (financial risk) and enhance data protection procedures in line with creditors. March 2020, there has been an increased focus on Infrastructure and support processes have regulations. The controls and procedures are subject to liquidity. During the year, the strength of the balance adapted well to a changing working The Group manages liquidity such that it always has regular independent internal and external audit. sheet has improved. The business secured an environment and there have been no sufficient liquidity to meet its liabilities when they fall additional £50m line of credit under the Coronavirus significant changes to the control environment. due. The Group continually monitors and stress tests its Large Business Interruption Loan Scheme. There are liquidity position. Funding arrangements are reviewed various other re-financing options now available regularly and approved by the Group Board. The sectors in which the Group works must, over time, reduce The Group’s environmental plans were to the Group. In addition, many customers have J. The their impact on nature and the environment. This creates huge launched in 2020 with the aim of The Group has access to a £120m Revolving Credit Facility continued to pay the business promptly. See ‘Cash environment opportunities and challenges for the business. There is a risk achieving stretching targets in 2025. that remains undrawn at 31 December 2020. management’ on page 70 in the Strategic report that the Group’s activities have a harmful impact on the The pandemic slowed progress against these for further details. environment and that the business is too slow to mitigate the targets. There has, for example, been an accelerated pace of climate change, reducing competitiveness increased use of single-use materials, such The success of the Group is dependent on being able People risks are elevated because of and the business’ ability to attract and retain quality staff. G. as PPE and disposable cups, to combat the to attract and retain people that have the necessary the pandemic due to changes to site Appointing Customers are increasingly expecting the business to demonstrate spread of infection. capability, character, experience and expertise. procedures, the impact of working at and retaining how it protects the environment and reduces its carbon Competition for highly skilled and talented employees home and consequential impact on colleague However, there have been COVID-19 related talent footprint and waste. There is a risk that the right investment is significant. interaction, pressures and mental health. More drops in emissions, as a result of a significant or resources, including through the supply chain, are not in emphasis is being placed on supporting the reduction in travel, as well as a fall in energy The Group seeks to offer market-competitive place to meet the challenges from climate change. workforce, with flexible working arrangements and water consumption because the Group’s remuneration (which is reviewed regularly), excellent and a re-evaluation of the Group’s approach to The Wates Group has committed to a series of bold, ambitious non-site offices were closed for several training and career development opportunities, and to remuneration. See People report on page 16 for and deliberately stretching targets for creating zero harm to the months. be an attractive and engaging employer. The Group is further details. environment and for having a positive impact on nature. These an Investors in People Gold accredited employer. See Streamlined Energy and Carbon Report targets set out where the Group needs to be by 2025, outlining (SECR) on page 56 for relevant environmental its commitment to eliminate harm to the environment and metrics. positively impact nature. These targets focus on achieving zero waste from Wates operations, zero carbon from Wates operations and commercial vehicles and achieving a positive impact on nature from operations by 2025.

Arrows indicate changes to risk profile as a result of COVID-19.

68 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 69 Strategic report

Strategic report ANALYSIS OF FINANCIAL KEY PERFORMANCE INDICATORS

Group performance Construction Group technology, the lessons learned from the ventures delivered 374 completions (2019: focus on productivity, the environment and 493) from 15 active sites (2019: 14). Across In 2020, the Group performed well in has separately identified items that are Underlying operating profit before The Construction Group comprises both its people means the Group now has plans these sites, there are 1,784 properties extremely challenging circumstances. considered to be exceptional because of interest and tax was £16.0m (2019: £39.0m). Wates Construction and SES, the Group’s in place to permanently adapt its working (2019: 2,130) still to be completed. Group turnover, including the Group’s their size or non-recurring nature: Underlying operating margin was 1.1% mechanical and electrical subcontracting practices to better fit the needs of its share of joint ventures’ and associates’ (2019: 2.4%) and underlying profit before business. Construction Group turnover, • Government grant income of £7.7m employees, customers and supply chain as turnover, fell by 11.3% to £1.45bn tax (and before tax of joint ventures and including its share of joint ventures, was Property Services (2019: £nil) received under the Coronavirus it moves forward into 2021 and beyond. (2019: £1.63bn). Total operating profit associates) was £13.1m (2019: £36.2m). £808.3m (2019: £922.7m), 12.4% down on 2019. Job Retention Scheme in respect of Wates Property Services consists of the including exceptional items and before furloughed employees The Group’s underlying EBITDA fell by Prior to the pandemic, Wates Construction Living Space, Facilities Management and interest and tax fell to £4.6m (2019: £39.0m). Residential £22.7m to £26.1m (2019: £48.8m). was forecasting strong growth into 2020. Smartspace business units. Turnover, The overall operating margin including • Furlough costs of £12.5m (2019: £nil) When the pandemic hit in March the Turnover for Residential, including share of including its share of associates’ turnover, exceptional items fell to 0.3% (2019: 2.4%). consisting of salary costs paid to staff The forward-order book increased by business worked quickly and efficiently joint ventures, increased by 21.1% to £153.4m was £419.0m (2019: £476.9m), 12.1% down Profit before tax including exceptional whilst on furlough who were therefore 13.5% and finished the year at £6.6bn with all stakeholders to review and revise (2019: £126.7m). Residential works continued on 2019, reflecting the impact of the items (and before tax of joint ventures not performing any services for the Group (2019: £5.9bn). site operating procedures. These revised on behalf of its public sector partners to pandemic on the business. and associates) of £1.7m (2019: £36.2m) deliver planning for development on publicly • Restructuring costs of £6.7m (2019: £nil) The Group’s statutory profit before tax procedures meant that 97% of sites were Living Space and Smartspace experienced was down 95.3% on the previous year. owned brownfield sites, including in 2020, consisting of the costs of redundancy fell to £0.8m (2019: £34.6m) with statutory closed for less than three days and this the greatest impact from the pandemic, strategically important sites in Harrow, In order to provide users with a clear and associated with the Group’s redundancy turnover of £1.38bn (2019: £1.55bn). work, combined with a relentless focus on with many customers in both social housing Havering, Cardiff and Lee-on-the-Solent. consistent presentation of the underlying programme productivity, has allowed the business to maintenance and fit-out postponing A list of key performance indicators is In 2020, planning permission was achieved financial performance of the Group, it continue to deliver for customers whilst works during the first lockdown in the included on page 2. for 254 residential units (2019: 1,077) with consistently meeting the requirements of second quarter of 2020. Living Space is decisions pending in relation to applications evolving government coronavirus advice. now operating at budgeted levels of for a further 1,700 units (2019: 218). House activity, whilst Smartspace continues to Cash management £million For SES, 2020 began with a continuation building through joint ventures and public see a reduction in new opportunities. of the previous year’s strong underlying sector collaborations delivered 173 As illustrated in the adjacent graph, the The Facilities Management business has 200.0 performance. The key areas of focus were completions (2019: 290) from 20 active sites Group maintained a strong cash position been least affected by the crisis, with efficient operational performance, the (2019: 17). Across these sites, there are 509 throughout the year. The Group’s average most activities continuing as normal. ongoing reduction of overheads and driving properties (2019: 612) still to be completed. daily gross cash balance during the year, profitability while delivering a sustainable excluding cash held in joint ventures and 150.0 The business also operates as a contractor The business reacted quickly to the level of turnover. However, despite for public sector customers and has pandemic, rapidly reducing its cost base restricted cash, was £166.9m (2019: £71.0m). quickly evolving its operating procedures The Group’s average daily cash balance worked on residential projects in the year and adapting to new ways of working. 100.0 the subsequent impact of the pandemic containing 776 residential units (2019: 240). With established leadership in place, all (net of debt and excluding cash held in has led to reduced turnover as COVID-19 joint ventures and restricted cash) during business units remain resilient with a delays impacted the third-party sites strong forward-order book of £1.47bn. the year was £88.0m (2019: £29.5m). The where SES were working. Developments Group finished the year with cash at bank 50.0 Turnover for Developments, including of £215.9m (2019: £142.2m) including £4.3m Across all of the Construction Group, Needspace? share of joint ventures, fell by 37.3% to of restricted cash (2019: £4.9m). The Group the challenges posed by COVID-19 have £64.9m (2019: £103.6m). The business controls Needspace? provides flexible serviced has in place a revolving credit facility of - highlighted the strength and resilience of 4,343 acres (13,601 plots) of privately owned office space to small and medium-sized £120m (£120m undrawn at 31 December its people as well as the quality and depth land (2019: 4,277 acres, 13,730 plots) on which entities from seven centres across London 2020), which expires in March 2023 and a of its relationships with both customers it seeks to obtain planning permission for and the South East. In December 2020, Coronavirus Large Business Interruption (50.0) and supply chain. Work-winning activity 2019 net cash (excluding share of joint ventures and restricted cash) residential development. In 2020, planning an external valuation of the portfolio Loan Scheme facility of £50m with the has continued throughout the pandemic 2020 net cash (excluding share of joint ventures and restricted cash) permission was achieved on no residential suggested that its value had reduced Group’s existing lenders, which was fully with an order book set to drive strong units (2019: 63) with decisions pending in by £2.5m (to £51.0m in total). During 2020, drawn at 31 December 2020 and which available. The Group has no other external which will be repaid in equal instalments future turnover growth. The Group has relation to applications for a further 5,339 an average of 92,924 square feet (2019: expires in October 2023. In March 2020 the financing debt. The Group ended the year between 30 April 2021 and 31 March 2022. also maintained its cash balance and units (2019: 3,257). 104,226 square feet) of floor space was business drew the balance of its Revolving with net cash of £161.6m (2019: £110.3m). Wates Group Limited (the company) posted excellent profits in the year. The occupied, being 74% (2019: 83%) of Credit Facility (RCF) on a precautionary basis. The Group has used the Government’s undertakes a trade in finance by offering business has also evolved significantly In addition to three land transactions available space. The entire £120m of this RCF was repaid VAT Deferral New Payment Scheme and services to the Group and controlling and during the pandemic. The better use of (2019: four), house building through joint by the end of October 2020 but remains at the end of the year owed £21.7m, managing bank facility arrangements.

Pensions Cash flow The defined benefit pension scheme, (2019: £19.7m). The reduction in the deficit was £345.3m (2019: £311.0m). There was Inflows from Group operating activities of joint ventures of £14.2m (2019: £40.0m), The inflow from Group operating activities which is closed to future accrual, has been was primarily the result of contributions an actuarial loss in the year of £6.3m £52.2m (2019: £64.0m) and amounts received purchase of fixed assets of £3.1m (2019: is after deficit funding contributions to valued in accordance with FRS102. At 31 from the Group. The market value of the (2019: £1.8m). Pension charges of £0.2m from joint ventures of £23.3m (2019: £23.7m) £11.2m) and dividends paid of £7.4m the pension fund of £8.4m (£2019: £9.1m). December 2020, the pension scheme had scheme’s assets was £323.5m (2019: £287.2m) (2019: £0.6m) were made to the profit and were partially offset by amounts paid to (2019: £10.4m). a deficit (net of deferred tax) of £17.7m and the net present value of the liabilities loss account in accordance with FRS102.

70 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 71 Strategic report

SECTION 172 COMPANIES ACT 2006 STATEMENT

Shareholders’ funds This report sets out how the directors deficit within the next six years whilst The strategy meetings also gave the the businesses detailed above in a way In setting the long-term strategic plan, comply with the requirements of Section ensuring that the business has the Board the opportunity to determine that balances expected returns and the as well as the day-to-day management of Shareholders’ funds fell by 6.8% 172 Companies Act 2006 and how these capacity to maintain financial resilience where the Group’s available capital should risks caused by changing economic and the business, the Board considers the key to £142.0m: requirements have impacted the Board’s and invest in opportunities that will be invested. Investments will be made in market conditions. stakeholders referred to in the table below. £m decision making throughout 2020. generate cash, profits and reserves in the future. The negotiations progressed Shareholders’ funds Engaging with stakeholders to deliver satisfactorily and resulted in future annual at 31 December 2019 152.4 long-term success is a key area of focus contributions remaining constant at the EMPLOYEES for the Board and all decisions take into Profit for the financial year 1.5 same time as de-risking investment risk. account the impact on a wide range of HOW THE GROUP ENGAGES OUTCOMES FURTHER DETAILS Pension movements (4.6) stakeholders. Views of stakeholders are The Board annually approves an updated Dividends (7.4) gathered in Board papers and inform strategic plan (most recently the 2021 • Group annual roadshow led by the Chief • Announcement of enhanced family leave policies, • ‘COVID-19 and the Group’s the decisions made in Board meetings. to 2023 strategic plan) and monitors its Executive (the roadshow was conducted signalling the intent to be an inclusive employer response’ Currency translation difference 0.1 Obviously, stakeholders are impacted implementation throughout the year virtually in 2020) on pages 8–15 • Communication on approach to flexible working by, or benefit from, decisions made by using detailed reports on operating and Shareholders’ funds • Biannual employee survey and office closures (in line with government • ‘People’ on pages 16–17 the Board in different ways. However, it financial performance. In approving the at 31 December 2020 142.0 guidance) is the Board’s priority to ensure that the plan, the Board considers factors such as • Site and office visits by shareholders, directors have acted both individually and competitor behaviour, the performance directors and members of the Executive • Communication providing information about the Tax collectively in the way that they consider, of the construction industry, as well as Committee actions the Group is taking to become more The Group’s tax liabilities arise and are in good faith, would be most likely to the evolving economic, political and inclusive, diverse and anti-racist • Video content from the family and met fully within the UK. The tax charge promote the success of the Group for market conditions. In January 2020, the executive directors • To ensure the long-term success and prosperity of for the year (including joint ventures and the benefit of its members as a whole Group launched its environmental the Group the Board had to make some challenging associates) was £0.1m (2019: £8.0m), which with regard to all its stakeholders and to campaign setting out its sustainability • Group-wide newsletters and emails decisions around furlough, temporary pay cuts gave an effective rate of 7.9% (2019: 22.0%). the matters set out in paragraphs a–f of ambitions (see page 48 for further details) • Social media channels (that have subsequently been repaid), redundancies This compares to the UK mainstream Section 172 of the Companies Act 2006. and will continue to consider its response and a reduction in agency staff. corporation tax rate of 19%. The current to climate change and biodiversity loss. • Intranet blogs The Board established a list of strategic • These decisions protected jobs for many of the year tax charge is less than the UK Long-term strategy and vision • Group leadership calls for messaging priorities that are to be addressed by Group’s employees. mainstream corporation tax rate due cascaded to workforce to short-term differences. The Board operates a forward agenda of management throughout 2021. The Board • The pay of all furloughed staff was topped up by standing items appropriate to the Group’s will monitor and guide progress against • Webinars (including ‘Inclusion Month’) the business to a minimum of 70% of their full salary. operating and reporting cycles. Items these priorities during 2021. • Emails from the Chief Executive Dividends requiring Board approval or endorsement • Pay rises approved from April 2021 Some specific 2020 outputs have included Dividends of £7.4m (2019: £10.4m) were are defined clearly. These include strategy the reorganisation of the Group to declared in 2020 in respect of 2019 and key contracts, as well as items required intensify its focus on the opportunities performance and paid on 27 March 2020 by law and regulation. The Board monitors that lie ahead. Smartspace has become (2019: 8 April 2019 and 11 November 2019). or reviews progress against strategic part of Property Services, giving that CUSTOMERS No dividends will be declared in respect priorities, risk management, health and division greater critical mass. Residential of the Group’s performance in 2020. safety or the adequacy of internal controls. has become a standalone business unit HOW THE GROUP ENGAGES OUTCOMES FURTHER DETAILS The Group anticipates that dividends During much of 2020, the Board’s focus (with leadership representation on the will be paid in respect of the Group’s has been primarily on the Group’s response Executive Committee) to help the Group • Regular customer engagement surveys by • Review by the Board of Net Promoter Score (NPS) • ‘Healthcare case study’ performance in 2021. to the pandemic (see ‘COVID-19 and the prioritise and strengthen its relationships external companies survey outcomes on a monthly basis to monitor on page 20 progress in improving customer engagement Group’s response’ on pages 8–15). The with key public sector customers. SES, • Meetings (either face-to-face or virtually) • ‘Cash management’ on Wates Giving Board convened outside of the regular Wates Building Services and Prism were • Positive feedback received from customers page 70 in the Strategic meeting schedule on 14 occasions to being brought together to form Wates • Contract negotiation, ongoing The Group continued to contribute to (e.g. on the Group’s work at The Royal London Report consider the Group’s response to the risks Integrated Construction Services, which management, site visits etc. Wates Giving, the charitable programme Hospital extension) and opportunities created by the pandemic. will help drive and coordinate the Group’s of the Wates Family Enterprise Trust • Indirect engagement through the Group The Executive Committee also met on efforts to integrate its delivery capabilities • Regular, effective and collaborative communication (WFET). In 2020, this support amounted to website, social media interaction, project 20 additional occasions to consider the (including through modern methods of with customers about the Group’s efforts to £0.8m (2019: £1.5m). WFET’s focus themes reports and marketing materials Group’s response to the pandemic. construction). Developments will invest in mitigate the effects of the pandemic on their are: life opportunities for young people, new house building joint ventures, in its • Communication about changes to projects and contracts housing and homelessness and The Board has been involved in Development Agency Services offering, legislation (e.g. Domestic Reverse sustainability. negotiations with the Pensions Trustee • Delivering safely, to a high quality, on time and in and in its new Partnerships business, which Charge VAT) on both investment strategy and future line with contractual requirements will allow the Group to participate in the deficit repair contributions. The • Quarterly newsletter entire lifecycle of projects from land negotiations have focused on finding the acquisition through to the maintenance appropriate balance between funding the of the assets it creates.

