6th Mar 2008 07:01
Taylor Wimpey PLC06 March 2008 6 March 2008 Taylor Wimpey plcPreliminary Results for the year ended 31 December 2007 14% growth in pro forma* pre-exceptional profits from UK housing to £608.5mNorth America business well positioned for difficult market conditions Operational Highlights • Successful and rapid integration to create the new Taylor Wimpey Group • Strong growth in pro forma* UK operating margins to 15.2% from 12.8%, ahead of target • Actions in place to achieve full synergy targets with further progress expected • North American unsold inventory reduced by 29% in second half of 2007 Pro Forma* Reporting Highlights • Total Group completions 27,642 (2006: 31,128) • Group revenue £5,887.5m (2006: £6,719.5m) • Group pre-exceptional profit before tax £535.6m (2006: £776.5m) * Pro forma numbers represent unaudited aggregated full year financialinformation for the underlying Taylor Woodrow plc and George Wimpey Plcbusinesses prior to the impact of accounting policy changes and fair valueadjustments. Statutory Reporting Summary • After the impact of exceptional items, particularly land and work in progress write downs in the US, loss before tax was £19.5m (2006: profit before tax of £405.6m) • Pre-exceptional EPS of 30.8p (2006: 50.5p) and post-exceptional loss per share of 24.2p (2006: earnings per share of 50.5p) • Year end gearing 38.2% (2006: 18.6%) following £250m share buyback • Full year dividend per share increased by 6.8% to 15.75p • Equity shareholders' funds per share 352.3p (2006: 364.7p) Commenting on the results, Norman Askew, Chairman, said:"The 2007 merger of Taylor Woodrow plc and George Wimpey Plc has alreadyrealised significant benefits. It has changed the face of, and the opportunitiesfor, the business. The benefits of the merger are as valid today as they were inJuly. This is especially true in the difficult market conditions that wecurrently face. "The rapid progress we have made in delivering an integrated Taylor Wimpey andthe confidence we have in the business is underlined by the proposed 6.8%increase in the total dividend for the year." Pete Redfern, Group Chief Executive, said:"We have delivered a strong margin improvement in the UK Housing business during2007, substantially exceeding our target of 14%. We continue to anticipate amore difficult trading environment in the UK during 2008. However, we haveactively positioned the business for more challenging conditions and are wellplaced for the future with a strengthened land bank, excellent momentum and arobust financial position. "In North America, following the merger, we are better positioned to navigatethe ongoing challenges. In the short term, our strategy remains to focus onrealising cash from existing sites, reducing the cost base, and maintaining asteady sales pace. Whilst it remains too early to make significant landpurchases, we are well placed to take advantage of any high quality landacquisition opportunities that arise as a result of the prolonged marketweakness." -ends- A presentation to analysts will be made at 09.00 hrs on 6 March 2008. Thispresentation will be broadcast live on taylorwimpey.com. For further information please contact: Pete Redfern, Group Chief Executive James MurgatroydPeter Johnson, Group Finance Director Faeth BirchJonathan Drake, Investor Relations Taylor Wimpey plc FinsburyTel: +44 (0) 7816 517 039 on 6 March Tel: +44 (0) 20 7251 3801Tel: +44 (0) 20 7355 8109 thereafter Group Strategy Summary Taylor Wimpey's primary financial objective is to deliver market leading returnsfrom both the UK and from our selected markets in North America. Following the successful completion of the largest ever merger in the UKhousebuilding industry, we are making excellent progress in the delivery of theanticipated business benefits: • Operating margin growth in the UK • Economies of scale in the UK • A stronger business in North America • Material annual synergies Despite currently challenging market conditions, we believe that in the mediumterm we can produce excellent returns from our core markets. Our focus is to continue to deliver synergies and cost savings, whilstpositioning the business cautiously for tougher trading conditions. This willinvolve measures to improve both cost efficiency to maintain margins and workingcapital efficiency to reduce risk and improve returns. Basis of Reporting The results set out in the commentary below for both 2007 and 2006 are based onpro forma financial information and are before exceptional items unlessotherwise stated. Pro forma numbers represent aggregated full year financial information for theunderlying Taylor Woodrow plc and George Wimpey Plc businesses prepared on thebasis set out in the Additional Pro Forma Unaudited Financial Information at theend of this announcement. The financial statements included within thisannouncement and the associated notes are prepared on the statutory accountingbasis, which includes the results of the legacy George Wimpey business from 3July 2007. UK Housing Strategy and integration We have already made excellent progress on improving our UK Housing margin. Wehave achieved margin growth of 2.4 percentage points to 15.2%, exceeding the 14per cent operating margin target set for the combined UK business for 2007 atour Interim Results in July. The key drivers of this margin improvement arechanges in land strategy, a focus on reducing costs and the impact of animproved sales strategy. The business has a strong land base, with a good mix of both short term and longterm land. Over the last six months, we have reviewed the combined land bank indetail, and sold a number of sites that did not meet our ongoing requirements.These sales include sites where the two businesses had duplicate holdings, orwhere the nature of the site did not meet our ongoing strategy. We have also focused on our outlet opening programme, key to driving salesvolumes without damaging pricing. We are extremely pleased that we have achievedour stretch target of 500 active outlets at the year end, including over 100 newoutlets which were opened in the fourth quarter of 2007. Synergy savings as a result of the merger will result in lower overhead costsper home sold, and we also have significant opportunities to reduce build costsover time. Our work comparing standard housetypes from the two historic productranges suggests that savings of as much as £8,000 per home could be achievable.The first of these savings will start to come through in 2008. Prior to the merger, George Wimpey had announced a target of £25 million ofbuild cost savings to be achieved in 2007. This target, which is in addition tothe synergy savings outlined above, has been exceeded during the year. We have successfully implemented a revised sales strategy to complement ourfocus on margin improvement rather than driving volume. As a result, we havebeen able to manage sales incentives tightly during the more subdued marketconditions of the second half of 2007. We continue to make excellent progress on our internal integration targets. TheUK management team and their direct reports were in place on the date ofcompletion of the merger and the majority of head office staff are now based atour office in High Wycombe. The four regional offices identified for closure at the time of the merger havenow been closed, with the responsibility for all of their sites transferred toneighbouring regions. Following the merger, we are now operating through 34regions across the UK, with a further 5 satellite regions providing additionalgeographic coverage. Wherever possible we sought to redeploy staff following the merger. However, atotal of 593 roles will be removed from the business due to duplication. 