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RNS
Urban&Civic plc  -  UANC   

Final Results

Released 07:00 29-Nov-2018

RNS Number : 8349I
Urban&Civic plc
29 November 2018
 

 

Urban&Civic plc

("Urban&Civic", the "Company" or the "Group")

 

Annual results for the year to 30 September 2018

                                     Urban&Civic plc (LSE: UANC) announces its results for the 12 months to 30 September 2018.

 

 

30 September 2018

30 September 2017

EPRA NAV (£m)

481.2

439.3

EPRA NAV per share (p)

331.8

304.4

Profit before tax (£m)

22.3

7.9

Dividend per share (p)

3.5

3.2

Contracted and unrealised plots

2,588

1,346

Plot completions

445

52

 

 

 

Financial highlights

•     EPRA net assets £481.2 million at September 2018, up from £439.3 million at September 2017.

•     EPRA net assets per share 9.0 per cent higher at 331.8p (304.4p at September 2017).

•    Profit before tax up for 12 months to September 2018 at £22.3 million (September 2017: £7.9 million), sales of the bulk of the remaining   commercial assets lifting pre-tax profits above trend.

•     85 per cent of Group property assets in strategic projects (September 2017: 69 per cent).

•     Large site discount represented a further £210 million at 30 September 2018, equivalent to 145p per share

(September 2017: £99 million, equivalent to 68p per share). Discount reflects store of future value and is proxy for increasing business      resilience.

•    30 September 2018 EPRA NAV + large site discount = 476.8p per share, an exceptional year-on-year increase of 28 per cent (30 September  2017: EPRA NAV per share + large site discount = 372.4p per share).

•     Net gearing at 30 September 2018 of 16.3 per cent (September 2017: 18.6 per cent), despite £60 million+ of new infrastructure investment.    Conservative gearing policy to maintain, supported by long term Homes England facilities

•     Final dividend for the year of 2.2p per share, providing a full year dividend of 3.5p. 9.4 per cent increase in line with stated policy to recognise continuing progress.

 

Project highlights and post year-end events

•  Urban&Civic Master Developer model definitively working for housebuilders, community stakeholders and landowners. Approved   applications, licensed plot sales and number of new projects all up.

•     Group portfolio now exceeds 50,000 residential plots, either consented or being progressed.

•     Three new project acquisitions: Priors Hall, Northamptonshire; Manydown in Basingstoke, Hampshire; Calvert in Buckinghamshire. Good       locations, not in multiple ownership and playing to Urban&Civic strengths.

•     Priors Hall acquired from joint administrators in October 2017; opening valuation up over 24 per cent.

•     Good Catesby contribution through realised sales and new allocations. Changed emphasis towards plan led applications.

•    445 completions for the year to 30 September 2018, compared with November 2017 guidance of 315. September especially strong and   included brought forward sales. Future realisations guidance repeated, despite current uncertainties.

•   Increased large site discount reflects 2,800 new consented units at Wintringham, Cambridgeshire and the acquisition of Priors Hall in   development. Discount will increase with each successive strategic consent.

•     Intention to apply for Premium Listing in January 2019.

                                              

Commenting on these results, Nigel Hugill, Chief Executive of Urban&Civic, said:

 

"Good results and marked progress with three major project additions to take the total to eight. Urban&Civic has early mover advantage on strategic sites and is establishing a brand that works for housebuilders, community stakeholders and landowners alike. EPRA NAV growth up 9 per cent, appreciably faster than last year, and more than 1,700 plot sales both speak to that advantage. It would be plain naive to be complacent at present but our Master Developer model with 4.5 years forward sales on contracted plots and ten year Homes England backing affords unusual resilience.  The revisions to national planning policy were anticipated and are expected to prove to our advantage."

 

For further information, please contact:

 

Urban&Civic plc

Nigel Hugill/David Wood

+44 (0)20 7509 5555

JP Morgan Cazenove

Bronson Albery

 

+44 (0)20 7742 4000

Stifel

Mark Young

 

+44 (0)20 7710 7600

FTI Consulting

Giles Barrie/ Dido Laurimore/ Ellie Sweeney

Urban&civic@fticonsulting.com

 

 

+44 (0)20 3727 1000

A presentation for analysts and investors will be held at 09.00am today at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD.

 

If you would like to attend please contact Alex King at FTI on +44 (0)20 3727 1000 or urban&civic@fticonsulting.com. A live webcast of the presentation will be available at www.urbanandcivic.com or via the following link:  http://webcasting.brrmedia.co.uk/broadcast/5baca187269b0c1ded18906e, and presentation slides will also be available to download.

Alternatively, details for the live dial-in facility are as follows:

Participants:        Tel: +44 (0)330 336 9105

Passcode:            1230309

 

 

Chief Executive's statement

 

Introduction

Another set of good results: demonstrable progress across all projects and substantial enlargement to pipeline. EPRA net assets per share were up 9 per cent to 331.8p as at 30 September 2018. The percentage increase in EPRA NAV was a little higher at 9.5 per cent, to reach £481.2 million, as compared with £439.3 million at 30 September 2017. Profit before tax at £22.3 million (year to 30 September 2017: £7.9 million) approached three times that of the previous 12 months, boosted by sales of the bulk of the remaining commercial assets which lifted realised numbers above trend.

 

A few additional opening observations: first, in contrast with most of the listed property sector, the pace of increase in EPRA NAV actually accelerated against last year (EPRA NAV per share annual increase to September 2017: 7.1 per cent). Second, the estimated large site discount reached the equivalent of 145p per share. That figure represents the gap between our valuers' appraised current open market value of a standard 150 plot parcel on consented sites as discounted to account for the strategic size of our holdings and can reasonably be regarded as a store of future value. It can also be regarded as a proxy for business resilience, rising with each new strategic consent. The increase to 30 September 2018 resulted from in year planning consent having been secured for 2,800 homes within walking distance of the East Coast Mainline station at Wintringham, St Neots, in Cambridgeshire and recognised the opening valuation of our holding at Priors Hall in Northamptonshire. EPRA NAV plus the discount reached 476.8p per share at 30 September 2018, representing an exceptional year-on-year increase of 28 per cent (30 September 2017 EPRA NAV per share plus large site discount: 372.4p).

 

Also gratifying is that Master Developer is now a recognised descriptor in our industry and that Urban&Civic has come to be regarded as market leader. Large site delivery carries its challenges but your Company enjoys real early mover status. Over the last 12 months, we have sold substantively all of our commercial investments to reinvest in projects where we carry clear competitive advantage. I hanker after going faster but console myself in the knowledge that the average lead times for strategic projects and our skillset and specific experiences are such that the growing list of new entrants expressing interest will struggle to make up ground any time soon. The example at Waterbeach represents a case in point. Undoubtedly important in providing vital additional housing capacity on the northern perimeter of Cambridge but, following procedural delays, not now scheduled to go to planning committee until early 2019. That would be a disappointing two years from application submission in February 2017.

 

There does seem to have been a discernible slowdown in show home visits to existing sites in November but without corresponding reduction in housebuilder enthusiasm for our product.  Quite the reverse.  Subsequent to September 2018, 953 additional plots have been contracted or placed under offer with nine different housebuilders. General public caution will obviously impact upon delivery rates, if sustained.

 

 

Early mover advantage

The existing early mover advantage that Urban&Civic enjoys has been reflected in strong cross-project demand from our housebuilding customers for fully infrastructured plots, as well as in a growing ability for us to source sites within the broader South East of England, where competition is most intense. Our core model provides for the sale of serviced plots via a percentage participation in the value on sale of completed houses, subject to minimum annual payments from housebuilders. This is highly capital efficient for our customers whilst enabling us to maintain project quality and direction. Seven contracts have been signed since 30 September 2017. The balance of business is also good; five of the contracts were with existing housebuilding customers with two new additions. Of the nine contracts currently under offer, five are repeat customers with four new.  Financial terms continue to be above previous budget in all cases with minimums now typically close to current market prices. On completion of the outstanding agreements, we will have approximately 4,000 plots under licence or deferred sale representing 19 per cent of currently consented strategic holdings. Significantly, given prevailing uncertainties, were one to take the minimum drawdown under those contracts, the aggregated outstanding outturn represents an average of four and a half years forward sold. The largest agreements are with the strongest financial covenants.

 

Recognition of the early mover status of Urban&Civic also means that your Company is genuinely hard to beat when we set out our stall in open competition. We were pleased to be able to acquire Priors Hall from the Joint Administrators at the beginning of the reporting year in October 2017 and duly grateful for the trusted partner support from Homes England received in the process. I would like to think that the level of subsequent progress is seen as justifying that confidence. Then came selection with our partner Wellcome Trust in February 2018 to join with Basingstoke and Deane and Hampshire Councils to steward an important urban extension at Manydown. The level of competition was intense through an extended procurement process and included some of the largest national housebuilders.

 

We have since been able to secure a further prospective strategic project off market with committed landowners wanting Urban&Civic to act as Master Developer. Calvert in Buckinghamshire is the longest dated and if potentially the most significant of all our existing projects. We have a conditional purchase agreement over approaching 800 acres, with co-operation arrangements to take total land interests close to 2,500 acres in the area of intersection between the intended route for HS2 with the to be restored Varsity Line between Oxford and Cambridge. The co-operation lands adjoin the massive proposed HS2 maintenance depot and, of themselves, could accommodate a new settlement in excess of 10,000 homes. Moreover, an announcement was made by the Department for Transport in September 2018 that the preferred route for the proposed accompanying Expressway was broadly parallel with the Varsity Line. Most likely the new road will run close, or through, existing interests. Singularity of ownership is a fundamental component of efficient large site delivery and discussions have commenced to enlarge the Calvert land area further.

 

 

Operating highlights

Three standout operating highlights: the expeditious planning consent at Wintringham, St Neots, showing just what can be achieved in terms of accelerated timing without compromising design quality; the scale of infrastructure works at Rugby; and the extent to which the project at Priors Hall has been rebooted during our still comparatively short ownership. Each speaks to different aspects of the Urban&Civic skillset, the evident alignment with local and national Government priorities and the long-term financial backing of Homes England.

 

Preliminary works are on site at Wintringham, with a signed section 106 agreement and released planning consent obtained barely 12 months after our initial application submission in October 2017. Urban&Civic acquired a one-third project ownership and management from trusts associated with Nuffield College, Oxford, for an aggregate consideration of £13.3 million only in April 2017. In addition to the new housing, the significant extension to St Neots will include two primary schools, health facilities and 63,500 sq.m. of commercial space. Detailed designs for the striking first primary school from architects dRMM have been submitted with a programme to open in September 2020. Wintringham is in Huntingdonshire, the same District Authority as Alconbury; such was the confidence in the speed of determination that housebuilders also worked contemporaneously to produce detailed designs. Accordingly, the first two will be in a position to commence construction in the early part of 2019. Homes England is providing a £26 million facility for infrastructure investment to accelerate delivery, including our now standard cycle paths and busways. I shall be disappointed if there are not homeowners in occupation at Wintringham by the end of next year, which would be little more than two years after outline application submission. The researched historical average is 6.75 years.

 

Nuffield College is proving a wonderful partner with a shared commitment to quality delivery and environmentally healthier lifestyles. We are also enjoying a shared economic reward. The Wintringham acquisition consideration represented the equivalent of £14,285 per residential plot, without placing a value on the commercial space. 18 months later at 30 September 2018, the external market valuation from CBRE was £23,900 per the plot. This valuation is well below the minimum under offer receipts.

 

The project at Rugby, owned jointly with Aviva Investors, provides still clearer demonstration of the transformational large site potential with a committed Master Developer and cross-governmental department backing. Two separate contracts totalling £27.0 million, supported with acceleration funding from Homes England, are running on time and budget to provide important new road and cycle links into Rugby town centre by July of 2019. Our largest licence agreement to date was signed with Redrow over the summer. Meanwhile, the Archbishop of Canterbury visited the newly completed St Gabriel's primary school, which opened with 82 pupils in September. Most recently, LocatED (the Government agency responsible for procuring new free school sites) approved £35 million funding for a new secondary school, to incorporate the listed C station from which the first ever transatlantic telephone call was transmitted in January 1927. The funding will be interest free and repayable on section 106 triggers when they come to fall due (1,800 homes and beyond). Secondary school places are at a premium in Rugby, which ought to be reflected in future absorption rates. Summarising the statistics at Rugby serves to emphasise the robust market position commanded by Urban&Civic: first primary school 2018; link road open 2019; sister secondary school with outstanding rating 2021; and the realistic expectation of accelerating housing sales with close to four and a half year forward sold minimum receipts, all within a revitalised and genuinely good quality environment. These are not easy milestones to emulate.

 

Similarly at Priors Hall in Northamptonshire, your Company acquired an existing scheme comprising 965 acres of partly built land across the adjoining local authorities of Corby and East Northamptonshire. A sound project that had interested us for some time but for which the experience and financial resources of the original developer fell well short of his ambitions. The gross consideration paid to the Joint Administrators in October 2017 amounted to £40.5 million. Purchasing assets in administration is not for the faint hearted but we were confident of our ground and in the identified upside potential. The local demographic fundamentals also merit reciting: 20 per cent population growth over the past ten years with more than 7 million people living within a 50 mile radius; and a 68-minute direct rail link to London.