72 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 73 Strategic report

SUPPLY CHAIN SHAREHOLDERS HOW THE GROUP ENGAGES OUTCOMES FURTHER DETAILS FURTHER HOW THE GROUP ENGAGES OUTCOMES DETAILS • Dedicated team responsible for supply chain • Supporting partners through changes in regulation • See ‘Principle 6 – relationships (e.g. Domestic Reverse Charge VAT) stakeholders’ on • The Group interfaces with shareholders through away • The directors have a regular dialogue with its • See ‘Corporate page 78 days, corporate events, interaction with the Wates family members, through both the members of the Board governance • ‘Meet the buyer’ events • The Group’s consistent approach with its supply office and through the Group Board (five members of and other shareholders, enabling them to establish report’ on chain over many years, put it in a good place to • Email bulletins to suppliers (including changes the fourth generation of the Wates family are members the issues most important to them pages 76–80 respond effectively to COVID-19. The Group in regulations) of the Group Board) implemented improved site communications, • Strategic plan agreed for 2021-2023 • Annual General Meeting (AGM) • Health and safety training health and safety and amenities in response to • The reorganisation of the Group in 2020 focused COVID-19 • Supply chain workshops • Preparation of the annual report helps shareholders on opportunities that meet the long-term • Compliance with the Prompt Payment Code, understand the business and the performance in the year requirements of the shareholders • Meetings (either face-to-face or virtually) ensuring that at least 95% of invoices are paid • Contract negotiation, ongoing management, within 60 days site visits etc. Standards of business conduct 2020 2019 Taxes paid in the year (note 1) Notes £000s £000s • Indirect engagement through the Group The Board is keenly aware of the need to website, social media and project reports maintain high standards of business conduct. Taxes borne by the Wates Group Sir James Wates (Chairman), on behalf of Corporate income tax (receipts)/payments (334) 6,204 the Secretary of State for Business, Energy and Industrial Strategy, chaired an industry Employment-related taxes 2 27,185 29,480 FINANCIAL INSTITUTIONS group on corporate governance for large Other taxes 3 5,211 5,715 privately owned companies in 2018. 32,062 41,399 HOW THE GROUP ENGAGES OUTCOMES FURTHER DETAILS The Group has a strong ethical culture, Taxes collected for HM government underpinned by its purpose, behaviours (in addition to taxes borne above) • The CFO and treasury function meet • Financial institutions gain a stronger understanding of the • ‘Cash management’ and its Code of Conduct. The Code of regularly with banks and providers of Group’s performance and operations on page 70 in the Conduct sets out the standards that all Employment-related taxes 4 59,771 67,046 bonds Strategic report • Approval and draw down of £50m additional funding through employees of Wates must follow. VAT 5 15,064 52,740 • Presentation of annual budgets and the Coronavirus Large Business Interruption Loan Scheme The directors take very seriously their 74,835 119,786 strategic plans • Ongoing covenant compliance and strong average daily net responsibility to ensure the Group is a good • Quarterly performance reporting cash of £88.0m (2019: £29.5m) corporate citizen. Business creates wealth that, through taxes, delivers the investment Total tax contribution which, if properly managed by politicians, (taxes generated by the Group from Wates Group activity) 106,897 161,185 leads to a fairer and more prosperous society. Government grant income received 6 (7,727) - COMMUNITIES AND ENVIRONMENT In 2020, the Group (including its share of joint ventures) contributed taxes, all within the UK, Total tax contribution (taxes generated by the Group 99,170 161,185 HOW THE GROUP OUTCOMES FURTHER whether borne by the Group or collected on from Wates Group activity) net of government grants ENGAGES DETAILS behalf on HMRC of £106.9m (2019: £161.2m). received The Group accessed funding of £7.7m through Notes • Local community events • In 2020 the Group spent £7.6m on SEs, taking the cumulative spend to £29m. Since • ‘Sustainability the Coronavirus Job Retention Scheme in 1) All taxes are paid in the UK; none in other jurisdictions (e.g. ‘Meet the buyer’) the engagement with SEs began in 2007, over £51m of social value has been created. report’ on 2) Employer national insurance contributions, income tax paid on benefits in kind and apprenticeship and CITB levies respect of furloughed employees. The Group 3) Business rates, insurance premium tax, stamp duty land tax, irrecoverable VAT, fuel duty and vehicle and other taxes pages 44–53 is proud of the part it plays in the industry’s 4) Income tax and employee national insurance contributions deducted from salaries and wages • Focused expenditure with • The Group launched its social value strategy ‘Creating Opportunities’ 5) Net VAT collected and paid. Payments in 2020 were lower due to the Group utilising the Government’s VAT Deferral social enterprises (SEs) • ‘Wates Family contribution through its economic activity. New Payment scheme. • The Group continued to contribute to Wates Giving, the charitable programme Enterprise Trust’ 6) Government grant income received through the Coronavirus Job Retention Scheme in respect of furloughed employees • Direct engagement of the Wates Family Enterprise Trust. In 2020, this support amounted to £0.8m on pages 58–59 through membership (2019: £1.5m) taking the total amount given since 2008 to £14.3m. The Board has also approved the Group’s policies on anti-slavery and human trafficking and anti-bribery and corruption (which can all be of the Considerate found on the Group’s website www.wates.co.uk). The Board has also considered the data, and narrative, relevant to the Group’s gender pay • Information on the Group’s environmental strategy and engagement campaign Constructors Scheme reporting in preparation for external publication, including proposed improvement plans to enhance performance. and environmental impact can be found on page 48 • Support of charitable Approved by the Board of Directors on 9 March 2021 and signed on its behalf by: • Wates can shape best practice in the industry and influence national and local programmes policy on climate change in the built environment • Member of UK Green • Creating jobs locally and engaging in local communities where the Group works Building Council (UKGBC) • Supporting young people into the workplace Sir James G. M. Wates CBE D. O. Allen Chairman Chief Executive

74 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 75 Corporate governance report

Corporate governance report

For the year ended 31 December 2020, under The Companies Principle 2 – Principle 3 – To support good governance the Audit (Miscellaneous Reporting) Regulations 2019, the Company has applied Board composition Director responsibilities Committee regularly reviews the the Wates Corporate Governance Principles for Large Private relationship with the external auditors Companies (published by the Financial Reporting Council (‘FRC’) The Board comprises a separate Chairman The Board has a programme of eight and has a policy that, at least every 10 in December 2019 and available on the FRC website). The following and Chief Executive to ensure that the principal meetings every year, plus an years, the external audit will be considered paragraphs summarise how the Group has applied the principles balance of responsibilities, accountabilities additional day for strategic planning. As for re-tender. The Group commenced a over the past year. and decision making across the Group part of every Group Board meeting, the tender process in 2019 that resulted in are maintained effectively, as well as a governance of the Group is included as BDO LLP becoming the statutory auditors. The Group’s website contains further supporting information Chief Financial Officer, Executive a standing agenda item. The Board’s key The Board will recommend reappointment on the Wates Principles Managing Director Wates Construction areas of focus in 2020 are noted in the of BDO for 2021. (www.wates.co.uk/who-we-are/corporate-governance/). Group, three independent non-executives ‘Section 172 Companies Act 2006 report’ and five family members (including the on pages 72–75. Chairman). This size and composition is Principle 4 – The Board receives regular and timely appropriate to the Group’s large yet opportunity and risk information on all key aspects of the Principle 1 – focused business. Independent non- business, including health and safety, The Board seeks out opportunity whilst executive directors bring experience in purpose and leadership risks and opportunities, the financial mitigating risk. The Company’s key property development, engineering, performance of the business, strategy, operational risks and mitigations are The Group continues to be governed finance and audit, in addition to operational matters, market conditions outlined in the Strategic report (and are by the Guiding Framework ‘Creating perspectives and challenge from outside and sustainability, all supported by Key denoted as ‘Principal risks’). The Board also Tomorrow Together’, which defines its the sectors in which the Group operates. purpose, goals and behaviours. Performance Indicators (KPIs). considers all major projects (as defined by The directors acknowledge that there is their value and risk profile) and approves In response to the pandemic, the Group The focus of the Board during much of a relative lack of diversity on the Board, them before any bids are finalised. heightened its focus on cash management 2020 has been on the Group’s response in particular when compared to the through weekly meetings attended by In previous years, the Group had an active to the pandemic – see page 8 for further diversity and inclusion targets that were various members of the Executive Risk Committee, consisting of Executive details. The goal of being “trusted” is approved by the Board in 2019. The Board Committee and senior members of the Committee members and business unit about ensuring that the Group has a is committed to developing a more finance team. On a precautionary basis, and functional leads, which ensured that reputation as one of the most trusted diverse workforce, including at the most it determined that it would be prudent inherent and emerging risks were identified businesses anywhere, that it invests in its senior levels. people and supply chain, that it treats to draw down the Revolving Credit Facility and managed appropriately and in a timely them fairly and that it manages its risks The most recent formal effectiveness in full (for six months) and to investigate manner. In 2020, the Group made an active In 2020 the Group announced a complete the next five years of its community and delivers its promises, safely, on time, review of the Board (by an independent the potential for accessing loan funding decision to disband this committee as it overhaul of its family-friendly policies, investment and engagement. The strategy at the right quality and without financial external advisor) took place in 2019. via the Coronavirus Large Business was deemed more appropriate for this which now offer a number of industry- ‘Creating Opportunities’ aims to: surprises. The review assessed that the Board was Interruption Loan Scheme. The Board responsibility to be managed directly by leading benefits. Paternity leave has been • Challenge inequality; competent and well run and had the regularly reviewed the Group’s cash flows, the Executive Committee. This was, in increased to eight weeks full pay and To drive the Group towards achieving potential to become even more effective whilst considering potential downside part, due to the heightened risk that came maternity leave has been increased to its goal of becoming more ‘progressive’, • Inspire and educate young people by clearly aligning its agenda to strategic scenarios, and deemed it appropriate to from the COVID-19 pandemic as well as 26 weeks full pay (and a further 26 weeks a new diversity and inclusion plan was about careers in the built environment; development, encouraging all directors access the available funding to further the Brexit transition. Day-to-day risks are Statutory Maternity Pay). The Group has introduced in 2019. In October 2020 the and to share their thoughts, observations support the strong levels of financial managed by the Business Unit Boards Group celebrated its first ‘Inclusion Month’, also introduced carers’ leave, ensuring staff • Support and scale the social and instincts for the benefit of all, and resilience. The Revolving Credit Facility and then consolidated and reported which kick-started an organisation-wide can take up to four weeks unpaid leave enterprise sector. engaging the whole Board more routinely was repaid in full in October 2020 as it through the Executive Committee to conversation on inclusion and helped in a year, and bereavement leave at two in the active management of investor was not required and this facility remains the Group Board. raise awareness of the everyday actions weeks full pay if one of its employees Wates is driven by its purpose of relations. The Board has been mindful undrawn as at both 31 December 2020 and that help and hinder inclusion. This was loses a member of their immediate family. The focus of the Executive Committee working together to inspire better ways of these findings during the year as it the date of this report. The Coronavirus supported by some excellent events that The new policies will help attract and and Board has been considering the of creating the places, communities responded to the pandemic. A formal Large Business Interruption Loan Scheme were organised by the Group’s Inclusion develop a diverse workforce with an risks, mitigations and opportunities and businesses of tomorrow. Delivering review is planned for 2021. facility of £50m was fully drawn in and Diversity team. inclusive mindset, as well as helping to associated with the pandemic and the social value is intrinsic to that purpose October 2020 and remains fully drawn close the gender pay gap by enabling and to its goal of being a progressive A biography for each Board director Group’s response to it. They have focused The Group is committed to having a at both 31 December 2020 and the date more sharing of responsibilities at work and responsible employer. By considering can be found on the Group’s website on ensuring the Group could continue to workforce that more accurately reflects of this report. At no point did the Group and home. social value in its business decisions, www.wates.co.uk/who-we-are/ and operate through the pandemic, reviewing society, and despite the distraction caused foresee a breach in its banking covenants. including the way it employs staff, on pages 60–62. site operating procedures, ensuring by the pandemic, is making progress As part of the Group’s drive to become engages with communities and buys The Board approves an updated strategic colleague welfare, health and safety and against the challenging targets it set to more ‘sustainable’, the Group has set products and services, it can cultivate plan for at least the next three years on working with the supply chain to handle achieve this by 2025: targets as part of its environmental a more sustainable and inclusive society, an annual basis. For details of the output pandemic and Brexit uncertainties. They strategy and engagement campaign – • 40% Female (2020: 22%) and demonstrate that business done of the strategic plan see the Section 172 have had to manage the impact on the these are discussed in detail within the well can be a force for good. This social Companies Act statement on page 72. Group’s financial performance of lower • 20% BAME (2020: 11%) ‘Sustainability report’ on page 48. value strategy is rooted in the Group’s • 3% Disability (2020: 1%) In November, the Group launched its belief that how it does business is as • 5% LGBTQ+ (2020: 1%) social value strategy which will steer important as what it does.