323roles were removed by the end of 2007. We have been able to accelerate our progress on achieving synergies in bothbuild and overhead costs. Against an overall target exit rate of £70 million forthe UK by the end of 2009, we have already identified specific savings in excessof this, and expect around £50 million of synergies to flow through in 2008. Financial review 2007 2006 --------------------------------------------------------------------------------Completions 20,690 21,910 --------------------------------------------------------------------------------Average Selling Price £188k £186k --------------------------------------------------------------------------------Revenue £3,998.8m £4,150.4m--------------------------------------------------------------------------------Profit before exceptional items, interest and tax £608.5m £533.0m --------------------------------------------------------------------------------Operating margin 15.2% 12.8% --------------------------------------------------------------------------------Average outlets 471 461 --------------------------------------------------------------------------------Order book as a percentage of revenue 26% 31% --------------------------------------------------------------------------------Owned and controlled plots with planning or resolution to grant 86,155 84,959 -------------------------------------------------------------------------------- UK housing revenue stood at £3,998.8 million (2006: £4,150.4 million), primarilydriven by the decrease in completions. Profit before exceptional items, interest and tax was £608.5 million, anincrease of 14.2% against the previous year (2006: £533.0 million), reflectingthe significant improvement in the operating margin. The operating margin for 2007 was 15.2% (2006: 12.8%). Sales, completions and pricing Whilst sales and cancellation rates were steady year on year for the first halfof 2007, second half sales levels were around 15% lower than the equivalentperiod of 2006. Cancellation rates in the second half of 2007 were running above30%, compared to a long run average of around 20%. This reflected the moresubdued market conditions being experienced across the UK, particularly in thefourth quarter of 2007. We completed 20,690 homes in 2007 (2006: 21,910). The average selling price of our homes in 2007 was £188,000 (2006: £186,000).The average selling price of a private home was £203,000 (2006: £197,000),whilst the average selling price of an affordable home was £106,000 (2006:£98,000). The estimated underlying cost inflation of labour and materials has been runningat around 3% per annum during 2007. The initiatives underway as a result of themerger are expected to more than offset inflationary increases. Our year end order book stood at £1,064 million (2006: £1,316 million).As at the end of February 2008, our order book had increased to £1,335 million(February 2007: £1,668 million). Product range and branding Following the merger, we are operating with two core brands in the UK, BryantHomes and George Wimpey. We have identified a number of ways to differentiateour brands to offer customers more choice on our sites, whilst retaining ashared set of 'core values'. Some of these differentiating factors, such as therange of optional extras that can be purchased, are already being rolled out.Other factors, such as changes to the design of the housetype portfolio, willtake time to come into effect. In addition, we are continuing to develop the G2 brand, with a product and pricerange specifically targeted at first time buyers. We built our second G2development during 2007 and 70 per cent of the homes were sold within one day. We offer a wide range of products from apartments to five-bedroom houses, withprices ranging from under £100,000 to over £500,000. During 2007, the majorityof our homes were priced within a range from £100,000 to £200,000. Quality and customers We remain committed to delivering high quality homes for all of our customers.Our key performance indicator for customer satisfaction during 2007 was thepercentage of customers who would recommend us. Both Bryant Homes and GeorgeWimpey scored 87%, although different methodologies had been used by the legacybusinesses. Going forward, we will be using a new measurement systemadministered by the National House-Building Council. We have once again been very successful in the NHBC Pride in the Job Awards,looking at build quality, with our UK site managers winning 65 Quality Awards,20 Seals of Excellence and 4 Regional Awards. Landbank Combining Taylor Woodrow's strong strategic landbank and George Wimpey's shortterm land has delivered a well balanced portfolio that puts Taylor Wimpey in anexcellent position for future home completions. At the year end all plotsrequired for forecast 2008 completions had detailed planning consents in placeand 90 per cent of forecast completions were on sites which were alreadyactively selling. We have undertaken a number of land sales in the second half of 2007, followingour review of the combined landbank. For the year as a whole, land sales havegenerated £163 million of revenue (2006: £227 million) and contributed anoperating profit of £38.7 million (2006: £42.8 million). As part of the review of the landbank, we have also reviewed in detail ourdisclosure, and as a result, have provided more information on the structure ofthe landbank. This includes both the actual stage of planning and a greaterbreakdown of the way in which the land is held. Plots 2007 2006 ----------------------------------------------------------------------------- Owned Controlled Pipeline Total Total -----------------------------------------------------------------------------Detailed planning 42,459 2,435 267 45,161 47,925 -----------------------------------------------------------------------------Outline planning 26,148 5,123 881 32,152 27,130-----------------------------------------------------------------------------Resolution to grant 4,109 5,881 3,756 13,746 15,996-----------------------------------------------------------------------------Sub total 72,716 13,439 4,904 91,059 91,051-----------------------------------------------------------------------------Allocated strategic 3,717 8,477 301 12,495 11,734 -----------------------------------------------------------------------------Non allocated strategic 25,514 64,347 536 90,397 92,171-----------------------------------------------------------------------------Total 101,947 86,263 5,741 193,951 