UK CORPORATE GOVERNANCE CODE

As a private family-owned company the Group is not required to comply with the UK Corporate Governance Code. 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 Group to protect the integrity of its business, meet its strategic objectives, create value for its shareholders and build a long-term sustainable business. The Board is clear that good governance is essential on a day to day basis to protect the Group’s 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 Group by creating and delivering sustainable shareholder value. The Board seeks to achieve this by setting out its strategy, monitoring performance against the Group’s strategic objectives and reviewing the Executive Committee’s implementation of the strategy.

A formal schedule of matters reserved for Board approval is maintained and reviewed regularly for operational relevance. This includes the 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 effectiveness of 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. The Chairman is responsible for the effective operation and chairing of the Board, ensuring that the Board’s time is used efficiently and 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, three Independent Non-Executive Directors and four family Directors.

On 10 November 2017 Andrew Davies stepped down as Chief Executive and David Allen was appointed Acting Chief Executive. On 3 July 2017 the Board appointed Jonathan Oatley to the Board as an Independent Non-Executive Director.

Directors update their skills, knowledge and familiarity with the Group by meeting with senior management, visiting regional and divisional operations and by attending appropriate external seminars and training courses. The Group has an induction programme for all new Directors, which is tailored to their 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 two 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, health & safety, market conditions, sustainability 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. 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 diversity 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 suggested by the UK Corporate Governance Code. During 2017 the Board conducted an informal self-assessment to consider its success in executing the action plans agreed as a result of the 2015 review. The Board considers the assessment an important process in the identification of key areas for future improvements and focus, to further strengthen and enhance the overall performance of the Board and its Committees.

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 the Group’s compliance with legal and regulatory requirements.

External Auditors

PricewaterhouseCoopers LLP was re-appointed external auditors at the Group’s AGM in May 2017. 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 assets protection. In 2017 the Audit Committee commissioned an independent assessment of the Internal Audit function. The report concluded that the function operated with a high level of professionalism, integrity and independence, performed to a good standard, generally complied with the IIA standards and compared favourably against sector peers.

Corporate Finance Committee

In 2016 the Board established a Corporate Finance Sub-Committee to provide oversight of discreet matters relative to the Group’s balance sheet. In 2017 the Committee’s primary objective was to develop a strategy to manage the Group’s defined benefit pension liabilities.

Remuneration Committee

In 2016 the Board established a Corporate Finance Sub-Committee to provide oversight of discreet matters relative to the Group’s balance sheet. In 2017 the Committee’s primary objective was to develop a strategy to manage the Group’s defined benefit pension liabilities.

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.

Sustainability Committee

In 2017 the Board established a Sustainability Committee to bring oversight and challenge to the Group’s corporate responsibility programmes and to explore the impact and opportunities that global trends might bring to the built environment. The Committee has commissioned a horizon scan project to ensure that the Group’s business planning and long terms strategy remains relevant and robust by exploring broader landscape, industry and disruptive trends that are likely to shape the future of the business.

Executive Committee

The Executive Committee is responsible for the day-to-day management of the Group’s business affairs under leadership of the Chief Executive. The Committee’s duties include 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 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.