TIDMCSP
RNS Number : 5552Z
Countryside Properties PLC
15 December 2017
15 December 2017
COUNTRYSIDE PROPERTIES PLC (THE "COMPANY")
ANNUAL REPORT AND FINANCIAL STATEMENTS 2017
The following documents have today been posted or otherwise made
available to shareholders:
-- Annual Report 2017
-- Notice of Annual General Meeting
-- Proxy Form
-- Electronic Communications Letter
In accordance with Listing Rule 9.6.1R, a copy of each of these
documents has been uploaded to the National Storage Mechanism and
will be available for viewing shortly at
http://www.morningstar.co.uk/uk/NSM.
The above documents may be viewed online at
http://investors.countryside-properties.com/reports-and-presentations
and
http://investors.countryside-properties.com/shareholder-information/agm
respectively.
A condensed set of the Company's financial statements and
information on important events that have occurred during the
financial year and their impact on the financial statements were
included in the Company's Preliminary Results Announcement on 22
November 2017. That information together with the information set
out below, which is extracted from the Annual Report 2017,
constitute the material required by Disclosure Guidance and
Transparency Rule 6.3.5R which is required to be communicated to
the media in full unedited text through a Regulatory Information
Service. This announcement is not a substitute for reading the full
Annual Report 2017. Page and note references in the text below
refer to page numbers in the Annual Report 2017. To view the
preliminary announcement, slides of the results presentation and
the webcast please visit
http://investors.countryside-properties.com/reports-and-presentations.
Enquiries: Tel: +44 (0) 1277 260 000
Ian Sutcliffe - Group Chief Executive
Rebecca Worthington - Group Chief Financial Officer
Victoria Prior - Investor Relations & Strategy Director
OPTIMISING OUR RISK MANAGEMENT PROCESS
Countryside has policies and procedures in place for the timely
identification, assessment and prioritisation of the Group's
material risks and uncertainties. This section describes how these
risks are identified, managed and mitigated appropriately in order
to deliver the Group's strategic objectives.
How We Manage Risk
Risk identification and management is built into every aspect of
Countryside's daily operations, ranging from the appraisal of new
sites, assessment of the prospects of planning success, building
safely and selling effectively to achieve long-term success through
the property market cycle. Risk management is built into
standardised processes for each part of the business at every stage
of the housebuilding process. Financial risk is managed centrally
through maintenance of a strong balance sheet, forward selling new
homes and the careful allocation of funds to the right projects, at
the right time and in the right locations. Risk management also
includes the internal controls described within the Corporate
Governance Report on pages 46 to 51.
The Risk Management Committee normally meets every quarter to
review the Group's risk register.
The Group's risk register is maintained to record all principal
risks and uncertainties identified in each part of the business. A
member of the Executive Committee is allocated, as appropriate, as
the "risk owner" for each risk. The risk owners call upon the
appropriate expertise to conduct an analysis of each risk,
according to a defined set of assessment criteria which
includes:
-- How does the risk relate to the Group's business model and/or strategy?
-- What is the likelihood of the risk occurring?
-- What is the potential impact were the risk to occur?
-- Would the consequences be short, medium or long-term?
-- What mitigating actions are available and which are cost effective?
-- What is the degree of residual risk and is it within the Group's risk appetite parameters?
-- Has the risk assessment changed and what is expected to change going forward?
The Risk Management Committee reviews the assessments made,
compares it to the Group's appetite for each risk, reviews the
current level of preparedness and determines whether further
actions or resource are required. In reviewing and agreeing the
mitigating actions, the Risk Management Committee considers the
impact of risks individually and in combination, in both the short
and the longer- term.
Our Approach to Risk
The Board - Role and responsibilities
-- Sets the Group strategy
-- Determines the Group's risk policy and the procedures that
are put in place to mitigate exposure to risk
-- Regularly monitors Group risks
-- Reviews the effectiveness of the Group's risk management and internal control procedures
Audit Committee - Role and responsibilities
-- Has delegated responsibility from the Board to oversee risk
management and internal controls
-- Monitors the integrity of the Group's financial reporting process
-- Monitors the effectiveness of the Internal Audit function and
the independence of the external audit
Risk Management Committee - Role and responsibilities
-- Determines the appropriate controls for the timely identification and management of risk
-- Manages the Group's risk register
-- Monitors the effective implementation of action plans
-- Reviews reports from the Internal Audit function
Internal Audit - Role and responsibilities
-- Undertakes independent reviews of effectiveness of internal control procedures
-- Reports on effectiveness of management actions
-- Provides assurance to the Audit Committee
Executive Committee - Roles and responsibilities
-- Responsible for identification of operational and strategic risks
-- Responsible for ownership and control of specific risks
-- Responsible for establishing and managing the implementation of appropriate action plans
Key Areas of Focus during 2017
Data Protection
Given that the EU's Data Protection Regulation ("GDPR") takes
effect from 25 May 2018, the
business-wide objective of ensuring all business divisions are
in compliance in advance of the deadline has been overseen by the
Risk Management Committee during 2017. The process commenced with
an internal audit of the Group's state of readiness, followed by
the development and implementation of an operational road map,
using the findings of the audit, to embrace GDPR and develop
sustainable privacy with respect to Countryside's employees,
customers and suppliers.
