TIDMCSP
RNS Number : 0230M
Countryside Partnerships PLC
19 May 2022
COUNTRYSIDE PARTNERSHIPS PLC
Unaudited results for the six months ended 31 March 2022
19 May 2022
Exclusively focused on Partnerships with strong platform for
growth
No change to full year guidance
Countryside, the market leader in Partnerships, providing high
quality, mixed tenure communities, today announces its unaudited
results for the six months ended 31 March 2022.
Results overview
HY 2022 HY 2021
Completions(1) 1,958 2,591
Adjusted operating profit(2) GBP46.9m GBP78.6m
Adjusted basic earnings per
share(3) 5.8p 11.1p
Reported revenue GBP602.2m GBP661.0m
Reported operating (loss)/profit GBP(184.5)m GBP24.7m
Reported basic (loss)/earnings
per share (30.5)p 6.1p
Key points
-- No change to current year adjusted operating profit expectations
-- Good progress in the transition to an exclusively Partnerships business
- Partnerships South and newly-established Home Counties divisions performing well
- Encouraging progress in North and Midlands divisions following site-by-site review
- Legacy asset realisation on track with GBP150m realised to date
-- Partnerships performance in the second quarter of the year
improved significantly on the first quarter
-- H1 2022 completions, revenue and adjusted operating profit
down on an unusually strong comparative period which had benefited
from Covid related deferrals
-- Reported operating loss includes GBP109m fire safety
provision and GBP77m impairment of intangibles
-- Net cash (4) of GBP9.8m at 31 March 2022, weekly average net
debt of GBP104m in the first six months
-- Total forward order book of GBP1,816m, up 19% since the start of the year
-- Retained HBF 5-star builder status for a third year running
-- Appointment of Mike Woolliscroft and Phil Chapman as
co-interim CEOs as the search for the permanent CEO progresses
Outlook
As announced on 7 April 2022, the Board expects adjusted
operating profit for the full year of approximately GBP150m (2021:
GBP167.3m) including a significant profit growth in the second
half. This figure is stated net of GBP10m of site-by-site related
charges, GBP10m of Manufacturing losses and excludes the impact of
GBP15m of planned annualised cost savings. This includes full year
Partnerships adjusted operating profit of GBP110m (FY 2021:
GBP108m). The private net reservation rate for the first seven
weeks of the second half has been strong at 1.09, and we are 91%
forward sold for private homes for the second half with a number of
PRS and affordable transactions left to secure.
Countryside has a very strong pipeline of new sites, a large
addressable market, and strong demand for mixed tenure
developments, providing substantial long-term growth potential. The
most significant macroeconomic headwind is from inflation which we
are seeking to mitigate through commercial and pricing
arrangements.
John Martin, Chair, said:
"We have taken significant steps to improve operational
performance, augment controls and manage our cost base to enhance
returns and cash generation. We are delighted with the quality and
scale of new bids we have won and invested in during the first
half, further strengthening our significant pipeline for profitable
growth. We expect continued momentum as we move through the rest of
this year and into next.
We are the market leader in the provision of mixed tenure homes,
with business development 100% focused on our differentiated
Partnerships business. There is considerable unfulfilled demand and
we are well positioned to deliver strong, sustainable financial
returns."
Our half year results presentation will be available in person
and via webcast at 9.30am on Thursday 19 May followed by Q&A.
To register for the webcast please visit
https://investors.countrysidepartnerships.com .
Enquiries:
Countryside Partnerships PLC - +44 (0)1277 260 000
Tim Lawlor - Group Chief Financial Officer
Victoria Prior - Managing Director, Corporate Affairs
Brunswick Group LLP - +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 ("MMC"),
with a target of 50% of all homes to be built using MMC by
2025.
-- Placemaking 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 visit www.countrysidepartnerships.com or follow @CountrysidePPLC 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 Partnerships 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
Partnerships 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 Partnerships
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 operating profit includes the Group's share of
operating profit from joint ventures and associate of GBP12.7m (HY
2021: GBP21.7m) and excludes adjusting items of GBP218.7m (HY 2021:
GBP32.2m). Refer to Notes 3 and 5.
(3) 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.
(4) 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 inclusion of the Group's share of
joint ventures and associate and the removal of adjusting items
from financial information present a clear and consistent
presentation of the underlying performance of the ongoing business
for shareholders.
Group results for the six months ended 31 March 2022
Strategy and market position
Countryside has a clear, differentiated strategy which is
focused entirely on the delivery of mixed tenure housing. There is
a structural undersupply of homes in the UK housing market, and
demand for all tenures of homes remains strong. The business has
undergone significant change over the past couple of years. We're
making good progress on establishing the Partnerships model in the
Home Counties and exiting the legacy Housebuilding assets.
Countryside continues to be held in very high regard by local
authorities, registered providers, PRS investors and other partners
and customers. Our track record of delivery and focus on
placemaking, putting both existing and new communities at the heart
of everything we do positions us well for the future to deliver
strong sustainable financial returns.
Growth
There is significant market demand for our homes and there is a
strong pipeline of new opportunities, which underpins our
confidence in the long-term growth of the business. The Group made
great progress on new business across all divisions in the first
half:
-- In our South division, we have started on site for the first
phase of the landmark 2,615 home Clapham Park Estate regeneration
project and we were awarded preferred bidder for the regeneration
of the former Hendon Metropolitan Police Training Centre, alongside
our joint venture partner Optivo, to build over 870 homes.
-- In our North division, we started on site at Rivers Edge
(Warrington) and Eastbrook Village (Maghull) where we will deliver
over 900 mixed tenure homes.
-- In our Midlands division, we started on site at Drakelow in
Derbyshire, to build over 1,700 homes and we have made a
significant investment into our joint venture with Sovereign
Housing Association to deliver over 2,000 homes at Lotmead in
Swindon.
-- The establishment of our Home Counties regions is on track
and, to date, we have invested GBP13m in our site at Barton Park,
which will see us deliver 475 homes.
We own 13,355 plots with planning permission for use in our
Partnerships business, with a further 37,965 plots under our
control . Including preferred bidder status , our total land bank
stood at 70,933 plots, providing significant opportunity for
profitable growth for many years .
Quality and social impact
In March we were awarded 5-star builder status by the HBF for
the third year running. Our commitment to making a positive
differen ce to the communities and the people we serve is well
recognised in the industry. We were highly commended in the
National Social Value 2022 awards in the Private Sector Leadership
category, for championing social value creation and community
wellbeing. We embedded a new social value platform in the first
half, having measured and monitored our social impact for the past
three years. Through the new system we will be better able to share
our social impact and social value story with our partners,
investors, and the communities we serve. In addition, as part of
our commitment to social impact, we target completing two
post-occupancy evaluations each year with the first of these
carried out at our flagship site in Beaulieu. This feedback will
help inform our approach to development in future ensuring we are
building homes that meet the communities' needs.
We are also delighted to have won the Construction Award for
Excellence in Health, Safety or Wellbeing Initiative 2022. This was
as a result of our adoption of artificial intelligence collision
and avoidance proximity camera technology across all construction
and factory sites, reaffirming our commitment to maintaining a safe
and healthy environment for all our stakeholders
Commitment to Fire Safety Pledge
The quality of the homes we build is fundamental to our strategy
and is of paramount importance to us and our customers. We have
been working with both the Government and other stakeholders to
find a solution to cladding and fire safety issues in
multi-occupancy tall buildings. As announced on 7 April 2022, the
Board has signed the Government's proposed Fire Safety Pledge ("the
Pledge"):
(i) Countryside will meet the cost of remediating buildings
currently proposed to be remediated via the Building Safety Fund
("BSF") or ACM funds; and
(ii) Countryside will take responsibility for performing or
funding self-remediation works relating to life-critical fire
safety issues on all buildings of 11 metres or more which it has
developed over the last 30 years.
As a result, we have recognised a further provision for fire
safety of GBP109.0m in the period. This is in addition to the
GBP41.0m provided for in 2021, taking our total provision for fire
safety to GBP150.0m.
The revised provision reflects the estimated costs to remediate
a total of 123 buildings constructed within the last 30 years, 11
of which are registered by the BSF at a cost of GBP29.5m.
D ue to the extent of the remediation works, a new standalone
division has been established to manage and deliver the programme.
GBP19.0m is included in the provision in relation to the costs of
this division. It is anticipated that work will be carried out over
the next ten years.
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 and the cost of investigation, replacement
materials, associated labour, and the potential cost of managing
the disruption to residents. We have calculated our provision based
on past experience of remediation costs and the best information
available to us.
Group performance
The results for the six months ended 31 March 2022 are measured
against an unusually strong comparative period in HY 2021 which
benefitted from the deferral of 1,119 completions from the second
half of the prior year and generated a positive operating profit
impact of around GBP30m in HY 2021.
Performance in the second quarter of the year showed improvement
following a weaker performance in the first quarter which was
impacted by delays to starting on a number of sites and operational
challenges, including groundworker, timber-frame and roofing
contractor issues.
Total adjusted revenue decreased 12.7% to GBP659.4m (HY 2021:
GBP755.0m). On a reported basis, revenue decreased 8.9% to
GBP602.2m (HY 2021: GBP661.0m).
Adjusted operating profit was GBP46.9m (HY 2021: GBP78.6m) which
is stated net of around GBP10m of charges identified in the
site-by-site review, such as aborted bid costs and costs resulting
from changes in estimates to complete a small number of
schemes.
The ramp-up in manufacturing capacity resulted in a net cost of
GBP6.5m in the first half (HY 2021: GBP1.3m), including
approximately GBP3m in relation to the new facility at Bardon. The
Board is considering all options to minimise future losses though
we remain absolutely committed to timber-frame construction and
MMC.
Gross profit from land and commercial sales contributed GBP16.0m
(HY 2021: GBP10.6m) of which GBP13.3m related to Partnerships and
GBP2.7m from Legacy Operations. Further land and commercial sales
are expected to complete in the second half, in line with our
Partnerships business model, on larger sites.
The Group has commenced a review of group overheads and office
footprint which, along with previously announced regional
consolidation, will generate around GBP15m of annualised cost
savings.
On a reported basis, the Group recognised an operating loss of
GBP184.5m (HY 2021: GBP24.7m operating profit). The difference
between adjusted and reported results reflects the proportional
consolidation of our joint ventures and associates (see Note 11)
and exclusion of adjusting items (see below). Overall, adjusted
operating margin was 7.1% (HY 2021: 10.4%).
Partnerships
HY 2022 HY 2021 Change
Completions (homes) 1,576 2,045 (469)
Adjusted revenue (GBPm) 448.6 479.9 (31.3)
Adjusted operating profit (GBPm) 31.6 52.0 (20.4)
We made good progress in the period in establishing our
Partnerships Home Counties division with all four regions
profitable and performing in line with expectations. Our
Partnerships South division also continued to perform well and saw
strong momentum in the period with a number of significant
wins.
Performance in our Partnerships North and Midlands divisions was
weaker than expected in the first half due to higher than
anticipated costs to complete some legacy sites and operational
disruptions caused by the failure of a number of contractors. The
actions we have put in place position us well for recovery and
growth in the medium term. To ensure overhead cost efficiency and
improved focus, we have consolidated our former South Midlands and
Chilterns regions into the West Midlands and Northern Home Counties
regions respectively.
Total Partnerships completions were 1,576 homes (HY 2021: 2,045
homes). Excluding our estimate of covid-related deferrals in the
prior period, Partnerships completions were up 16% compared to last
year. The tenure mix was broadly consistent with the prior
year.
Private ASP remained broadly flat at GBP345k (HY 2021: GBP339k)
reflecting strong house price inflation of around 4%, partially
offset by geographic site mix. Affordable ASP increased 17% to
GBP178,000 (HY 2021: GBP152,000), whilst PRS ASP was up 44% to
GBP208,000 (HY 2021: GBP144,000), both driven by an increase in the
proportion of delivery of these tenures from the South.
Adjusted revenue decreased by 7% to GBP448.6m (HY 2021:
GBP479.9m) mainly driven by the impact of covid related deferrals.
Reported revenue of GBP399.1m was broadly in line with the prior
year (HY 2021: GBP398.9m).
