WATES ANNUAL REVIEW 2018

Together we inspire better ways of creating the places, communities and businesses of tomorrow

ANNUAL REVIEW 2018

wates.co.uk

OUR BUSINESSES OUR STRUCTURE MANAGEMENT ACCOUNTS AND GOVERNANCE INTRODUCTION 3 2 5 4 6 8 31 12 15 19 21 14 33 37 22 25 34 36 38 30 26 29 28 wates.co.uk INTRODUCTION 2018 in focus Statement Chairman’s Review Chief Executive’s Our People Sustainability and Environmental Social Giving Wates CONSTRUCTION Construction Wates Engineering Services SES SERVICES PROPERTY Living Space Wates Smartspace Wates 54 Accounts 81 Locations Wates Smartspace FM Smartspace Wates 27 Needspace? DEVELOPMENT RESIDENTIAL Developments Wates Residential Wates STRUCTURE MANAGEMENT Board Group Wates Committee Executive Wates & ACCOUNTS GOVERNANCE Principles Governance/Wates Group Developments Residential Wates Contents people people 300300 were supportedwere supported through thethrough the programme in 2018,programme in 2018, with 70% movingwith 70% moving into education,into education, employment oremployment or training training (HSE report 2017/18)(HSE report 2017/18) AccidentAccident incidence rateincidence rate 77% below77% below constructionconstruction industry averageindustry average Industry-leadingIndustry-leading health and safetyhealth and safety performance –performance – drop over five years drop over five years 136136 programmes programmes ‘Building Futures’‘Building Futures’ adults adults helped unemployedhelped unemployed into workinto work 1717 2020 70%70% 1818 a a Accident Frequency RateAccident Frequency Rate – – down 26% from 2017 at 0.035down 26% from 2017 at 0.035 2020 20062006 reduction in the Lost reduction in the Lost 77%77% Time Injury Rate over five yearsTime Injury Rate over five years (33% reduction in number of injuries on 2017) (33% reduction in number of injuries on 2017) 31%31% reductionreduction in RIDDORin RIDDOR injuriesinjuries from 2017from 2017 participantsparticipants helped sincehelped since 1,5001,500 20182018 mm bnbn 20172017 20162016 7,000+ 7,000+ new homes undernew homes under constructionconstruction £35.9£35.9 Profit (PBT)Profit (PBT) up 1% toup 1% to (2017: £5.1bn) (2017: £5.1bn) £5.4£5.4 Record forwardRecord forward order book:order book: 31.8 million31.8 million hours workedhours worked homes maintained in thehomes maintained in the social housing sector social housing sector 500,000+500,000+ mm mm volunteered by our people at morevolunteered by our people at more than 60 projects in our communitiesthan 60 projects in our communities Over 5,000 hours 5,000 hours Over Over £114.2£114.2 CashCash Net assetsNet assets increasedincreased by 14% toby 14% to £136£136 ManagementManagement Trainees andTrainees and ApprenticesApprentices non-residentialnon-residential buildingsbuildings ManagedManaged facilities infacilities in 350+350+

177

bn

mm

£1.601 turnoverturnover (2017: £2.7m)(2017: £2.7m) spent with social enterprisesspent with social enterprises £5.5m£5.5m

EBITDAEBITDA up 1.7% toup 1.7% to £48£48

(at December 2018)(at December 2018) people people

£360,000£360,000 donated todonated to The Prince’s TrustThe Prince’s Trust over 4-yearover 4-year partnershippartnership in focus in focus

863863 3,3, CREATING TOMORROW TOGETHER TOMORROW CREATING was established in 1897 and is one of the leading privately-owned, privately-owned, leading is one of the and in 1897 established was Group The Wates almost employ UK. in the We companies services and property development construction, private the public and across from partners of clients and range with a working 4,000 people, the places, of creating of inspiring better ways the purpose is guided by Our work sectors. of tomorrow. businesses and communities 2018 REVIEW ANNUAL WATES 2018 2 WATES ANNUAL REVIEW 2018

Chairman’s Statement Chief Executive’s

Review INTRODUCTION

I’m pleased to present our annual report for 2018. In a turbulent year for the sector and Approach Despite challenging market conditions, on 11 March 2019 the Group’s Revolving for the UK economy as a whole, owing in large part to uncertainties surrounding plans The Wates Group’s long-term aim is Credit Facility, which had never been to become an ever more sustainably for the UK leaving the European Union, we displayed strong performance in all of our drawn, was extended to £120m from £60m. profitable business by investing in the The expiry date was extended from 2022 business areas, having adhered to our clear strategic focus on construction, property development of our people, by building to 2023 and the Group was delighted to and nurturing collaborative and trusting secure the support of an additional bank. services and residential developments. relationships with our customers, suppliers The increased facility size and its and partners, and by maintaining high extended duration provide the Group levels of financial resilience. Our work is with additional liquidity and even Our success is also attributable to our Mattar left the Board in March 2019 after guided by the purpose of inspiring better greater financial resilience. being guided by a clear and strong ethos. having served as Non-Executive Director ways of creating the places, communities The Wates Group is now in its fourth since 2013. I would like to extend my and businesses of tomorrow. Housing

generation of family ownership and sincere appreciation to her for her work, OUR BUSINESSES the shareholders are committed to a in particular as Chair of the Audit Safety and wellbeing Wates has a proud history in housing. In long-term perspective, with the goal of Committee. 2018 it continued to cement its position handing over to the next generation an Keeping people safe from harm and as both a major residential developer and David Allen was named as permanent even stronger, more sustainable business. creating a healthy and safe environment one of the country’s leading providers Chief Executive in April, having been wherever the Group operates is our of housing maintenance. During the year We, the shareholders, are guided by our Wembley Park appointed as Acting Chief Executive in number one priority. Since the introduction we were involved in the creation of over belief that good business, done well, is November 2017 and I thank him for the of a Group-wide Zero Harm campaign in 7,000 new homes, including city centre continues to be the key focus of our a force for good in society. Through the and the Estates Regeneration Programme excellent leadership he has demonstrated. 2016, we have seen a marked reduction flats, new build houses, retirement homes ongoing Build Yourself programme. The company’s core activities, we endeavour for the London Borough of Havering. The Executive Committee has responded in incidents. This continued in 2018 with and student accommodation units. Our Group also ran its second industry summer to leave the world a better place and Social value is central to what we do and positively to the change of Chief the Group‘s RIDDOR Accident Frequency Property Services businesses maintained camp (the first was in 2017) to enable and we aim to generate social value for the how we work and this is clearly aligned Executive and the smooth transition has Rate down by 26% from 2017 at 0.035 – in excess of 500,000 homes in the social empower those from disadvantaged communities in which we work. We also with our clients and delivery partners. reinforced that we have a strong team equivalent to a 70% drop over five years. housing sector and managed facilities in backgrounds to join the sector – 56 young continue to put great importance on at senior levels, capable of guiding the Notably, we continued to make The Group achieved a 33% reduction in more than 350 non-residential buildings. people attended the camp in 2018, with charitable giving. Wates Giving is nearly company successfully in a complex and improvements in our health and safety the number of lost time injuries reported Our Residential business enjoyed significant many drawn from among the most 11 years old, and in that time it has given challenging business environment. The performance, having reduced the number (a 77% rate fall over five years) and its growth, including the appointment to an deprived neighbourhoods in the UK. over £13.8 million to charities. In 2018, management team’s performance in 2018 of lost time injuries by 33%, and the health and safety performance led the estates regeneration programme in joint we distributed more than £1.28 million, Accident Frequency Rate by 26%. We bodes well for our continued success. industry, with an accident incidence rate During 2018 the Group’s four-year

venture with the London Borough of STRUCTURE MANAGEMENT which included £240,000 in match partnership with The Prince’s Trust came have the systems and levels of awareness During 2018, I was pleased to be asked by an encouraging 77% below the industry Havering, which will deliver 3,000 new funding for Wates employees’ efforts. to an end. We are proud that through in place to enable us to continue to Secretary of State the Rt Hon Greg Clark average. homes over the next 15 years. donations from our people and support improve these numbers, as we work MP to chair a group of organisations from the Wates Family Enterprise Trust, towards our objective of zero harm. developing corporate governance Financial performance Caring for communities over £360,000 has been donated to help principles for large private companies. On behalf of the shareholders, I would Financially, 2018 was another very positive disadvantaged young people develop This effort spanned the entire calendar The Group has a deep commitment to the like to thank all our employees for their year for the Wates Group. In contrast to skills and identify opportunities for year, culminating in the launch of the communities in which it works. Our people hard work and commitment to our shared the challenging market conditions that employment. In 2018 we selected a Wates Principles in December. I’m volunteered 5,000 hours at more than interest in generating social value for the affected many of our competitors, Wates new charity partner, The Conservation especially pleased that the Wates Group 60 projects to support the communities long-term. Our people’s personal efforts, grew pre-tax profits and achieved a level Volunteers, and raised over £40,000 in has become an early adopter of these in which they live and work, and the insights and commitment are what make of turnover that was consistent with 2017. Group supported a wide range of Social the first six months of our partnership. this company great. principles. The relevant information is set Nearly 80% of Wates’ turnover is derived out on pages 44 to 47 of this report. Enterprises (SEs), spending £5.5m with from frameworks and repeat customers. SEs in 2018 (2017: £2.7m). With a record order book, Together, we have all built The Group entered 2019 with 3,863 (2017: 3,972) people and a record forward order Together with our partner Ixion, Wates growing financial strength something special in this book of £5.4bn (2017: £5.1bn). delivered its 136th Building Futures and a clear purpose, the

company and we all have Programme and celebrated its 1,500th AND ACCOUNTS GOVERNANCE Turnover, including the Group’s share of Wates Group is looking reason to be proud. participant since 2006. The programme joint ventures’ and associates’ turnover, helps unemployed adults get into work. forward to 2019 and beyond decreased slightly to £1.601bn. Profit Sir James Wates CBE 300 people were supported through the with optimism. I’m pleased that this ethos is shared by Thank you also to the Group’s Board of before tax and before taxation of joint Chairman programme in 2018, with 70% moving so many of our stakeholders, including Directors. In 2018 we welcomed three ventures and associates was up 0.6% to into education, employment or training. clients. This is reflected in our success new Board Members – Paul Chandler, our £35.9m. The Group’s net assets increased in 2018 with some very large client wins, Group MD for Construction, Philip by 13.7% to £135.8m. During 2018, we made The Group pioneered an industry / school including the project to renovate the Wainwright who joined as Chief Financial significant investments in our Residential engagement programme #ThinkBuild with Parliament’s Northern Estate, part of the Officer and Jeremy Newsum who joined Developments businesses and increased Career Ready and Arcadis. Between 2016 Wembley Park development for Quintain as a Non-Executive Director. Deena contributions to our defined benefit and 2018, the programme reached over David Allen pension scheme. We ended the year 500 students through Insight Days, work Chief Executive with cash of £114.2m. experience and site visits. Employability 4 CREATING TOMORROW TOGETHER wates.co.uk 5 training6,546 and e-learning days provided 3,863 employees 896 new joiners

WATES ANNUAL REVIEW 2018 c.£1.5m investment in learning and development As a family-owned business we know our people are at the core of our continuing 6,5466,546 success. It’s our people who make Wates successful. We will only achieve our 6,546 training andtraining e-learning and e-learning

training and e-learning days provideddays provided INTRODUCTION employees employees strategic objectives if we retain and recruit the best people, and provide them 33,,863863 daysapprentices provided 3,863 employees 896 new new joiners1 joiners77 with an environment characterised by inclusivity, diversity and opportunity. 896 new joiners 896 or trainees

c.£1.5m Our c.£1.5m investment in learning investment in learning and developmentc.£1.5m and development investment in learning people and development 1 apprentices 77 OUR BUSINESSES 177 apprentices or trainees deliver our or trainees 177 apprentices vision or trainees

Commitment to equality Developing our people Resourcing the business Our commitment to equality is Wates is among a select group of businesses In 2018, 896 new colleagues joined the Group, enshrined in our Group-wide to have achieved the Investors in People Gold bringing the total number of employees at the sustainability programme, which sets standard on three consecutive occasions. end of December to 3,863. out our approach to eliminating Whilst this reflects the quality of our people Our in-house Resourcing Team is focused on discrimination and building inclusion, practices across a number of important areas it finding the best people to join us here at Wates fairness and respect across our business. also recognises our approach to investing in the and aims to source talent directly, attracting a In 2018 the Women in Wates network learning and development of all our employees. diverse group of talented people at all career was established and involves individuals levels and across all disciplines. We saw an 85%

at all levels of the business. This forum STRUCTURE MANAGEMENT increase in the percentage of new joiners that has provided networking opportunities were hired directly in 2018 and we were able to hosted by female leaders from within convert 89% of all offers to employment. the Group, at which women have shared During 2018, we invested c.£1.5m in 6,546 training their experiences, sought support and and e-learning days. Learning and development The Early Careers pipeline remains an important advice and discussed ideas for future activity is aligned with our business priorities. feature of our resourcing strategy, with 177 change. The group has been influential The We’re Safer Together – Lead and Drive the people on a structured Apprentice or Trainee in helping to inform the Group’s new Change! safety programmes programme in 2018 and preparation underway Diversity and Inclusion strategy. The were successfully delivered for a further 60 to join in 2019. In addition, we strategy responds to the idea that the to 889 of our leaders and employed 32 apprentices at Level 2 and 3. entire built environment sector needs to supervisors. Our improving We have retained 73% of the trainees who change to become more representative safety performance is have joined us over the last five years. of the communities it serves, and at evidence of the impact that As members of The Wates, we want to lead that change. these courses have had. 5% club, an alliance of The implementation of the strategy will 113 delegates participated in our new Professional companies aiming to be overseen by a new Head of Diversity. Supervisor and Manager development engage young people into We are proud that programmes. In 2018, the first group of 25 the workforce, we are AND ACCOUNTS GOVERNANCE we continue to be Supervisors completed the programme, with a committed to ensuring recognised as an 96% success rate. A new flagship senior leadership that 5% of our workforce is on a formal excellent employer development programme was launched with apprenticeship, student or graduate training through our national Henley Business School for a selected cohort programme. We are on track to exceed our accreditation with of talented leaders. commitment over the next five years. C2E (Committed to Equality) at ‘Gold’ Together with our ongoing investment in standard. This reflects our commitment Apprentices and Trainees through our Early to attracting, recruiting and retaining Careers strategy these programmes are examples the best people regardless of their of our commitment to supporting people at all background. levels as they progress within Wates.

6 CREATING TOMORROW TOGETHER wates.co.uk 7 WATES ANNUAL REVIEW 2018

Quality Mindset Social and Our approach to achieving project In 2018 we invested to equip our site teams excellence and delivering lasting value with the latest mobile technologies, capable focuses on developing a quality control of integrating location, quality, safety, Environmental mindset – from site set up and safety to schedule and handover data to improve right-first-time delivery and handover. our management of snags, observations, INTRODUCTION inspections and a variety of tasks, helping Sustainability our projects to keep on track.

In 2018 Wates’ social and environmental sustainability programmes continued to demonstrate our commitment to creating safer, better places for people and communities The Conservation Volunteers Our Treeathalon campaign is part of our One of the first TCV projects to benefit “It’s amazing to see students who are to thrive. Through our ongoing development of a Zero Harm culture that embraces the new partnership with The Conservation from Wates employee fundraising is the struggling in conventional classroom wellbeing of people and of the environment, 2018 saw the Wates Group achieve another Volunteers (TCV), which started in delivery of weekly practical gardening and settings really flourish within green May 2018. conservation sessions at Roding Primary gym sessions and becoming leaders industry-leading safety performance with an Accident Incidence Rate that is 77% lower School in West London. Delivered by TCV, amongst their peer group. To hear

In our first nine months to 31 December OUR BUSINESSES the sessions are aimed at year five pupils from the teachers that they are than the industry average* and with 95% of our projects being RIDDOR free. 2018, our employees raised over £41,000 for (age 10) and are being run alongside a making improvements in other the charity. This included match-funding research project in conjunction with UCL, classes is very positive.” through Wates Giving, supported 25 the Marmot Review and Inherit EU, which conservation projects and funded two Vicky Peet, TCV Project Officer is monitoring the academic and wellbeing specific projects. impact of ‘Green Gyms’, a TCV-developed The partnership is gaining considerable programme that promotes and improves Leading and Driving Change Mental Health Charter Project Excellence momentum and in 2019 we are expecting fitness whilst engaging with conservation to plant a further 5,000 trees and raise a activities for the benefit of communities Our Zero Harm strategy, which is brought Keeping our people safe from harm Our Safety, Health and Wellbeing, further £75,000 for the charity. Across all and the environment. to life through our ‘We’re Safer Together’ and improving their wellbeing remains Environment, Communities, Quality, our employee volunteering activities in The focus of these ‘Green Gym’ sessions campaign, focusses on behavioural the number one priority for the Wates Sustainable Building and Social Value 2018, over 5,000 hours were volunteered within Roding Primary School is to develop change. In 2018 a further 400 people Group. In 2018 the Group signed the programmes are all intrinsically linked to support a variety of community and and maintain its outdoor green spaces, participated in our ‘Lead the Change!’ Building Mental Health Charter. to creating the places, communities TCV projects. programme, with a further 200 people and businesses of tomorrow. and to provide a positive, tactile and fun As part of our effort to tackle engaging with our ‘Drive the Change!’ Prior to the start of our new charity environment in which the children can mental health issues, both within the They are the key drivers for project and training course as we acknowledge that partnership with TCV, we celebrated raising learn about different wildlife habitats, construction industry and in society operational excellence and in 2018 the £360,000 over our four-year partnership success will only be achieved when crops, food and nutrition choices, as well STRUCTURE MANAGEMENT more generally we had trained more Wates Group piloted a ‘Project Excellence’ we have championed and embedded with The Prince’s Trust, helping to fund as about team work, decision-making than 180 employees as Mental Health site recognition scheme within30% its change at every level of our business. reduction educational and support programmes for and leadership – benefiting their mental First Aiders, and have a goal of training construction business to20 further17 in RIDDORraise disadvantaged young people. and physical health. a total of 250 by the end of 2019. standards, promote innovationinjuries and These people are already providing acknowledge our teams’ performancefrom 2017 valued support to colleagues. We are in all these areas. 2Through018 this scheme, also training wellbeing champions as 14 sites achieved Gold, 22 Silver, and mental health instructors through three Bronze. Mental Health First Aid England. This complements our success with the nationally accredited Considerate Our sustainability Constructors Scheme (CCS) – of which we These programmes have been intrinsic programmes also focus are a partner – and which recognised 25 of to the improvement in our safety our 2018 sites for their excellence, with five performance, which in 2018 resulted in on projects that create gold, ten silver and ten bronze awards. a 31% reduction in RIDDOR injuries from lasting benefits for the 2017 to achieve an AFR of 0.035; a 33% environment and for reduction in the number of lost time Considerate AND ACCOUNTS GOVERNANCE communities. This includes Constructors injuries to achieve an LTIR of 0.075; helping disadvantaged and a 33% reduction in High Potential Scheme – Incidents and Dangerous Occurrences. communities and people 25 awards to thrive, and significantly overall 5 10 10 improving the impact of Gold Silver Bronze our operations on waste, In 2018 Wates Group was once again proud energy and nature. to outperform the CCS average industry score, with a Group overall average of 40.65, against an industry average of 36.27.

8 CREATING TOMORROW TOGETHER * compares to HSE industry average. wates.co.uk 9 WATES ANNUAL REVIEW 2018

Building Futures Focus on Environment of our Through our award-winning Building environment, engaged with 345 people Being part of the Wates summer camp We are restless in our approach to creating 30% e Futures programme – which celebrated its in 2018. The programme ran two summer taught me to embrace new challenges and total CO2 e emissions better communities and opportunities for were oŠset by supporting 1,500th student in 2018 – we have delivered camps, with one female attendee who work to overcome difficulties that arise people to thrive, and in our focus on combating international renewable 136 programmes retraining unemployed went on to develop a career in when working with new people. There is climate change and on enhancing the natural adults, helping 70% of them to get back construction saying: beauty in the uniqueness of humans and

energy, rainforest protection INTRODUCTION environment. into employment or further training. this camp really showed me that.” and by planting 852 trees in UK “I was lucky to take part in a summer Our education programme, Build Yourself, Our performance in 2018 saw over 97% of our construction camp run by Wates Group, tree planting schemes which is aimed at encouraging young which increased my new-found love for waste diverted from landfill and a continuous people into careers in the built downturn in the volume of absolute waste construction. created compared to 2017 reporting. We also made significant improvements in reducing our CO2e emissions by 11% from our baseline year (2016) as measured in accordance with the Green House Gas Protocol and verified by the Carbon Trust. In 2018 we also offset 30% of our measured CO2e emissions by investing in recognised international CO2e reduction Verification has projects, which funded over 850 native trees shown a reduction in being planted in the UK. Our carbon offsetting CO2e emissions from 2016 scheme will also contribute to our ‘Treeathalon’ 11% OUR BUSINESSES target to plant 15,000 native trees by 2022.