76 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 77 Corporate governance report

COMMITTEE INFORMATION

levels of activity, revised customer needs and the suspension of pay rises has been zero-harm working environment has 2020 has been a year that has required Group Board and expectations, of unbudgeted items, lifted. These are discussed within the resulted in an industry-leading performance significant stakeholder engagement as such as the costs of the Group-wide ‘Section 172 Companies Act 2006 report’ for four consecutive years. many of the decisions made by the Details of individual directors’ attendance of Board meetings in 2020 are shown in the redundancy programme, the net costs on pages 72–75. Board have had direct implications on following table: The Group continues to publish data of furloughing staff (whilst subsidising a its stakeholders and in particular on its The Group engaged an external reward evidencing its payment performance as proportion of their pay) and the additional employees. Stakeholder engagement is Maximum no. No. of specialist in 2018 to advise on the part of the duty to report on payment financing costs associated with drawing discussed in detail within the ‘Section 172 of Principal Principal Board Percentage of restructuring of its Executive incentive practices and performance. The speed down bank funding on a precautionary Companies Act 2006 report’ on pages Board Meetings Meetings Principal Board arrangement. This scheme was successfully with which contractors pay their basis. The Executive Committee (as 72–75. director could director Meetings delegated by the Board) also considers implemented in 2019. Due to the financial suppliers is a key area of focus within Name of director attend attended attended risks as part of the day-to-day management results of the Group, the Remuneration the construction sector. One of the key Chairman of the business. These risks are discussed Committee recommended that no metrics is the number of invoices paid The role of the Board further on pages 66 to 69. bonuses would be paid in respect of 2020 within 60 days. The Prompt Payment Sir James Wates 8 8 100% The Board’s primary responsibility is performance. The directors’ remuneration Code requires members to pay at least The introduction of the Wates Corporate to promote the long-term success of Executives is disclosed on page 99 (note 6). 95% of invoices within 60 days. The Governance Principles for Large Private the Group so it can create sustainable Group predominately trades through two David Allen 8 8 100% Companies has highlighted a need for In 2020, management’s focus has been shareholder value and contribute to statutory entities that operate as a main Chief Executive the Executive Committee to focus on on a second phase of the remuneration society. The successful delivery of the contractor and report their payment Philip Wainwright 8 8 100% opportunities as well as risks, and this has review with the aim of ensuring that the long-term plans relies on key inputs and performance externally. For the six-month Chief Financial Officer now been incorporated into the monthly principles of the Executive incentive positive relationships with a wide range period ending 31 December 2020, Wates Committee meetings. Some of the arrangement are applied to the wider of stakeholders. The Board seeks to Paul Chandler 8 8 100% Construction Limited has paid 97% of opportunities that have been considered employee population. Despite the delays achieve this by setting out its strategy, Executive Managing Director its invoices within 60 days (H2 2019: 96%) include leveraging the Group’s extensive caused by the pandemic, this review monitoring performance against the Wates Construction Group and Wates Property Services Limited has frameworks, additional investment has established a set of fundamental Group’s strategic objectives and paid 98% of its invoices within 60 days Non-executives – family opportunities, maximising the integration principles that will be adopted for 2022 reviewing the Executive Committee’s (H2 2019: 94%). of the Group’s delivery capabilities, cost and beyond. The Group will be operating implementation of the strategy. Andrew Wates 8 8 100% rationalisation, and the potential impact under its existing remuneration Additional activities oriented towards Charles Wates 8 8 100% A formal schedule of matters reserved of the Group’s diversity and inclusion, arrangements for the wider employee ensuring strong relationships with for Board approval is maintained and Jonathan Wates 8 8 100% social value and carbon reduction plans. population in 2021. stakeholders are detailed in the Section reviewed regularly for operational Timothy Wates 8 8 100% 172 Report on pages 72-75. The Group continues to publish its gender relevance. This includes determining the Non-executives – independent Principle 5 – pay reporting externally. The diversity Group’s strategy and long-term direction, remuneration and inclusion plan includes changes that reviewing health and safety performance, Susan Harris 8 8 100% should lead to improvements in this area. approving budgets, capital expenditure, Jeremy Newsum 8 8 100% The Remuneration Committee’s primary organisational changes (including new Jonathan Oatley 8 8 100% objective is to set remuneration at a level business ventures, the acquisition or Principle 6 – that will enhance the Company’s resources disposal of assets) and changes in key In 2020 the Group Board convened an additional 14 times following the outbreak of the coronavirus crisis in by securing and retaining quality senior stakeholders policies. The Board also monitors the March to discuss and provide guidance on management’s response to the crisis and to support and approve management who can deliver the Group’s the implementation of protective measures in the interest of the Group and its wider stakeholders. The Board is clear that good governance effectiveness of the Group’s systems of strategic ambitions in a manner consistent and effective communication are essential internal control, governance and risk with both its purpose and the interests of on a day-to-day basis to enable the management. its shareholders. Audit Committee business to fulfil its purpose and to The Board delegates authority for all The Committee’s primary responsibilities objectives and responsibilities relating The impact of the pandemic had an protect the Company’s brand, reputation day-to-day management of the Group’s are the integrity of the Group’s financial to financial reporting, internal controls, immediate significant financial impact on and relationships with all its stakeholders affairs to the Executive Committee. statements, the effectiveness of internal risk management and the application of the Group’s performance. To respond to including shareholders, customers In addition, certain governance controls, the performance of the internal appropriate accounting standards and this, the Board implemented several (including government), employees, responsibilities are delegated to Board audit function, the performance and procedures. Specific responsibilities measures that impacted the remuneration suppliers, financial institutions and the committees, which support the Board in independence of the external auditors, include reviewing and recommending for of the workforce, including temporary communities in which it works. carrying out its duties. These committees pay cuts (April to June) and the suspension and the Group’s compliance with legal approval the annual financial statements, The health and safety of the Group’s are made up of independent non- of pay rises that were intended for the and regulatory requirements. reviewing the Group’s accounting policies, employees (and other stakeholders) remains executive directors, together with second quarter of the year. Temporary reviewing the effectiveness of internal its number one priority and the directors non-executive directors from the The Committee has clearly defined pay cuts were reimbursed to non controls, internal audit and risk review the performance in this area at Wates family, and provide the Board terms of reference, which are reviewed furloughed employees who were still management processes and reviewing the each scheduled meeting. The Board’s with independent oversight. annually and maintained by the Company employed by the business in February 2021 scope and results of the external audit. commitment to creating a sustainable Secretary. These outline the Committee’s

78 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 79 Directors’ report

Directors’ report

Susan Harris, a chartered management Remuneration Committee Sustainability Committee The directors present their annual accounts and reports for the year ending 31 December 2020. accountant, is Chair of the Audit This report must be read in conjunction with the ‘Strategic report’ on pages 66–75. Committee and during the year the The Committee’s primary objective The Committee brings oversight and Committee comprised two other is to set remuneration at a level that challenge to the Group’s corporate will enhance the Group’s resources by responsibility programmes and explores Principal activities Employees victimisation, where everyone receives non-executive directors: Timothy Wates, equal treatment and career development a director of the Wates family; and attracting, retaining and motivating the impact and opportunities that The Company continues its activities The Group recognises the importance quality senior management who can global trends might bring to the built regardless of age, gender, nationality, Jonathan Oatley, an independent and roles, including the financing of the of engaging employees to help them ethnic origin, religion, marital status, sexual non-executive director. The Board is deliver the Group’s strategic ambitions environment. In 2020, the Committee Group’s activities, acting as holding make their fullest contribution to the within a framework that is aligned was chaired by Jonathan Wates, a orientation or disability. All decisions satisfied that the recent and relevant company for its subsidiaries and associates business, which is fundamental to relating to employment practices are financial experience and sector knowledge with shareholder interests. non-executive director from the Wates and active management of many of the achieving the Group’s strategy and family, and its members included Susan objective, free from bias and based solely of both the Committee Chair and the The Committee firmly believes that the Group’s joint Ventures. long-term objectives. Wates uses a variety Harris, an independent non-executive upon work criteria and individual merit. Committee’s members during 2020 best people on the right remuneration, of media to inform employees about the director, the Chief Executive and Chief followed the principles of good with an emphasis on performance-related Group’s development and prospects and The Group has for many years focused on Financial Officer, with invitations extended governance in relation to their collective pay, strengthens the Group’s ability to face seeks and listens to employees’ views fostering a diverse and inclusive working to the Group Safety, Health, Environment skills, knowledge and experience. challenges emanating from economic and COVID-19 and opinions. environment and has implemented and Quality Director and the Public market change, and to deliver long-term specific development programmes to Sector Director. In 2020, the Committee The Group has included a specific The Group’s annual roadshow, which is sustainable value for all stakeholders. assist business leaders in engaging further External auditors considered what the right scope of report on its response to COVID-19 open to all employees, is the forum by with their teams and in demonstrating the which can be seen on pages 8 to 15. which the Chief Executive informs and The Group appointed BDO LLP as In 2020, the Remuneration Committee sustainability activity would be for the contribution that each individual can updates staff on the Group’s performance, external auditors on 1 November 2019. comprised three non-executive directors business operationally and strategically make to the success of the Group. The plans and future outlook and provides The Committee assesses the effectiveness and was chaired by Jonathan Oatley. and agreed that the Committee’s focus Group is committed to growing a diverse employees with an opportunity to ask of the external auditors’ performance Members of the Committee during should be on three key priorities; pool of talent for purposes of long-term questions, or to seek clarification, on after completion of the annual audit plan the year included Jeremy Newsum, workforce; reduction of waste (including Dividends succession planning. the Group’s purpose, goals and direction. including assessment of their governance, Independent Non-Executive Director energy use); and new ways of designing The directors declared dividends in A biannual employee survey is undertaken The Wates Group is committed to being independence and professionalism. In and Andrew Wates, a director from and building sustainably. 2020 totaling £7,419,911 (2019: £10,368,109) to allow colleagues to provide honest actively and consistently anti-racist and July 2020 the Committee evaluated the the Wates family. which were paid on 27 March 2020. No feedback about their experience working has a zero tolerance approach to racism external auditors’ performance in relation Executive Committee further dividends have been declared or at Wates. Twice a year, the Group’s in all of its workplaces and in everything to the 2019 audit. Both management Nominations Committee proposed in respect of the accounts to senior leadership team convene to share it does. and the external auditors are committed The Executive Committee is responsible 31 December 2020. knowledge, disseminate good practice to a positive working relationship that The Board operates a Nominations for the day-to-day management of the The Group gives full and fair consideration and to discuss strategic priorities. Informal enhances the effective and efficient Committee to ensure that the Board Group’s business affairs. It is led and to applications for employment made by meetings are held at business-unit and execution of the audit plan. The Audit remains balanced and effective, that chaired by the Chief Executive. The Health and safety disabled people and encourages and regional levels and further communication Committee identifies re-tendering of the succession plans are in place, and that Committee’s duties include formulating assists the recruitment, training, career The Board remains committed to the is affected through the use of a group- external audit service at least every 10 its structure, composition and skills strategy proposals for Board approval development and promotion of disabled effective management and monitoring of wide intranet and enterprise social years as good practice. remain aligned to the Group’s strategic and ensuring that the agreed strategy is people. The Group endeavours to retain health and safety and to providing a safe objectives. The Committee’s primary implemented in a timely and effective network, electronic bulletins, notice and adjust the environment of employees working environment for all employees As a private company, the Group is not objective, when necessary, is to identify manner. boards, social media, the Group’s website who become disabled during the course subject to external restrictions in terms of and evaluate candidates for future and partners and to keeping members and blogs from contributors from all The Executive Committee consists of of their employment. non-audit work provided by the external appointments and, in doing so, it takes of the public with whom the Group parts of the Group. auditors, but for good governance has individuals responsible for the strategic comes into contact free from harm. advice from independent external The Group is committed to improving chosen to implement its own policy in business units and key functions. A list The Group’s ‘Zero Harm’ campaign, Corporate responsibility recruitment consultants. In 2020, the the skills of employees through training relation to the level of their remuneration is on page 63 and a biography for each ‘we’re safer together’, remains a key Corporate responsibility continues to Committee comprised non-executive and development and through nurturing and the extent of their non-audit services. Executive Committee member can strategic priority to further enhance the remain an integral part of the Group’s directors under the chairmanship of a culture in which employees feel valued be found at the Group’s website Group’s health and safety performance business and long-term strategic aspirations. James Wates, including Jeremy Newsum, for their contribution and motivated to www.wates.co.uk. and to develop the leadership skills and The Group’s approach, priorities and who is considered independent, and achieve their full potential. Statistics behaviours required to achieve a positive objectives in the corporate responsibility Timothy Wates, who is a director from relating to the average number of people and high-performing culture. arena, specific to the environment and the Wates family. The Committee has employed by the Group during the year communities in which it works, are no formal schedule of meetings and can be found in note 5 to the accounts. meets as required. published, communicated and embedded within the business as part of the Group’s Equal opportunities overarching strategic objectives. The Group is an active equal opportunities employer and promotes an environment free from discrimination, harassment and

80 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 81 Statement of Directors’ Responsibilities

