TIDMCSP
RNS Number : 9583T
Countryside Properties PLC
30 November 2021
30 November 2021
Focused Partnerships business to deliver strong and profitable
growth
Countryside, the market leader in high quality, mixed tenure
communities, today announces its results for the year ended 30
September 2021.
Results highlights
2021 2020 Change
Completions(1) 5,385 4,053 +33%
Adjusted revenue(2) GBP1,526.2m GBP988.8m +54%
Adjusted operating profit(3) GBP167.3m GBP54.2m +209%
Adjusted operating margin(4) 11.0% 5.5% +5.5%
Adjusted basic earnings per
share(5) 23.7 pence 7.4 pence +220%
Return on capital employed(6) 18.6% 7.1% +11.5%
Reported revenue GBP1,371.4m GBP892.0m +54%
Reported operating profit/(loss) GBP71.3m GBP(5.4)m -
Net cash(7) GBP41.0m GBP98.2m (58)%
Reported basic earnings/(loss)
per share 13.8 pence (0.8) pence +14.6 pence
Group highlights
-- Strong recovery from Covid-impacted 2020 results with
adjusted revenue +54%, adjusted operating profit +209% and ROCE of
18.6%
-- Partnerships teams established and securing development sites
in all regions, including good progress establishing the Home
Counties division
-- Partnerships land bank of 52,903 plots supporting future
growth
-- Retained HBF 5-star builder status for the second year
running
-- New factory constructed to support Group's Modern Methods of
Construction ("MMC") objectives
-- GBP450m legacy asset realisation programme on track with
proceeds of GBP50m realised and GBP49m of share buybacks completed
to date
-- Provision for building safety and quality of GBP41m
-- Agreed voluntary undertakings with the CMA resulting in a
GBP3.8m increase to the Ground Rent Assistance Scheme provision
-- New medium-term plan to capitalise on the significant
opportunity for sustained profitable growth
-- Excellent opportunities to invest in Partnerships, so the
Board does not recommend a final dividend
Outlook
We are 48% forward sold for 2022 including GBP426m from private
sales (as at 30 September 2021) with a private net reservation rate
in the nine weeks to 28 November 2021 at 0.94.
As the growth plans set out last year progress and our
attractive market conditions are expected to continue, we expect to
deliver adjusted operating profit in the range of GBP200m to
GBP210m in the year to 30 September 2022, including a c.GBP40m
contribution from legacy housebuilding operations.
New medium-term plan
Following the decision to focus 100% on Partnerships in the
future, the Group has announced a new medium-term plan to deliver
sustainable double-digit growth at attractive targeted return
rates.
The Group has invested considerably in Partnerships land and
work in progress over the last 5 years with assets employed
increasing from GBP103m to GBP610m over that period, including
GBP209m from the former Housebuilding division. We have also
invested significantly in the regional teams and central support
functions to generate capacity for profitable future growth. Over
the next two to three years the Group expects to employ Tangible
Net Operating Assets ("TNOAV") in the range of GBP750m (+/- GBP50m)
until the targeted ROCE of 40%+ is achieved. Over the same period,
we expect to grow operating margins to at least 13%.
After achieving the targeted ROCE, we will target organic
double-digit profit growth, expected to be in the range 10% to 15%
per annum to capitalise on the significant multi-year growth
opportunity.
Capital structure
The Group will maintain a prudent approach to managing the
balance sheet and seek to maintain net cash or net debt in the
range of +/- one times adjusted operating profit. There are
substantial opportunities for re-investment to deliver sustainable,
profitable double-digit organic growth in Partnerships. This will
take precedence over shareholder returns for the foreseeable
future.
John Martin, Chair said: "Countryside has a clear path to
becoming 100% focused on our differentiated and market-leading
mixed tenure Partnerships business. Since we announced the strategy
earlier this year, we have made excellent progress in establishing
the new division in the Home Counties where we have a wealth of
opportunities to bring our award-winning proposition to a new
generation of home-owners and tenants in an area where it is sorely
needed. We will stay focused on developing places where people love
to live in the most environmentally sustainable way. We have also
made good progress in the realisation of legacy assets and the
return of proceeds to shareholders."
"Countryside is uniquely positioned to fulfil the considerable
demand for homes in mixed-tenure developments and we believe that
this represents a multi-year growth opportunity. We have made
significant investments to align our resources - both capital and
people - with this market opportunity and we believe that this will
generate attractive returns for our shareholders in a sustainable,
low-risk way. Our management team will present this new plan, and
our associated expectations, at a Capital Markets Event later
today."
Iain McPherson, Group Chief Executive, said: " We have achieved
a strong recovery from Covid, with adjusted revenue growing by 54%,
with a continued focus on quality of delivery. This is testament to
the effort and commitment of our employees and the strength of our
relationships with our partners. After a strategic review of the
business, we have the structure and the team to continue to grasp
the compelling opportunity that is ahead of us. This will see us
create places people love, whilst delivering strong growth and
attractive returns for shareholders over the medium term ."
Analyst and investor presentations today:
1. FULL YEAR 2021 RESULTS:
There will be a live full year results webcast and conference
call for our analysts and investors at 08.30 hrs (GMT). There will
be the ability to ask questions via the webcast link as well as via
the conference call. Details are set out below:
Date: Tuesday 30 November 2021
Time: 0830hrs
Dial in (Int'l): +44 203 936 2999
Dial in UK Free Call: 0800 640 6441
Dial in UK Local Call: 0203 936 2999
Conference ID / passcode: 140781
Webcast link: https://www.investis-live.com/countryside-properties/61780095d5f3550c00092bad/q3r21
A recording of the event will be available shortly after the
presentation has finished.
2. CAPITAL MARKETS EVENT:
There will be a live Capital Markets Event this afternoon at
14.30 hours (GMT) at Institute of Chartered Accountants in England
and Wales, Chartered Accountants' Hall, Moorgate Place, London EC2R
6EA which will be webcast at
https://www.investis-live.com/countryside-properties/617805770f8b6e0d000bc51c/cmd2021
. Material covered in the presentations will include an update on
the market, strategy, land sourcing and sustainability. No new
material information will be given.
A recording of the event will be available shortly after the
presentation has finished.
Enquiries:
Countryside Properties PLC Tel: +44 (0) 1277 260 000
Iain McPherson - Group Chief Executive
Victoria Prior - Managing Director, Corporate Affairs
Brunswick Group LLP Tel: +44 (0) 20 7404 5959
Nina Coad
Robin Wrench
Note to editors:
Countryside is the market leader in the delivery of high quality
mixed-tenure communities in partnership with housing associations,
public bodies and institutional private rental operators, with a
strong focus on placemaking and regeneration.
Countryside's differentiated Partnerships business model:
-- Mixed tenure developments, including affordable homes, homes
for institutional private rental and homes for private sale.
-- Over 40 years track record of collaborative working with
partners in public and private sectors.
-- Over 60% of developments on regeneration or brownfield
sites.
-- Increasing use of Modern Methods of Construction, with a
target of 50% of all homes to be built using our in-house
manufacturing facilities by 2025.
-- Place-making at the heart of everything we do - designing
places people love, helping to build successful communities.
Committed to high quality design, construction and management,
creating a positive legacy for future generations.
For more information see www.countrysideproperties.com or follow
@CountrysideProp on Twitter.
Cautionary statement regarding forward-looking statements
Some of the information in this document may contain projections
or other forward-looking statements regarding future events or the
future financial performance of Countryside Properties PLC and its
subsidiaries ("the Group"). You can identify forward-looking
statements by terms such as "expect", "believe", "anticipate",
"estimate", "intend", "will", "could", "may" or "might", the
negative of such terms or other similar expressions. Countryside
Properties PLC ("the Company") wishes to caution you that these
statements are only predictions and that actual events or results
may differ materially. The Company does not intend to update these
statements to reflect events and circumstances occurring after the
date hereof or to reflect the occurrence of unanticipated events.
Many factors could cause the actual results to differ materially
from those contained in projections or forward-looking statements
of the Group, including among others, general economic conditions,
the competitive environment as well as many other risks
specifically related to the Group and its operations. Past
performance of the Group cannot be relied on as a guide to future
performance.
"Countryside" or the "Group" refers to Countryside Properties
PLC and its subsidiary companies.
(1) Completions relate to legally completed private homes, in
addition to affordable and PRS completions which are recognised on
a pro-rata basis, based on contractual revenues. Completions
include the Group's proportionate share of the joint ventures and
associate.
(2) Adjusted revenue includes the Group's share of revenue from
joint ventures and associate of GBP154.8m (2020: GBP96.8m).
(3) Adjusted operating profit includes the Group's share of
operating profit from joint ventures and associate of GBP32.8m
(2020: GBP17.2m) and excludes non-underlying items of GBP63.2m
(2020: GBP42.4m). Refer to Note 7.
(4) Adjusted operating margin is defined as adjusted operating
profit divided by adjusted revenue.
(5) Adjusted basic earnings per share is defined as adjusted
profit attributable to ordinary shareholders, net of attributable
taxation, divided by the weighted average number of shares in issue
for the period.
(6) Return on capital employed ("ROCE") is defined as adjusted
operating profit for the last 12 months divided by the average of
opening and closing tangible net operating asset value ("TNOAV")
for the 12-month period. TNOAV is calculated as net assets
excluding net cash or debt less intangible assets net of deferred
tax.
(7) Net cash/(debt) is defined as bank borrowings less
unrestricted cash. Unamortised debt arrangement fees and lease
obligations are not included in net cash/(debt).
The Directors believe that the use of adjusted measures is
necessary to understand the underlying trading performance of the
Group.
Chair statement
Focused Partnerships business to deliver strong growth and high
returns over the medium term
In many respects 2021 has been a pivotal year for the Group and
this report outlines how the Group has recovered from the impact of
Covid and the economic uncertainty it created. It also outlines the
Group's focused future strategy with all resources dedicated to
driving our Partnerships business .
Countryside is uniquely positioned in attractive markets to
fulfil the considerable demand for homes in mixed-tenure
developments and we believe that this represents a multi-year
growth opportunity. T he Group has invested considerably in
Partnerships land and work in progress with assets employed
increasing from GBP103m to GBP610m over the last five years
(including GBP209m from the former Housebuilding division). It has
also invested significantly in the regional teams and central
support functions to generate significant capacity for profitable
growth. We believe this investment will generate very attractive
returns for our shareholders in a low-risk way over the medium term
and we set out a new plan for Partnerships in the Chief Executive's
review below, and in more detail at our Capital Markets Event later
today.
Board changes
Having joined the Board on 13 April 2021, I assumed the role of
Chair with effect from 1 May 2021. David Howell stood down from the
board on 30 April 2021 after seven years' service, including five
as Chair. On behalf of the Board, I would like to thank David for
his significant contribution to Countryside, which developed
considerably under his Board leadership, and wish him every success
for the future.
On 29 June 2021 we announced the resignation of Mike Scott as
CFO, and he left the Company on 29 November 2021 to take up the CFO
role at Barratt Developments plc. I would like to thank Mike for
his sterling service to Countryside over the last seven years
including serving as CFO for the last three years and wish him
every success in his new role.
On 16 November 2021, we announced the appointment of Tim Lawlor
as CFO and we greatly look forward to welcoming him to Countryside
in the new year when he has fulfilled his exit obligations with
Wincanton plc. During the selection process, we targeted candidates
with an exceptional focus on driving operational performance as
well as outstanding financial management and Tim fulfils these
requirements, having served in several finance leadership roles,
most recently as CFO of Wincanton plc.
During the year, Simon Townsend also assumed responsibility as
the Board representative and Chair of the Group's new
Sustainability Committee. The Committee focuses on assessing our
sustainability approach and how it identifies and prioritises
sustainability issues material to the business strategy, including
climate change.
Building safety and quality
The quality of the homes that we build is a central tenet of our
strategy and is of paramount importance to us and our customers.
Since the Grenfell Tower fire, there has been considerable analysis
of the impact of cladding and fire safety issues in multi-occupancy
tall buildings. We have examined all buildings developed by
Countryside over the last 15 years and identified 69 buildings
across 17 sites where remedial works are required to bring them in
line with current building regulations. Throughout the year, we
have engaged with building owners, carried out invasive surveys and
priced building owners' scope of works. This has enabled us to more
accurately estimate the potential costs associated with these
buildings. As a result, we have established a provision of GBP41m
to cover the cost of remedial works and losses suffered by building
owners where it is identified that the works are necessary because
we fell short of our high standards at the time of construction. We
are committed to high quality design and construction to deliver a
positive legacy for future generations.
Capital allocation and shareholder returns
We have begun the programme of realising more than GBP450m from
the sale of certain legacy Housebuilding assets. Proceeds from this
programme have already started to be returned via the share buyback
programme and this will continue for the next two years.
The priorities of the business in designing the appropriate
capital structure for the Partnerships business going forward are
clear. We will maintain a prudent approach to net debt and ensure
that all stakeholders are comfortable with our balance sheet. Our
Partnerships business model is highly cash generative and there are
substantial opportunities for profitable reinvestment to deliver
double-digit organic growth over the long term. This will take
precedence over shareholder returns for the foreseeable future.
John Martin
Chair
29 November 2021
Group Chief Executive's review
Our strategy
We are proud to be the market leader in the delivery of high
quality mixed-tenure communities. Our Partnerships business works
closely with housing associations, public bodies and institutional
private rental operators to deliver a balanced portfolio of
affordable, private rental and private for sale homes.
We operate a highly differentiated mixed-tenure model
underpinned by over 40 years of experience and a strong track
record of delivery through collaborative working with partners. Our
continual focus on establishing positive social change through the
homes and communities we create means we are the partner of
choice.
Our master planning and design capabilities ensure we utilise
scarce land efficiently to create diverse, integrated and balanced
communities. This is complemented by our capability to act as
master developer on large sites, creating options for land owners
in the development of large-scale communities. Our investment in
off-site manufacturing facilities supports the delivery of
high-quality developments of scale and at pace, in a highly energy
efficient and sustainable manner. During the year, we completed
construction of our second modular panel factory in Bardon,
Leicestershire providing us with the infrastructure to deliver up
to 4,700 closed panel homes across England each year and
establishing our position in the use of modern methods of
construction. In addition, our open-panel timber frame factory has
capacity for a further 1,300 homes, supporting our low-rise home
delivery.
Our model focuses on regeneration with opportunities generally
sourced through public procurement processes or through direct
negotiation with local authority partners. We also develop
brownfield land or other land where we can deploy our mixed-tenure
model, with both private and public sector landowners.
We utilise a lower capital business model, which is efficient
with the pre-funding of both the private rental and affordable
homes we develop with our trusted partners. Against the backdrop of
continued demand across all housing tenures, this capital
efficient, high return on capital employed model uniquely positions
us to deliver multi-year double digit growth from new and existing
regions in the UK.
Group structure
In July 2021 we announced that, after a strategic review of the
business, the Group would focus all its resources on Partnerships
and that we would no longer operate a two-division structure. We
believe that this approach will create the greatest value for
shareholders and all our stakeholders over the long-term. We have
established a new Partnerships division to serve the Home Counties
using people and resources from the legacy Housebuilding
operations.
A small number of current Housebuilding sites and certain sites
in the strategic land bank, identified as fitting the mixed-tenure
Partnerships model, will be utilised by this new Partnerships
division. The strategy is aligned to the rest of the Partnerships
business. Any assets that do not fit the Partnerships model are
being realised over the course of the next two years with the
proceeds to be returned to shareholders. It is the Group's
intention to return surplus cash of at least GBP450 million to
shareholders via on-market purchases of ordinary shares in the
Company's share capital by 30 September 2023.
In August 2021, we appointed a Chief Investment Officer to
identify, develop and enhance long-term partnerships with public
sector partners and local Government, as well as private partners
such as institutional investors. This is to support our growth and
movement into new geographical areas.
Our markets
In a recovery from Covid, we have seen homeowners and renters
re-assess the ideals which they look for in a home and this has
fuelled the "race for space" to take advantage of the stamp duty
holiday which ended in September 2021. Demand has been sustained
through low interest rates; improved mortgage availability,
particularly in higher loan-to-value products; and the Government's
Help to Buy scheme. With the latter coming to an end in 2023, we
have been actively involved in several industry initiatives
including working with lenders to ensure suitable mortgage
availability for our customers.
Whilst household formation has been increasing, there has been a
chronic under-supply of quality homes in recent years - well below
the Government's annual target of 300,000 new homes. Commitment to
this target was further strengthened through the announcement of a
GBP1.8bn stimulus package to regenerate brownfield land that could
unlock up to 160,000 new homes. The Group's strength in creating
lasting communities and sustainably delivering large scale
developments means we are well placed to access opportunities and
continue to strengthen our relationships across the industry.
The shortage of homes is particularly acute within the
Affordable sector and demand from registered providers of social
housing continues to remain strong. Government initiatives
including the GBP12bn Affordable Homes Programme and First Homes
scheme continue to be supportive of the sector. Whilst we have
experienced some delays in the planning process during the year,
which has impacted our start on site, the market fundamentals
remain highly attractive and our presence on the key delivery
panels ensures we are well placed to capitalise on future growth
opportunities.
Demand from institutional investors for private rental housing
has been further stimulated by the current economic climate as
investors seek attractive yields from high quality homes with low
maintenance costs. The Group has established a strong presence in
key build to rent growth regions outside main city hubs,
particularly in the North and Midlands. Our commitment to putting
our customers at the heart of everything we do is built on a deep
understanding of their needs and governed by the framework
agreements under which we operate.
Group results
The Group has recovered strongly since the Covid crisis in 2020
and made excellent progress on executing our growth plans, which is
testament to the effort and commitment of our employees and
strength of relationships with our partners.
We increased total completions by 33% to 5,385 homes (2020:
4,053 homes), driven by a strong increase in private delivery,
where completions were 65% higher than last year at 2,394 homes
(2020: 1,454 homes) as we completed on homes deferred as a result
of Covid from the prior year.
Our net reservation rate of 0.74 (2020: 0.78) remained within
the Group's target range of 0.6 to 0.8, slightly lower than last
year as a result of our strong forward sales position as we entered
the year.
Affordable completions increased by 25% to 2,107 homes (2020:
1,691 homes). PRS completions decreased by 3% to 884 homes (2020:
908 homes) impacted by delays to site starts as we recognise
completions on an equivalent unit basis in line with construction
activity. Underlying demand for these tenures remains strong and
these delays are not expected to impact delivery over the medium
term.
Our private average selling price ("ASP") increased by 4% to
GBP380,000 (2020: GBP364,000) reflecting house price inflation of
2.6% in the year and an increase in weighting of delivery in the
South which typically has higher ASPs. House price inflation in the
forward order book is around 6% (2020: 2%). Affordable ASP
increased year on year by 7% to GBP161,000 (2020: GBP151,000), and
PRS ASP increased 19% to GBP170,000 (2020: GBP143,000) reflecting
geographical mix as we recorded a higher proportion of completions
in London where pricing is stronger.
Overall, our total forward order book at GBP1,528m (2020:
GBP1,432m) was up 7% year on year. Our private forward order book
at GBP426m (2020: GBP528m, 2019: GBP241m) was 19% lower than last
year as we completed on homes deferred from the prior year as a
result of the pandemic.
The quality of our homes and our exceptional customer service
act as key differentiators from our peers. For the second
consecutive year we have been awarded five-star builder status by
the HBF demonstrating the exceptional attention that goes into
planning, designing and constructing our homes. Our customer
satisfaction rating, as measured independently by the NHBC
Recommend a Friend score, improved to 91.6% (2020: 90.6%).
The health and safety of our colleagues, customers and
sub-contractors remains our key priority. We continued with our
Covid-safe operating procedures across the business, and our sites
operated without disruption throughout the period. Our Accident
Injury Incident Rate ("AIIR") showed an improvement over the prior
year at 163 people injured over a year per 100,000 workers at risk
(2020: 224) compared with the national average of 372 (2020:
416).
In March 2021, the CMA announced it had commenced the
consultation stage of its inquiry into the sale of leasehold
properties. In September 2021 we announced we had agreed voluntary
undertakings with the CMA where we would seek to address all leases
where the ground rent doubled more frequently than every 20 years
either directly or through negotiations with the current
freeholder, a positive outcome for affected leaseholders.
We made further progress with our three newer regions
established in July 2020, adding 1,519 plots to the land bank in
our Chilterns, South West and South London regions during the
course of the year. Overall our Partnerships land bank plus
preferred bidder stood at 73,391 plots at 30 September 2021, of
which 13,949 were owned and had planning, up 12% on the prior
year.
Outlook
While supply side constraints are continuing to generate
inflationary pressure, we continue to see strong demand across all
tenures with house price inflation off-setting much of the build
cost inflation. Our unique and attractive model allows us to secure
opportunities with partners and to work on a variety of
opportunities, especially brownfield and sites requiring
regeneration.
We are 48% forward sold for 2022 including GBP426m from private
sales (as at 30 September 2021) with a private net reservation rate
in the nine weeks to 28 November 2021 at 0.94.
As the growth plans set out last year progress and our
attractive market conditions are expected to continue, we expect to
deliver adjusted operating profit in the range of GBP200m to
GBP210m in the year to 30 September 2022, including a c.GBP40m
contribution from Legacy Operations.
New medium-term plan
Following the clarification of the Group's strategy, our
Partnerships teams are established and securing development sites
in all regions including excellent progress establishing the Home
Counties division. The Board is focused on delivering lower risk,
sustainable double-digit growth at target returns and today we set
out our new medium-term plan for Countryside Partnerships for
profitability and margins, ROCE and growth:
-- We expect to make meaningful improvements in the performance
of all our regions, including our established regions, over
time.
-- Group operating margins to be at least 13% when our new
regions are all reasonably established.
-- We have invested substantially in the expansion of
Partnerships. TNOAV has increased from GBP103m to GBP610m over the
last 5 years (including GBP209m from the former Housebuilding
division). Going forward, we plan to maintain TNOAV for
Partnerships at GBP750m (+/- GBP50m) until we achieve the optimised
ROCE. We expect this to be achieved within 2 to 3 years. We
continue to target ROCE of 40%+.
-- Attractive market conditions are expected to continue and
provide a significant multi-year growth opportunity.
-- After reaching our optimised ROCE, we expect to resume
double-digit growth in the range 10% to 15% per annum, with growth
funded from retained earnings.
Sustainability
The Government's commitment to making the UK net zero by 2050
will require all companies to make significant operational changes
to reduce the impact of their carbon emissions. Changes to Part L
and F of building regulations in England will come into effect in
2022 requiring new homes to achieve a 31% reduction in carbon
emissions compared to current standards. This will increase to
75%-80% under the 2025 Future Homes Standard, through the use of
low carbon heating systems and improved fabric efficiency. We
recently launched our route to achieving net zero emissions by
2030, supported by science-based reduction targets. Our pathway is
underpinned by the need to modernise construction and collaborate
with our stakeholders to identify challenges and mutually
beneficial net zero emission opportunities.
Our state-of-the-art manufacturing facilities in Bardon,
Warrington and Narborough provide us the infrastructure to build at
least 50% of new homes using modern methods of construction by
2025. We will work closely with our customers, suppliers and
sub-contractors as we transition to a net zero business.