Carbon Disclosure Project ranked Wates C (C) above the Creating Social Value Sustainable Building sector average (D) In addition to our work with TCV Through our partnership with the Standard Chartered Bank, which will and our education and employment Supply Chain Sustainability School (SCSS), reduce water usage by 81%, saving ENERGY programmes, Wates Group works to 85% of Wates’ top tier supply chain 14,314,300 litres of water a year, resulting generate social value for its communities. (businesses with which we spend more in an annual cost saving of £31,000 and a EXCELLENCE SITES on average used It does this through Social Enterprise than £500k a year) are now members of substantial reduction in the building’s procurement, which in 2018 resulted in the SCSS, ensuring building and operating carbon footprint, equivalent to an annual 348kWh/d ay £5.5m spend within the social enterprise sustainably is at the heart of our delivery reduction in CO2 of 14,798 kg. The Statistics 2018 of electricity down sector, measuring its impact at £1.77 and procurement. from 456kWh/day for every pound spent and putting the And further demonstrating our STRUCTURE MANAGEMENT company on target to achieve its goal SITES on average used commitment to sustainable building and of spending a total of £20m by 2020. 20,043 litres technologies, Wates Sustainable Technology of gas oil up from Measuring our investment in 2018 Services (WSTS) brought in a further ten innovative suppliers to expand its portfolio 18,490 litres Our operational fleet the total social value made through on average used corporate programmes such as Building to 40 suppliers in 2018, supporting customers and partners to achieve their 11.5 ltrs/100km Futures, support for Social Enterprises, our charity partnerships and volunteering sustainability goals and adding value by down from 16.9 was over £10 million. helping to identify, select and implement OFFICES on average used ltrs/100kms 2 In 2018 on average each cost-effective technologies that comply 115kWh/m for electric, employee travelled 7,018km with regulations, lower carbon emissions, 97kWh/m2 for gas and by car, train & plane, emitting improve building performance and reduce costs. 9 ltrs/m2 gas oil 1.2 t/CO2e/FTE down from 1.3 t/CO2e/FTE WSTS was launched in 2017 to accelerate the uptake of innovative sustainable in 2016 solutions to support the delivery of energy efficient sustainable buildings. AND ACCOUNTS GOVERNANCE In 2018, WSTS positively engaged with 30 customers to identify solutions for 41% sustainable building products and services, of our electricity SEP managed over 950 Gas, resulting in 18 customer implementations demand came from Electric and Water meters with on our projects. A great example of the renewable sources a saving of '49Cycle to Work Scheme' value Wates Sustainable Technology to get a new bike Services can bring to Wates customers £1.1m £5.5m and suppliers is the installation of 121 spent with smart toilets at the London HQ of social enterprises (2017: £2.7m) 10 CREATING TOMORROW TOGETHER wates.co.uk 11 £1.28m Total invested: invested in £13.8m charitable activities

£1.28m Total invested: invested in Total invested:£13.8m charitable activities £1.3m £1.28m match-funding invested in new238 awards £13.8m by employees charitable activities since launch

WATES ANNUAL REVIEW 2018 £1.3mTotal invested: £1.28m match-funding invested in£240,000new238 awards by £13.8memployees charitable activitiesmatch-funding supported since launch Over During 2018: by Wates Giving Since launch in 2008:£1.3m match-funding 2,100 238 by employees organisations new awards supported Total invested:since launch Wates Giving £1.28m Total invested: invested in £13.8m

£1.28m INTRODUCTION investedcharitable in activities match-funding£240,000 supported £13.8m Over Wates Giving is a programme of the Wates Family Enterprise Trust, a charity independent charitable activities by Wates Giving £1.3m 2,100match-funding 238 organisations of the Wates Group. It provides grants for the communities where the Group works and new awards supportedby employees match-funding£240,000 supported Over since launch backs the causes that Wates people and the Wates Family support. by Wates Giving organisations2,100 2018 was a landmark year for Wates Giving. Introducing new Focus themes Employee projects supported The programme celebrated its 10-year £1.3m anniversary and also embarked on a new The Trust made its first awards in 2018 challenging young people to tackle 2018 was yet another exceptional238 year £1.3mmatch-funding under its new three Focus themes: education inequality. This forms part for Wates Giving’s support of thenew awards match-fundingby employees strategic direction to ensure the Wates 238£240,000 by employeessince launch Family Enterprise Trust continues to support Life Opportunities for Young People, of the Life Opportunities for Young personal causes of Wates employeesnew awardsmatch-funding supported Over by Wates Giving since launch the Family vision to be a force for good. Housing and Homelessness, and People theme. and the second-best year on record Sustainability. for the total raised by the match- 2,100 During 2018, the Trust was pleased to make The Centre for Social Justice’s Housing organisations funding scheme. supported 238 new awards investing a total of £1.28m The Wates Family decided to focus more Commission also received an award in charitable activities. These included a funding on a smaller number of bigger, to support the production of reports The Trust made 159 awards, valued OUR BUSINESSES range of exciting community projects across longer term grants to make an even examining issues around social and at £148,000. Over £37,500 went to the UK, from Miss Macaroon, a Birmingham more substantial impact. affordable housing, with the aim of support£240,000 Wates employees working helping to shape government policy on behalfmatch-funding of their local supported communities Over based social enterprise training young As part of this new approach, City £240,000 and thinking. This award forms part of match-fundingand bycharities Wates as Givingtrustees, supported governors Dragon boat TCV (above), Arran Bird (below)Over people in catering skills, to Change Please, Year UK received a grant to help it pilot the work being carried out under the byor inWates other volunteerGiving roles such as 2,100 who are refurbishing a bus to provide vital a new schools and university partnering organisations Housing and Homelessness theme. fundraisers, sports coaches or general 2,100 services to London’s rough sleepers. programme in Coventry aimed at organisationssupported helpers. Support to local youth soccer, supported cricket, hockey, rugby and other sports teams providing strip and equipment was high on the list again this year ranging from the South Coast Kickboxing Club to the Sir Roger Casement Gaelic Athletic Association and Ashton-on-Mersey Cricket Club. Enthusiasm for raising funds to Miss Macaroon support the personal causes they care MANAGEMENT STRUCTURE MANAGEMENT The Trust also continued its support for about remains as strong as ever for existing schemes, including the Wates Wates employees. Since the inception Group’s Building Futures pathways-to-work of the Trust’s match-funding scheme programme. Wates Giving has supported in 2008, Wates people have raised the scheme since 2008, helping more than £920,000 to which Wates well over 1,500 unemployed Giving has added a further £385,000. people nationally. In 2018, over £240,000 was added to the running totals through fundraising activities including dragon boat racing, City Year UK sponsored netball matches and dress-down days, bringing the grand total at the end of the year to well Reshaping Celebrating ten years “2018 was another exciting year for Wates over £1.3m since its launch in 2008. Tomorrow week Giving and we would like to thank, as ever, The Trust was proud to celebrate Wates employees for the passion and The Trust made a grant to match the The Trust was pleased to award £25,000 its 10th anniversary during 2018 commitment they bring in supporting Give As You Earn donations made and marked this milestone with a to 19 of the 90 local community and communities. It was with great pleasure and by Wates Group employees, which AND ACCOUNTS GOVERNANCE number of activities to thank Wates charitable organisations to which people pride that during the year we celebrated totalled over £16,000 in 2018. employees for their continuing from the Wates Group volunteered their 10 years of the Trust and the impact it has support. This included a series of 10 time during June’s Reshaping Tomorrow made. We also made our first awards as special one-off awards of £500 Week. Wates Giving also continued to part of our Focus themes programme. This made to charities put forward by support the Group’s Corporate Charity will ensure Wates Giving remains a vital Wates employees, a film highlighting partner. During 2018 this transitioned from part of our approach to being responsible the scale of activity in the last the Prince’s Trust to The Conservation decade and celebrating some of business owners, supporting our Family Volunteers who were awarded £39,000 the charities supported as well as vision to be a force for good as the Trust in grants in the year. a Group-wide anniversary tea and enters its next 10 years.” cake party. Andy Wates

12 CREATING TOMORROW TOGETHER wates.co.uk 13 WATES ANNUAL REVIEW 2018

“We’ve had a strong year, which has seen us deliver award winning projects and secure some prestigious contracts. Nationally it’s great to see that our valued relationships with key customers continue to deliver excellent results.”

Wates INTRODUCTION Paul Chandler, Construction MD Wates Construction Group

London Design & Engineering Wates Construction enjoyed another strong year in 2018, despite an economic landscape that continues to be challenging. The business saw some significant wins, including within the Scape Major Works framework and OUR BUSINESSES: with the Department for Education. With new business secured in 2018 worth over £1.4bn, we remain on track OUR BUSINESSES Construction to meet growth forecasts for 2019.

Last year we created a more focussed leadership We were proud to be recognised at the structure and this, together with the embedding Construction Manager of the Year Awards, winning of our strategic priorities, means we are well- the coveted overall prize for our work on the V&A placed to grow in a controlled and sustainable way. museum extension. In addition to the overall award, 1,200 employeesA key focus for the year has been embracing new Wates colleagues received three Gold awards technology, including the distribution of tablets and one Silver award in recognition of their to more than 700 field-based colleagues, increasing outstanding work. employees 1,200 the efficiency with which our on-site teams work, Our success at industry awards has been matched allowing our people to spend more of their time by major contract wins including Nottingham City out on site.

Hub, a new campus for Nottingham College; STRUCTURE MANAGEMENT Our commitment to sustainability has been Wellington Place, MEPC’s new urban commercial recognised with a strong performance in the quarter in Leeds city centre and Parliament’s Considerate Constructors Awards, where the Northern Estate Programme, involving the Construction business claimed three of the five refurbishment and restoration of listed heritage coveted gold medals won by the Wates Group. buildings in Westminster. We have also been Judges were particularly impressed by the appointed design and construction partner for Boldrewood Innovation£2.1m Campus at the University the new aquatics centre in Smethwick for 66 of Southampton; thespent repair and with restoration social of Sandwell Council. employees the iconic Derby Hall and a £95 million residential 1,200 apprentices £2.1menterprises over 2018 was only the second year since the development for Quintain Estates at Wembley or66 trainees spent thewith year social introduction of our Zero Harm strategy and our Park. We spent in excess of £2.1 million with social apprentices enterprises over ‘Safer Together’ campaign. This has led to a 33% enterprises, part of our on-going commitment to or trainees the year reduction in our RIDDOR injuries, equating to generating social value through our supply chain. reductions of 28% in our Accident Frequency Rate and 57% in the number of lost time injuries. While we can never be complacent, our health and safety performance is industry-leading and AND ACCOUNTS GOVERNANCE remains our top priority. In 2019 our focus will remain on continuing to embrace new technology, looking for better ways to connect with our customers and continuing to £2.1m drive performance and efficiency on their behalf. 66 spent with social The launch of the Wates Group’s new Diversity apprentices enterprises over and Inclusion strategy provides an excellent or trainees the year opportunity for us to continue to promote a more diverse and inclusive workforce in the year ahead. Quintain Estates, Wembley Park

14 CREATING TOMORROW TOGETHER wates.co.uk 15 WATES ANNUAL REVIEW 2018

MEPC December 2015 marked the completion Despite several challenges at Eden Bolton – STAR of Eden Boys’ School in Bolton, and in the including community opposition and a delayed WELLINGTON PLACE following years we have established a start – Wates “worked tirelessly to deliver the LEEDS strong relationship with Star Academies, client’s aspirations” (Matthew Maisey, Gleeds), ACADEMIES leading to the construction of a number which resulted in us being selected to build the Wellington Place consists of a series of high MANCHESTER & of Tauheedul schools. Olive School in Blackburn. Both Eden School quality, new build Grade A office developments BLACKBURN and Olive School were completed on budget Eden Boys’ School Principal, Shabir Fazal, INTRODUCTION and on time, and once again, “the school in central Leeds for our client MEPC. We began said that Wates had “a problem-solving community were delighted with the finished working on the first units in 2014, with the 7th approach and teamwork ethos, making product.” (Julie Bradley, Executive Head Teacher and 8th units under construction by 2019. them a pleasure to work with.” at Tauheedul Olive). The latest flagship building in the development is an 8-storey commercial office building sympathetically designed to fit in with the Star Academy, Manchester remainder of the scheme and includes basement “Our vision is to create schools parking and space for 3,000 employees. Due to where every single young person complete in late 2019, the building has already can excel. Building a school is about been pre-let to the Government property much more than the building; it is hub, and will be used by civil servants working the learning environment that you for HMRC and NHS Digital. create. These are values we share The Wellington Place development with Wates, and this has been demonstrates the progress of our lean fundamental to our relationship construction techniques. Access methods over the past four years.” refined over the four previous schemes have OUR BUSINESSES produced tangible benefits at Units 7 & 8, Mo Isap, including programme savings, a reduction in Member and Trustee of reworking, snagging and improved safety. Star Academies since 2010

Key Aside from delivering a quality job at Olive women in construction. In 2018 Wates Blackburn, the Wates team also engaged was appointed lead contractor on both clients the students in the development of their Manchester Eden Boys’ and Eden Girls’ school. This included site visits for the pupils, Leadership Academies, as well as Tauheedul regular participation in class assemblies and Blackburn – projects with a total value extensive involvement in an event for of £41m, all of which are on track for HOXTON The regeneration of Hackney’s handover in 2019. estates is culturally, economically PRESS and politically sensitive and HACKNEY, LONDON each project must be delivered with a genuine understanding STRUCTURE MANAGEMENT of local needs. Hoxton Press – the construction of two residential towers in Hackney – is one of the first developments for our client Anthology, an Star Academy, organisation focused on Blackburn enhancing neighbourhoods. The 16- and 20- storey towers offer a mix of studio, one Meeting the architects’ design and two bed apartments and specifications for the cladding three bed penthouses totalling of the building required 198 residential units. There are brickwork to be embedded basement cycle and car parking into the face of ceiling panels, spaces, an energy centre, a involving the design of an café and a concierge. entirely new brickwork system, GOVERNANCE AND ACCOUNTS GOVERNANCE The outcome is a stunning design which we have named that has been lauded by the SafeSecure Brick Cladding. architectural press and praised This has allowed us to install by residents old and new. brickwork on the underside of balconies safely – Making the design a reality was something that would have an enormous technological and been impossible to do using engineering challenge, but was traditional methods. achieved within budget and on time, thanks to the ingenuity and hard work of our project team.

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“Our strong senior leadership team, investment in new digital technologies THE BANK and our talented people, have ensured we are in an excellent position to BIRMINGHAM deliver value to all our customers. Our portfolio of complex, technical projects, which showcase our technical ingenuity, gives us a strong pipeline The Bank is a residential development of of work for the future.” two towers of luxury apartments. Tower 1 is Jason Knights, Managing Director, SES Engineering Services

a striking high-rise 22-storey development INTRODUCTION located off Broad Street in the centre of Birmingham, comprising 189 studio, 1 and 2 bedroom apartments. SES Engineering Services

QUADRAM INSTITUTE NORWICH RESEARCH PARK 2018 has been a very positive year for SES Engineering Services The new Centre for Food and Health, (SES). Despite external challenges, the business has grown, Quadram Institute, is an innovative and multi-dimensional project integrating increasing turnover by 8.2 per cent year-on-year. under one roof, plant, human health and food research, clinical research, clinical interventions, patient care and related Improvements in efficiency and profitability have Continuing our journey to ‘Zero Harm’ whilst commercial activities. been driven by a strengthened senior leadership ensuring the health and safety of everyone OUR BUSINESSES team and sound engineering expertise. With this involved in what we do remains our top priority. The centre is of national importance, solid foundation in place, we expect to continue SES has an outstanding health and safety a high profile building and an important to grow. reputation and our current rolling accident employees landmark at the Norwich Research Park. 555 frequency rate is 0.00 – something we’re It brings together research teams from A significant investment in and adoption of incredibly proud of. the Institute of Food Research (IFR), the Virtual Reality (VR) over the last 12 months has University of East Anglia and Norfolk allowed many of our customers to immerse 555 employees and Norwich University Hospitals NHS themselves in a new, digitally constructed reality, Foundation Trust with major funding stepping inside their projects while they are still from BBSRC (Biotechnology and in the design phase, improving design efficiency Biological Sciences Research Council). and ensuring errors are eliminated at the earliest Essentially, the institute is three possible opportunity. buildings incorporated into one, a 2018 was notable for a number of key technically hospital, laboratories and offices. It complex projects, which have significantly comprises contemporary and purpose- The site, which encompasses fit out works on cordoned off enhanced SES’ portfolio of high-profile jobs. designed accommodation for 370 the refurbished Grade II listed floors. This helped to reduce the These included: research scientists, clinicians, support The Bank building at 78/79 Broad duration of the project, saving £47,000 staff and clinical trial participants, Street, includes more than 3,000 our client time and money. • Battersea Power Station STRUCTURE MANAGEMENT spent with social square metres of retail space, 38 and approximately 180 endoscopy The building’s reinforced employees enterprises over together with a secure bike • Cleveland Clinic 555 patients daily. concrete frame was also subject In 2018, SES was recognised at numerous industry apprentices the year storage. Our remit extended to to major value engineering work • E.ON Connecting Energies CHP awards for its world-class offsite manufacturing or trainees £47,000 The vision for the new centre was providing over 180 apartments between the first and second capabilities, outstanding health and safety record, spent with social for one integrated building. Dedicated with fitted kitchens and • GSK Aseptic Manufacturing Facility 38 stage tenders, generating a 10 per and commitment to maximising the use of BIM enterprises over research and clinical areas will support bathrooms at handover. apprentices the intended functions, but office cent cost reduction. The core We are continuing to see our average project on projects. This included a win at the Offsite the year space, meetings rooms, building support This was a challenging was also designed to be free size increase and have a strong pipeline of work Awards for the third consecutive year. Other or trainees and amenities will be shared across all development in a highly confined standing, allowing the slip form across all our key sectors of Energy, wins included: building occupants, to encourage and logistically challenging city rig underneath to extend to its Infrastructure and High-Tech. • Offsite Awards 2018 – Best Use of MEP & mixing, discussion and cross-fertilisation centre location, demanding full height, reducing rig hire costs. innovative approaches from our Sustainability is at the heart of SES’ growth and Pod Technology – Quadram Institute of ideas. This project involved SES in the All of this was carried out while core team and sub-contractor development. supply chain, and has been shortlisted maintaining an exceptional • British Safety Council International Award partners. With a site perimeter for a Supply Chain Excellence Award at health and safety record, with Through our investment in social enterprises; by 2018 – 22nd consecutive year of around eight metres and only the 2019 Construction News Awards. just three minor first aid injuries providing training for local people; by supporting one entry/exit point for vehicle • Construction News Awards 2018 – Specialist recorded and zero RIDDORs or education activities; and by volunteering in the £47,000

access, all materials had to come Contractor of the Year – Commended spent with social AND ACCOUNTS GOVERNANCE lost time incidents over 400,000 community, we generated social value of over 38 through the ground floor onto enterprises over working hours. £775,000 during 2018. • Construction News Specialist Awards 2018 – a hoist to then be distributed apprentices the year to the relevant floors. This made Such has been the success, that Projector of trainees the Year (subcontract over £6m) – sequencing critical to ensuring despite challenges, the project Queensferry Crossing supply chain productivity and was extended to include the • RISE Awards 2018 – Heritage Award for to meeting our programme. construction of Tower 2, well Restoration or Retrofit – Vita Student Work was completed in four before the completion of Village York bands of four or five storeys, Tower 1. allowing the team to commence

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E.ON CONNECTING ENERGIES CHP PLANT E.ON Connecting Energies (E.ON) selected SES to deliver M&E design and installation services on the largest combined heat and

power (CHP) project to be undertaken by INTRODUCTION E.ON in the UK. The scheme comprises design, supply and installation of new power, steam, low temperature hot water (LTHW) and chilled water generation plant. This project has been a great opportunity to showcase our technical engineering expertise and collaborative approach. The project also sees SES acting as the principal contractor on an extension to a bottling plant in Rugby, which is operated by a major soft drinks manufacturer. Further to the M&E work that is currently being carried out on the extension, we are overseeing the associated building works and the connection of the building services into the existing building. OUR BUSINESSES: The works focus mainly on bringing renewable OUR BUSINESSES power sources to the plant, through substantial high voltage (HV) power and protection improvements, and on upgrading the 60-year Property Services old boiler system to enable more efficient steam energy generation. All the works are being undertaken without interruption to the manufacturing and bottling processes. This major building services project benefited from our innovative pre-construction engineering, combining a new and enhanced approach to digital engineering and extensive use of our offsite manufacturing facility, Prism. The facility comprises a dedicated two-storey electrical building complete with ground floor uninterruptible power supplies and a choke and transformer room, with High Voltage (HV) MANAGEMENT STRUCTURE MANAGEMENT and Low Voltage (LV) electrical switch rooms located at first floor level. Dedicated CHP plantrooms and boiler rooms are provided in separate fire compartments, whilst a new absorption chiller is containerised. The CHP coolers are located on a new mezzanine plant deck. The system is controlled by a Power Management System and off-site monitoring is provided to E.ON’s Hamburg Remote Control Centre via a dedicated Supervisory Control and Data Acquisition system. The critical power and process heating and cooling services in the energy centre were commissioned in early 2019 and are now fully operational. GOVERNANCE AND ACCOUNTS GOVERNANCE

20 CREATING TOMORROW TOGETHER wates.co.uk 21 1,500 employees

1,500 employees WATES ANNUAL REVIEW 2018 £2.5m spent with social enterprises over the year BARRY JACKSON TOWER In partnership with Birmingham City Council, Wates £2.5m Living Space has transformed Barry Jackson Tower in spent with social 26 Birmingham, a disused 20-storey tower block, into enterprises over apprentices much-needed temporary accommodation for up to the year or trainees 1,500 employees 160 families who may have otherwise been living in emergency bed and breakfast or hotel accommodation. INTRODUCTION 26 Originally earmarked for demolition, the work involved a full back-to-frame strip-out of the tower, and has apprentices brought the 1970s building up to modern standards. or trainees Wates Living Space It now provides 17 floors of accommodation, two £2.5m recreational floors and one management office floor. spent with social enterprises over Modern life-safety equipment – essential due to the the year building’s height, occupation density and recent changes Wates Living Space has continued to build on its well-established in fire safety regulations – has been installed throughout, including sprinklers, fire lifts, wet and dry risers, automatic presence in the social housing sector, strengthening its position 26 opening ventilators, smoke extraction systems and as one of the UK’s leading planned and responsive maintenance automatic door actuators, complete with a stand-by apprentices generator and new water tanks. and compliance services partners. Our collaboration withor our trainees This project represents a significant investment in customers was recognised with a number of industry awards and providing improved standards of accommodation for

vulnerable people in Birmingham and places the council OUR BUSINESSES record levels of customer satisfaction, and we continued to win one step closer to eliminating the use of bed and breakfast new work and build relationships with new customers. accommodation for families facing homelessness.

The business continues to maintain Locally, our Resident Liaison Officers play a “2018 was a great year for Wates more than 500,000 homes across the UK, key role in promoting community relations Living Space. We achieved BEN STREET achieving high customer satisfaction levels – working within diverse communities, excellent customer satisfaction across its 64 housing association and local ensuring that all residents have confidence scores, developed positive REGENERATION authority customers. in the service being provided to them. relationships with new customers In January 2018, Wates was appointed by This work was recognised in 2018 by Tpas and took an active role in Manchester City Council to manage a major In 2018, Wates Living Space secured (Tenant Participatory Advisory Service), developing our people to ensure regeneration project in Ben Street, Manchester. additional works with existing customers which awarded Wates a Contractor we continue to perform to the such as Birmingham City Council, Sheffield The project included the full refurbishment Accreditation for a further three years. highest of standards – while also City Council and Thurrock, as well as forging of 62 vacant properties, external façade works We were the first organisation to achieve looking after the health, safety to 151 properties and improvements and the new partnerships with the Longhurst Group, STRUCTURE MANAGEMENT a 100% performance rating. and wellbeing of our teams, Manchester City Council and Barnet Council. addition of safety features in public areas, customers and communities. The business was also appointed to some including shared alleyways. key frameworks including Fusion 21 and the We will build on this growth in Refurbishment work included re-roofing Guinness Partnership – a testament to our 2019, continuing to focus on our works, energy efficiency upgrades, fitting new commitment to providing exceptional core business areas of responsive kitchens, bathrooms, flooring and carpeting, repairs and maintenance services for public and planned maintenance, new heating, lighting, power, alarm and fire sector clients across the UK. compliance and fire risk and smoke detection systems – bringing all 62 assessment works, whilst also properties up to Decent Homes standards. Support for community initiatives and broadening our offer to include customer engagement are central to The windows and doors of the 151 occupied facilities management. the Wates Living Space ethos. The social properties were replaced with modern UPVC enterprise sector forms a core part of the Heath Way, Birmingham With this growth will come a and guttering was improved. Brickwork was Wates supply chain and in 2018 Wates continuing commitment to the stripped, cleaned and the mortar was In 2016, Wates Living Space was appointed Living Space spent over £2.5m with social communities in which we work. repointed. to deliver the largest social housing enterprises across the country. The business As well as welcoming local maintenance contract of its kind in Europe Community Engagement played a key role in is committed to continuing to advance people to train and work within the successful delivery of the project. Access

for Birmingham City Council. In 2018 our AND ACCOUNTS GOVERNANCE this agenda in 2019. our teams, we will engage with to properties was made possible by building work on this contract – and notably our community groups, schools good relationships with local people, eventually investment in market-leading technology and charities to ensure we leave allowing the project to be completed a month and people development – was recognised a positive legacy wherever ahead of schedule. with the award of Outstanding Approach we work.” to Repairs and Housing Maintenance at What once was a run-down neighbourhood, the UK Housing Awards. In just 18 months, David Morgan, on the verge of further decline, is now home customer satisfaction levels reached 99.9%, Managing Director, to a thriving community. Ben Street is now a 100,000 repairs were undertaken and Wates Living Space catalyst for further regeneration in the area. complaints fell to just 0.2%.

