Annual Report and Accounts 2011

We have now finalised our strategy to optimise our UK business.

Pete Redfern
Chief Executive


2011 has been another year of significant progress for the Group, building on the improved financial performance that we delivered in 2010 and the strengthening of our financial position during 2009. Following the sale of our North American business and the successful implementation of the strategy for recovery that I set out in the 2009 Annual Report, we have now finalised our strategy to optimise our UK business with the aim of becoming the UK’s leading residential developer for creating value and delivering quality.

Sale of North American business

As I reported in my Chief Executive’s Review last year, we received interest in our North American operations towards the end of 2010. Following a comprehensive evaluation of these approaches, we completed the sale in July 2011. The total proceeds of £731.9 million represented an attractive valuation for the business and provide us with a strengthened balance sheet and increased financial capacity to invest in the UK.

As a result of the sale, we are reporting a profit from discontinued operations of £43.1 million in the 2011 results and Ryan Mangold provides more detail on this figure in his Group Financial Review.

Enhanced focus on the UK

We have already taken a number of steps to deliver the benefits of our enhanced focus on the UK, the most apparent of which has been the completion of the merger of our former Corporate office with our former UK Housing head office into a single team based in our existing High Wycombe office. Regrettably this has resulted in a small number of redundancies, although in most cases we were able to redeploy people whose roles were at risk into other parts of the business.

We have also revised our management structures combining the previous Executive Committee and UK Management Team into a single Group Management Team, which is responsible for the day to day running of the Company. As a team we are now able to focus more of our attention on the UK business and have made good progress on a number of operational initiatives, which are discussed in more detail in the UK Housing section of this Annual Report.

The UK housing market cycle

In last year’s Annual Report, we set out our value cycle and the associated strategy in some detail. The fundamental principle on which this is based is that the UK housing market is cyclical, albeit this is all too easy to forget when house prices are rising and there is an opportunity to deliver higher profits through increasing the number of home completions each year.

Monitoring the status of the UK housing market is a key requirement of taking a more active approach to managing the cycle. While we do not expect to be able to forecast the timing of this entirely accurately, we are monitoring a wide range of indicators in order to inform our judgement. As a management team we have in excess of 115 years of experience of the UK housebuilding industry and recognise that there are significant advantages to adjusting the operational tactics of the business according to the stage of the market cycle.

Below this section you will see four of these indicators, along with a brief commentary on their relevance to the housing market cycle.

Market data

The charts below illustrate the cyclical nature of the UK housing market and some of the external indicators that we monitor in assessing the status of the market.


Graph displaying the Mortgage/Earnings ratio
  • Source: Halifax
  • The mortgage/earnings ratio provides an indication of the affordability of housing, taking into account the underlying mortgage interest rates. Affordability is significantly improved as a result of recent declines in both house prices and Bank of England base rates.

Gross secured lending

Graph displaying the Gross secured lending
  • Source: Bank of England
  • The correlation between the gross secured lending chart above and the housing starts chart to the right reflects the impact of restricted credit availability on the housing market.

Average annual
house price change

Graph displaying the Average annual house price change
  • Source: Average of CLG, Halifax, Land Registry and Nationwide House Price indices
  • There has been significant variation in the average annual house price change since 1997, with very strong growth from 2001 to 2003 and price declines in 2008 and 2009.

Housing starts,
Great Britain

Graph displaying the Average annual house price change
  • Source: Communities and Local Government
  • Total housing starts do not exhibit the same strong growth as house prices in the period from 1997 to 2006, but fell sharply from 2007 to 2009.
Signature of Pete Redfern, Chief Executive

Pete Redfern
Chief Executive

© Taylor Wimpey plc 2012