Chief Financial Officer review
Group performance
As a result of the increase in volume and shift in mix, Group
adjusted revenue increased by 54% year on year to GBP1,526.2m
(2020: GBP988.8m). Reported revenue increased by 54% to GBP1,371.4m
(2020: GBP892.0m). The difference between adjusted and reported
revenue is the effect of the proportionate consolidation of the
results of the Group's joint ventures and associate in the adjusted
measure.
Group adjusted gross margin (including the Group's share of
joint ventures and associate gross profit) increased by 430bps to
17.1% (2020: 12.8%). This margin increase was due to a recovery of
margins in the Midlands towards target levels as we exited lower
margin Westleigh sites and a higher proportion of land and
commercial sales. During 2021 the Group recorded Covid-19 costs of
GBP14.8m (2020: GBP21.6m). Current year costs relate to ongoing
social distancing and health and safety measures at our sites and
office locations.
Operating profit from land and commercial sales contributed
GBP23.7m (2020: GBP7.8m), as we continue to realise value from our
Legacy Operations land bank and focus the Group's resources on the
Partnerships business. We sold land at Whittington Way, Bishop's
Stortford and Sutton Road, Maidstone during the year. Land sales
remain a part of our core Partnerships strategy for managing the
balance sheet and geographical exposure and are expected to deliver
GBP15m to GBP20m of operating profit per annum in the medium term.
We would also expect land sales to play a big role in accelerating
the cash generation from our Legacy Operations.
Additionally, as part of Legacy Operations strategy, we sold our
interest in the Cambridge Medipark Limited joint venture to the JV
partner Prologis for GBP16.2m. The joint venture delivers
commercial units at a single site in Cambridge, which is not seen
as core to our Partnerships model.
During the year, we continued to invest in future growth,
opening two new offices, continuing our software upgrade programme
and commissioning our new factory in Bardon. Together, these growth
costs amounted to around GBP21m.
Adjusted operating profit increased by 209% to GBP167.3m (2020:
GBP54.2m). This is stated after charging GBP5.9m of costs relating
to the development and implementation of cloud-based IT systems,
predominantly relating to the roll-out of our new accounting
software, Microsoft Dynamics, including its integration to our
wider IT infrastructure. These costs are required to be written off
as incurred.
The Group's adjusted operating margin increased by 550bps to
11.0% (2020: 5.5%) reflecting the higher gross margins described
above, lower Covid related costs, and overhead efficiency
savings.
Build cost inflation in the year was around 5% (2020: 0.2%)
driven by challenges in the supply chain as a result of a shortage
of HGV drivers and the blockage of the Suez Canal, with materials
cost seeing the biggest impact. Significant inflation was seen
across several categories including timber and steel and we expect
inflationary pressure to continue in the short term. With
construction costs contributing around 40% of our cost base,
combined with a focus to limit our exposure to cost increases
through early procurement, the impact of build cost inflation on
margin was 0.5% (2020: 0.1%).
We continue to focus on operational efficiency to minimise the
impact of cost increases through the use of standard house types,
use of Group buying deals and leveraging our off-site manufacturing
capabilities.
The Group reported a statutory operating profit of GBP71.3m
(2020: GBP5.4m operating loss) with the difference to adjusted
operating profit being the proportionate consolidation of the
Group's joint ventures and associate and non-underlying items
recognised during the year. Further details of the difference can
be found in Note 4 to the financial statements.
Our net reservation rate per open sales outlet remained at the
upper end of our target range at 0.74 (2020: 0.78). As expected,
this was slightly lower than the prior year as a result of our
strong forward order position as we started the year. The average
number of open sales outlets was broadly in line with the prior
year at 60 (2020: 63). In total, 51 sites (2020: 62 sites) were
under construction but not yet open for sale as at 30 September
2021, 18% lower than last year following the completion of a number
of smaller, affordable-only sites.
Partnerships
Our Partnerships business has recovered well from the Covid-19
pandemic with strong underlying demand across all tenures.
Our three new operating regions in the Chilterns, the South West
and South London are now established and operational. We appointed
two new divisional Chief Executives to support the delivery of our
growth plans in the North and Midlands. Construction of our new
modular panel factory in Bardon, Leicestershire is complete and
will begin production by the end of 2021.
The below results include the results of developments
transferred from Housebuilding to Partnerships Home Counties unless
stated otherwise. The results of the Partnerships Home Counties
operating region are shown below:
Partnerships Home Counties
2021 2020
Year ended 30 September GBPm GBPm
---------------------------------------- ----- ------
Completions:
---------------------------------------- ----- ------
Private 121 46
---------------------------------------- ----- ------
Affordable 90 38
---------------------------------------- ----- ------
PRS 34 -
---------------------------------------- ----- ------
Adjusted revenue (GBPm) 113.3 39.8
---------------------------------------- ----- ------
Adjusted operating profit (GBPm) 21.5 4.7
---------------------------------------- ----- ------
Adjusted operating margin (%) 19.0 11.8
---------------------------------------- ----- ------
ROCE (%) 12.3 4.0
---------------------------------------- ----- ------
Reported revenue (GBPm) 29.2 5.2
---------------------------------------- ----- ------
Reported operating profit/(loss) (GBPm) 1.7 (1.2)
---------------------------------------- ----- ------
Reported operating margin (%) 5.8 (23.1)
---------------------------------------- ----- ------
In total, 4,393 homes were delivered by the Partnerships
business in the year, an increase of 33% (2020: 3,297 homes).
Completions of private housing increased by 67% to 1,649 homes
(2020: 985 homes) as we completed on homes deferred from the prior
year due to Covid-19. As expected, our private forward order book
reduced by 32% to 645 homes (2020: 949 homes) as a consequence.
Delivery of affordable homes increased by 32% to 1,887 homes (2020:
1,428 homes) and PRS volume reduced by 3% to 857 homes (2020: 884
homes) with both non-private tenures impacted by delayed site
starts. Our total forward order book for the business stands at
GBP1,235m (2020: GBP1,092m).
Private ASP increased 5% to GBP329,000 (2020: GBP314,000),
reflecting slightly stronger house price inflation in the Midlands
and North and a greater proportion of delivery from the South
particularly our London developments such as Acton Gardens, Ealing
and Home Counties at Beaulieu, Chelmsford. Adjusted revenue
increased by 54% to GBP1,033.2m (2020: GBP669.2m), with reported
revenue, which excludes the Group's share of revenue from joint
ventures, up 53% to GBP902.3m (2020: GBP590.5m).
Gross margin increased by 490bps to 17.0% (2020: 12.1%), driven
by the recovery of margins particularly in the Midlands, and this
has resulted in an adjusted operating margin increased by 480bps to
10.4% (2020: 5.6%) which has been further improved due to an
improvement to operational gearing as we have seen a return to more
normal delivery levels after the Covid-19 pandemic. Adjusted
operating profit was up 187% to GBP107.7m (2020: GBP37.5m) and
reported operating profit increased to GBP34.4m (2020:
GBP15.0m).
In one of our underperforming regions we have a large site that
is not currently achieving expected financial hurdles. Management
continue to work to improve the financial performance of this
scheme. If we are unable to achieve this, we may choose to exit
from this particular site which could result in a write-down of
inventory of up to GBP20m. During the year we secured 9,008 new
plots (2020: 8,369) in addition to a further 9,665 plots where we
have agreed terms on options (2020: 3,005), with significant new
projects across all of our regions. These wins led to our
Partnerships land bank, including preferred bidder, increasing by
12% with 73,391 plots under our control (2020: 65,705 plots), of
which 13,949 are owned and with planning (2020: 9,340).
Legacy Operations
As previously noted, during the year, the Group completed a
strategic review of its Housebuilding business and announced its
intention to focus all its resources on its Partnerships business
going forward, with a strategy to realise GBP450m of cash from the
run off of former Housebuilding assets, now classified as Legacy
Operations.
Legacy Operations include several large multi-phase developments
including Newhall in Harlow, Hazel End in Bishops Stortford and
Runwell, Essex, as well as the St Mary's Island, Chatham and
Oaklands Hamlet, Chigwell joint ventures. Legacy Operations also
include the Millgate business which we had already decided to
close, and during the year we have accelerated the amortisation of
the Millgate brand to align with the completion of the final
Millgate sites.
The performance of Legacy Operations during the year was strong,
as the business caught up with build delays caused by the Covid-19
pandemic and private sales were supported by strong demand in the
Home Counties regions outside of London and by government
incentives for new homes buyers.
Private completions, including the Group's share from joint
ventures, increased to 745 (2020: 469), and affordable and PRS
completions decreased to 247 homes (2020: 289).
In keeping with previous years, the results also include a
number of land and commercial sales during the year, largely from
the strategic land bank, which contributed GBP73.3m of revenue and
GBP15.8m of profit (2020: revenue of GBP36.8m; profit of GBP6.8m).
As part of the strategy to exit non-Partnerships activities, the
Group also disposed of its interest in the Cambridge Medipark
Limited joint venture, recognising a gain on disposal of GBP13.9m,
reflecting the market value of the underlying land bank controlled
by the joint venture. We expect to use land sales as a way of
accelerating run off of Legacy Operations over the next two
years.
As at 30 September 2021, the land bank for Legacy Operations,
including strategic land parcels held for third party sales,
totalled 3,903 plots (2020: 5,779). The Group expects to have
disposed of the majority of these plots by the end of the 30
September 2023 year end, either through the traditional speculative
build and sales model (underpinned by a strong forward sold
position on private sales as at 30 September 2021 of 60%) or
through land parcel disposals.
Non-underlying items
The quality and safety of the homes we deliver is of the utmost
importance to the Group. Since December 2020, EWS1 surveys have
identified 69 buildings on 17 sites, constructed between 2008 and
2017, where the current building owner believes there are defects
in the building which need to be remediated. We have recognised a
provision of GBP41m (2020: GBPNil) in respect of these costs.
Following the Competition and Markets Authority's ("CMA") review
into the sale of leasehold properties, on 15 September 2021
Countryside announced that it had agreed voluntary undertakings
with the CMA to seek the removal of all 10 and 15 yearly doubling
clauses from leases where the ground rent is not for the ultimate
benefit of a local authority or registered provider of social
housing, at no cost to leaseholders. These undertakings have
resulted in an increase to the Ground Rent Assistance Scheme
provision of GBP3.8m (2020: GBP10.0m), taking the total provision
to GBP13.8m and the recognition of an inventory provision of
GBP0.7m (2020: GBPNil) relating to leases where Countryside is the
freeholder.
Following the conclusion of the Group strategy review into the
separation of the Housebuilding business and our subsequent
announcement in July 2021 to focus all resources on our
Partnerships business, the Group has recognised GBP6.0m of
non-underlying costs. These costs comprise legal, tax, and
accounting advisory services relating to the review.
Non-underlying items
2021 2020
Year ended 30 September GBPm GBPm
----------------------------------------------------- ------- -------
Non-underlying items included within cost of sales:
----------------------------------------------------- ------- -------
Remediation costs for multi-occupancy buildings (41.0) -
----------------------------------------------------- ------- -------
Ground Rent Assistance Scheme (0.7) -
----------------------------------------------------- ------- -------
Non-underlying items included within administrative
expenses:
----------------------------------------------------- ------- -------
Costs relating to the Housebuilding separation (6.0) -
----------------------------------------------------- ------- -------
Ground Rent Assistance Scheme (3.8) (10.0)
----------------------------------------------------- ------- -------
Amortisation / de-recognition of acquisition-related
intangible assets (11.7) (10.2)
----------------------------------------------------- ------- -------
Impairment of goodwill - (18.5)
----------------------------------------------------- ------- -------
Restructuring costs - (3.5)
----------------------------------------------------- ------- -------
Deferred consideration relating to Westleigh - (0.2)
----------------------------------------------------- ------- -------
Total non-underlying items (63.2) (42.4)
----------------------------------------------------- ------- -------
The amortisation/de-recognition of acquisition-related
intangible assets is reported within non-underlying items as
management does not believe this cost should be included when
considering the underlying performance of the Group.
A total tax credit of GBP11.6m (2020: GBP4.7m) in relation to
all of the above non-underlying items was included within taxation
in the statement of comprehensive income.
Net finance costs
The Group has a GBP300m revolving credit facility expiring in
May 2023. The agreement has a floating interest rate based on
LIBOR. As at 30 September 2021 the Group had no drawings under the
facility (2020: GBPNil). The reference interest rate will be
changed to SONIA later in 2021 following the retirement of LIBOR as
a reference rate. This change is not expected to have a material
impact on the Group's borrowing costs.
In 2021, net finance costs were GBP15.8m (2020: GBP13.5m), of
which net cash costs were GBP2.4m (2020: GBP5.1m). Interest on the
Group's bank loans and overdrafts was 40% lower than last year with
total charges of GBP3.2m (2020: GBP5.3m).
Taxation
The income tax charge was GBP13.1m (2020: GBP2.1m), with an
adjusted tax rate of 17.6% (2020: 17.2%) and, on a reported basis,
an effective tax rate of 15.3% (2020: (107.7)%), the main
difference between the rates reflecting non-underlying items and
the treatment of joint ventures and associate. The adjusted tax
rate reconciles to the reported rate as follows:
Adjusted tax rate
Profit Tax Rate
Year ended 30 September 2021 GBPm GBPm %
-------------------------------------------- ------ ------ -----
Adjusted profit before tax and tax thereon 150.3 26.4 17.6%
-------------------------------------------- ------ ------ -----
Adjustments and tax thereon:
-------------------------------------------- ------ ------ -----
Non-underlying items (63.2) (11.6)
-------------------------------------------- ------ ------ -----
Taxation on joint ventures and associate in
profit before tax (1.7) (1.7)
-------------------------------------------- ------ ------ -----
Reported profit before tax and tax thereon 85.4 13.1 15.3%
-------------------------------------------- ------ ------ -----
In April 2017 Countryside obtained clearance from HMRC in
respect of the VAT treatment of its supplies to Registered
Providers, allowing us to treat the sale of land and supply of
homes as one VAT supply. HMRC have notified us of their intention
to withdraw this clearance and that they now view this as two
separate VAT supplies. The withdrawal of the clearance will impact
on the timing of receipts from Registered Providers and profit
recognition.
In the Spring Budget 2021, the Government announced that from 1
April 2023 the corporation tax rate would increase to 25% and this
rate had been enacted at the reporting date.
In the Autumn Statement 2021, the Government confirmed that a
Residential Property Developer Tax ("RPDT") will be introduced with
effect from 1 April 2022. The RPDT will be charged at 4% on
relevant profits exceeding an annual allowance of GBP25m.
In 2022, Countryside expects the adjusted tax rate to be higher
than the UK statutory corporation tax rate due to the introduction
of the RPDT.
Share buyback
On 7 July 2021 we announced the results of our Strategic Review,
including the return of GBP450m of surplus cash generated from our
Legacy Operations Division to shareholders by 30 September
2023.
As at close of 30 September 2021, we had repurchased 7,124,979
shares at a cost of GBP34.8m. As at 29 November 2021, we had
repurchased a total of 9,474,979 shares at a cost of GBP49.9m.
Earnings per share
Adjusted basic earnings per share increased by 220% to 23.7
pence (2020: 7.4 pence) reflecting the increase in adjusted
operating profit during the year, offset by the higher number of
shares in issue following the equity placing in July 2020. The
basic weighted average number of shares in issue was 523.0m (2020:
462.1m).
The Group recorded a basic earnings per share of 13.8 pence
(2020 basic loss per share: 0.8 pence). Basic earnings per share is
lower than adjusted basic earnings per share due to the effect of
non-underlying items that are excluded from adjusted results.
Dividend
The Board has reviewed the capital allocation policy of the
Group. Given the excellent opportunities for us to invest in the
Partnerships business, the Board does not recommend the payment of
a final dividend in respect of 2021 performance (2020: GBPNil).
Statement of financial position
As at 30 September 2021, Group TNAV was GBP988.0m (2020:
GBP951.7m), an increase of GBP36.3m.
The Group's net working capital increased by GBP140.7m primarily
due to an increase in inventory of GBP84.7m as a result of later
than expected site starts which has delayed unit completions.
Receivables were GBP47.5m lower at year end due to higher than
normal levels of amounts due from customers in 2020, as a result of
the phasing of construction activity. This was partially offset by
the recognition of additional provisions in the year in respect of
remediation costs for multi-occupancy buildings and the Ground Rent
Assistance Scheme.
Our net investment in joint ventures and associate, including
loans from the Group, totalled GBP101.4m (2020: GBP111.3m) as
increased levels of stock within our active investments were offset
by reduced production from our Greenwich Millennium Village joint
venture.
Deferred land and overage payables totalled GBP250.6m (2020:
GBP224.1m), with GBP197.3m in Partnerships and GBP53.3m in Legacy
Operations (2020: GBP129.3m in Partnerships, GBP94.8m in Legacy
Operations). The decrease in Legacy Operations was driven by the
settlement of payables during the year relating to Bishop's
Stortford, Hertfordshire, and Maidstone, Kent.
ROCE increased to 18.6% (2020: 7.1%) reflecting the increase in
adjusted operating margin. The Partnerships business achieved ROCE
of 20.0% (2020: 10.1%).
Return on Capital Employed
Year ended 30 September 2021 2020
--------------------------------- -------- ----------
Adjusted operating profit (GBPm) 167.3 54.2
--------------------------------- -------- ----------
Average capital employed (GBPm)1 900.3 759.0
--------------------------------- -------- ----------
Return on capital employed (%) 18.6 7.1
--------------------------------- -------- ----------
Increase/(decrease) 1,150bps (3,070bps)
--------------------------------- -------- ----------
1. Capital employed is defined as tangible net operating asset
value, or TNAV excluding net cash.
Summary cash flow statement
2021 2020
Year ended 30 September GBPm GBPm
----------------------------------------------------- ------ -------
Profit/(loss) before taxation 85.4 (1.9)
Non-cash items (0.3) 38.5
Increase in inventories (84.7) (250.5)
(Increase)/decrease in receivables (47.5) 48.2
(Decrease)/increase in payables (8.5) 11.8
Increase in provisions 45.6 9.0
----------------------------------------------------- ------ -------
Cash used in operations (10.0) (144.9)
----------------------------------------------------- ------ -------
Interest and tax paid (23.7) (33.7)
Dividends paid - (50.5)
Purchase of own shares (34.8) (2.0)
Decrease/(increase) in advances to joint ventures
and associate 6.8 (19.8)
Dividends received from joint ventures and associate 24.3 35.8
Repayment of members' interest 5.8 4.4
Proceeds of issue of share capital - 243.0
Other net cash outflows (25.5) (7.4)
----------------------------------------------------- ------ -------
Net (decrease)/increase in cash and cash equivalents (57.1) 24.9
----------------------------------------------------- ------ -------
Cashflow
The Group's cash position reduced by GBP57.1m in the year to 30
September 2021 to GBP43.4m. The Group invested GBP10.0m in its
operations (2020: GBP144.9m cash investment) predominantly through
a GBP84.7m increase in inventories during the year (2020:
GBP250.5m) to support the growth into new regions.
The Group also repurchased 7.1 million shares as part of our
share buyback programme at a cost of GBP34.8m (2020: nil). Overall,
net cash reduced by GBP57.2m to GBP41.0m (2020 GBP98.2m).
Mike Scott
Group Chief Financial Officer
29 November 2021
Principal and emerging risks
Risk and impacts How we monitor and manage the risk Impact on strategy
---------------------------------- ----------------------------------------------------------- ---------------------
1. A major incident impacts the
United Kingdom or countries where * Maintenance of a strong balance sheet to sustain * Growth
key suppliers are located periods of complete or partial cessation of business.
and significantly impacts the
business * Returns
Responsible Executive: Group Chief * Monitoring of World Health Organization and/or UK
Executive Government health warnings.
The impact of a catastrophic * Resilience
event, such as flooding, failure
of the National Grid, or the * Robust and tested business interruption plans,
spread of an infectious disease on including "slow down" and "stop" procedures for all Risk change
an epidemic or pandemic scale, can supply and contractor agreements. No change
lead to the imposition
of Government controls on the
movement of people with the * Site layouts and planning to facilitate swift
associated cessation of large roll-out of social distancing requirements.
parts
of the economy for a significant
period of time. The cessation of
business can lead to zero
or reduced revenues until business
activity can be safely
recommenced.
---------------------------------- ----------------------------------------------------------- ---------------------
2. Adverse macroeconomic
conditions * Funds are allocated between the businesses according * Growth
Responsible Executive: Group Chief to the Company's capital allocation principles.
Executive
A decline in macroeconomic * Returns
conditions, or conditions in the * Land is purchased based on planning prospects,
UK residential property market, forecast demand and market resilience.
can reduce the propensity to buy Risk change
homes. Higher unemployment, No change
interest rates and inflation * In Partnerships, contracts are phased and, where
can affect consumer confidence and possible, subject to viability testing.
reduce demand for new homes.
Constraints on mortgage
availability, * In all cases, forward sales, cash flow and work in
or higher costs of mortgage progress are carefully monitored to give the Group
funding, may make it more time to react to changing market conditions.
difficult to sell homes.
---------------------------------- ----------------------------------------------------------- ---------------------
3. Adverse changes to Government
policy and regulation * The potential impact of changes in Government policy * Growth
Responsible Executive: Group and new laws and regulations are monitored and
Company Secretary and General communicated throughout the business.
Counsel * Returns
Adverse changes to Government
policy in areas such as climate * Detailed policies and procedures are in place to
change, tax, housing, planning, address the prevailing regulations. * Sustainability
the environment and building
regulations (including the
potential for extending historical Risk change
liability periods) may result in Risk increased
increased costs and/or delays.
Failure to comply with laws
and regulations could expose the
Group to penalties and
reputational damage. The
discontinuation
of Government backed purchase
assistance programmes (such as
Help to Buy) may adversely affect
the Group's sales.
---------------------------------- ----------------------------------------------------------- ---------------------
4. Climate change
Responsible Executive: Managing * Carbon Net Zero Pathway in place with a comprehensive * Growth
Director, Corporate Affairs spread of actions covering operations and central
Failure to adequately recognise support activities.
and prepare for the impacts of * Returns
climate change on our operations
and value chain, the risks of * GHG Management Plan in place to assimilate climate
which are severe resource change data collection and reporting mechanisms. * Sustainability
constraints, significant delays to
programme, rising build costs, an
inability to meet new, more * Group-level targets cascaded down and addressed at Risk change
demanding regulations and loss monthly regional board meetings and within quarterly NEW
of customer confidence. central services forums (e.g. Group technical forum).
* Group technical team evaluating and addressing
significant changes to building regulations.
* Close liaison with the HBF Future Homes Hub.
* Adaptation/flood risk assessment undertaken as part
of land acquisition process.
---------------------------------- ----------------------------------------------------------- ---------------------
5. Constraints on construction
resources * Optimise use of standard house types and design to * Growth
Responsible Executive: Chief maximise buying power.
