Countryside Properties PLC Annual Report 2017
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ANNUAL REPORT 2017 REPORT ANNUAL COUNTRYSIDE PROPERTIES PLC / ANNUAL REPORT 2017 COUNTRYSIDE’S DIFFERENTIATED BUSINESS MODEL “Countryside is a leading UK homebuilder specialising in placemaking and urban regeneration. Our balanced business model delivers this regeneration from our Partnerships division, together with larger scale communities from our strategic land-led Housebuilding division.” Ian Sutcliffe Group Chief Executive Strategic report Governance Financial statements 2 Group at a glance 40 Chairman’s introduction 78 Independent auditor’s report to governance 4 2017 performance 84 Consolidated statement and highlights 42 Board of Directors of comprehensive income 5 Chairman’s statement 44 Executive Committee 85 Consolidated statement 6 Group Chief Executive’s review 46 Corporate governance report of financial position 8 Our markets 52 Report of the Audit 86 Consolidated statement of changes in equity 10 Our business model Committee 87 Consolidated cash 12 Our strategy 56 Report of the Nomination Committee flow statement 14 Key performance indicators 57 Directors’ remuneration 88 Notes to the consolidated 18 Operational review report financial statements 18 Partnerships 59 Remuneration policy report Parent company 22 Housebuilding 67 Annual report on financial statements 26 Group Chief Financial remuneration 119 Parent company statement of Officer’s review 74 Directors’ report financial position 30 Our people 77 Statement of Directors’ 120 Parent company statement of 32 Sustainability report responsibilities changes in equity 36 Risk management 121 Notes to the parent company financial statements IBC Shareholder information Countryside Properties PLC // Annual report 2017 All text and images to be supplied 1 Strategic report PARTNERSHIPS Our Partnerships division Governance specialises in urban regeneration of public sector land, delivering private and affordable homes in partnership with local authorities and housing associations. It operates in outer London, the West Midlands and North West England. Read more on pages 18 to 21 Financial statements HOUSEBUILDING Our Housebuilding division develops private and affordable homes on land owned or controlled by the Group, located in outer London and the Home Counties. It operates under the Countryside and Millgate brands. Read more on pages 22 to 25 Countryside Properties PLC // Annual report 2017 Group at a glance 2 CREATING PLACES PEOPLE LOVE Our mixed-tenure approach to creating communities in both divisions, has delivered strong growth in completions across the Group in 2017. Private Rental Sector Private 21% 49% 3,389 homes Affordable 30% Private Rental Sector 33% Private Affordable Private 38% 30% 70% 2,192 1,197 homes homes Affordable 29% PARTNERSHIPS HOUSEBUILDING Continued Partnerships growth in our existing markets Strong growth in private homes has driven total of London and the North West of England has been completions to record levels. The Housebuilding supplemented by delivery of 180 homes in our new division has gained greater scale in each of our regions West Midlands region. around London. Read more Read more on pages 18 to 21 on pages 22 to 25 Countryside Properties PLC // Annual report 2017 3 9 Strategic report years’ visibility in our Partnerships division 83% of our Housebuilding land bank Governance is strategically sourced Financial statements PARTNERSHIPS HOUSEBUILDING OUR INVESTMENT CASE • Impressive track record of winning new business • Increasing scale with established platform for growth Countryside has a strong track record of placemaking and benefits from long-term relationships in both • Low-capital Partnerships model the Partnerships and Housebuilding divisions. • Strong balance sheet with capacity for growth • Balanced business model with two complementary divisions • Long-established supply chain • Excellent visibility through Partnerships pipeline and Housebuilding land bank Countryside Properties PLC // Annual report 2017 2017 performance and highlights 4 Adjusted revenue1 £m Adjusted operating profit2,3 £m Adjusted operating margin3 % £1,028.8m £164.1m 16.0% +32% +34% +20bps 17 476.7 552.1 1,028.8 17 79.4 91.5 164.1 17 16.7 16.6 16.0 16 349.9 427.1 777.0 16 56.8 68.1 122.5 16 16.2 15.9 15.8 15 285.1 330.7 615.8 15 39.6 51.6 91.2 15 13.9 15.6 14.8 Return on capital employed4 % Tangible net asset value5 £m Land bank # plots 30.5% £627.0m 34,581 +370bps +17% +27% 17 77.5 21.0 30.5 17 116.0 511.0 627.0 17 14,755 19,826 34,581 16 72.1 18.0 26.8 16 105.6 431.8 537.4 16 7,881 19,322 27,204 15 69.4 16.6 24.7 15 45.9 283.1 329.0 15 7,803 18,410 26,213 • Completions up 28 per cent to 3,389 homes • Reported revenue up 26 per cent to £845.8m (2016: 2,657 homes) (2016: £671.3m) • Private average selling price (“ASP”) down 