194,956----------------------------------------------------------------------------- Our UK short term landbank, representing owned or controlled land with planning,or a resolution to grant planning stood at 86,155 plots at 31 December 2007(2006: 84,959 plots). The average cost of plots acquired during the year was£47,100 (2006: £47,200). As a result of the strength of our landbank, and given an uncertain UK market,we have been able to be increasingly selective in our land purchasing since thestart of October 2007 and we expect to continue with this policy into 2008. North America Housing Strategy and integration Our markets in North America benefit from significant inward migration and jobgrowth and our long term strategy remains to grow the business. However, currentconditions in the US require us to focus in the short to medium term on costreductions and cash management, whilst preserving the value inherent in our longterm land positions. We are closely monitoring sales rates at each of our sites, actively adjustingour pricing and incentive packages to ensure that we remain competitive in localmarkets. Where we have high quality land holdings in areas of current marketweakness we are opting to postpone production in order to preserve longer termvalue. Both the legacy Taylor Woodrow and Morrison Homes businesses had alreadyachieved significant build cost and overhead cost reductions prior to the mergerin response to the slowdown in 2006. As this has continued through 2007 we haveincreased our savings in these areas through renegotiation with suppliers andrationalisation of our operations. We are not currently approving further new land acquisitions in the US and weare exercising our right to exit option deals where the price is no longerattractive. We are also reducing the amount of cash invested in work in progressthrough a number of initiatives to lower the level of inventory homes in ouroperations. These short term actions will both maintain the underlying value of the businessand put us in the best position to reinvest in new sites as value becomesavailable. The merger provides the North American business with:• Strong geographical overlap, with critical mass in more of its markets;• A broader product offering;• Synergy savings; and• Combined homebuilder/land developer business model We are now operating as a combined business, with 4 regions and a total of 13divisions. All of the personnel decisions were taken by 31 July 2007, with allproperty moves completed by 30 September 2007. An implementation programme for acommon integrated suite of business systems is underway and is expected to becomplete by early 2009. We remain on target to deliver merger related cost savings at an exit rate of£20 million by the end of 2009, in addition to the market related savingsoutlined above. The majority of these savings are expected to impact on 2008. Financial Review 2007 2006 -------------------------------------------------------------------------------Completions 6,740 8,839 -------------------------------------------------------------------------------Average Selling Price £175,000 £202,000 -------------------------------------------------------------------------------Revenue £1,215.0m £1,926.4m-------------------------------------------------------------------------------Profit before exceptional items, interestand tax £62.4m £336.8m-------------------------------------------------------------------------------Operating margin 5.1% 17.5%-------------------------------------------------------------------------------Average outlets 242 218 -------------------------------------------------------------------------------Order book as a percentage of revenue 43% 28% -------------------------------------------------------------------------------Owned and controlled plots 40,603 50,090 ------------------------------------------------------------------------------- North America housing revenue stood at £1,215.0 million (2006: £1,926.4million), reflecting the ongoing weakness in market conditions in the US. Profitbefore exceptional items, interest and tax was £62.4 million (2006: £336.8million). The operating margin for 2007 was 5.1% (2006: 17.5%). Due to the ongoing weakness in market conditions experienced during the year wehave conducted regular reviews of the carrying value of our land holdings. As aresult of these reviews, we have taken land and work in progress write downstotalling £283.4 million on a statutory reported basis during 2007. Sales, completions and pricing The combined business operated with an average of 242 outlets during 2007 (2006:218). Total home completions were 6,740 (2006: 8,839) and we completed 966 lots(2006: 2,640). Sales rates for North America as a whole in the second half of 2007 were belowthose achieved in the first half. Cancellation rates were 28% for the secondhalf. The average selling price of our North American homes in 2007 was £175,000(2006: £202,000), reflecting the weaker market conditions and also a shift insales away from higher priced products in Florida and California. Our year end order book was £529 million (2006: £549 million). Product range We offer a wide range of homes to our customers in North America, ranging fromentry level to luxury homes. Our product range includes high rise apartments,single family homes, townhomes and full service country club properties. Atpresent our only upcoming high rise projects are in the Canadian market. Our US homebuilding operations are now trading under the Taylor Morrison brand,with land development branded Taylor Woodrow Communities, whilst our Canadianbusiness continues to operate as Monarch. Quality and customers Quality is a key focus for all of our operations and we are particularly proudof our Canadian business, which was rated as the number one in Ottawa in the JDPower & Associates customer satisfaction survey for 2007. Similar to our UKbusiness, our key performance indicator for customer satisfaction was thepercentage of customers who would recommend us. Both legacy businesses recordedscores exceeding 80% during 2007, although different survey methodologies hadbeen used. Going forward, we will be using a new measurement system administeredby an independent third party organisation. We are running a series of best practice conferences to learn from the customercare experience of our legacy businesses. This consultation process will informthe development of core practices and guidelines. Landbank We remain extremely cautious with regard to land purchases in the US, althoughwe have continued to invest in land for our Canadian operations and renegotiateexisting terms on option contracts in Florida, California, and Arizona. At the year end, we had an owned and controlled landbank of 40,603 plots (2006:50,090 plots). Net operating assets in the US stood at £574.3 million at 31 December 2007(2006: £925.5 million). Spain & Gibraltar Housing Strategy We deliver high quality homes in popular locations in Spain that appeal to bothforeign and Spanish buyers. In Gibraltar, we service the luxury apartmentmarket, selling off plan well in advance of construction. Performance We completed