Taylor Wimpey plc Annual Report and Accounts 2007 Taylor Wimpey plc is a focused homebuilding company with operations in the UK, North America, Spain and Gibraltar. We aim to be the homebuilder of choice for customers, employees, shareholders and communities. Financial Highlights Revenue Pro forma** operating profit* 07 £4,714m 07 £667.0m 06 £3,572m 06 £892.6m Taylor Wimpey Taylor Wimpey Taylor Woodrow Taylor Wimpey £4,714m £667.0m Profit before exceptional items and tax (Loss)/profit before tax 07 £360.2m 07 £(19.5)m 06 £405.6m 06 £405.6m Taylor Wimpey Taylor Wimpey Taylor Woodrow Taylor Woodrow £360.2m £(19.5)m Adjusted basic earnings per share Basic (loss)/earnings per share 07 30.8p 378 07 (24.2)p xx.x 06 50.5p 06 50.5p Taylor Wimpey Taylor Wimpey Taylor Woodrow Taylor Woodrow 30.8p (24.2)p Dividend per share† Year end gearing 07 15.75p 07 38.2% 06 14.75p 06 18.6% Taylor Wimpey Taylor Wimpey Taylor Woodrow Taylor Woodrow 15.75p 38.2% * Profit on ordinary activities before finance costs, exceptional items and amortisation of brands. **The basis of preparation of pro forma financial information is set out on page 104. † Paid and proposed. Business Overview Our business today UK Housing Spain & Gibraltar Regional office Regional office Overview Overview We are one of the largest homebuilders The George Wimpey brand We have longstanding operations in in the UK, with 34 regional businesses incorporates modern design and Spain and Gibraltar, both of which and five smaller satellite operations. contemporary living into each home are branded as Taylor Woodrow. We operate two core brands, Bryant and offers customers a wide choice Our business in Spain is primarily Homes and George Wimpey. of options to personalise their home. focused on developing sites in popular Bryant Homes properties combine Our G2 brand is specifically targeted locations. the best of traditional design with at first time buyers and key workers, Our Gibraltar business operates in the convenience of the new to create providing quality one and two bedroom the luxury apartment market. safe and secure places to live. apartments at highly competitive prices. 14,862 337 £191,000 212 29 Completions Average outlets Average selling price Completions Average outlets For more information visit www.taylorwimpey.com 113 Principal Operating Addresses UK Taylor Wimpey plc 80 New Bond Street London W1S 1SB Tel: +44 (0)20 7355 8100 Fax: +44 (0)20 7355 8196 Email: [email protected] www.taylorwimpey.com Registered in England and Wales number 296805 Taylor Wimpey UK Ltd. Gate House Turnpike Road North America Housing Construction High Wycombe Buckinghamshire HP12 3NR Tel: +44 (0)1494 558323 Overview Fax: +44 (0)1494 885663 Taylor Woodrow Construction provides Taylor Woodrow Construction Ltd. construction and facilities management 41 Clarendon Road services throughout the UK and for Watford key customers in selected overseas Hertfordshire WD17 1TR markets. Tel: +44 (0)1923 478 400 The business is focused on selected Fax: +44 (0)1923 478 401 growth areas – repeat services for ‘blue chip’ customers, facilities management, rail and infrastructure, and engineering. Spain and Gibraltar Taylor Woodrow de España S.A. C/Aragon, 223-223A 07008 Palma de Mallorca Mallorca Spain Tel: +00 (34)971 706 570 £1,194m Fax: +00 (34)971 706 565 Regional office Order book Taylor Woodrow (Gibraltar) Ltd. 17 Bayside Road Gibraltar Overview Tel: +00 (350) 78780 Our business in North America has business which sells lots to other Fax: +00 (350) 75529 operations in both the US and in Canada. homebuilders using the Taylor Woodrow Communities brand. In the United States we sell homes under North America the Taylor Morrison brand in Arizona, Our business in Canada trades in Ottawa California, Colorado, Florida, Nevada and and Toronto under the Monarch brand. Taylor Morrison, Inc. Texas. We also have a land development 8430 Enterprise Circle, Ste. 100 Bradenton FL 34202 Tel: +00 (1)941 554 2000 Fax: +00 (1)941 554 3005 Details of all our operating locations are available on our website 5,197 183 £182,000 www.taylorwimpey.com Completions Average outlets Average selling price Published by Black Sun Plc Printed by Royle Corporate Print Taylor Wimpey plc Annual Report and Accounts 2007 113 Contents Group Overview Business Overview Financial Highlights Delivering merger benefits 2 03 Merger benefits We are making strong progress on Business Review Chairman’s Statement 12 integration and remain on track to Group Chief Executive’s Review 14 deliver synergy savings in line with the Our strategy 15 previously stated value and timetable. Our focus 17 Our principal risks and uncertainties 19 Our corporate responsibility approach 21 UK Housing 22 North America Housing 28 Spain and Gibraltar Housing 32 Construction 33 21 Group Financial Review 34 Acting responsibly We are committed to playing our part in Governance Board of Directors 38 building increasingly Directors’ Report 40 sustainable homes Corporate Governance 43 and communities. Remuneration Report 46 