Statement of Directors’ Responsibilities in respect of the financial statements

Research and development directors’ and officers’ liability insurance, Disclosure of information The directors are responsible for preparing the Annual Accounts and the financial in respect of certain losses or liabilities to to auditors statements in accordance with applicable law and regulation. The Group is dedicated to the research which officers of the Company may be and development of innovative exposed in the discharge of their duties. Each of the persons who is a director Company law requires the directors to The directors are also responsible for construction methods and techniques, at the date of approval of this report prepare financial statements for each safeguarding the assets of the Group and focusing on areas such as enhanced safety, confirms that: project delivery, the development and Directors financial year. Under that law the directors Company and hence for taking reasonable integration of new materials and working The directors of the Company who • So far as the director is aware, there is have prepared the Group and company steps for the prevention and detection techniques, energy efficiency and were in office during the year and up no relevant audit information of which financial statements in accordance with of fraud and other irregularities. the Company’s auditors are unaware; and United Kingdom Generally Accepted information modelling. to the date of signing the financial The directors are responsible for keeping Accounting Practice (United Kingdom statements were: • Each director has taken all the steps adequate accounting records that are Accounting Standards, comprising FRS 102 Share capital that he / she ought to have taken as a sufficient to show and explain the Group Sir James G. M. Wates, CBE (Chairman) ‘The Financial Reporting Standard director in order to make himself / and Company’s transactions and disclose Details of the Company’s share capital are David O. Allen (Chief Executive) applicable in UK and Republic of Ireland’ herself aware of any relevant audit with reasonable accuracy at any time set out in note 20 to the accounts. and applicable law). Under company law Philip M. Wainwright information and to establish that the the financial position of the Group and the directors must not approve the (Chief Financial Officer) Company’s auditors are aware of that Company and enable them to ensure financial statements unless they are Articles of Association Paul Chandler information. that the financial statements comply satisfied that they give a true and fair (Executive Managing Director with the Companies Act 2006. The Company’s Articles of Association This confirmation is given and should view of the state of affairs of the Group Wates Construction Group) may be amended by a special resolution be interpreted in accordance with the and Company and of the profit or loss of The directors are responsible for the of the Company’s shareholders. The Susan E. Harris provisions of s418 of the Companies the Group for that period. In preparing maintenance and integrity of the ultimate current articles were adopted by Jeremy H.M. Newsum Act 2006. these financial statements, the directors parent Company’s website. Legislation shareholders on 13 November 2012. Jonathan M. Oatley are required to: in the United Kingdom governing the preparation and dissemination of financial Andrew E. P. Wates Annual general meeting • Select suitable accounting policies and Conflicts of interest statements may differ from legislation Charles W. R. Wates The 2021 Annual general meeting of then apply them consistently; The Company’s Articles permit the Board in other jurisdictions. Jonathan G. M. Wates the Company will be held on Thursday • State whether applicable UK Accounting to consider and, if deemed fit, to authorise 6 May 2021. situations where a director has an interest Timothy A. D. Wates Standards, comprising FRS 102, have been followed, subject to any material that conflicts, or may possibly conflict, Streamlined energy and with the interests of the Company. In the Donations departures disclosed and explained event that a director becomes aware that carbon report in the financial statements; During the year the Group made they have an interest that may arise in a • Make judgements and accounting charitable donations amounting to £0.9m The ‘Streamlined energy and carbon conflict they are required to notify the estimates that are reasonable and (2019: £1.5m). No political donations were report’ is presented on page 56. Board in writing. Internal controls are in prudent; and made in 2020 or 2019. place to ensure that any related party Post balance sheet events transactions involving directors are • Prepare the financial statements on conducted on an arm’s length basis. Going concern There were no post balance sheet events the going concern basis unless it is inappropriate to presume that the Directors have a continuing duty to The directors have reviewed the forecast requiring disclosure. update changes to these conflicts. The Group and Company will continue future performance of the Group and in business. Board considers that the procedures in have prepared a cash flow forecast for place for reporting and considering 12 months from the date of approval of conflicts of interest are effective. these financial statements. Taking into Approved by the Board of Directors on account the Group’s ongoing response 9 March 2021 and signed on its behalf by: Directors’ indemnities to the pandemic, the Board considers it and insurance has sufficient cash reserves to continue trading, whilst meeting the financial The Company’s Articles of Association covenants set within its revolving credit provide for the indemnification of its facility and the Coronavirus Large Business directors and the Company Secretary to Interruption Loan Scheme facility. the extent permitted by the Companies P. M. Wainwright Act 2006 and other applicable legislation, Accordingly, the directors continue to Secretary out of the assets of the Company, in the adopt the going concern basis in preparing event that they incur certain expenses in the Group’s accounts. Further details connection with the execution of their regarding the adoption of the going duties. In addition, and in common with concern basis can be found in note 1 many other companies, the Company has to the accounts.

82 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 83 Independent Auditors’ Report

Independent auditor’s report TO THE MEMBERS OF WATES GROUP LIMITED

Opinion on the financial to our audit of the financial statements in gives rise to a material misstatement in Responsibilities of Directors The extent to which our procedures are unusual account combinations or posted statements the UK, including the FRC’s Ethical the financial statements themselves. If, capable of detecting irregularities, by senior management. We evaluated Standard, and we have fulfilled our other based on the work we have performed, As explained more fully in the Statement including fraud is detailed below: whether there was evidence of bias by In our opinion the financial statements: ethical responsibilities in accordance with we conclude that there is a material of Directors’ Responsibilities, the Directors the Directors in accounting estimates that We gained an understanding of the legal these requirements. We believe that the misstatement of this other information, are responsible for the preparation of the represented a risk of material misstatement • give a true and fair view of the state and regulatory framework applicable to audit evidence we have obtained is we are required to report that fact. financial statements and for being due to fraud. We challenged assumptions of the Group’s and of the Parent the Group and the industry in which it sufficient and appropriate to provide a satisfied that they give a true and fair and judgements made by management in Company’s affairs as at 31 December We have nothing to report in this regard. operates, and considered the risk of basis for our opinion. view, and for such internal control as their significant accounting estimates, 2020 and of its profit for the year acts by the Group that were contrary the Directors determine is necessary to in particular in relation to contract then ended; to applicable laws and regulations, Other Companies Act 2006 enable the preparation of financial accounting, the valuation of investment Conclusions relating to including fraud. Our audit procedures • have been properly prepared in statements that are free from material properties and defined benefit pension reporting were designed at Group and significant accordance with United Kingdom going concern misstatement, whether due to fraud scheme accounting. component levels to respond to the risk, Generally Accepted Accounting In our opinion, based on the work or error. In auditing the financial statements, we recognising that the risk of not detecting A further description of our responsibilities Practice; and undertaken in the course of the audit: have concluded that the Directors’ use In preparing the financial statements, a material misstatement due to fraud is is available on the Financial Reporting the Directors are responsible for assessing • have been prepared in accordance of the going concern basis of accounting • the information given in the Strategic higher than the risk of not detecting one Council’s website at: the Group’s and the Parent Company’s with the requirements of the in the preparation of the financial report and the Directors’ report for the resulting from error, as fraud may involve statements is appropriate. ability to continue as a going concern, https://www.frc.org.uk/ Companies Act 2006. financial year for which the financial deliberate concealment by, for example, statements are prepared is consistent disclosing, as applicable, matters related auditorsresponsibilities. This description Based on the work we have performed, forgery or intentional misrepresentations, We have audited the financial statements with the financial statements; and to going concern and using the going forms part of our auditor’s report. we have not identified any material or through collusion. of Wates Group Limited (“the Parent concern basis of accounting unless the uncertainties relating to events or • the Strategic report and the Directors’ Company”) and its subsidiaries (“the Directors either intend to liquidate the We focused on laws and regulations that conditions that, individually or collectively, report have been prepared in Use of our report Group”) for the year ended 31 December Group or the Parent Company or to cease could give rise to a material misstatement may cast significant doubt on the Group’s accordance with applicable legal 2020 which comprise the Consolidated operations, or have no realistic alternative in the financial statements, including, but This report is made solely to the Parent or Parent Company’s ability to continue requirements. Profit and Loss Account, the Consolidated but to do so. not limited to, financial reporting legislation, Company’s members, as a body, in as a going concern for a period of at least Statement of Comprehensive Income, the In the light of the knowledge and the Companies Act 2006, distributable accordance with Chapter 3 of Part 16 of twelve months from when the financial Consolidated Balance Sheet, the Company understanding of the Group and the profits legislation and UK pensions and the Companies Act 2006. Our audit work statements are authorised for issue. Auditor’s responsibilities for Balance Sheet, the Consolidated Parent Company and its environment tax legislation. We assessed the extent of has been undertaken so that we might Statement of Changes in Equity, the Our responsibilities and the responsibilities obtained in the course of the audit, the audit of the financial compliance with these laws and regulations state to the Parent Company’s members Company Statement of Changes in Equity, of the Directors with respect to going we have not identified material statements as part of our procedures on the related those matters we are required to state concern are described in the relevant financial statement items. Our tests to them in an auditor’s report and for no the Consolidated Cash Flow Statement misstatements in the Strategic report Our objectives are to obtain reasonable and the notes to the financial statements, sections of this report. or the Directors’ report. included agreeing the financial statement other purpose. To the fullest extent assurance about whether the financial permitted by law, we do not accept or including a summary of significant disclosures to underlying supporting We have nothing to report in respect of statements as a whole are free from documentation, review of board and assume responsibility to anyone other accounting policies. The financial Other information the following matters in relation to which material misstatement, whether due to committee meeting minutes, enquiries than the Parent Company and the Parent reporting framework that has been the Companies Act 2006 requires us to fraud or error, and to issue an auditor’s The directors are responsible for the with management, enquiries of external Company’s members as a body, for our applied in their preparation is applicable report to you if, in our opinion: report that includes our opinion. other information. The other information legal advisors, review of correspondence audit work, for this report, or for the law and United Kingdom Accounting Reasonable assurance is a high level of comprises the information included in with external legal advisors and review opinions we have formed. Standards, including Financial Reporting • adequate accounting records have assurance, but is not a guarantee that the Annual Report other than the of external press releases. Standard 102 The Financial Reporting not been kept, or returns adequate for an audit conducted in accordance with financial statements and our auditor’s Standard applicable in the UK and our audit have not been received from ISAs (UK) will always detect a material There are inherent limitations in the report thereon. Our opinion on the Republic of Ireland (United Kingdom branches not visited by us; or misstatement when it exists. Misstatements audit procedures described above and, financial statements does not cover the Generally Accepted Accounting Practice). can arise from fraud or error and are the further removed noncompliance with other information and, except to the • the financial statements are not in considered material if, individually or in laws and regulations is from the events extent otherwise explicitly stated in our agreement with the accounting records the aggregate, they could reasonably be and transactions reflected in the financial Basis for opinion report, we do not express any form of and returns; or expected to influence the economic statements, the less likely we would We conducted our audit in accordance assurance conclusion thereon. Our • certain disclosures of Directors’ become aware of it. decisions of users taken on the basis of Charles Ellis (Senior Statutory Auditor) with International Standards on Auditing responsibility is to read the other remuneration specified by law are not these financial statements. We evaluated management’s incentives (UK) (ISAs (UK)) and applicable law. Our information and, in doing so, consider made; or For and on behalf of BDO LLP, Extent to which the audit was capable of and opportunities for fraudulent responsibilities under those standards whether the other information is statutory auditor • we have not received all the detecting irregularities, including fraud manipulation of the financial statements are further described in the Auditor’s materially inconsistent with the financial London, UK information and explanations we (including the risk of override of controls), responsibilities for the audit of the statements or our knowledge obtained require for our audit. Irregularities, including fraud, are instances and determined that the principal risks Date: 9 March 2021 financial statements section of our report. in the course of the audit, or otherwise of non-compliance with laws and were related to management bias in We are independent of the Group and appears to be materially misstated. If we BDO LLP is a limited liability regulations. We design procedures in line accounting estimates. We addressed the Parent Company in accordance with identify such material inconsistencies partnership registered in England with our responsibilities, outlined above, the risk of management override of the ethical requirements that are relevant or apparent material misstatements, we and Wales (with registered number to detect material misstatements in internal controls through testing journals, are required to determine whether this OC305127). respect of irregularities, including fraud. in particular any entries posted with

84 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 85 Accounts and notes to the accounts

Consolidated profit and loss account Consolidated statement of FOR THE YEAR ENDED 31 DECEMBER 2020 comprehensive (expense)/income FOR THE YEAR ENDED 31 DECEMBER 2020 Exceptional Underlying (note 3) Statutory Statutory 2020 2020 2020 2019 2020 2019 Notes £000s £000s £000s £000s Notes £000s £000s Turnover: Profit for the financial year 1,554 28,224 1,449,247 - 1,449,247 1,634,374 Group and share of joint ventures and associates Currency translation difference on foreign currency net investment 117 232 (66,390) - (66,390) (86,338) Less share of turnover of joint ventures and associates Remeasurement of net defined benefit liability 24 (6,305) (1,817) Group turnover 2 1,382,857 - 1,382,857 1,548,036 (6,188) (1,585) Cost of sales (1,239,138) (13,723) (1,252,861) (1,366,935) Tax relating to components of other comprehensive income 24 1,673 309 Gross profit/(loss) 143,719 (13,723) 129,996 181,101 Other comprehensive expense for the year (4,515) (1,276) Administrative expenses (133,262) (5,429) (138,691) (158,386) Total comprehensive (expense)/income for the year (2,961) 26,948 Net (deficit)/surplus on revaluation of investment properties (2,510) - (2,510) 1,194 Other operating income 3 - 7,727 7,727 - Profit on sale of investment in joint venture - - - 571 The profit and total comprehensive (expense)/income for the financial years set out above is all attributable to equity shareholders of Group operating profit/(loss) 4 7,947 (11,425) (3,478) 24,480 the Company. Share of post-tax profit from joint ventures and associates 2,537 - 2,537 7,989 Total operating profit/(loss): Group and share of joint ventures and associates 10,484 (11,425) (941) 32,469 Analysed between: Total operating profit/(loss) before interest and tax 16,038 (11,425) 4,613 39,032 Net interest payable – joint ventures and associates (4,706) - (4,706) (4,931) Taxation – joint ventures and associates (848) - (848) (1,632) Interest payable and similar charges 7 (3,116) - (3,116) (2,878) Interest receivable 7 4,896 - 4,896 4,979 Profit/(loss) before taxation 12,264 (11,425) 839 34,570 Analysed between: Profit/(loss) before taxation and before taxation of joint ventures and associates 13,112 (11,425) 1,687 36,202 Taxation – joint ventures and associates (848) - (848) (1,632) Taxation on profit/(loss) 8 (1,456) 2,171 715 (6,346) Profit/(loss) for the financial year 10,808 (9,254) 1,554 28,224

The above results have been derived from continuing operations.

86 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 87 Accounts and notes to the accounts

Consolidated balance sheet Company balance sheet AT 31 DECEMBER 2020 AT 31 DECEMBER 2020

2020 2019 2020 2019 Notes £000s £000s Notes £000s £000s Fixed assets Fixed assets Intangible assets – goodwill 9 45,059 48,536 Investments 11 144,622 142,469 Tangible assets 10 74,318 80,351 Current assets Investments in joint ventures and associates 11 118,153 117,769 Debtors Other investments 11 366 824 – due within one year 13 53,809 51,526 237,896 247,480 – due after one year 13 1,655 753 Current assets 55,464 52,279 Stocks 12 40,612 48,248 Cash at bank and in hand 7,938 4,219 Debtors 63,402 56,498 – due within one year 13 239,315 296,838 Creditors: amounts falling due within one year 15 (120,051) (151,435) – due after one year 13 32,215 41,756 Net current liabilities (56,649) (94,937) 271,530 338,594 Total assets less current liabilities 87,973 47,532 Cash at bank and in hand 14 215,947 142,179 Creditors: amounts falling due after more than one year 16 (44,911) - 528,089 529,021 Net assets 43,062 47,532 Creditors: amounts falling due within one year 15 (514,004) (567,979) Net current assets/(liabilities) 14,085 (38,958) Capital and reserves Total assets less current liabilities 251,981 208,522 Called up share capital 20 14,777 14,777 Creditors: amounts falling due after more than one year 16 (69,522) (23,423) Share premium account 20 956 956 Provisions for liabilities 17 (40,448) (32,707) Capital redemption reserve 20 17,447 17,447 Net assets 142,011 152,392 Profit and loss account 20 9,882 14,352 Shareholders’ funds 43,062 47,532 Capital and reserves Called up share capital 20 14,777 14,777 Share premium account 20 956 956 The notes on pages 92–115 form part of these accounts. Capital redemption reserve 20 17,447 17,447 Profit and loss account 20 108,831 119,212 The profit for the financial year dealt with in the accounts of the parent company was £2,950,000 (2019: £16,261,000). Shareholders’ funds 142,011 152,392

The financial statements of Wates Group Limited (registered number 01824828) were approved by the Board of Directors on 9 March 2021 The notes on pages 92–115 form part of these accounts. and signed on its behalf by:

The financial statements of Wates Group Limited (registered number 01824828) were approved by the Board of Directors on 9 March 2021 and signed on its behalf by:

Sir James G. M. Wates CBE D. O. Allen Chairman Chief Executive

Sir James G. M. Wates CBE D. O. Allen Chairman Chief Executive

88 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 89 Accounts and notes to the accounts

Consolidated statement of changes in equity Company statement of changes in equity FOR THE YEAR ENDED 31 DECEMBER 2020 FOR THE YEAR ENDED 31 DECEMBER 2020

Called up Share Capital Profit Called up Share Capital Profit share premium redemption and loss Total share premium redemption and loss Total capital account reserve account equity capital account reserve account equity £000s £000s £000s £000s £000s £000s £000s £000s £000s £000s At 31 December 2018 14,777 956 17,447 102,632 135,812 At 31 December 2018 14,777 956 17,447 8,459 41,639 Profit for the financial year - - - 28,224 28,224 Total comprehensive income - - - 16,261 16,261 Currency translation difference on foreign currency net investment - - - 232 232 Dividends declared on equity shares - - - (10,368) (10,368) Remeasurement of net defined benefit liability - - - (1,817) (1,817) At 31 December 2019 14,777 956 17,447 14,352 47,532 Tax relating to items of other comprehensive income - - - 309 309 Total comprehensive income - - - 2,950 2,950 Share of other comprehensive income of joint venture - - - Dividends declared on equity shares - - - (7,420) (7,420) Total comprehensive income - - - 26,948 26,948 At 31 December 2020 14,777 956 17,447 9,882 43,062 Dividends declared on equity shares - - - (10,368) (10,368)

At 31 December 2019 14,777 956 17,447 119,212 152,392 The total comprehensive income of the company for each of the two years ended 31 December is its profit for these financial years. Profit for the financial year - - - 1,554 1,554 Currency translation difference on foreign currency net investment - - - 117 117 Remeasurement of net defined benefit liability - - - (6,305) (6,305) Tax relating to items of other comprehensive income - - - 1,673 1,673 Total comprehensive expense - - - (2,961) (2,961) Dividends declared on equity shares - - - (7,420) (7,420) Consolidated cash flow statement At 31 December 2020 14,777 956 17,447 108,831 142,011 FOR THE YEAR ENDED 31 DECEMBER 2020

Dividends of £10,368,109 were declared in 2019 and payments of £6,509,010 and £3,859,099 were paid on 8 April 2019 and 11 November 2019 respectively. 2020 2019 Notes £000s £000s Dividends of £7,419,911 were declared in 2020 and were paid on 27 March 2020. Net cash inflow from operating activities 21 52,187 64,010 Cash flows from investing activities Proceeds from sale of tangible fixed assets 4 5 Proceeds from sale of joint ventures - 250 Proceeds from sale of properties with equity loans 22 179 Purchase of tangible fixed assets (3,104) (11,216) Amounts paid to joint ventures (14,246) (40,029) Amounts received from joint ventures 23,325 23,711 Dividends received from joint ventures and associates - 831 Net cash inflow/(outflow) from investing activities 6,001 (26,269) Cash flows from financing activities Equity dividends paid (7,420) (10,368) Bank loans borrowed 143,000 30,635 Bank loans repaid (120,000) (30,000) Net cash inflow/(outflow) from financing activities 15,580 (9,733) Net increase in cash and cash equivalents 73,768 28,008

Cash and cash equivalents at beginning of year 142,179 114,171 Cash and cash equivalents 215,947 142,179

90 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 91 Accounts and notes to the accounts

Notes to the accounts

1. ACCOUNTING POLICIES above for a range of scenarios, the a clear and consistent presentation of useful lives of assets so as to write off the Directors have a reasonable expectation the underlying financial performance cost less the estimated residual values The principal accounting policies, which have all been applied consistently throughout the year and the preceding year, are set out below. that the Group has adequate resources of the Group, it has separately over the following periods: to continue in operational existence identified items that are considered i) General information and ii) Basis of consolidation forecast to improve throughout the for the foreseeable future. Thus, they to be exceptional because of their Leasehold period of second half of 2021, however, are not continue to adopt the going concern size or non-recurring nature. improvements lease basis of accounting The consolidated accounts include the basis of accounting in preparing the forecast to return to pre COVID-19 Plant and equipment 2 to 10 years accounts of Wates Group Limited and its Wates Group Limited is a private company levels in 2021. Within these forecasts, a annual financial statements. vii) Government grants limited by shares incorporated in the subsidiary undertakings up to 31 December significant proportion of the Group’s each year. The results of subsidiaries United Kingdom under the Companies Act revenue is already secured. iv) Turnover Government grants are recognised once xi) Financial instruments and registered in England and Wales. The acquired or sold are consolidated for there is reasonable assurance that the The Group has prepared a cash flow Financial assets and liabilities are address of the registered office is given periods from or to the date on which Turnover represents the value of work Group will comply with the conditions forecast for 12 months from the date of recognised when the Group becomes on page 65. The nature of the Group’s control passed. done on contracting activities, which attaching to them and that the grant will approval of these financial statements is recognised on a percentage of be received. During the year the Group a party to the contractual provisions of operations and its principal activities are Business combinations are accounted and the Group considers it has sufficient completion basis with reference to costs received a Coronavirus Job Retention the instrument. set out in the Strategic report. for under the purchase method. Where cash reserves to continue trading, whilst incurred to date as a proportion of total Scheme grant which was accounted for necessary, adjustments are made to Financial liabilities and equity instruments These accounts have been prepared meeting the financial covenants set within costs, rendering of services which is under the performance model. Amounts accounts of subsidiaries to bring the are classified according to the substance under the historical cost convention, its Revolving Credit and CLBILS facilities. recognised as the service is performed, received are disclosed within Other accounting policies into line with those of the contractual arrangements entered modified by the revaluation of investment The Group is not forecasting to need to sales of residential properties and operating income in the Consolidated used by the Group. All intra-group into. An equity instrument is any contract properties, in accordance with Financial draw down on its £120m Revolving Credit development properties that are legally profit and loss account. transactions, balances, income and that evidences a residual interest in the Reporting Standard 102 (FRS 102) issued by Facility in the next 12 months. completed within the year, sales of land expenses are eliminated on consolidation. assets of the Group after deducting all the Financial Reporting Council. on which unconditional exchange of In accordance with Section 35 of FRS 102, The Group recognises the economic viii) Research and development of its liabilities. contracts has taken place by the year The functional currency of Wates Group Section 19 of FRS 102 has not been applied and trading uncertainties resulting from end and other fees receivable. Rental Research and development costs are (a) Financial assets and liabilities Limited is considered to be pounds in these accounts in respect of business COVID-19 and has deemed it appropriate income arising from operating leases written off as incurred. sterling because that is the currency of combinations effected prior to the to consider a range of potential scenarios All financial assets and liabilities are on investment property is accounted the primary economic environment in transition to FRS 102 on 1 January 2014. of escalating impact and duration. Some initially measured at transaction price. which the company operates. The reasonable downside scenarios include: for on a straight line basis over the ix) Intangible assets – goodwill Non-current debt instruments, which consolidated financial statements are also a significant contract loss; a reduction in lease term. meet the conditions set out in paragraph presented in pounds sterling. Foreign iii) Going concern contracting turnover similar with those Goodwill arising on the acquisition of Turnover excludes the value of intra- subsidiary undertakings and businesses, 11.9 of FRS 102, are subsequently operations are included in accordance The activities of the Wates Group, along seen in 2020; an increase in costs without group transactions and value added tax. representing any excess of the fair value measured at amortised cost using with the policies set out below. with the factors that may affect its future any client recovery; and reductions in The Group’s share of turnover of joint of the consideration given over the fair the effective interest method. performance and position are set out in prices for both housing and land sales. Wates Group Limited meets the ventures and associates is disclosed value of the identifiable assets and the Directors’ report. The Group does not consider a prolonged Debt instruments that have no definition of a qualifying entity under FRS separately in the consolidated profit liabilities acquired, is capitalised and shut down of construction activities as a stated interest rate and are classified 102 and has therefore taken advantage of As at 31 December 2020, the Group had and loss account. written off on a straight line basis over likely scenario as construction related as payable or receivable within one the disclosure exemptions available to it cash of £215.9m, including £50.0m of debt its useful economic life (20 years). The activities have continued throughout all year and which meet the above in respect of its separate accounts, which under the Coronavirus Large Business useful life of goodwill is based on the national lockdowns experienced to date. v) Pre-contract costs conditions are initially measured at are presented alongside the consolidated Interruption Loan Scheme (CLBILS), access long-term nature of the contracts and The Group’s cash has continued to remain Tender costs on construction contracts the undiscounted amount of the cash accounts. Exemptions have been taken in to £120.0m undrawn bank facilities history of the subsidiary undertakings resilient even after November when the are written off to the profit and loss or other consideration expected to relation to financial instruments, (through the Group’s £120.0m Revolving and businesses acquired. Provision is second lockdown was announced and it account up until the point it is probable be paid or received, net of impairment. presentation of a cash flow statement, Credit Facility) and a strong forward secured made for any impairment. has not utilised any of its Revolving Credit that the Group will be awarded the intra-group transactions and remuneration order book. The Directors regularly review Facility throughout this period. Whilst the contract. For certain large multi-year (b) Investments of key management personnel. the working capital requirements of the cash flow impacts of these scenarios are frameworks, pre-contract costs are x) Tangible fixed assets Equity loans and unquoted In accordance with Section 408 of the Group while reviewing sensitivities to materially different to the current forecast, capitalised where it is sufficiently probable and depreciation investments are stated at cost less Companies Act 2006, no separate profit future performance. the Group forecasts and reasonable worst that the contract will be obtained. impairment. and loss account has been presented As part of the Group’s ongoing response case scenarios indicate that it would be Investment properties are measured for the company. However, the profits to the COVID-19 pandemic, the Directors able to continue trading for at least 12 at fair value annually with any change (c) Equity instruments for the year and the prior year have have reviewed the forecast future months from the date of approval of the vi) Exceptional items recognised in the profit and loss account. Equity instruments issued by the been disclosed with the company performance based on their current financial statements. Even if these Section 5 of FRS 102 requires material Depreciation is not provided in respect Company are recorded at the fair balance sheet. expectation. This expectation continues scenarios were compounded the Group items to be separately disclosed in a of freehold investment properties. value of cash or other resources to reflect the current level of activity would not need to draw its RCF. way that enables the users of the Tangible fixed assets are stated at cost, received or receivable, net of direct across the Group using management’s accounts to understand the entity’s After making enquiries and considering net of depreciation and any provision for issue costs. Preference share capital understanding of each sector that the financial performance. These items are the factors and sensitivities outlined impairment. Depreciation is provided on is classified as equity if it is non- Group operates in. Turnover levels are commonly referred to as ‘exceptional’ the following tangible fixed assets in equal redeemable and any dividends are items. In order to provide users with annual instalments over the estimated discretionary, or is redeemable but

92 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 93 Accounts and notes to the accounts

only at the Company’s option. xiii) Stocks amount that would be received for revenue can be directly attributed to that Where the amount attributed for tax The assets of the defined benefit Dividends on preference share capital the asset if it were to be sold at the project), each project is accounted for on purposes to assets (other than goodwill) scheme are held separately from those classified as equity are recognised Stocks are stated at the lower of cost, reporting date. a percentage completion basis. and liabilities that are acquired in a of the Group in trustee administered as an appropriation of profits. including attributable overheads, and business combination differs from their funds. Scheme assets are measured at fair Amounts recoverable on contracts estimated selling price less costs to sell, fair value, deferred tax is recognised to value and liabilities are measured on an xv) Contracts which are included in debtors are stated which is equivalent to net realisable value. reflect the future tax consequences with actuarial basis using a projected unit xii) Joint ventures and at cost, plus attributable profit, to the The principal estimation technique a corresponding adjustment to goodwill. method. Actuarial valuations are obtained extent that this is reasonably certain associates used by the Group in attributing profit triennially from an independent qualified xiv) Impairment of assets after making provision for contingencies, Deferred tax is measured using the tax on contracts to a particular accounting actuary and are updated at each year end. A joint venture is a jointly controlled less any losses incurred or foreseen in rates and laws that have been enacted Assets, other than those measured at period is the preparation of forecasts on entity in which the Group holds a bringing contracts to completion, and less or substantively enacted by the balance In the ordinary course of business, the fair value, are assessed for indicators a contract-by-contract basis. These focus long-term interest with one or more amounts received as progress payments. sheet date. The tax expense or income is Group sometimes transfers employees of impairment at each balance sheet on costs to completion and enable an other parties where a contractual Costs for this purpose include valuation recognised in the same component of (TUPE) and takes on obligations relating date. If there is objective evidence of assessment to be made of the final arrangement has established joint control of all work done by subcontractors, comprehensive income or equity as the to local government pension schemes. impairment, an impairment loss is outturn on each contract. Consistent over the entity. An associate is an whether certified or not, and all transaction or other event that resulted The largest scheme in which a subsidiary recognised in the profit and loss contract review procedures are in place undertaking in which the Group has a overheads other than those relating to in the tax expense. of the Group participates, in respect account immediately. in respect of contract forecasting. long-term interest, usually from 20% to the general administration of the relevant of certain employees, is the West Current and deferred tax assets and 50% of the equity voting rights and over Non financial assets Profit on contracts is only recognised companies. For any contracts where Midlands Pension Fund, a defined benefit liabilities are offset only when there is a which it exercises significant influence. when the Group is satisfied that the risks receipts exceed the book value of work scheme administered by the City of An asset is impaired where there is legally enforceable right to set off the on a contract have been mitigated to a done, the excess is included in creditors Wolverhampton Council for employees In Group accounts, investments in joint objective evidence that, as a result of one amounts and the Group intends to settle suitable level so that the forecast profit as payments on account. of approximately 600 active employers. ventures and associates are accounted for or more events that occurred after initial on a net basis. can be measured reliably. As a number of using the equity method. Investments in recognition, the estimated recoverable This scheme is part of the Local risks are not mitigated until a contract has joint ventures and associates are initially value of the asset has been reduced. xvi) Residential developments Research and development credits Government Pension Scheme. Sufficient been successfully delivered and final recognised at the transaction price The recoverable amount of an asset is receivable are included in operating profit information is not available for the Group accounts are agreed, an element of profit For residential development, profits are (including transaction costs), including the higher of its fair value less costs to and are taxed within current tax. Current to use defined benefit accounting and so is not recognised on contracts until the recognised on a site-by-site basis by advances, and are subsequently adjusted sell and its value in use. tax is then paid net of research and the Group accounts for this scheme as a to reflect the Group’s share of the profit contract is nearing completion. Provision reference to the expected outturn result development credits receivable. defined contribution plan. Information or loss and other comprehensive income The recoverable amount of goodwill is is made for all losses incurred to the for each site. Profit is recognised on the about the scheme is disclosed in the derived from measurement of the present of the joint venture or associate. Goodwill accounting date together with any further basis of actual property sales to date xviii) Leases accounts of the City of Wolverhampton arising on the acquisition of joint ventures value of the future cash flows of the losses that are foreseen in bringing compared to forecast final sales and the Council on www.wolverhampton.gov.uk or associates is accounted for in cash-generating units of which the contracts to completion. total actual and forecast costs for each Operating lease rentals are charged to the and in the accounts of the scheme goodwill is a part. development site. profit and loss account on a straight line available on www.wmpfonline.com. accordance with the policy set out above. As certain agreements can run over a basis over the period of the lease. Any unamortised balance of goodwill is Where indicators exist for a decrease considerable number of years and cover The Group also operates defined included in the carrying value of the in impairment loss on assets other than a number of individual separable projects, xvii) Taxation contribution schemes. The amount investment in joint ventures or goodwill, the prior impairment loss is the agreement is treated as a number of xix) Retirement benefits Current tax is provided at the amounts charged to the profit and loss account associates. tested to determine reversal. An individual projects. Each individual project expected to be paid (or recovered) using The Group operates a defined benefit represents the contributions payable impairment is reversed to the extent then follows the Group accounting Where the Group trades with a joint the tax rates and laws that have been pension scheme providing benefits based to the schemes in respect of the that the revised recoverable value does policies for the type of activity being venture or associate, the proportion enacted or substantively enacted by the on pensionable pay, which is closed to accounting period. not lead to a revised carrying amount delivered. of turnover and profit in respect of balance sheet date. future accrual and new entrants with higher than the carrying value had no the proportion of the joint venture Variations and claims are recognised only five active members continuing to impairment been recognised. Deferred tax is recognised in respect of xx) Foreign currency or associate owned by the Group is once there is sufficient certainty over be calculated on a CARE (Career Average all timing differences that have originated Transactions in foreign currencies are eliminated on consolidation. Such the probability that they will be received Revalued Earnings) basis. Financial assets but not reversed at the balance sheet recorded at the rate of exchange at the turnover and profit is taken when and the amount to be received can be date where transactions or events that For the defined benefit scheme, the date of the transaction. Monetary assets the assets purchased by the joint For financial assets carried at amortised measured reliably. venture are sold by it. cost, the amount of an impairment is result in an obligation to pay more tax in amounts charged to operating profit are and liabilities denominated in foreign the difference between the asset’s For contracts that are delivered as a the future or a right to pay less tax in the the current service costs and gains and currencies at the balance sheet date In the Company’s accounts, investments, carrying amount and the estimated value service and when the services performed future have occurred at the balance sheet losses on settlements and curtailments. are reported at the rates of exchange including those in joint ventures and of the future cash flows, discounted at are an indeterminate number of acts over date. Timing differences are differences They are included as part of staff costs. prevailing at that date. associates, are accounted for at cost a specified period of time (for example between the Group’s taxable profits and The net interest cost on the net defined the financial asset’s original effective The results of overseas operations less impairment. for services such as responsive its results as stated in the accounts that benefit liability is charged to profit and interest rate. are translated at the average rates of maintenance and facilities management), arise from the inclusion of gains and loss and included within net interest. exchange during the period and their For financial assets carried at cost less revenue is recognised on a straight line losses in tax assessments in periods Actuarial gains and losses are recognised balance sheets are translated at the rates impairment, the impairment loss is the basis. For responsive maintenance different from those in which they are immediately in other comprehensive of exchange at the balance sheet date. difference between the asset’s carrying contracts where the contract can be split recognised in the accounts. income. Exchange differences arising on the amount and the best estimate of the in to individual separable projects (and

