2016 Corporate Governance

UK CORPORATE GOVERNANCE CODE

As a private family-owned company the Group is not required to comply with the UK Corporate Governance Code 2016. However, it has included certain additional disclosures regarding corporate governance over and above those it is required to provide, where it is believed these disclosures would be helpful to readers of the Annual Accounts and Reports.

The Board believes that good business and sustained performance stems from good corporate governance, and remains firmly committed to achieving the highest standards in the interest of all stakeholders. Governance supports open and honest business, ensures that the Group has the right safeguards in place and makes certain that every decision it takes is underpinned by the right considerations.

This approach enables the Company to protect the integrity of its business, meet strategic objectives, create value for shareholders and build a long-term sustainable business. The Board is clear that by doing the right things in the right way the Group can protect its brand, reputation and relationships with shareholders, customers, employees, supply chain and the local communities in which it works.

THE ROLE OF THE BOARD

The Board’s primary responsibility is to promote the long-term success of the Company by creating and delivering sustainable shareholder value. The Board seeks to achieve this by setting out its strategy, monitoring performance against strategic objectives and reviewing implementation of the strategy by the Executive Committee.

A formal schedule of matters reserved for Board approval is maintained, including determination of the Group’s strategy and long-term direction, approval of budgets, capital expenditure, organisation changes, including new business ventures, the acquisition or disposal of assets, and changes in key policies. The Board also monitors the Group’s systems of internal control, governance and risk management.

The Board delegates authority for all day-to-day management of the Group’s affairs to the Executive Committee. In addition, certain governance responsibilities are delegated to Board committees, which support the Board in carrying out its duties. These committees are made up of Independent Non-Executive Directors, together with Non-Executive Directors from the Wates family, and provide the Board with independent oversight.

THE ROLE OF THE CHAIRMAN

The Chairman plays a pivotal role by creating the conditions for overall Board and individual director effectiveness. The Chairman is responsible for appraising the Board of all matters affecting the Group and its performance. He is responsible for effective operation and chairing of the Board, ensuring the efficient use of the Board’s time, that the agenda is forward looking and concentrates on strategy.

The Chairman ensures that sufficient time is allocated to discuss complex or contentious issues, so that decisions are reached in a consensual and timely manner, arranging pre-board preparation as necessary, to avoid unrealistic deadlines for decision making. The Chairman also has responsibility to ensure effective communication with shareholders and that all Board members are aware of the views of shareholders.

BOARD OF DIRECTORS

The Board comprises Chairman, Chief Executive, Chief Financial Officer, two Independent Non-Executive Directors and four family Directors. Huw Davies stepped down from the Board on 4th January 2016 and was replaced by David Allen as Chief Financial Officer. Jonathan Wates re-joined the Board on 20th June 2016. Graeme McFaull stepped down from the Board on 30 September 2016 and David Smith on 17 October 2016.

Directors update their skills, knowledge and familiarity with the Company by attending appropriate external seminars and training courses, meeting with senior management and visiting regional and divisional operating offices. The Group has an induction programme for all new Directors, which is tailored to specific experience and knowledge, and which provides access to all parts of the business, including access to shareholders.

INDEPENDENT DIRECTORS

The Board is satisfied that the number and calibre of its Independent Non-Executive Directors, together with their diverse backgrounds and experiences, ensures that the principles of the UK Corporate Governance Code are met. The Board believes that the Independent Non- Executive Directors are wholly independent in that they have no material business or relationships with the Group that might influence their independence or judgement.

BOARD MEETINGS

The Board has a programme of nine principal meetings every year, plus 2 additional days for the annual strategy conference with the Executive Committee. The Board receives regular and timely information on the financial performance of the business, together with reports on operational matters, market conditions, sustainability, competitor environment and corporate responsibility. The Directors have equal voting rights when making decisions, except the Chairman, who has a casting vote. All Directors have access to the advice and services of the Company Secretary and may, if they wish, take professional advice at the Group’s expense.

From time to time, matters arise which require urgent approval prior to the next scheduled Board meeting and in such instances approval of all Directors may be sought via a telephone conference call.

BOARD DIVERSITY

The Group is an equal opportunities employer and promotes an environment free from discrimination. The Group’s policy on diversification extends to the Board. New Board appointments are based on a balance of skills and experience and will always be objective, free from bias and based solely upon relevant experience, knowledge and individual merit. A copy of the Group’s Equality, Diversity and Inclusion Policy can be found at the Group’s website www.wates.co.uk

BOARD EFFECTIVENESS

The Board last undertook a formal effectiveness review facilitated by an independent external advisor in 2015 and has scheduled the next independent review for 2018, in accordance with the three year cycle set out in the UK Corporate Governance Code. Improvement actions emanating from the last assessment to further strengthen and enhance the Board’s performance have been implemented on an on-going basis. The Board plans to undertake an informal assessment of its effectiveness during 2017 to determine successful execution of the actions plans, particularly around individual development of Board members and the organisation and timing of matters reserved to the Board.

COMMITTEES

Audit Committee

The Board delegates a number of specific duties to the Audit Committee, in order to assist in the discharge of its duties and to bring independent oversight to the Group’s activities. The Committee’s primary concerns are the integrity of the Group’s financial statements; the effectiveness of internal controls; the performance of the internal audit function; performance and independence of the external auditors; and compliance with legal and regulatory requirements.

External Auditors

PricewaterhouseCoopers LLP was re-appointed external auditors at the Group’s AGM in April 2016. The Committee assesses the effectiveness of their performance every year after completion of the annual audit plan.

Internal Audit

Reporting to the Audit Committee Internal Audit is an independent objective assurance and advisory function established by the Board to provide assurance on controls and operations.

Its primary task is to assist the operating businesses accomplish their objectives by bringing a systematic disciplined approach to the evaluation and improvement of controls, risk management and asses protection.

Remuneration Committee

The Committee’s primary objective is to set remuneration at a level that will enhance the Group’s resources by attracting, retaining and motivating quality senior management who can deliver the Group’s strategic ambitions within a framework aligned with shareholder interests.

Nominations Committee

The Board operates a Nomination Committee to ensure that the Board remains balanced and effective, that succession plans are in place, and that its structure, composition and skills remain aligned to the Group’s strategic objectives.

Executive Committee

The Executive Committee consists of individuals responsible for the strategic business units and key functions. Together they are responsible for the day to day management of the Group’s business affairs under the leadership of the Chief Executive. This includes formulating strategy proposals for Board approval and ensuring that the agreed strategy is implemented in a timely and effective manner.

Group Risk Committee

The Group operates a Risk Committee to ensure that inherent and emerging risks in the Business are identified and managed in a timely manner and at an appropriate level. The Committee reviews the organisation’s response to specific areas of risk, and approves standards and processes where control weaknesses are considered to exist.

Reshaping Tomorrow Committee

The Reshaping Tomorrow Committee is a delegated authority of the Executive Committee, with the primary purpose of providing strategic leadership direction and oversight and setting the Group’s policy on corporate responsibility. Its scope covers environment issues, community investment, diversity and inclusion.

INTERNAL CONTROLS

The Board takes ultimate responsibility for the Group’s systems of risk management and internal control, and for reviewing their effectiveness.