TIDMCSP
RNS Number : 0832S
Countryside Properties PLC
16 December 2016
16 December 2016
COUNTRYSIDE PROPERTIES PLC (THE "COMPANY")
ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
The following documents have today been posted or otherwise made
available to shareholders:
-- Annual Report 2016
-- Notice of Annual General Meeting
-- Proxy Form
-- Electronic Communications Letter
In accordance with Listing Rule 9.6.1R, a copy of each of these
documents has been uploaded to the National Storage Mechanism and
will be available for viewing shortly at
http://www.morningstar.co.uk/uk/NSM
The above documents may be viewed online at
www.investors.countryside-properties.com.
A condensed set of the Company's financial statements and
information on important events that have occurred during the
financial year and their impact on the financial statements were
included in the Company's Preliminary Results Announcement on 29
November 2016. That information together with the information set
out below, which is extracted from the Annual Report 2016,
constitute the material required by Disclosure and Transparency
Rule 6.3.5R which is required to be communicated to the media in
full unedited text through a Regulatory Information Service. This
announcement is not a substitute for reading the full Annual Report
2016. Page and note references in the text below refer to page
numbers in the Annual Report 2016. To view the preliminary
announcement, slides of the results presentation and the webcast
please visit www.investors.countryside-properties.com.
Enquiries: Tel: +44 (0) 1277 260 000
Ian Sutcliffe - Group Chief Executive
Rebecca Worthington - Group Chief Financial Officer
Victoria Prior - Investor Relations & Strategy Director
PRINCIPAL RISKS AND UNCERTAINTIES
Countryside has policies and procedures in place for the timely
identification, assessment and prioritisation of the Group's
material risks and uncertainties. This section describes how these
risks are identified, managed and mitigated appropriately in order
to deliver the Group's strategic objectives.
How We Manage Risk
Risk identification and management is built into every aspect of
Countryside's daily operations, ranging from the appraisal of new
sites, assessment of the prospects of planning success, building
safely, and selling effectively to achieve long-term success
through the property market cycle. Risk management is built into
standardised processes for each part of the business at every stage
of the housebuilding process. Financial risk is managed centrally
through maintenance of a strong balance sheet, forward selling new
homes and the careful allocation of funds to the right projects, at
the right time and in the right locations. Risk management also
includes the internal controls described within the Corporate
Governance Report on page 48.
The Risk Management Committee normally meets every quarter to
review the Group's risk register. Given the uncertainty leading up
to the outcome of the EU Referendum on 23 June 2016, on the UK's
continuing membership of the European Union, additional meetings
were held by members of the Risk Management Committee to agree
appropriate mitigating actions should they be required.
The Group's risk register is maintained to record all principal
risks and uncertainties identified in each part of the business and
an appropriate "risk owner" for each risk. The risk owners conduct
an analysis of each risk, according to a defined set of assessment
criteria which includes:
3/4 How does the risk relate to the Group's business model and/or strategy?
3/4 What is the likelihood of the risk occurring?
3/4 What is the potential impact were the risk to occur?
3/4 Would the consequences be short, medium or long term?
3/4 What mitigating actions are available and which are cost effective?
3/4 What is the degree of residual risk and is it within the Group's risk appetite parameters?
3/4 Has the risk assessment changed and what is expected to change going forward?
The Risk Management Committee reviews the assessments made,
compares it to the Group's appetite for each risk, reviews the
current level of preparedness and determines whether further
actions or resource are required. In reviewing and agreeing the
mitigating actions, the Risk Management Committee considers the
impact of risks individually and in combination, in both the short
and the longer term.
Board and Audit Committee Responsibility
The Audit Committee reviewed the Group's risk register and the
assessment of the Group's principal risks and uncertainties
prepared by the Risk Management Committee at its meetings in
February and July 2016. The Audit Committee also considered the
effectiveness of the Group's systems, and has taken this into
account in preparing the Viability Statement on the next page.
The Audit Committee reported on its findings to the Board at the
Board's July and September meetings, in order to support it in
making its confirmation that it had carried out a robust assessment
of the principal risks. The table on pages 38 to 39 of the report
sets out the Group's principal risks and uncertainties, mitigation
and any change during the period.
The Board
- determines the Group's approach to risk, its policies and the
procedures that are put in place to mitigate exposure to risk.
Audit Committee
- has delegated responsibility from the Board to oversee risk management and internal controls;
- reviews the effectiveness of the Group's risk management and internal control procedures; and
- monitors the effectiveness of the Internal Audit function and
the independence of the external audit.