Adjusted operating profit fell by GBP20.5m to GBP31.6m (HY 2021:
GBP52.0m) as a result of the following:
-- The impact of covid-related deferrals in the comparative period of approximately GBP15m
-- Charges identified in the site-by-site review of GBP6.5m
-- Losses in our manufacturing business of GBP6.5m (HY 2021: GBP1.3m)
Adjusted gross margins were stable in the period at 16.3%
compared with 16.2% in the prior year. Adjusted operating margin
reduced 380bps to 7.0% (HY 2021: 10.8%) as a result of increased
overheads and lower operational gearing.
On a reported basis, the operating loss for the period was
GBP116.9m (HY 2021: GBP8.3m profit) and operating margin decreased
to (29.3)% (HY 2021: 2.1%), as a result of the provision for
remedial work on historical high-rise developments.
We had 45 open sales outlets at the end of the period (HY 2021:
40), with a net private reservation rate of 1.13 (HY 2021: 0.77),
and new sales launches are planned during the summer months
including at Pullman Green in Hexthorpe and Eastbrook Village in
Maghull. Total active sites increased by 12% to 92 (HY 2021:
82).
Overall, our total Partnerships forward order book of GBP1,549m
(HY 2021: GBP929m, FY 2021: GBP1,235m) was 25% higher than the
position at the start of the year. We are 86% forward sold for
second half across all tenures and anticipate a significant
improvement in profitability in the second half to deliver
approximately GBP110m operating profit from Partnerships for FY
2022.
Legacy Operations
The Group's focus is on our Partnerships business and we expect
our operations to be 100% Partnerships in 2024. We have established
a new Partnerships Home Counties division from the old
Housebuilding division and, in addition, we announced in July 2021
that we planned to realise GBP450m of cash from the completion of
Housebuilding sales. Since the commencement of the legacy wind-down
in July 2021 we have realised approximately GBP150m of cash, which
is slightly ahead of our expectations by this time. Two sites have
been identified, representing GBP49m of capital employed, where
realisation of the assets cannot be accelerated. These assets will
be retained and realised over the planned development cycle.
Adjusted operating profit was GBP15.8m (HY 2021: GBP29.3m)
including GBP3.5m of charges following the site-by-site review. FY
2022 adjusted operating profit is expected to be approximately
GBP45m.
Adjusting items
Total adjusting items of GBP218.7m were recognised in the period
(HY 2021: GBP32.2m). This includes the following elements:
-- GBP72m non-cash impairment of goodwill in relation to
Westleigh, and a further GBP4.9m impairment in respect of the
acquired customer relationship intangible assets. A further
provision has been recognised of GBP5m relating to costs required
to fulfil our obligations to close out 80 former Westleigh
sites.
-- Following our agreement to sign the Fire Safety Pledge we
have provided a further GBP109m in relation to remediating
buildings developed by Countryside over the past 30 years.
-- Impairment of GBP22m in relation to a large site in the North acquired in 2018.
-- A non-cash write-down of inventory of GBP1.2m that is linked
to the closure of the South Midlands region. We expect further
restructuring costs of around GBP8m in the second half.
-- We have also recognised a GBP4.6m amortisation charge of
acquired intangible assets in line with previous years.
Finance costs and taxation
Net finance costs were GBP7.5m in the period (HY 2021: GBP6.0m)
including a GBP0.8m IFRS16 charge relating to the new manufacturing
facility at Bardon (HY 2021: GBPNil).
The Residential Property Developer Tax ("RPDT") of 4% was
introduced on 1 April 2022. The impact of this for the full year
has been considered when calculating the effective tax rate to be
applied for the six months ended 31 March 2022. The effective tax
rate applied to adjusted profit for the period was 21.3% (HY 2021:
19.3%). On a reported basis, there was a tax credit of GBP25.4m in
the period due to the tax deductions for adjusting items.
The effective tax rate for FY23 will increase due to the
increase in Corporation tax from 1 April 2023 to 25%. As a result
of this and the full year impact of the RPDT, we expect an
effective tax rate of approximately 26% in FY23.
(Loss)/earnings per share
Adjusted basic earnings per share were 5.8 pence (HY 2021: 11.1
pence), reflecting the decrease in adjusted earnings in the period.
On a reported basis, basic loss per share was 30.5 pence (HY 2021:
6.1 pence earnings per share).
Assets and liabilities
Inventories increased by GBP63.0m to GBP1,206.8m (FY 2021:
GBP1,143.8m) during the period. This was driven by our continued
investment to support the growth of the Partnerships division with
GBP132m invested in land purchases and construction net of the
GBP22m impairment referred to above. There was a reduction in
Legacy Operations inventories as the Group progressed with the
asset realisation programme.
The Group's investment in joint ventures reduced to GBP31.7m (FY
2021: GBP38.3m) as a result of dividends received in the period
exceeding the profit generated by the joint ventures.
Cash and financing
The Group's closing net cash at 31 March 2022 was GBP9.8m (FY
2021: net cash GBP41.0m), a reduction of GBP31.2m in the six month
period, as summarised in the table below:
HY 2022
GBPm
Net cash generated from Legacy asset
sales 108
Partnerships Adjusted Operating
Profit 32
Partnerships work in progress investment (132)
Other working capital movements 11
Tax and net interest (8)
Cash generated before distributions 11
Share buyback (42)
Reduction in net cash in period (31)
Cash was generated in the period from the proceeds of the sale
of legacy assets and the generation of Partnerships profits. The
primary usage of cash in the six-month period was a significant
investment in Partnerships work in progress assets, consisting of
land purchases (GBP84m) and site development and construction
(GBP48m).
The net cash inflow before share buy-backs was GBP11m. The Group
returned GBP42m to shareholders through share repurchases during
the period. To date the Group has bought back 24.7 million shares
for GBP95.1m. We expect to continue with our previously announced
share buyback programme in the second half.
Our capital allocation policy targets a net cash/ debt range of
+/- 1 times the last twelve months adjusted operating profit. The
priorities for the usage of cash are the settlement of legacy
liabilities (including the fire safety remediation commitments) and
reinvestment where we can generate attractive returns, with surplus
cash to be returned to shareholders in the most appropriate
way.
Average net debt between period ends is significantly higher
than at the period-end due to the timing of working capital
movements, in particular completions which tend to peak in the
closing days of the period. The average weekly net debt in the
period was GBP104.3m (HY 2021: GBP59.9m net cash).
The Group has in place a GBP300m revolving credit facility
("RCF"), provided by a syndicate of four banks, which expires in
May 2023. The Group has commenced discussions with its lenders to
extend the current facility beyond this date.
Dividend
The Board does not propose the payment of an interim dividend
(HY 2021: GBPNil).
Board and leadership changes
On 13 January 2022 the Board announced that the CEO of the Group
was to step down and John Martin, Chair, would assume the CEO role
on an interim basis and review all of the operational sites. That
review was completed, and the results announced on 7 April 2022.
John Martin will now return to focus entirely on the role of Chair
of the Board. Mike Woolliscroft (CEO Partnerships South) and Phil
Chapman (CEO Partnerships Home Counties) will jointly lead the
business until a new CEO is able to join the Group. Mike and Phil
are very experienced executives, leading the two largest divisions
of the Group, and are highly trusted and well-respected by the
Board, our partners and within the business.
Peter Lee, a Partner at investment firm Browning West, joined
the Board as a Non-Executive Director on 21 January 2022.
Amanda Clack who is Executive Director, Head of Strategic
Advisory and Head of Public Sector at CBRE Ltd, joined the Board as
a Non-Executive Director on 10 March 2022.
Tim Lawlor joined the Board as CFO on 28 March 2022. Tim is an
experienced finance leader and a qualified chartered accountant who
was previously CFO of Wincanton plc. Tim has completed a smooth and
successful transition into his new role.
We are delighted to welcome such high-calibre and experienced
talent to the Board of Countryside.
COUNTRYSIDE PARTNERSHIPS PLC
PRINCIPAL AND EMERGING RISKS
For the six months ended 31 March 2022
PRINCIPAL AND EMERGING RISKS
The Group's principal and emerging risks are monitored by the
Risk Management Committee, the Audit Committee, and the Board. A
summary of each risk is provided below as well as an indication of
how the risk has changed during the period. Further detail on the
risks and how the Group monitors and manages them is provided on
pages 40 to 44 of the Annual Report and Accounts 2021.
1. A major incident impacts the United Kingdom or Risk change
countries where key suppliers are located and significantly No change
impacts the business
The impact of a catastrophic event, such as flooding,
failure of the National Grid, or the spread of an
infectious disease on an epidemic or pandemic scale,
can lead to the imposition of Government controls
on the movement of people, with the associated cessation
of large 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 Risk change
A decline in macroeconomic conditions, or conditions Increased
in the UK residential property market, can reduce
the propensity to buy homes. Higher unemployment,
interest rates and inflation can affect consumer confidence
and reduce demand for new homes. Constraints on mortgage
availability, or higher costs of mortgage funding,
may make it more difficult to sell homes.
------------
3. Adverse changes to Government policy and regulation Risk change
Adverse changes to Government policy in areas such No change
as climate change, tax, housing, planning, the environment
and building regulations may result in 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 Risk change
Failure to adequately recognise and prepare for the No change
impacts of climate change on our operations and value
chain, the risks of which are severe resource constraints,
significant delays to programme, rising build costs,
an inability to meet new, more demanding regulations
and loss of customer confidence.
------------
5. Constraints on construction resources Risk change
Costs may increase beyond budget due to the reduced No change
availability of skilled labour or shortages of sub-contractors
or building materials at competitive prices to support
the Group's growth ambitions.
------------
6. Poor operational performance Risk change
Inadequate controls or failures in compliance will No change
impact the Group's operational and financial performance.
------------
7. Land availability Risk change
Inability to source suitable land or obtain necessary No change
planning. Failure to secure timely planning permission
on economically viable terms may cause delays or the
potential termination of projects.
------------
8. Inability to attract and retain talented employees Risk change
Inability to attract and retain highly skilled, competent No change
people, with adequate diversity and inclusion, at
all levels could adversely affect the Group's results,
prospects and financial condition.
------------
9. Inadequate health, safety and environmental procedures Risk change
A deterioration in the Group's health, safety or environmental No change
standards could put the Group's employees, contractors
or the general public at risk of injury or death and
could lead to litigation, penalties or damage the
Group's reputation.
------------
10. Cyber security Risk change
A failure of the Group's IT systems, a security breach No change
of the internal systems or website, loss of data or
ransomware could significantly impact the Group's
business.
------------
11. Failure to generate or access adequate capital Risk change
The Group may fail to generate or access enough liquidity No change
to manage short or long-term funding or investment
requirements.
------------
12. Reputational damage Risk change
The perception of Countryside and its brand and values No change
deteriorate in the eyes of investors, customers, suppliers,
local authorities, housing associations, banks, analysts
or auditors, which could lead to increased operational
and financial risks.
------------
COUNTRYSIDE PARTNERSHIPS PLC
STATEMENT OF DIRECTORS' RESPONSIBILITIES
For the six months ended 31 March 2022
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that these condensed interim financial
statements have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the United Kingdom and that the interim management report
includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The maintenance and integrity of the Countryside Partnerships
PLC website is the responsibility of the Directors; the work
carried out by the auditor does not involve consideration of these
matters and, accordingly, the auditor accepts no responsibility for
any changes that might have occurred to the interim financial
statements since they were initially presented on the website.
The Directors of Countryside Partnerships PLC are listed in the
Countryside Partnerships PLC Annual Report and Accounts for the
year ended 30 September 2021. A list of current Directors is
maintained on the Countryside Partnerships PLC website:
https://investors.countrysidepartnerships.com.
