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Countryside Properties PLC   -  CSP   

Countryside - Annual Report 2018 and AGM 2019

Released 16:38 12-Dec-2018

RNS Number : 3052K
Countryside Properties PLC
12 December 2018

12 December 2018







The following documents have today been posted or otherwise made available to shareholders:


·      Annual Report 2018


·      Notice of Annual General Meeting


·      Proxy Form

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


The above documents may be viewed online at


·; and


· 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 21 November 2018.  That information together with the information set out below, which is extracted from the Annual Report 2018, 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 2018. Page and note references in the text below refer to page numbers in the Annual Report 2018.  To view the preliminary announcement, slides of the results presentation and the webcast please visit


Enquiries:  Tel: +44 (0) 1277 260 000      


Ian Sutcliffe - Group Chief Executive

Rebecca Worthington - Group Chief Operating Officer

Mike Scott - Group Chief Financial Officer





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 48 to 53.


The Risk Management Committee ("RMC") meets four times a year and provides a focal point for the coordination of the Group's risk management efforts.  Its membership comprises all members of the Executive Committee and it is chaired by the Group Chief Executive. 

The standing business of the RMC includes reviewing:


·      the Group risk register, mitigation plans and internal controls;

·      for each risk, the assessment of gross and net risk versus risk appetite;

·      the Internal Audit plan and reports;

·      the management of claims/litigation;

·      the forecast impact and preparation for proposed and new legislation;

·      key policies and risk mitigation documentation (e.g. start onsite or land acquisition check lists); and

·      total cost of risk against insurance and bond requirements.


At each RMC meeting, a different "principal risk" is also reviewed in depth by the RMC.  A description of the key areas of risk considered during 2018 is set out below.


A review of the principal risks is also a standing agenda item for all regional business board meetings.  All such board meetings are attended by the relevant Divisional CEO, who in turn feeds back any matters requiring consideration by members of the RMC.


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 RMC 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 RMC 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 financial 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 the effectiveness of internal control procedures

·      Reports on effectiveness of management actions

·      Provides assurance to the Audit Committee


Executive Committee - Role 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 2018



Given the planned continued growth of Countryside, the Board, Executive Committee and RMC have spent considerable time during 2018 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 engaged Lazarus Economics & Strategy, an independent economics advisor, to provide a rigorous and detailed statistical analysis of a broad range of indicators across the UK and the geographies in which Countryside operates.



A detailed review was undertaken to assess Countryside's exposure to risks that may flow from the United Kingdom's departure from the EU ("Brexit").  Plans have been formulated to put in place mitigating actions to reduce risks, covering areas such as the supply of materials and labour, the availability of capital and potential changes to Government regulation and policy.


Government policy and regulatory change

The RMC and Board have spent considerable time to determine actions required to prepare for and address significant changes in Government potential regulation and policy in areas such as the continuing availability of Help to Buy, building regulations (following the Grenfell tower fire tragedy in June 2017) and leasehold reform (following the Government announcement on 21 December 2017 on measures to tackle unfair leasehold practices).


Attracting and retaining talent

The success of Countryside's business and growth depends on recruiting, retaining and developing highly-skilled, competent people at all levels of the organisation.  During 2018 considerable effort has been made to ensure that Countryside is able to participate and win in the competition for talent.  This has included the extension of flexible benefits, improved study support, enhanced maternity and paternity policies, personal and professional development and training, enlarged graduate and apprenticeship schemes, additional recruitment resources and the determination to implement feedback obtained from the biannual employee survey.


Westleigh acquisition

On 12 April 2018, Countryside announced the acquisition of Westleigh Group Limited and its subsidiaries (together "Westleigh").  An integration team was established, consisting of key financial and operational leaders from both Countryside and Westleigh, who are overseeing a detailed integration plan to progressively and safely bring Westleigh into compliance with Countryside's policies and procedures.  This will result in considerable strengthening of a number of Westleigh's compliance functions, including health and safety, legal, environmental and quality.



Board, Audit Committee 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 2018.  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 2018 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.



Risk and impacts

How we monitor and manage the risk


Adverse macroeconomic conditions* (Responsible Executive: Group Chief Executive)

(impact on strategy-1/2) (risk change-risk increased)


A decline in macroeconomic conditions, or conditions 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.