 

We inherited an outline consent for 5,095 residential units, of which 775 were occupied at the time of acquisition. A further 669 plots had been sold to housebuilders and are in the process of being built out with all deferred consideration or overage accruing to Urban&Civic, without additional payment to the Administrators. Total proceeds paid or payable to Urban&Civic with respect to pre-acquisition contracts are now expected to amount to about £12.5 million, leaving a net purchase consideration of £28 million for 3,656 uncontracted plots, or about £7,700 per acquired residential plot after accounting for the value of commercial land. The purchase of Priors Hall was part funded by Homes England and included likely future infrastructure spend, such that total committed facilities for the transaction aggregated £47.0 million, including accrued interest. The terms reflected those afforded to Urban&Civic elsewhere, including the provision that interest is accrued and repayment made only out of distributed proceeds. On the basis of current sales rates, our invested equity capital is unlikely to materially exceed £15 million.

 

Proactive and knowledgeable senior management has helped tighten up the Priors Hall organisation. Resident involvement has been strengthened and formalised, with discretionary investment being made in practical improvements. Early positives are quantifiable. Housing completions in the 11 months from acquisition to 30 September 2018 numbered 230, compared with just less than 200 per year previously. Two further sales agreements have been signed since the September year end, which will take the total number of housebuilders on site to nine. Contracts are under offer with three small housebuilders to extend the product range. In addition, terms have been agreed with two existing customers for extensions or new parcels. A cafe, a nursery and a Sainsbury's convenience foodstore are on their way. Achieved house prices are edging up in the range £215 to £230 per square foot. Constructive discussions are taking place with the two local authorities regarding restructuring the respective planning consents on land which is not yet built. The appraised value of our holdings at Priors Hall at 30 September 2018 was £55 million, up more than 24 per cent over acquisition cost after adjustment for subsequent investment. The plot holding cost comparison relative to acquisition will not quite be like for like in the future in that the rebalancing of distribution in Zones 2 and 3 is likely to result in an increase in the number of units in higher value East Northamptonshire. Notwithstanding, the per plot valuation at September stood at £10,500. This is one-third of the terms agreed recently on a straightforward land sale in Corby Zone 1.

 

 

National Planning Policy Framework modifications

Large sites have always been an important part of the Government's consideration. The modifications to the National Planning Policy Framework, published in July 2018, not only reaffirmed their role in the mix but upped the focus further. Up until July this year the NPPF wording was: "The supply of new homes can sometimes be best achieved through planning for larger scale development, such as new settlements or extensions to existing villages and towns that follow the principles of Garden Cities." The replacement is: "The supply of large numbers of new homes can often be best achieved through planning for larger scale development, such as new settlements or significant extensions to existing villages and towns, provided they are well located and designed, and supported by the necessary infrastructure and facilities." Credible delivery expertise and demonstrable examples with local support are judged essential. Suffice to observe that Alconbury was used by the newly enlarged Ministry of Housing, Communities and Local Government to launch the Garden Cities initiative.

 

 

Letwin Review

The long-trailed Letwin Review was also published just after the Budget in November. The Review makes a strong case for aligned ownership and diversity of delivery being fundamental to increasing absorption rates on large sites. This again plays directly to our core strengths. The Urban&Civic approach as Master Developer has been to create diversity in design by working with a range of housebuilders, both local and national, which are collectively deploying a palette of over 100 house types at Alconbury alone. The market is also now responding to the need for a range of tenures with increasing interest in serviced land parcels from those specialising in modern methods of construction, retirement living, PRS and affordable providers. We are working with each of these channels to review opportunities and further diversify our customer base, which not only will improve absorption but is also good business. Buried at the back of the report are a series of structure diagrams for how the public sector/communities could deliver large sites. Our Master Developer model and partnering structuring could most readily be incorporated. That would have the additional benefit to government of the private sector assuming the infrastructure risk, as is our practice in any event.

 

 

Catesby

To the extent that we face headwinds other than those arising from prevailing political uncertainty, they may be seen to be in Catesby. Even those go to future prospects, including an apparently changed appeal environment, rather than current performance. For the year under review, Catesby completed four land promotion sales and two parcels at Europa Way with a third under offer. The realised contribution after overheads was £4.2 million, with a further £5.4 million of net EPRA movement. Capital invested in Catesby was £32.6 million in the 30 September 2018 balance sheet. The EPRA uplift over capital invested was £11.5 million.

 

Planning reflects politics from time to time. Small applications are being consented in growing numbers but above 10 units, non-technical grounds for appeal refusal are tending to prevail, most especially for applications between 100-500 units. Figures for the year to September 2018 show only 13,903 dwellings allowed on appeal on larger applications, the lowest since the adoption of the National Planning Policy Framework in March 2012. As a percentage of the number of residences being appealed, only 23 per cent of appeals were successful. This is a dramatically low number, as it includes those cases where the members have chosen to ignore their officers' recommendation. Recourse to higher courts carries no material liability to objectors and has also become more common. At the time of writing, we await the outcome of two Supreme Court hearings and a High Court Judicial Review. A disinclination for judicial lottery directs the focus towards schemes that are likely to be slower in adoption (having to be taken through local plans). Following the change of tack towards a greater emphasis on plan-led applications, Local Plan inspectors' reports have been received or are awaited currently by Catebsy in respect of allocations aggregating around 650 units.

 

A likely consequence will be increasing scope for crossover with sub-strategic sites. Catesby will continue to look for new sites requiring infrastructure delivery, along the lines of Europa Way, Warwick. On completion of the infrastructure works next August 2019, 64 per cent of Europa Way plots will have exchanged or completed. Catesby can build competitive advantage on such projects, since infrastructure delivery is not offered by the majority of competing land promoters.

 

 

GI placing and premium listing

In early July and following the publication of our interim results to 31 March 2018, GI Partners announced the successful sale of its entire 27.9 per cent holding in Urban&Civic at a price of 305p per share. The exercise was conducted by one of our joint brokers, Stifel Nicolaus, and raised aggregate gross proceeds of £123.4 million. The Company was not a party to the placing and did not receive any of the proceeds.

 

GI Partners had backed us in the original purchase of Alconbury and did not sell any of its shareholding when Urban&Civic came to market in 2014. The placing was all the more notable for reinforcing the configuration of our shareholder base having been taken up by existing and new investors, the vast majority of which are active small cap, specialist property funds or private client managers. It is a highly knowledgeable shareholder base but one which is conspicuously lacking in generalists and indexed funds.

 

Separately, our other joint broker, JP Morgan Cazenove, has been in discussion with the Financial Conduct Authority and the UK Listing Authority regarding premium listing for Urban&Civic. The shares trade currently under standard listing designation and, therefore, are not included in any of the main stock market indices. Following general consultation, FCA Listing guidance was altered as from January 2018 inter alia to provide that certain property companies that specialise in the development of projects of extended duration may demonstrate the development of assets more accurately through external property valuation reports than through the conventional three-year revenue accounts. It was recognised that Urban&Civic came within that category and confirmed that the Company is eligible to apply for premium listing via that concessionary route. Accordingly, it is intended that the Company will make application for premium listing on publication of the 2018 Annual Report and Accounts in January 2019.

 

 

Immediate priorities

As was the case last year, I am able to report that substantially all those priorities over which we have direction have been accomplished. The switch out of retail and leisure assets into further strategic projects in Autumn 2017 proved timely. The two areas that we have fallen short are in the determination of the outstanding planning application at Waterbeach, Cambridgeshire, that was submitted in February 2017 and our still awaited unblocking in the legal log jam of consented Catesby projects that would otherwise be helping to add to national housing numbers. The Waterbeach application includes 6,500 new homes, three miles north of some of the most dynamic employment creation in the western world on the Cambridge Science and Business Parks. The proposals have been shown to be net positive in terms of biodiversity. Clearance was given by Cambridgeshire County Council Economy and Environment Committee in July and announcement was made in September that the South Cambridgeshire Local Plan had been found sound by Government Inspectors. Both are necessary but not sufficient conditions. The legal challenges faced by Catesby reflect a manifest disproportion in the English Courts which objectors have become expert at exploiting. We have therefore focused on changing policy as described.

 

Elsewhere, Wintringham remains on track to become possibly the fastest ever strategic site within South East England from application submission to delivery with first occupations before the end of 2019; progress at Priors Hall is evidenced in the opening valuation; Calvert has the makings of the definitive new settlement in the Oxford to Cambridge corridor; the proposed routing for the new Expressway could not be better; and we led the selection at Manydown and are in exclusive due diligence on another significant project acquisition close to the M25, which we would hope to bring forward at pace.

 

Our commitment to quality delivery and to stakeholder engagement is the crucial engine to the continued building of the Urban&Civic brand. Your Company has an experienced and highly capable team below Board level. Transparent and inclusive internal processes retain project responsibility with formal reporting to an Executive Management Committee and then up to the Board. Manpower additions have been made and the governance structure is designed to cover risk and delivery as the business continues to scale up.

 

 

Outlook

The immediate outlook is terribly difficult to evaluate. The level of sales on our sites in the year comfortably exceeded the forecasts made last November. Total sales were 445, compared with guidance of 315 but include a very strong September. Business plan projections are for 635 realisations in the current year 2018/19 with a further 335 in Catesby at Europa Way. Wintringham apart, the investment required to deliver 4,000 plots, either contracted or under offer, has already been made. At Wintringham the necessary net infrastructure investment is expected to be covered by the new Homes England facility. Meanwhile the number of agreements still being signed with existing and new housebuilder customers bears witness to the core attractiveness of our product and the increasing resonance of the Urban&Civic brand. In negotiating those agreements, we were and are not short of first reserves. The queue to build out plots at Waterbeach is round the block, such is the shortage of good quality, well priced, new housing versus demand in North Cambridge. If the changed appeals environment results ultimately in fewer sites above 100 plots coming forward, that ought eventually to be reflected in serviced land pricing within commuting distance of London, where supply is constrained. Outside the broader South East there is no apparent shortage of consented land. Only our targeted areas (and London) show significant shortfalls. Speculative appeals are not likely to be successful. The escalating test for delivery against Local Plan targets can only benefit projects like ours, which offer a better consistency of output. Rentals will begin to feature in a maturing product offer.

 

The further extension of Help to Buy to 2023 ought to help underpin demand for entry-level new housing. Continuing low interest rates mean that accessibility, rather than affordability, often proves the hurdle for purchasers outside London. There is also growing evidence that first-time buyers in our identified locations are missing out the step of one and two-bedroom first apartment purchase, in favour of two and three-bedroom houses. As corollary, they then stay in their first purchase for longer. Obviously this remains a dynamic process but the signs are that this staying put could be up to 12 years (the pre-Lehmans average was around seven years). Bad for stamp duty receipts but altogether helpful in building new stable communities and with the direct look through into early provision of education and other community facilities. I am not aware of any other company bringing forward new schools at the pace that we anticipate. Elongation in the average length of first purchase occupations would be sufficient response to those scaremongers seeking to argue that Help to Buy purchases create some form of ticking time bomb.

 

All that said, near term absorption rates must suffer if the drop in consumer confidence is maintained. That is where the rubber hits the road. As a precaution we have cut budget plan sales rate assumptions back 20 per cent which in some cases is actually below contracted minimum draw downs. On that basis, our current estimate of 2019/20 sales still remains sharply upwards with 950 realisations in the year and 135 more at Europa Way. The average length of forward sales at 4.5 years with progressively higher minimums provides your Company with an unusual resilience. The Urban&Civic business model also indisputably benefits from the backing of Homes England, with which our priorities are closely aligned. My expectation is that the agency will be the principal lender to the Group for the foreseeable future, via project-specific funding on consented sites. Homes England has reiterated its long-term support for the business as part of the necessary preliminaries to premium listing. In turn, we will look to bring forward additional strategic projects as the opportunities arise and enlarge the housing offer in existing locations.

 

 

Dividend

The final dividend of 2.2p per share maintains the stated policy of increasing distributions to shareholders by 10 per cent per annum when the performance of the Company and the Board's estimation of future prospects are seen as warranting such. This is obviously not an environment to be cavalier, even if our own performance sets us apart from most of our property industry peers. We will monitor the next six months carefully before deciding upon the proposed dividend payout for next year.

 

A scrip dividend alternative will be made available to the 2018 final payment, for which I shall be electing.

 

 

Grateful thanks

I shall never tire of thanking Board and staff colleagues alike for their enthusiasm and unstinting commitment. The sale by GI represented a rite of passage for Urban&Civic. We are most grateful to Mark Tagliaferri and his partners for their early faith in what was then a novel concept. The fact that our co-founding private equity shareholders were able to place a 28 per cent holding with a broad range of existing and new investors in a single session speaks volumes for just how far your Company has travelled. The early mover advantage that everyone worked so hard to achieve is beginning to translate into real business scalability. Grateful thanks to all as we continue to move forward.

 

Nigel Hugill

Chief Executive

28 November 2018

 

 

Financial review

 

Introduction

Over the last twelve months the Group has continued to trend towards strategic land holdings. Following the acquisition of the 4,320 unit site at Priors Hall, Corby and disposal of four and a half commercial assets (namely the Stansted Hotel development, Feethams and Bradford leisure schemes, Skelton retail park and a 50 per cent share of the Manchester New Square apartment scheme to the Greater Manchester Pension Fund), strategic land now accounts for 85 per cent of the total property portfolio value (30 September 2017: 69 per cent).

 

Although the Group has seen strong cash generation from commercial sales (realising a combined £105.8 million of gross proceeds in the year), residential delivery and completion proceeds continue to grow and are now underpinned by forward sales contracts of four and a half years duration (reflecting minimum sales rates under licence arrangements).

 

Total plot completions in the year totalled 4451, which compares to 174 in the six months to 31 March 2018 and 52 in the year to 30 September 2017, with a further 240 plots exchanged or reserved by the year end. Both the number of plot sales and gross cash generated from plot sales (Urban&Civic's share being £21.0 million) exceeded previously stated expectations.

