ANNUAL REPORT & ACCOUNTS 2014 See more about us at: www.willmottdixon.co.uk CONTENTS Contents 04 DIRECTORS AND OFFICERS STATEMENT OF DIRECTORS’ RESPONSIBILITIES 69 05 SUMMARY OF RESULTS REPORT OF THE INDEPENDENT AUDITOR 70 06 GROUP CHAIRMAN’S STATEMENT CONSOLIDATED PROFIT AND LOSS ACCOUNT 72 18 GROUP CHIEF EXECUTIVE’S REPORT CONSOLIDATED BALANCE SHEET 73 46 SUSTAINABLE DEVELOPMENT COMPANY BALANCE SHEET 74 66 REPORT OF THE DIRECTORS CONSOLIDATED CASH FLOW STATEMENT 75 68 GROUP STRATEGIC REPORT RECONCILIATION OF MOVEMENTS IN 76 EQUITY SHAREHOLDERS’ FUNDS NOTES ON THE ACCOUNTS 77 2 ANNUAL REPORT & ACCOUNTS 2014 2 STATEMENT OF DIRECTORS’ RESPONSIBILITIES 69 REPORT OF THE INDEPENDENT AUDITOR 70 CONSOLIDATED PROFIT AND LOSS ACCOUNT 72 CONSOLIDATED BALANCE SHEET 73 COMPANY BALANCE SHEET 74 CONSOLIDATED CASH FLOW STATEMENT 75 RECONCILIATION OF MOVEMENTS IN 76 EQUITY SHAREHOLDERS’ FUNDS NOTES TO THE ACCOUNTS 77 3 WILLMOTT DIXON HOLDINGS LIMITED Directors and Officers COLIN ENTICKNAP RICK WILLMOTT PAUL SMITH ANDREW TELFER FRICS, FCIOB MCIOB Executive Director ACA, BSc (Eng) Group Chairman Group Chief Executive Executive Director CHRIS DURKIN JONATHON PORRITT CHRISTOPHER SHERIDAN MCIOB CBE FCIB, MSI Non-Executive Director Non-Executive Director Non-Executive Director CHIEF FINANCE OFFICER REGISTERED OFFICE Duncan Canney, BSc (Hons), CEng, FCA Spirella 2, Icknield Way, Letchworth Garden City Hertfordshire, SG6 4GY JOINT SECRETARIES AUDITOR Wendy McWilliams, LLB, ACIS BDO LLP, 55 Baker Street Laurence Holdcroft, FCIS London, W1U 7EU 4 ANNUAL REPORT & ACCOUNTS 2014 SUMMARY OF RESULTS 2014 2013 £000 £000 Group turnover 1,258,688 1,023,610 Profit before tax excluding amortisation 26,075 16,163 Profit before tax 22,977 12,974 Net current assets 117,191 82,314 Equity shareholders’ funds 164,755 147,673 Cash and bank balances 76,139 70,206 Group turnover 2014 £1,258,688 £000 2013 £1,023,610 5 Regenerating town centres; new offices, retail and leisure facilities in the heart of Redcar GROUP CHAIRMAN’S STATEMENT FOR 2014 Overview I am pleased to report that the Group’s overall performance improved during 2014, much in line with the sentiment expressed in my interim statement, and built mainly upon strong results from Willmott Dixon Construction (‘Construction’) which has continued to nurture a robust COLIN ENTICKNAP pipeline of predominantly public FRICS, FCIOB sector work, and from Prime Place Group Chairman which has capitalised on the strong residential development market in London and the South East. Willmott Dixon Interiors (‘Interiors’), Willmott Dixon Partnerships (‘Partnerships’) and Be:here also performed well, providing valuable profit contributions and demonstrating excellent growth prospects. Even Willmott Dixon Energy Services (‘Energy Services’) performed slightly better than expected, delivering a small profit from a market that remains difficult but is now maturing to become less dependent upon government induced subsidy. As predicted, our most serious challenges remained centred around Willmott Dixon Housing (‘Housing’), in particular completing the handful of loss making projects secured at extremely low prices just ahead of the residential market overheating across the South East, inducing severe inflationary pressure and resource shortages. That task has proved more difficult and taken much longer than we had hoped or expected, but we are at last approaching the point where the remaining ‘legacy projects’ will soon be completed, removing what has been a disproportionate source of distraction and de-motivation, and allowing those involved to focus upon the pipeline of much better quality work now in hand. 6 ANNUAL REPORT & ACCOUNTS 2014 7 GROUP CHAIRMAN’S STATEMENT FOR 2014 Continued Financial Results As one might expect, the improved operational performance has been translated into much better financial results. Group turnover including our share of joint ventures grew by 28% to reach £1,325.4 million (2013: £1,038.5 million), helped by a significant contribution from our growing development activity which, for the first time, exceeded £100 million. Pre-tax profit before amortisation of goodwill grew even more, rising 61% to reach £26.1 million (2013: £16.2 million); with this representing 2% of Group turnover, we are now back within our target range. After amortisation of goodwill, pre-tax profit rose 77% to £23.0 million (2013: £13.0 million) and profit after tax rose 93% to £17.1 million (2013: £8.8 million). This, in turn, has materially strengthened our consolidated balance sheet, with equity shareholders’ funds increasing to £164.8 million (2013: £147.7 million). Cash and bank balances also improved to £76.1 million (2013: £70.2 million). Rick Willmott has expanded upon these and other important financial and