Financial Statements Consolidated Income Statement 56 Consolidated Statement of Recognised Income and Expense 57 22 Consolidated Balance Sheet 58 UK Housing Consolidated Cash Flow Statement 59 Our objective is to drive relative Notes to the Consolidated improvement in the operating margin. Financial Statements 60 Excellent progress has already been Independent Auditors’ Report 94 made, driven by the changes in land Company Balance Sheet 95 strategy, the drive to reduce costs and Notes to the Company the impact of an improved sales Financial Statements 96 strategy. Independent Auditors’ Report 101 Particulars of Principal Subsidiary Undertakings 102 Five Year Review 103 More online Additional Pro Forma Unaudited www.taylorwimpey.com Financial Information 104 Our website contains a wide variety of additional information about the Group, Shareholder Information along with links to our sites for home Notice of Meeting 105 buyers. A fully interactive version of this Shareholder Information 112 report is also available. Principal Operating Addresses 113 Taylor Wimpey plc Annual Report and Accounts 2007 1 Delivering merger benefits One Group uniquely positioned Welcome to the first Annual Report of Taylor Wimpey plc. Following our successful merger and rapid integration to create the new Taylor Wimpey Group, we are well placed to Norman Askew Pete Redfern Chairman Group Chief Executive deliver business improvement. This improvement will be made through our land and planning strategy, build cost efficiency, improved sales and customer care and the delivery of significant synergy benefits. Over the next nine pages we will give you a clear overview of how we plan to move forward in these key areas and demonstrate that the combined strengths of the new business put Taylor Wimpey in an excellent position for the future. 2 www.taylorwimpey.com The merger delivered a better balance to our landbanks in both the UK and North America. Land and This provides the opportunity to add value through planning and development and a more stable planning base for the future. As the UK’s largest homebuilder and with increased scale in North America, Taylor Wimpey has Build cost significant opportunities for both procurement efficiencies and efficiency design and engineering savings. Our enlarged business gives a greater ability to manage sales rates in order to maximise margin Sales and performance. We continue to strive to deliver high quality homes and excellent levels customer care of customer service. We are committed to delivering synergy exit rates of £70m by the end of 2008 and £100m Synergy by the end of 2009. One-off merger related restructuring costs of £60m have been benefits charged in 2007. Taylor Wimpey plc Annual Report and Accounts 2007 3 planning Land and Land is the lifeblood of our business. Combining Taylor Woodrow’s strong strategic landbank and George Wimpey’s well sourced short term land has delivered a well balanced landbank that puts Taylor Wimpey in an excellent position for the future. 4 www.taylorwimpey.com 1 2 3 4 1 Strategic land In the UK, land with an implementable planning consent remains a scarce resource. Competition for such land is intense resulting in relatively high purchase prices. Our strategic land team is dedicated to identifying sites which do not currently have planning consent, but have good potential for future development. We would typically agree a purchase option arrangement with the landowner and then work together to promote the site through the planning process. Purchase options generally provide us with the ability to purchase the land at a discount to open market value when suitable planning consents are obtained. We aim to increase the proportion of our UK home completions that are built on strategically sourced land over time. 2 Brownfield land During 2007, 68% of our homes in the UK were built on ‘brownfield’ or previously developed land. This classification incorporates a wide variety of former uses. For example, our Axis development in Coventry is on the site of the former Peugeot works; our Grand Union Village development in West London is on the site of the former Taylor Woodrow head office; and our Modern Ice development in San José, California, is on the site of a former refrigeration and cold storage unit. We regularly turn disused, neglected or contaminated land into thriving new communities. Many of our developments integrate green spaces or wildlife areas and involve conservation work. 3 Developing communities Planning skills are a key element of our success. The ability to develop sustainable communities is a key factor in winning land bids and also ensures that the finished developments are attractive and vibrant communities where people want and can afford to live. More detail on this aspect of our business is provided in our separate Corporate Responsibility Report. 4 Taylor Woodrow Communities Our land development business in North America, Taylor Woodrow Communities, identifies and acquires land suitable for housing.