 

The £14.4 million (182 per cent) improvement in profit before tax remains unrepresentative of future income statements, benefitting greatly from commercial asset sales, although the main driver of EPRA NAV growth, which is up 9.0% in the year to 331.8p per share, continues to be property revaluations.

 

 

Key performance indicators

The measures we use to evaluate Group performance, together with the rationale for their use  are set out throughout the Strategic Report section of the Annual Report and Accounts, however I have reproduced this year's performance metrics below for your reference:

 

Year ended

30 September

2018

Year ended

30 September

2017

Increase/

 (decrease)

EPRA NAV

£481.2m

£439.3m

9.5%

EPRA NAV per share

331.8p

304.4p

9.0%

EPRA NNNAV

£458.1m

£421.9m

8.6%

EPRA NNNAV per share

315.9p

292.3p

8.1%

Total shareholder return

19.1%

16.0%

3.1%

Gearing  - EPRA NAV basis

16.3%

18.6%

(2.3)%

Look-through gearing - EPRA NAV basis

20.6%

21.3%

(0.7)%

Plot completions1

 445 plots

52 plots

393 plots

 

1.    Includes 100 plots at Alconbury (six months ended 31 March 2018: 49; year ended 30 September 2017: 52); 78 at Rugby (six months to 31 March 2018: ten; year ended 30 September 2017: nil); 37 at Newark (six months to 31 March 2018: nil; year ended 30 September 2017: nil); and 230 from pre-acquisition contracts at Priors Hall (acquisition to 31 March 2018: 115).

 

Ahead of significant residential plots sales, the Group still considers total shareholder return and EPRA NAV measures -which set out the net asset value attributable to equity shareholders adjusted for the revaluation surpluses on trading properties, with tax (EPRA triple net NAV) or without tax (EPRA NAV)- to be significant descriptors of value growth.

 

Total shareholder return

Urban&Civic's share price has risen 35.1 per cent over the last 24 months (from 225.0p at 30 September 2016 to 304.0p at 30 September 2018) and 17.8 per cent over the last 12 months - a period that included the placing of 40.4 million shares held by GIP U&C S.À R.L (representing 27.9 per cent of issued share capital). Combined with two dividends paid during the year totalling 3.3p, the share price movement has resulted in a total shareholder return of 19.1 per cent for the year. This compares to a 1.0 per cent rise in the FTSE 350 Real Estate Index, a 2.7 per cent increase in the FTSE All Share Index and a 9.0 per cent increase in EPRA NAV per share (which is further analysed below).

 

Net asset value - EPRA and IFRS

The below EPRA analysis and proportionately consolidated statement of comprehensive income and balance sheet summaries are non-statutory, but are presented to aid understanding and comparability of Group results both this year and between accounting periods.

 

The movements in Group EPRA and IFRS NAV during the year are summarised below.

 

 

Year ended 30 September 2018

 

Year ended 30 September 2017

Group

£m

Joint venture

and associates

£m

Total

£m

Pence

per share

 

Total

£m

Pence

per share

Revaluation of investment properties and write downs of trading properties1

9.1

-

9.1

6.3

 

6.4

4.4

Profit on trading and investment property sales

25.5

2.1

27.6

19.0

 

10.7

7.4

Rental and other income

5.5

-

5.5

4.0

 

4.9

3.5

Administrative expenses

(18.8)

-

(18.8)

(13.0)

 

(14.7)

(10.2)

Other income statement movements

(4.6)

-

(4.6)

(3.2)

 

(0.5)

(0.3)

Total comprehensive income

16.7

2.1

18.8

13.1

 

6.8

4.8

Dividends paid

(4.5)

-

(4.5)

(3.1)

 

(4.5)

(3.1)

Other equity movements

2.9

-

2.9

2.0

 

3.3

2.2

IFRS movement

15.1

2.1

17.2

12.0

 

5.6

3.9

Revaluation of retained trading properties1,2

22.8

12.3

35.1

24.2

 

27.3

18.9

Release of trading property revaluations on disposals3

(11.6)

-

(11.6)

(8.0)

 

(3.5)

(2.5)

Deferred taxation

1.2

-

1.2

0.8

 

0.1

0.1

EPRA movement

27.5

14.4

41.9

29.0

 

29.5

20.4

Effect of share issues and dilutive options

-

(1.6)

 

-

(0.2)

Movement in the year

41.9

27.4

 

29.5

20.2

EPRA NAV at start of year

439.3

304.4

 

409.8

284.2

EPRA NAV at end of year

481.2

331.8

 

439.3

304.4

 

1.    Classified as property revaluations for the purposes of the below EPRA NAV growth commentary.

2.    Includes revaluation of the Morris Homes, Redrow, Crest Nicholson and Avant variable considerations classified as financial assets.

 

Property revaluations (including trading property write-downs) contributed 30.5p to the Group's EPRA NAV growth of 27.4p per share in the year.

 

CBRE valued 90 per cent of the property portfolio at 30 September 2018 (30 September 2017: 76 per cent) with the remainder valued by Directors. A more detailed reconciliation between IFRS and EPRA NAV is provided in note 18.

 

Consolidated statement of comprehensive income

The Group's profit before tax increased by £14.4 million (182 per cent) over last year, largely as a result of commercial asset disposals, growing residential sales and property revaluations outweighing increases in overheads and write-offs of Catesby promotion costs; further explanation is provided below.

 

 

Year ended 30 September 2018

 

Year ended 30 September 2017

Group

£m

Joint venture

and associates

£m

Total

£m

 

Group

£m

Joint venture

and associates

£m

Total

£m

Revenue

150.4

8.8

159.2

 

60.3

11.0

71.3

Profit on trading property sales1

24.3

2.1

26.4

 

9.6

1.3

10.9

Rental and other property profits

3.8

-

3.8

 

3.4

-

3.4

Hotel operating profit

1.8

-

1.8

 

1.5

-

1.5

Write (down)/up of trading properties

(2.6)

-

(2.6)

 

1.4

-

1.4

Gross profit

27.3

2.1

29.4

 

15.9

1.3

17.2

Administrative expenses (net of capitalised costs)

(18.8)

-

(18.8)

 

(14.7)

-

(14.7)

Profit on investment property sales

1.2

-

1.2

 

-

-

-

Surplus on revaluation of investment properties and debtors

11.7

-

11.7

 

4.9

-

4.9

Share of post-tax profit from joint ventures

2.1

(2.1)

-

 

1.3

(1.3)

-

Other

(1.2)

-

(1.2)

 

0.5

-

0.5

Profit before tax

22.3

-

22.3

 

7.9

-

7.9

 

1.    Including residential property sales and profits from construction contracts as disclosed in note 2.

 

Revenue

Revenue has more than doubled since last year and comprises £97.9 million of commercial and land promotion sales, £43.3 million of residential property sales (including £8.8 million within joint ventures) and rental and other income of £18.0 million.

 

The £87.9 million increase over the prior period is predominantly the result of the disposal of our hotel development at Stansted Airport (£49.2 million), sale of a 50 per cent interest in the Manchester New Square apartment development to Greater Manchester Pension Fund (£22.9 million) and sale of the Skelton Retail Park (£7.4 million). Catesby has also seen improved revenues through a promote-and-infrastructure contract for a site known as Europa Way, which contributed £6.7 million to revenue.

 

Residential property sales have maintained comparable levels to last year although licence fee overages, rather than licence fee minimums, comprise a greater part of revenue this year - reflecting a greater number of plot completions.

 

Licence receipts continue to be at levels above contractual minimums and during the year Alconbury generated 100 plot completions (30 September 2017: 52); with Newark recording 37 plot completions (30 September 2017: nil); Priors Hall completing on 230 plots (30 September 2017: nil) and the Rugby joint venture making 78 plot sales.

 

You should note that the 230 plot completions at Priors Hall related to pre-acquisition housebuilding contracts and therefore the receipts in relation to these properties have been credited against the acquisition trade receivable (on the balance sheet) rather than being recognised through the income statement.

 

The terms minimums, overages and licences have been defined in the glossary.

 

Gross profit

Gross profits are £11.4 million higher than reported in the year to 30 September 2017 or £12.2 million higher if the Group's share of joint venture trading property sales are proportionately consolidated. Like revenue, this is largely the result of the disposal of Stansted and Skelton (£9.8 million) and Europa Way profits (£2.0 million), net of a £4.0 million adverse movement in trading property write offs/ups.

 

The £4.0 million increase in write downs over last year is the result of £1.4 million of trading property write ups last year (£1.2 million in relation to Stansted) against £2.6 million of written off Catesby promotion costs this year, where a decision has been made not to seek planning for seven sites.

 

Profits from trading property sales also include residential sales at Alconbury (£5.1 million) and the 50 per cent owned Rugby site (£2.1 million), and £7.5 million of Catesby land promotion profits (excluding Europa Way).

 

Residential sales profits at Alconbury comprise £2.5 million generated by the sale of 42 Hopkins homes, overages of £3.0 million on 61 exchanges made by Redrow and Morris, net of £0.4 million of Civic Living set-up costs. Rugby's profits relate to Davidsons' 48 house completions in the year (£1.3 million) and Morris Homes and Crest Nicholson overages (in respect of 42 exchanges).

 

Administrative expenses

Administrative costs of £18.8 million were expensed in the year, after capitalising £4.7 million into the Group's development projects. At the gross level, the £3.6 million increase in overheads is predominantly the result of a more senior headcount as additional strategic land projects have been taken on in the year, together with one-off reorganisation costs following the acquisition of Priors Hall in October 2017 and increased share option vesting. At the net level, the additional £0.5 million increase over the 12 months to 30 September 2018 is due to a lower proportionate capitalisation (20.0 per cent this year compared to 26.2 per cent last year) following development completion of Feethams, Herne Bay and Stansted and the time taken to reallocate  development staff to new projects.

 

Administrative costs also include a £3.4 million charge in relation to the non-cash share-based payment expense (30 September 2017: £3.1 million). A corresponding credit has been included with retained earnings, resulting in the expense having no NAV impact.

 

Surplus on revaluation of investment properties and profit on disposal of investment properties

Following the disposal of the Bradford leisure scheme, which realised a £1.2 million profit over the 30 September 2017 CBRE valuation, and the sale of the Feethams leisure scheme at book value, investment properties now comprise the commercial development and expansion areas at Alconbury and a proportion of the Waterbeach site, which could deliver both commercial buildings and residential properties for rent in due course.

 

The £10.6 million uplift in the year reflects (equally) an improved planning status of the Alconbury expansion area and higher achieved commercial sales values, again at Alconbury.

 

The Directors have valued Waterbeach interests at cost, recognising that the value of the Development Management Agreements with the Defence Infrastructure Organisation is dependent on planning.

 

Readers of our accounts will have noticed that the Group now holds a significantly lower proportion of its property interests as investment properties, and consequently movements through the income statement have reduced.

 

The Group continues to revalue all of its property interests; however, uplifts on trading properties are recognised by EPRA measures only (which are non-statutory).

 

Given the scale of Alconbury and its bifurcation across the Group's balance sheet, I have set out below how CBRE's valuation is incorporated into the Group's NAV and EPRA measures.

 

CBRE's valuation of Alconbury increased from £235.5 million to £266.5 million in the year, based on the consistent assumption that we deliver serviced land parcels.

 

After allowing for housebuilding and commercial construction expenditure incurred at Alconbury, which CBRE did not take into account in its valuation, the total site valuation increases to £275.2 million (representing 45 per cent of the Group's property portfolio value). The allocation of the value within our year-end balance sheet is shown below.

 

Alconbury Weald

£m

Investment

properties

Trading

properties

Properties

within PPE

Trade and

other receivables

Total

Valuation at 1 October 2017

60.3

163.7

3.4

17.2

244.6

Less: EPRA adjustment (trading properties)1

-

(37.3)

-

-

(37.3)

Carrying value in financial information at 1 October 2017

60.3

126.4

3.4

17.2

207.3

Capital expenditure (including capitalised overheads)/additions

12.1

20.8

-

0.2

33.1

Disposal/depreciation

-

(14.5)

(0.1)

-

(14.6)

Revaluation movements (investment properties)

10.6

-

 

-

10.6

Carrying value in financial information at 30 September 2018

83.0

132.7

3.3

17.4

236.4

Add: EPRA adjustment (trading properties)1

-

38.6

0.2

-

38.8

Valuation at 30 September 20182

83.0

171.3

3.5

17.4

275.2

 

1.    £1.5 million movement in year reflects £38.8 million closing EPRA adjustment less £37.3 million opening EPRA adjustment.

2.    Includes revaluation of the Morris Homes and Redrow variable considerations classified as a financial asset.

 

Taxation expense

The tax charge for the year of £3.6 million reflects an effective rate of tax of 16.0 per cent, lower than the average rate of UK corporation tax for the period, principally due to losses brought forward and excess losses generated in the period available to offset realised profits and revaluation surpluses. The charge relates in most part to the tax payable and utilisation of losses brought forward in respect of the sale of the Stansted Hotel and Bradford leisure scheme as well as deferred tax provided on the revaluation of the proportion of Alconbury held as an investment.

 

Dividend

The Board proposes to pay a final dividend of 2.2p in respect of the year ended 30 September 2018, taking the total dividend to 3.5p, up 9.4 per cent on last year. Subject to shareholder approval at the AGM, the dividend will be paid on 27 February 2019 to shareholders on the register on 11 January 2019. Investors choosing to participate in the dividend reinvestment scheme will need to make their election by 25 January 2019.

 

The Group paid its final dividend for the year to 30 September 2017 in February 2018 and the interim dividend in July 2018 at rates of 2.0p and 1.3p per share respectively, amounting to £4.5 million in total.

