Annual Report and Accounts 2011

The Group has made significant progress with the disposal of the North American business and strong operational performance during 2011.

Ryan Mangold
Group Finance Director

 

Financial highlights

Adjusted earnings per share – continuing Group

2.1p

for 2011
(1.5p loss for 2011)

Tangible net assets per share***

KPI

57.3p

at 31 December 2011
(56.9p at 31 December 2010)

Net debt

£116.9m

at 31 December 2011
(£654.5m at 31 December 2010)

Return on net operating assets**

KPI

9.8%

at 31 December 2011
(5.3% at 31 December 2010)

  • Return on net operating assets of 9.8% (2010: 5.3%)
  • Group operating profit* from continuing operations increased by 80.6% to £159.5 million
  • UK full year operating margin* of 9.7% (2010: 6.4% (a))
  • Net debt reduced to £116.9 million and gearing (including land creditors) has reduced to 23%
  • Sale of North American business for £731.9 million
  • Pension deficit reduced to £208.2 million (2010: £248.5 million)

Group summary

The Group has made significant progress with the disposal of the North American business and strong operational performance during 2011.

We have achieved:

  • an increase of 80.6% in the continuing Group operating profit* compared to 2010 (a);
  • the disposal of the North American business for £731.9 million;
  • a reduction in the level of net debt to £116.9 million at the year end; and
  • a return on net operating assets** of 9.8% up from 5.3% in 2010.

The solid operational results and the proceeds from the sale of North America have been used to reduce our net debt and re-invest in new land opportunities, as well as refocus the capital structure with the purchase of £85.4 million of the 10.375% Senior Notes in 2011.

Group results

Group revenue from continuing operations in 2011 increased by 2.3% to £1,808.0 million in 2011 (2010: £1,767.7 million) from Group completions of 10,289 (2010: 10,098). The small increases in revenue and completions are reflective of the continuing stability in market conditions in the UK during 2011 and our strategic focus on quality of earnings ahead of volume.

Gross profit from continuing operations of £287.7 million (2010: £229.8 million) is up by 25.2% and reflects our continual focus on prioritising margin ahead of volume growth. The gross profit from continuing operations includes a positive contribution of £99.6 million (2010: £103.5 million), relating to realisation of written-down inventory above its originally estimated net realisable value, where the combination of slightly higher selling prices and cost improvements through replans and cost reduction initiatives have exceeded our original market assumptions. These amounts are stated before the allocation of overhead excluded from the Group’s net realisable value exercise.

Group operating profit* from continuing operations increased by £71.2 million, or 80.6%, to £159.5 million (2010: £88.3 million (a)) and Group operating margin* rose to 8.8% (2010: 5.0%(a)) as a result of the improved trading performance and a decrease in overheads following the sale of North America and the Group becoming a UK focused business. Group asset turn increased to 1.11 times in 2011 (2010: 1.06 times), although we continue to hold a longer than normal land portfolio at this stage of the market cycle, in line with our strategy. This results in an increase in the Group’s return on net operating assets** of 4.5 percentage points to 9.8% (2010: 5.3%(a)).

Group results

  UK
Housing
Spain
Housing
Corporate Consolidated
Completions 10,180 109 10,289
Revenue 1,779.4 28.6 1,808.0
Operating profit/(loss)* (£m) 173.2 0.2 (13.9) 159.5
Operating margin* 9.7% 0.7% 8.8%
 
Profit before tax and before exceptional items (£m) 89.9
Exceptional items (£m) (11.3)
Profit before tax (£m) 78.6
Tax, including exceptional credit (£m) (22.7)
Profit for the year (£m) 55.9
Adjusted earnings per share (p) 2.1
Dividends per share (p) 0.38

UK Housing

We completed a total of 10,180 homes in the UK in 2011 (2010: 9,962) with revenues of £1,779.4 million (2010: £1,736.6 million) for an average selling price of £171k (2010: £171k). The UK financial performance showed strong progression with a full year operating profit of £173.2 million (2010: £111.0 million(a)) representing a full year operating margin* of 9.7% (2010: 6.4%(a)). For the second half of the year operating profit* was £97.6 million, an increase of £22 million over the first half of 2011, and the UK operating margin* increased to 10.1% for the second half compared to 9.3% for the first half of 2011. The UK market was stable during 2011 and the performance of UK Housing reflects the continued success of our strategy of prioritising margin ahead of volume.

Spain Housing

We completed 109 homes in Spain (2010: 136) with no completions in Gibraltar during 2011 following our exit in 2010. The average selling price of these completions was £238k (2010: £214k). Revenue was £28.6 million (2010: £31.1 million) and we recorded an operating profit* of £0.2 million (2010 loss: £3.6 million). The return to profit for Spain Housing, and continuing cash generation by the business, is a good performance against a challenging market backdrop.

Disposal of North American business

In July 2011, the Group completed the sale of its North American business for £731.9 million. The North American business generated a profit after tax of £24.5 million, with a corresponding increase in net assets, and contributed £8.9 million to the Group’s net operating cash flows in 2011 up to the disposal date. The disposal realised a total profit from discontinued operations of £43.1 million after taking into account an impairment of net assets of £24.0 million, transaction costs of £16.5 million and recycling of foreign exchange reserves for North America recorded in the cumulative translation reserves of £59.1 million.

Further details of discontinued operations are set out in Note 27 of the consolidated financial statements (PDF 281 KB).

Our priorities for 2012

  • Ongoing focus on margin improvement and return on net operating assets
  • Drive additional overhead savings to further improve operating margins
  • Continue our review of options to reduce the volatility of the pension scheme deficit
  • * Profit on ordinary activities from continuing operations before finance costs and exceptional items, after share of results of joint ventures.
  • ** Operating profit divided by the average of the opening and closing net operating assets, which is defined as capital employed plus intangibles less tax balances.
  • *** Tangible net assets per share is defined as net assets, excluding goodwill and intangible assets, divided by the number of shares in issue at the period end.
  • (a) 2010 comparative excludes a one-off pension curtailment credit of £12.0 million in the UK.

© Taylor Wimpey plc 2012