22 CREATING TOMORROW TOGETHER wates.co.uk 23 £363,000 spent with social enterprises over the year

WATES ANNUAL REVIEW 2018

Considerate £363,000 Constructors GOWLING WLG spent with social Scheme – TWO SNOWHILL, enterprises over BIRMINGHAM the year 9 awards 2 2 5 LONGHURST HOMES Gold Silver Bronze Gowling WLG is a global law firm with UK offices in Birmingham Wates was delighted to be appointed by A 63-strong team of operatives delivers and London. Wates Smartspace the Midlands-based housing provider the work across the Longhurst Group’s tendered and won the opportunity INTRODUCTION Longhurst Group in a contract worth close subsidiaries including Longhurst and PFM award won to deliver a full refurbishment to £100m, with work beginning in April Havelok Homes, Spire Homes and Considerate and fit out of the Birmingham 2018. The ten-year contract involves Friendship Care and Housing Limited. WatesConstructors Smartspace city centre office. managing a programme of repairs, Scheme – In its first year the team has delivered compliance work, void refurbishments and 9 awards almost 40,000 responsive repairs, planned maintenance of the Group’s stock PORT HAMILTON Wates Smartspace2 2 delivered5 a strong performance in 2018 across completed 1,278 void refurbishments, Gold Silver Bronze of c.16,000 homes across the Midlands. LLOYDS BANKING GROUP carried out 4,095 electrical repairs and all its service lines, including major property upgrades, store and To service this wide geographical area, has installed almost 500 new kitchens Wates Smartspace delivered a branch roll-outs, office fit-outs and facilities management. Our £9m programme of repairs to the Wates has taken a multi-location approach, and bathrooms, while also contributing dedicated facilities management division, Wates Smartspace FM, basing staff at a number of facilities in over £3m in economic, environmental external façade of Lloyds Banking PFM award won Birmingham, Wellingborough, Boston, and social value to the community. Group’s Port Hamilton building in continued to establish itself, acquiring new customers as well as Nottingham, Grimsby and Lincoln. Edinburgh. It was one of the largest national industry recognition. The team has adopted accounting and scaffolding projects in Scotland. IT infrastructure from the repairs and The programme comprised stone Our performance was supported by our strong including: M&S, The Ministry of Justice, North maintenance contract with Birmingham cleaning, column repairs, glazing position on key national framework, with major West Construction Hub (NWCH) and F1 Real OUR BUSINESSES City Council. repairs and seal replacements, UK businesses including the BBC, the Ministry Estate. We also secured projects with new curtain-wall checks and a full clean of Justice, Marks & Spencer (M&S), Royal Mail partners including the Department of Work of the building’s bronze cladding. and all four leading high street banks. As a result, and Pensions, HMRC and Costa Coffee. KEY DETAILS 90% of projects delivered in 2018 were Our success is underpinned by our high Value: £20m The team was required to procured either through this route or through 2 performing teams who deliver safe, high quality Size: 116,593ft operate a live site as Scottish existing contracts with long-term clients. Widows remained in occupation programmes 24 hours a day, seven days a week, throughout the works. In addition, Smartspace adds value for its customers by across the entire UK. In 2018 the business Two Snowhill is on a busy main road developing an in-depth understanding of recorded an industry-leading Lost Time Injury following the completion of opposite a railway station. This location individual operations and requirements. Rate of 0.1185 and our people were recognised external works, a further £9m of presented a logistical challenge around This close collaboration ensures high quality for their outstanding commitment to improving investment will be made on the the timing of deliveries, which we delivery across a diverse range of logistically the image of the construction industry, picking overcame by implementing a strict internal fabric of Port Hamilton to challenging live environments, extending from up nine Considerate Constructors Scheme traffic management plan whereby refresh and update the property commercial offices and retailers to healthcare awards including Most Considerate Site for and to enable more agile working. providers and a zoo. M&S West Hampstead and Park Road Primary deliveries from suppliers could only School in Trafford, as well as runner up in the be allowed between 1pm and 3pm. The complexities of this site have This approach saw the business secure further Most Considerate Site Award for BBC Elstree Any deliveries arriving outside of presented a number of challenges, projects in the year with existing partners these times were turned away. for example, maintaining safe Boiler House Works and the GSK Building 2. sub-tenant, public and neighbour Work was carried out over five MANAGEMENT STRUCTURE MANAGEMENT access. However, the team has storeys and included full strip out; risen to the challenge, managing FORD installation of new specialist glazed all key stakeholders including a DUNTON partitioning and folding screens, local nursery, public car park and lighting, suspended ceilings and Fitout of new dining facility and kitchens. bespoke joinery, as well as the retail outlets and building great Ford’s UK Technology Centre in Dunton, reconfiguration of the building’s M&E relationships with all concerned. Essex comprises office buildings, testing and This includes sponsoring the manufacturing facilities supporting Ford Motor and upgrading of the reception area. local nursery’s art competition, Company’s Engine Innovations throughout All the work was carried out in a live with prizes awarded and winning Europe. The whole Campus supports 4,000 environment, with the aim of us being entries on full public display on Ford staff and the facility operates 24/7. accommodated safely. An existing exhibition a ‘silent contractor’ and not impacting our site hoardings. centre was adapted to provide a temporary The dining facility and kitchens are located two Gowling’s productivity. food servery and seating area for all 4,000 staff miles from the main town of Basildon and provide and a temporary modular kitchen built in an We implemented a 14-week on-site catering for all of the campus’ staff. adjacent car park to maintain the food provision programme, developed in consultation The project was approved by William Ford – the to the whole campus. with all stakeholders – including Great Grandson of Ford’s founder, Henry Ford. Gowling staff working on critical In order to link the remote temporary kitchen

cases – which was signed off in AND ACCOUNTS GOVERNANCE The Dunton Facility was first constructed in with the converted exhibition centre safely, advance, together with a noise the 1970s and contains asbestos, which was in we adapted staff access routes and created common use at the time. A survey revealed safe, tarmacked, dedicated routes for the food reduction strategy. that the levels of asbestos were greater than trolleys travelling between the kitchen and the As a result, the project was had initially been expected. We initiated restaurant to segregate the customers from completed to the customer’s a contingency plan to ensure staff could be the food operation totally. complete satisfaction.

Key clients

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Considerate Constructors Scheme – 9 awards 2 2 5 Gold Silver Bronze

WATES ANNUAL REVIEW 2018

PFM award won Key clients “Our ability to reposition property assets successfully to provide much needed good quality, flexible and well managed workspace to the growing number of SMEs in London and the South East remains at the heart of what we do. We support over 160 businesses from a diverse range of sectors, helping them achieve their ambitions

and objectives. Our reward for this has been another INTRODUCTION record year for the Needspace? business.” Wates Needspace? Charlie Wates, Director

2018 saw another strong year of growth for Needspace?. In January, in Smartspace FM response to continued demand in London, we completed a new 13,000 sq. ft. acquisition at 227 Shepherds Bush Road in Hammersmith. The acquisition of SES Engineering Services in 2015 brought Wates an established facilities management capability. In the last three years, This is an area that has seen significant investment by 25%. The portfolio was reviewed independently by and is increasingly popular with office occupiers due CBRE, who uplifted its estimated value by £3.4m (+7%) Average Wates Smartspace FM has flourished and now has a growing list of to its excellent transport links and vibrant local to £52m. Customer demand for our well managed occupancy blue chip customers. amenities. During the year the building has been flexible workspace continued to grow, with average repositioned to provide a mix of nine small units to occupancy across our seven sites increasing to

be let on flexible terms alongside four traditional 87% (+2%). 87% OUR BUSINESSES In 2019, as part of a long-term strategic review, and to present a stronger proposition (2017: 85%) tenancies. The acquisition helped us achieve another 163 Smartspace FM will divest from the wider to existing and future customers. This will The business continues to search for new growth record year, with turnover increasing by 24% to £4.6m, businesses Smartspace business, and join the Group’s create exciting opportunities to share opportunities and to maximise the potential of while profit before tax and the valuation uplift rose Sussex occupying our housing repairs and maintenance business, innovation and technology and will give its existing portfolio through planning. buildings Wates Living Space, under a new Property our people new opportunities to develop No. of people Services division, enabling it to maximise the and progress. 67% accommodated: synergies that exist between both businesses POSITIVELY PIKS (2017: 68%) ST. MARK’S STUDIOS, ISLINGTON EARLSFIELD BUSINESS CENTRE c.1,500 When HIV peer support charity Positively UK Needspace? considers flexibility to be one of our London needed to relocate recently, they were daunted by greatest benefits, but we’re equally proud of the Hammersmith the challenge of finding premises that met all of long-standing relationships we have with customers Acquisition their requirements. Fortunately Garry Brough, the who have been with us for many years. Mark Calvert TWYCROSS ZOO (2017:92% 94%) £9.9m charity’s interim CEO, found St Mark’s Studios in moved Piks into our Earlsfield Business Centre over 2 Since June 2016, Wates Smartspace FM Islington, and Needspace? was able to help when 12 years ago, while our renovation works after taking 12,942ft has been delivering a range of services they were ready to make their move. Averageon the building were still being completed. It’s (Gnd, 1-3 floors) including landscaping, mechanical and proved a stable and consistent base for his electronics “St Mark’s Studios was the very first place we occupancy electrical works, and the maintenance maintenance and repair business ever since. saw, back in late summer last year,” Garry recalled. and refurbishment of the zoo’s 64 STRUCTURE MANAGEMENT “However, our lease ran until April of this year so buildings. our hands were tied; we had to keep our options 87% In a museum or a zoo, a lack of control open and keep looking. Nothing we saw was (2017: 85%) 163 over climate, humidity, or lighting anywhere near such a good fit for us – including businesses conditions can lead to the loss of some extremely glossy, high-spec brand new Sussex occupying our something irreplaceable – either an offices we were offered. Their rate Averagefor the first buildings artefact of significant historical, cultural, two years, discounted by 50%, was theoccupancy same price and social significance, or the loss of an as Needspace? but the environment would have No. of people endangered animal’s life. Work is carried created a false impression for us as a grass roots 67% accommodated: out to provide maximum levels of public charity, and we could never have justified the full (2017: 68%) (2017:87% 85%) Average safety, where possible, being completed price once it leapt up. occupancy163 outside of public visiting hours. businesses c.1,500 task descriptions at Twycross therefore Premises and Facilities Management “Our biggest challenge as a charity is being here Response times are also of great involve the checking of enclosure Magazine’s PFM Awards, celebrating long term for people with HIV who, withSussex advances London occupying our importance and we attend emergencies security, ensuring there are sufficient the best of the outsourced facilities 87%buildings Hammersmith in treatment, can expect to lead long and fulfilling “As well as making(2017: it 85%) a more sociable environment, No.Acquisition163 of people on site promptly. An example was when staff in attendance, and that doors management market. Only two years lives. Spending our funding wisely – getting the that are opened for work are closed into our relationship with the zoo, we 67% Needspace?’s friendly, helpful staff provide a very accommodated:businesses we were alerted that there was an issue best value to deliver what the people(2017: we support 68%) 92% and locked once the work is finished. were proud to share with them the (2017:important 94%) service to me as a sole trader. Having a £9.9moccupying our AND ACCOUNTS GOVERNANCE regarding the temperature in the penguin need – is of utmost importance to us, and we’re Sussex We ensure that any subcontractors award for ‘Partners in CSR – Public manned reception to intercept visitors means my buildings 2 enclosure, which we corrected in less satisfied that our move to St Mark’s Studio’s has c.1,500 No. of people or staff new to site are inducted and Sector’, recognising the importance workspace is more private. I can work with fewer 12,942ft than 15 minutes. helped us to achieve that.” London (Gnd, 1-3 floors) accommodated: accompanied by someone familiar of collaboration in successful service interruptions(2017:67% and even 68%) beHammersmith out of the office without Delivering services at a zoo means that with Twycross Zoo’s procedures so delivery. Underpinned by our missing deliveries; they keepAcquisition things ticking over. some aspects of compliance are a little we can be certain no mistakes are sustainability framework, we have 92% “As a small business I have to watch my overheads, c.1,500 unusual. Animals must be kept safe (2017: 94%) £9.9m made in relation to animal or public supported the zoo on its journey to but I would sayLondon the pricing here is good value from visitors and, just as crucially, visitors 2 Hammersmith safety and security. a sustainable future. This has included and it’s changed very little12,942ft over the years. It’s not Acquisition and staff must be protected from the co-funding an intern with Loughborough (Gnd, 1-3 floors) The team’s work was recognised in unusual for people92% to settle here like me; quite a animals. Our compliance checks and University to establish benchmarks in (2017: 94%) £9.9m 2018 with a national award at the few of my neighbours are fairly long-standing too. 2 energy, water and waste reduction. It seems to suit many of us well.” 12,942ft (Gnd, 1-3 floors)

26 CREATING TOMORROW TOGETHER wates.co.uk 27 WATES ANNUAL REVIEW 2018

Wates Residential INTRODUCTION £150m Developments Group capital committed 36 24,617 live sites new homes in pipeline The Group’s residential investment activity is focused on the Wates Residential Developments Group (WRDG), comprising£150m Wates Residential 22.9% OUR BUSINESSES: capital committed return on capital and Wates Developments. WRDG covers all aspects of the residential employed£150m (ROCE) development market – land, planning and development, building, capital36 committed24,617 live sites new homes sales and marketing expertise. in pipeline Residential OUR BUSINESSES 36 24,617 £150m live sites new homes WRDG works with a wide range of partners capital committed £107,910in pipeline across both private and public sector parts of the The Wates Residential22.9% Zero spent with social residential development market. The Group’s aim Injuries enterprises over Development Developments returnGroup on remains capital 36 24,617 the year is to support the UK’s substantial need for new employed (ROCE) live22.9% sites new homes homes and infrastructure. It also places positive highly selective in its focus on return onin pipeline capital community engagement at the heart of specific regional markets and on employed (ROCE) everything it does. working with quality development £150m WRDG achieved an excellent outcome partners. Its long22.9% term private capital committed return on capital in 2018, contributing significantly to the Group’s and public sector relationships, £107,910 overall financial performance. This was set against employedZero (ROCE) spent with social 36£107,91024,617 a difficult market backdrop with continuing opportunity pipeline Injuriesand financial enterprises over live sites new homes the Zeroyear spent with social uncertainty and concern over Brexit and ongoing strength give the business Injuries enterprisesin pipeline over the year challenges within the UK planning environment. real resilience. Wates Developments delivered a record performance, driven by excellent joint ventures 22.9%£107,910 returnspent on with capital social

Zero STRUCTURE MANAGEMENT and some significant land transactions, while Injuries employedenterprises (ROCE) over Wates Residential made strong progress in both the year contracting and development. WRDG is now a business of significant scale and expertise with a current development pipeline £107,910 totalling circa 24,000 homes and with £150m Zero spent with social of capital currently committed to our various Injuries enterprises over residential development investments. the year GOVERNANCE AND ACCOUNTS GOVERNANCE

Daedalus Village, Lee-on-the-Solent

28 CREATING TOMORROW TOGETHER wates.co.uk 29 WATES ANNUAL REVIEW 2018 INTRODUCTION Wates Residential

Southwater

Wates Developments In 2018, Wates Residential continued to grow, very encouragingly achieving its third consecutive year of operating without a reportable health and safety incident. Wates Developments had an exceptional year in 2018. The business The business continues to expand the number of both contracting and development generated value across all areas of operation – securing new land schemes throughout the South and in Cardiff and now has 25 live sites. The forward opportunities, delivering many significant planning successes, project pipeline is approaching 10,000 new homes and demonstrates the strength of OUR BUSINESSES boosting investment in joint venture developments with leading the business’ strategy, which focuses on providing new homes in partnership with housebuilders and closing several major land sales. public bodies (such as Homes England), local authorities and housing associations.

Royston

Key The Wates Residential team believes that everyone partners deserves a great place to live. The standout HAVERING “Working closely with the team achievement of the year was the conclusion of an at Wates Residential is going to ambitious £1bn joint venture with Havering Borough REGENERATION help us to achieve an overhaul Council. The partnership will create over 3,000 new The business now holds a growing of the borough’s existing council LINDFIELD homes in Romford and the surrounding areas over portfolio of over 65 sites at all stages accommodation. We are committed the next 15 years. This major regeneration scheme of planning representing in excess of In 2018 Wates Developments secured a to and excited about the vision we will transform the local environment for residents. 12,600 homes. The team maintains a valuable planning consent for 200 homes share and the long-term partnership deep understanding of the UK land on a large greenfield site on the edge Other notable achievements during 2018 include: between us. The new high quality of Lindfield, near Haywards Heath in homes and places we will build and housing markets and is expert at STRUCTURE MANAGEMENT • Exemplary health and safety delivering planning consents with West Sussex. together will create thriving landowners and partners. This expertise The site was promoted on behalf of 6 • Continued growth of the development portfolio communities where people are enabled consents for 2,606 new homes landowners and was part-owned by the to 17 live sites and over 6,700 homes proud to live.” to be achieved successfully across six business. Once consented, the land was • Expansion of contracting activities to 8 live sites Councillor Damian White sites in the year. sold to a leading housing association for Leader of Havering Council development. The scheme should be and over 2,650 homes (with a forward order book A record year for land returns was complete by 2022. This success followed the highest level and in this case the final of £0.9bn) underpinned by an exceptional outcome three years of challenging work promoting determination was made and supported • Significant investment in the communities where at North Burgess Hill and notable the site. The proposals established a third by the Secretary of State for Housing, we work planning successes at Crawley Down, phase of development to create 495 Communities and Local Government. Chalgrove, Lindfield and Walberton. homes in total and offer the community • Continued commitment to quality and to the The UK planning appeal system remains an 60 affordable homes, a site for a new environment, which was recognised with a silver It was also a record year for new expensive, complex and time consuming primary school and a 24 acre country park. Considerate Constructors Scheme award at home sales within our joint venture route to securing planning consent and In total the proposals created over Abbey Road in Camden developments, securing 559 completions appeals are very much viewed as a last £2.7million in public benefits. Despite being on 13 sites. The business established resort by Wates. However, appeals are supported by Planning Officers, the site was • Continued investment in people with the joint ventures from both the land sometimes necessary to achieve an ultimately refused by the District Council. addition of 46 new team members over the year AND ACCOUNTS GOVERNANCE portfolio and on ‘market sites’, impartial decision on a particular site. (a 74% increase) growing year on year. New homes proposals remain contentious In a recent survey of UK-wide planning in the UK for a variety of reasons. However, appeal activity since 2012, Wates The business continues to establish a strong housing Looking ahead to 2019, the business Wates is steadfast in the belief that everyone Developments ranked as the 5th most brand for open market and affordable sales in the anticipates selling homes in joint ventures deserves a decent place to live. We are successful organisation in relation to residential sector. across 17 active sites including new committed to boosting the UK’s housing appeal outcomes across the housebuilding The focus for 2019 will be on mobilising exciting schemes at Royston, Chalgrove, Bricket supply. Where a site is not supported by a and development sector. Wates Wood, Barrow Guerney and Walberton. Local Authority, despite holding very strong Developments will continue to support new projects whilst maintaining Wates Residential’s Together with live joint ventures, the credentials for sustainable development, the best and most suitable sites for excellent reputation for delivering quality new business has a committed pipeline of the business will contest an application at new homes. homes safely. over 3,800 new homes in development. Havering site at Napier New Plymouth House

30 CREATING TOMORROW TOGETHER wates.co.uk 31 32 CREATING TOMORROW TOGETHER partners Key WATES ANNUALREVIEW2018 standard, to thedelightof on timeandto thehighest The scheme was delivered the safety ofthegeneral public. working onsite andinensuring challenges inprotecting everyone The team faced considerable major road andamainlinerailway. In thiscase, thesite bordered a are often logistically complex. Urban redevelopment schemes additional retail spaces. affordable homes,andcreated car parkinto 141private and transformed anunderused in March 2019. Thescheme completed by Wates Residential Road regeneration inCamdenwas The firstphase oftheAbbey CAMDEN ABBEY ROAD our customer. CARDIFF LIVING

“Wates Residential hasproven they are able to deliver the London Borough ofCamden Senior Development Manager, Karen Honey other projects.” working relationship withWates Residential onthisand and finish achieved. We look forward to continuing aclose events. We are also very pleased withthequality of work benefited from Wates’ involvement, care andtraining surrounding community organisations that residents have promises they make to thecommunity. Itisclear from the private sale. ownership 900for andafurther homes for rent orassisted home includes approximately 600council of 1,500homesacross thecity. This Council isenabling thedevelopment withCardiffLiving’ partnership City Wates Residential’s 10year ‘Cardiff “Wates Residential isprogressing very and Communities Cabinet Memberfor Housing LyndaThorne Cllr who needthemmost.” affordable homes to thecity for people Living isbringingnew, highquality, to address housingdemand,Cardiff and, along withCouncil otherinitiatives completed before theendofyear time, withourfirst affordable homes the Cardiff Living scheme. It’s an exciting well onall sites across through thecity Cardiff Livingsite at Llanrumney

Structure Management wates.co.uk 33 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION WATES ANNUAL REVIEW 2018

