Annual Report 2015

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Annual Report 2015 Annual Report 2015 About this report Strategic Report Financials Welcome to the 2015 Annual Report of The Berkeley Group 02 2015 Performance Highlights 90 Independent Auditors’ Report Holdings plc (“the Berkeley 06 Chairman’s Statement 94 Consolida ted Income Statement Group”, “Berkeley”, “the Group”), 07 Managing Director’s Statement 94 Consolidated Statement of a publicly owned company, listed on the London Stock Exchange 08 Business model Comprehensive Income within the FTSE 250. The Strategic 17 What we do 95 Consolidated Statement of Report explains Berkeley’s strategy, 23 How we manage risk Financial Position business model, performance and 32 Where we operate 96 Consolidated Statement of outlook. The Governance Section covers the role and activities of the 37 Our plan and commitments for Changes in Equity Board in running the business and the business: ‘Our Vision’ 97 Consolidated Cash Flow Statement their remuneration. The detailed 49 Tr ading and Financial Review 98 Notes to the Consolidated Financial Financials, accompanied by a and Outlook Statements report from the Group’s auditors, complete the Annual Report. 121 Company Balance Sheet Governance 122 Notes to the Company Financial Statements Cover image: Goodman’s Fields, Aldgate. 58 Board of Directors 126 Five year summary and definitions Below: One Tower Bridge. 60 Corporate Governance Report 127 Financial Diary 64 Audit Committee Report 127 Registered Office and Advisors 66 Directors’ Remuneration Report 84 Directors’ Report Proud to be a member of the Berkeley Group of Companies BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT STRATEGIC REPORT STRATEGIC The Berkeley Group Berkeley builds new homes, neighbourhoods and communities for everyone, from families to first time buyers, student accommodation to senior living and luxury homes to affordable housing, with a focus on quality. GOVERNANCE Its business model recognises that Berkeley operates in a cyclical property market and that there are significant operational risks in identifying, designing, building and selling homes and creating places. Berkeley mitigates these risks by focusing on development in London and the South of England, markets which it knows and understands, and forward selling new homes wherever possible. In doing this, Berkeley maintains a strong balance sheet, keeps financial risk low and carefully allocates FINANCIALS resources to the right projects at the right time, matching supply to demand wherever it can. READ MORE ONLINE: www.berkeleygroup.co.uk/about-berkeley-group 01 BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT 2015 Performance Highlights A year of strong growth across all of our key performance indicators. Performance (Financial Key Performance Indicators) Adjusted profit before tax Basic earnings per share £454.6million 313.0 p 2011 £136.2m 2011 72.1p 2012 £214.8m 2012 121.0p 2013 £270.7m 2013 160.0p 2014 £380.0m 2014 221.8p 2015 £454.6m 2015 313.0p Note: includes proportion of earnings per share paid as dividends per share. Key Measure Result Key Measure Result This is our core measure Adjusted profit before This measure of profitability Basic earnings per share is of profitability, our absolute tax of £454.6m, an increase allows for total profit after tax 313.0 pence, up 91.2 pence return from the sale and of 19.6% on last year. and takes into account the from last year. delivery of new homes in weighted average number of Adjusted profit before tax Adjusted earnings per share, the year before the impact shares in issue during the year. excludes £85.1m of profit from which excludes the effect of profit from the sale of The dividend per share paid the sale of ground rent assets. of £85.1m of profit from the ground rent assets. in the year is articulated in the The unadjusted profit before sale of ground rent assets, is graph to show earnings cover. tax is £539.7m. 263.6p (2014: 221.8p). Adjusted return on equity Net asset value per share 29.5% 1,199p 2011 15.3% 2011 709p 2012 21.2% 2012 839p 2013 22.4% 2013 1,009p 2014 27.5% 2014 1,066p 2015 29.5% 2015 1,199p Key Measure Result Key Measure Result Calculated as profit before A result of 29.5%, up from This balance sheet measure The growth of 133 pence tax, excluding profit from the 27.5% last year, represents a reflects the value of to 1,199 pence per share sale of ground rent assets as strong performance ahead of shareholders’ interests in demonstrates value delivered a percentage of the average our long-term historic range. the net assets of the business to shareholders even after of opening and closing on an historical cost basis. allowing for dividend The unadjusted return on shareholders’ funds, this payments of 180 pence equity, including profit from measure shows the efficiency per share. the sale of ground rent of the returns generated assets, was 35.1%. from shareholder equity in the business. 