 

 

Consolidated balance sheet

Overview

 

Year ended 30 September 2018

 

Year ended 30 September 2017

Group

£m

Joint venture

and associates

£m

Total

£m

 

Group

£m

Joint venture

and associates

£m

Total

£m

Investment properties

86.9

-

86.9

 

79.1

-

79.1

Investment property held for sale

-

-

-

 

20.7

-

20.7

Trading properties1

273.8

116.5

390.3

 

289.7

79.4

369.1

Properties within PPE

3.7

-

3.7

 

4.1

-

4.1

Properties2

364.4

116.5

480.9

 

393.6

79.4

473.0

Investment in joint ventures and associate

103.4

(103.4)

-

 

76.8

(76.8)

-

Trade and other receivables

Non-current property2

20.4

11.6

32.0

 

16.9

10.6

27.5

Current property2

10.9

-

10.9

 

1.9

-

1.9

Current - other

18.1

10.0

28.1

 

13.5

0.7

14.2

49.4

21.6

71.0

 

32.3

11.3

43.6

Cash

16.6

0.5

17.1

 

12.2

1.0

13.2

Borrowings

(94.9)

(21.3)

(116.2)

 

(93.9)

(13.1)

(107.0)

Deferred tax liability (net)

(4.1)

-

(4.1)

 

(1.4)

-

(1.4)

Other net liabilities

(45.8)

(13.9)

(59.7)

 

(47.7)

(1.8)

(49.5)

Net assets

389.0

-

389.0

 

371.9

-

371.9

EPRA adjustments - property2

67.4

17.9

85.3

 

55.0

6.8

61.8

EPRA adjustments - deferred tax

6.9

-

6.9

 

5.6

-

5.6

EPRA net assets

463.3

17.9

481.2

 

432.5

6.8

439.3

 

1.    All properties held by joint ventures are trading properties.

2.    Total property related interests: £609.1 million (30 September 2017: £564.2 million). The 30 September 2017 comparative now incorporates Rugby minimums and overages that were previously classified as other working capital.

 

Non-current assets

Investment properties

Investment properties at 30 September 2018 amounted to £86.9 million and comprised the commercial development and expansion areas at Alconbury (£83.0 million) and a proportion of the Waterbeach site (£3.9 million), which could deliver both commercial buildings and residential properties for rent in due course.

 

The Group's total year-end property portfolio, irrespective of balance sheet classification, was valued at £609.1 million, 90 per cent by independent valuers CBRE and 10 per cent by Directors.

 

Investment in equity accounted joint ventures and associates

Investment in joint ventures and associates has increased by £26.6 million, predominantly the result of the reclassification of the Group's remaining interest in the Manchester New Square development (£14.9 million) - following a 50 per cent disposal to Greater Manchester Pension Fund in April 2018 - and further loans made to the Rugby joint venture to fund infrastructure expenditure (£8.6 million).

 

Following a resolution to grant planning consent for 2,800 homes at Wintringham, the Group has recognised an £8.5 million valuation uplift in respect of its one-third share through EPRA, with Rugby contributing a further £3.8 million of incremental value.

 

These uplifts (£12.3 million) together with £2.1 million of residential trading profits booked through the income statement see joint ventures contribute £14.4 million or 9.9p per share to the 27.4p EPRA movement in the year.

 

Further analysis of the Group's joint ventures can be found in note 11.

 

Non-current trade and other receivables

The £20.4 million disclosed on the face of the balance sheet comprises both the non-current proportions of the acquired Priors Hall receivables and the discounted value of Morris Homes and Redrow contractual minimums at Alconbury and Avant contractual minimums at Newark. Equivalent receivables are owed to the Rugby joint venture by Crest Nicholson (£5.7 million) and again Morris Homes (£5.9 million). All sums due will be received as and when the houses to which they relate are sold.

 

Current assets

Trading properties

The carrying value of trading properties decreased by £15.9 million in the year to £273.8 million.

 

This fall was the result of a combination of the reclassification of Manchester New Square to joint ventures as well as other compensating movements namely: additions of £90.1 million including the acquisition of Priors Hall, development expenditure at the strategic land sites and Catesby promotion expenditure. Against this £106.0 million of disposals or write downs were made including the sale of Stansted and Skelton (£46.8 million) and £26.5 million of residential disposals (incorporating the full cost of 173 plots on contract completion with Avant, the full cost of 58 plots on contract completion with Redrow, 42 Hopkins sales and a 64-plot land parcel to Bellway).

 

During the year, capitalised overheads and interest within trading properties amounted to £4.2 million and £2.2 million respectively.

 

Cash

Group cash balances, excluding joint ventures, at the year end totalled £16.6 million, up £4.4 million since last year, predominantly due to sales receipts (£140.6 million) and loan drawdowns (£42.8 million) exceeding development expenditure (£61.4 million), loan repayments on properties sold in the year (£42.0 million) and the £40.5 million acquisition of Priors Hall.

 

Sales receipts (net of debt repayments) comprised commercial sales receipts of £105.8 million, £17.2 million of Catesby promotion receipts (including cost reimbursement) and £17.6 million of residential sales receipts.

 

Liabilities

Current and non-current borrowings

The Group or its joint ventures have put in place four new facilities in the year: the first; a 15-year, £46.2 million Homes England acquisition and infrastructure facility in respect of Priors Hall; the second a ten-year, £2.0 million development facility with Huntingdon District Council to fund a second incubator commercial building at Alconbury; and the last two facilities, totalling £75.6 million, were put in place by the Manchester New Square joint venture to fund the development of 351 residential apartments.

 

At the year end total Group borrowings amounted to £94.9 million (30 September 2017: £93.9 million) with the Group's share of joint ventures borrowing a further £21.8 million (30 September 2017: £13.1 million).

 

During the year the Group made further drawings of £10.6 million from the Alconbury Homes England facility, together with £28.2 million from the Priors Hall facility (to fund part of the £40.5 million acquisition cost) and £2.0 million from the Incubator 2 development facility. These drawings broadly replaced Stansted, Bradford and Feethams facilities which were repaid following their disposal.

 

Joint ventures made further drawings during the year of £4.7 million from the Homes England facility within the Rugby joint venture and £3.2 million from the Manchester New Square development facilities.

 

Financial resources and capital management

The Group's net debt position at 30 September 2018 totalled £78.3 million (30 September 2017: £81.7 million), comprising external borrowings of £94.9 million and cash reserves of £16.6 million, producing a net gearing ratio of 20.1 per cent (30 September 2017: 22.0 per cent) on an IFRS NAV basis and 16.3 per cent (30 September 2017: 18.6 per cent) on an EPRA NAV basis.

 

On a full look-through basis, which additionally includes the Group's share of joint ventures' net debt, gearing on an EPRA basis increases to 20.6 per cent, still well within our self-imposed limit of 30 per cent.

 

Of the £118.1 million of borrowings at the year end (which includes the Groups share of joint venture borrowings) 78 per cent (£91.9 million) relate to facilities with Homes England, local authorities or the Housing Infrastructure Fund.

 

Undrawn facilities at 30 September 2018 totalled £86.0 million (comprising £51.4 million of Group facilities and £34.6 million of joint venture facilities).

 

The Group's weighted average loan maturity at 30 September 2018 was 7.9 years (30 September 2017: 5.3 years) and weighted average cost of borrowing on drawn debt was 3.3 per cent (30 September 2017: 2.9 per cent).

 

The Group has no loans maturing over the next three years, with the exception of the £40 million revolving credit facility (RCF), which matures in June 2019, the £11.2 million Homes England facility at Newark, which is currently amortising and due for repayment by March 2021 and £75.6 million of joint venture development loans at Manchester New Square, which will be repaid from sales proceeds. Subsequent to the year end, the Group has received credit committee approved terms for a five-year extension to the RCF, which is now in documentation, and discussions have commenced with Homes England on the extension of the Newark facility. A new £8.6 million development facility for Civic Living has also received credit approval and is in documentation and a £26.0 million infrastructure loan for the Wintringham development (in which Urban&Civic has a one-third interest) is in final form ; both are with Homes England.

 

The Group maintains a comprehensive business plan model which forecasts the cash usage and generation on a project-by-project and consolidated basis for five years, or longer in relation to our strategic land sites. This model is regularly updated and informs the Group as to its cash needs, allowing us to plan ahead.

 

David Wood

Group Finance Director

28 November 2018

 

 

 

 

Consolidated statement of comprehensive income

for the year ended 30 September 2018

 

Notes

Year ended

30 September

2018

£'000

Year ended

30 September

2017

£'000

Revenue

2

150,398

60,333

Direct costs

2

(123,127)

(44,402)

Gross profit

2

27,271

15,931

Administrative expenses

(18,812)

(14,691)

Other operating income

-

83

Surplus on revaluation of investment properties

9

10,582

4,949

Surplus on revaluation of receivables

14

1,090

-

Share of post-tax profit from joint ventures

11

2,059

1,271

Write back of loans to joint ventures and associates

11

-

1,500

Profit on disposal of investments

11

94

-

Profit/(loss) on disposal of investment properties

9

1,244

(143)

Operating profit

3

23,528

8,900

Finance income

5

866

245

Finance costs

5

(2,127)

(1,221)

Profit before taxation

22,267

7,924

Taxation expense

6

(3,572)

(1,113)

Total comprehensive income

18,695

6,811

Basic earnings per share

7

13.0p

4.8p

Diluted earnings per share

7

12.9p

4.7p

 

The Group had no amounts of other comprehensive income for the current or prior years and the profit for the respective years is wholly attributable to equity shareholders.

 

The accompanying notes form part of this preliminary financial information.

 

Consolidated balance sheet

as at 30 September 2018

 

Notes

30 September

2018

£'000

30 September

2017

£'000

Non-current assets

Investment properties

9

86,918

79,111

Property, plant and equipment

10

4,508

5,100

Investments in joint ventures and associates

11

103,418

76,757

Deferred tax assets

12

2,788

4,240

Trade and other receivables

14

20,445

16,922

218,077

182,130

Current assets

Trading properties

13

273,770

289,707

Trade and other receivables

14

29,039

15,360

Cash and cash equivalents

 

16,638

12,190

319,447

317,257

Investment property held for sale

9

-

20,735

319,447

337,992

Total assets

537,524

520,122

Non-current liabilities

Borrowings

16

(73,973)

(69,824)

Deferred tax liabilities

12

(6,851)

(5,652)

(80,824)

(75,476)

Current liabilities

Borrowings

16

(20,891)

(24,026)

Trade and other payables

15

(46,786)

(48,740)

(67,677)

(72,766)

Total liabilities

(148,501)

(148,242)

Net assets

389,023

371,880

Equity

Share capital

17

29,009

28,993

Share premium account

168,881

168,648

Capital redemption reserve

849

849

Own shares

(4,748)

(4,003)

Other reserve

113,785

113,785

Retained earnings

81,247

63,608

Total equity

389,023

371,880

NAV per share

18

268.3p

257.6p

EPRA NAV per share

18

331.8p

304.4p

 

The accompanying notes form part of this preliminary financial information.

 

Consolidated statement of changes in equity

for the year ended 30 September 2018

 

Share

capital

£'000

Share

premium

account

£'000

Capital

redemption

reserve

£'000

Own

shares

£'000

Other

reserve

£'000

Retained

earnings

£'000

Total

£'000

Balance at 1 October 2016

28,961

168,320

849

(3,817)

113,785

58,214

366,312

Shares issued under scrip dividend scheme

328

-

-

-

-

360

Deferred bonus award satisfied
out of own shares

-

-

63

-

-

63

Purchase of own shares

-

-

(249)

-

-

(249)

Share-based payment expense

-

-

-

-

3,119

3,119

Total comprehensive income for the year

-

-

-

-

6,811

6,811

Dividends paid

-

-

-

-

-

(4,536)

(4,536)

Balance at 30 September 2017

28,993

168,648

849

(4,003)

113,785

63,608

371,880

Shares issued under scrip dividend scheme

233

-

-

-

-

249

Share option exercise satisfied
out of own shares

-

-

647

-

-

647

Purchase of own shares

 -

-

(1,392)

-

-

(1,392)

Share-based payment expense

-

-

-

-

3,434

3,434

Total comprehensive income for the year

-

-

-

-

18,695

18,695

Dividends paid

-

-

-

-

-

(4,490)

(4,490)

Balance at 30 September 2018

29,009

168,881

849

(4,748)

113,785

81,247

389,023

 

Consolidated cash flow statement

for the year ended 30 September 2018

 

Year ended

30 September

2018

£'000

Year ended

30 September

2017

£'000

Cash flows from operating activities

Profit before taxation

22,267

7,924

Adjustments for:

Surplus on revaluation of investment properties

(10,582)

(4,949)

Surplus on revaluation of receivables

(1,090)

-

Share of post-tax profit from joint ventures

(2,059)

(1,271)

Finance income

(866)

(245)

Finance costs

2,127

1,221

Depreciation charge

1,148

814

Write back of loans to joint ventures and associates

-

(1,500)

Write down/(back) of trading properties

2,570

(1,402)

(Profit)/loss on sale of investment properties

(1,244)

143

Profit on disposal of investments

(94)

-

Loss on disposal of property, plant and equipment

2

15

Share-based payment expense

3,434

3,119

Cash flows from operating activities before change in working capital

15,613

3,869

Decrease/(increase) in trading properties

631

(54,714)

(Increase)/decrease in trade and other receivables

(15,284)

26,895

(Decrease)/increase in trade and other payables

(2,330)

1,705

Cash generated/(absorbed) by operations

(1,370)

(22,245)

Finance costs paid

(3,476)

(1,608)

Finance income received

39

238

Tax paid

(111)

-

Net cash flows from operating activities

(4,918)

(23,615)

Investing activities

Additions to investment properties

(14,174)

(14,792)

Additions to property, plant and equipment

(558)

(285)

Acquisition of loans in joint ventures

-

(3,300)

Loans advanced to joint ventures

(9,685)

(12,516)

Loans repaid by joint ventures and associates

2

2,432

Profit on disposal of investments

94

-

Proceeds from disposal of investment properties

38,925

8,811

Net cash flows from investing activities

14,604

(19,650)

Financing activities

New loans

42,818

62,114

Issue costs of new loans

(408)

(402)

Repayment of loans

(42,015)

(16,915)

Purchase of own shares

(1,392)

(249)

Dividends paid

(4,241)

(4,176)

Net cash flows from financing activities

(5,238)

40,372

Net increase/(decrease) in cash and cash equivalents

4,448

(2,893)

Cash and cash equivalents at 1 October

12,190

15,083

Cash and cash equivalents at 30 September

16,638

12,190

 

Notes to the consolidated financial information

for the year ended 30 September 2018

 

1. Accounting policies

Basis of preparation

The financial information contained in this announcement has been prepared on the basis of the accounting policies set out in the statutory accounts for the year-ended 30 September 2018. Whilst the financial information included in this announcement has been computed in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS. The financial information does not constitute the Company's statutory accounts for the periods ended 30 September 2018 or 2017, but is derived from those accounts. Those accounts give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole. Statutory accounts for 2017 have been delivered to the Registrar of Companies and those for 2018 will be delivered following the Company's Annual General Meeting. The auditor's reports on both the 2018 and 2017 accounts were unqualified; did not draw attention to any matters by way of emphasis; and did not contain statements under s498(2) or (3) of the Companies Act 2006.