Executive, Partnerships North
Costs may increase beyond budget * Returns
due to the reduced availability of * Use of strategic suppliers to leverage volume price
skilled labour or shortages reductions and minimise unforeseen disruption.
of sub-contractors or building * Resilience
materials at competitive prices to
support the Group's growth * Robust contract terms to control costs.
ambitions. The Group's strategic Risk change
geographic expansion may be at Risk increased
risk if new supply chains * Modular panel factory mitigates supply chain
cannot be established. exposures.
* Resource efficient processes on sites and in the
factory to minimise wastage
---------------------------------- ----------------------------------------------------------- ---------------------
6. Poor operational performance
Responsible Executive: Group Chief * Uniform implementation of Group-wide policies and * Growth
Executive procedures.
Inadequate controls or failures in
compliance will impact the Group's * Returns
operational and financial * Clear delegated authorities.
performance
* Resilience
* Group Directors responsible for key functions across
the Group (e.g. Finance, Commercial, Technical, Sales
, Risk change
Health and Safety and Legal). NEW
* Regular training.
* Regular review of all applicable policies and
procedures with accompanying "bring-up" system.
* Systematic audit process of all key procedures over
an agreed time period.
---------------------------------- ----------------------------------------------------------- ---------------------
7. Land availability
Responsible Executive: Group Chief * Identify land needs and requirements for at least a * Growth
Executive five-year period.
Inability to source suitable land
or obtain necessary planning. * Returns
Failure to secure timely planning * Maintain a significant forward land bank (with as
permission on economically viable much controlled but not owned) to ensure forward
terms may cause delay or visibility of earnings. Risk change
potentially termination of No change
project.
* Maintain strong relationships and reputation with
land owners and agents.
* Sufficient and skilled internal land and associated
technical teams.
* Use methods of land acquisition that give best
opportunity of acquiring land at below current market
value (e.g. use of optional/conditional contracts
subject to planning).
---------------------------------- ----------------------------------------------------------- ---------------------
8. Inability to attract and retain
talented employees * Remuneration packages are regularly benchmarked * Growth
Responsible Executive: Group Chief against industry standards to ensure competitiveness.
People & Culture Officer
Inability to attract and retain * Returns
highly skilled, competent people, * Succession plans are in place for all key roles
with adequate diversity within the Group.
and inclusion, at all levels could * Resilience
adversely affect the Group's
results, prospects and financial * Exit interviews are used to identify any areas for
condition. improvement. * Sustainability
* People development training programmes. Risk change
No change
* Embedding the culture, values and behaviours to
support the agreed strategy.
* Flexible working policy where practical.
---------------------------------- ----------------------------------------------------------- ---------------------
9. Inadequate health, safety and
environmental procedures * Procedures, training and reporting are all carefully * Returns
Responsible Executive: Group Chief monitored to ensure that high standards are
Executive maintained.
A deterioration in the Group's * Sustainability
health, safety and environmental
standards could put the Group's * An environmental risk assessment is carried out prior
employees, contractors or the to any land acquisition. Risk change
general public at risk of injury No change
or death and could lead to
litigation or penalties or damage * Appropriate insurance is in place to cover the risks
the Group's reputation. associated with housebuilding.
* Health and Safety audits.
* Professional Health & Safety team.
---------------------------------- ----------------------------------------------------------- ---------------------
10. Cyber security
Responsible Executive: Group Chief * Maintenance and communication of Group-wide IT * Returns
Financial Officer policies and procedures.
A failure of the Group's IT
systems, a security breach of the * Resilience
internal systems or website, * Regular systems updates, backups and storage of data
loss of data or ransomware could off site.
significantly impact the Group's Risk change
business. Risk increased
* Compulsory GDPR and IT/cyber risk training for all
employees within the business.
* All systems have the ability to accommodate home
working.
* Third-party assessments, including penetration
testing.
---------------------------------- ----------------------------------------------------------- ---------------------
11. Failure to generate or access
adequate capital * Five-Year Corporate Plan/budget process and timetable * Growth
Responsible Executive: Group Chief are clearly communicated.
Financial Officer
The Group may fail to generate or * Returns
access enough liquidity to manage * Rigour around the forecasting process with the
the short or long-term Development Managers updating the underlying
funding or investment financial appraisals supported by information * Resilience
requirements. provided by the Surveyors and market research team,
etc.
* Sustainability
* Thorough market testing at estimating stage (pre-bid)
and at procurement stage is undertaken to ensure Risk change
costs are correctly forecast. NEW
* Performance vs budget and forecast is assessed on a
monthly basis with commentary on all significant
variances.
* Regular updates to cash flow forecasts and regular
reviews of forecasting accuracy.
* Assessment of risks and opportunities is documented
and reviewed on a monthly basis.
---------------------------------- ----------------------------------------------------------- ---------------------
12. Reputational damage
Responsible Executive: Group Chief * Agreement of Company "purpose" and implementation of * Growth
Executive culture and values to support agreed strategy.
The perception of Countryside and
its brand and values deteriorate * Returns
in the eyes of investors, * Code of Conduct and Business Ethics.
customers, suppliers, local
authorities, housing associations, * Resilience
banks, analysts or auditors * Alignment of actions with cultural values.
which could lead to increased
operational and financial risks. * Sustainability
* Clear environmental, social and governance objectives
and plan to achieve them.
Risk change
Risk increased
* Clear Whistleblowing Policy and independent
whistleblowing reporting hotline.
* Shareholder engagement programme.
---------------------------------- ----------------------------------------------------------- ---------------------
Consolidated statement of comprehensive income
For the year ended 30 September 2021
2021 2020
Note GBPm GBPm
--------------------------------------------------------------------------------------- ------ --------- -------
Revenue 6 1,371.4 892.0
Cost of sales (1,185.6) (783.9)
--------------------------------------------------------------------------------------- ------ --------- -------
Gross profit 185.8 108.1
Administrative expenses (128.4) (113.5)
Other income 7 13.9 -
--------------------------------------------------------------------------------------- ------ --------- -------
Operating profit/(loss) 7 71.3 (5.4)
--------------------------------------------------------------------------------------- ------ --------- -------
Analysed as:
Adjusted operating profit 167.3 54.2
Less: share of joint ventures and associate operating profit 14, 15 (32.8) (17.2)
Less: non-underlying items 7 (63.2) (42.4)
--------------------------------------------------------------------------------------- ------ --------- -------
Operating profit/(loss) 7 71.3 (5.4)
--------------------------------------------------------------------------------------- ------ --------- -------
Finance costs 8 (17.3) (14.2)
Finance income 8 1.5 0.7
Share of post-tax profit from joint ventures and associate accounted for using the
equity
method 14, 15 29.9 17.0
--------------------------------------------------------------------------------------- ------ --------- -------
Profit/(loss) before income tax 85.4 (1.9)
Income tax expense 9 (13.1) (2.1)
--------------------------------------------------------------------------------------- ------ --------- -------
Profit/(loss) and total comprehensive income/(loss) for the year 72.3 (4.0)
--------------------------------------------------------------------------------------- ------ --------- -------
Profit/(loss) is attributable to:
- Owners of the parent 72.3 (3.7)
- Non-controlling interest - (0.3)
--------------------------------------------------------------------------------------- ------ --------- -------
72.3 (4.0)
--------------------------------------------------------------------------------------- ------ --------- -------
Earnings/(loss) per share (expressed in pence per share):
Basic 10 13.8 (0.8)
Diluted 10 13.7 (0.8)
--------------------------------------------------------------------------------------- ------ --------- -------
Revenue and operating profits/(losses) arise from the Group's
continuing operations. There were no items of other comprehensive
income during the year (2020: GBPNil).
Consolidated statement of financial position
As at 30 September 2021
2021 2020
Note GBPm GBPm
------------------------------------------------ ---- ------- -------
Assets
Non-current assets
Intangible assets 11 127.9 143.1
Property, plant and equipment 12 26.6 15.1
Right of use assets 13 70.6 26.3
Investment in joint ventures 14 38.3 40.9
Investment in associate 15 0.8 1.3
Deferred tax assets 16 6.0 4.1
Trade and other receivables 18 25.1 19.6
------------------------------------------------ ---- ------- -------
295.3 250.4
------------------------------------------------ ---- ------- -------
Current assets
Inventories 17 1,143.8 1,059.1
Trade and other receivables 18 250.4 199.2
Current income tax receivable 6.4 0.6
Cash and cash equivalents 19 43.4 100.5
------------------------------------------------ ---- ------- -------
1,444.0 1,359.4
------------------------------------------------ ---- ------- -------
Total assets 1,739.3 1,609.8
------------------------------------------------ ---- ------- -------
Liabilities
Current liabilities
Trade and other payables 20 (306.0) (344.6)
Lease liabilities 13 (8.0) (5.9)
Provisions 21 (56.0) (10.9)
------------------------------------------------ ---- ------- -------
(370.0) (361.4)
------------------------------------------------ ---- ------- -------
Non-current liabilities
Borrowings 19 (2.4) (2.3)
Trade and other payables 20 (182.3) (124.5)
Lease liabilities 13 (64.8) (24.6)
Deferred tax liabilities 16 (11.3) (10.5)
Provisions 21 (1.0) (0.5)
------------------------------------------------ ---- ------- -------
(261.8) (162.4)
------------------------------------------------ ---- ------- -------
Total liabilities (631.8) (523.8)
------------------------------------------------ ---- ------- -------
Net assets 1,107.5 1,086.0
------------------------------------------------ ---- ------- -------
Equity
Share capital 22 5.2 5.2
Share premium 22 5.3 5.3
Retained earnings 1,096.7 1,075.2
------------------------------------------------ ---- ------- -------
Equity attributable to owners of the parent 1,107.2 1,085.7
Equity attributable to non-controlling interest 0.3 0.3
------------------------------------------------ ---- ------- -------
Total equity 1,107.5 1,086.0
------------------------------------------------ ---- ------- -------
The notes on pages 22 to 54 form part of these financial
statements.
These financial statements were approved for issue by the Board
of Directors on 29 November 2021.
On behalf of the Board
Iain McPherson Mike Scott
Director Director
Consolidated statement of changes in equity
For the year ended 30 September 2021
Equity
attributable
Share Share Retained to owners Non-controlling Total
capital premium earnings of the parent interest equity
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- ------ -------- -------- --------- -------------- --------------- -------
At 1 October 2019 4.5 - 892.3 896.8 2.3 899.1
------------------------------------- ------ -------- -------- --------- -------------- --------------- -------
Comprehensive income
Loss and total comprehensive loss for
the year - - (3.7) (3.7) (0.3) (4.0)
------------------------------------- ------ -------- -------- --------- -------------- --------------- -------
Transactions with owners
Issue of shares, net of transaction
costs 22 0.7 5.3 237.0 243.0 - 243.0
Share-based payments, net of deferred
tax 16, 28 - - 0.4 0.4 - 0.4
Purchase of shares by Employee
Benefit Trust 22 - - (2.0) (2.0) - (2.0)
Dividends paid to owners of the
parent 32 - - (46.2) (46.2) - (46.2)
Dividends paid to non-controlling
interests - - - - (4.3) (4.3)
Reclassification - - (2.6) (2.6) 2.6 -
------------------------------------- ------ -------- -------- --------- -------------- --------------- -------
Total transactions with owners 0.7 5.3 186.6 192.6 (1.7) 190.9
------------------------------------- ------ -------- -------- --------- -------------- --------------- -------
At 30 September 2020 5.2 5.3 1,075.2 1,085.7 0.3 1,086.0
------------------------------------- ------ -------- -------- --------- -------------- --------------- -------
Comprehensive income
Profit and total comprehensive income
for the year - - 72.3 72.3 - 72.3
------------------------------------- ------ -------- -------- --------- -------------- --------------- -------
Transactions with owners
Share-based payments, net of deferred
tax 16, 28 - - 2.8 2.8 - 2.8
Purchase of shares by Employee
Benefit Trust 22 - - (1.4) (1.4) - (1.4)
Purchase of own shares, including
transaction costs 22 - - (52.2) (52.2) - (52.2)
------------------------------------- ------ -------- -------- --------- -------------- --------------- -------
Total transactions with owners - - (50.8) (50.8) - (50.8)
------------------------------------- ------ -------- -------- --------- -------------- --------------- -------
At 30 September 2021 5.2 5.3 1,096.7 1,107.2 0.3 1,107.5
------------------------------------- ------ -------- -------- --------- -------------- --------------- -------
Consolidated cash flow statement
For the year ended 30 September 2021
2021 2020
Note GBPm GBPm
-------------------------------------------------------------------------------- ------ ------ -------
Cash used in operations 23 (10.0) (144.9)
Interest paid - lease liabilities (2.2) (1.1)
Interest paid - other (3.2) (5.4)
Interest received 0.8 0.2
Tax paid (19.1) (27.2)
-------------------------------------------------------------------------------- ------ ------ -------
Net cash outflow from operating activities (33.7) (178.4)
-------------------------------------------------------------------------------- ------ ------ -------
Cash flows from investing activities
Purchase of intangible assets 11 (2.1) (2.9)
Purchase of property, plant and equipment 12 (13.8) (4.8)
Proceeds from disposal of financial assets at fair value through profit or loss - 5.0
Decrease/(increase) in advances to joint ventures and associate 25 6.8 (19.8)
Repayment of members' interest from joint ventures 14 5.8 4.4
Dividends received from joint ventures and associate 14, 15 24.3 35.8
-------------------------------------------------------------------------------- ------ ------ -------
Net cash inflow from investing activities 21.0 17.7
-------------------------------------------------------------------------------- ------ ------ -------
Cash flows from financing activities
Dividends paid to owners of the parent 32 - (46.2)
Dividends paid to non-controlling interests - (4.3)
Repayment of lease liabilities (8.2) (4.9)
Purchase of shares by Employee Benefit Trust 22 (1.4) (2.0)
Purchase of own shares, including transaction costs 22 (34.8) -
Net proceeds from the issue of share capital - 243.0
Borrowings under the revolving credit facility - 297.6
Repayment of borrowings under the revolving credit facility - (297.6)
-------------------------------------------------------------------------------- ------ ------ -------
Net cash (outflow)/inflow from financing activities (44.4) 185.6
-------------------------------------------------------------------------------- ------ ------ -------
Net (decrease)/increase in cash and cash equivalents (57.1) 24.9
Cash and cash equivalents at the beginning of the year 100.5 75.6
-------------------------------------------------------------------------------- ------ ------ -------
Cash and cash equivalents at the end of the year 19 43.4 100.5
-------------------------------------------------------------------------------- ------ ------ -------
Notes to the consolidated financial statements
For the year ended 30 September 2021
1. General information
Countryside is the market leader in the delivery of high quality
mixed-tenure communities in partnership with housing associations,
public bodies and institutional private rental operators, with a
strong focus on placemaking and regeneration.
Countryside Properties PLC (the "Company") is a public limited
company incorporated and domiciled in the United Kingdom whose
shares are publicly traded on the London Stock Exchange. The
Company's registered office is Countryside House, The Drive,
Brentwood, Essex CM13 3AT. The Company, its subsidiaries, joint
ventures and associate are together defined as the "Group".
2. Critical accounting judgements and estimates
The preparation of the Group's financial statements requires the
Directors to make estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets, liabilities, income, expenses and related disclosures.
Critical accounting judgements
In the process of applying the Group's accounting policies,
which are described in Note 3, the Directors have made no
individual judgements that have a significant impact on the
financial statements, apart from those involving estimates which
are described below.
Key sources of estimation uncertainty
Estimates and underlying assumptions affecting the financial
statements are based on historical experience and other relevant
factors and are reviewed on an ongoing basis. This approach forms
the basis of making judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Changes in accounting estimates may be necessary if there are
changes in the circumstances on which the estimate was based or as
a result of new information. Such changes are recognised in the
year in which the estimate is revised.
The key sources of estimation uncertainty that have a risk of
causing a material adjustment to the carrying value of assets and
liabilities are described below.
Estimation of site profitability
In order to determine the profit or loss that the Group
recognises on its developments and construction contracts in a
specific period, the Group allocates the total cost of each
development or construction contract between the proportion
completing in the period and the proportion completing in future
periods. The assessment of the total costs to be incurred requires
a degree of estimation.
Actual costs may differ to forecasts for several reasons such as
site delays, unforeseen costs, change orders and uncontracted cost
inflation and the Group is also exposed to various market
fluctuations. The long-term nature of the Group's activities adds
further complexity as forecasts are required for the duration of
developments or construction contracts.
The Covid-19 pandemic has increased this estimation uncertainty
due to the potential impact on house prices, materials, labour
costs and construction timelines. Group management has established
internal controls to review and ensure the appropriateness of
estimates made on an individual development or contract basis.
The Directors note that a change in estimated margins on several
sites (due, for example, to changes in estimates of cost inflation
or a material reduction in-house prices in the private market)
could materially alter future profitability. The Directors have
performed a detailed review of the Group's developments at the year
end and have recognised a net release of provisions relating to
inventories of GBP0.7m (2020: charge of GBP6.2m). Refer to Note
17.
As an illustration, if the Directors were to reduce the forecast
margins of all developments by 5 percentage points, the gross
profit recognised in the year would have reduced by GBP69m, or
GBP77m on an adjusted basis, with a reduction to net assets of the
same value. Likewise, an increase to margins by 5% would have
increased gross profit and net assets by the same values.
Remediation costs for multi-occupancy buildings
During the year, the Group recognised a provision of GBP41.0m
relating to expected remediation costs for multi-occupancy
buildings. The Directors have made estimates as to the extent of
the remedial works required and the associated costs, using
currently available information including third-party quotations
where possible. The detailed review is ongoing and therefore the
scope of remedial works required and the associated costs, are
likely to change over time. The estimation of expected future
outflows in relation to these properties, together with any
potential recovery of costs, is complex resulting in significant
estimation uncertainty. Refer to Note 21 and Note 31 for further
detail.
As an illustration a reasonably possible increase of 20% in the
estimated costs would increase cost of sales and reduce profit by
GBP8.2m, and reduce the Group's operating margin by 60bps on both a
reported and adjusted basis.
3. Accounting policies
Basis of preparation
These financial statements for the year ended 30 September 2021
are those of the Company and all of its subsidiaries. They have
been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006
("IFRS") and the applicable legal requirements of the Companies Act
2006. The consolidated financial statements also comply with
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European
Union.
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.
These financial statements have been prepared on a going concern
basis in Sterling and rounded to the nearest GBP0.1m under the
historical cost convention, except for share-based payments and
certain other assets and liabilities recognised at fair value as a
result of business combinations.
Going concern
The Group has the benefit of a GBP300m revolving credit facility
("RCF") provided by its banking syndicate of four banks, which
expires in May 2023. The facility includes covenants in respect of
gearing, interest cover, tangible net asset value and loan to book
value. In response to the initial outbreak of Covid-19, the Group's
gearing and interest cover covenants were relaxed until September
2022 to provide additional headroom under the RCF.
As described in the Viability Statement in the 2021 Annual
Report, the Directors have performed a robust assessment of the
principal risks facing the Company, including those risks that
would threaten Countryside's business model, future performance,
solvency, or liquidity. The Group's business activities, together
with the factors likely to affect its future development, are set
out in the Strategic Report in the 2021 Annual Report. The
financial position of the Group, its cash flows, liquidity position
and borrowing facilities are described in the Strategic Report in
the 2021 Annual Report. The Group's RCF was undrawn as at 30
September 2021 and further disclosures regarding the Group's
borrowings are provided in Note 19.
The assessment includes a financial review derived from the
Board-approved strategic forecasts over a three-year period to 30
September 2024. Plausible downside case scenarios have been
reviewed to illustrate the potential impact on the Group's
viability of one or more of the Group's principal risks
crystallising, both individually and in combination. Two scenarios
have been considered as follows:
-- A prolonged economic downturn commencing in January 2022
resulting in a significant reduction in house prices followed by a
gradual return to forecast volumes and prices over a three-year
period; and
-- A major incident occurs causing the business to shut down for
a period of two months and resulting in a sharp fall in house
prices.
Based on the forecasts and scenarios modelled, the Directors
have assessed the Group's going concern status over the next 12
months, which incorporates the downside scenarios noted above.
Having considered the Group's cash flow forecasts, the Directors
are satisfied that the Group has sufficient liquidity and covenant
headroom to remain liquid and meet its liabilities as they fall due
for at least 12 months from the date of these financial statements.
Accordingly, these financial statements have been prepared on a
going concern basis.
Adoption of new and revised accounting standards
During the financial year ended 30 September 2021, the Group
adopted the following standards and amendments issued by the
International Accounting Standards Board ("IASB"):
-- Definition of a Business - Amendments to IFRS 3 "Business Combinations";
-- Definition of Material - Amendments to IAS 1 "Presentation of
Financial Statements" and IAS 8 "Accounting Policies, Changes in
Accounting Estimates and Errors";
-- Interest Rate Benchmark Reform - Phase 1 - Amendments to IFRS 9, IAS 39 and IFRS 7; and
-- Covid-19 Related Rent Concessions - Amendment to IFRS 16 "Leases".
The adoption of these amendments did not have a material impact
on the Group financial statements.
Standards, interpretations and amendments in issue but not yet
effective
The following amendments to standards and interpretations have
also been issued, but are not yet effective and have not been early
adopted for the financial year ended 30 September 2021:
-- Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16.
The adoption of this amendment is not expected to have a
material impact on the Group financial statements.
Basis of consolidation
Subsidiaries are entities which the Group has the power to
control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the
entity and has the ability to govern the financial and operating
policies so as to obtain economic benefits from its activities. The
financial statements of subsidiaries are consolidated in the Group
financial statements using the acquisition method of accounting
from the date on which control is obtained up until the date that
control ceases.
Non-controlling interests in the results and equity of
subsidiaries are shown separately in the statement of comprehensive
income and the statement of changes in equity.
Where the accounting policies of a subsidiary or
equity-accounted investee do not conform in all material respects
to those of the Group, adjustments are made on consolidation to
reflect the accounting policies of the Group.
Intragroup transactions, balances and unrealised gains and
losses on transactions between Group companies are eliminated in
preparing the financial statements. Gains arising from transactions
with joint arrangements and associates are eliminated as described
below.
Joint arrangements and associates
Where the Group collaborates with other entities on a
development or contract, a judgement is made about the nature of
the relationship. Where there is joint control (as described by
IFRS 11), the arrangement is classified as a joint arrangement and
accounted for using the equity method (for joint ventures) or on
the basis of the Group's proportional share of the arrangement's
assets, liabilities, revenues and costs (for joint operations).
An associate is an entity over which the Group is in a position
to exercise significant influence but does not exercise control or
joint control. Investments in associates are accounted for using
the equity method.
Under the equity method of accounting, interests in joint
ventures and associates are initially recognised at cost and
adjusted thereafter to recognise the Group's share of profits or
losses and movements in other comprehensive income. When the
Group's share of losses in a joint venture or associate equals or
exceeds its interests in the joint venture or associate, the Group
does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the joint venture or
associate.
Unrealised losses arising on transactions between the Group and
its joint ventures and associates are eliminated unless the
transaction provides evidence of an impairment of the asset
transferred.
The Group funds its joint ventures and associate through a
combination of equity investments and debt (advances to joint
ventures). The Directors review the recoverability of its
investments and advances for impairment annually.