By order of the Board
John Martin
Chair
18 May 2022
Tim Lawlor
Group Chief Financial Officer
18 May 2022
COUNTRYSIDE PARTNERSHIPS PLC
INDEPENT REVIEW REPORT
For the six months ended 31 March 2022
INDEPENT REVIEW REPORT TO COUNTRYSIDE PARTNERSHIPS PLC
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 March 2022, which comprises the consolidated
statement of comprehensive income, the consolidated statement of
financial position, the consolidated statement of changes in
equity, the consolidated cash flow statement, and related notes 1
to 20. We have read the other information contained in the
half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in Note 2, the annual financial statements of the
group will be prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2022 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the Company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
18 May 2022
COUNTRYSIDE PARTNERSHIPS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 30 September
Six months ended 31 March Six months ended 31 March 2021
2022 Unaudited 2021 Unaudited Audited
Note GBPm GBPm GBPm
-------------------------------- --------------------------- --------------------------- -----------------------
Revenue 4 602.2 661.0 1,371.4
Cost of sales 5 (649.7) (584.2) (1,185.6)
---------------------------- --------------------------- --------------------------- -----------------------
Gross (loss)/profit (47.5) 76.8 185.8
Administrative expenses 5 (137.0) (52.1) (128.4)
Other income - - 13.9
---------------------------- --------------------------- --------------------------- -----------------------
Operating (loss)/profit (184.5) 24.7 71.3
---------------------------- --------------------------- --------------------------- -----------------------
Analysed as:
Adjusted operating profit 46.9 78.6 167.3
Less: share of joint
ventures and associate
operating profit (12.7) (21.7) (32.8)
Less: adjusting items 5 (218.7) (32.2) (63.2)
---------------------------- --------------------------- --------------------------- -----------------------
Operating (loss)/profit (184.5) 24.7 71.3
---------------------------- --------------------------- --------------------------- -----------------------
Finance costs 6 (8.4) (6.3) (17.3)
Finance income 6 0.9 0.3 1.5
Share of post-tax profit
from joint ventures and
associate accounted for
using the equity
method 11 10.5 20.1 29.9
---------------------------- --------------------------- --------------------------- -----------------------
(Loss)/profit before income
tax (181.5) 38.8 85.4
Income tax credit/(expense) 7 25.4 (6.9) (13.1)
---------------------------- --------------------------- --------------------------- -----------------------
(Loss)/profit and total
comprehensive (loss)/income
for the period attributable
to owners
of the parent (156.1) 31.9 72.3
---------------------------- --------------------------- --------------------------- -----------------------
(Loss)/earnings per share
(expressed in pence per
share):
Basic 8 (30.5) 6.1 13.8
Diluted 8 (30.5) 6.0 13.7
---------------------------- --------------------------- --------------------------- -----------------------
Revenue and operating (losses)/profits arose from the Group's
continuing operations.
There were no items of other comprehensive income during the
period (HY21: GBPNil, FY21: GBPNil).
COUNTRYSIDE PARTNERSHIPS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March As at 31 March As at 30 September 2021
2022 Unaudited 2021 Unaudited Audited
Note GBPm GBPm GBPm
------------------------------------------------ ---- --------------- --------------- -----------------------
Assets
Non-current assets
Intangible assets 10 46.3 140.3 127.9
Property, plant and equipment 27.5 15.2 26.6
Right of use assets 67.8 67.8 70.6
Investment in joint ventures 11 31.7 33.8 38.3
Investment in associate 0.8 0.8 0.8
Deferred tax assets 7.4 4.4 6.0
Trade and other receivables 20.0 31.9 25.1
------------------------------------------------ ---- --------------- --------------- -----------------------
201.5 294.2 295.3
------------------------------------------------ ---- --------------- --------------- -----------------------
Current assets
Inventories 12 1,206.8 1,084.1 1,143.8
Trade and other receivables 260.0 196.8 250.4
Current income tax receivable 33.0 6.9 6.4
Cash and cash equivalents 13 197.2 108.8 43.4
------------------------------------------------ ---- --------------- --------------- -----------------------
1,697.0 1,396.6 1,444.0
------------------------------------------------ ---- --------------- --------------- -----------------------
Total assets 1,898.5 1,690.8 1,739.3
------------------------------------------------ ---- --------------- --------------- -----------------------
Liabilities
Current liabilities
Borrowings 13 (2.4) (0.5) -
Trade and other payables 14 (350.0) (311.2) (306.0)
Lease liabilities (7.7) (4.8) (8.0)
Provisions 15 (41.2) (37.5) (56.0)
------------------------------------------------ ---- --------------- --------------- -----------------------
(401.3) (354.0) (370.0)
------------------------------------------------ ---- --------------- --------------- -----------------------
Non-current liabilities
Borrowings 13 (184.0) (2.4) (2.4)
Trade and other payables 14 (212.4) (141.1) (182.3)
Lease liabilities (63.4) (64.0) (64.8)
Deferred tax liabilities (9.3) (9.3) (11.3)
Provisions 15 (121.8) (0.6) (1.0)
------------------------------------------------ ---- --------------- --------------- -----------------------
(590.9) (217.4) (261.8)
------------------------------------------------ ---- --------------- --------------- -----------------------
Total liabilities (992.2) (571.4) (631.8)
------------------------------------------------ ---- --------------- --------------- -----------------------
Net assets 906.3 1,119.4 1,107.5
------------------------------------------------ ---- --------------- --------------- -----------------------
Equity
Share capital 5.2 5.2 5.2
Share premium 5.3 5.3 5.3
Retained earnings 895.5 1,108.6 1,096.7
------------------------------------------------ ---- --------------- --------------- -----------------------
Equity attributable to owners of the parent 906.0 1,119.1 1,107.2
Equity attributable to non-controlling interest 0.3 0.3 0.3
------------------------------------------------ ---- --------------- --------------- -----------------------
Total equity 906.3 1,119.4 1,107.5
------------------------------------------------ ---- --------------- --------------- -----------------------
The notes on pages 16 to 31 form part of these financial
statements.
These financial statements were approved for issue by the Board
of Directors on 18 May 2022.
On behalf of the Board
John Martin Tim Lawlor
Director Director
COUNTRYSIDE PARTNERSHIPS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 31 March 2022 (Unaudited)
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 2021 5.2 5.3 1,096.7 1,107.2 0.3 1,107.5
---------------------------------- ----- -------- -------- --------- -------------- --------------- -------
Comprehensive income
Loss and total comprehensive loss
for the year - - (156.1) (156.1) - (156.1)
---------------------------------- ----- -------- -------- --------- -------------- --------------- -------
Transactions with owners
Share-based payments, net of
deferred tax 18 - - (0.3) (0.3) - (0.3)
Purchase of own shares, including
transaction costs - - (44.8) (44.8) - (44.8)
---------------------------------- ----- -------- -------- --------- -------------- --------------- -------
Total transactions with owners - - (45.1) (45.1) - (45.1)
---------------------------------- ----- -------- -------- --------- -------------- --------------- -------
At 31 March 2022 5.2 5.3 895.5 906.0 0.3 906.3
---------------------------------- ----- -------- -------- --------- -------------- --------------- -------
Equity
attributable
Share Share Retained to owners Non-controlling Total
Six months ended 31 March 2021 capital premium earnings of the parent interest equity
(Unaudited) Note GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ----- -------- -------- --------- -------------- --------------- ---------
At 1 October 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 period - - 31.9 31.9 - 31.9
---------------------------------- ----- -------- -------- --------- -------------- --------------- ---------
Transactions with owners
Share-based payments, net of
deferred tax 18 - - 1.5 1.5 - 1.5
---------------------------------- ----- -------- -------- --------- -------------- --------------- ---------
At 31 March 2021 5.2 5.3 1,108.6 1,119.1 0.3 1,119.4
---------------------------------- ----- -------- -------- --------- -------------- --------------- ---------
Year ended 30 September 2021 (Audited)
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 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 18 - - 2.8 2.8 - 2.8
Purchase of shares by Employee Benefit
Trust - - (1.4) (1.4) - (1.4)
Purchase of own shares, including
transaction costs - - (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
--------------------------------------- ---- -------- -------- --------- -------------- --------------- -------
COUNTRYSIDE PARTNERSHIPS PLC
CONSOLIDATED CASHFLOW STATEMENT
Year ended
Six months ended 31 Six months ended 31 March 2021 30 September 2021
March 2022 Unaudited Unaudited Audited
Note GBPm GBPm GBPm
------------------------------------- ---- --------------------- ------------------------------ ------------------
(Loss)/profit before income tax (181.5) 38.8 85.4
Adjustments for:
Amortisation - intangible assets 5.2 5.0 10.4
Impairment and de-recognition -
intangible assets 10 76.9 - 6.9
Depreciation - property, plant
and equipment 1.6 1.1 2.3
Depreciation - right of use
assets 3.9 2.7 6.2
Share of post-tax profit from
joint ventures and associate 11 (10.5) (20.1) (29.9)
Share-based payments (pre-tax) 18 0.2 1.0 1.9
Finance costs 6 8.4 6.3 17.3
Finance income 6 (0.9) (0.3) (1.5)
Gain on disposal of interest in
joint venture - - (13.9)
Increase in inventories 12 (63.0) (25.0) (84.7)
Decrease/(increase) in trade and
other receivables 26.8 (27.9) (47.5)
Increase/(decrease) in trade and
other payables 67.1 (22.2) (8.5)
Increase in provisions 15 106.0 26.7 45.6
Other non-cash items - 0.8 -
------------------------------------- ---- --------------------- ------------------------------ ------------------
Cash generated from/(used in)
operations 40.2 (13.1) (10.0)
Interest paid - lease liabilities 6 (1.5) (0.7) (2.2)
Interest paid - bank loans 6 (2.2) (1.3) (3.2)
Interest received 6 0.7 0.1 0.8
Tax paid (5.1) (14.2) (19.1)
------------------------------------- ---- --------------------- ------------------------------ ------------------
Net cash inflow/(outflow) from
operating activities 32.1 (29.2) (33.7)
------------------------------------- ---- --------------------- ------------------------------ ------------------
Cash flows from investing activities
Purchase of intangible assets (0.4) (2.2) (2.1)
Purchase of property, plant and
equipment (2.5) (1.2) (13.8)
(Increase)/decrease in advances to
joint ventures 17 (33.6) 17.8 6.8
Repayment of members' interest from
joint ventures 11 - 2.8 5.8
Dividends received from joint
ventures and associate 11 18.2 24.1 24.3
------------------------------------- ---- --------------------- ------------------------------ ------------------
Net cash (outflow)/inflow from
investing activities (18.3) 41.3 21.0
------------------------------------- ---- --------------------- ------------------------------ ------------------
Cash flows from financing activities
Repayment of lease liabilities (2.8) (4.3) (8.2)
Purchase of shares by Employee
Benefit Trust - - (1.4)
Purchase of own shares, including
transaction costs 16 (42.2) - (34.8)
Borrowings under the revolving credit
facility* 13 185.0 - -
Proceeds from other borrowings 13 - 0.5 -
------------------------------------- ---- --------------------- ------------------------------ ------------------
Net cash inflow/(outflow) from
financing activities 140.0 (3.8) (44.4)
------------------------------------- ---- --------------------- ------------------------------ ------------------
Net increase/(decrease) in cash and
cash equivalents 153.8 8.3 (57.1)
Cash and cash equivalents at the
beginning of the year 43.4 100.5 100.5
------------------------------------- ---- --------------------- ------------------------------ ------------------
Cash and cash equivalents at the end
of the period 13 197.2 108.8 43.4
------------------------------------- ---- --------------------- ------------------------------ ------------------
* The movements shown above as "Borrowings under the revolving
credit facility" reflect the net advances by / (repayments to) the
syndicate banks during the period. Within each period shown, the
Group made a number of short-term drawings and repayments to
satisfy the Group's cashflow requirements.
COUNTRYSIDE PARTNERSHIPS PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the six months ended 31 March 2022
1. GENERAL INFORMATION
Countryside Partnerships PLC (the "Company"), formerly named
Countryside Properties PLC, 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".
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
specialises in mixed tenure developments, including affordable
homes, homes for institutional private rental and homes for private
sale. Placemaking is at the heart of everything we do; designing
places people love, helping to build successful communities, and
working collaboratively with partners in the public and private
sectors. We are committed to high quality design, construction and
management, creating a positive legacy for future generations.
2. BASIS OF PREPARATION
The financial information in these condensed consolidated
interim financial statements (the "Interim Financial Statements")
for the six months ended 31 March 2022 is that of the Company and
its subsidiaries and includes the Group's interest in its jointly
controlled entities. It has been prepared in accordance with the
Disclosure Guidance and Transparency Rules of the UK Financial
Conduct Authority and with International Accounting Standard 34
"Interim Financial Reporting", as adopted by the United
Kingdom.