operational measures within the Group Chief Executive’s Report that follows. Investing in the future; our 2014 Trainee of the Year Lucy Hedley with fellow finalists at Wembley Stadium 8 ANNUAL REPORT & ACCOUNTS 2014 9 New library at Imperial College was just one high-profile university project for our Interiors company GROUP CHAIRMAN’S STATEMENT FOR 2014 Continued Board The end of 2014 saw an important and carefully planned executive capacity at the beginning of succession change, with John Frankiewicz stepping down from January, to sit alongside Jonathon Porritt his executive role to start a sabbatical ahead of an intended and Christopher Sheridan. return to the board as a non-executive director in a year’s time. John has been an able colleague and friend to many of us over a Both these changes reflect a subtle shift career that has spanned almost 28 years, much of which has been in the composition of our board, which spent shaping and overseeing our hugely successful Construction is evolving towards a more compact and business; I am very grateful for his enormous contribution whilst strategically focused executive team, in that role, and wish him well in now pursuing his wider interests. subjected to greater non-executive scrutiny, John is following a similar path to that previously taken by Chris but better supported by stronger COO Durkin, who we were pleased to welcome back in his new non- leadership at subsidiary level. We undertake over 400,000 responsive repairs each year for our clients’ residents on a 24/7 basis 10 ANNUAL REPORT & ACCOUNTS 2014 Structure Most of our strategies have borne fruit over recent years, and the further significant mixed-tenure development decision to align Housing more closely alongside Construction was deals having been secured in recent weeks no exception; it provided greater flexibility to integrate systems and at Kew Bridge and Barking. To support this to share people and processes across our capital works contracting aim and improve interaction, we have just businesses, which was an important and necessary task. repositioned all three businesses together within a refreshed ‘residential’ sector team, With that work now well progressed, we have turned attention leaving Construction and Interiors within to our next priority - to foster better working relationships and a streamlined ‘public & commercial’ team operational efficiencies between Housing, Prime Place and Be:here. alongside Partnerships & Energy Services in We see interdependences and also opportunities to extract synergy a retained ‘support services’ team. across these businesses growing substantially, illustrated by two 11 GROUP CHAIRMAN’S STATEMENT FOR 2014 Continued Strategy Now that market conditions have improved for most parts of our prospects for sector growth, and also business, our strategy is being realigned with the aspiration of for helping rebalance the work profile delivering controlled, profitable and consistent growth. through a strong pipeline that has a predominance towards the rejuvenated ‘Public & commercial’ is well placed to meet that challenge and private commercial sector. remain the bedrock of Group activity, with Construction continuing to capitalise on its strong relationships with like-minded customers ‘Support services’ now needs to start owning sizeable property assets, and delivering predominantly replicating that success, in line with our through an expanding and replenished portfolio of public sector declared aim to see all three parts of our frameworks or through bespoke private sector relationships. They business achieve significant scale and already have an excellent service capability across the whole of make a meaningful contribution to Group England and Wales, and are giving more serious thought to now results. Partnerships has been challenged extending that service across Scotland. Interiors offers particular to lead the way, delivering bottom line 12 ANNUAL REPORT & ACCOUNTS 2014 Craven Park in Neasden was the final phase of our long-term transformation of Church Road estate for Catalyst growth through a combination of account wins, account renewals, acquired insufficient new plots over the account expansions and account improvements; the renewal of past two or three years whilst land prices the hugely important Birmingham City Council account is perhaps were overheating. This has emphasised the the most important target for this year. With a degree of clarity pressing need to assemble a substantial and maturity at last developing in its market, Energy Services and longer dated land bank of plots capable should also now begin to reward our patient investment over the of development, in order to provide forward past three years. visibility, scope to flex outputs, and thereby