94 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 95 Accounts and notes to the accounts

translation of opening net assets and In the event of the Group making a loss Defined benefit pension schemes require 2. GROUP TURNOVER on the results of overseas operations on a contract, provision is made for all significant judgements in relation to the are reported in other comprehensive losses incurred to the accounting date assumptions for inflation, future pension 2020 2019 income and accumulated in equity. together with any further losses that increases, investment returns and member Turnover Turnover are foreseen in bringing contracts to longevity that underpin the valuation. Analysis by class of business £000s £000s Other exchange differences are completion. This will often include an Each year in selecting the appropriate recognised in the profit and loss account Construction 808,260 922,699 estimate of the outcome of claims with assumptions, the directors take advice in the period in which they arise. Residential 149,948 125,346 our customers and / or our supply chain from an independent qualified actuary Developments 4,281 21,137 which are inherently uncertain. and the relevant assumptions are set out xxi) Dividends in a note to the accounts. Property Services 416,770 474,316 Management bases its judgements of Other 3,598 4,538 Dividends to the Company’s shareholders costs and income and its assessment The Group also considers Going Concern are recognised when dividends are of the expected outcome of each as a significant area of judgement and has Group total 1,382,857 1,548,036 approved for payment. contractual obligation on the latest included specific disclosure in relation to available information, which includes this within note 1 (iii). xxii) Significant areas of detailed contract valuations and forecasts of the costs to complete. The estimates 2020 2019 judgement and uncertainty of the contract position and the profit or Turnover Turnover The estimates and associated assumptions loss earned to date are updated regularly Analysis of Group turnover £000s £000s used in the preparation of the accounts and significant changes are highlighted Construction contracts 1,155,711 1,302,958 through established internal review are reviewed on an ongoing basis. Rendering of services 164,757 177,208 Revisions to accounting estimates are procedures. The impact of any change in Sale of land and residential properties 58,791 63,332 recognised in the period in which the the accounting estimates is then reflected estimate is revised if the revision only in the accounts. Rental/licence fee income 3,598 4,538 affects that period, or in the period of The carrying value of the residential land Group total 1,382,857 1,548,036 revision and future periods if the revision and development assets of the Group affects both current and future periods. and its joint ventures is supported by Group turnover is materially within the United Kingdom. The most critical accounting policies detailed viability reviews, which are and significant areas of judgement and updated regularly. estimation arise from the accounting for The annual valuation of investment contracts, assessments of the carrying properties is carried out by an 3. EXCEPTIONAL ITEMS value of residential land and development independent chartered surveyor or by (see note 12), the valuation of investment a director of a subsidiary who is a Fellow property (see note 10) and the assumptions of the Royal Institution of Chartered Group operating profit/(loss) has been arrived at after recognising the following items that are considered to be exceptional because of their used in the accounting for the defined Surveyors, to the required standard for size or non-recurring nature: benefit pension scheme (see note 24). such valuations. Assumptions on which 2020 2019 Contract accounting requires estimates the valuations have been based include, £000s £000s to be made for contract costs and but are not limited to, matters such as income. In many cases, these contractual tenure and tenancy details, ground Coronavirus Job Retention Scheme grant income 7,727 - obligations span more than one financial conditions and the structural condition Furlough costs (12,471) - period. Also the costs and income may of the properties, prevailing market yields Restructuring costs (6,681) - and comparable market transactions. be affected by a number of uncertainties (11,425) - that depend on the outcome of future The valuation is inherently subjective due events and may need to be revised as to, among other factors, the individual events unfold and uncertainties are nature of each property, its location and resolved. the expected future rental income from Coronavirus Job Retention Scheme grant income is government grant income received under the Coronavirus Job Retention Scheme in that property. respect of furloughed employees. All amounts were received in cash during the year. Furlough costs consist of salary costs made to staff whilst on furlough who were therefore not performing any services for the Group. The cost includes salary costs paid to staff in excess of the Coronavirus Job Retention Scheme grant income. £8,989,000 of the furlough costs are recognised within cost of sales and £3,482,000 is included within administrative expenses. Restructuring costs consist of the cost of redundancy (e.g. settlement agreements, PILONs and redundancy payments) associated with the Group redundancy programme which was announced in May 2020 where 268 employees left the Group across various business units and functions. The redundancy programme was instigated as a direct consequence of the Group’s response to the pandemic. £4,734,000 of the restructuring costs are recognised within cost of sales and £1,947,000 is included within administrative expenses.

96 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 97 Accounts and notes to the accounts

4. GROUP OPERATING PROFIT/(LOSS) 6. REMUNERATION OF DIRECTORS

2020 2019 2020 2019 £000s £000s £000s £000s This is stated after charging/(crediting): Directors’ emoluments – executive and family directors 2,172 3,232 Amortisation of goodwill 3,477 3,477 – independent non-executive directors 202 179 Auditors’ remuneration* Amounts receivable under long-term incentive scheme * - 1,330 - audit of these accounts 33 102 Contributions to money purchase pension schemes 40 72 - audit of subsidiaries’ accounts ** 344 336 2,414 4,813 Cost of stock recognised as expense 54,261 52,112 Depreciation of tangible fixed assets (including loss on disposal £30,000 (2019: £71,000)) 6,623 6,368 Three (2019: three) directors have benefits accruing under a money purchase pension scheme. Foreign exchange loss 85 280 Hire of plant and machinery 5,168 5,295 2020 2019 Operating lease rentals 8,433 6,547 £000s £000s Research and development credits (1,552) (2,241) Highest paid director – emoluments 540 1,024 Research and development 8,149 10,500 – amounts receivable under long-term incentive scheme * - 715 * Excludes fee payments made through joint ventures ** 2019 includes a fee of £18,000 paid to PricewaterhouseCoopers LLP in respect of the prior year audit *The 2019 figures for amounts receivable under long-term incentive schemes represent the cash payments made to directors in relation to the performance of the Group in the periods to 31 December 2019. The long-term incentive scheme has a deferred element which would normally result in payments being made to directors in March on an annual basis, even when no entitlement is earned in respect of the current financial year. The deferred payments that would ordinarily have been made in March 2021 have been deferred further and payments in the future remain subject to the financial performance of the Group in 2021 and beyond. The earliest such a payment could be made is September 2021. The value of the payments to directors that have been deferred from March 2021 is £505,000, of which £251,000 is payable to the highest paid director. No amounts are receivable by directors in respect of the performance of the Group in 2020. 5. STAFF NUMBERS AND COSTS

The average number of persons employed by the Group (including directors) during the year, analysed by category, was as follows: 7. NET INTEREST RECEIVABLE

2020 2019 Number Number 2020 2019 Operations 2,463 2,557 £000s £000s Administration 1,226 1,267 Interest payable and similar charges 3,689 3,824 Bank interest (1,894) (1,130) Bank charges (707) (994) Other interest (85) - The aggregate payroll costs for the Group were as follows: Net interest on defined benefit liability (430) (754) Interest payable and similar charges (3,116) (2,878) 2020 2019 £000s £000s Interest receivable Wages and salaries 198,939 228,315 Bank 209 346 Social security costs 22,664 26,772 Other 4,687 4,633 Other pension costs 20,087 20,325 Interest receivable 4,896 4,979 241,690 275,412

Other interest receivable includes amounts from joint ventures of £4,291,000 (2019: £4,269,000) which is also included within interest The pension operating cost for the year was £1,044,000 (2019: £1,063,000) in respect of defined benefit arrangements and £19,043,000 payable by joint ventures disclosed on the face of the consolidated profit and loss account. (2019: £19,262,000) in respect of defined contribution arrangements. There are no employees of the Company.

98 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 99 Accounts and notes to the accounts

8. TAXATION ON PROFIT 9. INTANGIBLE ASSETS – GOODWILL

a) Analysis of the (credit)/charge in the year Group £000s Cost at 1 January 2020 and 31 December 2020 72,098 2020 2019 £000s £000s Amortisation: Current tax At 1 January 2020 23,562 UK corporation tax on the profit for the year (342) 3,728 Provided during the year 3,477 Adjustments in respect of prior years (416) (277) At 31 December 2020 27,039 Total current tax (758) 3,451

Deferred tax Net book value: Origination and reversal of timing differences 498 2,333 At 31 December 2020 45,059 Adjustments in respect of prior years 134 562 At 31 December 2019 48,536 Impact of change in tax rate (589) - Total deferred tax 43 2,895 Total tax on profit (715) 6,346 The net book value of goodwill at 31 December 2020 includes amounts and remaining amortisation periods regarding the following acquisitions:

During the year beginning 1 January 2021, the net reversal of deferred tax assets is not expected to increase the corporation tax charge for Remaining the year significantly as the net reversal will be offset by lower current tax in respect of timing differences. There is no expiry date on amortisation Net book value timing differences. Acquisition period of goodwill Wates Property Services Limited 10.4 years £14,119,000 Purchase Group 13.9 years £5,787,000 b) Factors affecting the total tax (credit)/charge for the year Parts of the Shepherd Group 14.8 years £25,153,000 The total tax (credit)/charge for the year is lower (2019: higher) than the standard rate of corporation tax in the UK of 19% (2019: 19%). The differences are explained below:

2020 2019 £000s £000s Profit before taxation 839 34,570 Less share of profit after tax of joint ventures and associates taxed as separate entities (1,947) (5,699) Group (loss)/profit before tax (1,108) 28,871 Group (loss)/profit at the standard rate of corporation tax in the UK of 19% (2019: 19%) (211) 5,485 Effects of: Permanent disallowable costs 728 1,069 Decrease in tax rate / timing differences (950) (493) Adjustments in respect of prior years (282) 285 Group total tax (credit)/charge for the year (715) 6,346

100 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 101 Accounts and notes to the accounts

10. TANGIBLE FIXED ASSETS 11. JOINT VENTURES AND ASSOCIATES AND OTHER INVESTMENTS

Land and buildings Total joint Joint ventures and Unquoted Total other Investment Assets in ventures Associates associates investments Equity loans investments properties – Leasehold Plant and the course of Group freehold improvements equipment construction total £000s £000s £000s £000s £000s £000s Group £000s £000s £000s £000s £000s At 1 January 2020 117,478 291 117,769 439 385 824 Valuation or cost: Additions 14,353 - 14,353 - - - At 1 January 2020 53,440 10,577 44,568 6,781 115,366 Repayments (16,867) - (16,867) - (22) (22) Additions 95 (82) 607 2,484 3,104 Deferred income release 361 - 361 - - - Revaluations (2,510) - - - (2,510) Profit - - - - 3 3 Transfers - - 864 (864) - Impairment - - - (439) - (439) Disposals - - (4,916) - (4,916) Share of profit/(loss) 2,580 (43) 2,537 - - - At 31 December 2020 51,025 10,495 41,123 8,401 111,044 At 31 December 2020 117,905 248 118,153 - 366 366

Depreciation: At 1 January 2020 - 3,726 31,289 - 35,015 The investment in joint ventures includes loans amounting to £86,420,000 (2019: £85,008,000). Repayments includes dividends received from joint ventures and associates of £5,700,000 (2019: £1,581,000). Provided during the year - 1,422 5,171 - 6,593 Disposals - - (4,882) - (4,882) At 31 December 2020 - 5,148 31,578 - 36,726

Net book amounts: At 31 December 2020 51,025 5,347 9,545 8,401 74,318 At 31 December 2019 53,440 6,851 13,279 6,781 80,351

Investment properties, which are all freehold, were revalued as at 31 December 2020 to fair value at £51,025,000, based on a valuation undertaken by CBRE Limited, chartered surveyors, an independent valuer with recent experience of the location and class of the investment properties being valued. The method of determining fair value and assumptions on which valuations are based are set out in note 1(xxii). The cost of investment properties at 31 December 2020 was £43,780,000 (2019: £43,684,000). Other tangible fixed assets are stated at cost less depreciation. At the balance sheet date the Group had committed to incur capital expenditure of £nil (2019: £172,000). At the balance sheet date the Group had contracted with licence and lease holders regarding provision of flexible office space, studios and managed workspace for minimum payments due within one year of £838,000 (2019: £1,046,000) and due over one year up to five years of £1,640,000 (2019: £730,000). Contracts include licence agreements. They are generally issued on a three-month minimum term basis, rolling monthly thereafter.