The Interim Financial Statements for the six months ended 31
March 2022 and 31 March 2021 are unaudited but have been subject to
a review in accordance with the International Standard on Review
Engagements 2410 "Review of Interim Financial Information performed
by the Independent Auditor of the Entity", issued by the Auditing
Practices Board.
The Interim Financial Statements do not constitute full
statutory accounts within the meaning of Section 434 of the
Companies Act 2006 and should be read in conjunction with the
annual consolidated financial statements of the Group for the year
ended 30 September 2021 (the "Group Financial Statements"). The
Group Financial Statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union, and are filed at Companies House.
The Group Financial Statements have been reported on by the
Company's auditor at the time, PricewaterhouseCoopers LLP, and are
available on the Company's website
https://investors.countrysidepartnerships.com. The report of the
auditor on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
The Interim Financial Statements were approved for issue by the
Directors on 18 May 2022.
Going concern
The Group has the benefit of a GBP300m revolving credit facility
("RCF") provided by its banking syndicate of four banks, which
expires on 12 May 2023. At 31 March 2022 the Group held net cash of
GBP9.8m, with net assets of GBP906.3m.
Internal forecasts are regularly updated, and the latest Board
approved forecasts reflect the Group's experience and expectations
of the current macro-economic climate. The forecast cash flows have
been sensitised to assess the Group's resilience to the principal
risks facing the Group, including those risks that would threaten
Countryside's business model, future performance, solvency and
liquidity.
The most severe but plausible downside scenario is a severe and
prolonged economic downturn, where it is assumed, at its worst,
that there is a:
-- sharp reduction in revenue of 20% from decreases in prices;
-- a further 10% reduction in revenue from lower sales rates; and
-- an 8% increase in costs driven by inflation.
The impact of the above assumptions could be mitigated as
follows:
-- suspending share buybacks; and
-- not proceeding with uncommitted land purchases.
As noted above, the Group's RCF expires on 12 May 2023.
Negotiations for the renewal of the RCF are ongoing and the
Directors expect to have concluded these prior to the current
financial year end. However, as the RCF expires within 12 months
from the date of approval of these financial statements, a second
scenario was modelled to review the liquidity of the Group on a
debt-free basis applying the base case forecast cash flows. In the
event of this scenario, the mitigations noted above could be
applied to ensure adequate liquidity would be available.
The Directors have assessed the Group's going concern status
over the next 12 months, based on forecasts which incorporate the
severe but plausible downside scenario noted above and the scenario
where the RCF is not renewed. The Directors note that the level of
uncertainty which the macro-economic climate poses to the Group
remains significant, however the assessment performed has shown
that the Group can remain liquid and compliant with all RCF
covenants for at least 12 months from the date of approval of these
financial statements. Accordingly, these financial statements have
been prepared on a going concern basis.
Critical accounting judgements and estimates
The preparation of the Interim Financial Statements requires the
Directors to make judgements, estimates and assumptions that affect
the application of policies and the reported amounts of assets,
liabilities, income, expenses and related disclosures. Actual
results may differ from these estimates.
In preparing the Interim Financial Statements, the nature of the
significant judgements and the key areas of estimation uncertainty
were as follows:
-- Site profitability;
-- Remediation costs for multi-occupancy buildings; and
-- Impairment of assets.
(a) 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 in addition to the Group's exposure 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.
Recent macro-economic events have 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. 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 period would have reduced by GBP30.1m, or GBP33.0m on an
adjusted basis, with a reduction in 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.
(b) Remediation costs for multi-occupancy buildings
Remediation costs for multi-occupancy buildings is an area of
increased estimation uncertainty as at 31 March 2022 compared to 30
September 2021. The Group has recognised a charge of GBP109.0m
during the period (HY21: GBP25.0m, FY21: GBP41.0m), increasing the
total provided for to date to GBP150.0m. The increase in the period
is primarily due to the Board's agreement to the commitments of the
Government's proposed voluntary Fire Safety Pledge ("the Pledge").
Further detail on the Pledge and the increase in the provision in
the period is provided in Note 15.
The Directors have made estimates as to the number of buildings
potentially requiring remediation, the extent of the remedial works
required, the timeframe over which the remediation works will take
place, and the associated costs. The Directors have used relevant
information that is currently available to form these estimates,
including third-party quotations where possible.
Detailed reviews are ongoing and therefore the scope of remedial
works required, and the associated costs, are likely to change over
time. This is particularly the case for the buildings now included
under the Pledge commitments, as the Directors have less detail
behind the estimated costs to remediate these buildings compared to
those provided for at 30 September 2021.
As an illustration, a reasonably possible increase of GBP30.0m
to the estimated costs of remediation of GBP150.0m would have
increased cost of sales and reduced profit before tax for the
period by GBP30.0m and reduced the Group's operating margin by 450
bps on both a reported and adjusted basis.
(c) Impairment of assets
Determining whether assets, such as goodwill and
acquisition-related intangible assets, are impaired requires an
estimation of the value in use of the cash-generating units to
which the assets have been allocated. The value in use calculation
requires the Directors to estimate the future cash flows expected
to be generated by the cash-generating units, and a suitable
discount rate and long-term growth rate to apply in order to
calculate present value. During the period, these estimates
resulted in an impairment charge of GBP76.9m (HY21: GBPNil, FY21:
GBPNil) relating to goodwill and customer-related intangible assets
recognised on the acquisition of Westleigh in 2018. Refer to Note
10.
A reasonably possible increase of 100 bps to the discount rate
applied would have increased the impairment charge by GBP13.2m,
whilst a reduction to the discount rate by the same amount would
have resulted in a reduction to the impairment charge of GBP15.5m.
Increasing the long-term growth rate by 100 bps would have reduced
the impairment charge by GBP11.9m.
Accounting policies
The accounting policies and methods of computation adopted in
the preparation of these condensed consolidated financial
statements are consistent with those applied in the preparation of
the Group Financial Statements, except for the following:
-- Adjusting items
In reviewing the financial performance of the Group, the
Directors review various Alternative Performance Measures ("APMs"),
including "adjusted gross profit" and "adjusted operating profit".
To derive "adjusted" profit measures, the Directors include the
Group's share of profit from its joint ventures and associate,
which are equity accounted in reported measures in line with IFRS,
and exclude "adjusting items".
In prior financial years, the Directors excluded "non-underlying
items" as opposed to "adjusting items". Non-underlying items were
previously disclosed as items that, in the judgement of Directors,
needed 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.
The Directors have reviewed the Group's policy on items excluded
from adjusted profit measures and have redefined these as
"adjusting items" in the period. As opposed to excluding items
based solely on "nature, size or incidence", adjusting items are
those which are adjusted for when the Directors review the
operational performance of the Group, as they are not seen to be
representative of the ongoing business performance.
Examples of such items are:
- costs incurred directly in relation to business combinations
or capital market transactions including advisory costs and one-off
integration costs;
- adjustments to the statement of financial position that do not
relate to trading activity such as the recognition of non-trade
impairments (e.g. goodwill) or the recognition of material
liabilities which are not considered to be in the ordinary course
of business;
- the costs of significant Group restructuring exercises; and
- material and one-off trading related impairments that vary significantly year on year.
No adjustments were required to the prior year financial
information as a result of this change.
-- Revenue recognition - Land sales
In prior years, revenue for land sales was recognised on
unconditional exchange of contracts. During the period, the
Directors have re-assessed the point at which control transfers to
the customer and has changed the Group's policy to recognise
revenue on legal completion. The impact of the change in policy if
applied to the prior financial year would not be material and
therefore no prior year information has been restated.
-- Income tax
The income tax charge for the six months ended 31 March 2022
reflects the anticipated full year effective rate before adjusting
items, as amended for the tax effect of adjusting items incurred in
the first half of the financial year.
New and revised standards and interpretations
During the period the Group has adopted the following new and
revised standards and interpretations which have had no impact on
these condensed consolidated financial statements:
-- Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16.
Alternative Performance Measures
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. Refer to pages 32 to 36 for a full list of the
Group's APMs.
Seasonality
In common with the rest of the UK housebuilding industry,
activity occurs throughout the year, with peaks in sales
completions typically observed in spring and autumn. This creates a
degree of seasonality in the Group's trading results and working
capital.
Segmental reporting
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 now
regarded as Legacy Operations, which the Group is exiting as soon
as practical.
As a result of the Group's strategy update, the following
changes were applied in the Group Financial Statements, and have
been applied in these Interim Financial Statements:
-- A number of sites previously included within the
Housebuilding segment, identified as fitting the mixed tenure
Partnerships model, 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.
Segmental financial information for the six months ended 31
March 2021 has been restated to reflect these changes. Refer to
Notes 3, 4 and 11, as well as pages 32 to 36.
3. 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 Chief Operating Decision Maker
("CODM"), which has been identified as the Group's Executive
Committee.
The Group's two reportable segments are Partnerships and Legacy
Operations.
The Partnerships business specialises in mixed tenure
developments, including affordable homes, homes for institutional
private rental and homes for private sale, working collaboratively
with partners in the public and private sectors. As detailed in
Note 2, any non-Partnerships activities are regarded as Legacy
Operations, which the Group is exiting as soon as practical.
The 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. Each of the divisions
build and deliver homes on mixed tenure sites, sell to similar
customers, operate in the same legal and regulatory environment,
and have similar target financial returns.
Segmental financial information for the six months ended 31
March 2021 has been restated. Refer to Note 2.
(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 32 to 36.
The tables below present the financial performance of the
segments on an adjusted and reported basis.
Legacy Group
Partnerships Operations items Total
Six months ended 31 March 2022 GBPm GBPm GBPm GBPm
------------------------------------- ------------ ----------- ------ -------
Adjusted revenue 448.6 210.8 - 659.4
Less: share of revenue from joint
ventures and associate (49.5) (7.7) - (57.2)
------------------------------------- ------------ ----------- ------ -------
Revenue 399.1 203.1 - 602.2
------------------------------------- ------------ ----------- ------ -------
Adjusted operating profit/(loss) 31.6 15.8 (0.5) 46.9
Less: share of operating profit from
joint ventures and associate (11.3) (1.4) - (12.7)
Less: adjusting items (Note 5) (137.2) - (81.5) (218.7)
------------------------------------- ------------ ----------- ------ -------
Operating (loss)/profit (116.9) 14.4 (82.0) (184.5)
Net finance costs (7.5)
Share of post-tax profit from joint
ventures and associate 10.5
------------------------------------- ------------ ----------- ------ -------
Loss before income tax (181.5)
------------------------------------- ------------ ----------- ------ -------
Legacy Group
Partnerships Operations items Total
Six months ended 31 March 2021 (restated) GBPm GBPm GBPm GBPm
------------------------------------------ ------------ ----------- ------ ------
Adjusted revenue 479.9 275.1 - 755.0
Less: share of revenue from joint
ventures and associate (81.0) (13.0) - (94.0)
------------------------------------------ ------------ ----------- ------ ------
Revenue 398.9 262.1 - 661.0
------------------------------------------ ------------ ----------- ------ ------
Adjusted operating profit/(loss) 52.0 29.3 (2.7) 78.6
Less: share of operating profit from
joint ventures and associate (18.7) (3.0) - (21.7)
Less: adjusting items (Note 5) (25.0) - (7.2) (32.2)
------------------------------------------ ------------ ----------- ------ ------
Operating profit/(loss) 8.3 26.3 (9.9) 24.7
Net finance costs (6.0)
Share of post-tax profit from joint
ventures and associate 20.1
------------------------------------------ ------------ ----------- ------ ------
Profit before income tax 38.8
------------------------------------------ ------------ ----------- ------ ------
Legacy Group
Partnerships Operations items Total
Year ended 30 September 2021 GBPm GBPm GBPm GBPm
------------------------------------- ------------ ----------- ------ -------
Adjusted revenue 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) 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: adjusting items (Note 5) (44.4) (1.1) (17.7) (63.2)
------------------------------------- ------------ ----------- ------ -------
Operating profit/(loss) 34.4 65.5 (28.6) 71.3
Net finance costs (15.8)
Share of post-tax profit from joint
ventures and associate 29.9
------------------------------------- ------------ ----------- ------ -------
Profit before income tax 85.4
------------------------------------- ------------ ----------- ------ -------
Unallocated "Group items" within adjusted operating
profit/(loss) consist of amortisation of GBP0.6m (HY21: GBP1.1m,
FY21: GBP1.8m) and a share-based payments credit of GBP0.1m (HY21:
charge of GBP1.6m, FY21: charge of GBP2.7m). The FY21 Group items
also included a charge of GBP6.4m relating to the development and
implementation of cloud-based IT systems.