Purchase of own shares
From time to time, the Employee Benefit Trust ("EBT") purchases
shares of the Company in order to hold an appropriate level of
shares towards the future settlement of outstanding share-related
incentives on behalf of the Group. The EBT is funded directly by
the Group. The EBT waives its dividend and voting rights in respect
of the shares it holds. The purchase value of EBT shares is charged
to retained earnings.
During the year ended 30 September 2021, the Company announced
its intention to return surplus cash to shareholders via on-market
purchases of ordinary shares. Shares purchased by the Company are
held in treasury and result in a charge to retained earnings. All
directly attributable costs incurred relating to the purchase of
treasury shares are also charged to retained earnings. Where the
Company engages a third party to carry out a share purchase
programme on a non-discretionary and irrevocable basis, a liability
is recognised on the date of inception of the contract for the
present value of the redemption amount.
Business combinations
All acquisitions are accounted for using the acquisition method
of accounting. The cost of an acquisition is the aggregate of the
fair values of the assets transferred, liabilities incurred or
assumed, and equity instruments issued at the date of acquisition.
The consideration transferred includes the fair value of the asset
or liability resulting from a deferred or contingent consideration
arrangement, unless that arrangement is dependent on continued
employment of the beneficiaries.
The identified assets and liabilities are measured at their fair
value at the date of acquisition. The excess of consideration over
the Group's share of the fair value of the total identifiable net
assets acquired is recorded as goodwill. Costs directly relating to
an acquisition are expensed to the statement of comprehensive
income.
Intangible assets
Goodwill
Goodwill recognised on acquisition of a subsidiary represents
the excess of consideration over the Group's share of the fair
value of the total identifiable net assets acquired. If the total
consideration transferred is less than the fair value of the net
assets acquired, the difference is recognised directly in the
statement of comprehensive income.
An impairment review is carried out annually or when
circumstances arise that may indicate an impairment is likely. The
carrying value of goodwill is compared to its recoverable amount,
being the higher of its value in use and its fair value less costs
of disposal. Any impairment is charged immediately to the statement
of comprehensive income and is not subsequently reversed.
For the purpose of impairment testing, goodwill acquired in a
business combination is allocated at the acquisition date to cash
generating units ("CGUs"), or groups of CGUs, that are expected to
benefit from the synergies of the business combination. Each CGU or
group of CGUs to which the goodwill is allocated represents the
lowest level within the entity at which the goodwill is monitored
for internal management purposes.
Brands
The Group carries assets on the statement of financial position
for acquired brands. The cost is determined at acquisition as being
directly attributable cost or, where relevant, by using an
appropriate valuation method. The brand assets are tested for
impairment when a triggering event is identified and are amortised
over the estimated useful life of the brand, up to a maximum of 20
years. Internally generated brands are not recognised.
Customer-related assets
The Group carries customer-related intangible assets on the
statement of financial position resulting from acquisitions. These
assets are recognised at fair value. The assets are tested for
impairment when a triggering event is identified and are amortised
over a period of between two and a half and ten years. Internally
generated relationships are not recognised.
Computer software
Computer software that generates an economic benefit of greater
than one year, and is controlled by the Group, is recognised as an
intangible asset and carried at cost less accumulated amortisation.
Computer software costs that are recognised as an asset are
amortised on a straight-line basis over their economic useful life
of either four or five years. These assets are reviewed for
impairment at such time as there is a change in circumstances due
to which the carrying value may no longer be recoverable.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any applicable impairment losses.
Depreciation is charged at rates to write off the cost of the
asset (to its residual value) on a straight-line basis over the
estimated useful life of the asset. The applicable useful lives
are:
-- Plant and machinery: four to five years, except for
manufacturing machinery with a maximum useful life of twelve
years
-- Fixtures and fittings: ten years
The Group does not own any land or buildings considered to be
non-trade related.
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at each balance sheet date.
Financial assets
The classification of financial assets depends on the purpose
for which the financial assets were acquired. Management determines
the classification of its financial assets at initial recognition.
Financial assets are derecognised only when the contractual rights
to the cash flows from the financial assets expire or when the
Group is no longer considered to have control over the assets.
The Group's financial assets comprise "trade and other
receivables" and "cash and cash equivalents" in the statement of
financial position. Trade and other receivables are classified as
financial assets at amortised cost. Financial assets at amortised
cost are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market.
Inventories
Inventories are held at the lower of cost or net realisable
value, with the exception of inventories acquired as part of a
business combination which are held at fair value.
Cost comprises of land, land option costs, materials, applicable
direct labour and those overheads incurred to bring the inventories
to their present location and condition, less the value of
inventories charged to cost of sales. The Group determines the
value of inventories charged to cost of sales based on the total
forecast margin of developing a site or part of a site. Refer to
page 28 for the Group's cost of sales accounting policy.
Net realisable value represents estimated selling price less all
estimated costs to sell, including sales and marketing costs.
Purchased land options are initially stated at cost. Option
costs are written off on a straight-line basis over the remaining
life of the option and are also subject to impairment review.
Impairment reviews are performed when circumstances arise which
indicate an impairment is likely, such as a refusal of planning
permission. Any impairments are recognised immediately in the
statement of comprehensive income. Upon exercise, the unamortised
balance of an option is included within the value of inventory.
Land inventory is recognised when the Group obtains control of
the land, which is considered to be on unconditional exchange of
contracts. Where land is purchased on deferred payment terms, the
liability is discounted to fair value with the land recognised at
the discounted value in inventories. The liability is presented as
"deferred land payments" within trade and other payables.
Pre-contract expenditure is capitalised into inventories where
it is probable that a contract will be signed or otherwise is
recognised as an expense within costs of sales in the statement of
comprehensive income.
Provisions for inventories are made, where appropriate, to
reduce the value of inventories to their net realisable value.
Trade and other receivables
Trade and other receivables are recognised initially at fair
value and subsequently measured at amortised cost, less any
provision for impairment.
The Group applies the simplified approach under IFRS 9 to
measure expected credit losses ("ECL") associated with trade and
other receivables. The carrying value of the receivable is reduced
at each reporting date for any increase in the lifetime ECL, with
an impairment loss recognised in the statement of comprehensive
income.
If collection is expected in one year or less, receivables are
classified as current assets. If not, they are classified as
non-current assets.
Where land is sold on deferred payment terms, the revenue and
associated receivable are discounted to their fair value. The
discount to fair value is amortised over the period to the
settlement date and credited to finance income using the effective
interest rate method. Changes in estimates of the final amount due
are recognised in revenue in the statement of comprehensive
income.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and
other short-term deposits held by the Group with maturities of
three months or less.
Trade and other payables
Trade and other payables on normal terms are not interest
bearing and are stated initially at their fair value and
subsequently at amortised cost. They are classified as current
liabilities if payment is due within 12 months. If not, they are
classified as non-current liabilities.
Where land is purchased on deferred payment terms, the liability
is discounted to fair value with the land recognised at the
discounted value in inventories. The discount to fair value
relating to the liability is amortised over the period of the
credit term and charged to finance costs using the effective
interest rate method.
Trade and other payables also include overage payable where the
Group is committed to make contractual payments to land vendors
related to the performance of the development in the future.
Overage payable is estimated based on expected future cash flows in
relation to relevant developments and, where payment will take
place in more than one year, is discounted.
Changes in estimates of the final payment value of deferred land
payments and overage payable are capitalised into inventories and,
in due course, to cost of sales in the statement of comprehensive
income. If there is a change to the timing of payments, the present
value of the revised payments is recalculated with any change to
the liability recognised within finance costs.
Deposits received from customers relating to sales of new
properties are classified within current trade payables.
Leases
Lease liabilities are initially recognised at the present value
of future lease payments. Future lease payments are included in the
lease liability where they are fixed in value, or variable based on
an index or a rate. Variable lease payments that do not depend on
an index or rate are recognised as an expense in the period in
which the condition that triggers the payment occurs. To calculate
the present value of future lease payments, the payments are
discounted at the Group's incremental borrowing rate, which is the
rate that the Group would have to pay to borrow the funds necessary
to obtain an asset of similar value in a similar economic
environment with similar terms and conditions.
Subsequently, lease liabilities increase to reflect the unwind
of discount and reduce by the value of payments made to lessors.
Lease liabilities are remeasured where the Group's assessment of
the expected lease term changes or there is a modification to the
lease terms. The unwind of the discount on lease liabilities is
recorded in finance costs in the statement of comprehensive income.
Cash outflows relating to lease interest are presented within net
cash flows from operating activities in the statement of cash
flows.
Right of use assets are initially measured at cost, comprising
the initial value of the lease liabilities adjusted for rental
payments made at or prior to the start of the lease term, initial
direct costs, lease incentives and restoration costs.
Subsequently, right of use assets are measured at cost less
accumulated depreciation and impairment losses and adjusted for any
remeasurement of lease liabilities. Right of use assets are
depreciated over the shorter of the asset's estimated useful life
and the lease term on a straight-line basis. Depreciation is
recorded in either cost of sales or administrative expenses in the
statement of comprehensive income depending on the nature of the
asset.
The Group applies the recognition exemptions for short-term and
low-value asset leases. The rental expense for these leases is
recognised on a straight-line basis in the statement of
comprehensive income. The rental expense is recorded in either cost
of sales or administrative expenses depending on the nature of the
asset. Short-term leases are leases with a lease term of 12 months
or less.
Borrowings
Interest-bearing bank loans and overdrafts are recorded
initially at fair value. Such instruments are subsequently carried
at amortised cost and finance charges, including premiums payable
on settlement or redemption, are amortised over the term of the
instrument using the effective interest rate method.
Bank loans are reported net of direct transaction costs to the
extent that borrowings are available for offset. If the value of
unamortised borrowing costs exceeds the value of borrowings, these
amounts are disclosed within prepayments.
Bank loans are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the date of the statement of
financial position.
Bank overdrafts are classified as current liabilities.
Provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event which is probable to result
in an outflow of economic benefits that can be reliably estimated.
Where the effect of the time value of money is material, the
provision is discounted at the pre-tax discount rate that reflects
the risks specific to the liability.
Share capital and share premium
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are presented in
share premium as a deduction from the proceeds received.
Revenue
Revenue comprises the fair value of the consideration received
or receivable, net of applicable value-added tax, stamp duty land
tax, rebates and discounts and after eliminating sales within the
Group.
The Group operates a range of legal and contractual structures
which are tailored according to the land structure and parties to
the contract. Recognition of revenue reflects the underlying nature
of these contracts, as described below in more detail by
category.
Private housing revenue
Revenue is recognised on the sale of private housing at a point
in time on legal completion, as this is when the customer obtains
control of the property and the Group has fulfilled its performance
obligations. Revenue is recognised at the fair value of the
consideration received.
Cash incentives are considered to be a discount from the
purchase price offered to the acquirer and are therefore accounted
for as a reduction to revenue.
Cash is received by the Group on legal completion and there is
no variable or financing component to the consideration received.
Where customers use the Government's Help to Buy scheme, the Group
typically receives the cash from Homes England within two weeks of
legal completion.
Affordable housing and private rental sector ("PRS") revenue
Contract revenue for affordable housing and PRS contracts is
recognised over time based on surveyor-certified valuations of work
performed at the balance sheet date. Where there is a disposal of
land to the customer under the contract, revenue for this disposal
is recognised in line with the accounting policy for land sales
below.
As the build progresses, customer-controlled assets are created,
with the design tailored to the specification of the customer. The
Group has an enforceable right to be paid for the work completed to
date and invoices are issued and paid over the life of the
development. Variations in contract work and claims are included to
the extent that it is highly probable that there will not be a
significant reversal when the value of such payments is
finalised.
Where progress towards the satisfaction of performance
obligations cannot be reasonably determined, revenue is recognised
over time as the work is performed, to the extent that costs have
been incurred and are expected to be recoverable, and contract
costs are recognised as expenses in the period in which they are
incurred.
When it is probable that total contract costs will exceed total
contract revenue, the expected loss is recognised immediately in
the statement of comprehensive income within cost of sales.
The Group recognises affordable housing and PRS unit completions
on a pro-rata basis in line with revenue recognition.
Other revenue - land sales
Revenue is recognised in the statement of comprehensive income
at a point in time on unconditional exchange of contracts as this
is the point at which the Group is considered to have satisfied its
performance obligations. Revenue is measured as the fair value of
consideration received or receivable.
Where there are residual obligations in the land sale contract
that are not satisfied at the balance sheet date, an element of the
transaction price is deferred into future periods. If the
stand-alone selling price of the residual obligations is not
directly observable, the transaction price is derived by
calculating a value for the land element of the contract and
deducting this from the total transaction price. The remainder is
allocated to the residual obligations. Revenue is recognised on the
residual obligations at a point in time when the performance
obligations have been satisfied.
Cash is either received on completion or on deferred settlement
terms. Where land is sold on deferred settlement terms the revenue
and associated receivable are discounted to their fair value. The
discount to fair value is amortised over the period to the
settlement date and credited to finance income using the effective
interest rate method. Changes in estimates of the final amount due
are recognised in revenue in the statement of comprehensive
income.
Other revenue - commercial sales
Revenue is typically recognised in the statement of
comprehensive income at a point in time on unconditional exchange
of contracts as this is the point at which the Group is considered
to have satisfied its performance obligations. Cash is received on
legal completion and, in most cases, there is no variable or
financing component to the consideration received.
In some cases, where longer-term performance obligations are
present, for example in design and build contracts, revenue is
recognised over time as described above in "Affordable housing and
private rental sector ("PRS") revenue". Revenue is measured as the
fair value of consideration received or receivable.
Other revenue - project management services
Revenue earned for the provision of project management services,
typically to the Group's joint ventures and associates, is
recognised on an accruals basis in line with the underlying
contract.
Other revenue - part exchange
In certain instances, property may be accepted as part
consideration in the sale of a Countryside property. The fair value
of the part exchange property is established by independent
surveyors and reduced for costs to sell. The sale of the
Countryside property is recorded in line with the accounting policy
for private housing described above, with the value of revenue
recognised reflecting the total of cash proceeds and the fair value
of the part exchange property received by the Group. The part
exchange property is recognised within inventories until sold.
The subsequent sale of the part exchange property is treated as
a separate transaction with revenue recognised in line with the
treatment of private housing described above.
Other revenue - freehold reversions
Revenue is recognised on freehold reversion sales on
unconditional exchange.
Cost of sales
The Group determines the value of inventories charged to cost of
sales based on the total forecast margin of developing a site or a
phase of a site. Once the total expected margin of the site or
phase of a site is established it is allocated based on revenue to
calculate a build cost per plot. These costs are recognised within
cost of sales when the related revenue is recognised in accordance
with the Group's revenue recognition policy.
To the extent that additional costs or savings are identified
and the expected margin changes as the site progresses, the change
is recognised over the remaining units.
Cost of sales for land and commercial property which form part
of a larger site is recognised based on forecast site margin as
described above. Where land and commercial property relate to the
entirety of a site, cost of sales represents the carrying value of
the related inventory in the Group's statement of financial
position and is recognised within cost of sales when revenue is
recognised in accordance with the Group's revenue recognition
policy.
Finance costs and finance income
Borrowing costs
Borrowing costs in relation to the Group's debt facility are
recognised on an accruals basis. Also included in borrowing costs
is the amortisation of fees associated with the arrangement of the
financing.
Finance charges, including premiums payable on settlement or
redemption and direct issue costs, are accounted for on an accruals
basis in the statement of comprehensive income using the effective
interest method. These amounts are added to the carrying amount of
the instrument to the extent that they are not settled in the
period in which they arise.
The Group capitalises borrowing costs into developments only
where project-specific borrowings are used.
Unwind of discounting
The finance costs and income associated with the time value of
money on discounted payables and receivables are recognised within
finance costs and income as the discount unwinds over the life of
the relevant item.
Current and deferred income taxation
Income tax comprises current and deferred tax.
Current taxation
The current taxation payable is based on taxable profit for the
period which differs from accounting profit as reported in the
statement of comprehensive income because it excludes items of
income or expense that are taxable or deductible in other years and
those items never taxable or deductible. The Group's liability for
current tax is measured using tax rates that have been enacted or
substantively enacted by the reporting date.
Deferred taxation
Deferred taxation is the tax expected to be payable or
recoverable on differences between the carrying amount of assets
and liabilities in the financial statements and their corresponding
tax values used in the computation of taxable profit and is
accounted for using the balance sheet liability method.
Deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised to the
extent that it is probable that future taxable profits will be
available against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the
temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction which
affects neither the taxable profit nor the accounting profit.
Deferred tax is calculated at the tax rates that are expected to
apply to the period when the asset is realised or the liability is
settled based upon tax rates that have been enacted or
substantively enacted by the reporting date. Deferred tax is
charged or credited in the statement of comprehensive income,
except when it relates to items credited or charged directly to the
statement of changes in equity, in which case the deferred tax is
also dealt with in equity.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the Group intends to settle the
balances on a net basis.
Segmental reporting
The chief operating decision maker ("CODM") has been identified
as the Group's Executive Committee. The CODM reviews the Group's
internal reporting in order to assess performance and allocate
resources to the Group's operating segments. The CODM assesses the
performance of the operating segments based on adjusted revenue,
adjusted operating profit, return on capital employed ("ROCE") and
tangible net operating asset value ("TNOAV").
On 7 July 2021, the Group announced an update to its strategy
which resulted in all of the Group's resources being focused on the
Partnerships business. Any non-Partnerships activities are regarded
as Legacy Operations, which the Group is exiting as soon as
practical.
The Group's Partnerships business comprises four geographical
operating segments across the United Kingdom, each managed by a
Divisional Chief Executive. All Divisional Chief Executives are
members of the Group's Executive Committee. The Group aggregates
the Partnerships operating segments into one reportable segment on
the basis that they share similar economic characteristics.
Segmental results include items directly attributable to the
segment, as well as those that can be allocated on a reasonable
basis.
Pension plans
The Group operates a defined contribution pension plan. A
defined contribution plan is a pension plan under which the Group
pays fixed contributions to a separate entity.
The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised on
an accruals basis as employee benefit expenses.
Share-based payments
The Group provides benefits to employees of the Group, including
Directors, in the form of equity-settled share-based awards,
whereby employees render services in exchange for rights over
shares.
For equity-settled share-based payments, the fair value of the
employee services rendered is determined by reference to the fair
value of the shares awarded or options granted, excluding the
impact of any non-market vesting conditions. All share options are
valued using an option-pricing model (Black Scholes or Monte
Carlo). This fair value is charged to the statement of
comprehensive income over the vesting period of the share-based
awards.
The Group does not operate any cash-settled share-based payment
plans.
Non-underlying items
Certain items which do not relate to the Group's underlying
performance are presented separately in the statement of
comprehensive income as non-underlying items where, in the
judgement of the Directors, they need to be disclosed separately by
virtue of their nature, size or incidence in order to obtain a
clear and consistent presentation of the Group's underlying
business performance. As these non-underlying items can vary
significantly from year to year, they create volatility in reported
earnings.
In addition, the Directors believe that in discussing the
performance of the Group, the results of joint ventures and
associates should be proportionally consolidated, including the
Group's share of revenue and operating profit, as they are managed
as an integral part of the Group's operations. As such, the
Directors adjust for these non-underlying items in the calculation
of the Group's Alternative Performance Measures ("APMs"), which are
set out on pages 55 to 57.
Examples of material and non-recurring items which may give rise
to disclosure as non-underlying items are:
-- costs incurred directly in relation to business combinations
or capital market transactions including advisory costs, one-off
integration costs and employment-related deferred consideration
costs;
-- adjustments to the statement of financial position that do
not relate to trading activity such as the recognition and reversal
of non-trade impairments or the recognition of material liabilities
which are not considered to be in the ordinary course of business;
and
-- the costs of significant Group restructuring exercises.
In addition, the amortisation/de-recognition of
acquisition-related intangible assets is treated as a
non-underlying item as management does not believe this potentially
variable cost should be included when considering the underlying
trading performance of the Group.
Dividends
Dividend income from investments is recognised when the
shareholders' rights to receive payment have been established.
Dividends payable are recorded in the period in which they
become unconditional.
4. Segmental reporting
Segmental reporting is presented in respect of the Group's
reportable segments reflecting the Group's management and internal
reporting structure and is the basis on which strategic operating
decisions are made by the Group's CODM (the Group's Executive
Committee).
On 7 July 2021, the Group announced an update to its strategy
which resulted in all of the Group's resources being focused on the
Partnerships business. Any non-Partnerships activities are regarded
as Legacy Operations, which the Group is exiting as soon as
practical.
The Group's Partnerships business comprises of four geographical
operating segments across the United Kingdom, each managed by a
Divisional Chief Executive. All Divisional Chief Executives are
members of the Group's Executive Committee. The Group aggregates
the Partnerships operating segments into one reportable segment on
the basis that they share similar economic characteristics. Each of
the divisions build and deliver homes on mixed-tenure sites, sell
to similar customers, and operate in the same legal and regulatory
environment.
As a result of the Group's strategy update, the following
changes have been applied for the year ended 30 September 2021:
-- A number of sites previously included within the
Housebuilding segment have been identified as fitting the
mixed-tenure Partnerships model and have been reclassified within
Partnerships. This includes the Group's investment in two of its
joint ventures, Greenwich Millennium Village Limited and
Countryside Zest (Beaulieu Park) LLP.
-- The remaining operations previously disclosed as
Housebuilding are now disclosed as Legacy Operations as the Group's
second reportable segment. This reflects the Group's strategy to
allocate its capital to the Partnerships business, with Legacy
Operations expected to be substantially complete by 30 September
2023.
Further detail on the Group's strategy and the changes during
the year is provided in the Strategic Report in the 2021 Annual
Report.
Prior year information has been restated to reflect the changes
above.
(a) Segmental financial performance
Segmental adjusted operating profit and segmental operating
profit include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis. Central head
office costs that are directly attributable to a segment are
allocated where possible, or otherwise allocated between segments
based on an appropriate allocation methodology.
Adjusted revenue and adjusted operating profit are Alternative
Performance Measures ("APMs") for the Group. Further detail on APMs
is provided on pages 55 to 57.