The principal accounting policies adopted in the preparation of this preliminary financial information are set out below. The policies have been consistently applied to both years, unless otherwise stated.

Functional and presentation currency

All financial information is presented in British Pounds Sterling (£), the functional currency of all Group entities, and has been rounded to the nearest thousand (£'000) unless indicated to the contrary.

 

Going concern

The consolidated financial information has been prepared on a going concern basis, which assumes that the Group will continue to meet its liabilities as they fall due. At 30 September 2018 the Group has prepared cash flow projections that show that it is expected to have adequate resources to continue in operational existence for the foreseeable future.

 

In arriving at this assessment the Directors have considered any facilities that are due to expire in the next 12 months against progress made on their extension or renewal to date, and/or the Group's ability to repay the maturing facilities from Group resources.

 

Adoption of new and revised standards

There have been no new or revised accounting standards that have become effective during the year ended 30 September 2018 which have a material impact on the Group.

 

New standards and interpretations not yet applied

The IASB has issued or amended the following standards that are mandatory for later accounting years, are relevant to the Group and have not been adopted early. These are:

 

IFRS 9 'Financial Instruments' (effective date: 1 January 2018)

 

IFRS 15 'Revenue from Contracts with Customers' (effective date: 1 January 2018)

 

IFRS 16 'Leases' (effective date: 1 January 2019)

 

The Group has undertaken an assessment of the impact should these standards have been adopted for the current period of account.

 

IFRS 9 'Financial Instruments' will be effective for the Group from the period beginning 1 October 2018 and applies to the recognition, derecognition, classification and measurement of financial assets and financial liabilities as well as hedge accounting. Based on the current financial instruments held by the Group, there would be no impact to the Group's current year results, other than possible disclosure items. The main future impact based on current financial instruments held by the Group is likely to be in respect of long-term receivables, which will be revalued where it is identified that there has been an indication of an underlying change in the credit risk of the counterparty.

 

IFRS 15 'Revenue from Contracts with Customers' will be effective for the Group from the period beginning 1 October 2018 and replaces IAS 18 'Revenue' and IAS 11 'Construction Contracts'. IFRS 15 establishes a five-step principle-based approach to revenue recognition including identifying the contract, the performance obligations within the contract and the point at which these are satisfied, determining the transaction price and allocating it to the performance obligations. The principal impact on the Group that has been identified to date has been assessed as being in respect of determining the transaction price for land sale contracts where the Group will be required to estimate any variable consideration to which it is entitled at the point that the performance conditions of the contract are satisfied. Under certain land sales contracts, the Group is entitled to a minimum payment, with an additional overage receivable dependent on the onward house prices achieved following the construction of houses on the land by the purchaser. Currently, under IAS 18, the Group recognises the contractual minimums at the point of sale with the overage recognised when revenue can be measured reliably. Under IFRS 15, these overage amounts would instead be recognised to the extent that it is highly probable that there will not be a significant reversal of the cumulative amounts recognised. Were IFRS 15 to be applied to the current year results and the overage amounts estimated accordingly, an additional receivable of £3.2 million would be reflected on the balance sheet with corresponding cumulative additional revenue recognised within the income statement and retained earnings, as well as an increase in the share of profits from and the investments in joint ventures of £0.8 million. This acceleration of profits would result in an additional deferred tax liability of £0.8 million based on the tax rates currently in effect. The 2018 figures will be restated in the 2019 accounts to reflect the new accounting treatment.

 

IFRS 16 'Leases' will be effective for the Group from the period beginning 1 October 2019, and will result in the Group recognising a financial asset and liability on the balance sheet initially at the present value of all future lease payments it is obliged to make for any material leases for which it is the lessee. These are disclosed in note 20. For the year ended 30 September 2018, it has been assessed that this would lead to the recognition on the balance sheet of assets and liabilities of £1.3 million. There is no net impact on profit and loss over the lease term, but under IFRS 16 part of the payment currently recognised within administrative expenses (£0.1 million) in the year ended 30 September 2018 would be recognised as a finance cost. The treatment of leases where the Group is acting as a lessor is substantially unchanged from that currently applied under IAS 17.

 

The above assessments are based on the assumption that the Group does not take advantage of any of the transitional provisions available within the new standards.

 

Basis of consolidation

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

 

The consolidated financial information presents the results of the Group as if it formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

 

Business combinations

The consolidated financial information incorporates the results of business combinations using the purchase method. In the consolidated balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained.

 

Joint arrangements

The Group is party to joint arrangements where there are contractual arrangements that confer joint control over the relevant activities of the arrangements to the Group and at least one other party. Joint control is assessed under the same principles as control over subsidiaries.

 

All of the Group's interests in joint arrangements constitute joint ventures, where the Group has rights to only a share of the net assets of the joint arrangements.

 

In the consolidated financial information, interests in joint ventures are accounted for using the equity method of accounting whereby the consolidated balance sheet incorporates the Group's share of the net assets of the joint ventures. The consolidated statement of comprehensive income incorporates the Group's share of the joint ventures' profits after tax.

 

Where there is objective evidence that the investment in a joint venture has been impaired, the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.

 

Associates

Where the Group has significant influence but not control or joint control over the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recorded in the consolidated balance sheet at cost. The Group's share of post-acquisition profits and losses is recognised in the consolidated statement of comprehensive income, except that losses in excess of the Group's investment in the associate are not recognised unless there is an obligation to make good those losses.

 

Where the Group has a legal obligation to a third party in relation to the losses of an associate, the Group fully provides for its share and the charge is recognised in the consolidated statement of comprehensive income.

 

Investment properties

Investment properties are properties held for long-term rental income and/or for capital appreciation and are measured initially at cost, including related transaction costs, and subsequently at fair value. Changes in fair value of an investment property at the balance sheet date and its carrying amount prior to remeasurement are recorded in the consolidated statement of comprehensive income.

 

Investment properties are recognised as an asset when:

 

•    it is probable that future economic benefits that are associated with the investment property will flow to the Group;

•    there are no material conditions present that could prevent completion; and

•    the cost of the investment property can be measured reliably.

 

Additions to investment properties in the course of development or refurbishment include the cost of finance and directly attributable internal and external costs incurred during the period of development until the properties are ready for their intended use.

 

An investment property undergoing redevelopment or refurbishment for continued use as an investment property will remain as an investment property measured at fair value and is not reclassified.

 

An investment property is classified as held for sale when it is available for immediate sale, management is committed to a plan to sell, an active programme to locate a buyer has been initiated and a sale is expected to occur within 12 months.

 

A transfer of a property from investment properties to trading properties will be made where there is a change in use such that the asset is to be developed or held with a view to sale.

 

Trading properties

Trading properties comprise both direct interests in property and indirect beneficial interests in property held through land promotion agreements or other contractual arrangements. They are classified as inventory and are included in the consolidated balance sheet at the lower of cost and net realisable value. Net realisable value is the expected net sales proceeds of the developed property in the ordinary course of business less the estimated costs to completion and associated selling costs. A provision is made to the extent that projected costs exceed projected revenues.

 

All external and internal costs, including borrowing costs, directly associated with the purchase, promotion and construction of a trading property are capitalised up to the date that the property is ready for its intended use. Property acquisitions are recognised when legally binding contracts that are irrevocable and effectively unconditional are exchanged.

 

Properties reclassified to trading properties from investment properties are transferred at deemed cost, being the fair value at the date of reclassification.

 

Properties reclassified from trading properties to investment properties are transferred at cost when there is a change in use of the asset such that it is to be held for long-term rental income and/or for capital appreciation.

 

Leases

Where the Group is the lessor, the Directors have considered the potential transfer of risks and rewards of ownership in accordance with IAS 17 'Leases' and in their judgement have determined that all such leases are operating leases. Rental income from operating leases is recognised in the consolidated statement of comprehensive income on a straight line basis over the term of the relevant lease.

 

Where the Group is the lessee, leases in which substantially all risks and rewards of ownership are retained by another party are classified as operating leases. The Directors have determined that all of their lessee arrangements constitute operating leases. Rentals paid under operating leases are charged to the consolidated statement of comprehensive income on a straight line basis over the term of the lease.

 

Property, plant and equipment

Property, plant and equipment is stated at cost or fair value at the date of transfer less accumulated depreciation and accumulated impairment losses. This includes costs directly attributable to making the asset capable of operating as intended.

 

Depreciation is provided on all plant and equipment at rates calculated to write off the cost less estimated residual value, based on prices prevailing at the reporting date, of each asset over its expected useful life as follows:

 

Freehold property              -            shorter of expected period to redevelopment and 2 per cent straight line

 

Leasehold improvements  -            shorter of term of the lease and 10 per cent straight line

 

Furniture and equipment   -           20-33 per cent straight line

 

Revenue recognition

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration receivable, including the fair value of any residential properties received in part exchange, excluding VAT. The following recognition policies are applied:

 

Sale of property

Revenue from the sale of trading and investment properties, including beneficial interests held indirectly through land promotion and other contractual agreements, is recognised when the significant risks and rewards of ownership of the Group's interest have passed to the buyer, usually when legally binding contracts that are irrevocable and effectively unconditional are exchanged and the amount of revenue can be measured reliably. Revenue and profits on construction contracts from trading properties in the course of development where construction risks remain is recognised on a percentage completion basis determined with reference to costs incurred to date as a proportion of total forecast costs at completion.

 

Revenue from the sale of constructed residential property is recognised on completion of sale.

 

Rental and hotel income

Rental income arising from property is accounted for on a straight line basis over the term of the lease. Lease incentives, including rent free periods and payments to tenants, are allocated to the consolidated statement of comprehensive income on a straight line basis over the lease term as a deduction from rental income.

 

Hotel income includes revenues derived from hotel operations, including the rental of rooms and food and beverage sales. Revenue is recognised when rooms are occupied and services have been rendered.

 

Fees and other income

Fees from development management service arrangements and other agreements are determined by reference to the relevant agreement and recognised as the services are provided.

 

Taxation

Current tax

The charge for current taxation is based on the results for the year as adjusted for items that are non-taxable or disallowed. It is calculated using rates and laws that have been enacted or substantively enacted by the balance sheet date. Tax payable upon realisation of revaluation gains on investment property disposals that were recognised in prior periods is recorded as a current tax charge with a release of the associated deferred taxation.

 

Deferred tax

Deferred tax is provided using the balance sheet liability method in respect of temporary differences between the carrying amount of assets and liabilities in the consolidated balance sheet and the corresponding tax base cost used in computing taxable profit.

 

Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. It is recognised in the consolidated statement of comprehensive income except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

 

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same tax authority.

 

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

 

Under IAS 12 'Income Taxes', a deferred tax liability is recognised for tax potentially payable on the realisation of investment properties at fair values at the balance sheet date.

 

Deferred tax balances are not discounted.

 

Share-based payments

The fair value of granting share awards under the Group's performance share plan, and the other share-based remuneration of the Directors and other employees, is recognised through the consolidated statement of comprehensive income. The fair value of shares awarded is calculated by using an option pricing model. The resulting fair value is amortised through the consolidated statement of comprehensive income on a straight line basis over the vesting period. The charge is reversed if it is likely that any non-market-based vesting criteria will not be met. The charge is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.

 

Employee Benefit Trust

The Group is deemed to have control of its Employee Benefit Trust (EBT) and it is therefore treated as a subsidiary and consolidated for the purposes of the consolidated accounts. The EBT's investment in the parent company's shares is deducted from equity in the consolidated balance sheet as if they were treasury shares. Other assets and liabilities of the EBT are recognised as assets and liabilities of the Group. Any shares held by the EBT are excluded for the purposes of calculating earnings per share and net assets per share.

 

Retirement benefits

Contributions to defined contribution pension schemes are charged to the consolidated statement of comprehensive income in the period to which they relate.

 

Government grants

Government grants received in relation to property asset capital expenditure are generally deducted in arriving at the cost of the relevant asset. Where retention of a Government grant is dependent on the Group satisfying certain criteria, it is initially recognised in other loans. When the criteria for retention have been satisfied, the balance is netted against the cost of the asset.