(b) Segmental financial position
Segmental tangible net asset value ("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 tangible net operating
asset value ("TNOAV") is the Group's measure of capital employed,
as used in the calculation of return on capital employed
("ROCE").
Group and segmental TNAV and TNOAV are Alternative Performance
Measures ("APMs") for the Group. Further detail on APMs is provided
on pages 32 to 36.
Legacy
Partnerships Operations Total
As at 31 March 2022 GBPm GBPm GBPm
---------------------------------- ------------ ----------- -------
Segment assets 1,248.2 407.8 1,656.0
Segment liabilities (638.5) (162.0) (800.5)
---------------------------------- ------------ ----------- -------
TNOAV 609.7 245.8 855.5
Net cash 9.8
---------------------------------- ------------ ----------- -------
TNAV 865.3
Intangible assets 46.3
Deferred tax on intangible assets (5.3)
---------------------------------- ------------ ----------- -------
Net assets 906.3
---------------------------------- ------------ ----------- -------
Legacy
Partnerships Operations Total
As at 31 March 2021 (restated) GBPm GBPm GBPm
---------------------------------- ------------ ----------- -------
Segment assets 938.9 502.8 1,441.7
Segment liabilities (385.6) (174.8) (560.4)
---------------------------------- ------------ ----------- -------
TNOAV 553.3 328.0 881.3
Net cash 105.9
---------------------------------- ------------ ----------- -------
TNAV 987.2
Intangible assets 140.3
Deferred tax on intangible assets (8.1)
---------------------------------- ------------ ----------- -------
Net assets 1,119.4
---------------------------------- ------------ ----------- -------
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 41.0
---------------------------------- ------------ ----------- -------
TNAV 988.0
Intangible assets 127.9
Deferred tax on intangible assets (8.4)
---------------------------------- ------------ ----------- -------
Net assets 1,107.5
---------------------------------- ------------ ----------- -------
4. REVENUE
An analysis of Group reported revenue by type is set out below.
Segmental financial information for the six months ended 31 March
2021 has been restated. Refer to Note 2.
Six months
Six months Year ended
ended 31 ended 31 30 September
March 2022 March 2021 2021
(restated)
GBPm GBPm GBPm
--------------------------------------- ----------- ----------- -------------
Partnerships:
- Private housing 166.0 220.6 449.2
- Affordable 113.5 118.5 274.9
- PRS 64.1 49.5 141.5
- Land 44.2 1.0 14.0
- Other 11.3 9.3 22.7
--------------------------------------- ----------- ----------- -------------
399.1 398.9 902.3
--------------------------------------- ----------- ----------- -------------
Legacy Operations:
- Private housing 135.7 203.0 344.3
- Affordable 16.8 13.4 41.5
- PRS 0.5 4.3 7.5
- Land 49.6 39.9 73.3
- Other 0.5 1.5 2.5
--------------------------------------- ----------- ----------- -------------
203.1 262.1 469.1
--------------------------------------- ----------- ----------- -------------
Total revenue (reported) 602.2 661.0 1,371.4
--------------------------------------- ----------- ----------- -------------
Share of revenue from joint ventures
and associate:
- Partnerships 49.5 81.0 130.9
- Legacy Operations 7.7 13.0 23.9
--------------------------------------- ----------- ----------- -------------
Total revenue (adjusted) 659.4 755.0 1,526.2
--------------------------------------- ----------- ----------- -------------
5. ADJUSTING ITEMS
When reviewing the operational performance of the Group, the
Directors remove certain items from adjusted profit measures where
they are not seen to be representative of the Group's ongoing
business performance. As these adjusting items can vary
significantly from year to year, they can create volatility in
reported earnings.
The table below sets out the items that have been identified as
adjusting items and have therefore been excluded from the Group's
APMs.
Six months Six months Year ended
ended 31 ended 31 30 September
March 2022 March 2021 2021
GBPm GBPm GBPm
----------------------------------------------------- ----------- ----------- -------------
Adjusting items included within cost of
sales:
- Remediation costs for multi-occupancy
buildings 109.0 25.0 41.0
- Write-down of inventories 22.0 - -
- Westleigh close-out costs 5.0 - -
- Closure and restructuring costs 1.2 - -
- Ground Rent Assistance Scheme - - 0.7
----------------------------------------------------- ----------- ----------- -------------
Total 137.2 25.0 41.7
----------------------------------------------------- ----------- ----------- -------------
Adjusting items included within administrative
expenses:
- Impairment of acquisition-related intangible
assets 76.9 - -
- Amortisation/de-recognition of acquisition-related
intangible assets 4.6 3.9 11.7
- Costs relating to the Housebuilding
separation - 3.3 6.0
- Ground Rent Assistance Scheme - - 3.8
----------------------------------------------------- ----------- ----------- -------------
Total 81.5 7.2 21.5
----------------------------------------------------- ----------- ----------- -------------
Total adjusting items 218.7 32.2 63.2
----------------------------------------------------- ----------- ----------- -------------
In the reporting of the Group's segmental financial performance
in Note 3, GBP137.2m of the above has been allocated to
Partnerships (HY21: GBP25.0m, FY21: GBP44.4m), GBPNil has been
allocated to Legacy Operations (HY21: GBPNil, FY21: GBP1.1m), and
GBP81.5m has been presented as Group items (HY21: GBP7.2m, FY21:
GBP17.7m). Group items relate to acquisition-related intangible
assets and the costs relating to the Housebuilding separation in
the prior year.
The table below reconciles the adjusting items above to the
total cost of sales and administrative expenses presented in the
consolidated statement of comprehensive income.
Six months Six months Year ended
ended 31 ended 31 30 September
March 2022 March 2021 2021
GBPm GBPm GBPm
-------------------------------------- ----------- ----------- -------------
Total adjusting items included within
cost of sales 137.2 25.0 41.7
Other cost of sales 512.5 559.2 1,143.9
-------------------------------------- ----------- ----------- -------------
Total cost of sales 649.7 584.2 1,185.6
-------------------------------------- ----------- ----------- -------------
Total adjusting items included within
administrative expenses 81.5 7.2 21.5
Other administrative expenses 55.5 44.9 106.9
-------------------------------------- ----------- ----------- -------------
Total administrative expenses 137.0 52.1 128.4
-------------------------------------- ----------- ----------- -------------
Remediation costs for multi-occupancy buildings
During the period a charge of GBP109.0m (HY21: GBP25.0m, FY21:
GBP41.0m) has been recognised in relation to remediation costs for
multi-occupancy buildings. Refer to Notes 15 and 19 for further
detail.
Write-down of inventories
On 25 March 2022, the Directors approved a change in strategy at
one site in the North division, which will result in the land being
sold to the local council as opposed to being further developed by
the Group. This change in strategy was due to a significant
increase in the upfront working capital requirements for the site,
and the deterioration in the forecast margin and ROCE, identified
since the acquisition was approved by the Board in 2018. An
impairment charge of GBP22.0m has been recognised in the period to
reduce the carrying amount of the land to its net realisable
value.
Westleigh close-out costs
During the site-by-site reviews carried out in the period, over
80 former Westleigh sites were identified as not yet having
handover obligations closed out, such as road adoptions. These
sites are historical in nature and the majority pre-date the
Group's acquisition of Westleigh in 2018. The Group expects to
incur GBP5.0m of costs to close out these sites, resulting in a
provision being recognised in the period.
Closure and restructuring costs
As detailed in Note 20, on 7 April 2022 the Group provided an
update on its site-by-site review, which included the announcement
of the closure of the South Midlands region. A charge of GBP1.2m
relating to the write-down of inventories at one site in the South
Midlands has been recognised in the period and has been presented
within adjusting items as the decision not to proceed with the
development of the site is directly associated with the closure of
the region. Further costs of approximately GBP8.0m will be
recognised in the second half of the year within adjusting items as
a result of the announcement on 7 April 2022, primarily relating to
employee severance costs. Refer to Note 20 for further detail.
Impairment of acquisition-related intangible assets
During the period the Group recognised an impairment charge of
GBP76.9m (HY21: GBPNil, FY21: GBPNil) against the goodwill and
customer related intangible assets previously recognised on the
acquisition of Westleigh in 2018. Refer to Note 10 for further
detail.
Amortisation/de-recognition of acquisition-related intangible
assets
Amortisation/de-recognition of acquisition-related intangible
assets is reported within adjusting items as the Directors review
and report the Group's financial performance excluding these
costs.
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-year 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
resulted in an increase to the Ground Rent Assistance Scheme
provision of GBP3.8m and a write-down of inventories of GBP0.7m
during the previous financial year.
Costs relating to the Housebuilding separation
Total costs of GBP6.0m (HY21: GBP3.3m) were incurred during the
year ended 30 September 2021 for legal, tax and accounting advisory
services relating to the separation of the Housebuilding division
from the rest of the Group.
Taxation
A total tax credit of GBP32.8m (HY21: GBP5.8m, FY21: GBP11.6m)
in relation to adjusting items is included within taxation in the
statement of comprehensive income.
6. NET FINANCE COSTS
Six months Six months Year ended
ended 31 ended 31 30 September
March 2022 March 2021 2021
GBPm GBPm GBPm
------------------------------------ ----------- ----------- -------------
Bank loans and overdrafts (2.2) (1.3) (3.2)
Amortisation of debt finance
costs (0.4) (0.4) (0.9)
Unwind of discount relating
to:
- Land purchases on deferred
payment terms (4.3) (3.8) (10.9)
- Lease liabilities (1.5) (0.7) (2.2)
- Other loans - (0.1) (0.1)
------------------------------------- ----------- ----------- -------------
Finance costs (8.4) (6.3) (17.3)
------------------------------------- ----------- ----------- -------------
Interest receivable 0.7 0.1 0.8
Unwind of discount relating
to:
- Land sales on deferred settlement
terms 0.2 0.2 0.7
------------------------------------- ----------- ----------- -------------
Finance income 0.9 0.3 1.5
Net finance costs (7.5) (6.0) (15.8)
------------------------------------- ----------- ----------- -------------
7. TAXATION
The effective tax rate applied for the period was 14.0% (HY21:
17.7%, FY21: 15.3%). This reflects the anticipated full year
effective rate before adjusting items, as amended for the tax
effect of adjusting items incurred in the first half of the
financial year. This is lower than the statutory rate of 19.0%
mainly due to the impairment of goodwill, for which no tax credit
arises.
The adjusted effective tax rate for the period was 21.3% (HY21:
19.3%, FY21: 17.6%) with the difference between the reported and
adjusted rates reflecting adjusting items and the treatment of the
Group's joint ventures and associate.
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,
including any liability under the Residential Property Developer
Tax ("RPDT") applying from 1 April 2022. Any liability to RPDT for
the year ended 30 September 2022 has been considered when
calculating the effective tax rate to be applied for the six months
ended 31 March 2022.
8. (LOSS)/EARNINGS PER SHARE
Basic earnings or loss per share ("basic EPS") is calculated by
dividing the profit from continuing operations attributable to the
owners of the parent 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 16.
The weighted average number of shares held in treasury during
the period was 12.1 million (HY21: Nil, FY21: 0.6 million) and the
weighted average number of shares held in the EBT during the period
was 0.3 million (HY21: 1.2 million, FY21: 1.0 million).