Wates Group Board INTRODUCTION The Group Board comprises the Chairman; Chief Executive; Chief Financial Officer; the Wates Family Enterprise Trust and the responsibility for environment, pre- Kleinwort, the investment bank. Earlier William Wates Memorial Trust and has an construction and strategic development. in his career, he spent ten years in the UK Group Managing Director, Wates Construction Group; three Independent Non-Executive MBA from Cranfield University. He has a Over a 34 year career with Skanska, Paul civil service, including two years as private particular interest in sustainability. delivered large and complex projects secretary to the then Prime Minister, Directors and four family Directors. Its primary responsibility is to promote the long- (routinely over £100 million in value) across Margaret Thatcher. the commercial, residential and engineering term success of the Group by creating and delivering sustainable value. The Board seeks Timothy Wates services sectors as well as a significant Director Jeremy Newsum to achieve this in part by being clear about the company’s purpose and ensuring that its number of large public-private partnership Independent (PPP) schemes in healthcare, defence and Non Executive values, strategy and culture align with that purpose. education. Amongst the most notable Director landmark projects for which Paul has had accountability are 30 St Mary Axe (The In 2014 Andy was appointed Chairman Sir James David Allen Gherkin) and Heron Tower in London. Wates CBE Chief Executive of Construction Youth Trust, as well as a Chairman member of the IFB Policy Committee. Tim joined Wates in 1993 and has served In the following year Andy was appointed Philip Wainwright

on the Board from 2006 to 2008 and since Jeremy Newsum joined the Wates Group OUR BUSINESSES Chair of Wates Foundation and Chair of Chief Financial 2011. He is Chairman of the Wates Family Board on 1 September 2018. IFB South East Region, along with becoming Officer Council – the Family Shareholder forum – a Board member of the European Family A Fellow of the Royal Institute of Chartered and is a member of the Audit Committee. Businesses. He also holds an MBA from Surveyors, Jeremy retired in 2016 after He is also a Trustee of various Wates Roffey Park Business School. spending over 25 years leading the executive Sir James Wates CBE has worked for David Allen was appointed Chief Executive Family charities. team of the Grosvenor Estate and the the Wates Group since 1983 and has in April 2018 having joined Wates as Chief Prior to joining the Wates Group, Tim Grosvenor Family Investment Office. He been Chairman since 2013. He was first Financial Officer in January 2016. Charles Wates started his career at Cazenove & Co. remains a trustee of the Grosvenor Estate, appointed to the Wates Group Board Director Philip Wainwright joined Wates as Chief Before arriving at Wates, David was and also holds Non-Executive roles at in 1997. He is chairman of the Outside of the company, he is Chairman Financial Officer in December 2018 and sits Crossrail’s Finance Director and one of the Trinity College, Cambridge; Grupo Lar Nominations Committee. of the Coast to Capital Local Enterprise on both the Group Board and the Executive three Executive members of the £15bn (Spain) and Cambridge Ahead. Partnership and a Deputy Lieutenant of Committee. Outside of the company, Sir James is project’s board. He had joined Crossrail in Surrey. He serves on the Advisory Board Previous Non-Executive roles include Chair Chairman of the CBI Construction Council, March 2009 from Laing O’Rourke, where Formerly Group Finance Director at Wilmott of the Cambridge Judge Business School, of the Urban Land Institute; President of Co-chair of Infrastructure Exports: he was Finance Director for its European Dixon, Philip has a degree in mechanical and is a Non-Executive Director of the British Property Federation and council UK, and Chairman of the BRE (Building Construction business. engineering and began his career as a Tampopo and Pedder Property. He has an member of Imperial College, London. Research Establishment) Trust. He has Charlie is a chartered surveyor with over graduate engineer with Balfour Beatty, Prior to entering the construction industry MBA from the University of Cambridge. also served in the past as President of fifteen years’ experience in the commercial before qualifying as a chartered accountant in 2004, David worked in Accenture’s the Chartered Institute of Building, property sector. He is founder and joint Tim has particular interest in housing and with Ernst & Young. He has over 20 years of Strategy Consulting practice and HSBC Joe Oatley Chairman of the Construction Industry Managing Director of Needspace?, the regeneration issues, as well as facilitating experience in the construction industry in Independent STRUCTURE MANAGEMENT Investment Bank’s Corporate Finance & Training Board, and Co-chair of Build UK. Wates Group managed workspace division the effective management of public-private both senior financial and operational roles, Non-Executive Advisory Division. He is a Non-Executive Director of which now comprises a portfolio of six partnerships. including at Byrne Group, Laing O’Rourke, Director Argent Services LLP. David began his career with Arthur properties across London and the South Biwater Plc, National Grid and ED&F Man. Andersen’s Tax Practice, is a Chartered East. Charlie joined the Wates Group Board Sir James feels passionately that good Accountant and holds a degree in Modern in May 2011 and is a member of the Property Paul Chandler business, done well, is a force for good Group Managing David Barclay History from St. Peter’s College Oxford. Investment Committee. In addition, he is a for society, which has led him to take member of the British Council of Offices, the Director, Wates Independent on a number of other roles, such as British Property Federation and a director Construction Group Non-Executive Joe Oatley was appointed to the Board Chairman of the think tank Tomorrow’s Andrew Wates of the British Centre Association. Charlie is Director as Non-executive director in July 2017. Company and Chairman of the Princes Director on the Board of Management, Estates He was Chief Executive at Cape plc – a Trust Corporate Advisory Group. In 2018 Committee and Finance Committee of the global FTSE-listed company specialising in he was appointed by the government Royal Alexandra & Albert School in Reigate. the provision of critical industrial services to chair the coalition group developing to the energy and natural resources sectors Paul joined Wates as Group Managing corporate governance principles for – for six years until 2018. Joe was previously Director of the Construction Group in David was appointed Non-Executive Director large private companies (the so-called Jonathan Wates Chief Executive of Hamworthy plc, a global January 2017, with accountability for the of Wates Group in December 2012 and is ‘Wates Principles’). Director oil and gas engineering business, which he portfolio of businesses comprising the Group’s Senior Independent Director. joined in 2007 and led until its takeover by

He was awarded the CBE for services to Andy joined the Wates Group in 1995 Construction London, Construction London He is Chairman of the Remuneration AND ACCOUNTS GOVERNANCE Wartsila in 2012. Joe is also a non-executive construction and the charitable sector having spent six years gaining experience Residential, Construction Home Counties, Committee and a member of the Audit director at Carclo plc, an international and was awarded the knighthood in the of the construction industry with Costain Construction North, SES Engineering and Nomination Committees. He also holds manufacturer serving the medical and Queen’s Birthday Honours in 2019. Construction and John Shreeves & Partners. Services and Wates Building Services. Non-Executive positions with Wessex Water automotive sectors. Formerly the Managing Director of Wates and The British Library, where he is Deputy He was appointed to the Wates Group Interiors, Andy was appointed to the Chairman and Chairman of the Remuneration Prior to this, Joe spent most of his career Board in June 2018. Wates Group Board in May 2011 and is also a Having started his career at Grand Committee. He was appointed to the Board in the engineering sector in a broad range member of the Remuneration Committee. Metropolitan (now Diageo), Jonny joined Before joining Wates Paul was Executive of YTL Land & Property (UK) Limited on 13 of roles including Managing Director – He is Chairman of the Wates Family Wates Developments in 1995 and later held Vice President at Skanska UK, responsible March 2017. He is former Non-Executive Strategy Development and Acquisitions. Enterprise Trust and chairs the Wates the position of Group Marketing Director for building and mechanical/electrical Deputy Chairman of the John Lewis Investment Partnership, which is the until 2006. He was appointed to the Wates operations. Additionally Paul held executive Partnership and Vice Chairman of Dresdner family’s long term investment portfolio Group Board in 2008. Jonny is a Trustee of outside of the Group. 34 CREATING TOMORROW TOGETHER wates.co.uk 35 WATES ANNUAL REVIEW 2018

Wates Executive Committee INTRODUCTION Wates Executive Committee is comprised of 10 individuals, all of whom are expert in their field. Together they are responsible for the management of the Group under the leadership of the Chief Executive. This includes formulating strategy proposals for Board approval and ensuring that the agreed strategies are implemented in a timely, safe and effective manner.

David Allen Stephen Beechey Chief Executive Group Strategy Director and Managing Director Government Affairs

Governance OUR BUSINESSES and Accounts David Brocklebank Helen Bunch Group Managing Director, Managing Director, Wates Residential Developments Group Wates Smartspace

Paul Chandler John Dunne Group Managing Director, Group Safety, Health, Environment

Wates Construction Group & Quality Director STRUCTURE MANAGEMENT

David Morgan Simon Potter Managing Director, Group Commercial Director Wates Living Space GOVERNANCE AND ACCOUNTS GOVERNANCE

Paul Rowan Philip Wainwright Group Human Resources Director Chief Financial Officer

36 CREATING TOMORROW TOGETHER wates.co.uk 37 38 Contents CREATING TOMORROW TOGETHER Group Five Year Summary Notes to theAccounts Consolidated CashFlow Statement Company Statement ofChanges inEquity Consolidated Statement ofChanges inEquity Company Balance Sheet Consolidated Balance Sheet Consolidated Statement ofComprehensive Income Consolidated Profit andLoss Account Directors’ ResponsibilitiesStatement Directors’ Report Corporate Governance Report Strategic Report Directors andAdvisors attention to anymatters by way ofemphasisanddidnot contain statements oftheCompanies undersection498(2)or(3) 2006. Act delivered to theRegistrar ofCompanies. Theauditors have reported onthose accounts: theirreports were unqualified, didnot draw the years ended31December 2018 or2017, butisderived from those accounts. Statutory accounts for 2017and2018have been The financial information set outinpages 38 to 80ofthisAnnual Review doesnot constitute the Company’s statutory accounts for WATES ANNUALREVIEW2018 Reports forReports theyear ended 31December 2018 Extracts from theAnnual Accounts and WATES GROUP LIMITED Company number:01824828 Page 80 60 40 58 56 44 59 59 54 39 55 57 53 51 Directors andAdvisors * David Allen remained aDirector Directors

Website www.wates.co.uk Telephone Surrey Leatherhead Business Head Office Registered Office and London Bankers London Independent Auditors Company Secretary James G.M.Wates, CBE(Chairman) David O. Allen (ChiefExecutive) Deena E. Mattar (Resigned4March Deena E. 2019) Paul Chandler (Appointed 18June2018) David M.Barclay Jonathan M.Oatley Jeremy H.M.Newsum (Appointed 1October 2018) Andrew P. E. Wates Philip M.Wainwright (Appointed 3December 2018) Charles W. Wates R. Jonathan G.M.Wates 01372 861000 KT22 7SW United Kingdom Station Approach Wates House EC4N 4TR 60 QueenVictoria Street HSBC Bankplc WC2N 6RH 1 EmbankmentPlace Chartered Accountants andStatutory Auditors PricewaterhouseCoopers LLP Philip M.Wainwright (Appointed 3December 2018) David O. Allen (Resigned3December 2018)* D.Timothy A. Wates

wates.co.uk

39 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 40 contract awards. decisions, price often remains oneofthedetermining factors in capability, reputation andexperience are considered inclient Group runstheriskoflosing market share. While service quality, If itdoesnot compete effectively initsmarket sectors, the The construction sector ishighly competitive withlow margins. D. Competition Group. the level ofcounter-party credit andcurrency riskfaced by the cancelling proposed andexisting projects. Itmay also increase UK economy. Thismay result inclientsdelaying, or curtailing The impact ofBrexit continues to create uncertainty inthe BrexitC. and increases incosts. regulatory developments (includingbuilding andfire regulations) reductions ingovernment andprivate sector spending, confidence inthehousingmarket andthebroader economy, be vulnerable to sudden economic downturns, alack of Demand for theservices oftheGroup iscyclical andmay B. Market risk high standards andprocedures. reliant onalargely subcontracted workforce to operate to our damage property, theenvironment orourreputation. We are the potential to cause serious injuryto itsstakeholders, orto The Group isinvolved inactivities andenvironments that have Health andsafetyA. Risk Principal risks anduncertainties Strategic Report The Chairman’s Statement andChiefExecutive’s Review form ofthisStrategic part report can beviewed onpages 4and5respectively. consolidated Accounts for theyear ended31December 2018. The directors present theirStrategic which is followed Report, by theCorporate Governance Directors’ Report, andtheaudited Report CREATING TOMORROW TOGETHER WATES ANNUALREVIEW2018

on work that itcan deliver effectively. given. TheGroup ishighly selective at bidstage only andwill take strategic objectives oftheGroup before approval to tender is estimation stage to determine whetheritisinlinewiththe its costs andrisks.Theriskprofile of every bidisassessed at the projects where ithasacompetitive advantage andcan manage The Group mitigates competitive riskby seeking to target country intheEU. does not deliver anycontract, projects orservices to anyother see asignificant impact oncurrent orfuture projects. TheGroup The Group hasanalysed theforward order bookanddoesnot rates andpricingimpact ofincreased tariff and commodity costs. in delivery ofmaterials andcomponents, changes inexchange availability ofourworkforce, pressure onthesupply chain,delays market conditions, complications withthemovement and scenarios. Thisincludesspecificplans that cater for changes in and hasdeveloped plans to respond to arange ofpotential The Group continues to monitor theUK’s progress towards Brexit government andregulatory authorities. forums to maintain effective working relationships withthe leadership team participate inpolitical, economic andregulatory service offering across different market sectors. Members ofour to anyonesector, theGroup hasdiversified itsproduct and potential for profitable growth. To limittheimpact of exposure competitive advantage ismaintained andthat have themost The Group’s strategic focus isonthose market sectors inwhicha procedures. organisational arrangements are inplace to operate these and safety procedures andensuringthat effective leadership and management. Thisisachieved by establishing effective health focused onachieving thehigheststandards ofhealth andsafety Group. Inorder to control riskandprevent harm,theGroup is The health andsafety ofpeople istheprimaryfocus ofthe Mitigation confidential data, damaging our reputation andbrand. successful delivery ofourprojects andlead to aloss of information security breach orattack, could impact the A loss ofourkey systems through alack ofresilience oran I. Systems, Data, Cyber &GDPR Security payments, resulting inless money to invest intheGroup. significantly which could lead to increased pensiondeficit pension scheme. ThePension Fund liabilities could increase The Group carries afundingobligation for ourdefinedbenefit H. Pension Fund Liabilities (Financial Risk) expertise. Competition for highquality people isintense. and retain people that have thenecessary experience and The success of theGroup isdependentonbeingable to attract G. Appointingandretaining talent toability invest, winwork orpay dividends. its financial obligations asthey fall dueand could affect our riskisthethatLiquidity theGroup not will beable to meet F. (Financial Liquidity Risk) Risk litigation ordisputes. that could lead to cost andtime overruns, lower revenues, environments. TheGroup’s projects could encounter difficulties designandconstruction,estimating, planning, often incomplex Execution ofprojects involves professional judgement in ProjectE. Delivery