102 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 103 Accounts and notes to the accounts

Joint ventures The Group holds the following interests in the ordinary share capital of the following companies: The Group holds the following interests in limited liability partnerships:

Interest Registered office Interest Registered office Annington Wates (Cove) Limited 50.0% Wates House, Havering and Wates Regeneration LLP 50.0% Wates House, Station Approach, HWR Phase 1 Stage 1 LLP 50.0% Station Approach, Leatherhead, Signature Wates Residential LLP 50.0% Leatherhead, Surrey KT22 7SW Surrey KT22 7SW Barratt Wates (East Grinstead) Limited 50.0% Barratt House, Laurus Living Space LLP 50.0% Sale Point, Barratt Wates (East Grinstead) No. 2 Limited 50.0% Cartwright Way, 126–150 Washway Road, Barratt Wates (Horley) Limited 21.5% Forest Business Park, Sale, Bardon Hill, Barratt Wates (Lindfield) Limited 50.0% Manchester M33 6AG Coalville, Barratt Wates (Worthing) Limited 50.0% Leicestershire LE67 1UF Linden (Battersea Bridge Road) LLP 50.0% 11 Tower View, DWH/Wates (Thame) Limited 50.0% Linden Wates (Horsham) LLP 50.0% Kings Hill, Linden Wates (Ringwood) LLP 50.0% West Malling, Berkshire Land Limited 33.3% 11 Tower View, Kent ME19 4UY Linden (Basingstoke) Limited 50.0% Kings Hill, Linden Wates (Royston) LLP 50.0% Linden Wates (Barrow Gurney) Limited 50.0% West Malling, Linden Wates (Salisbury) LLP 50.0% Kent ME19 4UY Linden Wates (Bricket Wood) Limited 50.0% Linden Wates (Walberton) LLP 50.0% Linden Wates (Cranleigh) Limited 50.0% Linden Wates Developments (Chichester) Limited 50.0% Linden Wates Developments (Folders Meadow) Limited 50.0% Linden Wates (Dorking) Limited 50.0% Associates Linden Wates (Kempshott) Limited 50.0% The Group holds the following interests in the ordinary share capital of the following companies: Linden Wates (Lovedean) Limited 50.0% Linden Wates (Ravenscourt Park) Limited 50.0% Linden Wates (Ridgewood) Limited 50.0% Interest Registered office Linden Wates (The Frythe) Limited 50.0% Countrywise Repairs Limited 49.0% Monson House, Linden Wates (Westbury) Limited 50.0% Monson Way, Linden Wates (West Hampstead) Limited 50.0% Tunbridge Wells, Kent TN1 1LQ HWR Nominee Ltd 50.0% Wates House, Station Approach, QSH Propco Limited 15.0% 1934 the Yard, Leatherhead, Quality Social Housing Management Limited 15.0% Exploration Drive, Surrey KT22 7SW Leicester LE4 5JD Miller Wates (Bracklesham) Limited 50.0% 2 Centro Place, Miller Wates (Chalgrove) Limited 50.0% Pride Park, Miller Wates (Didcot) Limited 50.0% Derby, Derbyshire DE24 8RF The Group holds the following interest in a limited liability partnership: Miller Wates (Southwater) Limited 50.0% Miller Wates (Wallingford) Limited 50.0% Interest Registered office QSH Property LLP 7.5% 2 Merus Court, Meridian Business Park, Leicester LE19 1RJ

104 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 105 Accounts and notes to the accounts

Unquoted investments 12. STOCKS The Group’s interests in unquoted investments are as follows: 2020 2019 Interest Registered office Group £000s £000s Gambado Limited 100% non-voting Preference shares Connect House, Raw materials and consumables 92 207 and 1.4% Ordinary shares Kingston Road, Residential land and work in progress under development 40,520 48,041 Leatherhead, 40,612 48,248 Surrey KT22 7LT

The cost of shares in unquoted investments is £1,874,000 (2019: £1,874,000). An impairment of £439,000 (2019: £1,436,000) was recognised in the year. The investment is now fully impaired as the Group considers that it is no longer recoverable due to past trading and the 13. DEBTORS additional strains of the current environment. Group Group Company Company 2020 2019 2020 2019 Equity loans £000s £000s £000s £000s Amounts falling due within one year These comprise amounts advanced to homebuyers to assist in their purchase of the Group’s residential properties under equity share schemes. The loans, with a cost of £449,000 (2019: £467,000), are repayable, together with a share in the capital appreciation, when the Trade debtors 73,803 96,845 - 18 underlying property is sold. Included in this total are loans with a cost of £93,000 (2019: £93,000), which are repayable if the properties are Amounts recoverable on contracts 141,206 171,753 - - not sold by 2021. The loans are mainly secured by a charge over the property. Loans with a cost of £180,000 (2019: £180,000) are interest Amounts owed by subsidiary undertakings - - 51,904 48,024 free and loans with a cost of £269,000 (2019: £287,000) were interest free until 2016 when a fee of 1.75% became receivable, rising annually Amounts owed by joint ventures and associates 11 2,926 989 962 by the Retail Price Index plus 1%. A provision of £83,000 (2019: £82,000) is held against these loans. Deferred taxation (note 18) 3,913 2,917 426 - Corporation tax receivable 3,492 2,281 124 - Company Other debtors 5,813 8,494 - 2,140 Prepayments and accrued income 11,077 11,622 366 382 Shares Interests 239,315 296,838 53,809 51,526 in Group in joint Unquoted undertakings ventures investments Total Amounts falling due after more than one year £000s £000s £000s £000s Trade debtors 1,013 2,048 - - Amounts recoverable on contracts 21,960 32,000 - - At 1 January 2020 56,538 85,493 438 142,469 Deferred taxation (note 18) 7,456 6,822 - - Additions - 13,121 - 13,121 Other debtors 1,381 133 1,250 - Repayments - (10,530) - (10,530) Prepayments and accrued income 405 753 405 753 Impairment - - (438) (438) 32,215 41,756 1,655 753 At 31 December 2020 56,538 88,084 - 144,622 271,530 338,594 55,464 52,279

The cost of shares in Group undertakings is £71,762,000 (2019: £71,762,000). The shares in Group undertakings of £56,538,000 (2019: £56,538,000) is net of cumulative impairments of £15,224,000 (2019: £15,224,000). The investment in joint ventures includes loans amounting to £88,074,000 (2019: £85,483,000). Repayments includes dividends received from joint ventures of £5,700,000 (2019: £750,000). 14. CASH AND CASH EQUIVALENTS The cost of shares in unquoted investments is £1,874,000 (2019: £1,874,000). An impairment of £438,000 (2019: £1,436,000) was recognised in the year. The investment is now fully impaired as the Company considers that it is no longer recoverable due to past trading and the 2020 2019 additional strains of the current environment. Group £000s £000s For the year ending 31 December 2020, the following subsidiary companies of the Company were entitled to exemption from audit of Restricted cash 4,327 4,870 individual company accounts under Section 479A of the Companies Act 2006: Cash at bank 211,620 137,309 Brooks and Rivers Limited (Company number 00260431) Wates Group Services Limited (Company number 00340931) 215,947 142,179 Wates Limited (Company number 03599183) Wates Homes (Bracknell) Limited (Company number 02285497) Wates Amenity Lands Limited (Company number 00733498) Wates Homes (Odiham) Limited (Company number 05511849) Restricted cash represents money held in a proceeds account from property sales for a development site. The lower of 90% of the sales Wates Built Homes (Southern) Limited (Company number 00977105) Wates (Walberton) Limited (Company number 11149972) proceeds received and the full construction costs incurred to date are released from the account on receipt of a signed certificate from the site partner. The remaining balance will be distributed in full between the partners, in accordance with the profit share agreement, A list of the Group’s subsidiary undertakings is set out on page 116. six months after the final unit sale on the site. The net cash position at year end is £166,085,000 (2019: £115,551,000).

106 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 107 Accounts and notes to the accounts

15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR The maturity of bank loans is as follows:

2020 2019 2020 2019 Group Group Company Company Group £000s £000s Company £000s £000s 2020 2019 2020 2019 Within one year 5,000 27,000 Within one year 5,000 - £000s £000s £000s £000s Between one and two years 11,000 - Between one and two years 11,000 - Bank loans 4,951 26,628 4,951 - Between two and five years 34,000 - Between two and five years 34,000 - Advance payments on account of contracts 152,774 135,518 - - 50,000 27,000 50,000 - Trade creditors 72,167 99,015 - - Amounts owed to subsidiary undertakings - - 95,635 138,689 These amounts are disclosed before the deduction of These amounts are disclosed before the deduction of Amounts owed to joint ventures 18,948 12,022 18,948 12,022 unamortised arrangement fees of £138,000 (2019: £372,000). unamortised arrangement fees of £138,000 (2019: £nil). Corporation tax payable - - - 232 Other taxes and social security 28,081 19,318 - - Other creditors 5,114 3,554 - - 17. PROVISIONS FOR LIABILITIES Accruals 229,090 270,640 517 492 2020 2019 Deferred income 2,879 1,284 - - Group £000s £000s 514,004 567,979 120,051 151,435 At 1 January 8,921 8,779 Utilised during the year - (100) Charged to profit and loss account 9,716 242 The Group has in place a Revolving Credit Facility of £120,000,000 which was undrawn at 31 December 2020 and expires in 2023 and a At 31 December 18,637 8,921 Coronavirus Large Business Interruption Loan Scheme facility of £50,000,000 which was fully drawn at 31 December 2020 and which Provision for net defined benefit scheme deficit (note 24) 21,811 23,786 expires in 2023. A repayment of £5,000,000 in respect of the Coronavirus Large Business Interruption Loan Scheme facility is payable on 31 December 2021. In 2019, Bank loans included £27,000,000 drawn under the Revolving Credit Facility in a subsidiary, Needspace? Total 40,448 32,707 Limited. This loan was repaid during the year. Bank loans are disclosed net of unamortised arrangement fees of £49,000 (2019: £372,000). Provisions, other than the provision for the net defined benefit scheme deficit, are construction activity related and are the Group’s estimates of the Both the Revolving Credit Facility and Coronavirus Large Business Interruption Loan Scheme facility are secured against the majority of amounts which are expected to be paid. These construction amounts reflect the expected future loss which is considered after making an allowance for the Group’s subsidiaries and their assets. The Group has remained compliant with the covenants throughout the period up to the date insurance policy excess, if the Group has received reasonable satisfaction of policy coverage from insurers that costs are recoverable for certain works and of this report. Interest rates on the Group’s banking facilities (bank loans) are less than 2.5%. where the process is at an advanced stage. The obligation is likely to crystallise more than one year after the balance sheet date. Other taxes and social security includes £15,799,000 (2019: £nil) due under the Government’s VAT Deferral New Payment Scheme. 18. DEFERRED TAXATION

Group £000s 16. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR At 1 January 2020 9,739 Charged to profit and loss account (43) Group Group Company Company Credited to other comprehensive income 1,673 2020 2019 2020 2019 At 31 December 2020 11,369 £000s £000s £000s £000s Bank loans 44,911 - 44,911 - The Finance Act 2016 reduced the corporation tax rate to 17% with effect from 1 April 2020 and so this rate was used in the December 2019 deferred tax Other taxes and social security 5,925 - - - calculations. In the Budget of 11 March 2020, the Chancellor of the Exchequer announced that the planned rate reduction to 17% would no longer be taking effect. The changes announced during the Budget of 11 March 2020 were substantively enacted as at the 2020 balance sheet date, therefore, all opening Accruals 16,034 20,117 - - deferred taxation balances have been remeasured at 19% with an adjustment recognised in the 2020 total tax charge. On 3 March 2021, the Chancellor of Deferred income 2,652 3,306 - - the Exchequer announced various amendments to the Government’s VAT deferral scheme and rises in UK Corporation Tax. When enacted these will impact the tax assets and liabilities of the Group. 69,522 23,423 44,911 - Deferred taxation is provided as follows: The Group has in place a Revolving Credit Facility of £120,000,000 which expires in 2023 and a Coronavirus Large Business Interruption 2020 2019 Loan Scheme facility of £50,000,000 which was fully drawn at 31 December 2020 and which expires in 2023. Repayments of £45,000,000 £000s £000s are payable in respect of the Coronavirus Large Business Interruption Loan Scheme facility over the remainder of the loan term. Bank Accumulated depreciation in excess of capital allowances 308 668 loans are disclosed net of unamortised arrangement fees of £89,000 (2019: £ nil). Deferred tax arising in relation to retirement benefit obligations 4,144 4,044 Other taxes and social security includes £5,925,000 (2019: £nil) due under the Government’s VAT Deferral New Payment Scheme. Other timing differences including tax losses 6,917 5,027 11,369 9,739

108 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 109 Accounts and notes to the accounts

18. DEFERRED TAXATION – CONTINUED 20. CALLED UP SHARE CAPITAL AND RESERVES

2020 2019 2020 2019 £000s £000s Number £000s Number £000s Deferred taxation asset under one year 3,913 2,917 Issued and fully paid: Deferred taxation asset over one year 7,456 6,822 A ordinary shares of £1 each 323,854 324 323,854 324 11,369 9,739 B ordinary shares of £1 each 323,854 324 323,854 324 C ordinary shares of £1 each 323,854 324 323,854 324 A second ordinary shares of £0.0277 each 60 - 60 - Company £000s B second ordinary shares of £0.0277 each 60 - 60 - C second ordinary shares of £0.0277 each 60 - 60 - At 1 January 2020 - Non-voting second preference shares of £1 each 5,000,000 5,000 5,000,000 5,000 Credited to profit and loss account 426 Non-voting A preference shares of £1 each 2,914,677 2,914 2,914,677 2,914 At 31 December 2020 426 Non-voting B preference shares of £1 each 2,914,677 2,914 2,914,677 2,914 Non-voting C preference shares of £1 each 2,914,677 2,914 2,914,677 2,914 Index linked non-voting A shares of £1 each 20,750 21 20,750 21 Deferred taxation is provided as follows: Index linked non-voting B shares of £1 each 20,750 21 20,750 21 2020 2019 Index linked non-voting C shares of £1 each 20,750 21 20,750 21 £000s £000s 14,778,023 14,777 14,778,023 14,777 Other timing differences 426 -

Ordinary and second ordinary shares, which carry the rights to receive notice, attend and vote at general meetings of the Company, are entitled to dividends declared after the payment of index linked share dividends, preference and second preference share dividends. The priority of dividends other than ordinary dividends is as follows: 19. FINANCIAL INSTRUMENTS 1. Firstly, index linked shareholders (‘index shareholders’) are entitled to annual non-cumulative preferential dividends being the greater of the preceding such dividend and an amount of £4.82 per share indexed using the Retail Price Index since September 2007; The carrying values of the Group’s financial assets and liabilities, other than those measured at the undiscounted amount receivable or payable, are summarised by category below: 2. Secondly, preference shareholders are entitled to biannual fixed non-cumulative dividends, the first at the rate of 17% per annum and the second at a rate of 17% per annum subject to minimum profit levels on the amount paid up and in issue regarding these shares; 2020 2019 3. Thirdly, second preference shareholders are entitled to fixed non-cumulative dividends at the rate of 7.5% per annum on the amount Group £000s £000s paid up and in issue regarding these shares. Financial assets On a return of capital on a winding-up of the Company, assets available for distribution shall be applied firstly to repaying the index Debt instruments measured at amortised cost shareholders, secondly to repaying the preference shareholders, thirdly to repaying the second preference shareholders, fourthly to • Loans receivable from joint ventures (notes 11 and 13) 86,420 85,533 repaying the second ordinary shareholders and fifthly to repaying the ordinary shareholders. Equity instruments measured at cost less impairment The A, B and C preference, ordinary and second ordinary shares are treated as separate classes of shares regarding further issues and • Fixed asset investments in unlisted equity instruments (note 11) - 439 transfers and, in the case of ordinary and second ordinary shares only, proceedings at general meetings. • Equity loans (note 11) 366 385 The Group and Company’s reserves are as follows: • The share premium reserve contains the premium arising on the issue of equity shares, net of issue expenses. Financial liabilities • The capital redemption reserve contains the amounts transferred following repurchase and redemption of the Company’s shares. Measured at amortised cost • Loans payable (notes 15 and 16) 49,862 26,628 The profit and loss account reserve represents cumulative profits and losses, including unrealised profit on the remeasurement of investment properties, net of dividends paid and other adjustments.