a total of 212 homes in 2007 (2006: 379) at an average sellingprice of £279,000 (2006: £205,000). Profit before exceptional items, interest and tax of £7.9 million, was below the£26.4 million achieved in 2006 as a result of weaker market conditions and aone-off land sale in the Malaga area undertaken during 2006. We achieved an operating margin of 12.3 per cent (2006: 28.7 per cent). The landbank has remained at similar levels to last year as we have becomeincreasingly cautious in our approach to land purchases. Our year end order bookstood at £83 million (2006: £100 million). We have undertaken a review of the carrying value of our landbank in Spain,which has resulted in an inventory provision of £6.3 million (2006: £nil). Construction Strategy We provide construction and facilities management services to high growthindustry sectors throughout the UK and for key customers in selected overseasmarkets. Performance Revenue increased by 10.7 per cent in 2007 to £609.3 million (2006:£550.6million), delivering a profit before interest and tax of £2.0 million(2006: £8.1 million). This fall is primarily due to losses on a small number ofroad construction contracts in Ghana. We have no further similar contracts. TheUK business delivered a strong performance, recording an operating profit of£16.3 million (2006: £5.3 million). The year end order book was £1.19 billion (2006: £1.17 billion), reflecting asteady flow of contract awards in our chosen sectors. In particular, ourfacilities management operations have secured a number of new contracts fromblue chip customers. Pro Forma Financial Summary Group revenue fell by 12.4 per cent to £5,887.5 million (2006: £6,719.5million). Group completions fell by 11.2 per cent to 27,642 (2006: 31,128)reflecting the continued poor trading conditions in the US. Group profit before tax and exceptional items amounted to £535.6 million for theyear to 31 December 2007 (2006: £776.5 million). Statutory Reported Financial Summary Group profit before tax and exceptional items amounted to £360.2 million for theyear to 31 December 2007 (2006: £405.6 million). The UK housing businessperformed well in 2007, delivering an operating margin of 13.7% after the impactof fair value adjustments and accounting policy alignment. However, continuingmaterial weakness in the Group's US and Spanish markets has resulted in land andwork in progress write downs of £289.7 million. Other exceptional items of £90.0million relate to restructuring costs and the write off of the Morrison Homesand Laing brands. As disclosed in the 2007 interim results we had provided £15.5 million duringthe first half of 2007 against a potential liability arising from a legal casein Florida. During the second half of the year the case was settled at £5.2million and the remaining provision has been released. The Group has returned a loss before tax of £19.5 million (2006 profit beforetax: £405.6 million) after charging net finance costs of £112.1 million (2006:£64.2 million). The tax charge was £177.2 million (2006: £115.0 million),bringing the loss for the year to £196.7 million (2006 profit for the year:£290.6 million). The pre-exceptional Group tax rate for 2007 was 29.7%. In addition, there hasbeen a significant exceptional tax charge of £70.2 million, principally beingthe write-off of deferred tax assets due to the weakening of the US markets inthe second half of the year. In total, the Group has unrecognised potential deferred tax assets in the US of£189.4 million as at 31 December 2007 primarily due to the reduced opportunitiesin the US to utilise inventory provisions in the near future against taxableincome. Net assets total £3.7 billion (2006: £2.1 billion), with net tangible assetsamounting to £2.9 billion (£1.7 billion). Shareholders' funds per share totalled352.3 pence (2006: 364.7 pence). Tangible net worth per share stood at 274.3pence. Year end gearing stood at 38.2 per cent (2006: 18.6 per cent). Undrawn committedfacilities stood at £1,193 million at the year end (2006: £630 million). Share buyback and dividend In July we set out the conclusions of our review of capital requirements andbalance sheet targets, including the plan to return £750 million of capital toshareholders through a share buyback programme. £250 million of this programmewas carried out in during 2007. The purpose of the review was to ensure that ourrequirements for growth are balanced by a suitable and efficient capitalstructure. We remain committed to maintaining year end adjusted gearing within arange of 40% to 60% and interest cover between five and seven times in normalmarket conditions. However given the uncertainty in the UK housing market, the Board has decided tosuspend the buy back programme temporarily until conditions improve. In order tomaintain flexibility we will be seeking the usual authority at the forthcomingAnnual General Meeting on 17 April 2008 to purchase up to 10% of our shares. A 5% increase in the final dividend to 10.25 pence is being proposed, reflectingour continuing confidence in the future of the Group. If approved, this willbring full year dividends to 15.75 pence per share (2006: 14.75 pence). Group Outlook The Group is well placed following the merger to benefit from a strengthenedlandbank, operational efficiencies, ongoing cost savings programmes and a strongfinancial position. We have continued to identify additional areas for furthersavings and efficiencies. In the UK, although sales and cancellation rates have improved in the early partof 2008, they remain weaker than seasonal norms. Our order book at the end ofFebruary 2008 is £1.3 billion with a greater than historical weighting towardsaffordable homes. We anticipate that the current subdued conditions willcontinue, with interest rates and mortgage availability being key determinantsof customer confidence. Our focus is on preserving value through maintaining asteady, but reduced, sales rate and controlling land and work in progress spendtightly. We anticipate that these actions will result in significant cashgeneration, particularly in the second half of 2008. In North America, we do not expect market conditions in the US to improvesignificantly during 2008. In the short term, our strategy remains to focus onmanaging out existing sites and reducing the cost base. We are well placed totake advantage of land acquisition opportunities as they arise in the future. Shareholder Information The Company's 2008 Annual General Meeting will be held at 11:00am on Thursday 17April 2008 at the Royal College of Physicians, 11 St Andrews Place, Regent'sPark, London NW1 4LE. Subject to confirmation at the Annual General Meeting, the 2007 final dividendof 10.25 pence per share will be paid on Tuesday 1 July 2008 to shareholders onthe register of members at the close of business on Friday 23 May 2008. Shareholders are again being offered the opportunity to re-invest some or all oftheir dividend under the Dividend Re-Investment Plan, details of which will becontained in the Shareholder Information section of the 2007 Annual Report andAccounts, which will be posted to shareholders on Friday 14 March 