For diluted earnings or loss 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 (loss)/earnings per share
Six months Six months Year ended
ended 31 ended 31 30 September
March 2022 March 2021 2021
--------------------------------------------- ----------- ----------- -------------
(Loss)/profit from continuing operations
attributable to owners of the parent (GBPm) (156.1) 31.9 72.3
--------------------------------------------- ----------- ----------- -------------
Basic weighted average number of shares
(millions) 511.6 523.4 523.0
Basic (loss)/earnings per share (pence
per share) (30.5) 6.1 13.8
Diluted weighted average number of shares
(millions) 511.6 528.3 526.7
Diluted (loss)/earnings per share (pence
per share) (30.5) 6.0 13.7
--------------------------------------------- ----------- ----------- -------------
The weighted average number of shares in the table above is not
adjusted for the impact of dilutive shares for the six months ended
31 March 2022 as a result of the Group being loss making in the
period.
(b) Adjusted basic and diluted earnings per share
Six months Six months Year ended
ended 31 ended 31 30 September
March 2022 March 2021 2021
--------------------------------------------- ----------- ----------- -------------
Loss/(profit) from continuing operations
attributable to owners of the parent (GBPm) (156.1) 31.9 72.3
Add: adjusting items net of tax (GBPm) 185.9 26.4 51.6
--------------------------------------------- ----------- ----------- -------------
Adjusted profit from continuing operations
attributable to owners of the parent (GBPm) 29.8 58.3 123.9
--------------------------------------------- ----------- ----------- -------------
Basic weighted average number of shares
(millions) 511.6 523.4 523.0
Adjusted basic earnings per share (pence
per share) 5.8 11.1 23.7
Diluted weighted average number of shares
(millions) 512.6 528.3 526.7
Adjusted diluted earnings per share (pence
per share) 5.8 11.0 23.5
--------------------------------------------- ----------- ----------- -------------
Adjusting items net of tax include costs of GBP218.7m and a tax
credit of GBP32.8m (HY21: costs of GBP32.2m and tax credit of
GBP5.8m, FY21: costs of GBP63.2m and tax credit of GBP11.6m). Refer
to Note 5.
9. DIVIDS
No dividends have been declared or distributions made in the
period (HY21: GBPNil, FY21: GBPNil) and the Board of Directors does
not recommend the payment of an interim dividend for the current
financial year (HY21: GBPNil, FY21: GBPNil).
10. INTANGIBLE ASSETS
Intangible assets of GBP46.3m (HY21: GBP140.3m, FY21: GBP127.9m)
comprised the following:
As at As at As at 30
31 March 31 March September
2022 2021 2021
GBPm GBPm GBPm
------------------------ --------- --------- ----------
Software 1.8 6.7 2.0
Customer related 15.3 23.6 21.9
Brand 9.9 18.7 12.7
Goodwill - Westleigh - 72.0 72.0
Goodwill - Copthorn 19.3 19.3 19.3
------------------------ --------- --------- ----------
Total intangible assets 46.3 140.3 127.9
------------------------ --------- --------- ----------
Impairment of acquisition-related intangible assets
On 13 January 2022, the Group announced Q1 FY22 results that
were significantly behind Board expectations. Following this
announcement, a detailed site-by-site review was carried out
resulting in a number of costs being recognised and a review of
regional structures and forecasts.
On 7 April 2022, the Group announced the results of these
reviews, which included the closure of two operating regions and a
significant reduction to adjusted operating profit guidance for
FY22. One of the regions identified for closure in the Midlands
division was a cash generating unit ("CGU") to which an element of
the Westleigh goodwill had previously been allocated.
In addition to the above, the Group also saw a significant
reduction in share price during the period from 505.5 pence on 30
September 2021 to 270.8 pence on 31 March 2022.
The Directors considered the events above to be indicators of
potential impairment and therefore a full impairment assessment was
carried out. 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. The Directors consider
this to be an area of significant estimation uncertainty as
detailed in Note 2.
Forecast cash flows were derived from the most recent
Board-approved forecasts. Following the site-by-site review, the
Directors prepared a revised forecast for FY22 and FY23 on a
site-by-site basis, reflecting an updated expectation of future
growth plans for the relevant CGUs. These forecasts have been used
for the value in use calculation. The cash flows reflect the
Directors' assessment of current market conditions relating to
house prices and the costs of materials and labour. The forecast
also considers broader market trends and expected regulatory and
tax changes.
Cash flows beyond FY23 have been extrapolated using a growth
rate of 1% (FY21: 1%) per annum based on GDP growth forecasts by HM
Treasury, the Bank of England and the British Chambers of
Commerce.
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 12.1% (FY21: 10.1%), whilst 13.1% (FY21: 12.1%)
was applied to the CGU, and group of CGUs, to which the Westleigh
goodwill has been allocated.
The impairment testing for the CGU, and group of CGUs, to which
the Westleigh goodwill has been allocated illustrated that the
carrying amount exceeded the recoverable amount by GBP76.9m. As a
result, an impairment charge has been recognised to impair the
goodwill of GBP72.0m in full. The remaining GBP4.9m shortfall has
been allocated to the customer relationships asset, reducing the
carrying value to GBP15.3m at 31 March 2022. The total impairment
charge of GBP76.9m has been included within adjusting items within
administrative expenses (refer to Note 5).
The impairment testing for the groups of CGUs to which the
Copthorn goodwill has been allocated illustrated that the
recoverable amount exceeded the carrying amount, with no impairment
required.
11. JOINT VENTURES
The table below reconciles the movement in the Group's aggregate
investment in joint ventures:
Six months Six months Year ended
ended 31 ended 31 30 September
March 2022 March 2021 2021
GBPm GBPm GBPm
------------------------------- ----------- ----------- -------------
Opening balance 38.3 40.9 40.9
Share of post-tax profit 10.5 20.1 29.8
Dividends received (18.2) (23.6) (23.7)
Repayment of members' interest - (2.8) (5.8)
Disposal - - (2.3)
Other movements 1.1 (0.8) (0.6)
------------------------------- ----------- ----------- -------------
Closing balance 31.7 33.8 38.3
------------------------------- ----------- ----------- -------------
The tables below present the financial performance of the
Group's joint ventures during the period. Segmental financial
information for the six months ended 31 March 2021 has been
restated. Refer to Note 2.
Legacy
Partnerships Operations Group
Six months ended 31 March 2022 GBPm GBPm GBPm
---------------------------------- ------------ ----------- ------
Revenue 99.0 15.4 114.4
Expenses (76.4) (12.5) (88.9)
---------------------------------- ------------ ----------- ------
Operating profit 22.6 2.9 25.5
Finance costs (3.3) - (3.3)
Income tax expense (1.2) - (1.2)
---------------------------------- ------------ ----------- ------
Profit for the period 18.1 2.9 21.0
---------------------------------- ------------ ----------- ------
Group's share in % 50.0% 50.0% 50.0%
Group's share of revenue 49.5 7.7 57.2
Group's share of operating profit 11.3 1.4 12.7
---------------------------------- ------------ ----------- ------
Legacy
Partnerships Operations Group
Six months ended 31 March 2021 (restated) GBPm GBPm GBPm
------------------------------------------ ------------ ----------- -------
Revenue 161.9 26.1 188.0
Expenses (124.5) (20.1) (144.6)
------------------------------------------ ------------ ----------- -------
Operating profit 37.4 6.0 43.4
Finance costs (0.6) - (0.6)
Income tax expense (2.6) - (2.6)
------------------------------------------ ------------ ----------- -------
Profit for the period 34.2 6.0 40.2
------------------------------------------ ------------ ----------- -------
Group's share in % 50.0% 50.0% 50.0%
Group's share of revenue 81.0 13.0 94.0
Group's share of operating profit 18.7 3.0 21.7
------------------------------------------ ------------ ----------- -------
Legacy
Partnerships Operations Group
Year ended 30 September 2021 GBPm GBPm GBPm
---------------------------------- ------------ ----------- -------
Revenue 261.8 47.6 309.4
Expenses (204.0) (40.0) (244.0)
---------------------------------- ------------ ----------- -------
Operating profit 57.8 7.6 65.4
Finance costs (1.8) (0.2) (2.0)
Income tax expense (3.8) - (3.8)
---------------------------------- ------------ ----------- -------
Profit for the period 52.2 7.4 59.6
---------------------------------- ------------ ----------- -------
Group's share in % 50.0% 50.0% 50.0%
Group's share of revenue 130.9 23.8 154.7
Group's share of operating profit 28.9 3.8 32.7
---------------------------------- ------------ ----------- -------
The amount due from joint ventures is GBP96.4m (HY21: GBP51.8m,
FY21: GBP62.8m) and the amount due to joint ventures is GBP0.5m
(HY21: GBP0.5m. FY21: GBP0.5m). Transactions between the Group and
its joint ventures are disclosed in Note 17.
12. INVENTORIES
As at As at As at 30
31 March 31 March September
2022 2021 2021
GBPm GBPm GBPm
---------------------------------- --------- --------- ----------
Development land and land options 638.7 551.5 646.2
Work in progress 523.1 466.4 446.7
Completed properties 45.0 66.2 50.9
---------------------------------- --------- --------- ----------
1,206.8 1,084.1 1,143.8
---------------------------------- --------- --------- ----------
During the period, charges for inventory write-offs have been
recognised of GBP23.2m (HY21: charge of GBP3.2m, FY21: credit of
GBP0.7m), including GBP23.2m (HY21: GBPNil, FY21: GBPNil) presented
within adjusting items. Refer to Note 5.
13. CASH AND BORROWINGS
As at As at As at 30
31 March 31 March September
2022 2021 2021
GBPm GBPm GBPm
--------------------------------- --------- --------- ----------
Bank loans (185.0) - -
Bank loan arrangement fees 1.0 - -
Other loans (2.4) (2.9) (2.4)
--------------------------------- --------- --------- ----------
Total borrowings (186.4) (2.9) (2.4)
Add: Cash and cash equivalents 197.2 108.8 43.4
Less: Bank loan arrangement fees (1.0) - -
Net cash 9.8 105.9 41.0
--------------------------------- --------- --------- ----------
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 SONIA, is subject to 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. The Group are currently
negotiating the renewal of the RCF and expect this to be complete
by 30 September 2022.
As at 31 March 2022, the Group had GBP185.0m drawings under the
facility (HY21: GBPNil, FY21: GBPNil) and GBP3.0m of promissory
notes were in issue (HY21: GBPNil, FY21: GBPNil).
Bank loan arrangement fees are amortised over the term of the
facility. As at 31 March 2022, unamortised loan arrangement fees
were GBP1.0m (HY21: GBP1.8m, FY21: GBP1.3m). Amortisation of
GBP0.4m (HY21: GBP0.4m, FY21: GBP0.9m) is included in finance costs
in the statement of comprehensive income (see Note 6). As the Group
did not have any debt under this facility at 30 September 2021 or
31 March 2021, the unamortised loan arrangement fees are included
within prepayments in the consolidated statement of financial
position for those periods.
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. The carrying value as at 31 March 2022 was GBP2.4m (HY21:
GBP2.4m, FY21: GBP2.4m).
During the year ended 30 September 2020, a local authority made
available a forward funding loan arrangement of GBP2.5m that the
Group could draw upon if required under the development agreement
for the purposes of infrastructure development, with any funds
drawn repayable by 31 March 2022. The Group had drawn GBP0.5m under
the loan arrangement as at 31 March 2021, which was repaid by 30
September 2021.
14. TRADE AND OTHER PAYABLES
Trade and other payables of GBP562.4m (HY21: GBP452.3m, FY21:
GBP488.3m) include deferred land payments of GBP234.2m (HY21:
GBP216.3m, FY21: GBP226.5m) and overage payable of GBP24.7m (HY21:
GBP24.9m, FY21: GBP24.1m). The Directors consider that the carrying
amounts of trade and other payables approximate to their fair
value.