 

Dividends

Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when the dividends are approved by the Directors and paid. In the case of final dividends, this is when approved by the shareholders at the AGM.

 

Impairment of non-financial assets (excluding trading properties, investment properties and deferred tax)

Impairment tests on the Group's property, plant and equipment and interests in joint ventures and associates are undertaken at each reporting date to determine whether there is any indication of impairment. If such indication becomes evident, the asset's recoverable amount is estimated and an impairment loss is recognised in the consolidated statement of comprehensive income whenever the carrying amount of the asset exceeds its recoverable amount.

 

The recoverable amount of an asset is the greater of its fair value less costs to sell and its value in use. The value in use is determined as the net present value of the future cash flows expected to be derived from the asset.

 

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated balance sheet when the Group becomes a party to the contractual provisions of the instrument.

 

Cash and cash equivalents

Cash and cash equivalents consist of cash in hand, deposits with banks and other short-term, highly liquid investments with original maturities of three months or less from inception. For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand and deposits with banks net of bank overdrafts.

 

Trade and other receivables

Trade and other receivables arising in the normal course of business are initially recognised at fair value and subsequently at amortised cost or recoverable amount. Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable. The amount of such a provision is the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

 

Receivables acquired by the Group that include a variable right to receive cash are recognised initially at fair value and are subsequently remeasured to fair value at each reporting date with fair value movements recognised within the income statement.

 

Trade and other payables

Trade and other payables are initially recorded at fair value and subsequently at amortised cost.

 

Borrowings

Interest-bearing loans are initially recorded at fair value, net of any directly attributable issue costs, and subsequently recognised at amortised cost.

 

Borrowing costs

Finance and other costs incurred in respect of obtaining borrowings are accounted for on an accruals basis using the effective interest method and amortised to the consolidated statement of comprehensive income over the term of the associated borrowings.

 

Borrowing costs directly attributable to the acquisition and construction of investment and trading properties are added to the costs of such properties until the properties are ready for their intended use.

 

All other borrowing costs are recognised in the consolidated statement of comprehensive income in the period in which they are incurred.

 

Critical accounting estimates and judgements

The preparation of financial information in accordance with IFRSs requires the use of certain critical accounting estimates and judgements. It also requires management to exercise judgement in the process of applying the Group's accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may differ from those estimates.

 

Areas requiring the use of estimates and critical judgement that may impact on the Group's earnings and financial position include:

 

Accounting estimates

Valuation of investment and trading properties

For the purposes of calculating the fair value of its investment property portfolio and the net realisable value (and, for EPRA reporting purposes, the fair value) of its trading property portfolio, the Group uses valuations carried out by either independent valuers or the Directors on the basis of market value in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors. The valuations are based upon assumptions including future rental income, sales prices, an estimate of typical profit margins, anticipated maintenance costs, future development costs and appropriate discount rates. Assumptions used in the valuations of the Group's significant investment property interests carried at valuation at 30 September 2018 are disclosed in note 9. Details of the Group's trading properties that are measured at net realisable value are disclosed in note 13. The valuers and Directors also make reference to market evidence for comparable property transactions and principal inputs and assumptions.

 

Due to the nature of development timescales, it is routinely necessary to estimate costs to complete and future revenues and to allocate non-unit-specific development costs between units legally completing in the current financial year and in future periods.

 

Cost of trading property sales

The sale of parcels or units of strategic land requires an allocation of costs, including site-wide infrastructure, any construction costs directly attributable to individual land parcels and capitalised administrative expenses in order to account for cost of sales associated with the disposal. The costs being allocated, based on plot numbers as a proportion of total project plot numbers, include those incurred to date together with an allocation of costs remaining estimated with reference to latest project forecasts.

 

Taxation

There are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Group recognises tax liabilities based on estimates of whether additional taxes and interest will be due. The Group believes that its accruals for tax liabilities are adequate for all open years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve judgements about future events. The Directors have also exercised their judgement in relation to the recognition of certain deferred tax assets and liabilities. In order to assess whether the Group should recognise a deferred tax asset or liability, the Directors consider the timing and likelihood of expected future profits along with how these expected future profits match up with the existing tax losses within specific Group entities.

 

Share-based payments

The value of share-based payments is estimated using an option pricing model as at the date of grant and using certain assumptions.

 

Judgements

Distinction between investment properties and trading properties

Where there is a strategic decision taken to develop any element of an investment property for sale rather than hold for investment purposes, then that element is remeasured to fair value at the decision date and transferred to trading properties. Where there is a strategic decision taken to hold any element of a trading property for long-term capital growth or income, then that element is transferred to investment properties at cost and subsequently held at fair value.

 

Trading income

Revenue in respect of certain strategic land parcels is determined with reference to the onward house prices achieved following the construction of houses on the land by the purchaser following their acquisition, subject to agreed minimums. Following completion of the parcel sale, once all substantive conditions have been satisfied, revenue is recognised at the minimum amounts receivable discounted to adjust for the counterparty risk and timescale over which these are to be received. The additional variable element of the revenue is recognised at the point where the Directors consider that a reliable estimate can be made of the actual amount receivable taking into consideration reasonable possible outcomes based on historical house price data, timescales to completion and variability of consideration. This is currently considered to be the point of exchange of the house sale given the relatively early stage of each relevant development.

 

2. Revenue and gross profit

Year ended

30 September

2018

£'000

Year ended

30 September

2017

£'000

Trading property sales

91,213

8,002

Residential property sales

34,457

33,767

Revenue on construction contracts

6,688

-

Rental and other property income

5,618

6,504

Recoverable property expenses

1,458

1,383

Hotel income

7,973

9,228

Project management fees and other income

2,991

1,449

Revenue

150,398

60,333

Cost of trading property sales

(73,918)

(3,237)

Cost of residential property sales

(29,391)

(28,912)

Costs of construction contracts

(4,724)

-

Direct property expenses

(4,942)

(4,549)

Recoverable property expenses

(1,458)

(1,383)

Cost of hotel trading

(6,124)

(7,723)

Write (down)/back of trading properties

(2,570)

1,402

Direct costs

(123,127)

(44,402)

Gross profit

27,271

15,931

 

Year ended

30 September

2018

Year ended

30 September

2017

Number of construction contracts

1

-

     

 

Year ended

30 September

2018

£'000

Year ended

30 September

2017

£'000

Revenue on construction contracts

6,688

-

Costs of construction contracts

(4,724)

-

Profit on construction contracts

1,964

-

 

Construction contract revenue is recognised in the consolidated statement of comprehensive income in line with the contract stage of completion on the relevant contract, determined using the proportion of total estimated development costs incurred at the reporting date.

 

3. Operating profit

Is arrived at after charging/(crediting):

Year ended

30 September

2018

£'000

Year ended

30 September

2017

£'000

Depreciation of property, plant and equipment - included in administrative expenses

934

545

Depreciation of property, plant and equipment - included in direct costs

214

269

Loss on disposal of property, plant and equipment

2

15

Impairment of trade receivables

29

61

Operating lease charges - rent of properties

808

779

Share-based payment expense

3,434

3,119

Capitalisation of administrative expenses to investment properties

(486)

(725)

Capitalisation of administrative expenses to trading properties held at year end

(4,238)

(4,494)

Fees paid to BDO LLP1 in respect of:

 

 

- audit of the Company

167

151

Other services:

 

 

- audit of subsidiaries and associates

95

101

- audit related assurance services

37

36

- other fees payable

42

-

 

1.    Total fees for 2018 payable to the Company's auditor are £340,500 (2017: £287,500). Of this, £261,500 (2017: £251,500) relates to audit services and £37,000 (2017: £36,000) to assurance services. £42,000 (2017: £Nil) relates to fees incurred to date for Reporting Accountant services in relation to the Company's proposed premium listing application.

 

4. Segmental information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Directors.

 

The two principal segments are strategic land and commercial property development. The strategic land segment includes serviced and unserviced land, consented and unconsented land and mixed-use development and promotion sites. The commercial segment includes city centre development and commercial regional developments. All of the Group's revenue is generated in the United Kingdom.

 

Segmental information is reported in the table that follows in respect of the current year in accordance with the requirements of IFRS 8 'Operating Segments'.

 

The segmental results that are monitored by the Board include all the separate lines making up the segmental IFRS operating profit. This excludes central overheads and taxation which are not allocated to operating segments.

 

Consolidated statement of comprehensive income

for the year ended 30 September 2018

Strategic land

£'000

Commercial

£'000

Unallocated

£'000

Total

£'000

Revenue

55,487

94,911

-

150,398

Other direct costs

(40,519)

(80,038)

-

(120,557)

Write (down)/back of trading properties

(2,608)

38

-

(2,570)

Total direct costs

(43,127)

(80,000)

-

(123,127)

Gross profit

12,360

14,911

-

27,271

Share-based payment expense

-

-

(3,434)

(3,434)

Other administrative expenses

-

-

(15,378)

(15,378)

Total administrative expenses

-

-

(18,812)

(18,812)

Surplus on revaluation of investment properties

10,582

-

-

10,582

Surplus on revaluation of receivables

1,090

-

-

1,090

Share of post-tax profit from joint ventures

1,993

66

-

2,059

Profit on disposal of investments

-

94

-

94

Profit on disposal of investment properties

-

1,244

-

1,244

Operating profit/(loss)

26,025

16,315

(18,812)

23,528

Net finance cost

(449)

(812)

-

(1,261)

Profit/(loss) before tax

25,576

15,503

(18,812)

22,267

 

In the year ended 30 September 2018, there were two major customers that generated £49,350,000 and £22,961,000 of revenue. Each of these represented 10 per cent or more of the total revenue.

 

Consolidated balance sheet

as at 30 September 2018

Strategic land

£'000

Commercial

£'000

Unallocated

£'000

Total

£'000

Investment properties

86,918

-

-

86,918

Property, plant and equipment

3,423

632

453

4,508

Investments in joint ventures

85,815

17,603

-

103,418

Deferred tax assets

-

-

2,788

2,788

Trade and other receivables

20,445

-

-

20,445

Non-current assets

196,601

18,235

3,241

218,077

Trading properties

246,617

27,153

-

273,770

Trade and other receivables

21,979

7,060

-

29,039

Cash and cash equivalents

-

-

16,638

16,638

Current assets

268,596

34,213

16,638

319,447

Borrowings

(74,973)

-

(19,891)

(94,864)

Trade and other payables

(33,816)

(12,970)

-

(46,786)

Deferred tax liabilities

(6,269)

-

(582)

(6,851)

Total liabilities

(115,058)

(12,970)

(20,473)

(148,501)

Net assets

350,139

39,478

(594)

389,023

 

Consolidated statement of comprehensive income

for the year ended 30 September 2017

Strategic land

£'000

Commercial

£'000

Unallocated

£'000

Total

£'000

Revenue

44,419

15,914

-

60,333

Other direct costs

(33,893)

(11,911)

-

(45,804)

Write back of trading properties

-

1,402

-

1,402

Total direct costs

(33,893)

(10,509)

-

(44,402)

Gross profit

10,526

5,405

-

15,931

Share-based payment expense

-

-

(3,119)

(3,119)

Other administrative expenses

-

-

(11,572)

(11,572)

Total administrative expenses

-

-

(14,691)

(14,691)

Other operating income

-

83

-

83

Surplus/(deficit) on revaluation of investment properties

5,899

(950)

-

4,949

Share of post-tax profit from joint ventures

1,065

206

-

1,271

Write back of loans to joint ventures

-

1,500

-

1,500

Loss on sale of investment properties

(143)

-

-

(143)

Operating profit/(loss)

17,347

6,244

(14,691)

8,900

Net finance income/(cost)

110

(1,086)

-

(976)

Profit/(loss) before tax

17,457

5,158

(14,691)

7,924

 

In the year ended 30 September 2017, there were three major customers that generated £15,509,000, £10,761,000 and £6,781,000 of revenue. Each of these represented 10 per cent or more of the total revenue.

 

Consolidated balance sheet

as at 30 September 2017

Strategic land

£'000

Commercial

£'000

Unallocated

£'000

Total

£'000

Investment properties

63,357

15,754

-

79,111

Property, plant and equipment

3,367

773

960

5,100

Investments in joint ventures and associates

74,154

2,603

-

76,757

Deferred tax assets

-

-

4,240

4,240

Trade and other receivables

16,922

-

-

16,922

Non-current assets

157,800

19,130

5,200

182,130

Investment property held for sale

-

20,735

-

20,735

Trading properties

202,262

87,445

-

289,707

Trade and other receivables

8,359

7,001

-

15,360

Cash and cash equivalents

-

-

12,190

12,190

Current assets

210,621

115,181

12,190

337,992

Borrowings

(33,812)

(36,816)

(23,222)

(93,850)

Trade and other payables

(23,687)

(25,053)

-

(48,740)

Deferred tax liabilities

(5,585)

-

(67)

(5,652)

Total liabilities

(63,084)

(61,869)

(23,289)

(148,242)

Net assets

305,337

72,442

(5,899)

371,880

 

5. Finance income and finance costs

Year ended

30 September

2018

£'000

Year ended

30 September

2017

£'000

Interest receivable from cash deposits

37

33

Unwinding of discount applied to long-term debtors

826

149

Other interest receivable

3

63

Finance income

866

245

Interest payable on borrowings

(3,089)

(1,854)

Amortisation of loan arrangement costs

(1,220)

(266)

Finance costs pre-capitalisation

(4,309)

(2,120)

Finance costs capitalised to trading properties

2,182

899

Finance costs

(2,127)

(1,221)

Net finance costs

(1,261)

(976)

 

Finance costs are capitalised at the same rate as the Group is charged on respective borrowings.