Risk Management Committee
- is responsible for the effective maintenance of the Group's risk register;
- oversees the management of risk;
- monitors risk mitigation and controls; and
- monitors the effective implementation of action plans.
Internal Audit
- undertakes independent reviews of effectiveness of internal control procedures;
- reports on effectiveness of management actions; and
- provides assurance to the Audit Committee.
Executive Committee
- is responsible for identification of operational and strategic risks;
- is responsible for ownership and control of specific risks; and
- is responsible for establishing and managing the implementation of appropriate action plans.
Referendum on 23 June 2016 on the UK's Continuing Membership of
the European Union
Given the considerable uncertainty in the lead up to the EU
Referendum vote, members of the Risk Management Committee met with
the senior management of all business divisions to ensure that
appropriate mitigation plans were agreed, and ready for
implementation if required, to mitigate the full range of possible
Brexit vote outcomes foreseen by some commentators.
The uncertainty in the market leading up to the EU Referendum
vote lasted for two to three weeks after the vote. This impacted
customer confidence and, while visitor levels and gross
reservations remained largely unchanged, we did experience higher
levels of cancellations and some price renegotiation. However, this
period was relatively short-lived and we have experienced good
trading conditions from August onwards.
The wider economic impacts of the EU Referendum vote may also be
felt by the housebuilding industry in future, such as a slowdown in
economic growth, higher imported material costs and possible
restrictions on foreign labour. However, all of these risks are
monitored and will be mitigated where possible by the Risk
Management and Executive Committees with the appropriate action
being taken in a timely manner.
PRINCIPAL RISKS AND UNCERTAINTIES FACING THE GROUP
The Group's principal risks are monitored by the Risk Management
Committee, the Audit Committee and the Board.
The table below sets out the Group's principal risks and
uncertainties.
PRINCIPAL RISKS RISK MITIGATION
----------------------------- ------------------------------------
Adverse macroeconomic conditions (change over
year - increase)
A decline in macroeconomic Funds are allocated between
conditions, or conditions the Housebuilding and Partnerships
in the UK residential divisions. In Housebuilding,
property market, can land is purchased based
reduce the propensity on planning prospects,
to buy homes. Higher forecast demand and market
unemployment and/or resilience. In Partnerships,
interest rates affect contracts are phased and,
consumer confidence where possible, subject
and can reduce demand to viability testing. In
for new homes. Constraints all cases, forward sales,
on mortgage availability, cash flow and work in progress
or higher costs of are carefully monitored
mortgage funding, may to give the Group time
make it more difficult to react to changing market
to sell homes. conditions.
----------------------------- ------------------------------------
Adverse changes to Government policy and regulation
(change over year - no change)
Adverse changes to The potential impact of
Government policy in changes in Government policy
areas such as tax, and new laws and regulations
housing and the environment are monitored and communicated
may result in increased throughout the business.
costs and/or delays.
The discontinuation
of Government-backed
purchase assistance
programmes may adversely
affect the Group's
sales.
----------------------------- ------------------------------------
Build cost inflation (change over year - no
change)
Build costs may increase Use of standard house types
beyond budget due to is optimised and designed
the reduced availability to maximise buying power.
of skilled labour, Use of strategic suppliers
increases in sub-contractor to leverage volume price
or material costs, reductions and minimise
errors, omissions or unforeseen disruption.
unforeseen technical Robust contract terms to
conditions. control costs.
----------------------------- ------------------------------------
Programme delay including rising project complexity
(change over year - no change)
Poor project forecasting, The budgeted programme
unforeseen operational for each site is approved
delays due to technical by the divisional board
issues, disputes with before acquisition. Sites
third party contractors are managed as a portfolio
or suppliers, bad weather to control overall Group
or changes in purchaser delivery risk. Weekly monitoring
requirements may cause at both Divisional and
delay or potentially Group level.
termination of a project.
----------------------------- ------------------------------------
Inability to source and develop suitable land
(change over year - no change)
Competition or poor A robust land appraisal
planning may result process ensures each project
in a failure to procure is financially viable and
land in the right location, consistent with the Group's
at the right price strategy.
and at the right time.
----------------------------- ------------------------------------
Poor sales performance (change over year - no
change)
Poor forecasting of Market demand for design,
market demand, or inability product type and price
to react quickly enough is assessed for each potential
to changes in market site prior to acquisition.
demand, in terms of Forward sales are monitored
product, location, closely to react to changing
time and price will market conditions.
impact the Group's
competitiveness and
reduce sales or sales
prices.