15. PROVISIONS
Remediation Six months Six months Year ended
costs for Ground Rent ended 31 ended 31 30 September
multi-occupancy Assistance March 2022 March 2021 2021
buildings Scheme Other Total Total Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ---------------- ----------- ------- ----------- ----------- -------------
At the start of
the period 39.7 13.4 3.9 57.0 11.4 11.4
Charged in the period 109.0 - 5.2 114.2 27.2 47.9
Released in the
period - - - - - (0.2)
Utilised in the
period (1.8) (4.7) (1.7) (8.2) (0.5) (2.1)
---------------------- ---------------- ----------- ------- ----------- ----------- -------------
At the end of the
period 146.9 8.7 7.4 163.0 38.1 57.0
---------------------- ---------------- ----------- ------- ----------- ----------- -------------
Current 26.2 8.7 6.3 41.2 37.5 56.0
Non-current 120.7 - 1.1 121.8 0.6 1.0
---------------------- ---------------- ----------- ------- ----------- ----------- -------------
Total provisions 146.9 8.7 7.4 163.0 38.1 57.0
---------------------- ---------------- ----------- ------- ----------- ----------- -------------
Remediation costs for multi-occupancy buildings
As disclosed in the Group Financial Statements, the Group
recognised a provision of GBP41.0m in FY21 reflecting the estimated
cost to remediate 68 buildings across 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 period to progress the
intrusive building surveys and review the proposed scope of works
to assess the extent and cost of remedial works for these
buildings.
On 10 January 2022 the Secretary of State at the Department for
Levelling Up, Housing and Communities ("DLUHC") wrote to
residential property developers describing its approach to the
safety of multi-occupancy residential buildings of 11 metres or
more. Since that time, Countryside has engaged with DLUHC and on 6
April 2022 Countryside signed the Government's proposed Fire Safety
Pledge ("the Pledge"), entailing the following voluntary
commitments, beyond its legal obligations, subject to shareholder
approval if required:
-- Countryside will meet the cost of remediating buildings
currently proposed to be remediated via the Building Safety Fund
("BSF") or the Aluminium Composite Material ("ACM") Remediation
Fund; and
-- Countryside will take responsibility for performing or
funding self-remediation works relating to life-critical fire
safety issues on all buildings of 11 metres or more, built in the
last 30 years, which Countryside developed.
The Directors have reviewed relevant information that is
currently available on Countryside buildings built in the last 30
years and note that an additional provision of approximately
GBP74.0m is expected to be required for potential remediation works
as a result of these commitments, including GBP29.5m relating to 11
buildings which are registered by the BSF.
The estimation of the provision for remediation costs for
multi-occupancy buildings is a key area of estimation uncertainty
(Note 2). The quantification of the cost of these remedial works is
inherently complex and depends on a number of factors including the
number of buildings potentially requiring remediation; the extent
of remedial works required; the size of the buildings; the
timeframe over which the remediation works will take place; the
associated costs of investigation, materials and labour; and the
potential cost of managing disruption to residents.
Further to this, during the period the British Standards
Institution has issued Publicly Available Specification ("PAS")
9980:2022, which replaces previous guidance with the intention of
encouraging a more proportionate response to dealing with critical
fire safety issues. The Directors note that it is not yet possible
to anticipate how this new guidance will work in practice and what
impact it will have on the scope and cost of the remediation works,
and therefore its effect on the provision recognised.
Due to the extent of the remediation works, which may continue
for up to 10 years, the Directors have established a new building
remediation division to manage and deliver the remediation works.
This division will be led by its own Managing Director and operate
as a standalone delivery team solely focused on the remediation
works. This represents a purely incremental cost to the Group and
is expected to total approximately GBP19.0m.
During the period, a total charge of GBP109.0m (HY21: GBP25.0m,
FY21: GBP41.0m) has been recognised for remediation costs within
adjusting items within cost of sales in the consolidated statement
of comprehensive income. The cumulative charge of GBP150.0m relates
to 123 buildings that may require remediation and reflects gross
costs of GBP166.2m net of discount of GBP16.2m to reflect the
present value of future cash outflows. Approximately GBP26.0m of
these costs are expected to be incurred within one year and are
therefore presented as current liabilities.
Refer to Note 19 "Contingent liabilities and contingent assets"
for disclosures relating to further potential liabilities and
recoveries relating to these remedial works.
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-year 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. During the period, the
Group reached agreements with the majority of freehold owners, with
the freehold owners accepting the Group's offer of compensation.
Total cash payments of GBP4.7m were made during the period, and a
further GBP7.3m has been paid to freeholders in the period from 1
April 2022 to the date of approval of these interim financial
statements.
Other provisions
Other provisions primarily relate to the GBP5.0m recognised for
Westleigh close-out costs, as discussed in Note 5, as well as legal
provisions and amounts provided for in respect of dilapidation
costs for office buildings and factories that are leased by the
Group.
16. RESERVES
(a) Share Repurchases
On 7 July 2021, the Company announced its intention to return
surplus cash to shareholders via on-market purchases of ordinary
shares. During the period, a total of 9,870,190 shares were
purchased (HY21: Nil, FY21: 7,124,979) at an average share price of
387.4 pence (HY21: Nil, FY21: 532.4 pence).
In addition to the above, on 31 March 2022 the Company entered
into a non-discretionary and irrevocable arrangement with Numis
Securities Limited to conduct the next tranche of the share
repurchase programme, capped at 10 million shares or GBP20.0m. As a
result, the Group recognised a reduction to retained earnings of
GBP20.0m during the period, reflecting the maximum commitment under
the arrangement.
The cash outflows during the period associated with the share
repurchases totalled GBP42.2m including transaction costs (HY21:
GBPNil, FY21: GBP34.8m). The number of shares held in treasury at
31 March 2022 was 16,995,169 (HY21: Nil, FY21: 7,124,979).
A further 7,679,710 shares were purchased for GBP18.9m from 1
April 2022 to 17 May 2022, increasing the number of shares held in
treasury to 24,674,879.
(b) Employee Benefit Trust
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 EBT made no purchases of shares during the period (HY21:
Nil, FY21: 500,000). The number of shares held in the EBT at 31
March 2022 was 178,395 (HY21: 620,592, FY21: 1,046,182).
17. RELATED PARTY TRANSACTIONS
Transactions with joint ventures and associate
Joint Ventures Associate
-------------------------- ---------------------------------- -----------------------------------
Six months Six months Year ended Six months Six months Year ended
ended ended 30 ended ended 30
31 March 31 March September 31 March 31 March September
2022 2021 2021 2022 2021 2021
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ---------- ---------- ---------- ----------- ---------- ----------
Sales during the period 12.1 7.9 22.0 - 0.1 0.2
-------------------------- ---------- ---------- ---------- ----------- ---------- ----------
Net advances:
Amount due at start
of period 62.3 69.1 69.1 - - -
Net advances/(repayments)
during period 33.6 (17.8) (6.8) - - -
-------------------------- ---------- ---------- ---------- ----------- ---------- ----------
Amount due at end
of period 95.9 51.3 62.3 - - -
-------------------------- ---------- ---------- ---------- ----------- ---------- ----------
Sales of goods and services to related parties related
principally to the provision of services to the joint ventures 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.
Transactions with key management personnel
As at the reporting date, three 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 three individuals
is less than GBP80,000 (HY21: two individuals, less than GBP60,000;
FY21: two individuals, less than GBP60,000).
18. SHARE PLANS
The Group operates three employee incentive schemes: An
all-employee Save as you Earn ("SAYE") plan and two discretionary
plans - the Long-Term Incentive Plan ("LTIP") and the Deferred
Bonus Plan ("DBP").
During the period, the following options were granted over the
Company's shares:
-- LTIP: 2.1 million (HY21: 2.2 million, FY21: 2.2 million)
-- DBP: 0.2 million (HY21: Nil, FY21: Nil)
-- SAYE: 0.7 million (HY21: Nil, FY21: 0.7 million)
The Group recognised GBP0.2m (HY21: GBP1.0m, FY21: GBP1.9m) of
employee costs related to share-based payment transactions during
the period. A corresponding credit of GBP0.3m relating to national
insurance contributions was recognised (HY21: charge of GBP0.6m,
FY21: charge of GBP0.7m).
A deferred tax asset of GBP1.2m (HY21: GBP1.5m, FY21: GBP2.1m)
is held in relation to share-based payments. Transactions during
the period resulted in a deferred tax charge to the statement of
comprehensive income of GBP0.4m (HY21: credit of GBP0.1m, FY21:
credit of GBP0.3m) and a charge direct to equity of GBP0.5m (HY21:
credit of GBP0.5m, FY21: credit of GBP0.9m).
19. 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 15, a provision charge of GBP109.0m (HY21:
GBP25.0m, FY21: GBP41.0m) has been recognised during the period 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 and the cost of investigation, replacement
materials, associated labour, and the potential cost of managing
the disruption to residents, all of which may increase over time
with inflation.
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, which
obtained Royal Assent on 28 April 2022, has extended the limitation
period to bring a claim under the Defective Premises Act from 6
years to 15 years prospectively and 30 years retrospectively. This
extension may result in additional liabilities for the Group, in
excess of the provision recognised to date, that cannot currently
be reliably estimated.
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.
20. POST-BALANCE SHEET EVENTS
Closures and restructuring
On 7 April 2022, the Group provided an update on its
site-by-site review and announced the closure of the South Midlands
and Chilterns regions. The Group also announced expected cost
savings resulting from regional and central restructuring. The
plans for restructuring had not been finalised or announced prior
to 31 March 2022, and therefore no costs for employee severance
have been recognised in these interim financial statements. Costs
of approximately GBP8.0m will be recognised in the second half of
the financial year.
Building Safety Bill
The updated Building Safety Bill obtained Royal Assent on 28
April 2022. This has extended the limitation period to bring
a claim under the Defective Premises Act from 6 years to 15
years prospectively and 30 years retrospectively. Refer to Note
19.
COUNTRYSIDE PARTNERSHIPS PLC
ALTERNATIVE PERFORMANCE MEASURES
For the six months ended 31 March 2022
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.
To derive "adjusted" profit measures, the Directors exclude
"adjusting items" and include the Group's share of profit from its
joint ventures and associate, which are equity accounted in
reported measures in line with IFRS.
In prior financial years, the Directors excluded "non-underlying
items" as opposed to "adjusting items". Non-underlying items were
previously disclosed as items that, in the judgement of Directors,
needed 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.
The Directors have reviewed the Group's policy on items excluded
from adjusted profit measures and have redefined these as
"adjusting items" in the period. As opposed to excluding items
based solely on "nature, size or incidence", adjusting items are
those which are adjusted for when the Directors review the
operational performance of the Group, as they are not seen to be
representative of the ongoing business performance. Examples of
such items are detailed in Note 2. No adjustments were required to
the prior period financial information as a result of this
change.
Segmental financial information for the six months ended 31
March 2021 has been restated. Refer to Note 2.
(a) Financial performance
Adjusted revenue
Adjusted revenue includes the Group's share of revenue from the
joint ventures and associate. Refer to "Adjusted gross margin"
below for a reconciliation of adjusted to reported revenue, and to
Note 3 for a segmental analysis of adjusted and reported
revenue.
Adjusted gross margin
Adjusted gross margin is calculated as adjusted gross
profit/(loss) divided by adjusted revenue. Adjusted gross
profit/(loss) includes the Group's share of gross profit from the
joint ventures and associate and excludes adjusting items. The
tables below present the calculation of gross margin on a reported
and adjusted basis.
Year ended
Six months Six months 30
ended 31 ended 31 September
March 2022 March 2021 2021
Note GBPm GBPm GBPm
------------------------------------------ ---- ----------- ----------- ----------
Gross (loss)/profit (47.5) 76.8 185.8
Add: adjusting items 5 137.2 25.0 41.7
Add: share of gross profit from joint
ventures and associate 13.2 22.3 34.1
------------------------------------------ ---- ----------- ----------- ----------
Adjusted gross profit 102.9 124.1 261.6
------------------------------------------ ---- ----------- ----------- ----------
Revenue 602.2 661.0 1,371.4
Add: share of revenue from joint ventures
and associate 57.2 94.0 154.8
------------------------------------------ ---- ----------- ----------- ----------
Adjusted revenue 659.4 755.0 1,526.2
------------------------------------------ ---- ----------- ----------- ----------
Gross margin (%) (7.9)% 11.6% 13.5%
------------------------------------------ ---- ----------- ----------- ----------
Adjusted gross margin (%) 15.6% 16.4% 17.1%
------------------------------------------ ---- ----------- ----------- ----------
Adjusted operating profit
Adjusted operating profit includes the Group's share of
operating profit from the joint ventures and associate and excludes
adjusting items. Refer to Note 3 for a reconciliation of adjusted
to reported operating profit, and a segmental analysis of adjusted
and 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 operating margin on a reported and adjusted basis
for the Group.