 

6. Tax on profit on ordinary activities

(a) Analysis of charge in the year

 

Year ended

30 September

2018

£'000

Year ended

30 September

2017

£'000

Current tax:

 

Adjustments in respect of previous periods

5

15

UK corporation tax on profits for the year

916

-

Total current tax

921

15

Deferred tax:

Origination and reversal of timing differences

2,746

857

Adjustments in respect of previous periods

(95)

241

Total deferred tax

2,651

1,098

Total tax charge

3,572

1,113

 

(b) Factors affecting the tax charge for the year

The effective rate of tax for the year varies from the standard rate of tax in the UK. The differences can be explained below.

 

Year ended

30 September

2018

£'000

Year ended

30 September

2017

£'000

Profit attributable to the Group before tax

22,267

7,924

Profit multiplied by the average rate of UK corporation tax of 19 per cent (30 September 2017: 19.5 per cent)

4,231

 1,545

Expenses not deductible for tax purposes

694

543

Differences arising from taxation of chargeable gains and property revaluations

(1,384)

(2,497)

Tax losses and other items

121

1,266

3,662

857

Adjustments to tax charge in respect of previous periods

(90)

256

Total tax charge

3,572

1,113

 

(c) Associates and joint ventures

The Group's share of tax on the joint ventures and associates is £Nil (2017: £Nil).

 

7. Earnings per share

Basic earnings per share

The calculation of basic earnings per share is based on a profit of £18,695,000 (2017: £6,811,000) and on 143,413,414 (2017: 143,300,624) shares, being the weighted average number of shares in issue during the year less own shares held.

 

Diluted earnings per share

The calculation of diluted earnings per share is based on a profit of £18,695,000 (2017: £6,811,000) and on 145,156,832 (2017: 144,244,702) shares, being the weighted average number of shares in issue less own shares held and the dilutive impact of share options granted.

 

Weighted average number of shares

2018

Number

2017

Number

In issue at 1 October

144,964,808

144,804,728

Effect of shares issued under scrip dividend scheme

40,877

75,933

Effect of own shares held

(1,592,272)

(1,580,037)

Weighted average number of shares at 30 September - basic

143,413,414

143,300,624

Dilutive effect of share options

1,743,418

944,078

Weighted average number of shares at 30 September - diluted

145,156,832

144,244,702

 

8. Dividends

Year ended

30 September

2018

£'000

Year ended

30 September

2017

£'000

Final dividend of 2.0p per share proposed and paid February 2018

2,442

-

Final dividend of 2.0p per share granted via scrip dividend

188

-

Interim dividend of 1.3p per share paid July 2018

1,799

-

Interim dividend of 1.3p per share granted via scrip dividend scheme

61

-

Final dividend of 1.8p per share proposed and paid February 2017

-

2,577

Final dividend of 1.8p per share granted via scrip dividend

-

239

Interim dividend of 1.2p per share paid July 2017

-

1,599

Interim dividend of 1.2p per share granted via scrip dividend scheme

-

121

4,490

4,536

 

The Directors are proposing a final dividend of 2.2p (2017: 2.0p) per share totalling £3,152,000. Dividends are not paid on the shares held by the Employee Benefit Trust. The dividend has not been accrued in the consolidated balance sheet at 30 September 2018.

 

9. Investment properties

(i) Carrying amount reconciliation

 

£'000

Valuation

At 1 October 2016

128,858

Additions at cost

15,292

Disposals

(8,954)

Surplus on revaluation

4,949

Transfer from trading properties

2,988

Transfer to trading properties

(43,287)

At 1 October 2017

99,846

Additions at cost

14,172

Disposals

(37,682)

Surplus on revaluation

10,582

Carrying value and portfolio valuation at 30 September 2018

86,918

 

30 September

2018

£'000

30 September

2017

£'000

Classification

 

 

Investment properties held for continuing use

86,918

79,111

Investment properties held for sale

-

20,735

Carrying value at 30 September

86,918

99,846

 

(ii) Operating lease arrangements

Refer to note 20 for details of the operating leases related to investment properties.

 

(iii) Items of income and expense

During the year ended 30 September 2018, £3,595,000 (2017: £5,106,000) was recognised in the consolidated statement of comprehensive income in relation to rental and ancillary income from investment properties. Direct operating expenses, including repairs and maintenance, arising from investment properties that generated rental income amounted to £2,760,000 (2017: £3,011,000). The Group did not incur any direct operating expenses arising from investment properties that did not generate rental income (2017: £Nil).

 

(iv) Restrictions and obligations

At 30 September 2018 and 2017 there were no restrictions on the realisability of investment properties or the remittance of income and proceeds of disposal.

 

There are no obligations, except those already contracted, to construct or develop the Group's investment properties.

 

(v) Historical cost and capitalisation

The historical cost of investment properties as at 30 September 2018 was £52,284,000 (2017: £76,773,000), which included capitalised interest of £10,705,000 (2017: £10,705,000). There was no interest capitalised during the current or prior year. During the year staff and administrative costs of £486,000 (2017: £725,000) have been capitalised and are included within additions.

 

(vi) Transfer of properties

On 30 September 2017, based on the terms of the licensing arrangements being agreed or negotiated with housebuilders, the Group agreed that the strategy for the residential part of Alconbury Weald held within investment properties was to develop it for sale. Accordingly, on 30 September 2017 this element of the property was reclassified as a trading property.

 

On 30 September 2017, based on the site intention set out in the submitted development plan, the Group agreed that the strategy for part of its interest in Waterbeach, previously held wholly within trading stock, was to hold for long-term capital gain and rental income. Accordingly, 32 per cent of the asset value was transferred to investment properties.

 

(vii) Fair value measurement

The Group's principal investment property, Alconbury Weald, which represents 97 per cent of the year-end carrying value (2017: 60 per cent), is valued on a semi-annual basis by CBRE Limited (CBRE), an independent firm of chartered surveyors, on the basis of fair value. The valuation at each period end is carried out in accordance with guidance issued by the Royal Institution of Chartered Surveyors. Fair value represents the estimated amount that should be received for selling an investment property in an orderly transaction between market participants at the valuation date.

 

As noted above, the Group's investment properties are all carried at fair value and are classified as level 3 within the fair value hierarchy as some of the inputs used in determining the fair value are based on unobservable market data. The following summarises the valuation technique used in measuring the fair value of Alconbury Weald, the Group's principal investment property, as well as the significant unobservable inputs and their inter-relationship with the fair value measurement. The remaining investment property interests have been valued by the Directors, either with reference to subsequent sales prices achieved or costs incurred to date.

 

Valuation technique

Discounted cash flows: the valuation model for the Group's strategic land considers the present value of net cash flows to be generated from a property (reflecting the current approach of constructing the infrastructure and discharging the section 106 cost obligations), taking into account expected land value growth rates, build cost inflation, absorption rates and general economic conditions. The expected net cash flows are discounted using risk-adjusted discount rates and the resultant value is benchmarked against transaction evidence.

 

Significant unobservable inputs

The key inputs to the investment property valuation at Alconbury Weald included:

 

30 September

2018

30 September

2017

Expected land price inflation (per cent)

3.0

3.0

Expected annual cost price inflation (per cent)

2.25

2.0

Commercial land value (£'000 per acre)

400

345

Risk-adjusted discount rate (per cent)

7.5

7.5

 

Inter-relationship between significant unobservable inputs and fair value measurement

The estimated fair value would increase/(decrease) if:

 

•    expected annual land price inflation was higher/(lower);

•    expected annual cost price inflation was lower/(higher);

•    commercial land value was higher/(lower); and

•    risk-adjusted discount rate was lower/(higher).

 

10. Property, plant and equipment

 

Freehold

property

£'000

Leasehold

improvements

£'000

Furniture

and equipment

£'000

Total

£'000

Cost

At 1 October 2016

5,425

700

1,170

7,295

Additions

-

30

255

285

Disposals

-

-

(53)

(53)

At 1 October 2017

5,425

730

1,372

7,527

Additions

-

86

472

558

Disposals

-

(76)

(248)

(324)

At 30 September 2018

5,425

740

1,596

7,761

Depreciation

At 1 October 2016

922

208

521

1,651

Charge for the year

391

122

301

814

Released on disposal

-

-

(38)

(38)

At 1 October 2017

1,313

330

784

2,427

Charge for the year

459

183

506

1,148

Released on disposal

-

(76)

(246)

(322)

At 30 September 2018

1,772

437

1,044

3,253

Net book value

At 30 September 2018

3,653

303

552

4,508

At 30 September 2017

4,112

400

588

5,100

 

No assets were held under finance leases in either the current or prior years.

 

11. Investments

Investments in joint ventures and associates

Joint

ventures

£'000

Associates

£'000

Total

£'000

Cost or valuation

 

 

 

At 1 October 2016

50,547

500

51,047

Share of post-tax profit from joint ventures

1,271

-

1,271

Additions

14,303

-

14,303

Loans advanced

11,068

-

11,068

Loans repaid

(434)

(1,998)

(2,432)

Write back of loans to associates

-

1,500

1,500

At 1 October 2017

76,755

2

76,757

Share of post-tax profit from joint ventures

2,059

-

2,059

Additions

14,918

-

14,918

Loans advanced

9,686

-

9,686

Loans repaid

-

(2)

(2)

At 30 September 2018

103,418

-

103,418

 

At 30 September 2018 the Group's interests in its joint ventures were as follows:

 

Manchester New Square LP

50%

Property development

SUE Developments LP

50%

Property development

Achadonn Limited

50%

Property development

Altira Park JV LLP

50%

Property development

Wintringham Partners LLP

33%

Property development

 

Summarised information on joint ventures 2018

100%

SUE

Developments LP

£'000

Wintringham

 Partners LLP

£'000

Achadonn

Limited

£'000

Altira Park JV

LLP

£'000

Manchester New

Square LP

£'000

Total

2018

£'000

Revenue

17,400

-

-

54

-

17,454

Profit/(loss) after tax

3,990

(6)

-

53

-

4,037

Total assets

193,453

44,267

6,564

1,239

45,619

291,142

Other liabilities

(142,877)

(44,273)

(6,609)

(52)

(45,619)

(239,430)

Total liabilities

(142,877)

(44,273)

(6,609)

(52)

(45,619)

(239,430)

Net assets/(liabilities)

50,576

(6)

(45)

1,187

-

51,712

The Group's carrying value consists of:

Group's share of net assets

25,288

(2)

-

594

-

25,880

Loans

45,146

15,383

2,091

-

14,918

77,538

Total investment in joint ventures

70,434

15,381

2,091

594

14,918

103,418

 

Summarised information on joint ventures 2017

100%

SUE

Developments LP

£'000

Achadonn

Limited

£'000

Altira Park JV

LLP

£'000

Wintringham

 Partners LLP

£'000

Total

2017

£'000

Revenue

21,965

-

660

-

22,625

Profit/(loss) after tax

2,130

(2)

(10)

-

2,118

Total assets

149,702

6,554

1,146

49,898

207,300

Other liabilities

(103,116)

(6,600)

(90)

(49,898)

(159,704)

Total liabilities

(103,116)

(6,600)

(90)

(49,898)

(159,704)

Net assets/(liabilities)

46,586

(46)

1,056

-

47,596

The Group's carrying value consists of:

Group's share of net assets

23,293

-

528

-

23,821

Loans

36,558

2,073

-

14,303

52,934

Total investment in joint ventures

59,851

2,073

528

14,303

76,755

 

SUE Developments LP holds the RadioStation Rugby site.

 

Summarised information on associate

 

2018

Terrace Hill

Development

Partnership

£'000

2017

Terrace Hill

Development

Partnership

£'000

Revenue

-

3,099

Profit after tax

-

399

Total assets

-

695

Total liabilities

-

(216)

Net assets

-

479

Non-recourse net assets

-

479

Adjust for:

Group's share of net assets

-

-

The carrying value consists of:

Group's share of net assets

-

-

Loans

-

2

Total investment in associates

-

2

Share of unrecognised profit

At 1 October

80

483

Share of unrecognised profit for the year

-

80

Profits distributed and recognised in the year

(94)

-

Adjustments in respect of previous periods

14

(483)

At 30 September

-

80

 

 

12. Deferred tax

The net movement on the deferred tax account is as follows:

 

Year ended

30 September

2018

£'000

Year ended

30 September

2017

£'000

At 1 October

(1,412)

(314)

Movement in the year (see note 6)

(2,651)

(1,098)

At 30 September

(4,063)

(1,412)

 

The deferred tax balances are made up as follows:

 

 

At

30 September

2018

£'000

At

30 September

2017

£'000

Deferred tax assets

 

Tax losses

2,788

4,240

 

2,788

4,240

Deferred tax liabilities

Revaluation surpluses

6,851

5,652

6,851

5,652

 

At 30 September 2018, the Group had unused tax losses of £23,118,000 (2017: £32,132,000), of which £16,302,000 (2017: £23,120,000) has been recognised as a deferred tax asset. A further £6,227,000 (2017: £5,373,000) has been applied to reduce the Group's deferred tax liability recognised at the balance sheet date as required by IAS 12 'Income Taxes' in respect of tax potentially payable on the realisation of investment properties at fair value at the balance sheet date. No deferred tax asset is recognised in respect of realised or unrealised capital losses if there is uncertainty over future recoverability.

 

Tax losses of £589,000 (2017: £3,639,000) have not been recognised as it is not considered sufficiently certain that there will be appropriate taxable profits available in the foreseeable future against which these losses can be utilised.