Legacy Group
Partnerships Operations items Total
GBPm GBPm GBPm GBPm
-------------------------------------------- ------------ ----------- ------ -------
Year ended 30 September 2021
Adjusted revenue including share of revenue
from joint ventures and associate 1,033.2 493.0 - 1,526.2
Less: share of revenue from joint ventures
and associate (130.9) (23.9) - (154.8)
-------------------------------------------- ------------ ----------- ------ -------
Revenue 902.3 469.1 - 1,371.4
-------------------------------------------- ------------ ----------- ------ -------
Adjusted operating profit/(loss) including
share of operating profit/(loss) from
joint ventures and associate 107.7 70.5 (10.9) 167.3
Less: share of operating profit from
joint ventures and associate (28.9) (3.9) - (32.8)
Less: non-underlying items (Note 7) (44.4) (1.1) (17.7) (63.2)
-------------------------------------------- ------------ ----------- ------ -------
Operating profit/(loss) 34.4 65.5 (28.6) 71.3
-------------------------------------------- ------------ ----------- ------ -------
Legacy Group
Partnerships Operations items Total
GBPm GBPm GBPm GBPm
-------------------------------------------- ------------ ----------- ------ ------
Year ended 30 September 2020 (restated)
Adjusted revenue including share of revenue
from joint ventures and associate 669.2 319.6 - 988.8
Less: share of revenue from joint ventures
and associate (78.7) (18.1) - (96.8)
-------------------------------------------- ------------ ----------- ------ ------
Revenue 590.5 301.5 - 892.0
-------------------------------------------- ------------ ----------- ------ ------
Adjusted operating profit/(loss) including
share of operating profit/(loss) from
joint ventures and associate 37.5 20.3 (3.6) 54.2
Less: share of operating profit from
joint ventures and associate (14.2) (3.0) - (17.2)
Less: non-underlying items (Note 7) (8.3) (5.2) (28.9) (42.4)
-------------------------------------------- ------------ ----------- ------ ------
Operating profit/(loss) 15.0 12.1 (32.5) (5.4)
-------------------------------------------- ------------ ----------- ------ ------
(b) Segmental financial position
Segmental TNAV represents the net assets of each operating
segment, excluding intangible assets and related deferred tax
liabilities. It includes items directly attributable to each
segment as well as those that can be allocated on a reasonable
basis. Segmental TNOAV is the Group's measure of capital employed,
as used in the calculation of ROCE. Group and segmental TNAV and
TNOAV are Alternative Performance Measures ("APMs") for the Group.
Further detail on APMs is provided on pages 55 to 57.
Legacy
Partnerships Operations Total
As at 30 September 2021 GBPm GBPm GBPm
----------------------------------- ------------ ----------- -------
Segment assets 1,092.9 475.1 1,568.0
Segment liabilities (482.7) (138.3) (621.0)
----------------------------------- ------------ ----------- -------
TNOAV 610.2 336.8 947.0
Net cash/(debt) 41.0 - 41.0
----------------------------------- ------------ ----------- -------
TNAV 651.2 336.8 988.0
----------------------------------- ------------ ----------- -------
Legacy
Partnerships Operations Total
As at 30 September 2020 (restated) GBPm GBPm GBPm
----------------------------------- ------------ ----------- -------
Segment assets 804.1 561.1 1,365.2
Segment liabilities (337.5) (174.2) (511.7)
----------------------------------- ------------ ----------- -------
TNOAV 466.6 386.9 853.5
Net cash/(debt) (39.4) 137.6 98.2
----------------------------------- ------------ ----------- -------
TNAV 427.2 524.5 951.7
----------------------------------- ------------ ----------- -------
(c) Segmental other items
Legacy Group
Partnerships Operations items Total
GBPm GBPm GBPm GBPm
--------------------------------------------- ------------ ----------- ------ -----
Year ended 30 September 2021
Investment in joint ventures 36.8 1.5 - 38.3
Investment in associate - 0.8 - 0.8
Share of post-tax profit from joint
ventures and associate 26.1 3.8 - 29.9
Capital expenditure - property, plant
and equipment 11.8 2.0 - 13.8
Capital expenditure - right of use assets 44.4 6.1 - 50.5
Capital expenditure - intangible assets - - 2.1 2.1
Depreciation - property, plant and equipment 1.7 0.6 - 2.3
Depreciation - right of use assets 4.7 1.5 - 6.2
Amortisation - intangible assets - - 10.4 10.4
Gain on sale of Group's interest in
joint venture - 13.9 - 13.9
Share-based payments - - 1.9 1.9
--------------------------------------------- ------------ ----------- ------ -----
Legacy Group
Partnerships Operations items Total
GBPm GBPm GBPm GBPm
--------------------------------------------- ------------ ----------- ------ -----
Year ended 30 September 2020 (restated)
Investment in joint ventures 32.9 8.0 - 40.9
Investment in associate - 1.3 - 1.3
Share of post-tax profit from joint
ventures and associate 12.7 4.3 - 17.0
Capital expenditure - property, plant
and equipment 4.2 0.6 - 4.8
Capital expenditure - right of use assets 3.1 1.3 - 4.4
Capital expenditure - intangible assets - - 2.9 2.9
Depreciation - property, plant and equipment 1.8 0.7 - 2.5
Depreciation - right of use assets 4.6 3.2 - 7.8
Amortisation - intangible assets - - 12.2 12.2
Impairment of goodwill - - 18.5 18.5
Share-based payments - - 1.0 1.0
--------------------------------------------- ------------ ----------- ------ -----
5. Employee costs
2021 2020
GBPm GBPm
------------------------------- ----- -----
Wages and salaries 127.5 108.8
Social security costs 14.9 13.8
Other pension costs 7.9 6.6
Share-based payments (Note 28) 1.9 1.0
------------------------------- ----- -----
152.2 130.2
------------------------------- ----- -----
All the Group's employees are entitled to join the Group's
defined contribution schemes, which are invested with Aegon. Annual
contributions to these plans expensed in the statement of
comprehensive income amounted to GBP7.9m (2020: GBP6.6m), of which
GBP1.1m (2020: GBP0.8m) was outstanding as at 30 September 2021.
The Group does not operate any defined benefit pension schemes.
The average monthly number of employees (including Directors)
for the year for each of the Group's principal activities was as
follows:
2021 2020
Number Number
------------ ------- -------
Development 1,826 1,782
Head office 219 165
------------ ------- -------
2,045 1,947
------------ ------- -------
6. Revenue
An analysis of Group reported revenue by type is set out below.
Segmental revenue has been restated for the year ended 30 September
2020. Refer to Note 4.
2020
2021 restated
GBPm GBPm
------------------------------------ ------- ---------
Partnerships:
- Private housing 449.2 251.7
- Affordable 274.9 197.6
- PRS 141.5 116.5
- Other 36.7 24.7
------------------------------------ ------- ---------
7 902.3 590.5
------------------------------------ ------- ---------
Legacy Operations:
- Private housing 344.3 205.1
- Affordable 41.5 45.2
- PRS 7.5 7.2
- Other 75.8 44.0
------------------------------------ ------- ---------
469.1 301.5
------------------------------------ ------- ---------
Total revenue (reported) 1,371.4 892.0
------------------------------------ ------- ---------
Share of revenue from joint ventures
and associate:
- Partnerships 130.9 78.7
- Legacy Operations 23.9 18.1
------------------------------------ ------- ---------
Total revenue (adjusted) 1,526.2 988.8
------------------------------------ ------- ---------
Other revenue of GBP112.5m (2020: GBP68.3m) includes land sales
of GBP87.2m (2020: GBP30.7m).
At 30 September 2021, the aggregate amount of unsatisfied
performance obligations relating to contracts with customers was
GBP1,042.3m (2020: GBP891.8m). Approximately 40% of these amounts
are expected to be recognised as revenue within one year, with the
remainder recognised over varying contractual lengths.
7. Operating profit/(loss)
(a) Operating profit/(loss)
Operating profit of GBP71.3m (2020: loss of GBP5.4m) is stated
after charging/(crediting):
2021 2020
Note GBPm GBPm
----------------------------------- ---- ------- -----
Inventories expensed to cost of
sales 1,151.2 760.5
Net provisions for impairment
of inventories 17 (0.7) 6.2
Gain on sale of Group's interest
in joint venture 14 (13.9) -
Staff costs 5 152.2 130.2
Amortisation - intangible assets 11 10.4 12.2
Impairment of goodwill 11 - 18.5
Depreciation - property, plant
and equipment 12 2.3 2.5
Depreciation - right of use assets 13 6.2 7.8
----------------------------------- ---- ------- -----
During the year, the Group disposed of its investment in the
Cambridge Medipark Limited joint venture for total consideration of
GBP16.2m, net of transaction costs. Prior to disposal the carrying
value of the investment was GBP2.3m, resulting in a gain on
disposal of GBP13.9m.
During the year the Group received the following services from
the Group's auditor:
2021 2020
GBPm GBPm
---------------------------------------- ----- -----
Fees payable to the Group's auditor for
the audit of parent and consolidated
financial statements 0.8 0.4
Fees payable to the Group's auditor for
other services:
- Audit of subsidiary companies 0.5 0.5
- Audit of joint ventures and associate
(Group share) 0.1 0.1
- Audit-related services 0.2 0.2
---------------------------------------- ----- -----
Total 1.6 1.2
---------------------------------------- ----- -----
(b) Non-underlying items
2021 2020
GBPm GBPm
----------------------------------------------------- ----- -----
Non-underlying items included within
cost of sales:
- Remediation costs for multi-occupancy
buildings 41.0 -
- Ground Rent Assistance Scheme 0.7 -
Non-underlying items included within
administrative expenses:
- Costs relating to the Housebuilding
separation 6.0 -
- Ground Rent Assistance Scheme 3.8 10.0
- Amortisation/de-recognition of acquisition-related
intangible assets 11.7 10.2
- Impairment of goodwill - 18.5
- Restructuring costs - 3.5
- Deferred consideration relating to
Westleigh - 0.2
----------------------------------------------------- ----- -----
Total non-underlying items 63.2 42.4
----------------------------------------------------- ----- -----
Remediation costs for multi-occupancy buildings
As a result of progress made in the Group's review of expected
remediation costs for multi-occupancy buildings, a provision of
GBP41.0m has been recognised. Refer to Note 21 for further
detail.
Ground Rent Assistance Scheme
Following the Competition and Markets Authority's ("CMA's")
review into the sale of leasehold properties, on 15 September 2021
Countryside announced that it had agreed voluntary undertakings
with the CMA to seek the removal of all 10- and 15-year doubling
clauses from leases where the ground rent is not for the ultimate
benefit of a local authority or registered provider of social
housing, at no cost to leaseholders. These undertakings have
resulted in an increase to the Ground Rent Assistance Scheme
provision of GBP3.8m (2020: GBP10.0m) and a write down of
inventories of GBP0.7m (2020: GBPNil) relating to leases where
Countryside is the freeholder.
Costs relating to the Housebuilding separation
As announced on 3 December 2020, the Group appointed Rothschild
& Co to examine the separation of its Housebuilding division.
The Group's review was concluded in July 2021, with the Group
issuing a strategy update on 7 July 2021. Total costs of GBP6.0m
were incurred during the year for legal, tax and accounting
advisory services relating to the review.
Amortisation/de-recognition of acquisition-related intangible
assets
Amortisation/de-recognition of acquisition-related intangible
assets is reported within non-underlying items as management does
not believe this cost should be included when considering the
underlying trading performance of the Group.
Impairment of goodwill
During September 2020, the Directors announced the Board's
decision to close the Millgate business with the remaining Millgate
sites being transferred to the Housebuilding West region. The
goodwill previously recognised on the acquisition of Millgate was
tested for impairment and an impairment charge of GBP18.5m was
recognised.
Restructuring costs
Restructuring costs of GBP3.5m were recognised in the year ended
30 September 2020 in relation to the closure of the Millgate
business and restructuring in the Partnerships division.
Taxation
A total tax credit of GBP11.6m (2020: GBP4.7m) in relation to
non-underlying items is included within taxation in the statement
of comprehensive income.
8. Net finance costs
2021 2020
Note GBPm GBPm
------------------------------------- ---- ------ ------
Bank loans and overdrafts (3.2) (5.3)
Amortisation of debt finance costs 19 (0.9) (0.7)
Unwind of discount relating to:
- Land purchases on deferred payment
terms (10.9) (7.0)
- Lease liabilities 13 (2.2) (1.1)
- Other loans (0.1) (0.1)
------------------------------------- ---- ------ ------
Finance costs (17.3) (14.2)
------------------------------------- ---- ------ ------
Interest receivable 0.8 0.2
Unwind of discount relating to:
- Land sales on deferred settlement
terms 0.7 0.5
------------------------------------- ---- ------ ------
Finance income 1.5 0.7
Net finance costs (15.8) (13.5)
------------------------------------- ---- ------ ------
9. Income tax expense
2021 2020
Analysis of charge for the year GBPm GBPm
---------------------------------------- ----- -----
Current tax
Current year 13.3 1.9
---------------------------------------- ----- -----
Total current tax 13.3 1.9
---------------------------------------- ----- -----
Deferred tax (Note 16)
Origination and reversal of temporary
differences 0.3 0.2
Adjustments in respect of prior periods (0.5) -
---------------------------------------- ----- -----
Total deferred tax (0.2) 0.2
---------------------------------------- ----- -----
Total income tax expense 13.1 2.1
---------------------------------------- ----- -----
In the Spring Budget 2021, the Government announced that from 1
April 2023 the corporation tax rate would increase to 25% and this
rate had been enacted at the reporting date. Deferred tax has been
measured using the enacted rates that are expected to apply to the
period in which each asset or liability is expected to unwind.
In the Autumn Statement 2021, the Government confirmed that a
Residential Property Developer Tax ("RPDT") will be introduced with
effect from 1 April 2022. The RPDT will be charged at 4% on
relevant profits exceeding an annual allowance of GBP25m.
The Group effective tax rate for the year of 15.3% (2020:
(107.7)%) results in a lower tax expense (2020: higher tax expense)
than the standard rate of corporation tax in the United Kingdom of
19.0% (2020: 19.0%). The table below shows the reconciliation of
the Group's income tax expense calculated at the standard rate of
tax in the United Kingdom to the Group's income tax expense at the
effective tax rate.
2021 2020
GBPm GBPm
------------------------------------------- ----- -----
Profit/(loss) before income tax 85.4 (1.9)
------------------------------------------- ----- -----
Tax calculated at the parent entity rate
of tax of 19.0% (2020: 19.0%) 16.2 (0.4)
- Impairment of goodwill - 3.5
- Adjustments to deferred tax due to
increase in UK tax rates 1.7 0.7
- Other timing differences (1.5) (0.9)
- Deferred tax credited/(charged) directly
to reserves 0.9 (0.6)
- Joint ventures and associate tax (1.6) (0.2)
- Adjustments in respect of prior periods
- deferred tax (0.5) -
- Income not taxable (3.1) -
- Enhanced deductions for land remediation (0.3) -
- Expenses not deductible for tax 1.3 -
------------------------------------------- ----- -----
Income tax expense 13.1 2.1
------------------------------------------- ----- -----
10. Earnings/(loss) per share
Basic earnings per share ("basic EPS") is calculated by dividing
the profit from continuing operations attributable to ordinary
shareholders by the weighted average number of ordinary shares in
issue during the period.
The weighted average number of shares in issue is adjusted to
exclude the weighted average number of treasury shares held by the
Company and shares held by the Employee Benefit Trust ("EBT").
Refer to Note 22. The weighted average number of shares held in
treasury during the year was 0.6 million (2020: GBPNil) and the
weighted average number of shares held in the EBT during the year
was 1.0 million (2020: 1.2 million).
For diluted earnings per share ("diluted EPS"), the weighted
average number of ordinary shares also assumes the conversion of
all potentially dilutive share awards.
(a) Basic and diluted earnings/(loss) per share
2021 2020
------------------------------------------------------ ----- -----
Profit/(loss) from continuing operations attributable
to equity holders of the parent (GBPm) 72.3 (3.7)
------------------------------------------------------ ----- -----
Basic weighted average number of shares (millions) 523.0 462.1
Basic earnings/(loss) per share (pence per share) 13.8 (0.8)
Diluted weighted average number of shares (millions) 526.7 464.5
Diluted earnings/(loss) per share (pence per share) 13.7 (0.8)
------------------------------------------------------ ----- -----
(b) Adjusted basic and diluted earnings per share
2021 2020
-------------------------------------------------------- ----- -----
Profit/(loss) from continuing operations attributable
to equity holders of the parent (GBPm) 72.3 (3.7)
Add: non-underlying items net of tax (GBPm) 51.6 37.7
-------------------------------------------------------- ----- -----
Adjusted profit from continuing operations attributable
to equity holders of the parent (GBPm) 123.9 34.0
-------------------------------------------------------- ----- -----
Basic weighted average number of shares (millions) 523.0 462.1
Adjusted basic earnings per share (pence per share) 23.7 7.4
Diluted weighted average number of shares (millions) 526.7 464.5
Adjusted diluted earnings per share (pence per share) 23.5 7.3
-------------------------------------------------------- ----- -----
Non-underlying items net of tax include costs of GBP63.2m and a
tax credit of GBP11.6m (2020: costs of GBP42.4m and a tax credit of
GBP4.7m). Refer to Note 7.
Adjusted basic and diluted earnings per share are APMs for the
Group. Refer to pages 55 to 57 for details of the Group's APMs.
11. Intangible assets
Customer
Software related Brand Goodwill Total
GBPm GBPm GBPm GBPm GBPm
---------------------------------------- -------- -------- ------ -------- ------
Cost
At 1 October 2019 8.2 42.1 34.6 109.8 194.7
Additions 4.8 - - - 4.8
---------------------------------------- -------- -------- ------ -------- ------
At 30 September 2020 11.1 42.1 34.6 109.8 197.6
Additions 2.1 - - - 2.1
Disposals and de-recognition (5.4) - (10.4) - (15.8)
---------------------------------------- -------- -------- ------ -------- ------
At 30 September 2021 7.8 42.1 24.2 109.8 183.9
---------------------------------------- -------- -------- ------ -------- ------
Accumulated amortisation and impairment
At 1 October 2019 3.3 10.1 10.4 - 23.8
Amortisation charge for the year 2.2 6.7 3.3 - 12.2
Impairment charge for the year - - - 18.5 18.5
---------------------------------------- -------- -------- ------ -------- ------
At 30 September 2020 5.5 16.8 13.7 18.5 54.5
Amortisation charge for the year 1.9 3.4 5.1 - 10.4
Disposals and de-recognition (1.6) - (7.3) - (8.9)
---------------------------------------- -------- -------- ------ -------- ------
At 30 September 2021 5.8 20.2 11.5 18.5 56.0
---------------------------------------- -------- -------- ------ -------- ------
Net book value
---------------------------------------- -------- -------- ------ -------- ------
At 30 September 2021 2.0 21.9 12.7 91.3 127.9
---------------------------------------- -------- -------- ------ -------- ------
At 30 September 2020 5.6 25.3 20.9 91.3 143.1
---------------------------------------- -------- -------- ------ -------- ------
(a) Goodwill
Goodwill held by the Group comprises that resulting from the
following acquisitions:
2021 2020
GBPm GBPm
--------------------------------------- ----- -----
Copthorn Holdings Limited ("Copthorn")
- April 2013 19.3 19.3
Westleigh Group Limited1 ("Westleigh")
- April 2018 72.0 72.0
--------------------------------------- ----- -----
91.3 91.3
--------------------------------------- ----- -----
1 Westleigh Group Limited was subsequently renamed as Countryside Properties (WGL) Limited.
Goodwill is tested annually for impairment at the year end.
For the purpose of impairment testing, goodwill is allocated at
the acquisition date to cash generating units ("CGUs"), or groups
of CGUs, that are expected to benefit from the synergies of the
business combination. Goodwill is allocated to CGUs or groups of
CGUs at the lowest level at which management monitors the goodwill
and at no higher level than that of the Group's operating segments.
As a result of the strategy update issued in July 2021, Management
have redefined the Group's operating segments to be the Divisions
within the Partnerships segment, resulting in a change to the
allocation of the Group's goodwill balances.
The goodwill arising on the acquisition of Westleigh of GBP72.0m
has been re-allocated to a group of CGUs in the Midlands Division
(GBP40.6m) and one CGU in the North division (GBP31.4m). These CGUs
reflect the geographical regions that the Group has been able to
establish a presence in and grow as a result of the acquisition.
The Copthorn goodwill of GBP19.3m has been re-allocated to the
groups of CGUs, which represent the four Divisions of the
Partnerships business (North, South, Midlands and Home
Counties).
The impairment reviews were performed by comparing the value in
use with the carrying amount of the relevant CGU, or group of CGUs,
including the allocated goodwill. The recoverable amount has been
determined to be the value in use, in line with the prior year
assessment.
The key estimates for the value in use calculations are the
forecast cash flows and the discount rates.
Forecast cash flows are derived from the most recent
Board-approved strategic plan. The strategic plan incorporates
management's assumptions regarding the future performance of the
Group over the next four years, including the ongoing impact of the
Covid-19 pandemic and the expected costs to deliver the Group's
Approach to Sustainability strategy. The cash flows also reflect
the Directors' assessment of current market conditions relating to
house prices and the costs of materials and labour. The plan also
considers broader market trends, the Group's growth plans, planned
changes to the business model, and expected regulatory and tax
changes.
Cash flows beyond the strategic plan are extrapolated using a
growth rate of 1% (2020: 1%) per annum based on GDP growth
forecasts by HM Treasury.
To calculate the value in use, the forecast cash flows have been
discounted using a pre-tax discount rate that reflects a current
market assessment of the time value of money, and the estimated
relative risk profile of each group of CGUs. The discount rate
applied for each group of CGUs to which the Copthorn goodwill has
been allocated was 10.1% (2020: 9.0%), whilst 12.1% (2020: 11.0%)
was applied to the CGU, and group of CGUs, to which the Westleigh
goodwill has been allocated.
The impairment testing illustrated that the recoverable amount
exceeded the carrying amount in each instance, and therefore no
impairment charge has been recorded.
Sensitivity analysis has been undertaken for each impairment
review by changing discount rates and assumptions in the underlying
cash flows, including reduced unit delivery, lower average selling
prices, and reductions to gross margins from higher cost inflation.
No impairment was indicated under any of the scenarios modelled.
When modelled in isolation, a reduction in the forecast cash flows
in excess of 45% per annum, or an increase in the discount rate to
over 17%, would be required to derive GBPNil headroom in any of the
impairment tests carried out.
(b) Brands
Brands reflect those acquired in business combinations and are
not internally generated:
Acquired Life 2021 2020
(year) (years) GBPm GBPm
------------ --------- -------- ----- -----
Countryside 2013 20.0 7.8 8.4
Millgate 2014 8.7 4.9 7.2
Westleigh 2018 - - 5.3
------------ --------- -------- ----- -----
12.7 20.9
---------------------- -------- ----- -----
As a result of the strategy update issued on 7 July 2021, the
Millgate brand is expected to have no further useful life to the
Group beyond 30 September 2022, reducing the total useful life
since acquisition to 8.7 years.
The Directors also reviewed the useful life and carrying value
of the Westleigh brand during the year and consider it to have no
future value to the Group beyond 30 September 2021. As a result,
the Westleigh brand has been de-recognised during the year,
generating a loss on de-recognition of GBP3.1m.
(c) Customer-related intangible assets
Customer-related intangible assets of GBP21.9m (2020: GBP25.3m)
relate to customer relationships recognised on the acquisition of
Westleigh in April 2018. The useful economic life of these customer
relationships is ten years, reflecting the expected timeframe over
which the Group will derive value from these assets.
Amortisation is charged to administrative expenses in the
statement of comprehensive income.