Six months Six months Year ended
ended 31 ended 31 30 September
March 2022 March 2021 2021
Note GBPm GBPm GBPm
-------------------------------- ---- ----------- ----------- -------------
Adjusted operating profit 3 46.9 78.6 167.3
Adjusted revenue 3 659.4 755.0 1,526.2
-------------------------------- ---- ----------- ----------- -------------
Group adjusted operating margin
(%) 7.1% 10.4% 11.0%
-------------------------------- ---- ----------- ----------- -------------
Operating (loss)/profit 3 (184.5) 24.7 71.3
Revenue 3 602.2 661.0 1,371.4
-------------------------------- ---- ----------- ----------- -------------
Group operating margin (%) (30.6)% 3.7% 5.2%
-------------------------------- ---- ----------- ----------- -------------
The table below presents the calculation of operating margin on
a reported and adjusted basis for the Partnerships segment.
Six months Six months Year ended
ended 31 ended 31 30 September
March 2022 March 2021 2021
Note GBPm GBPm GBPm
-------------------------------- ---- ----------- ----------- -------------
Adjusted operating profit 3 31.6 52.0 107.7
Adjusted revenue 3 448.6 479.9 1,033.2
-------------------------------- ---- ----------- ----------- -------------
Partnerships adjusted operating
margin (%) 7.0% 10.8% 10.4%
-------------------------------- ---- ----------- ----------- -------------
Operating (loss)/profit 3 (116.9) 8.3 34.4
Revenue 3 399.1 398.9 902.3
-------------------------------- ---- ----------- ----------- -------------
Partnerships operating margin
(%) (29.3)% 2.1% 3.8%
-------------------------------- ---- ----------- ----------- -------------
The table below presents the calculation of operating margin on
a reported and adjusted basis for the Legacy Operations
segment.
Six months Six months Year ended
ended 31 ended 31 30 September
March 2022 March 2021 2021
Note GBPm GBPm GBPm
------------------------------------- ---- ----------- ----------- -------------
Adjusted operating profit 3 15.8 29.3 70.5
Adjusted revenue 3 210.8 275.1 493.0
------------------------------------- ---- ----------- ----------- -------------
Legacy Operations adjusted operating
margin (%) 7.5% 10.7% 14.3%
------------------------------------- ---- ----------- ----------- -------------
Operating profit 3 14.4 26.3 65.5
Revenue 3 203.1 262.1 469.1
------------------------------------- ---- ----------- ----------- -------------
Legacy Operations operating margin
(%) 7.1% 10.0% 14.0%
------------------------------------- ---- ----------- ----------- -------------
Adjusted basic and diluted earnings per share
Adjusted basic and diluted earnings per share exclude the impact
of adjusting items on profit from continuing operations
attributable to owners of the parent. Refer to Note 8 for a
reconciliation of adjusted to reported basic and diluted earnings
per share.
Return on capital employed ("ROCE")
ROCE is calculated as adjusted operating profit for the last 12
months from the period end, divided by the average of the opening
and closing tangible net operating asset value ("TNOAV") of those
12 months.
The table below presents the calculation of ROCE for the Group.
There is no equivalent statutory measure to reconcile to.
Six months Six months Year ended
ended 31 ended 31 30 September
March 2022 March 2021 2021
Note GBPm GBPm GBPm
-------------------------------------------- ---- ----------- ----------- -------------
Closing TNOAV 3 855.5 881.3 947.0
Opening TNOAV (12 months prior to reporting
date) 881.3 860.5 853.5
-------------------------------------------- ---- ----------- ----------- -------------
Average TNOAV 868.4 870.9 900.3
-------------------------------------------- ---- ----------- ----------- -------------
Adjusted operating profit (12-month
rolling) 135.6 77.5 167.3
-------------------------------------------- ---- ----------- ----------- -------------
Group ROCE (%) 15.6% 8.9% 18.6%
-------------------------------------------- ---- ----------- ----------- -------------
The table below presents the calculation of ROCE for the
Partnerships segment. There is no equivalent statutory measure to
reconcile to.
Six months
ended 31
March 2021
Six months Year ended
ended 31 30 September
March 2022 (restated) 2021
Note GBPm GBPm GBPm
------------------------------------ ---- ----------- ----------- -------------
Closing TNOAV 3 609.7 553.3 610.2
Opening TNOAV (12 months prior to
reporting date) 553.3 411.3 466.6
------------------------------------ ---- ----------- ----------- -------------
Average TNOAV 581.5 482.3 538.4
------------------------------------ ---- ----------- ----------- -------------
Adjusted operating profit (12-month
rolling) 87.3 51.5 107.7
------------------------------------ ---- ----------- ----------- -------------
Partnerships ROCE (%) 15.0% 10.7% 20.0%
------------------------------------ ---- ----------- ----------- -------------
The table below presents the calculation of ROCE for the Legacy
Operations segment. There is no equivalent statutory measure to
reconcile to.
Six months
ended 31
March 2021
Six months Year ended
ended 31 30 September
March 2022 (restated) 2021
Note GBPm GBPm GBPm
------------------------------------ ---- ----------- ----------- -------------
Closing TNOAV 3 245.8 328.0 336.8
Opening TNOAV (12 months prior to
reporting date) 328.0 449.3 386.9
------------------------------------ ---- ----------- ----------- -------------
Average TNOAV 286.9 388.7 361.9
------------------------------------ ---- ----------- ----------- -------------
Adjusted operating profit (12-month
rolling) 57.0 30.7 70.5
------------------------------------ ---- ----------- ----------- -------------
Legacy Operations ROCE (%) 19.9% 7.9% 19.5%
------------------------------------ ---- ----------- ----------- -------------
12-month rolling adjusted operating profit used in the
calculation of ROCE above is calculated as follows for the six
months ended 31 March 2022. Group adjusted operating profit
includes other Group items that are not allocated to the two
segments. Refer to Note 3.
Partnerships Legacy Operations Group
GBPm GBPm GBPm
-------------------------------------- ------------ ----------------- ------
Adjusted operating profit for the six
months ended 31/03/22 31.6 15.8 46.9
Add: Adjusted operating profit for
the prior financial year 107.7 70.5 167.3
Less: Adjusted operating profit for
the six months ended 31/03/21 (52.0) (29.3) (78.6)
--------------------------------------- ------------ ----------------- ------
Adjusted operating profit (12-month
rolling) 87.3 57.0 135.6
--------------------------------------- ------------ ----------------- ------
12-month rolling adjusted operating profit used in the
calculation of ROCE above is calculated as follows for the six
months ended 31 March 2021. Group adjusted operating profit
includes other Group items that are not allocated to the two
segments. Refer to Note 3.
Partnerships Legacy Operations Group
GBPm GBPm GBPm
-------------------------------------- ------------ ----------------- ------
Adjusted operating profit for the six
months ended 31/03/21 52.0 29.3 78.6
Add: Adjusted operating profit for
the prior financial year 37.5 20.3 54.2
Less: Adjusted operating profit for
the six months ended 31/03/20 (38.0) (18.9) (55.3)
--------------------------------------- ------------ ----------------- ------
Adjusted operating profit (12-month
rolling) 51.5 30.7 77.5
--------------------------------------- ------------ ----------------- ------
Asset turn
Asset turn is calculated as adjusted revenue for the last 12
months from the period end, divided by the average of the opening
and closing tangible net operating asset value ("TNOAV") of those
12 months.
The table below presents the calculation of asset turn for the
Group. There is no equivalent statutory measure to reconcile
to.
Six months Six months Year ended
ended 31 ended 31 30 September
March 2022 March 2021 2021
GBPm GBPm GBPm
--------------------------- ----------- ----------- -------------
Adjusted revenue (12-month
rolling) 1,430.6 1,212.9 1,526.2
Average TNOAV 868.4 870.9 900.3
---------------------------- ----------- ----------- -------------
Group asset turn 1.6 1.4 1.7
---------------------------- ----------- ----------- -------------
The table below presents the calculation of asset turn for the
Partnerships segment. There is no equivalent statutory measure to
reconcile to.
Six months
ended 31
March 2021
Six months Year ended
ended 31 30 September
March 2021 (restated) 2021
GBPm GBPm GBPm
--------------------------- --- ----------- ----------- -------------
Adjusted revenue (12-month
rolling) 1,001.9 784.0 1,033.2
Average TNOAV 581.5 482.3 538.4
-------------------------------- ----------- ----------- -------------
Partnerships asset turn 1.7 1.6 1.9
-------------------------------- ----------- ----------- -------------
The table below presents the calculation of asset turn for the
Legacy Operations segment. There is no equivalent statutory measure
to reconcile to.
Six months
ended 31
March 2021
Six months Year ended
ended 31 30 September
March 2022 (restated) 2021
GBPm GBPm GBPm
----------------------------- --- ----------- ----------- -------------
Adjusted revenue (12-month
rolling) 428.7 428.9 493.0
Average TNOAV 286.9 388.7 361.9
---------------------------------- ----------- ----------- -------------
Legacy Operations asset turn 1.5 1.1 1.4
---------------------------------- ----------- ----------- -------------
12-month rolling adjusted revenue used in the calculation of
asset turn above is calculated as follows for the six months ended
31 March 2022:
Partnerships Legacy Operations Total
Note GBPm GBPm GBPm
------------------------------------ ---- ------------ ----------------- -------
Adjusted revenue for the six months
ended 31/03/22 3 448.6 210.8 659.4
Add: Adjusted revenue for the prior
financial year 3 1,033.2 493.0 1,526.2
Less: Adjusted revenue for the six
months ended 31/03/21 3 (479.9) (275.1) (755.0)
------------------------------------ ---- ------------ ----------------- -------
Adjusted revenue (12-month rolling) 1,001.9 428.7 1,430.6
------------------------------------ ---- ------------ ----------------- -------
12-month rolling adjusted revenue used in the calculation of
asset turn above is calculated as follows for the six months ended
31 March 2021:
Partnerships Legacy Operations Total
Note GBPm GBPm GBPm
------------------------------------ ---- ------------ ----------------- -------
Adjusted revenue for the six months
ended 31/03/21 3 479.9 275.1 755.0
Add: Adjusted revenue for the prior
financial year 669.2 319.6 988.8
Less: Adjusted revenue for the six
months ended 31/03/20 (365.1) (165.8) (530.9)
------------------------------------ ---- ------------ ----------------- -------
Adjusted revenue (12-month rolling) 784.0 428.9 1,212.9
------------------------------------ ---- ------------ ----------------- -------
(b) Financial position
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. Refer to Note 13.
Tangible net asset value ("TNAV")
TNAV is calculated as net assets excluding intangible assets net
of deferred tax. Refer to Note 3.
Tangible net operating asset value ("TNOAV")
TNOAV is calculated as TNAV excluding net cash/debt. Refer to
Note 3.
Gearing
Gearing is calculated as net debt divided by net assets. The
table below presents the calculation of gearing.
Six months Six months Year ended
ended 31 ended 31 30 September
March 2022 March 2021 2021
Note GBPm GBPm GBPm
----------- ---- ----------- ----------- -------------
Net cash 13 9.8 105.9 41.0
Net assets 906.3 1,119.4 1,107.5
----------- ---- ----------- ----------- -------------
Gearing (1.1)% (9.5)% (3.7)%
----------- ---- ----------- ----------- -------------
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.
Six months Six months Year ended
ended 31 ended 31 30 September
March 2022 March 2021 2021
Note GBPm GBPm GBPm
------------------------------------------------- ---- ----------- ----------- -------------
Net cash 13 9.8 105.9 41.0
Less: deferred land payments (excluding overage) 14 (234.2) (216.3) (226.5)
------------------------------------------------- ---- ----------- ----------- -------------
Adjusted net debt (224.4) (110.4) (185.5)
Net assets 906.3 1,119.4 1,107.5
------------------------------------------------- ---- ----------- ----------- -------------
Adjusted gearing 24.8% 9.9% 16.7%
------------------------------------------------- ---- ----------- ----------- -------------
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END
IR BCGDUXXBDGDI
(END) Dow Jones Newswires
May 19, 2022 02:00 ET (06:00 GMT)
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