----------------------------- ------------------------------------
Product quality declines (change over year -
no change)
-------------------------------------------------------------------
Failure to deliver Standard house types and
high quality product strategic suppliers are
and customer service used to maximise maintenance
may reduce sales, adversely of Group standards. Regular
affect the Group's quality reviews are performed
brand and reputation at each stage of construction.
and potentially lead Customer surveys are conducted
to third party liabilities. on handover of homes and
results are analysed to
improve product quality.
----------------------------- ------------------------------------
Inability to attract and retain talented employees
(change over year - no change)
-------------------------------------------------------------------
Inability to attract Remuneration packages are
and retain highly skilled, regularly benchmarked against
competent people at industry standards to ensure
all levels could adversely competitiveness. Succession
affect the Group's plans are in place for
results, prospects all key roles within the
and financial condition. Group. Exit interviews
are used to identify any
areas for improvement.
----------------------------- ------------------------------------
Delays or refusals in planning (change over
year - no change)
Failure to secure timely A planning and risk assessment
planning permission is conducted prior to any
on economically viable land purchase. Strong relations
terms is critical to are maintained with local
the value of the Group's communities, the local
land bank. authority and planning
officers to best understand
underlying policy and planning
prospects.
----------------------------- ------------------------------------
Inadequate health, safety and environmental
procedures (change over year - no change)
A deterioration in Procedures, training and
the Group's health, reporting are all carefully
safety and environmental monitored to ensure that
standards could put high standards are maintained.
the Group's employees An environmental risk assessment
and contractors or is carried out prior to
the general public any land acquisition. Appropriate
at risk of injury or insurance is in place to
death and could lead cover the risks associated
to litigation or penalties with housebuilding.
or damage the Group's
reputation.
----------------------------- ------------------------------------
RELATED PARTY TRANSACTIONS
Transactions with Group joint ventures and associate
Joint ventures Associate
---------------------- -------------------- --------------------
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- --------- --------- ---------
Sales during the
year 26,150 20,648 674 1,522
---------------------- --------- --------- --------- ---------
At 1 October 62,117 45,442 - -
Net advances during
the period 22,116 16,675 - -
---------------------- --------- --------- --------- ---------
At 30 September 84,233 62,117 - -
---------------------- --------- --------- --------- ---------
The transactions noted above are between the Group and its joint
ventures and associate whose relationship is described in Note 13
and Note 14 respectively.
Sales of goods to related parties were made at the Group's usual
list prices. No purchases were made by the Group from its joint
ventures or associate. The amounts outstanding ordinarily bear no
interest and will be settled in cash.
Remuneration of key management personnel
The aggregate remuneration of the Executive Committee, who are
considered to be key management personnel of the Group, was GBP6.1m
(2015: GBP6.4m).
Transactions with key management personnel
In 2014, properties were sold at market value by the Group to
parties related to key management personnel who continue to lease
them back to the Group as follows:
3/4 Close family members of Ian Sutcliffe received GBP17,250 (2015: GBP17,250)
3/4 A company of which Graham Cherry, a member of the Executive
Committee, is a Director and shareholder received GBP21,000 (2015:
GBP21,000).
In 2016 a close family member of Ian Sutcliffe jointly purchased
a property from Acton Gardens LLP, an entity in which the Group has
a 50 per cent interest, at market value of GBP530,000.
Last financial year, a close family member of Ian Sutcliffe and
a close family member of Graham Cherry were employed by a
subsidiary of the Group. Both individuals were recruited through
the normal interview process and are employed at salaries
commensurate with their experience and roles. The combined annual
salary and benefits of these individuals is less than GBP100,000
(2015: less than GBP100,000).
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Annual Report,
the Directors' Remuneration Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group financial statements in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by
the European Union, and the parent company financial statements in
accordance with Financial Reporting Standard 102 (FRS102) the
financial reporting standard applicable in the UK and Republic of
Ireland (FRS 102).
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
the profit or loss of the Group for that period. In preparing these
financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and accounting estimates that are reasonable and prudent;
- state whether IFRSs as adopted by the European Union and FRS
102 have been followed, subject to any material departures
disclosed and explained in the Group and parent company financial
statements respectively;
- notify its shareholders in writing about the use of disclosure
exemptions, if any, of FRS 102 used in the preparation of the
parent financial statements; and
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and enable them to
ensure that the financial statements and the Directors'
Remuneration Report comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets
of the Company and the Group and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's
performance, business model and strategy.
Each of the Directors, whose names and functions are listed on
page 42 to 43 of the Annual Report confirm that, to the best of
their knowledge:
- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of
the Group; and
- the Directors' Report contained on page 70 of the Annual
Report includes a fair review of the development and performance of
the business and the position of the Group, together with a
description of the principal risks and uncertainties that it
faces.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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