12. Property, plant and equipment
Plant Fixtures Assets
and and under
machinery fittings construction Total
GBPm GBPm GBPm GBPm
--------------------------------- ---------- --------- ------------- ------
Cost
At 1 October 2019 10.4 11.2 - 21.6
Additions 1.4 1.0 2.4 4.8
Disposals (0.2) (0.1) - (0.3)
--------------------------------- ---------- --------- ------------- ------
At 30 September 2020 11.6 12.1 2.4 26.1
Additions 0.7 6.8 6.3 13.8
Disposals (5.9) (4.2) - (10.1)
--------------------------------- ---------- --------- ------------- ------
At 30 September 2021 6.4 14.7 8.7 29.8
--------------------------------- ---------- --------- ------------- ------
Accumulated depreciation
At 1 October 2019 5.9 2.9 - 8.8
Depreciation charge for the year 1.6 0.9 - 2.5
Disposals (0.2) (0.1) - (0.3)
--------------------------------- ---------- --------- ------------- ------
At 30 September 2020 7.3 3.7 - 11.0
Depreciation charge for the year 1.1 1.2 - 2.3
Disposals (5.9) (4.2) - (10.1)
--------------------------------- ---------- --------- ------------- ------
At 30 September 2021 2.5 0.7 - 3.2
--------------------------------- ---------- --------- ------------- ------
Net book value
--------------------------------- ---------- --------- ------------- ------
At 30 September 2021 3.9 14.0 8.7 26.6
--------------------------------- ---------- --------- ------------- ------
At 30 September 2020 4.3 8.4 2.4 15.1
--------------------------------- ---------- --------- ------------- ------
Depreciation is charged to administrative expenses in the
statement of comprehensive income.
Assets under construction of GBP8.7m (2020: GBP2.4m) comprises
machinery for the new modular panel factory in Bardon,
Leicestershire. Depreciation will commence in the first half of
2022.
13. Leases
The Group's leases consist primarily of buildings (offices,
factories and show homes). The Group also leases other assets such
as company cars and IT equipment, presented within "Other"
below.
(a) Right of use assets
Buildings Other Total
GBPm GBPm GBPm
--------------------------------- --------- ----- -----
Cost
At 1 October 2019 26.9 3.4 30.3
Additions 1.4 3.0 4.4
De-recognition (1.2) - (1.2)
--------------------------------- --------- ----- -----
At 1 October 2020 27.1 6.4 33.5
Additions 47.1 3.4 50.5
De-recognition - (0.5) (0.5)
--------------------------------- --------- ----- -----
At 30 September 2021 74.2 9.3 83.5
--------------------------------- --------- ----- -----
Accumulated depreciation
At 1 October 2019 - - -
Depreciation charge for the year 5.9 1.9 7.8
De-recognition (0.6) - (0.6)
--------------------------------- --------- ----- -----
At 1 October 2020 5.3 1.9 7.2
Depreciation charge for the year 4.0 2.2 6.2
De-recognition - (0.5) (0.5)
--------------------------------- --------- ----- -----
At 30 September 2021 9.3 3.6 12.9
--------------------------------- --------- ----- -----
Net book value
--------------------------------- --------- ----- -----
At 30 September 2021 64.9 5.7 70.6
--------------------------------- --------- ----- -----
At 30 September 2020 21.8 4.5 26.3
--------------------------------- --------- ----- -----
Right of use asset additions of GBP50.5m in the year include
GBP31.9m relating to the new modular panel factory in Bardon,
Leicestershire.
(b) Lease liabilities
2021 2020
GBPm GBPm
------------ ----- -----
Current 8.0 5.9
Non-current 64.8 24.6
------------ ----- -----
Total 72.8 30.5
------------ ----- -----
The total cash outflow relating to lease liabilities for the
year ended 30 September 2021 was GBP10.4m (2020: GBP6.0m). A
maturity analysis of the contractual undiscounted future lease
payments is presented in Note 27.
(c) Amounts recognised in the statement of comprehensive
income
2021 2020
GBPm GBPm
----------------------------------------- ----- -----
Depreciation of right of use assets 6.2 7.8
Finance costs - unwind of discount 2.2 1.1
Expenses relating to short-term leases 0.1 0.9
Expenses relating to leases of low value
assets 0.4 0.3
----------------------------------------- ----- -----
14. Joint arrangements
Joint ventures
The Directors have aggregated the disclosure of the joint
ventures' statements of financial position and statements of
comprehensive income, and separately disclosed material joint
ventures below.
As a result of the Group's strategy update (refer to Note 4),
the segmental presentation of the Group's joint ventures for the
year ended 30 September 2020 has been restated as follows:
-- The Group's investments in Greenwich Millennium Village
Limited and Countryside Zest (Beaulieu Park) LLP have been
reclassified within Partnerships; and
-- All non-Partnerships joint ventures have been included within Legacy Operations.
The Group's aggregate investment in joint ventures is
represented by:
2021 2020 (restated)
-------------------------------------- ---------------------------------- ----------------------------------
Legacy Legacy
Partnerships Operations Group Partnerships Operations Group
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ------------ ----------- ------- ------------ ----------- -------
Summarised statement of financial
position:
Non-current assets 1.3 0.1 1.4 2.4 0.1 2.5
Current assets excluding cash 239.6 7.8 247.4 263.9 19.9 283.8
Cash 6.7 9.8 16.5 2.9 3.1 6.0
Current liabilities (79.1) (11.8) (90.9) (83.3) (4.1) (87.5)
Non-current liabilities (94.8) (2.9) (97.7) (120.0) (3.0) (123.0)
-------------------------------------- ------------ ----------- ------- ------------ ----------- -------
73.7 3.0 76.7 65.9 15.9 81.8
-------------------------------------- ------------ ----------- ------- ------------ ----------- -------
Movements in net assets:
At 1 October 65.9 15.9 81.8 95.6 28.8 124.4
Profit for the year 52.2 7.4 59.6 28.0 5.8 33.8
Dividends paid (38.4) (9.0) (47.4) (57.7) (9.3) (67.0)
Repayment of members' interest (6.0) (5.5) (11.5) - (8.8) (8.8)
Disposal - (4.6) (4.6) - - -
Other movements - (1.2) (1.2) - (0.6) (0.6)
-------------------------------------- ------------ ----------- ------- ------------ ----------- -------
At 30 September 73.7 3.0 76.7 65.9 15.9 81.8
-------------------------------------- ------------ ----------- ------- ------------ ----------- -------
Summarised statement of comprehensive
income:
Revenue 261.8 47.6 309.4 157.5 36.1 193.6
Expenses (204.0) (40.0) (244.0) (129.1) (30.2) (159.3)
-------------------------------------- ------------ ----------- ------- ------------ ----------- -------
Operating profit for the year 57.8 7.6 65.4 28.4 5.9 34.3
Finance costs (1.8) (0.2) (2.0) (0.3) (0.1) (0.4)
Income tax (expense)/credit (3.8) - (3.8) (0.1) - (0.1)
-------------------------------------- ------------ ----------- ------- ------------ ----------- -------
Profit for the year 52.2 7.4 59.6 28.0 5.8 33.8
-------------------------------------- ------------ ----------- ------- ------------ ----------- -------
Group's share in % 50% 50% 50% 50% 50% 50%
Share of revenue1 130.9 23.8 154.7 78.7 18.1 96.8
Share of operating profit1 28.9 3.8 32.7 14.2 3.0 17.2
Dividends received by the
Group 19.2 4.5 23.7 28.9 4.6 33.5
Investment in joint ventures 36.8 1.5 38.3 32.9 8.0 40.9
-------------------------------------- ------------ ----------- ------- ------------ ----------- -------
1. The Group's share of revenue and operating profit from joint
ventures is included in the Group's APMs as set out on pages 55 to
57.
Investment in joint ventures
The table below reconciles the movement in the Group's aggregate
investment in joint ventures:
2021 2020
GBPm GBPm
------------------------------- ------ ------
At 1 October 40.9 62.2
Share of post-tax profit 29.8 16.9
Dividends received (23.7) (33.5)
Repayment of members' interest (5.8) (4.4)
Disposal (2.3) -
Other movements (0.6) (0.3)
------------------------------- ------ ------
At 30 September 38.3 40.9
------------------------------- ------ ------
During the year, the Group disposed of its investment in the
Cambridge Medipark Limited joint venture for total consideration of
GBP16.2m. Prior to disposal the carrying value of the investment
was GBP2.3m, resulting in a gain on disposal of GBP13.9m.
The amount due from joint ventures is GBP62.8m (2020: GBP69.5m)
and the amount due to joint ventures is GBP0.5m (2020: GBP0.4m).
Transactions between the Group and its joint ventures are disclosed
in Note 25.
Individually material joint ventures
The Directors consider that joint ventures are material where
they contribute 5% or more of either Group profit after tax or
Group net assets. The summarised results and position of
individually material joint ventures are highlighted below:
Partnerships Legacy Operations
-------------------------------------- ---------------------------------- -----------------
Countryside
Greenwich Zest Countryside
Acton Millennium (Beaulieu L&Q
Gardens Village Park) (Oaks Village)
LLP Limited LLP LLP
2021 GBPm GBPm GBPm GBPm
-------------------------------------- -------- ----------- ----------- -----------------
Summarised statement of financial
position:
Non-current assets 1.5 0.1 0.5 0.1
Current assets excluding cash 50.0 50.4 115.0 3.9
Cash 0.2 1.9 2.2 9.6
Current liabilities (34.3) (8.7) (12.7) (7.9)
Non-current liabilities (1.2) (8.1) (85.5) (2.9)
-------------------------------------- -------- ----------- ----------- -----------------
16.2 35.6 19.5 2.8
-------------------------------------- -------- ----------- ----------- -----------------
Movements in net assets:
At 1 October 16.6 31.9 9.8 11.1
Profit for the year 16.1 15.7 19.6 6.1
Dividends paid (16.5) (12.0) (9.9) (8.9)
Repayment of members' interest - - - (5.5)
-------------------------------------- -------- ----------- ----------- -----------------
At 30 September 16.2 35.6 19.5 2.8
-------------------------------------- -------- ----------- ----------- -----------------
Summarised statement of comprehensive
income:
Revenue 80.7 76.4 91.6 31.2
Expenses (64.6) (56.6) (72.0) (25.0)
-------------------------------------- -------- ----------- ----------- -----------------
Operating profit for the year 16.1 19.8 19.6 6.2
Finance costs - (0.3) - (0.1)
Income tax expense - (3.8) -
-------------------------------------- -------- ----------- ----------- -----------------
Profit for the year 16.1 15.7 19.6 6.1
-------------------------------------- -------- ----------- ----------- -----------------
Legacy
Partnerships Operations
------------------------------- ---------------------------------- ---------------
Countryside
Greenwich Zest Countryside
Acton Millennium (Beaulieu L&Q
Gardens Village Park) (Oaks Village)
LLP Limited LLP LLP
2020 GBPm GBPm GBPm GBPm
------------------------------- -------- ----------- ----------- ---------------
Summarised statement of
financial position:
Non-current assets 1.6 0.1 0.7 0.1
Current assets excluding
cash 47.6 78.2 128.9 16.2
Cash 0.4 0.9 0.6 0.7
Current liabilities (29.8) (43.4) (7.5) (2.9)
Non-current liabilities (3.2) (3.9) (112.9) (3.0)
------------------------------- -------- ----------- ----------- ---------------
16.6 31.9 9.8 11.1
------------------------------- -------- ----------- ----------- ---------------
Movements in net assets:
At 1 October 27.0 30.6 30.2 22.0
Profit for the year 16.2 1.3 10.7 5.3
Dividends paid (26.6) - (31.1) (7.4)
Repayment of members' interest - - - (8.8)
------------------------------- -------- ----------- ----------- ---------------
At 30 September 16.6 31.9 9.8 11.1
------------------------------- -------- ----------- ----------- ---------------
Summarised statement of
comprehensive income:
Revenue 88.2 13.4 55.9 26.5
Expenses (71.7) (11.8) (45.6) (21.1)
------------------------------- -------- ----------- ----------- ---------------
Operating profit for the
year 16.5 1.6 10.3 5.4
Finance (costs)/income (0.4) (0.1) 0.4 (0.1)
Income tax credit/(expense) - (0.1) - -
------------------------------- -------- ----------- ----------- ---------------
Profit for the year 16.1 1.4 10.7 5.3
------------------------------- -------- ----------- ----------- ---------------
The Group's joint ventures
The Group's joint ventures, all of which are incorporated and
domiciled in the UK and are accounted for using the equity method,
comprise:
Country Ownership
of interest Principal
incorporation % activity
----------------------------------------- -------------- --------- -----------------
Acton Gardens LLP UK 50.0 Development
Bracknell Forest Cambium Partnership
LLP UK 50.0 Development
Brenthall Park (Commercial) Limited UK 50.0 Non-trading
Brenthall Park (Infrastructure) Limited UK 50.0 Non-trading
Brenthall Park (Three) Limited UK 50.0 Non-trading
Brenthall Park Limited UK 50.0 Non-trading
Bromley Regeneration (Pike Close) LLP UK 50.0 Development
Cambridge Road (RBK) LLP UK 50.0 Development
Camden Development Partnership LLP UK 50.0 Development
C.C.B. (Stevenage) Limited UK 33.3 Non-trading
Countryside 27 Limited UK 50.0 Commercial
Countryside L&Q (Oaks Village) LLP UK 50.0 Development
Countryside L&Q (North East Chelmsford)
LLP UK 50.0 Development
Countryside Annington (Mill Hill) Limited UK 50.0 Development
Countryside Clarion (Eastern Quarry)
LLP UK 50.0 Development
Countryside Properties (Accordia) Limited UK 50.0 Non-trading
Countryside Properties (Booth Street
2) Limited UK 39.0 Non-trading
Countryside Properties (Merton Abbey
Mills) Limited UK 50.0 Non-trading
Countryside Places for People (Lower
Herne) LLP UK 50.0 Development
Countryside Maritime Limited UK 50.0 Development
Countryside Neptune LLP UK 50.0 Non-trading
Countryside Zest (Beaulieu Park) LLP UK 50.0 Development
Greenwich Millennium Village Limited UK 50.0 Development
Mann Island Estate Limited UK 50.0 Estate management
Marrco 25 Limited UK 50.0 Non-trading
Oaklands Hamlet Resident Management
Limited UK 50.0 Estate management
Peartree Village Management Limited UK 50.0 Estate management
Westleigh Cherry Bank LLP UK 50.0 Non-trading
----------------------------------------- -------------- --------- -----------------
All joint ventures hold the registered address of Countryside
House, The Drive, Brentwood, Essex CM13 3AT, except for C.C.B.
(Stevenage) Limited (Croudace House, Tupwood Lane, Caterham, Surrey
CR3 6XQ).
No joint venture was committed to the purchase of any property,
plant and equipment or software intangible assets as at 30
September 2021 (2020: GBPNil).
Joint operations
The Group has a number of joint operations. These include Beam
Park in Rainham, Rochester Riverside on the Kent Medway, South
Oxhey in Hertfordshire and Fresh Wharf in Barking, where the Group
has joint control of the developments, alongside a housing
association. Joint operations are proportionally consolidated with
50% of the assets, liabilities, income and expenses included in the
consolidated financial statements.
15. Investment in associate
The Group holds 28.5% of the ordinary share capital with
pro-rata voting rights in Countryside Properties (Bicester)
Limited, a company incorporated and domiciled in the UK, whose
principal activity is the sale of serviced parcels of land, and for
segmental purposes is disclosed within Legacy Operations. It is
accounted for using the equity method.
The Group's investment in associate is represented by:
2021 2020
GBPm GBPm
-------------------------------------------- ----- ------
Summarised statement of financial position:
Current assets excluding cash 0.5 3.2
Cash 8.4 13.4
Current liabilities (5.6) (11.4)
Non-current liabilities (0.4) (0.5)
-------------------------------------------- ----- ------
2.9 4.7
-------------------------------------------- ----- ------
Movements in net assets:
At 1 October 4.7 12.3
Profit for the year 0.2 0.4
Dividends paid (2.0) (8.0)
-------------------------------------------- ----- ------
At 30 September 2.9 4.7
-------------------------------------------- ----- ------
Summarised statement of comprehensive
income:
Revenue 0.2 -
Expenses - -
-------------------------------------------- ----- ------
Operating profit 0.2 -
Finance income - 0.5
Income tax expense - (0.1)
-------------------------------------------- ----- ------
Profit for the year 0.2 0.4
-------------------------------------------- ----- ------
Group's share in % 28.5% 28.5%
Share of revenue1 0.1 -
Share of operating profit1 0.1 -
Dividends received by the Group 0.6 2.3
Investment in associate 0.8 1.3
-------------------------------------------- ----- ------
1. The Group's share of revenue and operating profit from
associate is included in the Group's APMs as set out on pages 55 to
57.
Transactions between the Group and its associate are disclosed
in Note 25. No amounts are due to or from the associate as at 30
September 2021 (2020: GBPNil).
The table below reconciles the movement in the Group's
investment in associate:
2021 2020
GBPm GBPm
----------------------------------- ----- -----
Reconciliation to carrying amount:
At 1 October 1.3 3.5
Share of post-tax profit 0.1 0.1
Dividends received (0.6) (2.3)
----------------------------------- ----- -----
At 30 September 0.8 1.3
----------------------------------- ----- -----
Countryside Properties (Bicester) Limited is the sole subscriber
to Kingsmere Estate Management Limited, an estate management
company limited by guarantee. The address of the registered office
of Countryside Properties (Bicester) Limited and Kingsmere Estate
Management Limited is Countryside House, The Drive, Brentwood,
Essex CM13 3AT.
16. Deferred tax assets and liabilities
Deferred tax assets held on the balance sheet date have the
following expected maturities:
2021 2020
GBPm GBPm
--------------------------------------- ----- -----
Amounts due to be recovered within one
year 3.0 1.4
Amounts due to be recovered after more
than one year 3.0 2.7
--------------------------------------- ----- -----
6.0 4.1
--------------------------------------- ----- -----
Deferred tax liabilities held on the balance sheet date have the
following expected maturities:
2021 2020
GBPm GBPm
------------------------------------- ----- -----
Amounts due to be settled within one
year 1.8 1.3
Amounts due to be settled after more
than one year 9.5 9.2
------------------------------------- ----- -----
11.3 10.5
------------------------------------- ----- -----
The movement in the year in the Group's net deferred tax
position was as follows:
Other
Share-based timing
payments differences Total
GBPm GBPm GBPm
-------------------------------------------------- ----------- ------------ -----
At 1 October 2019 2.3 (7.9) (5.6)
Credit/(charge) to the statement of comprehensive
income for the year (0.8) 0.6 (0.2)
Credit/(charge) to the statement of changes
in equity for the year (0.6) - (0.6)
-------------------------------------------------- ----------- ------------ -----
At 30 September 2020 0.9 (7.3) (6.4)
Credit/(charge) to the statement of comprehensive
income for the year 0.3 (0.1) 0.2
Credit/(charge) to the statement of changes
in equity for the year 0.9 - 0.9
-------------------------------------------------- ----------- ------------ -----
At 30 September 2021 2.1 (7.4) (5.3)
-------------------------------------------------- ----------- ------------ -----
Temporary differences arising in connection with interests in
joint ventures and associate are not significant. There are no
unrecognised tax assets on joint ventures and associate relating to
historical losses (2020: GBP0.6m on historical losses of GBP3.5m).
No deferred tax asset has been recognised in relation to losses
where it is considered that they are not recoverable in the near
future. The Group has unrecognised deferred tax assets of GBP1.9m
on historical losses of GBP7.8m (2020: GBP1.4m on historical losses
of GBP7.6m).
17. Inventories
2021 2020
GBPm GBPm
---------------------------------------- ------- -------
Development land and work in progress 1,092.9 965.0
Completed properties unsold or awaiting
sale 50.9 94.1
---------------------------------------- ------- -------
1,143.8 1,059.1
---------------------------------------- ------- -------
Development land and work in progress of GBP1,092.9m (2020:
GBP965.0m) includes land costs of GBP611.7m (2020: GBP417.8m), land
options with a carrying value of GBP34.5m (2020: GBP26.9m) and
development expenditure of GBP446.7m (2020: GBP520.3m).
During the year, the Group recognised a net release of
provisions relating to inventories of GBP0.7m (2020: charge of
GBP6.2m).
No borrowing costs were capitalised into inventories during the
year (2020: GBPNil).
18. Trade and other receivables
2021 2020
GBPm GBPm
---------------------------------------------- ----- -----
Amounts falling due within one year:
Trade receivables 65.2 44.5
Amounts recoverable on construction contracts 53.0 40.4
Advances to joint ventures 62.8 69.5
Other taxation and social security 3.3 6.0
Other receivables 7.2 1.5
Prepayments and accrued income 58.9 37.3
---------------------------------------------- ----- -----
250.4 199.2
---------------------------------------------- ----- -----
Amounts falling due in more than one
year:
Trade receivables 9.6 -
Amounts recoverable on construction contracts 15.5 19.6
---------------------------------------------- ----- -----
25.1 19.6
---------------------------------------------- ----- -----
Total trade and other receivables 275.5 218.8
---------------------------------------------- ----- -----
Trade and other receivables are stated after provisions for
expected credit losses of GBP0.3m (2020: GBPNil).
A provision of GBP8.0m (2020: GBP8.0m) is held against an
advance to Countryside Neptune LLP, a joint venture, to reflect the
Directors' view of the recoverability of this advance.
Prepayments and accrued income of GBP58.9m (2020: GBP37.3m)
include GBP47.5m of contract assets (2020: GBP31.1m) relating to
uninvoiced amounts where revenue has been recognised in the
statement of comprehensive income.
The fair value of the financial assets included in trade and
other receivables is not considered to be materially different from
their carrying value.
19. Cash and borrowings
(a) Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term deposits
held in Sterling of GBP43.4m (2020: GBP100.5m).
As at 30 September 2021, no cash balances were ring-fenced for
specific developments (2020: GBPNil).
(b) Borrowings
2021 2020
GBPm GBPm
----------------- ----- -----
Other loans (2.4) (2.3)
----------------- ----- -----
Total borrowings (2.4) (2.3)
----------------- ----- -----
Bank loans
The Group has a GBP300m revolving credit facility ("RCF") with
Lloyds Bank plc, Barclays Bank PLC, HSBC Bank plc and Santander UK
plc, expiring in May 2023. The agreement has a floating interest
rate based on LIBOR. As at 30 September 2021 and 30 September 2020
the Group had no drawings under the facility.
Subject to obtaining credit approval from the syndicate banks,
the Group has the option to extend the facility by a further
GBP100m. This facility is subject to both financial and
non-financial covenants and is secured by floating charges over all
the Group's assets.
The Group also has the option to issue promissory notes from
Barclays Bank PLC under the facility, with any notes issued
reducing the available funds such that total borrowings under the
facility does not exceed GBP300m. As at 30 September 2021, and 30
September 2020, the Group had no promissory notes in issue.
Bank loan arrangement fees are amortised over the term of the
facility. At 30 September 2021, unamortised loan arrangement fees
were GBP1.3m (2020: GBP2.2m). Amortisation of GBP0.9m (2020:
GBP0.7m) is included in finance costs in the statement of
comprehensive income (Note 8).
As the Group did not have any debt under this facility at 30
September 2021 or 30 September 2020, the unamortised loan
arrangement fees are included within prepayments in the statement
of financial position.