02 BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT STRATEGIC REPORT STRATEGIC GOVERNANCE Outlook (Financial Key Performance Indicators) Cash due on forward sales Gross margin on land holdings £2,959million £5,272million 2011 £814m 2012 £1,056m FINANCIALS 2013 £1,453m 2014 £2,274m 2014 £4,514m 2015 £2,959m 2015 £5,272m Note: 2014 and 2015 figures now include legacy pipeline of future land. Key Measure Result Key Measure Result This measures cash due from This has risen by £685 million This provides a measure of This has increased by customers during the next to £2,959 million in the year, expected value in the Group’s £758 million to £5,272 million three financial years under an increase of 30.1 %. existing land holdings in in the year, a result of further unconditional contracts for the event that the Group value added from planning sale, and provides visibility successfully sells and delivers consents, sales secured and over the security of future the schemes planned for schemes acquired over and cash flows. this land. above profit recognised in the year. Performance (Non-financial Key Performance Indicators) Our People Customers Our People Accident Incident Rate Net Promoter Staff Engaged with the per 1,000 employees Score Berkeley Foundation 2.46 69.8 73% (2014: 2.92) (2014: not applicable) (2014: 64%) Managing health and safety on We introduced this independently Our aim is for all employees to our sites is a priority to protect the assessed measure of customer satisfaction be involved with the Berkeley wellbeing of our staff and contractors. in 2015 that enables comparison to Foundation, providing a positive This year we have performed within companies across all markets and sectors. impact on society. our target of 3.25, and the industry A result of 69.8 ranks us alongside some average of 4.12. of Britain’s top companies. Read more: see pg 46 Read more: see pg 38 Read more: see pg 46 03 BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT 71 new apartments at Ebury Square in Belgravia were completed this year. 04 BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT STRATEGIC REPORT STRATEGIC Strategic Report GOVERNANCE FINANCIALS 05 BERKELEY ANNUAL REPORT 2015 / STRATEGIC REPORT Chairman’s Statement I believe that Berkeley has the right plan in place to deliver long-term sustainable success. TONY PIDGLEY CBE CHAIRMAN 90p £1.7billion Per share – interim dividend To be returned in cash payable in September 2015 to shareholders by 2021 “I am pleased to announce pre-tax profits We are acutely aware of the importance The Board has declared a further for the Berkeley Group of £539.7 million to our society of all forms of tenure for interim dividend of 90 pence per share for the year ended 30 April 2015. This new housing and welcome the vision of (£122.9 million), payable on 17 September result underlines the benefit of operating Government, the Greater London Authority 2015 to shareholders on the register on the right strategy consistently through and local councils to increase the number 14 August 2015. This will complete the the cycle. By maintaining our financial of new homes built. For Berkeley it is first milestone of paying 434 pence per discipline Berkeley can apply its unique equally important to ensure that we are share by 30 September 2015. The Board operating model to develop sites which are market leaders in terms of the quality of considers that the Group is well positioned complex and where others may perceive the places and homes we create. to meet the remaining milestones of that the risk is too great, and in doing so, 433 pence by September 2018 and 433 We welcome the stability in Central we unlock land for new homes that would pence by September 2021. Government following the General Election not otherwise come forward. and the commitment to increase housing In closing, I would like to express my thanks Berkeley accepts this additional operational supply, but political uncertainty remains to my colleagues in Berkeley for their risk which is managed carefully and with the London Mayoral Election and dedication and hard work in delivering this intensively to create sustainable added referendum on Britain’s relationship with strong performance. I firmly believe that value returns. Europe on the horizon. Berkeley is a Berkeley has the right plan in place to deliver supporter of the UK remaining in Europe long-term sustainable success, a strategy Berkeley is delivering some 10% of all new as this is the best way for London to remain which can adapt to any changes in the homes in London and 10% of the Capital’s a world city. There is no doubt, however, market to protect the business, in what is a affordable homes across our 74 sites. that for business to thrive, we must not cyclical market, and continue to deliver value This creates economic value of £1.4 billion be bound by over-regulation, be this from to shareholders and the community alike.” and sustains some 12,000 jobs.
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