internal andexternal audit. controls andprocedures are to subject regular independent our data protection procedures inlinewithregulations. The assessment capabilities. We continue to develop andenhance upgrading itsITinfrastructure, software andcyber threat and external threats. TheGroup iscontinually developing and performance ofoursystems andto identifyandmitigate Robust controls andprocedures are inplace to monitor the payments to reduce thedeficit. on riskandreturn. TheGroup hascommitted to deficitfunding liabilities andare well diversified, ensuringa reasonable balance Investment strategies aimto limittheimpact ofincreases inthe independent trustees andadvisors ofthepensionscheme. scheme are regularly assessed by theGroup Board andthe The performance, risksandfundingarrangements ofthepension The Group isanInvestors inPeople Gold accredited employer. andtoopportunities, beanattractive andengaging employer. (which isreviewed regularly), training andcareer development success. Itseeks to offer market-competitive remuneration The Group knows that itspeople are at theheart ofitson-going Board (see details ofgroup financingarrangements onpage 42). arrangements are reviewed regularly andapproved by theGroup monitors andstress tests position. itsliquidity Funding toliquidity meetitsliabilities whendue.TheGroup continually The Group manages suchthat liquidity italways hassufficient prudent view ontherecognition ofrevenue andprofit. judgements made onprojects andtheGroup takes ahighly project delivery. There isclose scrutiny ofthefinancial and customer feedback helpmitigate theriskto successful reviews, independentinternal andexternal audits,peerreviews management oversight, theriskmanagement process, project project lifecycle. These, combined withcomprehensive mandates rigorous policiesandprocedures throughout the The Group’s activities are guidedby anOperating Framework that Mitigation wates.co.uk 41 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 42 the year containing 964residential units(2017: 423). public sector clientsandhasworked onresidential projects in be completed. Thebusiness also operates asacontractor for Across these sites, there are 3,416 properties (2017: 2,572) to still 828 completions (2017: 540)from 27active sites (2017: 15). through jointventures andpublicsector collaborations delivered In addition to seven land transactions (2017: three), house building for 1,870 afurther units(2017: 1,396). (2017: 1,025) withdecisionspendinginrelation to applications planning permission was achieved for 709 residential units sites inHavering, Cardiff andLee-On-The-Solent. In2018, held brownfield sites, includingin2018,strategically important sector partners to deliver planning for development onpublicly residential development. Italso works onbehalf ofitspublic seeks to create value by achieving planning permission for privately owned land (2017: 3,587 acres, 11,945 plots) onwhichit sectors. Thebusiness controls 4,016acres plots) of (12,687 Residential Developments operates inthepublicandprivate ventures) increased by 10.7% to £233.3m (2017: £206.1m). Turnover for Residential Developments (includingshare ofjoint Residential Developments a project ofreal national andhistorical significance. for Estates theNorthern Programme for theParliamentary Estate, Our Construction business was appointed aslead contractor contractor inthissector. education projects during2018,makingWates theleading forDepartment Education saw uswork onover £500mofnew for thepublicsector. Ourproductive relationship withthe framework, we have seen asteady demandfor new projects Following ourappointmentto theScape Procure majorworks was £848.9m (2017: £934.8m), 9.2% down on2017. Construction turnover, includingitsshare ofjointventures, Construction at £5.4bn (2017: £5.1bn). The forward-order bookincreased by 5.9% andfinishedthe year of £120m,whichexpires in2023. (2017: £169.5m). TheGroup hasinplace arevolving credit facility year. TheGroup finishedthe year with cash at bankof£114.2m The Group maintained astrong cash position throughout the were up0.6% ontheprevious year. maintained at 2.4%; pre-tax profits at £35.9m (2017: £35.7m) Developments business. Theoverall operating margin was supported by another strong year for ourResidential to £39.0m (2017: £38.5m),withaconsistent trading performance; Total operating profit before interest and tax increased by 1.3% associates’ turnover, decreased by 1.3% to £1.60bn(2017: £1.62bn). Group turnover, includingtheGroup’s share ofjointventures’ and Group Performance Strategic Report CREATING TOMORROW TOGETHER Analysis ofFinancial Key Performance Indicators WATES ANNUALREVIEW2018 continued includes contributions to thepensionfundof£12.7m. activities (£9.8m). Theoutflow from Group operating activities fixed assets (£18.2m),dividendspaid(£11.6m)andGroup operating outflows from investments injoint ventures purchase (£25.3m), of from jointventures andassociates (£3.5m)were offset by Inflows from bankborrowings (£5.8m)anddividends received £169.5m) andcash (netofdebt)was £88.1m (2017: £148.8m). At 31December 2018,thegross cash balance was £114.2m(2017: The Group’s cash position was resilient throughout theyear. Cash flow andfinancing being 84% (2017: 90%)ofavailable space. 104,522 square foot (2017: 101,316)offloor space was occupied, of theportfolio to £52.0m (2017: £48.5m).Attheendof2018, properties was performed resulting inanincrease inthevalue South Eastin2018.In2018,anindependentvaluation ofthe medium sizedentitiesfrom 7centres across Londonandthe Needspace? provided flexible serviced office space to and small Needspace? 350 non-residential buildings. in thesocial housingsector andmanaged facilities inmore than In 2018,Property Services maintained inexcess of500,000homes turnover, was £514.1m (2017: £477.3m), 7.7% upon2017. Property Services turnover, includingitsshare ofassociates’ Property Services provision for theestimated costs arisingfrom thejudgment. has beenincludedat the31December 2018year endto make GMP Inequalities case. Inresponse to this,anallowance of£1.3m On 26October 2018,theHighCourt ruled ontheLloyds Bank to theprofit and loss account in accordance withFRS102. (2017: £34.5m).Pension charges (2017: of£2.3m £2.1m) were made (2017: £298.1m). There was anactuarial gain intheyear of£0.5m £256.6m) andthenetpresent value oftheliabilities was £282.3m The market value ofthescheme’s assets was £251.7m (2017: result ofanincreased level ofcontributions from theGroup. deferred tax) had fallen to £25.4m (2017: £34.4m) principally asa with FRS102. At31December 2018thepensiondeficit(netof The definedbenefit schemedeficitis calculated in accordance Pensions such astheamortisation ofgoodwill. the UKmainstream corporation tax rate dueto disallowable costs mainstream corporation tax rate of19%. Thetax charge exceeds effective rate of23.5% (2017: 22.8%). This compares to theUK The tax charge for theyear was £8.4m (2017: £8.1m), whichgave an The Group’s tax liabilities arise andare metfully withintheUK. Tax Shareholders’ funds Chairman James G.M.Wates Approved by theBoard ofDirectors on13March 2019andsignedonitsbehalf by: Shareholders’ fundsat 31December 2018 Currency translation difference Share ofother comprehensive income ofjointventure Dividends (11.6) Pension movements Profit for thefinancial year Shareholders’ fundsat 31December 2017 £m Shareholders’ fundsincreased by 13.7% to £135.8m: Chief Executive D. O. Allen 135.8 (0.5) 119.4 27.5 0.6 0.4 Section 172Section Companies 2006 Act that provide sustainable benefits to communities. The programme’s focus remains investment inlocal projects amountedIn 2018thissupport to £1.50m (2017: £1.25m). charitable programme oftheWates Family Enterprise Trust. The Group continued to contribute to Wates the Giving, Wates Giving 2018 respectively. £7.9m and£3.7m were paidon6April2018and7November Dividends of£11.6mwere declared in2018andpayments of Dividend employees andstakeholders. challenge how theGroup can improve engagement withits Throughout 2019, theBoard continue will to review and the Wates Principles hasbeenincludedonpages 44to 47. 172Section oftheCompanies 2016.Ourreporting Act against Board ensures theGroup complies withtherequirements of Stakeholders, onpage 46),butalso having regard to how the success ofthecompany anditsstakeholders (see Principle 6– demonstrate how theBoard makes decisionsfor the long term Companies provides aframework for theGroup to not only The Wates Corporate Governance Principles for Large Private wates.co.uk 43 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 44 and environmental sustainability. inclusion, diversity, community engagement, social responsibility, presence inthecompany, promoting along-term ethos, shareholders are members oftheboard andmaintain avisible stewards ofasocially responsible family enterprise. Five family The family shareholders see themselves asactively engaged The Conservation Volunteers. Contractor partnership Schememetrics;andacharity with into oursupply chain;performance against Considerate programme called Zero Harm;incorporating Social Enterprises amongst manyother things: ahealth, safety andwellbeing good governance andsocial responsibility. TheGroup promotes, during 2019. Itbuilds ontheGroup’s existing commitment to the annual leadership conference androadshows taking place The purpose becommunicated will to theworkforce through the organisation’s strategy, decisions,processes andculture. formalised during2018,undertheBoard’s direction, to guide The Group’s purpose, goals andtarget behaviours were • • • which definesourpurpose, goals andbehaviours: We have aguidingframework, “Creating Tomorrow Together” all it does. property services) andseeks to generate social value routinely in built environment (construction, property development and generation offamily ownership. Itoperates inthree areas ofthe The Wates Group was founded in1897 andisinitsfourth Principle 1–Purpose andleadership Principles throughout ourwork. the pastyear; for thenext financial year beapplyingwe will the and set outbelow how thePrinciples would have appliedover to adopt thedisclosure early andAccounts inour2018Report regarding corporate governance arrangements. We have decided principles asanappropriate framework whenmakingadisclosure after 1January2019andCompanies are able to adopt theWates apply to company reporting for financial years onor starting These new corporate governance reporting requirements will (‘FRC’) inDecember 2018andavailable ontheFRC website). Private Companies (publishedby theFinancial Council Reporting applied theWates Corporate Governance Principles for Large (Miscellaneous Regulations Reporting) 2018,theCompany has For theyear ended31December 2018,underTheCompanies Corporate Governance Report CREATING TOMORROW TOGETHER WATES ANNUALREVIEW2018 a betterway”. Our behaviours are that “we care; we are fair; andwe look for Our goals are to be“sustainable”, “trusted” and“progressive”; tomorrow”; creating theplaces, communities andbusinesses of Our purpose isthat “together we inspire betterways of investor relations. whole Board more routinely intheactive management of observations for andinstincts thebenefitof andengagingall, the development, encouraging all directors to share theirthoughts, more effective by clearly aligning its agenda to strategic competent andwell runandhad thepotential to become even Board Effectiveness Review assessed that theBoard was scheduled thenext independent review for mid-2019. The2015 facilitated by anindependentexternal advisor in2015andhas The Board last undertook aformal effectiveness review ofthebusiness,all parts includingaccess to shareholders. specific experience andknowledge andwhichprovides access to programme for all new Directors whichistailored to their external seminars andtraining courses. There isaninduction (such asvisitsto construction sites) andby attending appropriate Group by meetingwithsenior management, visitingoperations Directors update knowledge theirskills, and familiarity withthe roadshows that are available to all employees. through regular leadership team conferences andtheannual are communicated consistently to theworkforce -for example that thevalues, strategy andculture align, are implemented and The Executive Committee (a committee oftheBoard) ensures the Group. are able to challenge andinfluence abroad range ofareas across to relevant committees (as noted onpages 48to 50)so that they committees. TheNon-Executive Directors attend andact aschair The dutiesoftheBoard are executed partially through may, ifthey wish,take professional advice at thecompany’s expense. access to theadvice andservices oftheCompany Secretary and except theChairman,whohasacasting vote. Directors All have The Directors have equal voting rightswhenmakingdecisions, sectors inwhichtheGroup operates. in addition to perspectives andchallenge from outsidethe construction, property development, finance, engineering, audit, Independent Non-Executive Directors bringexperience in this area by publishingourInclusionStrategy in2019. most senior levels. We bedemonstrating will ourcommitment to a more diverse workforce whichshould increase diversity at the company anever-more inclusive environment, thereby fostering construction sector asawhole. We are committed to makingthe Board andrecognise that thisisachallenge across the We acknowledge that there isarelative lack ofdiversity onthe composition isappropriate to ourlarge yet focused business. Non-Executives andfour family members. Thissizeand Officer, Group MD Construction Group, fourIndependent The Board comprises aChairman,ChiefExecutive, ChiefFinancial overall Board andindividual director effectiveness. The Chairmanplays apivotal role increating theconditions for decision makingacross theGroup are effectively maintained. ensure that thebalance ofresponsibilities, accountabilities and The Group hasaseparate ChairmanandChiefExecutive to website: www.wates.co.uk/who-we-are/. A biography for each Board Director can befound ontheGroup’s Principle 2–Board Composition and for strengthening itsoverall performance. in theidentification of key areas for future improvements, focus review. TheBoard considers effectiveness assessments important success intheexecution oftheaction plans agreed underformal conducted informal self-assessments to consider progress and Between externally facilitated assessments theBoard has annual Board programme. and performance monitoring spread over thecourse ofthe monthly basis,withoperational matters reviewed quarterly significant instrategic shift issues being considered ona Since the2015Board Effectiveness Review there hasbeena effective decisionmakingandindependentchallenge. Directors, together withWates Family Directors, whosupport These committees includeboth IndependentNon-Executive Remuneration, Nomination, Corporate Finance andSustainability). responsibilities are delegated to other Board committees (Audit, independence Inaddition, orjudgement. certain governance relationships withthecompany that mightinfluence their independent inthat they have nomaterial business or The IndependentNon-Executive Directors are wholly Safety functions. Unit, Commercial, HumanResources, Strategy andHealth & includes theChiefFinancial Officer and leaders of each Business and ischaired by theChiefExecutive andwhose membership the company to theExecutive Committee whichmeetsmonthly The Board delegates for authority day-to-day management of Committees potential conflicts, appropriatesafeguards have beenimplemented. communicated to theGroup RiskCommittee. Where there are declarations are collated by theHead ofInternal Auditand individuals mustdeclare anypotential conflicts ofinterest. These the Group’s behaviours andvalues. ofthisprocess, Aspart all declaration confirming that they have behaved in accordance with wider leadership team complete anAnnual Code ofConduct The Directors, Committee members andother members ofthe The Board’s key areas offocus in2018are includedon page 49. days for strategic planning withtheExecutive Committee. of nineprincipal meetings every year, plustwo additional accountability andresponsibilities. TheBoard hasaprogramme Each Board memberhasaclear understanding oftheir the most appropriate knowledge andindustryexperience. key decisionsare made by theindividuals andcommittees with considerations. WhilstBoard oversight isalways maintained, certain that every decisionittakes isunderpinnedby theright that thecompany hastherightsafeguards inplace andmakes Good governance openandfair supports business, ensures Accountability Principle 3–Director Responsibilities absolute assurance against ariskmaterialising. business objectives andcan only provide reasonable andnot an rather thanto entirely eliminate, theriskoffailure to achieve The company’s systems and controls are designed to manage, the Board are discussed inthesubsequent RiskCommittee. to theGroup Board onamonthly basis–specificpoints raised by monitored by theRiskCommittee. Theriskregister ispresented The company’s Strategic includes key Report risksthat are becomes material to theGroup. the riskregister once itslikelihood andimpact ofoccurrence considered at each meeting–anemerging riskisincludedon emerging risksismaintained by theRiskCommittee and are outlinedintheStrategic (on Report pages 40to 41).Alistof operations. Thecompany’s key operational risksandmitigations and riskregisters andworks to ensure consistency across refine andenhance the company’s riskmanagement framework changes in underlying conditions. TheCommittee continues to meets onaquarterly basisandupdates theriskregister for any risk identification, classification andmitigation. The Committee monitoring the effectiveness ofthe Wates Group’s approach to appropriately andinatimely manner. Itsfocus in2018was on inherent andemerging risksare identifiedandmanaged members andbusiness leads, unitandfunctional ensures that The RiskCommittee, consisting ofExecutive Committee Risk members oftheExecutive Committee. quarterly business unitreview process, whichisattended by performance, resilience are andliquidity collated through the which itdelegates. term to Short opportunities improve business, thefamily enterprise strategy andthecommittees to every year. TheBoard seeks drawn outopportunities from the Group Strategy process whichispresented to theGroup Board Long term strategic are opportunities highlighted intheannual Opportunity The Board whilstmitigating seeks outopportunity risk. Principle andRisk 4–Opportunity with quarterly reporting provided to theAuditCommittee. reviewed onacyclical basisby theGroup’s internal auditfunction Processes for collecting data, aswell asthereporting ofthat data, is Other key information isprepared by therelevant internal function. whichisstaffedfunction by five people. financial controls are reviewed by theGroup’s internal audit audited by PricewaterhouseCoopers LLPonanannual basis,and regulatory changes. Financial information iscurrently externally provided withthenecessary training to keep upto date with qualified to ensure theintegrity ofthisinformation andis accounting systems. TheGroup’s finance isappropriately function Key financial information is collated from theGroup’s various sustainability, all supported by Key Performance Indicators (KPIs). business, strategy, operational matters, market conditions and safety, thefinancial risksandopportunities, performance ofthe monthly) onall key ofthebusiness aspects includinghealth and The Board receives regular andtimely information (at least Integrity ofinformation wates.co.uk 45 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 46 and based solely uponwork criteria andindividual merit. practices (includingremuneration) are objective, free from bias orientation ordisability. decisions relating All to employment nationality, ethnicorigin,religion, marital status, sexual treatment andcareer development regardless ofage, gender, harassment andvictimisation, where everyone receives equal and promotes anenvironment free from discrimination, beyond. TheGroup isanactive employer equal opportunities time whichhighlighted some specificareas of focus for 2019 and In 2018,theGroup reported itsGenderPay for Reporting thefirst directors’ remuneration isdisclosed onpage 65(note 5). companies operating withintheconstruction sector. The with companies ofasimilar sizeandcomplexity, aswell asother that theGroup’s remuneration policy for executives isconsistent An independentreview was performed in2018,whichhighlighted company’s workforce. and taking into account fair pay andconditions across the operates andfrom other sectors. Pay isaligned withperformance on evidence from across thesectors inwhichthecompany best market practice andremuneration drawing benchmarking, consultants whoprovide updates onlegislative requirements, doing so, theCommittee takes advice from independentexternal framework andlong-term incentive plans for senior executives. In Board concerning theGroup’s remuneration strategy, recruitment reference andisresponsible for makingrecommendations to the The Remuneration Committee hasclearly defined terms of both itspurpose andtheinterests ofitsshareholders. deliver theGroup’s strategic ambitionsinamannerconsistent with by securing andretaining quality senior management whocan remuneration at alevel that enhance will thecompany’s resources The Remuneration Committee’s primaryobjective isto set Principle 5–Remuneration and to create value for itsshareholders, customers andsuppliers. ofallsustainability itsbusinesses, to meetitsstrategic objectives This enables theGroup to protect theintegrity andlong-term understanding theobligations, risksandterms ofthecontract. appropriate level ofdiligence hasbeenperformed in requires anunbudgeted allocation ofcapital, to ensure that the certain value (determined by theBoard) oranytransaction that Specifically, theGroup Board approves any contract above a (www.wates.co.uk/who-we-are/corporate-governance/). ISO 14001andISO 18001whichare available onourwebsite which includes(butgoes beyond) itscertifications for ISO 9001, fundamental platform to ourinternal control framework practice standards anddelegated authorities.Itisthe encapsulates theGroup’s operating rules, processes, best The Group hasdeveloped anOperating Framework which Responsibilities Corporate Governance Report CREATING TOMORROW TOGETHER WATES ANNUALREVIEW2018 Board onamonthly basis. on spendwithSocial Enterprises, whichare reported to the create andmaintain. Thecompany’s internal KPIsincludemetrics seeking new ways to ensure ofthebuildings thesustainability we employer ofchoice where everyone isvalued andrespected; and creating positive environmental andsocial impact; beingan the safety, health andwellbeing ofeveryone whoworks withus); throughpart itscommitment to: aculture ofzero harm(ensuring engagement andenvironmental sustainability. Itachieves thisin The Board iscommitted to social responsibility, community External impacts amongst thewidershareholder group. eight shareholders), they work to ensure harmonyandunity Chairman oftheFamily Council (a semi-annual meetingofall Board andshareholders. Together withTimothy Wates, as of theBoard, istheprimarycommunication route between the investment inthebuiltenvironment. JamesWates, asChairman aspirations for sustainability, growth, diversification and direction withitspurpose andto theshareholders’ long-term The Board continues to seek to align thecompany’s strategic communities inwhichwe work. shareholders, customers, employees, suppliers andthelocal relationships withall ourstakeholder community including purpose andto protect thecompany’s brand, reputation and communication are essential onaday-to-day basisto deliver our The Board isclear that good governance andeffective Principle 6–Stakeholders employees well for sustainable results. policies andperformance inleading, andmanaging supporting People external –animportant validation ofthecompany’s The Wates Group iscertified to Gold standard by Investors in knowledge beingshared across all ofourbusiness. are beingused to improve customer engagement with on amonthly basis.Althoughthisisanew process, thefindings independence. NPS performance isbeingreported to theBoard the Group –thisprocess isrunby anexternal company to ensure surveys determine whichwill theNetPromoter Score (NPS) of The Group hasrecently introduced new customer engagement including ‘MeettheBuyer’ to engage withlocal stakeholders. On all large contracts, theGroup hosts local community events industry bodiesandourstakeholder community. the family includinginourChairman’s active engagement across promoting thepublicgood isdemonstrated andsupported by presence inthemedia. TheCompany’s fundamental beliefin and other opinionleaders, whilstmaintaining anopenandvisible external stakeholders andwithrepresentatives ofgovernment The Board promotes accountability andtransparency withall Stakeholders continued recent developments. media channelsprovide extensive andup-to-date news on The company’s website (www.wates.co.uk), intranet andsocial scheme reflect theinterest of stakeholders.all ensuring that thedecisionsmade by both theCompany andthe members andtheCompany. These relationships are key to comprise individuals nominated by both thepensionscheme trustee, whoisindependentofthecompany. Thetrustees The Group communicates openly withtheChairofpension stakeholders. it islooking to constantly improve initsengagement withall Group needsto improve. TheGroup welcomes these changes as conduct thisreporting hashighlighted some areas onwhichthe which are publishedexternally. Theadditional analysis required to and Payment Practices andPerformance both of Reporting, 2018 hasseen theintroduction ofboth GenderPay Reporting achievements andsuccess. channels ofcommunication to share information, bestpractice, initiatives andupdating theGroup’s intranet platform and encouraging more flexible working practices and wellbeing connectivity, expanding themenuofflexible benefitson offer, roadshows at both Group anddivisional level, improving IT improve employee relations by launching more interactive has overseen anumberofinitiatives over thepastfew years to Togetheropportunities. withtheExecutive Committee theBoard Group’s strategic direction, optimism in thefuture andcareer surveys agood barometer oftheworkforce’s confidence inthe The Board considers theresults ofall employee engagement areas ofimprovement incommunication oftheGroup’s purpose. Annual employee engagement surveys are performed to highlight Audit Committee. formal investigation follows, withanonymousreporting to the contact theindependentwhistleblowing services provider anda any potential breaches to theCode ofConduct, they can Group’s Code ofConduct. Ifanyemployee wishesto highlight declaration confirming whetherthey have complied withthe asking members ofsenior management to submitanannual monitors itsemployee’s commitment to itsguidingframework by and allows individuals to raise questionsandconcerns. TheGroup the country provides abriefingonthe Company’s performance An annual employee ‘Roadshow’ delivered inlocations around wates.co.uk 47 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 48 Details ofindividual Directors’ attendance ofBoard meetings in2018are shown inthefollowing table: Group Board – Committee information Corporate Governance Report strategy. Directors All were eitherpresent orhad provided feedback to theChairmanfor consideration priorto thecall ormeetings. meetings to consider anddiscuss shareholders’ long term goals andthestrategic planning that would berequired to develop anenterprise The Board convened onetelephone conference call in2018to consider andapprove aspecificinvestment proposal and four extraordinary CREATING TOMORROW TOGETHER WATES ANNUALREVIEW2018 management ortheadequacy ofinternal controls. approval orendorsement are definedclearly. Otheritems are for monitoring or reviewing progress against strategic priorities,risk The Board operates aforward agenda ofstanding items appropriate to theGroup’s operating andreporting cycles. Items requiring Board oftheBoardActivities in2018 Name ofDirector Appointed 1October 2018 Jeremy Newsum Jonathan Oatley Deena Mattar David Barclay Non-Executives -Independent Timothy Wates Jonathan Wates Charles Wates Andrew Wates Non-Executives -Family Appointed 18June2018 Paul Chandler –Group MDConstruction Group Appointed 3December 2018 Philip Wainwright –ChiefFinancial Officer and ChiefExecutive 6April2018 Appointed ChiefExecutive Acting 10November 2017 David Allen Executives James Wates Chairman Meetings Director Maximum no.of Principal Board could attend 9 9 9 9 9 9 9 9 9 5 2 1 Director attended Board Meetings No. ofPrincipal 9 9 9 9 9 9 9 9 9 5 1 1 Meetings attended Principal Board Percentage of 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 50% • • • • • • • • • • • • • • • • • • • • • During 2018theBoard:

Group’s website www.wates.co.uk and theGroup’s tax strategy, whichcan all be found onthe anti-slavery andhumantrafficking, anti-briberyand corruption Approved theannual statements onthe Group’s policieson performance; and including proposed improvement plans to enhance Performance inpreparation Reporting for external publication, Gender Pay andPayment Reporting Practices and Considered thedata andnarrative relevant to theGroup’s the Group’s new charitable partner; Endorsed theappointment ofTheConservation Volunteers as Group’s long term planning process; that would helpto inform thewiderbusiness strategy andthe Evaluated andlong terms theshort trends insustainability ofabroaderpart focus ondiversity andInclusion; Endorsed actions to promote theconstruction industryas with shareholder returns; management incentive arrangements to ensure alignment Implemented areview oftheGroup’s remuneration ofsenior succession planning; Executive Committee, includingsenior management Considered thecontinued personal development ofthe recommendations oftheCommittees; Remuneration Committees andSustainability onactivities and Received regular reports from theChairs oftheAudit, approved budgets; excess of£35minvalue andinvestment proposals inexcess of Assessed all project delivery contracts andframeworks in mitigation controls; Regularly reviewed key risks,together withtheadequacy of on theGroup’s investments; Reviewed cash forecasts, cash management andstatus reports achievement ofthedesired resilience targets; capacity andpotential financingoptions that would enable Reviewed theGroup’s forecast fundingrequirements, debt acceptable level ofresilience andliquidity; Considered andagreed inprinciple aset oftargets for the contractors andtheresulting impact ontheindustryasawhole; Considered competitor behaviour, includingtheimpact offailing market conditions relative to Brexit; Frequently considered theevolving economic, political and shareholders’ long term objectives; and tested theoverall strategy against thedelivery of Received updates onprogress against strategic programmes Gave consideration to theGroup’s safety performance; financial performance; Received detailed reports ontheGroup’s operating and year business plan; Considered theallocation ofcapital to therolling support five Set theGroup’s 2018budget andfive year business plan; Approved theAnnual Accounts 2017; andReports external auditservice at least every ten years asgood practice. May 2011.TheAuditCommittee identifies re-tendering ofthe PricewaterhouseCoopers LLPwere appointed external auditors in and independentthat theauditprocess was robust. with andconcluded that theexternal auditors remained objective Group’s external auditors’ engagement policy had beencomplied At itsmeetinginJuly 2018theCommittee was satisfied that the extent oftheirnon-auditservices. own policy inrelation to thelevel oftheirremuneration andthe auditors, butfor good governance haschosen to implement its restrictions interms ofnon-auditwork provided by theexternal As aprivate company, theGroup to isnot subject external execution oftheauditprocess. working relationship that enhances theeffective andefficient management andexternal auditors are committed to apositive professionalism continues to receive good feedback. Both of theexternal auditors, theirgovernance, independence and andmembersfunctions oftheExecutive Committee. Thecaliber members ofthefinancial, commercial, ITandinternal audit cross-section ofstaff involved intheauditprocess, including Theevaluationaudit. takes theform ofaquestionnaire to a Committee evaluated theirperformance inrelation to the2017 completion oftheannual auditplan andinJuly 2018the assesses theeffectiveness oftheirperformance every year after auditors at theGroup’s AGM inMay 2018.TheCommittee PricewaterhouseCoopers LLPwere re-appointed external External Auditors governance inrelation to knowledge theirskills, andexperience. members during2018followed theprinciples ofgood experience ofboth theCommittee ChairandtheCommittee’s The Board issatisfied that the recent and relevant financial independent, andTimWates, aDirector from theWates family. other Non-Executive Director; David Barclay whoisconsidered October 2016.In2018,theAuditCommittee comprised one Accountants, was appointed ChairoftheCommittee on1 Deena Mattar, aFellow oftheInstitute ofChartered the external audit. management processes andreviewing thescope andresults of effectiveness ofinternal controls, internal auditandrisk reviewing theGroup’s accounting policies,reviewing the recommending for approval theannual financial statements, procedures. Specific responsibilities include reviewing and and theapplication ofappropriate accounting standards and relating to financial internal reporting, controls, riskmanagement These outlinetheCommittee’s objectives andresponsibilities reviewed annually andare available from theCompany Secretary. The Committee hasclearly defined terms of reference, whichare Group’s compliance withlegal andregulatory requirements. performance andindependence oftheexternal auditors; andthe controls; theperformance oftheinternal the auditfunction; Group’s financial statements; theeffectiveness ofinternal The Committee’s primaryconcerns are theintegrity ofthe Audit Committee wates.co.uk 49 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 50 – Committee information Corporate Governance Report CREATING TOMORROW TOGETHER the Board. as ChiefFinancial Officer and PaulChandler’s appointment to appointment ofDavid Allen asChiefExecutive, PhilipWainwright In 2018theCommittee led theprocess that resulted inthe formal schedule ofmeetings andmeetsasrequired who are Directors from theWates family. TheCommittee hasno considered independentandAndrew Wates andTimothy Wates the chairmanshipofJamesWates, includingDavid Barclay whois 2018, theCommittee comprised Non-Executive Directors under advice from independentexternal recruitment consultants. In candidates for future appointments and,indoingso, ittakes primary objective, whennecessary, isto identifyandevaluate aligned to theGroup’s strategic objectives. TheCommittee’s in place, andthat itsstructure, composition remain andskills Board remains balanced andeffective, that succession plans are The Board operates aNominations Committee to ensure that the Nominations Committee Director andAndrew Wates, aDirector from theWates family. included DeenaMattar whowas anIndependentNon-Executive Executive Directors andischaired by David Barclay. Members In 2018,theRemuneration Committee comprised three Non- sustainable value for all stakeholders. economic andmarket change, andto deliver long-term strengthens theGroup’s to ability face challenges emanating from remuneration, withanemphasisonperformance-related pay, The Committee firmly believes that thebestpeople ontheright aligned withshareholder interests. deliver theGroup’s strategic ambitionswithinaframework that is retaining andmotivating quality senior management whocan level that enhance will theGroup’s resources by attracting, The Committee’s primaryobjective isto set remuneration at a Remuneration Committee as required underthechairmanshipofDavid Barclay. The Committee hasnoformal schedule ofmeetings andmeets and David Allen andPhilipWainwright, asExecutive Directors. Andrew Wates, Non-Executive Directors from theWates family Independent Non-Executive Directors, Timothy Wates and the Committee comprised David Barclay andDeenaMattar, discrete matters relative to theGroup’s balance In2018, sheet. The Committee hasdelegated responsibility for theoversight of Corporate Finance Committee WATES ANNUALREVIEW2018 member can befound at theGroup’s website www.wates.co.uk and key Abiography functions. for each Executive Committee consists ofindividuals responsible for thestrategic business units The Executive Committee ischaired by theChief Executive and agreed strategy isimplemented inatimely andeffective manner. strategy proposals for Board approval andensuringthat the the ChiefExecutive. TheCommittee’s dutiesincludeformulating management oftheGroup’s business affairs under leadership of The Executive Committee isresponsible for theday-to-day Executive Committee the future ofthebusiness. and long terms trends that insustainability were likely to shape evaluated outputsofaHorizon Scan study, identifyingtheshort Director andtheGroup Strategy Director. In2018theCommittee Environment andQuality Director, theGroup Sustainability Officer withinvitations extended tothe Safety,Group Health, Executive Director, theChiefExecutive andChiefFinancial members included Jonathan Oatley, anindependentNon- Wates, aNon-Executive Director from theWates family, andits environment. In2018,theCommittee was chaired by Jonathan thatand opportunities global trends mightbringto the built corporate responsibility programmes andexplores theimpact The Committee brings oversight andchallenge to theGroup’s CommitteeSustainability mitigation plans. rotational basisto discuss theirrespective riskmanagement and commercial leads heads andfunction attend meetings ona of Group-wide messages andlessons learnt, business unit of theGroup’s riskmanagement approach, includingthe cascade To theCommittees’ support work andto enhance thecohesion and operational performance. Committee remains focused onthekey risksaffecting financial approach to riskmanagement andmitigation andthat the composition oftheCommittee strengthens theGroup’s Commercial Legal Adviser. TheBoard remains satisfied that the Internal Audit,the Group Financial Controller andtheGroup business directors leaders, andfunctional includingtheHead of comprised ofmembers oftheExecutive Committee, regional In 2018,theCommittee was chaired by theChiefExecutive and considered to exist. standards andprocesses where control weaknesses are organisation’s response to specificareas ofriskandapproves and at anappropriate level. TheCommittee reviews the and emerging risksare identifiedandmanaged inatimely manner The Group operates aRiskCommittee to ensure that inherent Group RiskCommittee continued Directors’ Report bias andbased solely upon work criteria andindividual merit. decisions relating to employment practices are objective, free from origin, religion, marital status, sexual orientation ordisability. All career development regardless of age, gender, nationality, ethnic and victimisation, where everyone receives equal treatment and promotes anenvironment free from discrimination, harassment The Group isanactive employer equal opportunities and Equal Opportunities year can befound innote 4to theaccounts. average numberofpeople employed by theGroup duringthe motivated to achieve potential. theirfull Statistics relating to the culture inwhichemployees feel valued for theircontribution and through training anddevelopment andthrough a nurturing The Group iscommitted to improving ofemployees theskills guest contributors from oftheGroup. all parts media, theGroup’s website andaweekly whichfeatures blog, in-house magazines, electronic bulletins, notice boards, social levels communication andfurther iseffected through theuse of priorities. Informal meetings are held at business unitandregional knowledge, disseminate good practice andto discuss strategic Twice ayear, theGroup’s senior leadership team convene to share seek clarification, ontheGroup’s purpose, goals anddirection. provides employees to withanopportunity askquestions,orto on theGroup’s performance, plans andfuture outlook and the forum by whichtheChiefExecutive informs andupdates staff The Group’s annual Roadshow, whichisopento all employees, is listens to employees’ views andopinions. about theGroup’s development andprospects andseeks and objectives. Wates uses avariety ofmedia to inform employees is fundamental to achieving theGroup’s strategy andlong-term help themmake theirfullest contribution to thebusiness, which The Group recognises theimportance ofengaging employees to Employees high performing culture. leadership andbehaviours skills required to achieve apositive and the Group’s health andsafety performance andto develop the safer together’ remains akey strategic to priority enhance further contact free from harm.TheGroup’s Zero Harmcampaign ‘we’re members ofthepublic withwhomtheGroup comes into environment for all employees andpartners andto keeping monitoring ofhealth andsafety andto providing asafe working The Board remains committed to theeffective management and Health &Safety 31 December 2018. dividends have beendeclared inrespect oftheAccounts to and £3,680,167 was paidon7November 2018.Nofurther (2017: £8,245,072) ofwhich£7,885,513 was paidon6April2018 The directors declared dividendsin2018totalling £11,565,680 Dividends Statement onpage 4andtheChiefExecutive’s Review onpage 5. conjunction withtheStrategic onpage Report 40,theChairman’s the year ending31December 2018.Thisreport mustberead in The directors present theirAnnual Accounts for andReports