2008. The latest date for receipt of the Dividend Re-Investment Plan mandate forms forthe 2007 final dividend is Monday 2 June, 2008. The latest date for receipt ofnotices of withdrawal from the Plan for the 2007 final dividend is Monday 16June, 2008. Copies of the Report and Accounts 2007 will also be available from Friday 14March on the Company's website taylorwimpey.com and from the registered officeat 80 New Bond Street, London, W1S 1SB. Consolidated Income StatementFor the year to 31 December 2007 Before exceptional Exceptional items items* Total 2007 2007 2007 2006Continuing Operations Note £m £m £m £m -------------------------------------------------------------------------------- Revenue 1 4,714.3 - 4,714.3 3,572.1Cost of sales (3,975.9) (289.7) (4,265.6) (2,933.4) --------------------------------------------------------------------------------Gross profit 738.4 (289.7) 448.7 638.7Net operating expenses 2 (289.5) (90.0) (379.5) (191.0) Share of results of jointventures 23.4 - 23.4 22.1 --------------------------------------------------------------------------------Profit on ordinary activities before finance costs and amortisation of brands 476.0 (349.7) 126.3 469.8Amortisation of brands (3.7) (30.0) (33.7) - ----------------------------------------------------------------------------------------------------------------------------------------------------------------Profit on ordinary activitiesbefore finance costs 472.3 (379.7) 92.6 469.8Interest receivable 9.7 - 9.7 9.1Finance costs 3 (121.8) - (121.8) (73.3) --------------------------------------------------------------------------------(Loss)/profit on ordinaryactivities before taxation 360.2 (379.7) (19.5) 405.6Taxation 4 (107.0) (70.2) (177.2) (115.0) --------------------------------------------------------------------------------(Loss)/profit for the year 253.2 (449.9) (196.7) 290.6 -------------------------------------------------------------------------------- Attributable to:Equity holders of the parent (197.9) 289.5Minority interest 1.2 1.1 -------------------------------------------------------------------------------- (196.7) 290.6 -------------------------------------------------------------------------------- Proposed/paid dividends per ordinary share Interim 5 5.5p 5.0pFinal 5 10.25p 9.75p (Loss)/earnings per ordinary share - basic 6 (24.2p) 50.5p (Loss)/earnings per ordinary share - diluted 6 (24.2p) 50.1p -------------------------------------------------------------------------------- * The current period items relate to restructuring costs, brand impairments and land and work in progress write-downs (note 2). There were no exceptional items in 2006. Consolidated Statement of Recognised Income and ExpenseFor the year to 31 December 2007 2007 2006 £m £m -------------------------------------------------------------------------------- Exchange differences on translation of foreign operations 21.7 (49.0)Actuarial gains/(losses) on defined benefit pension schemes 91.3 (1.6)Surplus on revaluation - 1.0Tax on items taken directly to equity (28.5) 0.5 --------------------------------------------------------------------------------Net income/(expense) recognised directly in equity 84.5 (49.1)(Loss)/profit for the year (196.7) 290.6--------------------------------------------------------------------------------Total recognised (expense)/income for the year (112.2) 241.5-------------------------------------------------------------------------------- Attributable to:Equity holders of the parent (113.4) 240.4Minority interests 1.2 1.1-------------------------------------------------------------------------------- (112.2) 241.5-------------------------------------------------------------------------------- Consolidated Balance Sheetat 31 December 2007 2007 2006 £m £m -------------------------------------------------------------------------------- Non-current assetsGoodwill 699.8 363.1Other intangible assets 120.5 -Property, plant and equipment 39.0 25.5Interests in joint ventures 59.9 56.2Trade and other receivables 76.4 56.0Deferred tax assets 117.7 95.4-------------------------------------------------------------------------------- 1,113.3 596.2-------------------------------------------------------------------------------- Current assetsInventories 6,017.8 2,946.5Trade and other receivables 391.3 294.9Tax receivables 16.8 19.7Cash and cash equivalents 130.0 236.5-------------------------------------------------------------------------------- 6,555.9 3,497.6--------------------------------------------------------------------------------Total assets 7,669.2 4,093.8-------------------------------------------------------------------------------- Current liabilitiesTrade and other payables (1,540.3) (926.0)Tax payables (154.4) (74.1)Debenture loans (1.4) (2.5)Bank loans and overdrafts (12.2) (12.3)Provisions (48.2) --------------------------------------------------------------------------------- (1,756.5) (1,014.9)--------------------------------------------------------------------------------Net current assets 4,799.4 2,482.7-------------------------------------------------------------------------------- Non-current liabilitiesTrade and other payables (388.4) (123.1)Debenture loans (823.3) (610.6)Bank loans (708.5) (2.4)Retirement benefit obligation (219.1) (208.6)Deferred tax liabilities (29.8) (0.8)Provisions (38.4) (27.9)-------------------------------------------------------------------------------- (2,207.5) (973.4)--------------------------------------------------------------------------------Total liabilities (3,964.0) (1,988.3)----------------------------------------------------------------------------------------------------------------------------------------------------------------Net assets 3,705.2 2,105.5-------------------------------------------------------------------------------- EquityShare capital 289.6 148.5Share premium account 758.1 758.8Merger relief reserve 1,934.2 -Revaluation reserve 0.5 1.5Own shares (282.0) (45.0)Share-based payment tax reserve 5.6 8.2Capital redemption reserve 31.5 31.5Other reserve 4.8 4.8Translation reserve 3.7 (19.1)Retained earnings 957.1 1,214.3--------------------------------------------------------------------------------Equity attributable to equity holders of the parent 3,703.1 2,103.5Minority interests 2.1 2.0--------------------------------------------------------------------------------Total equity 3,705.2 2,105.5-------------------------------------------------------------------------------- Consolidated Cash Flow StatementFor the year to 31 December 2007 2007 2006 Note £m £m-------------------------------------------------------------------------------- Net cash (used in)/from operating activities 7 (163.3) 57.0 Investing activitiesInterest received 2.3 9.1Dividends received from joint ventures 24.4 22.6Amounts invested in software development (0.4) -Proceeds on disposal of property, plant and investments 17.3 48.0Purchases of property, plant and investments (13.6) (6.7)Amounts invested in joint ventures (3.1) (9.2)Amounts repaid by joint ventures 10.6 5.3Acquisition of George Wimpey Plc 28.1 -Net cash