Cyber
Recognising that cyber risk continues to grow as a leading issue
for all organisations, there has been a significant focus during
2017 on reviewing the Group's material IT controls, policies and
procedures to ensure their resilience to support business
performance. The Board received a presentation on the mitigating
actions being undertaken and an assessment of the Group's state of
preparedness on 27 July 2017. A case study of the work undertaken
to address cyber risk is set out on page 54.
Market
The Board, Executive Committee and Risk Management Committee
have spent considerable time during 2017 to ensure that the Group's
mixed-tenure approach and product mix are best suited to ensure we
maintain affordability and serve the areas of strongest demand. In
order to better monitor potential changes in market risk,
management has expanded the range of third party data it reviews
(such as the monthly Barclays UK spend trend) and increased the use
of third party market assessments in advance of all major new
projects.
Board, Audit and Risk Management Committee responsibility
The Audit Committee reviewed the Group's risk register and the
assessment of the Group's principal risks and uncertainties
prepared by the Risk Management Committee at its meetings in July
and October 2017. The Audit Committee also considered the
effectiveness of the Group's systems, and has taken this into
account in preparing the Viability Statement on the previous
page.
The Audit Committee reported on its findings at the Board's July
and October meetings, in order to support it in making its
confirmation that it had carried out a robust assessment of the
principal risks.
Principal risks and uncertainties
The Group's principal risks are monitored by the Risk Management
Committee, the Audit Committee and the Board. The table below sets
out the Group's principal risks and uncertainties and
mitigation.
Our strategic priorities - Key
1 - Growth; 2 - Returns; 3 - Resilience
RISK DESCRIPTION MITIGATION
1 Adverse macroeconomic conditions* (change
during year-increase) (Link to Strategy-1/2/3)
A decline in macroeconomic Funds are allocated
conditions, or conditions between the Housebuilding
in the UK residential and Partnerships businesses.
property market, can In Housebuilding, land
reduce the propensity is purchased based on
to buy homes. Higher planning prospects,
unemployment, interest forecast demand and
rates and inflation market resilience. In
can affect consumer Partnerships, contracts
confidence and reduce are phased and, where
demand for new homes. possible, subject to
Constraints on mortgage viability testing. In
availability, or higher all cases, forward sales,
costs of mortgage cash flow and work in
funding, may make progress are carefully
it more difficult monitored to give the
to sell homes. Group time to react
to changing market conditions.
2 Adverse changes to Government policy and
regulation* (change during year-increase)
(Link to Strategy-1/2)
Adverse changes to The potential impact
Government policy of changes in Government
in areas such as tax, policy and new laws
housing, the environment and regulations are
and building regulations monitored and communicated
may result in increased throughout the business.
costs and/or delays. Detailed policies and
Failure to comply procedures are in place
with laws and regulations to address the prevailing
could expose the Group regulations.
to penalties and reputational
damage.
3 Constraints on construction resources* (change
during year-no change) (Link to Strategy-1/2)
Costs may increase Optimise use of standard
beyond budget due house types and design
to the reduced availability to maximise buying power.
of skilled labour, Use of strategic suppliers
or shortages of sub-contractors to leverage volume price
or building materials reductions and minimise
at competitive prices unforeseen disruption.
to support the Group's Robust contract terms
growth ambitions. to control costs.
The Group's strategic
geographic expansion
may be at risk if
new supply chains
cannot be established.
4 Programme delay (rising project complexity)
(change during year-no change) (Link to
Strategy-1/2)
Failure to secure The budgeted programme
timely planning permission for each site is approved
on economically viable by the Divisional Board
terms or poor project before acquisition.
forecasting, unforeseen Sites are managed as
operational delays a portfolio to control
due to technical issues, overall Group delivery
disputes with third risk. Weekly monitoring
party contractors at both divisional and
or suppliers, bad Group level.
weather or changes
in purchaser requirements
may cause delay or
potentially termination
of project.
5 Inability to source and develop suitable
land (change during year-no change) (Link
to Strategy-1/2)
Competition or poor A robust land appraisal
planning may result process ensures each
in a failure to procure project is financially
land in the right viable and consistent
location, at the right with the Group's strategy.
price and at the right
time.