during thecourse oftheiremployment. and adjust theenvironment ofemployees whobecome disabled promotion ofdisabled people. TheGroup endeavours to retain assists therecruitment, training, career development and employment made by disabled people andencourages and The Group gives andfair full consideration to applications for purposes oflong term succession planning. Group iscommitted to growing adiverse pooloftalent for that each individual can make to thesuccess oftheGroup. The withtheirteamsfurther andindemonstrating thecontribution development programmes to assist business leaders inengaging inclusive working environment andhasimplemented specific The Group hasfor manyyears focused onfostering adiverse and considering conflicts ofinterest are effective. considers that theprocedures inplace for reporting and continuing to duty update changes to these conflicts. TheBoard directors are conducted onanarm’s length basis.Directors have a place to ensure that anyrelated transactions party involving required to notify theBoard Internal controls inwriting. are in that they have aninterest that may arise inaconflict they are of theCompany. Intheevent that aDirector becomes aware interest that conflicts, ormay possibly withtheinterestsconflict, deemed fit, to authorise situations where aDirector has an The Company’s Articles permittheBoard to consider and,if Conflicts ofInterest Articles were adopted by shareholders on13November 2012. special resolution of theCompany’s shareholders. Thecurrent The Company’s Articles ofAssociation may beamendedby a Articles ofAssociation the accounts. Details oftheCompany’s share capital are set outinnote 18to Share Capital efficiency andinformation modelling. and integration ofnew materials andworking techniques, energy areas suchasenhanced safety, project delivery, thedevelopment innovative construction methodsandtechniques, focusing on The Group isdedicated to theresearch anddevelopment of Research andDevelopment overarching strategic objectives. and embeddedwithinthebusiness oftheGroup’s aspart communities inwhichwe work, are published,communicated responsibility arena, specific to theenvironment and Group’s approach, prioritiesandobjectives inthecorporate the Group’s business andlong term strategic aspirations. The Corporate responsibility continues to remain anintegral of part Corporate Responsibility wates.co.uk 51 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 52 Secretary P. M.Wainwright Approved by theBoard ofDirectors on13March 2019andsignedonitsbehalf by: CREATING TOMORROW TOGETHER D.Timothy A. Wates Jonathan G.M.Wates Charles W. Wates R. Andrew P. E. Wates Jonathan M.Oatley (appointed 1October 2018) Jeremy H.M.Newsum (resigned 4March 2019) Mattar Deena E. David M.Barclay (appointed 18June2018) Paul Chandler (Group MDConstruction Group) (appointed 3December 2018) Philip M.Wainwright (ChiefFinancial Officer) David O. Allen (ChiefExecutive) James G.M.Wates, CBE(Chairman) and upto thedate ofsigningthefinancial statements were: The directors ofthecompany whowere inoffice duringthe year Directors December 2018andbenefitsfrom this at thedate ofthis report. scheme provision indemnity duringthefinancial year ending31 of theirduties.Adirector benefited from aqualifying pension which officers ofthe Company may be exposed inthedischarge liability insurance, inrespect ofcertain losses orliabilities to other companies, theCompany hasdirectors’ andofficers’ execution oftheirduties.Inaddition, andincommon withmany event that they incurcertain expenses inconnection withthe applicable legislation, outoftheassets oftheCompany, inthe the extent permitted by theCompanies 2006andother Act indemnification ofitsdirectors andthe Company Secretary to The Company’s Articles ofAssociation provide for the Directors IndemnitiesandInsurance Directors’ Report WATES ANNUALREVIEW2018 continued with theprovisions ofs418theCompanies 2006. Act This confirmation isgiven andshould beinterpreted in accordance • • this report confirms that: Each ofthepersons whoisadirector at thedate ofapproval of Disclosure ofInformation to Auditors concern basiscan befound innote 1iii)to theaccounts. accounts. Further details regarding theadoption ofthegoing continue to adopt thegoing concern basisinpreparing theGroup’s existence for theforeseeable future. Accordingly, thedirectors and theGroup have adequate resources to continue inoperational The directors have areasonable expectation that theCompany Going Concern to £1,518,000. Nopolitical donations were made in2018. During theyear theGroup made charitable donations amounting Donations There were noother post balance sheetevents requiring disclosure. from 2022 to 2023. extended to £120mfrom £60m.Theexpiry date was extended On 11March 2019theGroup’s Revolving Credit Facility was Post Balance SheetEvents on Thursday 2May 2019. The 2019Annual General MeetingoftheCompany beheld will Annual General Meeting the Company’s auditors are aware ofthat information. aware ofanyrelevant auditinformation andto establish that have taken asadirector inorder to make himself /herself Each director has taken all thesteps that he/sheoughtto and information ofwhichtheCompany’s auditors are unaware; So far asthedirector isaware, there isnorelevant audit in respect ofthefinancial statements Statement ofDirectors’ Responsibilities • • • • financial statements, thedirectors are required to: the profit or loss oftheGroup for that period.Inpreparing these view ofthestate ofaffairs oftheGroup and Company andof statements unless they are satisfied that they give atrueand fair company law thedirectors mustnot approve thefinancial in UKandRepublicofIreland’ andapplicable law). Under comprising FRS102 Financial Standard Reporting ‘The applicable Accounting Practice (United Kingdom Accounting Standards, accordance withUnited Kingdom Generally Accepted have prepared theGroup andCompany financial statements in statements for each financial year. Underthat law thedirectors Company law requires thedirectors to prepare financial and regulation. and thefinancial statements in accordance withapplicable law The directors are responsible for preparing theAnnual Accounts Company continue will inbusiness. unless itisinappropriate to presume that theGroup and Prepare thefinancial statements onthe going concern basis reasonable andprudent; Make judgements andaccounting estimates that are statements; material departures disclosed andexplained inthefinancial comprising FRS102, have beenfollowed, to subject any State whetherapplicable UKAccounting Standards, consistently; Select suitable accounting policiesandthenapply them jurisdictions. financial statements may differ from legislation in other United Kingdom governing thepreparation anddissemination of of theultimate parent Company’s website. Legislation inthe The directors are responsible for themaintenance and integrity the Companies 2006. Act enable themto ensure that thefinancial statements comply with any timethefinancial position oftheGroup and Company and Company’s transactions anddisclose withreasonable accuracy at records that are sufficient toshow and explain the Group and The directors are responsible for keeping adequate accounting for the prevention and detection of fraud and other irregularities. the Group andCompany andhence for taking reasonable steps The directors are also responsible for safeguarding theassets of wates.co.uk 53 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 54 CREATING TOMORROW TOGETHER WATES ANNUALREVIEW2018 by way ofemphasisanddidnot contain statements of theCompanies undersection498(2)or(3) 2006. Act Registrar ofCompanies. Theauditors have reported onthose accounts: theirreports were unqualified, didnot draw attention to anymatters years ended31December 2018or2017, butisderived from those accounts. Statutory accounts for 2017and2018have beendelivered to the The financial information set outinpages 38 to 80ofthisAnnual Review doesnot constitute the Company’s statutory accounts for the The above results have beenderived from continuing operations. For theyear ended31December 2018 Consolidated Profit andLoss Account

Profit for thefinancial year Group operating profit Net surplusonrevaluation ofinvestment properties Administrative Gross profit Cost ofsales Group Less share ofturnover ofjointventures andassociates Group andshare ofjointventures andassociates Turnover: Taxation onprofit Taxation –jointventures andassociates Profit before taxation andbefore taxation ofjoint ventures andassociates Analysed Profit before taxation Net interest receivable Taxation –jointventures andassociates Net interest payable –jointventures andassociates Total operating profit before interest and tax Analysed Total operating profit: Group andshare ofjoint ventures andassociates Share ofpost-tax profit from joint ventures andassociates turnover between: between: expenses

Notes 6 2 7 3

(1,322,746) (1,369,342) 1,500,609 1,530,202 (100,426) (91,771) (159,845) (142,937) 1,601,035 1,621,973 177,863 160,860 (3,574)(5,230) 32,290 32,109 34,427 32,892 (6,951) (5,313) 10,863 13,436 27,476 (2,814) (1,491) (2,814) (1,491) 35,918 35,706 £000s 21,427 18,673 39,011 38,497 3,409 750 2,137 2018 2017 27,579 783 £000s

The profit and total comprehensive income for thefinancial years setoutabove isall attributable shareholders toequity ofthe Company. For theyear ended31December 2018 of Comprehensive Income Consolidated Statement Total comprehensive income for theyear Other comprehensive income for theyear Share ofother comprehensive income ofjointventure

Tax relating to components ofother comprehensive income Currency translation difference on foreign currency netinvestment Profit for thefinancial year Remeasurement ofnetdefinedbenefit liability

Notes 21 21 27,963 56,973 27,476 £000s (470) 2018 2017 487 479 559 (81) (5,864) 9 35,214 29,394 44 34,493 27,579 721 wates.co.uk £000s

55 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 56 Approved by theBoard ofDirectors on13March 2019andsignedonitsbehalf by: The notes onpages 60to 80form ofthese part accounts. At 31December 2018 Consolidated Balance Sheet CREATING TOMORROW TOGETHER WATES ANNUALREVIEW2018 Chairman James G.M.Wates Shareholders’ funds Profit and loss account Cash flow hedge reserve Capital redemption reserve Share premium account Called upshare capital Capital andreserves Net assets Provisions for liabilities Creditors: amountsfalling dueafter more thanoneyear Total assets less current liabilities Net current assets Creditors: amountsfalling duewithinoneyear Cash at bankandinhand - dueafter oneyear Stocks Current assets Other

- duewithinoneyear Debtors Investments injointventures Tangible Intangible assets -goodwill Fixed assets investments assets Chief Executive D. O. Allen

Notes 18 18 18 18 18 10 10 14 15 12 12 13 11 8 9

Company number:01824828 (462,773) 223,508 203,948 (39,383) (48,313) (39,227) 310,654 309,785 465,031 509,163 221,250 193,601 102,632 279,817 274,817 40,206 29,842 135,812 119,415 135,812 119,415 92,250 67,989 30,837 34,968 14,777 14,777 52,013 55,491 £000s 74,314 67,415 114,171 169,536 17,447 17,447 10,3472,258 2,673 2018 2017 956 - (559) 86,794 (45,306) (498,816) 2,706 £000s

Approved by theBoard ofDirectors on13March 2019andsignedonitsbehalf by: The profit for thefinancial year dealt withinthe accounts oftheparent company was£10,172,000 (2017: £10,869,000). The notes onpages 60to 80form ofthese part accounts. At 31December 2018 Company Balance Sheet Chairman James G.M.Wates Shareholders’ funds Profit and loss account Capital redemption reserve Share premium account Called upshare capital Capital andreserves Net assets Net current liabilities Creditors: amountsfalling duewithinoneyear Cash at bankandinhand - dueafter oneyear

- duewithinoneyear Debtors Current assets Investments Fixed assets Chief Executive D. O. Allen

Notes 18 18 18 18 10 12 12 13

Company number:01824828 (141,679) (73,973) (83,307) (15,379) 124,946 58,412 53,526 58,389 58,372 58,594 41,639 41,639 14,777 14,777 53,012 55,813 £000s 17,447 17,447 4,846 205 8,459 2018 2017 956 514 43,033 9,853 43,033 2,576 wates.co.uk £000s 57 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 58 respectively. Dividends of£11,565,680 were declared in2018andpayments of£7,885,513 and£3,680,167 were paidon6April2018and7November 2018 2017 and8November 2017respectively. Dividends of£8,245,072 were declared in2017andpayments of£1,673,985, £3,050,000and£3,521,087 were paidon10May 2017, 2August Consolidated Statement ofChanges inEquity At 31December 2018 CREATING TOMORROW TOGETHER WATES ANNUALREVIEW2018 At 31December 2018 Dividends declared shares onequity Total comprehensive income Share ofother comprehensive income ofjointventure Tax relating to items ofother comprehensive income Remeasurement ofnetdefinedbenefit liability foreign currency netinvestment Currency translation difference on Profit for thefinancial year At 31December 2017 Dividends declared shares onequity Total comprehensive income Share ofother comprehensive income ofjointventure Tax relating to items ofother comprehensive income Remeasurement ofnetdefinedbenefit liability foreign currency netinvestment Currency translation difference on Profit for thefinancial year At 31December 2016 Called up capital 14,777 14,777 14,777 £000s share ------premium account Share 956 956 956 ------redemption reserve reserve Capital 17,447 17,447 17,447 ------Cash flow hedge £000s (603) (559) 559 559 44 44 ------account and loss 102,632 86,794 56,929 27,404 (11,566) (5,864) (8,245) 27,579 27,476 34,493 £000s 38,110 Profit (470) 479 (81) 721 - - 135,812 70,687 (11,566) 56,973 119,415 (5,864) equity 27,963 (8,245) 27,579 27,476 34,493 Total (470) 559 479 (81) 721 44

At 31December 2018 Company Statement ofChanges inEquity The total comprehensive income oftheCompany for each ofthetwo years ended31December isitsprofit for these financial years. For theyear ended31December 2018 Consolidated CashFlow Statement Cash andcash equivalents are cash at bankandinhand.

At 31December 2018 Dividends declared shares onequity Total comprehensive income At 31December 2017 Dividends declared shares onequity Total comprehensive income At 31December 2016

Cash andcash equivalents at endofyear Cash andcash equivalents at beginningofyear Net decrease incash andcash equivalents Net cash outflow from financingactivities Bank loans borrowed Repayment ofbankloans dividendspaid Equity Cash flows from financingactivities Net cash outflow from investing activities Dividends received from jointventures andassociates Net loans (paidto)/repaid by jointventures Purchase oftangible fixed assets Proceeds from sale oftangible fixed assets Cash flows from investing activities Net cash (outflow)/inflow from operatingactivities £000s

Called up capital 14,777 14,777 14,777 share - - - -

premium account Share 956 956 956 - - - -

redemption Notes reserve account Capital 19 17,447 17,447 17,447 £000s

- - - - and loss (22,094) (55,365) (25,283) 4,142 (23,220) (18,248) (39,792) (4,758) (15,447)(11,566) (9,842) 11,017 169,536 10,869 (11,566) (8,245) (5,731) (28,353) £000s 114,171 169,536 £000s 10,172 8,459 3,486 14,255 Profit 9,853 5,835 7,523 7,229 2018 2017 253 - (20,429) 65 wates.co.uk 40,409 10,869 (11,566) 191,630 43,033 equity (8,245) 41,639 £000s 10,172 Total 59 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 60 ii) i) 1. Accounting policies Notes to theAccounts CREATING TOMORROW TOGETHER WATES ANNUALREVIEW2018 Basis ofconsolidation General information andbasisofaccounting to thetransition to FRS102 on1January2014. accounts inrespect ofbusiness combinations effected prior 19ofFRS102Section has not beenappliedinthese on consolidation. Inaccordance 35ofFRS102, withSection transactions, balances, income andexpenses are eliminated into linewiththose used by theGroup. intra-group All to accounts ofsubsidiaries to bringtheaccounting policies purchase method.Where necessary, adjustments are made Business combinations are accounted for underthe which control passed. sold are consolidated for periodsfrom orto thedate on December each year. Theresults ofsubsidiaries acquired or Group Limited anditssubsidiary undertakings upto 31 The consolidated accounts includetheaccounts ofWates Company balance sheet. year andtheprioryear have beendisclosed withthe presented for theCompany. However, theprofits for the 2006, noseparate profit and loss account hasbeen In accordance 408oftheCompanies withSection Act key management personnel. statement, intra-group transactions andremuneration of relation to financial instruments,presentation ofa cash flow consolidated accounts. Exemptions have been taken in separate accounts, whichare presented alongside the the disclosure exemptions available to itinrespect ofits underFRS102entity andhastherefore taken advantage of Wates Group Limited meetsthedefinitionofaqualifying out below. operations are includedinaccordance withthepoliciesset statements are also presented Foreign inpoundssterling. the Company operates. Theconsolidated financial currency oftheprimaryeconomic environment inwhich considered to bepoundssterling because that isthe currencyThe functional ofWates Group Limited is issued by theFinancial Council. Reporting accordance withFinancial Standard Reporting 102 (FRS102) properties andderivative financial instruments,in cost convention, modified by the revaluation ofinvestment These accounts have beenprepared underthehistorical the Strategic Report. Group’s operations anditsprincipal activities are set outin registered office isgiven on page 39. The nature ofthe andregisteredAct inEngland andWales. Theaddress ofthe incorporated intheUnited Kingdom undertheCompanies Wates Group Limited isaprivate company limited by shares year, are set outbelow. applied consistently throughout theyear and thepreceding The principal accounting policies,whichhave all been iv) Turnover iii) vii) vi) v) Going concern Intangible assets –goodwill Research anddevelopment Pre-contract costs consolidated profit and loss account. ventures and associates isdisclosed separately inthe Value AddedTax. TheGroup’s share ofturnover ofjoint Turnover excludes thevalue ofintra-group transactions and year endandother fees receivable. unconditional exchange ofcontracts hastaken place by the completed withintheyear, sales ofland onwhich properties anddevelopment properties that are legally recognised astheservice isperformed, sales ofresidential as aproportion oftotal costs, rendering ofservices whichis completion basiswithreference to costs incurred to date activities, whichisrecognised onapercentage of Turnover represents thevalue ofwork doneoncontracting accounts. to adopt thegoing concern basisinpreparing theGroup’s the foreseeable future. Accordingly, thedirectors continue adequate resources to continue inoperational existence for expectation that theCompany andtheGroup have effectively.Report Thedirectors have a reasonable business risksanduncertainties set outintheStrategic that theGroup iswell placed to manage theprincipal and market sectors. Asaconsequence, thedirectors believe customers andsuppliers across different geographic areas with astrong forward-order withanumberof book, The Group hasconsiderable financial resources, together made for anyimpairment. subsidiary undertakings and businesses acquired. Provision is on thelong-term nature ofthecontracts andhistory ofthe economic life (20years). Theuseful life ofgoodwill isbased and written offonastraight linebasis over itsuseful the identifiable assets andliabilities acquired, is capitalised fair value oftheconsideration given over thefair value of undertakings andbusinesses, representing anyexcess ofthe arisingontheacquisitionGoodwill ofsubsidiary incurred. Research anddevelopment costs are written offas contract beobtained. will capitalised where itissufficiently probable that the certain large multi-year frameworks, pre-contract costs are certain that theGroup beawarded will thecontract. For the profit and loss account upuntilthepointitisvirtually Tender costs onconstruction contracts are written off to ix) viii)

Financial instruments Tangible fixed assets anddepreciation (c) instruments Equity (b) Investments (a) Financial assets andliabilities allafter ofitsliabilities. deducting evidences aresidual interest intheassets oftheGroup entered into. instrumentisanycontract Anequity that according to thesubstance ofthecontractual arrangements Financial liabilities instrumentsare andequity classified instrument. Group becomes to aparty thecontractual provisions ofthe Financial assets andliabilities are recognised whenthe Freehold land andbuildings the following periods: to write offthe cost less theestimated residual values over instalments over theestimated useful lives ofassets so as on thefollowing tangible fixed assets inequal annual and anyprovision for Depreciation impairment. isprovided Tangible fixed assets are stated at cost, netofdepreciation investment properties. Depreciation isnot provided inrespect offreehold with anychange recognised intheprofit and loss account. Investment properties are measured at fair value annually Short leaseholdShort land andbuildings Plant andequipment equity areequity recognised asanappropriation ofprofits. Dividends onpreference share capital classified as is redeemable butonly at theCompany’s option. non-redeemable andanydividendsare discretionary, or Preference share capital isclassified if itis asequity received orreceivable, netofdirect issue costs. recorded at thefair value ofcash orother resources instrumentsissuedEquity by theCompany are cost less impairment. loansEquity andunquoted investments are stated at net ofimpairment. other consideration expected to bepaidorreceived, measured at theundiscounted amountofthecash or and whichmeettheabove conditions are initially are classified aspayable or receivable withinone year Debt instrumentsthat have nostated interest rate and effective interest method. subsequently measured at amortisedcost usingthe conditions set outinparagraph 11.9 ofFRS102, are Non-current debtinstruments,whichmeetthe at transaction price. financialAll assets andliabilities are initially measured 50 years period oflease 2 to 10years xi) Stocks x) Joint ventures andassociates (d) costs to sell, whichis equivalent to netrealisable value. attributable overheads, andestimated selling price less Stocks are stated at thelower ofcost, including impairment. joint ventures andassociates, are accounted for at cost less In theCompany’s accounts, investments, includingthose in when theassets purchased by thejointventure are sold by it. Group iseliminated on consolidation. Suchprofit is taken proportion ofthejointventure orassociate owned by the the proportion ofturnover andprofit in ofthe respect Where theGroup trades withajointventure orassociate, ventures orassociates. included inthecarrying value oftheinvestment injoint set outabove. Anyunamortised balance ofgoodwill is associates isaccounted for inaccordance withthepolicy arisingontheacquisitionGoodwill ofjointventures or comprehensive income ofthejointventure orassociate. reflect theGroup’s share oftheprofit or loss and other costs), includingadvances, andare subsequently adjusted to recognised at thetransaction price (includingtransaction Investments injointventures andassociates are initially associates are accounted for method. usingtheequity In Group accounts, investments in jointventures and over whichitexercises significant influence. 20 percent to 50percent voting oftheequity rightsand in whichtheGroup hasalong-term interest, usually from joint control over theentity. Anassociate isanundertaking whereparties acontractual arrangement hasestablished Group holds along-term interest withoneormore other A jointventure isa jointly controlled inwhichthe entity profit and loss account immediately. the cumulative unrealised gain orloss isrecognised inthe hedged transaction isnolonger expected to take place, with theabove policy whenthetransaction occurs. Ifthe point remains andisrecognised inequity inaccordance expectedstill to occur, thecumulative gain orloss at that hedge relationship butthehedged forecast transaction is or exercised, discontinues ortheentity designation ofthe When ahedginginstrumentexpires orissold, terminated immediately inprofit and loss account. Any ineffective ofthehedge portion is recognised recognised directly inother comprehensive income. gain orloss onthederivative financial instrumentis probable forecast transaction. Theeffective ofany part designated thisasacash flow hedge for ahighly A jointventure entered into aninterest rate swap and depends onthenature oftheitem beinghedged. accounting, recognition ofanyresultant gain orloss However, where derivatives qualify for hedge value isrecognised immediately inprofit or loss. at fair value. Thegain orloss onremeasurement to fair in whichtheGroup hasaninvestment, are recognised The derivative financial instrumentsofajoint venture, joint venture Derivative financial instrumentsandhedgingina wates.co.uk 61 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 62 xiii) Contracts xii) 1. Accounting policiescontinued Notes to theAccounts CREATING TOMORROW TOGETHER WATES ANNUALREVIEW2018 Impairment ofassets accounting policiesfor thetypeofactivity beingdelivered. projects. Each individual project thenfollows thegroup projects, theagreement is treated asanumberofindividual of years andcover anumberofindividual separable As certain agreements can runover aconsiderable number foreseen inbringingcontracts to completion. the accounting date together losses with anyfurther that are nearing completion. Provision ismade for all losses incurred to profit isnot recognised on contracts untilthe contract is has beensuccessfully delivered andfinal accounts are agreed, reliably. Asanumberofrisksare not mitigated untilacontract suitable level so that the forecast profit can bemeasured satisfied that therisksona contract have beenmitigateda to Profit on contracts is only recognised whentheGroup is place inrespect ofcontract forecasting. each contract. Consistent contract review procedures are in enable anassessment to bemade on ofthefinal outturn contract basis.These focus oncosts to completion and period isthepreparation offorecasts onacontract-by- attributing profit on contracts to aparticular accounting The principal estimation technique used by theGroup in reporting date. would bereceived for theasset ifitwere to besold at the carrying amountandthebestestimate oftheamountthat impairment loss isthedifference between theasset’s For financial assets carried at cost less impairment,the interest rate. flows, discounted at thefinancial asset’s original effective carrying amountandtheestimated value ofthefuture cash an impairmentisthedifference between theasset’s For financial assets carried at amortised cost, theamountof Financial assets had noimpairmentbeenrecognised. to arevised carrying amounthigherthanthecarrying value the extent that therevised recoverable value doesnot lead tested to determine reversal. Animpairment isreversed to assets other thangoodwill, thepriorimpairmentloss is Where indicators exist for adecrease inimpairmentloss on of thecash-generating unitsofwhichthegoodwill isapart. measurement ofthepresent value ofthefuture cash flows The recoverable amountofgoodwill isderived from higher ofitsfair value less costs to sell anditsvalue inuse. been reduced. Therecoverable amountofanasset isthe recognition, theestimated recoverable value oftheasset has as aresult oneormore events that occurred after initial An asset isimpaired where there isobjective evidence that, Non financial assets loss isrecognised intheprofit and loss account immediately. there isobjective evidence ofimpairment,animpairment for indicators ofimpairmentat each balance sheetdate. If Assets, other thanthose measured at fair value, are assessed continued