inflow on acquisition of remaining 50% of NorthCentral Management Limited 2.9 - --------------------------------------------------------------------------------Net cash from investing activities 68.5 69.1-------------------------------------------------------------------------------- Financing activitiesDividends paid (117.3) (79.7)Dividends paid by subsidiaries to minority shareholders (1.1) (0.1)Proceeds on issue of ordinary share capital - 3.3Proceeds from sale of own shares 4.7 15.9Purchase of own shares (251.6) (12.4)New bank loans raised 2,083.8 608.7New debenture loans raised 256.2 -Repayment of debenture loans (52.1) (4.3)Repayment of bank loans (1,944.6) (600.9)Increase/(decrease) in bank overdrafts 0.5 (2.7)--------------------------------------------------------------------------------Net cash used in financing activities (21.5) (72.2)-------------------------------------------------------------------------------- Net (decrease)/increase in cash and cash equivalents (116.3) 53.9Cash and cash equivalents at beginning of year 236.5 197.3Effect of foreign exchange rate changes 9.8 (14.7)--------------------------------------------------------------------------------Cash and cash equivalents at end of year 130.0 236.5-------------------------------------------------------------------------------- Notes to the Consolidated Financial StatementsFor year to 31 December 2007 1. Business and geographical segments Business segments-----------------For management purposes, the Group is currently organised into five operatingdivisions - Housing - United Kingdom, Housing - North America, Housing - Spainand Gibraltar, Construction and Corporate. These divisions are the basis onwhich the Group reports its primary segment information. Segment information about these businesses is presented below. Housing Housing Housing Spain United North and Kingdom America Gibraltar Construction Corporate Consolidated 2007 £m £m £m £m £m £m ----------------------------------------------------------------------------------------------------- RevenueExternal sales 3,053.8 986.8 64.4 609.3 - 4,714.3Inter-segment sales - - - 34.5 - 34.5Eliminations - - - (34.5) - (34.5) -----------------------------------------------------------------------------------------------------Total revenue 3,053.8 986.8 64.4 609.3 - 4,714.3 Result:Operating profit/(loss)before joint ventures,brand amortisationand exceptional items 409.1 53.3 2.2 3.4 (15.4) 452.6Share of results ofjoint ventures 9.1 14.2 - 0.1 - 23.4 -----------------------------------------------------------------------------------------------------Profit/(loss) on ordinary activitiesbefore finance costs,exceptional items andamortisation of brands 418.2 67.5 2.2 3.5 (15.4) 476.0Brand amortisation (3.7) - - - - (3.7)Exceptional items (47.9) (321.3) (6.3) - (4.2) (379.7)-----------------------------------------------------------------------------------------------------Profit/(loss) onordinary activitiesbefore finance costs 366.6 (253.8) (4.1) 3.5 (19.6) 92.6Finance costs,(net) (112.1)Taxation (177.2)-----------------------------------------------------------------------------------------------------Loss for the year (196.7)----------------------------------------------------------------------------------------------------- Inter-segment construction and housing revenue relates to contracts conducted on an arm's-length basis. Housing Housing Housing Spain United North and Kingdom America Gibraltar Construction Corporate Consolidated 2007 £m £m £m £m £m £m ----------------------------------------------------------------------------------------------------- Asset andliabilities:Segment assets 5,350.1 976.7 182.1 96.6 39.5 6,645.0Joint ventures 39.6 20.0 0.2 0.1 - 59.9Segment liabilities (1,548.7) (316.4) (66.7) (232.0) (70.6) (2,234.4)-----------------------------------------------------------------------------------------------------Net operating assets/(liabilities)* 3,841.0 680.3 115.6 (135.3) (31.1) 4,470.5 -----------------------------------------------------------------------------------------------------Goodwill 699.8Current taxation (net) (137.6)Deferred taxation (net) 87.9Net debt (1,415.4)-----------------------------------------------------------------------------------------------------Net assets 3,705.2 ----------------------------------------------------------------------------------------------------- * The Group is unable to allocate the defined benefit pension scheme assets and liabilities of theTaylor Woodrow Group Pension and Life Assurance Fund on an actuarial basis by entity. However, for the purposes of the segmental analysis above the Group has allocated the deficit on the basis of members in the plan. This allocation is performed solely for the purposes of providing a moremeaningful segmental analysis and is not an appropriate apportionment in accordance with IAS 19.The assets and liabilities of the George Wimpey Staff Pension Scheme have been allocated in their entirety to UK Housing. Housing Housing Housing Spain United North and Kingdom America Gibraltar Construction Corporate Consolidated 2007 £m £m £m £m £m £m ----------------------------------------------------------------------------------------------------- Other information:Property, plant andequipment additions 6.2 5.8 0.3 1.3 - 13.6Amortisation ofintangibles* 15.7 20.0 - - - 35.7Depreciation - plant and equipment 3.3 3.6 0.1 1.3 - 8.3 -----------------------------------------------------------------------------------------------------Other non-cashexpenses:Provisions provided 48.7 28.7 0.6 - - 78.0 ----------------------------------------------------------------------------------------------------- * The amortisation of intangibles includes impairment losses of £10.0m on the Laing Homes brand(Housing United Kingdom) and £20.0m on the Morrison Homes brand (Housing North America) following their current retirements. Housing Housing Housing Spain United North and Kingdom* America* Gibraltar* Construction* Corporate* Consolidated 2006 £m £m £m £m £m £m ----------------------------------------------------------------------------------------------------- RevenueExternal sales 1,759.2 1,170.2 92.1 550.6 - 3,572.1Inter-segment sales 4.1 - - 60.8 - 64.9Eliminations (4.1) - - (60.8) - (64.9)-----------------------------------------------------------------------------------------------------Total revenue 1,759.2 1,170.2 92.1 550.6 - 3,572.1----------------------------------------------------------------------------------------------------- Result:Operating profit/(loss) before joint ventures 215.4 209.1 26.8 9.6 (13.2) 447.7Share of results of joint ventures 8.6 13.5 - - - 22.1 -----------------------------------------------------------------------------------------------------Profit/(loss) on ordinaryactivities beforefinance costs 224.0 222.6 26.8 9.6 (13.2) 469.8Finance costs,(net) (64.2)Taxation (115.0)-----------------------------------------------------------------------------------------------------Profit for the year 290.6 ----------------------------------------------------------------------------------------------------- Asset