Other loans
During the year ended 30 September 2018, the Group received an
interest-free loan of GBP2.5m for the purpose of funding
remediation works in relation to one of its joint operations. The
loan is repayable on 22 November 2022. The loan was initially
recognised at fair value and is subsequently carried at amortised
cost.
Interbank Offered Rates ("IBOR") reform
The Directors do not anticipate the IBOR reform to have a
material impact on the Group's finance costs.
20. Trade and other payables
2021 2020
GBPm GBPm
------------------------------------- ----- -----
Amounts falling due within one year:
Trade payables 54.7 71.9
Deferred land payments 87.3 109.5
Overage payable 4.7 11.5
Accruals and deferred income 134.7 141.7
Other taxation and social security 4.1 4.9
Other payables 20.0 4.7
Advances from joint ventures 0.5 0.4
------------------------------------- ----- -----
306.0 344.6
------------------------------------- ----- -----
Amounts falling due in more than one
year:
Trade payables 23.7 21.4
Deferred land payments 139.2 83.3
Overage payable 19.4 19.8
------------------------------------- ----- -----
182.3 124.5
------------------------------------- ----- -----
Total trade and other payables 488.3 469.1
------------------------------------- ----- -----
Trade and other payables principally comprise amounts
outstanding for trade purchases and land acquired on deferred
terms. The Directors consider that the carrying amount of trade
payables approximates to their fair value.
The carrying amount of deferred land payments and overage
payable represents the discounted payment obligations. Land
acquired on deferred payment terms is discounted using an interest
rate of 3.4% for transactions entered into from 1 April 2017 and
6.0% for transactions prior to this date. Discount rates are
regularly reviewed to ensure that the most appropriate rate is
applied at the inception of new developments. At 30 September 2021,
the liabilities had been discounted by GBP15.1m (2020: GBP9.2m),
reflecting the time value of money.
Other payables include GBP17.4m (2020: GBPNil) recognised in
relation to the share buyback programme. Refer to Note 22.
Accruals and deferred income include GBP4.0m (2020: GBP11.9m) of
contract liabilities, where the value of payments made by customers
exceeds the revenue recognised in the statement of comprehensive
income. The Group recognised revenue of GBP10.2m during the year
relating to the contract liabilities of GBP11.9m as at 30 September
2020.
21. Provisions
Remediation Ground
costs for Rent
multi-occupancy Assistance 2021 2020
buildings Scheme Other Total Total
GBPm GBPm GBPm GBPm GBPm
--------------------- ---------------- ----------- ------- ------ ------
At 1 October - 10.0 1.4 11.4 2.4
Charged in the year 41.0 3.8 3.1 47.9 10.7
Released in the year - - (0.2) (0.2) (1.0)
Utilised in the year (1.3) (0.4) (0.4) (2.1) (0.7)
At 30 September 39.7 13.4 3.9 57.0 11.4
--------------------- ---------------- ----------- ------- ------ ------
Current 39.7 13.4 2.9 56.0 10.9
Non-current - - 1.0 1.0 0.5
--------------------- ---------------- ----------- ------- ------ ------
Total provisions 39.7 13.4 3.9 57.0 11.4
--------------------- ---------------- ----------- ------- ------ ------
Remediation costs for multi-occupancy buildings
In October 2019, the Directors appointed an independent third
party to carry out a risk review of all multi-occupancy buildings
delivered by the Group during the previous 15 years. This review
found that none of those buildings were assessed to have a high
fire risk.
In December 2019, the External Wall System Fire Review (EWS1)
process was introduced by the Royal Institute of Chartered
Surveyors ("RICS") and others to support mortgage valuation
processes for buildings over 18 metres tall, or where specific fire
safety concerns exist. In January 2020, the Ministry of Housing,
Communities & Local Government's ("MHCLG") mandated that a
formal fire safety assessment must be conducted by a suitably
qualified and competent professional for all multi-occupancy
buildings.
As disclosed in the 2020 Annual Report, the review of buildings
delivered by Countryside using the EWS1 assessment did not at that
time identify any buildings with issues that would have resulted in
a potential liability for remediation costs for Countryside. As a
result, at 30 September 2020, no provision was recognised and this
matter was disclosed as a contingent liability.
Since December 2020, as the extent of a number of EWS1 surveys
at various sites has progressed, the Directors have become aware of
69 buildings on 17 sites, constructed between 2008 and 2017, where
remedial works are required to enable an EWS1 certificate to be
issued.
Countryside has been engaging with the building owners and
others throughout the year to progress the intrusive building
surveys and review their proposed scope of works to assess the
extent and cost of remedial works that Countryside is liable
for.
As a result of the progress made to estimate the potential
liability to the Group, a provision of GBP25.0m was recognised in
the interim results to 31 March 2021. During the second half of the
year, considerable progress has been made to complete the surveys,
in part to meet the September deadline for qualification under the
Building Safety Fund. Knowing considerably more about the scope of
remedial works required, the Directors have increased the provision
by a further GBP16.0m in the second half of the year, resulting in
a GBP41.0m charge to the Group statement of comprehensive income
within non-underlying items (2020: GBPNil).
The quantification of the cost of these remedial works is
inherently complex and depends on a number of factors, including
the size of the building, the cost of investigation and replacement
materials and associated labour and the potential cost of managing
the disruption to residents.
Refer to Note 31 "Contingent liabilities and contingent assets"
for disclosures relating to further potential liabilities and
recoveries relating to these remedial works.
As the timing of utilisation is uncertain, the provision has
been included within current liabilities.
Ground Rent Assistance Scheme
Following the Group's commitment to the Government's Leasehold
Pledge, in April 2020 the Group established the Countryside Ground
Rent Assistance Scheme. The purpose of the Scheme at inception was
to support Countryside customers who own homes with ground rents
that double more frequently than every 20 years to vary their
leases to increase every 15 years in line with RPI instead. A
provision of GBP10.0m was recorded in relation to the Scheme in the
year ended 30 September 2020.
Following the Competition and Markets Authority's ("CMA's")
review into the sale of leasehold properties, on 15 September 2021
Countryside announced that it had agreed voluntary undertakings
with the CMA to seek the removal of all 10- and 15-year doubling
clauses from leases where the ground rent is not for the ultimate
benefit of a local authority or registered provider of social
housing, at no cost to leaseholders. These undertakings have
resulted in an increase to the provision of GBP3.8m, with the total
cost to compensate freeholders plus related costs totalling
GBP13.8m. The provision is expected to be utilised during the year
ending 30 September 2022 and therefore, has been included within
current liabilities.
Other provisions
The remaining provisions and movements during the year primarily
relate to legal provisions and amounts in respect of expected
dilapidations on office buildings that are leased by the Group.
22. Reserves
(a) Share capital and share premium
Number of shares Share capital Share premium
--------------------------- ------------------ --------------- ---------------
2021 2020 2021 2020 2021 2020
million million GBPm GBPm GBPm GBPm
--------------------------- -------- -------- ------- ------ ------- ------
Allotted, issued and fully
paid
Ordinary shares of GBP0.01
each 524.6 524.6 5.2 5.2 5.3 5.3
--------------------------- -------- -------- ------- ------ ------- ------
(b) Treasury shares
On 7 July 2021, the Company announced its intention to return
surplus cash to shareholders via on-market purchases of ordinary
shares. The Company entered into a non-discretionary and
irrevocable arrangement with Barclays Capital Securities Limited to
conduct the share purchase programme, with the initial programme
capped at 23 million shares or GBP52.0m.
As a result, the Company recognised a reduction to retained
earnings of GBP52.2m during the year, reflecting the maximum
commitment under the arrangement with Barclays of GBP52.0m as well
as directly attributable costs charged to equity of GBP0.2m.
A total of 7,124,979 shares were purchased during the year under
the programme, all of which were held in treasury at 30 September
2021 (2020: GBPNil). A further 2,350,000 shares were purchased
between 1 October 2021 and 14 October 2021, when the initial
programme was completed. 9,474,979 shares are held in treasury at
the date of approval of these financial statements (2020:
GBPNil).
The cash outflows during the year associated with the share
repurchases totalled GBP34.8m including transaction costs, with a
further GBP15.1m paid between 1 October 2021 and 14 October 2021.
Refer to Note 33.
(c) Employee Benefit Trust
On 18 June 2021, the EBT acquired 500,000 shares in the Company
through purchases on the London Stock Exchange to meet the Group's
expected obligations under share-based incentive arrangements. The
total amount paid by the EBT for the shares was GBP2.4m, with the
Group contributing GBP1.4m during the year to fund the
purchases.
The EBT has waived its right to vote and to dividends on the
shares it holds which are unallocated. The number of shares held in
the EBT as at 30 September 2021 was 1,046,182 (2020:
1,649,207).
23. Notes to the cash flow statement
The table below provides a reconciliation of profit before
income tax to cash generated from operations:
2021 2020
Note GBPm GBPm
----------------------------------------------------- ------ ------ -------
Profit/(loss) before income tax 85.4 (1.9)
- Amortisation - intangible assets 11 10.4 12.2
- De-recognition - intangible assets 11 6.9 -
- Depreciation - property, plant and equipment 12 2.3 2.5
- Depreciation - right of use assets 13 6.2 7.8
- Impairment of goodwill 11 - 18.5
- Share of post-tax profit from joint ventures
and associate 14, 15 (29.9) (17.0)
- Share-based payments (pre-tax) 28 1.9 1.0
- Finance costs 8 17.3 14.2
- Finance income 8 (1.5) (0.7)
- Gain on disposal of interest in joint venture (13.9) -
- Increase in inventories (84.7) (250.5)
- (Increase)/decrease in trade and other receivables (47.5) 48.2
- (Decrease)/increase in trade and other payables (8.5) 11.8
- Increase in provisions 21 45.6 9.0
----------------------------------------------------- ------ ------ -------
Cash used in operations (10.0) (144.9)
----------------------------------------------------- ------ ------ -------
Changes in liabilities relating to financing activities are
shown below:
Lease Share
Borrowings liabilities buyback Total
GBPm GBPm GBPm GBPm
-------------------------------------- ---------- ------------ -------- ------
Liabilities from financing activities
at 1 October 2019 2.2 31.6 - 33.8
Financing cash flows - (4.9) - (4.9)
Operating cash flows - (1.1) - (1.1)
Lease additions - 4.4 - 4.4
Lease disposals - (0.6) - (0.6)
Unwind of discount 0.1 1.1 - 1.2
-------------------------------------- ---------- ------------ -------- ------
Liabilities from financing activities
at 30 September 2020 2.3 30.5 - 32.8
Share buyback programme - - 52.2 52.2
Financing cash flows - (8.2) (34.8) (43.0)
Operating cash flows - (2.2) - (2.2)
Lease additions - 50.5 - 50.5
Unwind of discount 0.1 2.2 - 2.3
-------------------------------------- ---------- ------------ -------- ------
Liabilities from financing activities
at 30 September 2021 2.4 72.8 17.4 92.6
-------------------------------------- ---------- ------------ -------- ------
24. Investments
The Company substantially owns, directly or indirectly, the
whole of the issued and fully paid ordinary share capital of its
subsidiary undertakings. Subsidiary undertakings of the Group as at
30 September 2021 are presented below:
Voting
Country of rights Principal
incorporation % activity
----------------------------------------- -------------- ------- -----------------
Direct investment
Copthorn Holdings Limited UK 100 Holding company
Indirect investment
Alma Estate (Enfield) Management Company
Limited UK 100 Estate management
Brenthall Park (One) Limited UK 100 Non-trading
Beechgrove (Sunninghill) Management
Company Limited UK 100 Estate management
Breedon Place Management Company Limited UK 100 Estate management
Berrywood Estates Ltd UK 100 Non-trading
Countryside 26 Limited UK 100 Development
Countryside 28 Limited UK 100 Development
Countryside Cambridge One Limited UK 100 Holding land
Countryside Cambridge Two Limited UK 100 Holding land
Countryside Developments Limited UK 100 Non-trading
Countryside Four Limited UK 100 Holding company
Countryside Properties (Commercial)
Limited UK 100 Non-trading
Countryside Properties (Housebuilding)
Limited1 UK 100 Development
Countryside Properties (In Partnership)
Limited UK 100 Non-trading
Countryside Properties (Joint Ventures)
Limited UK 100 Holding company
Countryside Properties Land (One)
Limited UK 100 Holding land
Countryside Properties Land (Two)
Limited UK 100 Holding land
Countryside Properties (London & Thames
Gateway) Limited UK 100 Non-trading
Countryside Properties (Northern)
Limited UK 100 Non-trading
Countryside Properties (Salford Quays)
Limited UK 100 Non-trading
Countryside Properties (Southern)
Limited UK 100 Non-trading
Countryside Properties (Special Projects)
Limited UK 100 Non-trading
Countryside Properties (Springhead)
Limited UK 100 Development
Countryside Properties (Strategic
Land) Limited UK 100 Development
Countryside Properties (Uberior) Limited UK 100 Development
Countryside Properties (UK) Limited UK 100 Development
Countryside Properties (WGL) Limited UK 100 Holding company
Countryside Properties (WHL) Limited UK 100 Holding company
Countryside Properties (WPL) Limited UK 100 Development
Countryside Residential Limited UK 100 Non-trading
Countryside Residential (South Thames)
Limited UK 100 Non-trading
Countryside Residential (South West)
Limited UK 100 Non-trading
Countryside Seven Limited UK 100 Non-trading
Countryside Sigma Limited UK 74.9 Development
Countryside Thirteen Limited UK 100 Development
Countryside Timber Frame Limited UK 100 Manufacturing
Countryside (UK) Limited UK 100 Non-trading
Dunton Garden Suburb Limited UK 100 Land promotion
Fresh Wharf Residents Management Company
Limited UK 100 Estate management
Harold Wood Management Limited UK 100 Estate management
Hilborn Management Company Limited UK 100 Estate management
Knight Strategic Land Limited UK 100 Land promotion
Mandeville Place (Radwinter) Management
Limited UK 100 Estate management
Marlowe Road Management Company Limited UK 100 Estate management
Millgate Developments Limited UK 100 Development
Millgate (UK) Holdings Limited UK 100 Holding company
Mulberry Green Management Company
Limited UK 100 Estate management
New Avenue (Cockfosters) Management
Company Limited UK 100 Estate management
Newhall Land Limited UK 100 Development
Newhall Resident Management Company
Limited UK 100 Estate management
Parklands Manor Management Company
Limited UK 100 Estate management
Skyline 120 Management Limited UK 100 Estate management
Skyline 120 Nexus Management Limited UK 100 Estate management
Springhead Resident Management Company
Limited UK 100 Estate management
Urban Hive Hackney Management Limited UK 100 Estate management
Watersplash Lane Management Company
Limited UK 100 Estate management
Westleigh Construction Limited UK 100 Non-trading
Westleigh LNT Limited UK 100 Non-trading
Westleigh Homes Limited UK 100 Non-trading
York Road (Maidenhead) Management
Limited UK 100 Estate management
----------------------------------------- -------------- ------- -----------------
1. Formerly Countryside Properties (Holdings) Limited.
All subsidiaries are fully consolidated, after eliminating
intragroup transactions. The registered office address of all
subsidiaries is Countryside House, The Drive, Brentwood, Essex CM13
3AT.
25. Related party transactions
Transactions with joint ventures and associate
Joint ventures Associate
--------------------------------------------- ---------------- ------------
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
--------------------------------------------- ------- ------- ----- -----
Sales during the year 22.0 14.8 0.2 0.2
--------------------------------------------- ------- ------- ----- -----
Net advances to joint ventures and associate
at 1 October 69.1 49.3 - -
Net advances/(repayments) during the year (6.8) 19.8 - -
--------------------------------------------- ------- ------- ----- -----
Net advances to joint ventures and associate
at 30 September 62.3 69.1 - -
--------------------------------------------- ------- ------- ----- -----
Sales of goods and services to related parties related
principally to the provision of services to the joint ventures and
associate at contractually agreed 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
Key management personnel are deemed to be the Executive
Committee, along with other Directors of the Company, including the
Non-Executive Directors.
2021 2020
GBPm GBPm
--------------------- ----- -----
Salaries and bonus 6.1 3.0
Retirement benefits 0.4 0.4
Share-based payments 0.3 0.1
--------------------- ----- -----
6.8 3.5
--------------------- ----- -----
Included within the above is GBP2.1m (2020: GBP2.1m) relating to
the Board of Directors, including GBP1.3m (2020: GBP0.6m) relating
to the highest paid Director. Refer to the Annual Report on
Remuneration in the 2021 Annual Report for further detail.
The disclosures of shares granted under the long-term incentive
schemes are included in Note 28.
Transactions with key management personnel
As at the reporting date, two of the Group's employees have a
close family member on the Executive Committee. These 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 two individuals is
less than GBP60,000 (2020: three individuals, less than
GBP190,000).
26. Financial instruments
The following tables categorise the Group's financial assets and
liabilities included in the statement of financial position:
Financial assets
at amortised
cost
GBPm
-------------------------------- ----------------
2021
Assets
Trade and other receivables 150.5
Amounts due from joint ventures 62.8
Cash and cash equivalents 43.4
-------------------------------- ----------------
256.7
-------------------------------- ----------------
2020
Assets
Trade and other receivables 106.0
Amounts due from joint ventures 69.5
Cash and cash equivalents 100.5
-------------------------------- ----------------
276.0
-------------------------------- ----------------
There were no transfers of assets or liabilities between levels
of the fair value hierarchy during the year.
Trade and other receivables presented above excludes
"prepayments and accrued income" and "other taxation and social
security".
Other financial
liabilities at
amortised cost
GBPm
------------------------------------------- ---------------
2021
Liabilities
Other loans 2.4
Deferred land payments and overage payable 250.6
Lease liabilities 72.8
Other trade and other payables 98.4
Amount due to joint ventures 0.5
------------------------------------------- ---------------
424.7
------------------------------------------- ---------------
2020
Liabilities
Other loans 2.3
Deferred land payments and overage payable 224.1
Lease liabilities 30.5
Other trade and other payables 98.0
Amount due to joint ventures 0.4
------------------------------------------- ---------------
355.3
------------------------------------------- ---------------
Other trade and other payables presented above excludes
"accruals and deferred income" and "other taxation and social
security".
27. Financial risk management
The Group has identified the main financial risks to be
liquidity risk, interest rate risk, housing market risk and credit
risk. The Directors are responsible for managing these risks and
the policies adopted are set out below.
Liquidity risk
The Group finances its operations through a mixture of equity
(Company share capital, reserves and retained earnings) and debt
(bank loan facilities).
Liquidity risk is managed by monitoring existing facilities for
both financial covenant compliance and funding headroom against
forecast requirements based on short-term and long-term cash flow
forecasts.
During the year ended 30 September 2020 the Group raised net
proceeds of GBP243.0m to support accelerated growth of its
Partnerships division, as well as to improve the liquidity of the
business.
The Group has access to a GBP300m revolving credit facility
which is committed to May 2023; this facility is provided by a
syndicate of four banks, reducing the Group's exposure to any
single institution. The facility is subject to a number of
financial and technical covenants which, if breached, could result
in the facility becoming immediately repayable. The Directors
regularly review forecasts which extend beyond the maturity of the
facility to ensure acceptable headroom exists across all of these
financial covenants, including under certain downside scenarios as
referenced in the Viability Statement on in the 2021 Annual Report.
Following the onset of the Covid-19 pandemic, the Group's key
gearing and interest cover covenants were relaxed until September
2022 to provide further security over the Group's funding.
Operational controls preventing the breach of technical covenants
have been implemented across the business.
Maturity analysis
The following table sets out the contractual undiscounted
maturities, including estimated cash flows, of the financial assets
and liabilities of the Group at 30 September:
One to Two to
Less than two five Over five
one year years years years Total
GBPm GBPm GBPm GBPm GBPm
----------------------------------- --------- ------ ------ --------- -----
2021
Assets
Cash and cash equivalents 43.4 - - - 43.4
Trade and other receivables 124.2 19.9 5.3 0.3 149.7
Amounts due from joint ventures 62.8 - - - 62.8
----------------------------------- --------- ------ ------ --------- -----
230.4 19.9 5.3 0.3 255.9
----------------------------------- --------- ------ ------ --------- -----
2021
Liabilities
Other loans - 2.5 - - 2.5
Deferred land payments and overage
payable 94.5 57.0 96.7 17.5 265.7
Lease liabilities 8.4 8.3 22.8 60.7 100.2
Other trade and other payables 74.9 11.7 11.6 0.2 98.4
Amounts due to joint ventures 0.5 - - - 0.5
----------------------------------- --------- ------ ------ --------- -----
178.3 79.5 131.1 78.4 467.3
----------------------------------- --------- ------ ------ --------- -----
2020
Assets
Cash and cash equivalents 100.5 - - - 100.5
Trade and other receivables 86.4 14.1 5.0 0.5 106.0
Amounts due from joint ventures 69.5 - - - 69.5
----------------------------------- --------- ------ ------ --------- -----
256.4 14.1 5.0 0.5 276.0
----------------------------------- --------- ------ ------ --------- -----
2020
Liabilities
Other loans - - 2.5 - 2.5
Deferred land payments and overage
payable 123.2 69.7 35.1 5.3 233.3
Lease liabilities 5.5 5.2 10.3 13.7 34.7
Other trade and other payables 76.6 10.0 11.4 - 98.0
Amounts due to joint ventures 0.4 - - - 0.4
----------------------------------- --------- ------ ------ --------- -----
205.7 84.9 59.3 19.0 368.9
----------------------------------- --------- ------ ------ --------- -----
Interest rate risk
Interest rate risk reflects the Group's exposure to fluctuations
in interest rates in the market. This risk arises from bank loans
that are drawn under the Group's loan facilities with variable
interest rates based upon UK LIBOR. For the year ended 30 September
2021 it is estimated that an increase of 0.5% to UK LIBOR would
have decreased the Group's profit before tax by GBP0.4m (2020:
GBP0.9m).
The Group's financial assets and liabilities are non-interest
bearing with the exception of cash and cash equivalents of GBP43.4m
(2020: GBP100.5m) which attracts interest at floating rates.
The Group has minimal exposure to foreign currency risk.
Housing market risk
The Group is affected by price fluctuations in the UK housing
market. These are in turn affected by the wider economic conditions
such as mortgage availability and associated interest rates,
employment and consumer confidence. Whilst these risks are beyond
the Group's ultimate control, the Group's mixed-tenure model
provides resilience by reducing the reliance on the private for
sale market. The geographical spread of the Group's sites across
the UK also reduces the risk of adverse conditions in regional
housing markets significantly impacting the Group.
Credit risk
The Group's exposure to credit risk is limited solely to the UK
for housebuilding activities and by the fact that the Group
receives cash at the point of legal completion of its sales.
The Group's remaining credit risk predominantly arises from
trade receivables, amounts recoverable from construction contracts
and cash and cash equivalents.
Trade and other receivables primarily comprise amounts
receivable from Homes England (in relation to Help to Buy), housing
associations and joint ventures. The Directors consider the credit
rating of the various debtors to be good in respect of the amounts
outstanding and therefore credit risk is considered to be low. The
Directors are of the opinion that there are no significant
concentrations of credit risk.