6 Inability to attract and retain talented
employees* (change during year-no change)
(Link to Strategy-1/2/3)
------------------------------------------------------------------
Inability to attract Remuneration packages
and retain highly are regularly benchmarked
skilled, competent against industry standards
people at all levels to ensure competitiveness.
could adversely affect Succession plans are
the Group's results, in place for all key
prospects and financial roles within the Group.
condition. Exit interviews are
used to identify any
areas for improvement.
--------------------------------- -------------------------------
7 Inadequate health, safety and environmental
procedures (change during year-no change)
(Link to Strategy-2)
A deterioration in Procedures, training
the Group's health, and reporting are all
safety and environmental carefully monitored
standards could put to ensure that high
the Group's employees standards are maintained.
and contractors or An environmental risk
the general public assessment is carried
at risk of injury out prior to any land
or death and could acquisition. Appropriate
lead to litigation insurance is in place
or penalties or damage to cover the risks associated
the Group's reputation. with housebuilding.
Brexit
Note: The Risk Management Committee's review of risk, including
the principal risks, takes into account the known and forecast
developments flowing from plans being made for the UK's planned
exit from membership of the European Union by March 2019
("Brexit"). Brexit affects many of the principal risks, but
particularly those marked with an asterisk.
RELATED PARTY TRANSACTIONS
Transactions with Group joint ventures and associate
Joint ventures Associate
---------------------------- ----------------- --------------
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
---------------------------- --------- ------ ------ ------
Sales during the year 24.0 26.2 1.1 0.7
---------------------------- --------- ------ ------ ------
At 1 October 84.2 62.1 - -
Net (repayments)/advances (16.6) 22.1 - -
during the year
---------------------------- --------- ------ ------ ------
At 30 September 67.6 84.2 - -
---------------------------- --------- ------ ------ ------
Included within the advances movement are non-cash items of
GBP(0.7)m (2016: GBP(0.7)m) relating to deferred revenue and
GBP1.1m (2016: GBP(1.3)m) relating to joint ventures reporting net
liabilities.
The transactions noted above are between the Group and its joint
ventures and associate whose relationship is described in Note 13
and Note 14 respectively.
Sales of goods to related parties were made at the Group's usual
list prices. No purchases were made by the Group from its joint
ventures or associate. The amounts outstanding ordinarily bear no
interest and will be settled in cash.
Remuneration of key management personnel
The aggregate remuneration of the Executive Committee, who are
considered to be key management personnel of the Group, was GBP7.1m
(2016: GBP6.1m). During the year, the Executive Committee was
expanded as described on page 44.
Transactions with key management personnel
In 2014, properties were sold at market value by the Group to
parties related to key management personnel who continue to lease
them back to the Group. Payments under those leases were made to
the individuals as follows:
-- Close family members of Ian Sutcliffe received GBP17,250 (2016: GBP17,250)
-- A company of which Graham Cherry, a member of the Group's
Executive Committee, is a Director and shareholder received
GBP21,000 (2016: GBP21,000).
In 2016 a close family member of Ian Sutcliffe jointly purchased
a property from Acton Gardens LLP, an entity in which the Group has
a 50 per cent interest, at market value of GBP530,000.
In 2016 a close family member of Ian Sutcliffe and a close
family member of Graham Cherry were employed by a subsidiary of the
Group. Both individuals were recruited through the normal interview
process and are employed at salaries commensurate with their
experience and roles. The combined annual salary and benefits of
these individuals is less than GBP100,000 (2016: less than
GBP100,000).
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE
FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group financial statements in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by
the European Union and Parent Company financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 102
'The Financial Reporting Standard applicable in the UK and Republic
of Ireland', and applicable law). Under company law the Directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Group and Parent Company and of the profit or loss of the Group and
Parent Company for that period. In preparing the financial
statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable IFRSs as adopted by the European
Union have been followed for the Group financial statements and
United Kingdom Accounting Standards, comprising FRS 102, have been
followed for the Company financial statements, subject to any
material departures disclosed and explained in the financial
statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Parent
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Parent Company's transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Parent Company
and enable them to ensure that the financial statements and the
Directors' Remuneration Report comply with the Companies Act 2006
and, as regards the Group financial statements, Article 4 of the
IAS Regulation.
The Directors are also responsible for safeguarding the assets
of the Group and Parent Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the Parent Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group and
Parent Company's performance, business model and strategy.
Each of the Directors, whose names and functions are listed in
the Board of Directors section, confirms that, to the best of their
knowledge:
-- the Parent Company financial statements, which have been
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 102 'The Financial Reporting Standard applicable in
the UK and Republic of Ireland', and applicable law), give a true
and fair view of the assets, liabilities, financial position and
loss of the Company;
-- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
profit of the Group; and
-- the Directors' Report includes a fair review of the
development and performance of the business and the position of the
Group and Parent Company, together with a description of the
principal risks and uncertainties that it faces.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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