·      Funds are allocated between the Housebuilding and Partnerships businesses.

·      In Housebuilding, land is purchased based on planning prospects, forecast demand and market resilience.

·      In Partnerships, contracts are phased and, where possible, subject to viability testing.

·      In all cases, forward sales, cash flow and work in progress are carefully monitored to give the Group time to react to changing market conditions.



Adverse changes to Government policy and regulation* (Responsible Executive: Group Company Secretary and General Counsel)

(impact on strategy - 1/2/3) (risk change-risk increased)


Adverse changes to Government policy in areas such as tax, housing, 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 potential impact of changes in Government policy and new laws and regulations are monitored and communicated throughout the business.

·      Detailed policies and procedures are in place to address the prevailing regulations.    


Constraints on construction resources* (Responsible Executive: Chief Executive, Partnerships North)

(impact on strategy-1/2) (risk change-no change)


Costs may increase beyond budget due to the reduced availability of skilled labour or shortages of sub-contractors or building materials at competitive prices to support the Group's growth ambitions.  The Group's strategic geographic expansion may be at risk if new supply chains cannot be established.


·      Optimise use of standard house types and design to maximise buying power.

·      Use of strategic suppliers to leverage volume price reductions and minimise unforeseen disruption.

·      Robust contract terms to control costs.   


Programme delay (rising project complexity) (Responsible Executive:  Chief Executive, Partnerships South)

(impact on strategy-1/2) (risk change-no change)


Failure to secure timely planning permission on economically viable terms or poor project forecasting, unforeseen operational delays due to technical issues, disputes with third-party contractors or suppliers, bad weather or changes in purchaser requirements may cause delay or potentially termination of project. 


·      The budgeted programme for each site is approved by the Divisional Board before acquisition.

·      Sites are managed as a portfolio to control overall Group delivery risk.

·      Weekly monitoring at both divisional and Group level. 


Inability to source and develop suitable land (Responsible Executive: Chief Executive, Housebuilding

(impact on strategy-1/2) (risk change-no change)


Competition or poor planning may result in a failure to procure land in the right location, at the right price and at the right time.


·      A robust land appraisal process ensures each project is financially viable and consistent with the Group's strategy.


Inability to attract and retain talented employees* (Responsible Executive: Group HR Director

(impact on strategy-1/2/3) (risk change-no change)


Inability to attract and retain highly skilled, competent people at all levels could adversely affect the Group's results, prospects and financial condition.  

·      Remuneration packages are regularly benchmarked against industry standards to ensure competitiveness.

·      Succession plans are in place for all key roles within the Group.

·      Exit interviews are used to identify any areas for improvement.



Inadequate health, safety and environmental procedures (Responsible Executive: Group Company Secretary and General Counsel)

(impact on strategy-2) (risk change-no change)


A deterioration in the Group's health, safety and environmental standards could put the Group's employees, contractors or the general public at risk of injury or death and could lead to litigation or penalties or damage the Group's reputation.


·      Procedures, training and reporting are all carefully monitored to ensure that high standards are maintained.

·      An environmental risk assessment is carried out prior to any land acquisition.

·      Appropriate insurance is in place to cover the risks associated with housebuilding.


Impact on our strategy

1    - Growth; 2 - Returns; 3 - Resilience



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.





Transactions with Group joint ventures and associate



Joint ventures










Sales during the year





Net advances to joint ventures and associate at 1 October

Net repayments during the year









Net advances to joint ventures and associate at 30 September






Included within the advances movement are non-cash items of £(2.3)m (2017: £(0.7)m) relating to deferred revenue and £1.4m (2017: £1.1m) relating to joint ventures reporting net liabilities.


The transactions noted above are between the Group and its joint ventures and associate, the details of which are described in Note 14 and Note 15 respectively.


Sales of goods and services 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

Key personnel are deemed to be the Executive Committee, along with other Directors of the company, including the Non-Executive Directors.  The aggregate remuneration of these personnel was £8.8m (2017: £9.5m).


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 £Nil (2017: £17,250).

·      A company of which Graham Cherry, a member of the Group's Executive Committee, is a Director and shareholder received £21,000 (2017: £21,000).


From 2015, 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 £110,000 (2017: less than £100,000).




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.




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Countryside - Annual Report 2018 and AGM 2019 - RNS