xv) Taxation xiv) Residential developments as payments onaccount. book value ofwork done,theexcess isincludedincreditors companies. For anycontracts where receipts exceed the those relating to thegeneral administration oftherelevant whether certified ornot, and all overheads other than include valuation ofall work doneby subcontractors, received asprogress payments. Costs for thispurpose bringing contracts to completion, andless amounts for contingencies, less anylosses incurred orforeseen in extent that thisisreasonably certain after makingprovision debtors are stated at cost, plusattributable profit, to the Amounts recoverable oncontracts whichare includedin a percentage completion basis. attributed to that project), each project isaccounted for on individual separable projects (and revenue can bedirectly maintenance contracts where thecontract can besplitinto revenue isrecognised onastraight linebasis.For responsive such asresponsive maintenance andfacilities management), over aspecifiedperiodoftime(for example for services services performed are anindeterminate numberofacts For contracts that are delivered asaservice andwhenthe the amountto bereceived can bemeasured reliably. certainty over theprobability that they bereceived will and Variations andclaims are recognised once there issufficient transaction orother event that resulted inthetax expense. componentsame ofcomprehensive income asthe orequity sheet date. Thetax expense orincome isrecognised inthe have beenenacted orsubstantively enacted by thebalance Deferred tax ismeasured usingthetax rates andlaws that with acorresponding adjustment to goodwill. tax isrecognised to reflect thefuture tax consequences business combination differs from their fair value, deferred (other thangoodwill) andliabilities that are acquired ina Where theamountattributed for tax purposes to assets they are recognised intheaccounts. tax assessments inperiodsdifferent from those inwhich accounts that arise from theinclusion ofgains andlosses in Group’s taxable profits andits results asstated inthe sheet date. Timingdifferences are differences between the pay less tax inthefuture have occurred at thebalance in anobligation to pay more tax inthefuture orarightto balance sheetdate where transactions orevents that result differences that have originated butnot reversed at the Deferred tax isrecognised inrespect ofall timing enacted orsubstantively enacted by thebalance sheetdate. (or recovered) usingthetax rates andlaws that have been Current tax isprovided at the amountsexpected to bepaid development site. sales andthetotal actual andforecast costs for each actual property sales to date compared to forecast final result for each site. Profit is recognised onthebasisof site-by-site basisby reference to theexpected outturn For residential development, profits are recognised ona

xviii) xvii) xvi) Leases

Foreign currency Retirement benefits development credits receivable. Currenttax. tax isthenpaidnetofresearch and included inoperating profit andare taxed withincurrent Research anddevelopment credits receivable are in amounts andtheGroup intends to settle onanetbasis. only whenthere isalegally enforceable rightto set offthe Current anddeferred tax assets andliabilities are offset translated at therates ofexchange at thebalance sheet date. rates ofexchange duringtheperiod andtheirbalance sheetsare The results ofoverseas operations are translated at theaverage prevailing at that date. balance sheet date are reported at therates ofexchange and liabilities denominated inforeign currencies at the of exchange at the date of the transaction. Monetary assets Transactions inforeign currencies are recorded at therate respect oftheaccounting period. represents thecontributions payable to theschemes in The amountcharged to theprofit and loss account The Group also operates defined contribution schemes. of thescheme available onwww.wmpfonline.com . Council onwww.wolverhampton.gov.uk andintheaccounts disclosed intheaccounts ofWolverhampton oftheCity contribution plan. Information aboutthescheme is and so theGroup accounts for thisscheme asadefined available for theGroup to use definedbenefit accounting Government Pension Scheme.Sufficientinformation is not 600 active employers. Thisscheme oftheLocal ispart Wolverhampton Council for employees ofapproximately benefit scheme administered of by theCity employees, intheWest Midlands Pension Fund, adefined A subsidiary ofthegroup participates, inrespect ofcertain updated at each year end. triennially from anindependent qualified andareactuary projected unitmethod.Actuarial valuations are obtained liabilities are measured onanactuarial basisusinga funds. Schemeassets are measured at fair value and separately from those oftheGroup intrustee administered The assets ofthedefinedbenefit scheme are held recognised immediately inother comprehensive income. included withinnetinterest. Actuarial gains andlosses are defined benefit ischargedliability to profit and loss and ofstaff as part costs. Thenetinterest cost onthenet losses onsettlements They andcurtailments. are included operating profit are thecurrent service costs and gains and For thedefinedbenefit scheme,theamountscharged to closed to new entrants. providing benefitsbased onpensionable pay, whichis The Group operates adefinedbenefitpension scheme account onastraight linebasisover theperiodoflease. Operating lease rentals are charged to theprofit and loss xix)

Significant areas ofjudgement anduncertainty assumptions are set outinanote to theaccounts. an independentqualified andthe actuary relevant the appropriate assumptions, thedirectors take advice from longevity that underpin thevaluation. Each year inselecting future pensionincreases, investment returns andmember judgements inrelation to the assumptions for inflation, Defined benefitpension schemes require significant expected future rental income from that property. individual nature ofeach property, itslocation andthe inherently subjective dueto, amongother factors, the yields andcomparable market transactions. Thevaluation is structural condition ofthe properties, prevailing market tenure andtenancy details, ground conditions andthe based include, butare not limited to, matters suchas valuations. Assumptions onwhichthevaluations have been Chartered Surveyors, to therequired standard for such subsidiary whois a Fellow oftheRoyal Institutionof by anindependentchartered surveyor orby adirector ofa The annual valuation ofinvestment properties iscarried out detailed viability reviews, whichare updated regularly. assets oftheGroup anditsjointventures issupported by The carrying value oftheresidential land anddevelopment accounting estimates isthenreflected inthe accounts. internal review procedures. Theimpact ofanychange inthe significant changes are highlighted through established profit or loss earned to date are updated regularly and complete. Theestimates ofthecontract position andthe detailed contract valuations andforecasts ofthecosts to obligation onthelatest available information, whichincludes its assessment oftheexpected outcome ofeach contractual Management bases itsjudgements ofcosts andincome and uncertainties are resolved. and may needto berevised asevents unfold and uncertainties that dependontheoutcome of future events costs andincome may beaffected by anumberof obligations spanmore thanonefinancial period.Also the contract costs andincome. Inmanycases, these contractual Contract accounting requires estimates to bemade for the definedbenefitpension scheme. property andtheassumptions used intheaccounting for land anddevelopment, thevaluation ofinvestment contracts, assessments ofthecarrying value ofresidential judgement andestimation arise from theaccounting for The most critical accounting policiesandsignificant areas of revision affects both current andfuture periods. period, orintheperiodofrevision andfuture periodsifthe in whichtheestimate isrevised iftherevision only affects that Revisions to accounting estimates are recognised intheperiod preparation oftheaccounts are reviewed onanongoing basis. The estimates andassociated assumptions used inthe loss account intheperiodwhichthey arise. Other exchange differences are recognised intheprofit and other comprehensive income andaccumulated inequity. assets andontheresults ofoverseas operations are reported in Exchange differences arisingonthetranslation ofopeningnet wates.co.uk 63 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 64 Group turnover ismaterially withinthe United Kingdom. * Excludes fee payments made through jointventures 3. Group2. turnover Notes to theAccounts CREATING TOMORROW TOGETHER WATES ANNUALREVIEW2018 Group Rental/licence fee income Auditors’ Amortisation ofgoodwill Sale ofland andresidential properties Group Other This isstated after charging/(crediting): Rendering ofservices Construction Analysis ofGroup turnover Property Residential Construction Analysis by class ofbusiness GMP Research and development Research and development credits Operating lease rentals Hire ofplant andmachinery Foreign exchange (gain)/loss (including loss ondisposal £19,000 (2017£92,000)) Depreciation oftangible fixed assets Cost ofstock recognised asexpense -non-auditservices -taxation compliance services -auditofsubsidiaries’ accounts -auditofthese accounts Group operating profit equalisation

total total Services remuneration* Developments contracts

continued

1,500,609 1,530,202 1,500,609 1,530,202 Turnover Turnover 1,216,702 1,320,497 846,481 932,499 215,795 170,246 137,900 118,911 56,906 27,378 63,459 511,575 474,983 £000s £000s £000s (1,169) (1,928) 6,949 6,815 4,653 3,809 4,653 3,809 5,554 4,983 3,478 1,300 - (470) 7,108 6,513 7,271 6,242 2018 2017 2018 2017 2018 2017 286 278 330 28 27 8 35,650 3,746 780 373 Turnover Turnover £000s £000s £000s

5. (2017: £14,746,000) inrespect ofdefined contribution arrangements. The pensionoperating cost for theyear was £1,371,000 (2017: £1,338,000) inrespect ofdefinedbenefitarrangements and£16,474,000 Three (2017: three) directors have benefits accruing underamoney purchase pension scheme. The aggregate payroll costs for theGroup were asfollows: The average numberofpersons employed by theGroup (includingdirectors) duringtheyear, analysed by category, was asfollows: 4. Highest paiddirector Directors’ emoluments Other pensioncosts Social security costs Wages andsalaries Administration Operations Contributions to money purchase pensionschemes Amounts receivable underlong-term incentive scheme Remuneration ofdirectors Staff numbersand costs - amountsreceivable underlong-term incentive scheme - emoluments – independentnon-executive directors – executive andfamily directors

Number 267,843 256,648 223,758 215,379 26,240 25,185 17,845 16,084 £000s £000s £000s 4,808 2,366 2,704 3,897 3,972 2,104 2018 2017 2018 2017 2018 2017 2018 2017 1,193 1,151 972 213 130 49 97 - 1,932 - 1,212 2,649 1,145 2,821 wates.co.uk Number £000s £000s £000s

65 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 66 Notes to theAccounts b) a) Analysis ofthecharge intheyear significantly asthenet reversal beoffset will by lower current taxin oftimingdifferences. respect There isno expiry date ontiming differences. During theyear beginning1January2019, thenetreversal ofdeferred tax assets isnot expected to increase thecorporation tax charge for theyear CREATING TOMORROW TOGETHER The differences are explained below: The total tax charge for theyear ishigher(2017: higher) thanthestandard rate ofcorporation tax intheUKof19% (2017: 19.25%). 7. 6. WATES ANNUALREVIEW2018 joint ventures disclosed ontheface oftheConsolidated profit and loss account. Other interest receivable includesamountsfrom Jointventures of£3,481k (2017: £3,119k) whichisalso includedwithininterest payable by Total tax onprofit Total deferred tax charge Adjustments inrespect ofprioryears Decrease intax rate Group profit at thestandard rate of corporation Group profit before tax Less share ofprofit after tax ofjoint ventures andassociates taxed as separate entities Profit before taxation Origination andreversal oftimingdifferences Deferred tax Total current tax Adjustments inrespect ofprioryears UK corporation tax ontheprofit for the year at 19% (2017: 19.25%) Current tax Interest Group total tax charge for theyear Adjustments inrespect ofprioryears Decrease intax rate /timingdifferences Permanent disallowable costs Effects of: Interest Interest Other Bank Net interest receivable Net interest ondefinedbenefit liability Other finance costs: Interest payable andsimilar charges Other Bank Factors affecting the total tax charge for the year Taxation onprofit Net interest receivable receivable: payable: receivable

tax intheUKof19% (2017: 19.25%)

continued

28,258 22,970 34,427 32,892 (6,169) (9,922) £000s £000s £000s (985) (1,011) (983) (1,011) 4,062 3,775 5,369 4,422 - (584) 3,819 3,450 6,951 5,313 6,951 5,313 6,102 4,128 3,051 2,790 5,421 4,354 1,543 1,182 (914) (2,007) 2,137 2018 2017 2018 2017 2018 2017 (65) (58) 849 1,185 907 623 243 681 (226) - - (2) 1,250 (291) 325 783 £000s £000s £000s

minimum term basis,rolling monthly thereafter. £923,000) and dueover 5years of£83,000 (2017: £nil).Contracts includelicence agreements whichare generally issued ona3month for minimum payments duewithinoneyear of£1,540,000(2017: £976,000), anddue over oneyear upto 5years of£1,508,000(2017: At thebalance sheet date theGroup had contracted withlicence andlease holders regarding provision ofworkplace services andsupport stated at cost less depreciation. note 1(xix).Thecost ofinvestment properties at 31December 2018was £43,463,000 (2017: £41,496,000). Othertangible fixed assets are investment properties beingvalued. Themethod ofdetermining fair value and assumptions onwhichvaluations are based are set outin undertaken by CBRELimited, chartered surveyors, anindependentvaluer withrecent experience ofthelocation andclass ofthe Investment properties, whichare all freehold, were revalued asat 31December 2018to fair value at £52,025,000, based onavaluation 9. 8. acquisitions: The netbookvalue ofgoodwill at 31December 2018includesamountsandremaining amortisation periodsregarding thefollowing At 31December 2017 At 31December 2018 Net bookamounts: At 31December 2018 Disposals Provided duringtheyear At 1January2018 Depreciation: At 31December 2018 Disposals Revaluations Additions Transfers At 1January2018 Valuation orcost: Group

At 31December 2018 Net bookvalue: At 31December 2018 Provided duringtheyear At 1January2018 Amortisation: Cost at 1January2018and31December 2018 Group Parts oftheShepherd Group £28,563,000 –16.8years Purchase Group Limited Group £6,621,000 –15.9 years Wates LivingSpace (Maintenance) Limited £16,829,000 –12.4 years At 31December 2017 Tangible fixed assets Intangible assets –goodwill properties - Investment freehold 52,025 52,025 48,510 48,510 £000s 3,409 106 ------

Land andbuildings Freehold £000s

(180) (23) 180 158 22 ------1

leasehold

10,565 10,277 Short 9,069 2,300 7,977 1,496 1,445 (641) (1,917) (641) (1,998) 301 2,944 52

equipment construction Plant and

35,054 25,219 27,391 33,187 4,089 7,968 7,663 921

course of Assets £000s in 6,649 6,649 5,932 (993) 1,710 1,710 the ------

wates.co.uk 104,005 20,085 72,098 16,607 Group 55,491 52,013 £000s 26,737 (2,819) (2,581) £000s 29,691 94,152 74,314 67,415 3,478 3,409 9,283 5,535 total (20)

67 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 68 The Group holds thefollowing interests intheordinary share capital ofthefollowing companies: Joint ventures 10. Notes to theAccounts CREATING TOMORROW TOGETHER WATES ANNUALREVIEW2018 At 31December 2018 Share ofother comprehensive income Share ofprofit Transferred to debtors Repayments Additions At 1January2018 Group Annington Wates (Cove) Limited Barratt Wates (EastGrinstead) Limited Barratt Wates (EastGrinstead) No.2Limited Barratt Wates (Horley) Limited Barratt Wates (Lindfield) Limited Barratt Wates (Worthing) Limited Linden (Basingstoke) Limited Berkshire LandLimited DWH/Wates (Thame) Limited Linden Wates (Barrow Gurney) Limited Linden Wates (Bricket Wood) Limited Linden Wates (Cranleigh) Limited Linden Wates Developments (Chichester) Limited Linden Wates Developments (Folders Meadow) Limited Linden Wates (Dorking)Limited Linden Wates (Kempshott) Limited Linden Wates (Lovedean) Limited Linden Wates (Ravenscourt Park) Limited Linden Wates (Ridgewood) Limited Linden Wates (TheFrythe) Limited Linden Wates (Westbury) Limited Miller Wates (Bracklesham) Limited Luton Learning andCommunity Partnership Limited Linden Wates (West Hampstead) Limited Miller Wates (Chalgrove) Limited Miller Wates (Didcot) Limited Miller Wates (Southwater) Limited Luton Challney (Refico) Limited Miller Wates (Wallingford) Limited QED Luton (Challney) Limited QED Luton (Challney) Holdings Limited Joint ventures andother investments joint ventures Interests in (19,626) 92,250 (8,958) 67,989 10,829 £000s 41,457 559 continued Interests in associates £000s 328 294 Interest 34 - - - - 80.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 33.3% 21.5% 8.0% 8.0% 8.0% investments Unquoted

£000s 1,874 1,874 ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( - - - - (67)

Wates House, Station Approach, Wates House, Station Approach, Leatherhead, Surrey KT227SW Leatherhead, Surrey KT227SW Equity loansEquity £000s West ME194UY Malling, 11 Tower View, Kings Hill, Leicestershire LE67 1UF 538 Hertfordshire SG4 0TJ 471 Cowley Business Park, Forest Business Park, Derbyshire DE24 8RF - - - - Middlesex UB82AL

Registered office Cartwright Way,Cartwright 2 HuntingGate, 2 Centro Place, Barratt House, investments Bardon Hill, Total other Pride Park, Uxbridge, Coalville, Cowley, Hitchin, Derby, £000s 2,673 2,706 (67) 34 - - -

The cost ofshares inunquoted investments is£1,874,000 (2017: £1,874,000). The Group’s interests inunquoted investments are asfollows: Unquoted investments The Group holds thefollowing interests intheordinary share capital ofthefollowing companies: Associates Joint ventures continued The Group holds thefollowing interests inlimited liability partnerships: QSH Propco Limited Gambado Limited Countrywise Repairs Limited Linden (Battersea Bridge Road) LLP Laurus LivingSpace LLP Signature Wates Residential LLP Havering andWates Regeneration LLP QSH Property LLP The Group holds thefollowing interest inalimited liability partnership: Quality Social HousingManagement Limited Linden Wates (Horsham) LLP Linden Wates (Ringwood) LLP Linden Wates (Royston) LLP Linden Wates (Salisbury) LLP Linden Wates (Walberton) LLP 100% non-voting Preference shares and1.4% Ordinary shares Interest Interest Interest Interest 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0% 49.0% 15.0% 15.0% 7.5% ( ( ( ( ( ( ( ( ( ( ( Sale Point, 126-150Washway Road, Wates House, Station Approach, Connect House, Kingston Road, Leatherhead, Surrey KT227SW Tunbridge Wells, Kent TN11LQ Monson House, Monson Way, Leatherhead, Surrey KT227LT Sale, Manchester M33 6AG Meridian Business Park, Meridian Business Park, Cowley Business Park, Middlesex UB82AL Leicester LE191RJ Leicester LE191RJ Registered office Registered office Registered office Registered office 2 MerusCourt, 2 MerusCourt, wates.co.uk Uxbridge, Cowley,

69 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 70 Equity loansEquity Miller Wates (Southwater) Limited Miller Wates (Didcot) Limited Miller Wates (Chalgrove) Limited Miller Wates (Bracklesham) Limited Linden Wates (West Hampstead) Limited Linden Wates (Westbury) Limited Linden Wates (TheFrythe) Limited Linden Wates (Ridgewood) Limited Linden Wates (Ravenscourt Park) Limited Linden Wates (Lovedean) Limited Linden Wates (Kempshott) Limited Linden Wates (Dorking)Limited Linden Wates Developments (Folders Meadow) Limited Linden Wates Developments (Chichester) Limited Linden Wates (Cranleigh) Limited Linden Wates (Bricket Wood) Limited Linden Wates (Barrow Gurney) Limited Linden (Basingstoke) Limited DWH/Wates (Thame) Limited Barratt Wates (Worthing) Limited Barratt Wates (Lindfield) Limited Barratt Wates (Horley) Limited Barratt Wates (EastGrinstead) No.2Limited Barratt Wates (EastGrinstead) Limited share capital ofthefollowing companies to Wates Group Limited at cost: On 1April2018,Wates Developments Limited transferred itsinterest intheordinary The cost ofshares inunquoted investments is£1,874,000 (2017: £1,874,000). The cost ofshares inGroup undertakings is£75,262,000 (2017: £75,262,000). annually by theRetail Price Index plusonepercent. Aprovision of£94,000(2017: £94,000)isheld against these loans. free andloans withacost of£322,000 (2017: £391,000) were interest free until2016whenafee of1.75 percent became receivable, rising not sold by 2021. Theloans are mainly secured by acharge over theproperty. Loanswithacost of£242,000 (2017: £259,000) are interest underlying property issold. Includedinthistotal are loans withacost of£144,000(2017: £144,000),whichare repayable iftheproperties are schemes. Theloans, withacost of£564,000(2017: £650,000),are repayable together withashare inthecapital appreciation whenthe These comprise amountsadvanced to homebuyers to assist intheirpurchase oftheGroup’s residential properties share underequity 10. Notes to theAccounts CREATING TOMORROW TOGETHER WATES ANNUALREVIEW2018 At 31December 2018 Transfer from Wates Developments Limited At 1January2018 Company Disposals

Joint ventures andother investments continued continued

undertakings Shares in 56,538 Group 56,538 £000s - - ventures Investments Interests inJoint 66,534 69,680 £000s (3,146) - Unquoted £000s 1,874 1,874 - (3,146) -

