Countryside Properties PLC Annual Report 2017 and AGM 2018 (5552Z)

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: [phone]

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

ACSGGGBCPUPMGAA

(END) Dow Jones Newswires

December 15, 2017 10:54 ET (15:54 GMT)