Trade receivables on deferred settlement terms arise from land
sales. The amount deferred is secured by a charge over the land
until payment is received.
Cash and cash equivalents are held with UK clearing banks which
are either A or A- rated.
Capital management
The Group's policies seek to protect returns to shareholders by
ensuring the Group will continue to trade profitably in the
foreseeable future. The Group also aims to optimise its capital
structure of debt and equity over the medium term so as to minimise
its cost of capital, though for operational flexibility may choose
to use varying levels of debt in the short term. The Group manages
its capital with regard to the risks inherent in the business and
the sector within which it operates by monitoring its actual cash
flows against bank loan facilities, financial covenants and the
cash flow forecasts approved by the Directors.
2021 2020
GBPm GBPm
----------------- ------- -------
Total borrowings 2.4 2.3
Total equity 1,107.5 1,086.0
----------------- ------- -------
Total capital 1,109.9 1,088.3
----------------- ------- -------
28. Share-based payments
The Group recognised GBP1.9m (2020: GBP1.0m) of employee costs
related to share-based payment transactions during the financial
year, excluding accrued National Insurance contributions. A
deferred tax asset of GBP2.1m (2020: GBP0.9m) is held in relation
to share-based payments, of which GBP0.3m was credited to the
statement of comprehensive income (2020: GBP0.8m charged) and
GBP0.9m was credited directly to equity (2020: GBP0.6m charged)
during the year.
National Insurance contributions are payable in respect of
certain share-based payment transactions and are treated as
cash-settled transactions. The cost of these contributions during
the year was GBP0.7m (2020: GBP0.6m). At 30 September 2021, the
carrying amount of National Insurance contributions payable was
GBP0.9m (2020: GBP0.7m), which is included in accruals within trade
and other payables in the statement of financial position.
The Group operated a number of share-based payment schemes
during the financial year (all of which are equity settled) as set
out below:
(a) Savings-Related Share Option Scheme ("SRSOS")
The Group operates an SRSOS, which is open to all employees at
the date of invitation. This is a UK tax-advantaged Save As You
Earn ("SAYE") plan.
Under the SAYE, eligible participants are granted options over
such number of shares as determined by reference to their monthly
savings contract over three years. Participants remaining in the
Group's employment at the end of the three-year savings period are
entitled to use their savings to purchase shares in the Company at
a stated exercise price (set at a discount of up to 20% of the
share price on the day preceding the date of grant). Employees
leaving for certain reasons are able to use their savings to
purchase shares within six months of their cessation of employment.
A reconciliation of option movements is shown below.
Options granted during the year were valued using the Black
Scholes option-pricing model. No performance conditions or
assumptions regarding service were included in the fair value
calculations. The fair value per option granted during the year and
the assumptions used in the calculation are detailed in the table
below:
22 June 24 June 27 June 19 December
Date of grant 2021 2020 2019 2017
---------------------------------------------- ----------- ----------- ----------- -----------
Options granted (millions) 0.7 2.2 2.1 0.6
Share price at date of grant (pence) 492 329 293 349
Exercise price (pence) 401 245 245 282
Volatility (%) 39 36 30 38
Option life (years) 3 3 3 3
Expected dividend yield (%) 2.0 2.6 3.9 3.6
Risk-free rate (%) 0.3 (0.1) 0.6 0.6
Fair value per option - Black Scholes (pence) 152 77 63 93
---------------------------------------------- ----------- ----------- ----------- -----------
Instruments Instruments Instruments Instruments
Movements in the year m m m m
---------------------------------------------- ----------- ----------- ----------- -----------
Options outstanding at 1 October 2019 - - 2.1 0.4
Granted - 2.2 - -
Forfeited - (0.1) (0.2) -
Exercised - - - -
---------------------------------------------- ----------- ----------- ----------- -----------
Options outstanding at 30 September 2020 - 2.1 1.9 0.4
Granted 0.7 - - -
Forfeited - (0.2) (0.2) -
Exercised - - - (0.4)
---------------------------------------------- ----------- ----------- ----------- -----------
Options outstanding at 30 September 2021 0.7 1.9 1.7 -
---------------------------------------------- ----------- ----------- ----------- -----------
The resulting fair value is expensed over the service period of
three years, on the assumption that each year 15% of options will
lapse as employees leave the Company based on the Group's
experience of employee attrition rates.
Options under the December 2017 grant vested on 1 February 2021,
with 82% of granted options vesting. The average share price during
the year ended 30 September 2021 was 447 pence.
Awards under the June 2019 grant will vest on 27 June 2022.
The weighted average remaining contractual life of share options
outstanding at 30 September 2021 was 1.5 years (2020: 2.1
years).
(b) Long-Term Incentive Plan ("LTIP")
Under the LTIP, shares are conditionally awarded to senior
managers of the Group. The core awards are calculated as a
percentage of the participants' salaries and scaled according to
grade. Awards issued in prior years are assessed against ROCE, TNAV
and relative total shareholder return ("TSR"). Awards issued in the
years ended 30 September 2020 and 30 September 2021 are assessed
against ROCE and adjusted basic EPS.
Straight-line vesting will apply if performance falls between
threshold and target or target and maximum. Performance will be
measured at the end of the three-year performance period. If the
required level of performance has been reached, the awards vest and
the shares under award will be released. Dividends do not accrue on
the shares that vest.
For grants from 1 October 2018, once released, the shares issued
to the Group Chief Executive and the Group Chief Financial Officer
are subject to a two-year post-vesting holding period.
The weighted average remaining contractual life of LTIP awards
outstanding at 30 September 2021 was 1.3 years (2020: 1.2 years).
Details of the shares conditionally allocated at 30 September 2021
are set out below.
The conditional shares were valued using the following
methods:
-- for the non-market-based elements of the award, a Black Scholes option-pricing model; and
-- for the relative TSR elements of the award, a Monte Carlo simulation model.
The key assumptions underpinning the Black Scholes
option-pricing model and Monte Carlo simulation model are set out
in the table below:
4 26 7
Share price at date of 20 September March January 11 December January 12 December 19 December 19 December
grant (pence) 2021 2021 2021 2020 2020 2019 2018 2017
------------------------ ------------ ------ -------- ----------- -------- ----------- ----------- -----------
Awards granted
(millions) 0.04 0.10 0.20 1.90 0.30 1.70 3.50 2.70
Share price at date of
grant (pence) 516 493 428 400 462 426 288 349
Exercise price (pence) Nil Nil Nil Nil Nil Nil Nil Nil
Volatility (%) 40 40 40 39 29 29 35 38
Award life (years) 3 3 3 3 3 3 3 3
Expected dividend yield
(%) 1.8 1.8 1.8 1.9 4.7 4.7 4.8 3.5
Risk-free rate (%) (0.1) (0.1) (0.1) (0.1) 0.6 0.6 0.7 0.6
------------------------ ------------ ------ -------- ----------- -------- ----------- ----------- -----------
Fair value per
conditional share
Black Scholes - no
holding period (pence) 489 467 405 378 401 370 174 220
Fair value per
conditional share
Monte Carlo - no
holding period (pence) n/a n/a n/a n/a n/a n/a 46 54
Total fair value per
conditional share
No holding period
(pence) 489 467 405 378 401 370 220 274
------------------------ ------------ ------ -------- ----------- -------- ----------- ----------- -----------
Fair value per
conditional share
Black Scholes -
two-year holding period
(pence) n/a n/a n/a 326 367 339 157 n/a
Fair value per
conditional share
Monte Carlo - two-year
holding period (pence) n/a n/a n/a n/a n/a n/a 48 n/a
Total fair value per
conditional share
Two-year holding period
(pence) n/a n/a n/a 326 367 339 205 n/a
------------------------ ------------ ------ -------- ----------- -------- ----------- ----------- -----------
4 26 7
Movements in the year 20 September March January 11 December January 12 December 19 December 19 December
(millions) 2021 2021 2021 2020 2020 2019 2018 2017
------------------------ ------------ ------ -------- ----------- -------- ----------- ----------- -----------
Awards outstanding at 1
October 2019 - - - - - - 3.0 2.5
Granted - - - - 0.3 1.7 - -
Lapsed - - - - - (0.1) (0.4) (0.3)
Forfeited - - - - - (0.3) (0.4) (0.3)
Exercised - - - - - - - -
------------------------ ------------ ------ -------- ----------- -------- ----------- ----------- -----------
Awards outstanding at 30
September 2020 - - - - 0.3 1.3 2.2 1.9
Granted 0.04 0.1 0.2 1.9 - - - -
Lapsed - - - - - - (0.1) (1.5)
Forfeited - - - (0.1) - (0.1) (0.2) (0.1)
Exercised - - - - - - - (0.3)
------------------------ ------------ ------ -------- ----------- -------- ----------- ----------- -----------
Awards outstanding at 30
September 2021 0.04 0.1 0.2 1.8 0.3 1.2 1.9 -
------------------------ ------------ ------ -------- ----------- -------- ----------- ----------- -----------
Awards under the December 2017 grant vested on 21 December 2020
with 16.4% of the awards outstanding vesting.
Awards under the December 2018 grant will vest on 19 December
2021. The performance conditions for this award were measured for
the period to 30 September 2021 and 30.0% of the awards outstanding
are expected to vest.
(c) Deferred Bonus Plan ("DBP")
Under the DBP, certain senior managers and Directors of the
Group receive one-third of their annual bonus entitlement as a
conditional share award. The number of shares awarded is calculated
by dividing the value of the deferred bonus by the average
mid-market share price on the three business days prior to grant.
The shares vest after three years subject to the employee remaining
in the employment of the Group. If an employee leaves during the
three-year period, the shares are forfeited except in certain
circumstances as set out in the Plan rules. Additional shares are
issued on vesting equivalent to the value of dividends declared by
the Company during the vesting period.
The fair value of the awards is equal to the share price on the
date of grant. The fair value is expensed to the statement of
comprehensive income in a straight line over four years, being the
year in which the bonus is earned and the three-year holding
period.
A reconciliation of the number of shares conditionally allocated
is shown below:
12 December 19 December 19 December
2019 2018 2017
Movements in the year m m m
----------------------------------- ----------- ----------- -----------
Awards outstanding at 1 October
2019 - 0.4 0.4
Granted 0.4 - -
Forfeited (0.1) (0.1) (0.1)
----------------------------------- ----------- ----------- -----------
Awards outstanding at 30 September
2020 0.3 0.3 0.3
Exercised - - (0.3)
----------------------------------- ----------- ----------- -----------
Awards outstanding at 30 September
2021 0.3 0.3 -
----------------------------------- ----------- ----------- -----------
Awards under the December 2017 grant vested on 18 December
2020.
29. Capital commitments
At 30 September 2021, the Group was committed to the purchase of
property, plant and equipment of GBP1.0m (2020: GBP6.0m) relating
to machinery for the new modular panel factory in Bardon,
Leicestershire.
The Group was not committed to the purchase of any software
intangible assets at 30 September 2021 (2020: GBPNil).
30. Guarantees
Subsidiaries of the Group have made guarantees to its joint
ventures and associate in the ordinary course of business.
The Group has entered into counter indemnities with banks,
insurance companies, statutory undertakings and the National House
Building Council in the ordinary course of business, including
those in respect of the Group's joint ventures and associate, from
which it is anticipated that no material liabilities will
arise.
31. Contingent liabilities and contingent assets
The Group is subject to various claims, audits and
investigations that have arisen in the ordinary course of business.
These matters include but are not limited to employment and
commercial matters. The outcome of all these matters is subject to
future resolution, including the uncertainties of litigation. Based
on information currently known to the Group and after consultation
with external lawyers, the Directors believe that the ultimate
resolution of these matters, individually and in aggregate, will
not have a material adverse impact on the Group's financial
condition. Where necessary, applicable costs are included within
the cost to complete estimates for individual developments or are
otherwise accrued in the statement of financial position.
As detailed in Note 21, a provision of GBP41.0m has been
recognised during the year in relation to remediation costs for
multi-occupancy buildings. The provision is based on currently
available information and reflects the Directors' best estimate of
gross cash outflows for the Group. The quantification of the cost
of these remedial works is inherently complex and depends on a
number of factors, including the size of the building, the cost of
investigation and replacement materials and associated labour and
the potential cost of managing the disruption to residents.
The Directors also note that as Government legislation,
regulation and guidance further evolves in this area this may
result in additional liabilities for the Group that cannot
currently be reliably estimated. There may also be changes
concerning the use of materials currently undergoing fire safety
tests instructed by product manufacturers. If such materials are no
longer considered safe, this could result in an increase in the
number of buildings requiring remediation works as well as an
increase in the estimated cost to remediate the buildings currently
provided for. We may however expect further Government intervention
if such circumstances arise.
Further to this, the updated Building Safety Bill, published on
5 July 2021, will (if passed) extend the limitation period to bring
a claim under the Defective Premises Act from 6 years to 15 years
(or 25 years, if the latest amendment is passed) and this will be
applied retrospectively. The provision recognised during the year
for remediation costs reflects the Group's review of buildings up
to 12 years and therefore the extension to 15 years (or 25 years)
may result in additional liabilities for the Group.
In respect of the remediation costs noted above, the Directors
believe that Countryside may be able to recover some of these costs
via insurance or, in the case of defective workmanship, from
subcontractors or other third parties. However, any such recoveries
are not deemed to be virtually certain and therefore no contingent
assets have been recognised during the year.
32. Dividends
No dividends have been declared or distributions made in the
year (2020: GBP46.2m distribution paid in relation to the previous
year's final dividend of 10.3 pence per share).
The Board of Directors has reviewed the capital allocation
policy of the Group and considers that sufficient growth
opportunities exist for the Partnerships business that all cash
available for investment should be used to fund that growth.
Accordingly, the Board of Directors does not recommend the payment
of a final dividend for the year ended 30 September 2021 (2020:
GBPNil).
33. Post-balance sheet events
On 14 October 2021, Barclays Capital Securities Limited
confirmed that it had completed the initial tranche of the share
buyback programme announced by the Group on 7 July 2021 (Note 22).
The total cost of the programme, including directly attributable
costs, was GBP49.9m. The total charge recorded in the statement of
changes in equity for the year ended 30 September 2021 was
GBP52.2m, therefore a credit to retained earnings of GBP2.3m will
be recognised in the year ending 30 September 2022.
This has been treated as a non-adjusting event after the
reporting period.
Alternative Performance Measures (unaudited)
In the reporting of financial information, the Directors have
adopted various Alternative Performance Measures ("APMs"). These
measures are not defined by IFRS and therefore may not be directly
comparable with other companies' APMs, including those in the
Group's industry. APMs should be considered in addition to, and are
not intended to be a substitute for, or superior to, IFRS
measurements.
The Directors believe that the inclusion of the Group's share of
joint ventures and associate and the removal of non-underlying
items from financial information present a clear and consistent
presentation of the underlying performance of the ongoing business
for shareholders.
On 7 July 2021, the Group announced an update to its strategy
which resulted in all of the Group's resources being focused on the
Partnerships business. Any non-Partnerships activities are regarded
as Legacy Operations, which the Group is exiting as soon as
practical. The strategy update resulted in some changes to the
Group's segmental reporting as described in Note 4. The prior year
segmental information below has been restated to reflect these
changes.
(a) Financial performance
Adjusted revenue
Adjusted revenue includes the Group's share of revenue from the
joint ventures and associate. Refer to Note 4 for a reconciliation
to reported revenue.
Adjusted gross margin
Adjusted gross margin is calculated as adjusted gross profit
divided by adjusted revenue. The table below reconciles adjusted
gross profit to reported gross profit and presents the calculation
of adjusted gross margin.
Adjusted gross profit includes the Group's share of gross profit
from the joint ventures and associate and excludes non-underlying
items.
2021 2020
Note GBPm GBPm
----------------------------------------------- ---- ------- -----
Gross profit 185.8 108.1
Add: non-underlying items 7 41.7 -
Add: share of gross profit from joint ventures
and associate 34.1 18.2
----------------------------------------------- ---- ------- -----
Adjusted gross profit 261.6 126.3
----------------------------------------------- ---- ------- -----
Adjusted revenue 4 1,526.2 988.8
----------------------------------------------- ---- ------- -----
Adjusted gross margin 17.1% 12.8%
----------------------------------------------- ---- ------- -----
Adjusted operating profit
Adjusted operating profit includes the Group's share of
operating profit from the joint ventures and associate and excludes
non-underlying items. Refer to Note 4 for a reconciliation to
reported operating profit.
Adjusted operating margin
Adjusted operating margin is calculated as adjusted operating
profit divided by adjusted revenue. The table below presents the
calculation of adjusted operating margin for the Group:
2021 2020
Note GBPm GBPm
-------------------------------- ---- ------- -----
Adjusted operating profit 4 167.3 54.2
Adjusted revenue 4 1,526.2 988.8
-------------------------------- ---- ------- -----
Group adjusted operating margin
(%) 11.0% 5.5%
-------------------------------- ---- ------- -----
The table below presents the calculation of adjusted operating
margin for the Partnerships segment:
2020
2021 restated
Note GBPm GBPm
-------------------------------- ---- ------- ---------
Adjusted operating profit 4 107.7 37.5
Adjusted revenue 4 1,033.2 669.2
-------------------------------- ---- ------- ---------
Partnerships adjusted operating
margin (%) 10.4% 5.6%
-------------------------------- ---- ------- ---------
The table below presents the calculation of adjusted operating
margin for the Legacy Operations segment.
2020
2021 restated
Note GBPm GBPm
------------------------------------- ---- ----- ---------
Adjusted operating profit 4 70.5 20.3
Adjusted revenue 4 493.0 319.6
------------------------------------- ---- ----- ---------
Legacy Operations adjusted operating
margin (%) 14.3% 6.4%
------------------------------------- ---- ----- ---------
Adjusted basic and diluted earnings per share
Adjusted basic and diluted earnings per share exclude the impact
of non-underlying items on profit from continuing operations
attributable to equity holders of the parent. Refer to Note 10 for
a reconciliation to reported basic and diluted earnings per
share.
Return on capital employed ("ROCE")
ROCE is calculated as adjusted operating profit divided by
average tangible net operating asset value ("TNOAV").
The table below presents the calculation of ROCE for the
Group:
2021 2020
Note GBPm GBPm
-------------------------- ---- ----- -----
Closing TNOAV 4 947.0 853.5
Opening TNOAV 853.5 664.4
-------------------------- ---- ----- -----
Average TNOAV 900.3 759.0
-------------------------- ---- ----- -----
Adjusted operating profit 4 167.3 54.2
-------------------------- ---- ----- -----
Group ROCE (%) 18.6% 7.1%
-------------------------- ---- ----- -----
The table below presents the calculation of ROCE for the
Partnerships segment:
2020
2021 restated
Note GBPm GBPm
-------------------------- ---- ----- ---------
Closing TNOAV 4 610.2 466.6
Opening TNOAV 466.6 272.5
-------------------------- ---- ----- ---------
Average TNOAV 538.4 369.6
-------------------------- ---- ----- ---------
Adjusted operating profit 4 107.7 37.5
-------------------------- ---- ----- ---------
Partnerships ROCE (%) 20.0% 10.1%
-------------------------- ---- ----- ---------
The table below presents the calculation of ROCE for the Legacy
Operations segment:
2020
2021 restated
Note GBPm GBPm
--------------------------- ---- ----- ---------
Closing TNOAV 4 336.8 386.9
Opening TNOAV 386.9 391.9
--------------------------- ---- ----- ---------
Average TNOAV 361.9 389.4
--------------------------- ---- ----- ---------
Adjusted operating profit 4 70.5 20.3
--------------------------- ---- ----- ---------
Legacy Operations ROCE (%) 19.5% 5.2%
--------------------------- ---- ----- ---------
Asset turn
Asset turn is calculated as adjusted revenue divided by average
TNOAV.
The table below presents the calculation of asset turn for the
Group:
2021 2020
Note GBPm GBPm
----------------- ---- ------- -----
Adjusted revenue 4 1,526.2 988.8
Average TNOAV 900.3 759.0
----------------- ---- ------- -----
Group asset turn 1.7 1.3
----------------- ---- ------- -----
The table below presents the calculation of asset turn for the
Partnerships segment:
2020
2021 restated
Note GBPm GBPm
------------------------ ---- ------- ---------
Adjusted revenue 4 1,033.2 669.2
Average TNOAV 538.4 369.6
------------------------ ---- ------- ---------
Partnerships asset turn 1.9 1.8
------------------------ ---- ------- ---------
The table below presents the calculation of asset turn for the
Legacy Operations segment:
2020
2021 restated
Note GBPm GBPm
----------------------------- ---- ----- ---------
Adjusted revenue 4 493.0 319.6
Average TNOAV 361.9 389.4
----------------------------- ---- ----- ---------
Legacy Operations asset turn 1.4 0.8
----------------------------- ---- ----- ---------
(b) Financial position
Tangible net asset value ("TNAV")
TNAV is calculated as net assets excluding intangible assets net
of deferred tax. The table below reconciles TNAV to reported net
assets.
2021 2020
Note GBPm GBPm
-------------------------------- ---- ------- -------
Net assets 1,107.5 1,086.0
Less: intangible assets 11 (127.9) (143.1)
Add: deferred tax on intangible
assets 8.4 8.8
-------------------------------- ---- ------- -------
TNAV 4 988.0 951.7
-------------------------------- ---- ------- -------
Net cash/(debt)
Net cash/(debt) includes borrowings and net cash and cash
equivalents and excludes lease liabilities and debt arrangement
fees included in borrowings.
2021 2020
Note GBPm GBPm
----------------------------------- ---- ----- -----
Borrowings 19 (2.4) (2.3)
Add: net cash and cash equivalents 19 43.4 100.5
----------------------------------- ---- ----- -----
Net cash 41.0 98.2
----------------------------------- ---- ----- -----
Tangible net operating asset value ("TNOAV")
TNOAV is calculated as TNAV excluding net cash/debt. The table
below presents the calculation of TNOAV.
2021 2020 2019
GBPm GBPm GBPm
--------------- ------ ------ ------
TNAV 988.0 951.7 737.8
Less: net cash (41.0) (98.2) (73.4)
---------------- ------ ------ ------
TNOAV 947.0 853.5 664.4
---------------- ------ ------ ------
Gearing
Gearing is calculated as net debt divided by net assets. The
table below presents the calculation of gearing.
2021 2020
GBPm GBPm
----------- ------- -------
Net cash (41.0) (98.2)
Net assets 1,107.5 1,086.0
------------ ------- -------
Gearing (3.7)% (9.0)%
------------ ------- -------
Adjusted gearing
Adjusted gearing is calculated as net debt, including deferred
land payments (excluding overage), divided by net assets. The table
below presents the calculation of adjusted gearing.
2021 2020
Note GBPm GBPm
--------------------------------------- ---- ------- -------
Net cash (41.0) (98.2)
Add: deferred land payments (excluding
overage) 20 226.5 192.8
--------------------------------------- ---- ------- -------
Adjusted net debt 185.5 94.6
Net assets 1,107.5 1,086.0
--------------------------------------- ---- ------- -------
Adjusted gearing 16.7% 8.7%
--------------------------------------- ---- ------- -------
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FR GZMFMGGNGMZG
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