124,946 69,680 £000s 58,412 Total

10. Debtors 12. 11. Stocks A listoftheGroup’s subsidiary undertakings isset outonpages 79 to 80. from auditofindividual company accounts 479A under Section oftheCompanies 2006: Act For theyear ending31December 2018thefollowing subsidiary companies were entitled to exemption Linden Wates (Salisbury) LLP Linden Wates (Royston) LLP Linden Wates (Ringwood) LLP Linden Wates (Horsham) LLP Linden (Battersea Bridge Road) LLP limited liability partnerships to Wates Group Limited at cost: On 1April2018,Wates Developments Limited transferred itsinterest inthefollowing Prepayments andaccrued income Other debtors Deferred taxation (note 16) Amounts owed by jointventures andassociates Amounts recoverable oncontracts Trade debtors Amounts falling dueafter more thanoneyear Prepayments andaccrued income Other debtors Corporation tax receivable Deferred taxation (note 16) Amounts owed by jointventures andassociates Amounts owed by subsidiary undertakings Amounts recoverable oncontracts Trade debtors Residential land andwork inprogress underdevelopment Raw materials andconsumables Group Wates Homes(Oakley) Limited (company number5511851) Brooks andRivers Limited (company number0260431) Wates (Walberton) Limited (company number11149972) Wates Group Services Limited (company number0340931) Wates Limited (company number03599183) Amounts falling duewithinoneyear Joint ventures andother investments continued

158,097 160,828 310,654 309,785 279,817 274,817 94,939 87,817 30,837 34,968 4,834 12,588 £000s 15,198 15,971 2,397 2,573 4,146 8,623 9,752 7,474 3,107 5,273 2018 2017 249 134 2,356 - 414 - 355 - 11,013 10,059 2,242

Company Group £000s

40,206 29,842 53,526 53,012 55,813 £000s 41,633 53,643 39,918 29,582 2,018 2,000 £000s 8,953 2018 2018 2017 249 265 288 260 233 514 193 - 2,221 ------

wates.co.uk 58,389 £000s £000s 2,576 2017 355 137 15 ------71 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 72 the amountswhichare expected to bepaidwhenfinalised generally more than one year after thebalance sheetdate. Provisions other thantheprovision for thenetdefinedbenefit schemedeficit are construction related and arethe Group’s estimates of 15. Notes to theAccounts CREATING TOMORROW TOGETHER 14. 13. WATES ANNUALREVIEW2018 subsidiary, Needspace? Limited, whichhave acarrying value of£54,246,000 (2017: £50,340,000)andisguaranteed by theCompany. (2017: £534,000) perannumwiththebalance repayable in2021. Itissecured onthefreehold investment properties andother assets ofa Bank loans includeafive year secured term bank loan of£26,120,000 (2017: £20,777,000) whichis repayable ininstalments of£694,000 Total Provision for netdefinedbenefit schemedeficit (note 21) At 31December Charged to profit and loss account Utilised duringtheyear At 1January Group

Accruals Trade creditors Bank loans Accruals Other creditors Other taxes andsocial security Corporation tax payable Amounts owed to jointventures Amounts owed to subsidiary undertakings Trade creditors Advance payments onaccount ofcontracts Bank loans (note 14) Deferred income Deferred income Provisions for liabilities Creditors: amountsfalling dueafter more thanoneyear Creditors: amountsfalling duewithinoneyear

continued

462,773 246,137 240,754 89,078 15,684 13,475 24,017 22,031 48,313 39,227 £000s £000s 25,513 20,304 5,289 4,470 3,407 4,104 3,823 12,559 7,657 87,111 114,593 1,827 978 2018 2017 2018 2017 607 936 -

3,330 100,972 473 - 498,816

Company Group Company Group £000s £000s

141,679 133,198 30,604 £000s £000s 39,383 £000s (1,626) 8,779 7,657 6,572 2018 2018 3,833 2018 2017 286 538 ------

45,306 (1,077) 73,973 £000s £000s £000s 41,473 73,917 3,833 3,881 1,029 2017 2017 56 ------16. Deferred taxation isprovided asfollows: Deferred taxation isprovided asfollows: At 31December 2018 Credited to profit and loss account At 1January2018 Company At 31December 2018 Charged to other comprehensive income Charged to profit and loss account At 1January2018 Group Deferred taxation asset over oneyear Deferred taxation asset underoneyear Other timingdifferences Deferred taxation asset over oneyear Deferred taxation asset underoneyear Other timingdifferences Deferred tax arisinginrelation to retirement benefitobligations Accumulated depreciation inexcess ofcapital allowances Deferred taxation

£000s £000s £000s £000s 12,325 13,255 12,325 13,255 6,286 5,557 5,203 7,050 2,573 9,752 2018 2017 2018 2017 2018 2017 2018 2017 458 - 458 - 458 - 836 265 - 193

- 2,242 648 11,013 wates.co.uk 12,325 £000s £000s 13,255 £000s £000s £000s £000s (849) 458 458 (81) - 73 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 74 The priority ofdividendsother thanordinaryThe priority dividendsisasfollows: entitled to dividendsdeclared after thepayment ofindex linked share dividends,preference andsecond preference share dividends. Ordinary andsecond ordinary shares, whichcarry therights to receive notice, attend andvote at general meetings oftheCompany, are 18. at theundiscounted amountreceivable orpayable, are summarised by category below: The carrying values oftheGroup’s financial assets andliabilities, other thanthose measured Notes to theAccounts CREATING TOMORROW TOGETHER 17. Financial instruments WATES ANNUALREVIEW2018 Index linked non-voting Cshares of£1each Index linked non-voting Bshares of£1each Index linked non-voting Ashares of£1each Non-voting Cpreference shares of£1each Non-voting Bpreference shares of£1each Non-voting Apreference shares of£1each Non-voting second preference shares of£1each C second ordinary shares of£0.0277 each B second ordinary shares of£0.0277 each A second ordinary shares of£0.0277 each C ordinary shares of£1each B ordinary shares of£1each A ordinary shares of£1each Issued and fully paid: Total interest expense for financial liabilities at amortised cost Total interest income for financial assets at amortised cost Interest income andexpense •Loanspayable (notes 13and14) Measured at amortised cost Financial liabilities loans •Equity (note 10) • instrumentsmeasuredEquity at cost less impairment •Loansreceivable from jointventures (notes 10and12) Debt instrumentsmeasured at amortised cost Financial assets Group 3. 2. 1. Fixed asset investments inunlisted instruments(note equity 10) Called upshare capital andreserves amount paidupandinissue regarding these shares, ifthepost-tax profit of theGroup exceeds £9,000,000 for the year inquestion. Thirdly, second preference shareholders are entitled to fixed non-cumulative dividends at the rate of 7.5 per cent perannumonthe on theamountpaidupandinissue regarding these shares; Secondly, preference shareholders are entitled to biannual fixed non-cumulative dividends each at the rate of17per cent perannum of thepreceding suchdividend andthat amountindexed usingtheRetail Price Index; Firstly, index linked shareholders (‘index shareholders’) are entitled to annual non-cumulative preferential dividendsbeingthegreater

continued

14,778,023 14,778,023 14,777 5,000,000 5,000 2,914,677 2,914 2,914,677 2,914,677 2,914 2,914,677 2,914,677 2,914 2,914,677 Number 323,854 324 323,854 323,854 324 323,854 323,854 324 323,854 20,750 21 20,750 20,750 21 20,750 20,750 21 20,750 60 - 60 - 60 -

£000s Number 2017 2018

26,120 20,777 £000s 76,317 55,945 3,481 3,119 1,874 1,874 2018 2017 1,011 983 471 538 £000s 14,777 £000s 5,000 2,914 2,914 2,914 324 324 324 21 21 21 - - - investment properties, netofdividendspaidandother adjustments. The profit and loss account reserve represents cumulative profits and losses, includingunrealised profit onthe remeasurement of The Group andCompany’s reserves are asfollows: transfers and,inthecase ofordinary andsecond ordinary shares only, proceedings at general meetings. BandCpreference,The A, ordinary andsecond ordinary shares are treated asseparate classes ofshares regarding issues further and repaying thesecond ordinary shareholders andfifthly to repaying theordinary shareholders. shareholders, secondly to repaying thepreference shareholders, thirdly to repaying thesecond preference shareholders, fourthly to On areturn ofcapital onawinding-upoftheCompany, assets available for distributionshall beappliedfirstly to repaying theindex 20. 19. 18. After five years Between oneandfive years Within oneyear Group total future minimumlease Adjustments Group operating profit includingjoint ventures andassociates Net cash (outflow) /inflow from operatingactivities Corporation tax paid Interest Interest Cash (used in)/generated from operations Adjustment for pensionsfunding Cash from operations before adjustment for pensionsfunding Increase /(decrease) inprovisions (Decrease) increditors Decrease indebtors Increase instocks Joint ventures and associates Depreciation andamortisation Increase infair value ofinvestment property rate swap whichhasbeendesignated acash flow hedge for hedge accounting purposes. The cash flow hedge reserve isin oftheGrouprespect share ofajoint venture regarding themovement ofthe fair value ofaninterest The capital redemption reserve contains theamountstransferred following repurchase andredemption oftheCompany’s shares. The share premium reserve contains thepremium arisingontheissue shares, ofequity netofissue expenses. Operating lease commitments Reconciliation ofGroup operating profit to cash generated by operations Called upshare capital andreserves continued paid received for:

payments undernon-cancellable

operating leases are asfollows:

(10,620) (10,364) (3,615) (11,304) (13,436)(11,456) (27,031) (10,037) (750)(3,409) (9,842) 11,017 (3,347) (4,005) 24,695 24,124 (9,750) 12,027 32,290 32,109 13,880 14,532 £000s £000s 4,946 (48) 4,220 3,841 3,805 3,633 6,595 5,751 7,546 9,695 9,032 (638)(550) 1,554 15,642 2018 2017 2018 2017

8,729 wates.co.uk £000s £000s

75 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 76 included asacost inarrivingat theGroup’s profit for the year. included at the31December 2018year end to make provision for theestimated costs arisingfrom This amounthasbeen thejudgment. * On26October 2018,theHighCourt ruled ontheLloyds BankGMPInequalities case. In response to this, anallowance hasbeen of£1.3m independent actuary. The latest actuarial full valuation oftheSchemewas carried outat 1January2017andwas updated to 31December 2018by aqualified entrants. The fundsoftheSchemeare administered by trustees andare separate from thefundsofGroup. TheSchemeisclosed to new in adefinedbenefit scheme accounted foronadefined contributionbasis (see note 1(xvii)). working intheUKandpersonal pensionschemes providing benefitsonadefined contributionbasis.Asubsidiary ofthe Group participates The Group operates afundeddefinedbenefitpension scheme,the Wates Pension Fund(‘theScheme’), forall qualifying employees Notes to theAccounts CREATING TOMORROW TOGETHER 21. WATES ANNUALREVIEW2018 Total cost /(credit) relating to definedbenefit scheme Recognised inother comprehensive income Female memberage 45(life expectancy at age 65) Rate ofpensionincrease Past service cost * Male memberage 45(life expectancy at age 65) Rate ofprice inflation Net interest cost Current service cost Female memberage 65(current life expectancy) Male memberage 65(current life expectancy) Rate ofcompensation increase Recognised intheprofit and loss account: used to determine benefitobligations at year end Weighted average life expectancy for tables mortality Discount Principal actuarial assumptions at thebalance sheetdate (expressed asweighted averages) Tax cost relating to remeasurement ofnetdefinedbenefit liability Analysis ofdeferred tax recognised inother comprehensive income Components ofpensioncost/(credit) Total tax cost relating to other comprehensive income Decrease in tax rate onopeningnetdefined benefit liability Pension schemes

rate

continued

4.20% 2.90% 2.60% £000s £000s 3.20% Years Years 2.10% 2.10% 2,347 2,055 1,868 (32,438) 1,300 - (479) 2018 2017 2018 2017 2018 2017 2018 2017 26.0 26.1 24.5 24.6 22.7 22.5 23.9 24.1 914 2,007 133 81 5,864 81 5,864 - (34,493) 48

The analysis ofSchemeassets at thebalance sheetdate was asfollows: The amountincludedinthebalance sheetarisingfrom theGroup’s obligations inrespect oftheSchemeisasfollows: The Group expects to contribute £8,400,000 to the Schemein2019for deficit reduction contributions. Contributions 21. Major categories ofSchemeassets asapercentage At 31December Benefits Employer returnActual less interest onSchemeassets Interest At 1January Movements inthefair value ofSchemeassets: At 31December Past service cost Benefits Actuarial Interest Service At 1January Movements inthepresent value ofdefinedbenefitobligations: Net liability recognised inthebalance sheet Fair value ofSchemeassets Present value ofdefinedbenefitobligations Cash andcash equivalents Real Debt Equity Pension schemes continued estate securities securities cost income cost paid paid gain contribution

ofthefair value oftotal Scheme assets:

256,649 250,574 282,308 298,122 282,308 298,122 (10,392)(10,225) (10,392)(10,225) (28,241) (14,641) 298,122 328,148 251,704 256,649 251,704 256,649 (14,162) 6,252 100.0% 30,604 41,473 £000s £000s 12,737 72.3% 19.4% 6,705 6,552 1,300 - 7,619 2.7% 5.6% 2.9% 2018 2017 2018 2017 2018 2017 133 % 8,559 48 3,663 68.1% 2.5% 26.5% wates.co.uk

77 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION 78 24. 23. Contingencies22. Notes to theAccounts CREATING TOMORROW TOGETHER WATES ANNUALREVIEW2018 Post Balance SheetEvents Related parties extended from 2022 to 2023. extended to £120mfrom £60m.Theexpiry date was On 11March 2019theGroup’s Revolving Credit Facility was the year was £5,643,000 (2017: £10,093,000). The total remuneration for key management personnel for £19,000 (2017: £5,000). work for theinternal oftheGroup auditfunction for fees of Non-Executive for Grant Thornton, whocarried out advisory Deena Mattar, aNon-Executive Director oftheCompany, isa extendable for 10years onpayment ofanadditional fee. planning on thesite within10years. Thepromotion is paid apromotion fee of20%ifit successfully achieves of £85,000was paid.Wates Developments Limited be will The initial contract last will for 10years andaninitial amount shareholder oftheCompany, andhiswife, Sarah, inJuly 2016. agreement for asite, withAndrew T. Wates, A. whoisa Wates Developments Limited, entered into apromotion During itsnormal course ofbusiness, aGroup subsidiary, and theGroup through common control. amounts. Myriad andCornflower are related to the Company Interest isreceivable at amarket rate inrespect ofthese included inother debtors oftheCompany andtheGroup. December 2018.Theamountduefrom Cornflower is Group Ltd hasbeenfully provided intheyear to 31 Limited (‘Cornflower’). Theamountduefrom Myriad CEG (2017: was £2,018,000) duefrom Cornflower Investments from Myriad CEGGroup Limited (‘Myriad’) and£2,000,000 At 31December 2018,£2,422,000 (2017: was £2,221,000) due are unsecured, duefrom/(to) jointventures. market rates isreceivable/(payable) inrespect ofloans, which owed jointventures £7,657,000 (2017: £3,330,000). Interest at Additionally£56,071,000). at 31 December 2018,theGroup associates at 31December 2018of£81,822,000 (2017: Amounts were dueto theGroup from jointventures and the proportion ofthose jointventures owned by theGroup. consolidation beingtheproportion ofturnover relating to includes £10,159,000 (2017: £3,866,000)that was eliminated on done for andland sold to jointventures: £7,413,000), which December 2018was £19,973,000 (2017for contracting work for andland sold to jointventures intheyear ended31 Turnover inrespect ofthevalue ofcontracting work done subsidiary (notes undertaking 13and14). The Company hasguaranteed thebankloan due by a course ofbusiness. buildings andother agreements entered into inthenormal contingent liabilities inrespect ofguarantees under becomewill payable onaccount ofclaims. There are has beenmade for all amountswhichthedirectors consider negotiations may beprotracted over several years. Provision are intheprocess ofnegotiation. Insome cases these There are claims arisinginthenormal course oftrading that continued Wates Living Space (Maintenance) Limited Wates Wates Lancewood Estates Limited* WatesLimited* Interiors Limited Wates (Hungerford) Limited Wates Homes(Warsash) Limited Wates Homes(Wallingford) Limited Wates Homes(Odiham)Limited Wates Homes(Oakley) Limited Wates HomesLimited Wates Homes(Farnham Common) Limited Wates Homes(Chichester) Limited Wates Homes(Cambridge) Limited Wates Homes(Bracknell) Limited Wates Healthcare Trustee Company Limited Wates Group Services Limited* Wates Group Properties Limited Wates Financial Services Limited Wates Developments Limited* Wates Developments (Bonehurst Horley) Limited Wates Construction Services Limited Wates Construction Limited* Abu Dhabi,United Arab Emirates) CornicheSheikh Sultan BinHamdanBuilding, POBox 3486, registered office –Sultan International Holdings, 20th Floor, (incorporated inAbuDhabi;ownership interest 49%; Wates Construction International LLC Wates BuiltHomes(Southern)Limited Wates BuiltHomes(Retirement) Limited Wates BuiltHomesLimited Wates BuiltHomes(London)Limited Wates BuiltHomes(Blakes) Limited Wates LandsLimited Amenity Subsidiary undertaking • • • Except where otherwise stated: At 31December 2018 Subsidiary Undertakings the consolidated accounts. capital ofthesubsidiary undertakings listed below includedin The Wates Group Limited interest is100%intheissued share House, Station Approach, Leatherhead, Surrey KT227SW; The registered office ofall subsidiary undertakings is Wates Kingdom andregistered inEngland andWales; subsidiaryAll undertakings are incorporated intheUnited *Owned directly by Wates Group Limited Woodside LandsManagement Limited Woodside LandsLimited Woodside LandsEstates Limited WBH (Financial Services) Limited Third Wates Investments Limited Stageselect Limited* SES (Engineering Services) Limited Relocation andInventory Services Limited QED Education Environments Limited* Purchase Limited Support Purchase HomesLimited Purchase HomeImprovements Limited Purchase Group Limited Needspace? Limited* GW 217Limited G Purchase Construction Limited Brooks andRivers Limited 10 StBrideStreet Limited* Wates (Walberton) Limited Wates Staff Trustees Limited Wates Smartspace Limited Wates Second LandLimited Wates Regeneration (Tavy Bridge) Limited Wates Regeneration (SouthActon) Limited Wates Regeneration (Coventry) Limited Wates PFIInvestments (QED)Limited Wates PFIInvestments (Projects) Limited Wates PFIInvestments Limited Wates Pension Trustee Company Limited Wates Maintenance Services Limited wates.co.uk 79 GOVERNANCE AND ACCOUNTS MANAGEMENT STRUCTURE OUR BUSINESSES INTRODUCTION WATES ANNUAL REVIEW 2018

Notes to the Accounts continued Locations

Subsidiary undertaking continued Head office Wates House The consolidated income and expenditure, assets and liabilities and cash flows of the subsidiary undertakings of the Group include the Station Approach Group’s shares of the following unincorporated jointly controlled assets: Leatherhead Surrey Interest Address KT22 7SW Al Ain Schools Joint Venture 24.5% ( Suite 702, Tel: 01372 861000 Al Bateen Secondary School Joint Venture 24.5% ( Al Fara’a Corporate Office, British School Joint Venture 24.5% ( Al Nahyan Camp Area, ( PO Box 3486, Abu Dhabi, ( United Arab Emirates Regional offices Basingstoke Cambridge Durham Leeds Manchester American Community School Expansion Joint Venture 24.5% ( Eastern International LLC, 4th Floor Blenheim House Shannon House Paradigm, 1st Floor 4th Floor American Community School Landscaping Joint Venture 24.5% ( Bel Resheed Tower, Network House Cambridge Innovation Park Mandale Business Park 3175 Century Way The Royals CFB Building Joint Venture 24.5% ( 14th Floor, Basing View Denny End Road Belmont Thorpe Park 353 Altrincham Road Qasr Al Hosn Fort Joint Venture 24.5% ( Al Buhaira Corniche, Basingstoke Waterbeach Durham Leeds Sharston Qasr Al Hosn Fort and NCCC Main Contract Works Joint Venture 24.5% ( PO Box 1596, Sharjah, Hampshire Cambridge DH1 1TH LS15 8ZB Manchester Specialised Rehabilitation Hospital Joint Venture 24.5% ( United Arab Emirates RG21 4HG CB25 9QE Tel: 0191 375 8180 Tel: 0113 397 5200 M22 4BJ Tel: 01256 301750 Tel: 01223 627140 Tel: 0161 946 8800 Linden Wates (St. Albans) Joint Venture 50.0% Linden House, Linden Square, Enfield London Harefield, Middlesex UB9 6TQ Birmingham Cardiff 7th Floor 1st Floor Wakefield Wates House Vision House Civic Centre 184-192 Drummond Street Unit 8 (Building 5) Oak Tree Court Silver Street London Calder Park 11 Ridgeway Mulberry Drive Enfield NW1 3HP Wakefield Quinton Business Park Cardiff Gate Business Park EN1 3XA Tel: 0207 380 1800 WF4 3BA Quinton CF23 8RS Tel: 020 8804 7777 Tel: 01924 240190 Luton Birmingham Tel: 02922 406777 B32 1AF Kendal 1st Floor Warrington Group Five Year Summary Castle Donington Suite 9 Mulberry House Building 1 Tel: 0121 423 2323 Unit 2a Helm Bank Parkland Square Clearwater 2014** 2015 2016 2017 2018 Bristol Donington Court Kendal 750 Capability Green Lingley Mere Business Park £m £m £m £m £m 190 Aztec West Pegasus Business Park Cumbria Luton Warrington Park Avenue Castle Donington LA9 7PS Bedfordshire Cheshire Profit and loss account Bristol DE74 2UZ Tel: 015395 61215 LU1 3LU WA5 3UZ Group turnover 1,050 1,272 1,532 1,622 1,601 BS32 4TP Tel: 01332 308882 Tel: 01582 400171 Tel: 01925 791 100 (plus share of joint ventures’ and associates’ turnover) Tel: 01454 615561 Group turnover 1,002 1,207 1,442 1,530 1,501 Operating profit 24.7 31.5 37.3 38.5 39.0 (excluding share of joint ventures’ and associates’ interest and tax) Profit before taxation 24.1 30.3 35.5 35.7 35.9 SES Engineering Services (and excluding share of joint ventures’ and associates’ tax) Birmingham Glasgow Manchester York York Prism Balance sheet The Podium Cadell House Ground Floor Moorside Unit 2 Bank House 27 Waterloo Street The Royals Monks Cross Drive New Lane Net assets 86.5 93.3 70.7 119.4 135.8 8 Cherry Street Glasgow 353 Altrincham Road Huntington Huntington Birmingham G2 6BZ Sharston York York **2014 restated in accordance with Financial Reporting Standard 102 B2 5AL Tel: 0141 221 8800 Manchester YO32 9LB YO32 9PT Tel: 0121 616 4350 M22 4BJ Tel: 01904 437340 Tel: 01904 673272 London Tel: 0161 945 5589 Bristol 1st Floor 190 Aztec West 184-192 Drummond Street North Shields Park Avenue London Centre for Bristol NW1 3HP Advanced Industry BS32 4TP Tel: 0207 380 1800 Coble Dene Tel: 01454 627150 Royal Quays North Shields NE29 6DE Tel: 0191 258 6627

80 CREATING TOMORROW TOGETHER wates.co.uk 81 Head Office Wates House Station Approach Leatherhead Surrey KT22 7SW Tel: 01372 861000

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