8 per cent • Reported operating profit up 48 per cent to £128.9m to £430,000 (2016: £465,000) (2016: £87.3m) • Net reservation rates increased to 0.84 (2016: 0.78) • Net cash of £77.4m (2016: £12.0m) • Open sales outlets up 9 per cent at 47 (2016: 43) • Basic earnings per share of 26.0 pence (2016: 13.6 pence) • Private forward order book up 8 per cent to £242.4m • Accident Incident Rate (“AIR”) of 220 (2016: 305) (2016: £225.4m) • NHBC Recommend a Friend score of 88.6 per cent • Total land bank increased to 34,581 (2016: 27,204) (2016: 84.8 per cent) • Adjusted earnings per share of 27.8 pence (2016: 16.3 pence) Read more on our KPIs on pages 14 to 17 Key 1. Adjusted revenue includes the Group’s share of revenue from associate and joint ventures of £183.0m (2016: £105.7m; 2015: £68.3m). 2. Adjusted operating profit includes the Group’s share of operating profit from associate and joint Group ventures of £33.6m (2016: £25.3m; 2015: £16.7m) and excludes non-underlying items of £1.6m (2016: £9.9m; 2015: £6.6m). Partnerships 3. Divisional adjusted operating profit excludes Group items of £6.8m (2016: £2.4m; 2015: £1.2m), comprising share-based payment expense of £5.1m (2016: £1.1m; 2015: £Nil) and brand Housebuilding amortisation of £1.7m (2016: £1.3m; 2015: £1.2m). 4. Return on capital employed (“ROCE”) is calculated as adjusted operating profit divided by average tangible net operating assets value (“TNOAV”). TNOAV is calculated as tangible net asset value excluding net cash. 5. Divisional tangible net asset value (“TNAV”) is calculated as divisional TNOAV plus net cash allocated pro rata based on divisional TNOAV. Countryside Properties PLC // Annual report 2017 Chairman’s statement 5 A YEAR OF Strategic report SIGNIFICANT PROGRESS As we enter 2018, our key areas of focus Governance continue to be to support implementation of the Group’s business strategy, to deepen the succession planning for the Board and Executive Committee and to ensure that corporate governance and risk management mitigation plans are embedded across the business. There were two Board changes during the course of the year. On 26 May 2017, we announced that Oaktree had completed a sale of shares in Countryside, reducing its remaining shareholding to approximately 23 per cent of the Company’s issued share capital. As a consequence, James Financial statements Van Steenkiste stepped down from the Board on 5 June 2017 as per the Relationship Agreement between Oaktree and the Company. Additionally, on 2 October 2017, Richard Adam announced his intention to step down as a Non-Executive Director of the Company, with his last day of service being 31 December 2017. Countryside has delivered another Our position going into the next financial year is strong. Our year-end private forward order On behalf of the Board, I would like to thank year of significant progress completing book is at a record level at £242.4m, which, both James and Richard for their significant 3,389 homes while maintaining a combined with a strong pipeline in both contributions to the Board and its Committees divisions, positions us well to achieve our since joining Countryside. The whole Board strong balance sheet and with ambitious growth plans. wishes them both well for the future. A search excellent visibility over our future for Richard’s successor is well under way and growth ambitions. Returns to shareholders an announcement of the appointment will be Our share price performed well over the course made in due course. Well positioned for growth of the financial year, reflecting the performance of the business along with continued investor Our people During 2017 the business continued to perform education. In the year to 30 September 2017, We recognise that our people are the well, delivering on the key targets set out at we delivered a total shareholder return of most important factor in delivering on our our initial public offering (“IPO”) in February 46.6 per cent compared to 13.5 per cent for ambitious growth plans and we continue to 2016. Political support for the housebuilding the FTSE 250 (excluding Investment Trusts). invest in developing them at all levels. As at industry remains strong and we welcome the 30 September 2017 we had over 1,200 employees, With the growth in earnings, our proposed dividend Government’s commitment to housing with 12 per cent more than a year ago. We are per share has also increased by 147 per cent the white paper “Fixing our broken housing recruiting more apprentices, graduates and with a recommended final dividend per share market” and subsequently announced increased trainees than ever before. In addition, we have of 5.0 pence. Subject to approval at the AGM funding for both affordable housing and the placed great focus on succession planning at all on 25 January 2018, the dividend will be paid Help to Buy scheme.