and liabilities:Segment assets 2,160.0 865.0 173.7 106.1 18.1 3,322.9Joint ventures 33.5 19.4 - 3.3 - 56.2Segment liabilities (609.5) (318.9) (82.2) (249.1) (25.9) (1,285.6)-----------------------------------------------------------------------------------------------------Net operating assets/(liabilities) 1,584.0 565.5 91.5 (139.7) (7.8) 2,093.5 ----------------------------------------------------------------------------------------------------- Goodwill 363.1Current taxation (net) (54.4)Deferred taxation (net) 94.6Net debt (391.3)-----------------------------------------------------------------------------------------------------Net assets 2,105.5 ----------------------------------------------------------------------------------------------------- * The Corporate segment has been added in 2007 to reflect better the way the Group is managed. As a consequence the comparative segmental analysis has been restated to reflect this as necessary. Housing Housing Housing Spain United North and Kingdom America Gibraltar Construction Corporate Consolidated 2006 £m £m £m £m £m £m ----------------------------------------------------------------------------------------------------- Other information:Property, plant andequipment additions 2.5 1.7 0.3 2.2 - 6.7Depreciation - plant andequipment 1.1 1.1 0.1 5.4 - 7.7 -----------------------------------------------------------------------------------------------------Other non-cash expenses:Provisions provided 11.2 10.2 0.3 - - 21.7 ----------------------------------------------------------------------------------------------------- Geographical segments---------------------The Group's operations are located primarily in the United Kingdom and North America. The Group's housing divisions are already segmented geographically above. The construction division is primarilylocated in the United Kingdom. The following table provides an analysis of the Group's sales by geographical market, irrespective of the origin of the goods/services: Sales revenue by geographical market 2007 2006 £m £m-------------------------------------------------------------------------------- United Kingdom 3,614.7 2,243.6North America 986.8 1,170.1Rest of the world 112.8 158.4-------------------------------------------------------------------------------- 4,714.3 3,572.1-------------------------------------------------------------------------------- The following is an analysis of the carrying amount of segment assets, and additions to property and plant, analysed by the geographical area in which the assets are located: Carrying amount of Additions to property segment assests and plant 2007 2006 2007 2006 £m £m £m £m-------------------------------------------------------------------------------- United Kingdom 6,205.9 2,854.9 6.9 2.6North America 1,231.8 1,012.3 5.8 1.7Rest of the world 231.5 226.6 0.9 2.4-------------------------------------------------------------------------------- 7,669.2 4,093.8 13.6 6.7-------------------------------------------------------------------------------- 2. Net operating expenses and profit on ordinary activities before finance costs 2007 2006 Net operating expenses: £m £m -------------------------------------------------------------------------------- Administration expenses 302.4 200.1Net other income (12.9) (9.1)Exceptional item 90.0 - -------------------------------------------------------------------------------- 379.5 191.0-------------------------------------------------------------------------------- Net other income includes profits on the sale of property, plant & equipment and broker fees from mortgage origination services. Restructuring costs 60.0 -Brand impairments 30.0 -Land write-downs 289.7 ---------------------------------------------------------------------------------Exceptional items 379.7 --------------------------------------------------------------------------------- 3. Finance costs 2007 2006 £m £m-------------------------------------------------------------------------------- Interest on bank overdrafts and loans 45.9 22.9Interest on debenture loans 47.4 41.2Movement on interest rate derivatives 5.4 - -------------------------------------------------------------------------------- 98.7 64.1Amortisation of discount on land creditors 19.3 6.5Notional interest on pension liability 3.8 2.7-------------------------------------------------------------------------------- 121.8 73.3-------------------------------------------------------------------------------- 4. Tax 2007 2006 £m £m--------------------------------------------------------------------------------Current tax: UK corporation tax: Current year 88.9 58.8 Prior years (9.8) (9.9)Relief for foreign tax (5.0) (8.3)Foreign tax: Current year 18.0 80.4 Prior years 16.9 (8.3)-------------------------------------------------------------------------------- 109.0 112.7--------------------------------------------------------------------------------Deferred tax:UK: Current year (9.1) (3.0) Prior years 6.3 (0.2)Foreign: Current year 80.9 (4.8) Prior years (9.9) 10.3-------------------------------------------------------------------------------- 68.2 2.3-------------------------------------------------------------------------------- 177.2 115.0-------------------------------------------------------------------------------- Corporation tax is calculated at 30 per cent (2006: 30 per cent) of the estimated assessable profit for the year in the UK.Taxation outside the UK is calculated at the rates prevailing in the respective jurisdictions.Deferred tax recognised in the Group statement of recognised income and expense is due to actuarial gains on post-retirement liabilities at the prevailing rate in the relevant jurisdiction. This includes the effect of the change in the UK rate of corporation tax from 30 per cent to 28 per cent from 1 April 2008. 5. Dividends 2007 2006 £m £m----------------------------------------------------------------------------------------------------- Amounts recognised as distributions to equity holders in the year: Final dividend for the year ended 31 December 2006 of 9.75p (2005:8.9p) per share 56.6 51.0Interim dividend for the year ended 31 December 2007 of 5.5p (2006: 5.0p) per share 60.7 28.7----------------------------------------------------------------------------------------------------- 117.3 79.7 -----------------------------------------------------------------------------------------------------Proposed final dividend for the year ended 31 December 2007 of 10.25p (2006:9.75p) per share 107.7 56.6----------------------------------------------------------------------------------------------------- 6. Earnings per share 2007 2006 From continuing operations £m £m -------------------------------------------------------------------------------- Basic (24.2p) 50.5p--------------------------------------------------------------------------------Diluted (24.2p) 50.1p--------------------------------------------------------------------------------Adjusted basic 30.8p 50.5p--------------------------------------------------------------------------------Adjusted diluted 30.7p 