Interest income and expense Total interest income for financial assets at amortised cost 4,291 4,269 Total interest expense for financial liabilities at amortised cost 2,601 2,124

110 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 111 Accounts and notes to the accounts

21. RECONCILIATION OF GROUP OPERATING PROFIT TO CASH GENERATED 23. OPERATING LEASE COMMITMENTS BY OPERATIONS 2020 2019 2020 2019* £000s £000s £000s £000s Group total future minimum lease payments under non-cancellable operating leases are as follows: Group operating (loss)/profit including joint ventures and associates (941) 32,469 Within one year 7,052 6,343 Adjustments for: Between one and five years 10,459 10,469 Decrease/(increase) in fair value of investment property 2,510 (1,194) After five years 1,162 2,023 Profit on sale of investment in joint venture - (571) 18,673 18,835 Profit on sale of properties with equity loans (3) (93) Depreciation and amortisation 10,100 9,845 Joint ventures and associates (2,537) (7,989) Impairment of other investments 439 1,435 Decrease/(increase) in stocks 7,636 (8,042) Decrease/(increase) in debtors 71,767 (29,083) 24. PENSION SCHEMES (Decrease)/increase in creditors* (41,441) 77,268 Increase in provisions 9,716 142 The Group historically operated a defined benefit pension scheme, the Wates Pension Fund (‘the scheme’), which is now closed to Cash from operations before adjustment for pensions funding 57,246 74,187 future accrual and new entrants. The Group also operates personal pension schemes providing benefits on a defined contribution basis. Adjustment for pensions funding (8,710) (9,389) A subsidiary of the Group participates in a defined benefit scheme accounted for on a defined contribution basis (see note 1(xix)). Cash generated from operations 48,536 64,798 The funds of the scheme are administered by trustees and are separate from the funds of the Group. The scheme is closed to future Interest received 4,582 4,686 accrual and new entrants. Interest paid (1,952) (1,130) The latest full actuarial valuation of the scheme was carried out at 31 December 2017 and was updated to 31 December 2020 by a Corporation tax recovered/(paid) 1,021 (4,344) qualified independent actuary. Net cash inflow from operating activities 52,187 64,010 Principal actuarial assumptions at the balance sheet date (expressed as weighted averages) 2020 2019 *The prior year cash flow statement has been corrected to present certain cash inflows received from joint ventures as cash flows from investing activities that were previously presented as cash flows from operating activities. This has resulted in a decrease in the net movement in creditors of £4,365,000 Discount rate 1.30% 2.20% (in note 21) and a corresponding net increase in the cash inflows from investing activities in the Consolidated Cash Flow Statement. The corresponding net Rate of compensation increase 3.70% 3.80% increase in investing activities is represented by a £5,115,000 cash inflow which has been presented as amounts received from joint ventures and a reduction Rate of price inflation 2.70% 2.80% in dividends from joint ventures of £750,000. An amount of £18,596,000 previously presented as loans repaid by joint ventures is now also presented as Rate of pension increase 1.90% 2.00% amounts received from joint ventures. Cash is often received from joint ventures in advance of any formal distribution and therefore the dividends from joint ventures are not always cash transactions. The dividends received from joint ventures of £750,000 (31 December 2019) are not included in the Consolidated Cash Flow Statement as these were non-cash transactions resulting in a reduction in the amount due to the joint venture. 2020 2019 Weighted average life expectancy for mortality tables used to determine benefit obligations at year end Years Years Male member age 65 (current life expectancy) 22.5 22.4 Female member age 65 (current life expectancy) 24.8 24.8 22. GROUP NET CASH RECONCILIATION Male member age 45 (life expectancy at age 65) 23.8 23.7 Female member age 45 (life expectancy at age 65) 26.2 26.2 1 January 2020 Cash flows 31 December 2020 £000s £000s £000s Cash at bank 137,309 74,311 211,620 2020 2019 Restricted cash 4,870 (543) 4,327 Components of pension cost £000s £000s Cash at bank and in hand 142,179 73,768 215,947 Recognised in the profit and loss account: Current service credit (216) (181) Bank loans (excluding arrangement fees *) (27,000) (23,000) (50,000) Net interest cost 430 754 Net cash including restricted cash 115,179 50,768 165,947 214 573 Net cash excluding restricted cash 110,309 51,311 161,620 Recognised in other comprehensive income 6,305 1,817 Total cost relating to defined benefit scheme 6,519 2,390 * Bank loans are disclosed before the deduction of unamortised arrangement fees of £138,000 (2019: £372,000).

112 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 113 Accounts and notes to the accounts

2020 2019 25. CONTINGENCIES Analysis of deferred tax recognised in other comprehensive income £000s £000s Tax credit relating to remeasurement of net defined benefit liability (1,197) (309) There are claims arising in the normal course of trading that are in the process of negotiation. In some cases these negotiations may be Increase in tax rate on opening net defined benefit liability (476) - protracted over several years. Provision has been made for all amounts that the directors consider will become payable on account of claims. There are contingent liabilities in respect of guarantees and other agreements entered into in the normal course of business. Total tax credit relating to other comprehensive income (1,673) (309)

The amount included in the balance sheet arising from the Group’s obligations in respect of the scheme is as follows:

2020 2019 26. RELATED PARTIES £000s £000s Present value of defined benefit obligations 345,356 310,996 Turnover in respect of the value of contracting work done for and land sold to joint ventures in the year ended 31 December 2020 was Fair value of scheme assets 323,545 287,210 £4,617,000 (2019: £5,000,000). Net liability recognised in the balance sheet 21,811 23,786 Amounts were due to the Group from joint ventures and associates at 31 December 2020 of £86,432,000 (2019: £87,935,000). Additionally, at 31 December 2020, the Group owed joint ventures £18,948,000 (2019: £12,022,000). Interest at market rates is receivable/(payable) in respect of loans, which are unsecured, due from/(to) joint ventures. 2020 2019 At 31 December 2020, £2,822,000 (2019: £2,605,000) was due from Myriad CEG Group Limited (‘Myriad’) and £nil (2019: £2,000,000) was due £000s £000s from Cornflower Investments Limited (‘Cornflower’). The amount due from Myriad CEG Group Ltd has been fully provided for. Interest Movements in the present value of defined benefit obligations: is/was receivable at a market rate in respect of these amounts. Myriad and Cornflower are/were related to the Company and the Group At 1 January 310,996 282,308 through common control. Service credit (216) (181) On 10 September 2020, the £2,000,000 loan to Cornflower was repaid in full and in a related transaction, loans to shareholders were Interest cost 6,649 8,030 granted such that: at 31 December 2020, £500,000 (2019: £nil) was due from Sir James G.M Wates, a shareholder and director of the Actuarial loss 45,565 31,706 Company, to the Company; at 31 December 2020, £250,000 (2019: £nil) was due from Jonathan G.M. Wates, a shareholder and director of Benefits paid (17,638) (10,867) the Company, to the Company; at 31 December 2020, £250,000 (2019: £nil) was due from Timothy A.D. Wates, a shareholder and director of the Company, to the Company; and at 31 December 2020, £250,000 (2019: £nil) was due from Andrew E.P. Wates, a director of the At 31 December 345,356 310,996 Company, to the Company. All loans are repayable in September 2027. Interest on the loans is charged at the higher of the official rate for beneficial loans arrangements as set by HMRC of 2.25% and 2.5%. Interest accrues daily and is payable annually in arrears on each Movements in the fair value of scheme assets: anniversary of the date on which the loan is borrowed. At 1 January 287,210 251,704 The Company has guaranteed a £500,000 bank overdraft facility held by a subsidiary of Myriad and in turn has received a counter guarantee from members of the Wates family. Interest income 6,219 7,276 Actual return less interest on scheme assets 39,260 29,889 During its normal course of business, a Group subsidiary, Wates Developments Limited, entered into a promotion agreement for a site, Employer contribution 8,494 9,208 with Andrew T. A. Wates, who is a shareholder of the Company, and his wife, Sarah, in July 2016. The initial contract will last for 10 years and an initial amount of £85,000 was paid. Wates Developments Limited will be paid a promotion fee of 20% if it successfully achieves Benefits paid (17,638) (10,867) planning on the site within 10 years. The promotion is extendable for 10 years on payment of an additional fee. During 2019, Wates At 31 December 323,545 287,210 Developments Limited bought a piece of land adjacent to the site. If the promotion contract between Andrew T. A. Wates and his wife, Sarah expires, Andrew T. A. Wates and his wife, Sarah, can purchase this piece of land at cost plus interest at 2% above the base rate.

The analysis of scheme assets at the balance sheet date was as follows: During its normal course of business, a Group subsidiary, Wates Developments Limited, entered into a promotion agreement for a site, with Michael E. Wates, who is a shareholder of the Company, and his wife, Caroline, in August 2020. The initial contract will last for 10 years 2020 2019 and an initial amount of £50,000 was paid. Wates Developments Limited will be paid a promotion fee of 20% if it successfully achieves % % planning on the site within 10 years. The promotion is extendable for 10 years on payment of an additional fee. Major categories of scheme assets as a percentage of the fair value of total scheme assets: Key management personnel includes all statutory directors of the company and of the Executive Committee. The total remuneration for Equity securities 20.6% 25.9% key management personnel for the year was £4,260,000 (2019: £10,226,000). Debt securities 66.6% 66.8% Real estate 1.1% 2.3% Cash and cash equivalents 11.7% 5.0% 100.0% 100.0%

Contributions The Group expects to contribute £8,400,000 to the scheme in 2021 for deficit reduction contributions.

114 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 115 Group five-year summary

Subsidiary undertakings Group five-year summary AT 31 DECEMBER 2020

Except where otherwise stated: 2016 2017 2018 2019 2020 • All subsidiary undertakings are incorporated in the United Kingdom and registered in England and Wales; £m £m £m £m £m • The registered office of all subsidiary undertakings is Wates House, Station Approach, Leatherhead, Surrey KT22 7SW; Profit and loss account • The Wates Group Limited interest is 100% in the issued share capital of the subsidiary undertakings listed below included Group turnover (plus share of joint ventures’ and associates’ turnover) 1,532 1,622 1,601 1,634 1,449 in the consolidated accounts. Group turnover 1,442 1,530 1,501 1,548 1,383 Operating profit (excluding share of joint ventures’ and associates’ interest and tax) 37.3 38.5 39.0 39.0 4.6 Subsidiary undertaking Underlying operating profit Wates Amenity Lands Limited Wates Homes (Farnham Common) Limited Wates (Walberton) Limited (excluding share of joint ventures’ and associates’ interest and tax) 37.3 38.5 39.0 39.0 16.0 Wates Built Homes (Blakes) Limited Wates Homes Limited 10 St Bride Street Limited* Profit before taxation (and excluding share of joint ventures’ and associates’ tax) 35.5 35.7 35.9 36.2 1.7 Wates Built Homes (London) Limited Wates Homes (Oakley) Limited Brooks and Rivers Limited Underlying profit before taxation Wates Built Homes Limited Wates Homes (Odiham) Limited Danesdale (Pebble Drive) Limited (and excluding share of joint ventures’ and associates’ tax) 35.5 35.7 35.9 36.2 13.1 Wates Built Homes (Retirement) Limited Wates Homes (Wallingford) Limited (formerly known as Wates Developments (Bonehurst Horley) Limited) Balance sheet Wates Built Homes (Southern) Limited Wates Homes (Warsash) Limited G Purchase Construction Limited Net assets 70.7 119.4 135.8 152.4 142.0 Wates Construction International LLC Wates (Hungerford) Limited GW 217 Limited (incorporated in Abu Dhabi; ownership Wates Interiors Limited interest 49%; registered office – Needspace? Limited* Wates Lancewood Estates Limited* Sultan International Holdings, 20th Floor, Purchase Group Limited Sheikh Sultan Bin Hamdan Building, Wates Limited* Purchase Home Improvements Limited Corniche PO Box 3486, Abu Dhabi, Wates Property Services Limited United Arab Emirates) Purchase Homes Limited Wates Maintenance Services Limited Wates Construction Limited* Purchase Support Limited Wates Pension Trustee Company Limited Wates Construction Services Limited QED Education Environments Limited* Wates PFI Investments Limited Wates Developments Limited* Relocation and Inventory Services Limited Wates PFI Investments (Projects) Limited Wates Financial Services Limited SES (Engineering Services) Limited Wates PFI Investments (QED) Limited Wates Group Properties Limited Stageselect Limited* Wates Regeneration (Coventry) Limited Wates Group Services Limited* Third Wates Investments Limited Wates Regeneration (South Acton) Wates Healthcare Trustee Company Limited WBH (Financial Services) Limited Limited Wates Regeneration (Tavy Bridge) Limited Woodside Lands Estates Limited Wates Homes (Bracknell) Limited Wates Second Land Limited Woodside Lands Limited Wates Homes (Cambridge) Limited Wates Smartspace Limited Woodside Lands Management Limited Wates Homes (Chichester) Limited Wates Staff Trustees Limited *Owned directly by Wates Group Limited

The consolidated income and expenditure, assets and liabilities and cash flows of the subsidiary undertakings of the Group include the Group’s shares of the following unincorporated jointly controlled assets:

Interest Address American Community School Expansion 24.5% Eastern International LLC, American Community School Landscaping 24.5% Bel City Gate Tower, CFB Building 24.5% 11th Floor, Qasr Al Hosn Fort 24.5% Al Wahda Street, PO Box 1596, Sharjah, Qasr Al Hosn Fort and NCCC Main Contract Works 24.5% United Arab Emirates Linden Wates (St. Albans) 50.0% 11 Tower View, Kings Hill, West Malling, Kent ME19 4UY

116 WATES GROUP LIMITED ANNUAL ACCOUNTS AND REPORTS 2020 117 Head Office Wates House Station Approach Leatherhead Surrey KT22 7SW Tel: 01372 861000

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