50.1p-------------------------------------------------------------------------------- Adjusted basic and adjusted diluted earnings per share, which exclude the impact of exceptional items and the associated tax effects, are shown to provide clarity on the underlying performance of the Group. The calculation of the basic and diluted earnings per share is based on the following data: 2007 2006Earnings £m £m--------------------------------------------------------------------------------------- Earnings for basic earnings per share and diluted earnings per share (197.9) 289.5 Add exceptional items (note 2): 379.7 - Add tax effect of exceptional items 70.2 - ---------------------------------------------------------------------------------------Earnings for adjusted basic and adjusted diluted earnings per share 252.0 289.5--------------------------------------------------------------------------------------- 2007 2006Weighted average number of shares: m m--------------------------------------------------------------------------------------- For basic earnings per share 818.5 572.9Weighted average of dilutive options 2.5 5.0Weighted average of dilutive awards under bonus plans - 0.5---------------------------------------------------------------------------------------For diluted earnings per share 821.0 578.4--------------------------------------------------------------------------------------- 7. Notes to the cash flow statement 2007 2006 £m £m -------------------------------------------------------------------------------- Profit on ordinary activities before finance costs 92.6 469.8Adjustments for: Amortisation of brands 33.7 - Amortisation of software development costs 2.0 - Depreciation of plant and equipment 8.3 7.7 Share-based payment charge 0.6 6.1 Gain on disposal of property and plant (5.7) (9.1) Share of joint ventures' operating profit (23.4) (22.1) Increase in provisions 38.6 8.5 --------------------------------------------------------------------------------Operating cash flows before movements in working capital 146.7 460.9 Increase in inventories (26.3) (347.5) Decrease/(increase) in receivables 38.9 (37.2) (Decrease)/increase in payables (81.6) 174.4 Pension contributions in excess of charge (30.0) (27.3)--------------------------------------------------------------------------------Cash generated by operations 47.7 223.3 Income taxes paid (127.3) (95.2)Interest paid (83.7) (71.1)--------------------------------------------------------------------------------Net cash (used in)/from operating activities (163.3) 57.0 -------------------------------------------------------------------------------- Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with an original maturity of three months or less. 2007 2006 £m £m -------------------------------------------------------------------------------- Net debtCash and cash equivalents 130.0 236.5Bank overdrafts and bank loans (720.7) (14.7)Debenture loans (824.7) (613.1)--------------------------------------------------------------------------------Net debt (1,415.4) (391.3)-------------------------------------------------------------------------------- 8. Statutory Accounts The Report and Accounts were approved by the Board of Directors on 5 March 2008. This announcement does not constitute the company's statutory accounts for the years ended 31December 2007 and 2006 but is derived from those accounts. Statutory accounts for 2006 have been delivered to the Registrar of Companies and those for 2007 will be delivered following the company's annual general meeting. The auditors have reported on these accounts; their reports wereunqualified and did not contain a statement under section 237 (2) or (3) of the companies Act 1985. While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Group expects to publish full financial statements that comply with IFRSs in March 2008. Basis of preparation--------------------The Group completed the merger with George Wimpey Plc on 3 July 2007. The statutory results of the Group for the year to 31 December 2007 therefore exclude the first six months trading of the former George Wimpey Plc businesses. To assist investors in understanding the performance of the combined Taylor Wimpey plc Group, a summary pro forma income statement has been prepared by aggregating the underlying financial information for the year to 31 December 2007 of the former Taylor Woodrow plc ("TW") and the former George Wimpey Plc ("GW"), to illustrate the effect of the merger of TW and GW as if thetransaction had taken place on 1 January 2006. The results from the two legacy businesses have been prepared on the basis of their historic accounting policies as published in the 2006 financial statements of the two Groups. In aggregating the two sets of financial information, intra-Group trading between the two entities has not been eliminated and fair value adjustments arising from theacquisition accounting have been excluded. This information has not been audited. Pro Forma Unaudited Combined Group Summary Income StatementFor the year to 31 December 2007 Pro forma Pro forma Combined Combined before before exceptional items exceptional items year to year to 31 December 2007 31 December 2006 £m £m-------------------------------------------------------------------------------- Consolidated Revenue 5,887.5 6,719.5Cost of sales (4,899.7) (5,514.6)--------------------------------------------------------------------------------Gross profit 987.8 1,204.9Net operating expenses (347.8) (342.0)Share of results of joint ventures 27.0 29.7--------------------------------------------------------------------------------Profit on ordinary activities before finance costs 667.0 892.6Net finance costs (131.4) (116.1)--------------------------------------------------------------------------------Profit on ordinary activities before taxation 535.6 776.5-------------------------------------------------------------------------------- Pro forma Pro forma Combined Combined before beforeRevenue exceptional items exceptional items year to year to 31 December 2007 31 December 2006 £m £m -------------------------------------------------------------------------------- Housing United Kingdom 3,998.8 4,150.4Housing North America 1,215.0 1,926.4Housing Spain and Gibraltar 64.4 92.1Construction 609.3 550.6Corporate - --------------------------------------------------------------------------------- 5,887.5 6,719.5-------------------------------------------------------------------------------- Pro forma Pro forma Combined Combined before before exceptional items exceptional items year to year toProfit on ordinary activities 31 December 2007 31 December 2006before finance costs £m £m-------------------------------------------------------------------------------- Housing United Kingdom 608.5 533.0Housing North America 62.4 336.8Housing Spain and Gibraltar 7.9 26.4Construction 2.0 8.1Corporate (13.8) (11.7)-------------------------------------------------------------------------------- 667.0 892.6-------------------------------------------------------------------------------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Taylor Wimpey