 

The UK corporation tax rate reduced to 19 per cent from 1 April 2017 and will reduce to 17 per cent from 1 April 2020, which will reduce the amount of UK corporation tax that the Group will have to pay in the future. The Group's deferred tax balances have been measured at rates between 17 and 19 per cent (2017: between 17 and 19 per cent), being the enacted rates of corporation tax in the UK at the balance sheet date against which the temporary differences giving rise to the deferred tax are expected to reverse.

 

13. Trading properties

Year ended

30 September

2018

£'000

Year ended

30 September

2017

£'000

At 1 October

289,707

185,204

Additions at cost

90,057

93,086

Costs written (down)/back

(2,570)

1,402

Disposals

(103,424)

(30,284)

Transfer to investment properties

-

(2,988)

Transfer from investment properties

-

43,287

Carrying value at 30 September

273,770

289,707

 

During the year staff and administrative costs of £4,238,000 (2017: £4,494,000) have been capitalised and are included within additions.

 

Capitalised interest of £3,449,000 is included within the carrying value of trading properties as at 30 September 2018 (2017: £1,768,000), of which £2,182,000 (2017: £899,000) was capitalised during the year. Included within disposals is £501,000 (2017: £Nil) of interest previously capitalised and written off on disposal.

 

The carrying value of trading properties at 30 September 2018 includes £2,656,000 (2017: £2,825,000) measured at net realisable value. The remaining assets have been measured at cost. In arriving at their net realisable value assessments, the Directors have had regard to the current valuations of the properties (where relevant) and the future expected profitability of the asset.

 

The costs written back in 2017 were as a result of an increase in the value of the properties in question.

 

 

14. Trade and other receivables

Non-current

At

30 September

2018

£'000

At

30 September

2017

£'000

Trade receivables

17,338

16,922

Other receivables

3,107

-

20,445

16,922

 

Current

At

30 September

2018

£'000

At

30 September

2017

£'000

Trade receivables

19,034

6,698

Less: provision for impairment of trade receivables

(29)

(61)

Trade receivables (net)

19,005

6,637

Other receivables

5,348

3,040

Amounts recoverable under contracts

1,350

-

Prepayments and accrued income

3,336

5,683

29,039

15,360

 

Trade receivables include minimum amounts due from housebuilders on strategic land parcel sales. Other receivables include an amount of £6,582,000 relating to overage entitlements that were acquired with the Priors Hall asset in the year and attributed a purchase price allocation of £9,366,000. This asset is measured at fair value through profit and loss using a discounted cash flow model and is categorised as level 3 in the fair value hierarchy. The key assumptions applied in the valuation at 30 September 2018 are current expectations over future house price values, the timing of housebuilder delivery and a discount rate of 9.6 per cent. The fair value movement since acquisition is £1,090,000 which has been credited to the income statement for the year. Amounts totalling £3,874,000 have been collected by 30 September 2018.

 

The ageing of trade receivables was as follows:

At

30 September

2018

£'000

At

30 September

2017

£'000

Up to 30 days

5,180

1,003

31 to 60 days

661

134

61 to 90 days

63

2

Over 90 days

555

173

Total

6,459

1,312

Amounts not yet due

29,884

22,247

Trade receivables (net)

36,343

23,559

 

There were no amounts past due but not impaired at 30 September 2018 or 2017.

 

15. Trade and other payables

At

30 September

2018

£'000

At

30 September

2017

£'000

Trade payables

7,978

11,348

Taxes and social security costs

3,124

284

Other payables

8,628

12,127

Accruals

24,985

23,617

Deferred income

2,071

1,364

46,786

48,740

 

16. Borrowings

At

30 September

2018

£'000

At

30 September

2017

£'000

Bank loans and overdrafts

19,891

61,038

Other loans

74,973

32,812

94,864

93,850

 

Maturity profile

At

30 September

2018

£'000

At

30 September

2017

£'000

Less than one year

20,891

24,026

Between one and five years

11,424

49,150

More than five years

62,549

20,674

94,864

93,850

 

Other loans comprise borrowings from Homes England and Huntington District Council and a conditional grant. Interest on borrowing from Homes England is charged at between 2.2 and 2.5 per cent above the EC Reference Rate and the facilities are secured against specific land holdings. The £1,000,000 grant is conditional on certain milestones of construction being achieved before 2020. The grant is only repayable if these are not reached.

 

There are no bank loans other than the revolving credit facility. In the prior year, bank loans, other than the revolving credit facility, were secured against specific property holdings.

 

17. Share capital

Urban&Civic plc

At

30 September

2018

£'000

At

30 September

2017

£'000

Issued and fully paid

145,044,582 (2017: 144,964,808) shares of 20p each (2017: 20p each)

29,009

28,993

 

Movements in share capital in issue

Ordinary shares

Issued and

fully paid

£'000

Number

At 1 October 2016

28,961

144,804,728

Shares issued under scrip dividend scheme

32

160,080

At 1 October 2017

28,993

144,964,808

Shares issued under scrip dividend scheme

16

79,774

At 30 September 2018

29,009

145,044,582

 

18. Net asset value and EPRA net asset value per share

Net asset value and EPRA net asset value per share are calculated as the net assets or EPRA net assets of the Group attributable to shareholders at each balance sheet date, divided by the number of shares in issue at that date, adjusted for own shares held and the dilutive effect of outstanding share issues.

 

 

At

30 September

2018

At

30 September

2017

Number of ordinary shares in issue

145,044,582

144,964,808

Own shares held

(1,769,935)

(1,569,437)

Dilutive effect of share options

1,743,418

944,078

145,018,065

144,339,449

NAV per share

268.3p

257.6p

Net asset value (£'000)

389,023

371,880

Revaluation of trading property held as current assets (£'000)

- Alconbury Weald

38,809

37,304

- Radio Station Rugby

10,561

6,784

- Priors Hall

9,384

-

- Wintringham St Neots

8,461

-

- Land promotion sites

11,667

6,234

- Newark

138

(2,055)

- Manchester sites

5,023

2,431

- Stansted

-

8,660

- Other

1,292

2,453

85,335

61,811

Deferred tax liability (£'000)

6,851

5,652

EPRA NAV (£'000)

481,209

439,343

EPRA NAV per share

331.8p

304.4p

Deferred tax (£'000)

(23,065)

(17,396)

EPRA NNNAV (£'000)

458,144

421,947

EPRA NNNAV per share

315.9p

292.3p

 

19. Contingent liabilities, capital commitments and guarantees

The parent company has given guarantees totalling £71,393,000 (2017: £58,040,000) as part of its development obligations.

 

Capital commitments relating to the Group's development sites, including the Group's share of joint ventures, are as follows:

 

 

At

30 September

2018

£'000

At

30 September

2017

£'000

Contracted but not provided for

54,744

39,956

 

20. Leases

Operating lease commitments where the Group is the lessee

The future aggregate minimum lease rentals payable under non-cancellable operating leases are as follows:

 

Land and buildings

At

30 September

2018

£'000

At

30 September

2017

£'000

In one year or less

1,013

2,016

Between one and five years

841

1,748

In five years or more

33

86

1,887

3,850

 

Operating lease commitments where the Group is the lessor

The future aggregate minimum rentals receivable under non-cancellable operating leases are as follows:

 

Land and buildings (including investment property)

At

30 September

2018

£'000

At

30 September

2017

£'000

In one year or less

2,996

5,430

Between one and five years

5,580

12,684

In five years or more

4,984

20,882

13,560

38,996

 

21. Related party transactions

Key management personnel

The Directors of the Company who served during the year are considered to be key management personnel.

                                                                                                                                                                          

Fees, other income and amounts due from joint ventures and associates

The following amounts are due from the Group's joint ventures and associates. These sums relate to loans provided to those entities and form part of the net investment in that entity.

 

At

30 September

2018

£'000

At

30 September

2017

£'000

SUE Developments LP

45,146

36,558

Manchester New Square LP

15,383

-

Wintringham Partners LLP

14,918

14,303

Terrace Hill Residential PLC

-

4,220

Achadonn Limited

3,334

3,316

78,781

58,397

 

Amounts due from Terrace Hill Residential PLC were provided against at 30 September 2017. On 13 October 2015 Terrace Hill Residential PLC went into liquidation and on 29 June 2018 it was dissolved. The total provision at 30 September 2018 against amounts due from Achadonn Limited was £1,243,000 (2017: £1,243,000).

 

Fees charged by the Group to SUE Developments LP during the year were £925,000 (2017: £1,017,000). Included in prepayments and accrued income at 30 September 2018 was £273,000 (2017: £362,000) in respect of these fees. Fees charged to Wintringham Partners LLP during the year were £1,048,000 (2017: £Nil) and included in prepayments and accrued income at 30 September 2018 was £801,452.

 

 

Glossary of terms

 

AGM

Annual General Meeting

Catesby/Catesby Estates plc

Catesby Estates plc and subsidiaries, joint ventures and associates

CIL

Communities infrastructure levy

Company

Urban&Civic plc

Earnings per share (EPS)

Profit after tax divided by the weighted average number of shares in issue

EBT/the Trust

Urban&Civic Employee Benefit Trust

EC Reference Rate

European Commission Reference Rate

Employment land/plots

Land and parcels of land upon which a variety of commercial uses will be delivered in accordance with a planning consent

EPRA

European Public Real Estate Association

EPRA net asset value (EPRA NAV)

Net assets attributable to equity shareholders of the Company, adjusted for the revaluation surpluses on trading properties and property, plant and equipment and eliminating any deferred taxation liability for revaluation surpluses

EPRA net gearing

Total debt less cash and cash equivalents divided by EPRA net asset value

EPRA triple net asset value

(EPRA NNNAV)

EPRA net asset value adjusted to include deferred tax on property valuations
and capital allowances

Estimated rental value (ERV)

Open market rental value that could reasonably be expected to be obtained for a new letting or rent review at a particular point in time

EZ

Enterprise Zone

Fair value

The price that would be required to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a measurable date (i.e. an exit price)

FRC

Financial Reporting Council

FRS 102

Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'

Gearing

Group borrowings as a proportion of net asset value (either IFRS or EPRA
depending on stated denominator)

Group and Urban&Civic Group

Urban&Civic plc and subsidiaries, joint ventures and associates

Gross development value (GDV)

Sales value once construction is complete

IAS

International Accounting Standards

IASB

International Accounting Standards Board

IFRS

International Financial Reporting Standards

Initial yield

Annualised net rent as a proportion of property value

ISA

International Standards on Auditing

Key performance indicators
(KPIs)

Significant areas of Group operations that have been identified by the Board as capable of measurement and are used to evaluate Group performance

LADs

Liquidated Ascertained Damages

LEP

Local Enterprise Partnership

Licences

Agreements entered into with housebuilders, which typically comprise a fixed element (the minimums) due to the Group upon reaching unconditional exchange and a variable element (the overage) which is dependent on the final selling price of the house

Listing

The 22 May 2014 transfer of Urban&Civic plc from the Alternative Investment Market (AIM) to the standard listing segment of the Capital Official List and admission to trading on the London Stock Exchange

Look-through gearing

Gearing including the Group's share of joint ventures' and associates' borrowing

LTV

Loan to value

MHCLG

Ministry of Housing, Communities and Local Government

Minimums

Contractual right to receive a minimum plot value in respect of a minimum number of plots each year. These minimums are payable on a look-back basis if minimum sales are not achieved, although are recognised through the income statement on unconditional exchange

MOD

Ministry of Defence

Net asset value (NAV)

Value of the Group's balance sheet attributable to the owners of the Company

Net gearing

Total debt less cash and cash equivalents divided by net assets

NPPF

National Planning Policy Framework

Overage

Variable consideration which applies an agreed percentage to the house sales price and then nets off any minimum already paid. No overage is payable where minimums are not achieved

Private rented sector (PRS)

A sector of the real estate market where residential accommodation is privately owned and rented out as housing, usually by an individual landlord, but potentially by housing organisations

PSP

Performance Share Plan

S106

Section 106 planning obligations

SDLT

Stamp Duty Land Tax

Terrace Hill Group

Terrace Hill Group plc and subsidiaries at 21 May 2014

Total return

Movement in the value of net assets, adjusted for dividends paid, as a proportion
of opening net asset value

Total shareholder return (TSR)

Growth in the value of a shareholding, assuming reinvestment of any dividends into shares, over a period

Urban&Civic plc

Parent company of the Group

Voids

Period of non-occupancy of a lease

Wholesale discount

The difference between the unserviced land values imputed by CBRE valuations (which take into account site scale and buildout duration among other matters) and the current retail prices being achieved on smaller parcel sales.

 

Risk review

 

Urban&Civic continues to seek to deliver on its strategic objectives while operating through a Board-led risk management framework that:

 

•    establishes the nature and scale of risk that the Group is prepared to take (risk appetite);

•    identifies and assesses risks applicable to the Group's strategy and operations (both existing and emerging);

•    designs and implements mitigating actions and/or procedures;

•    seeks assurance over the effectiveness of those mitigating actions and/or procedures; and

•    manages the Group's risks on an ongoing basis against risk appetite, acknowledging that risk cannot be totally eliminated.

 

1 Establish risk appetite and regularly review: Board

2 Identify and assess relevant risks: Executive Directors and EMC

3 Design and implement mitigation: Executive Directors and EMC

4 Seek assurance over mitigation: Audit Committee and Internal Audit (Grant Thornton)

5 Manage and report on risk: Executive Directors, EMC and business segment subcommittees

 

Readers of last year's risk section would have noted the introduction of an Executive Management Committee (EMC) into the Group's risk management structure. Over the last 12 months, the EMC has been instrumental in helping the Board embed the risk management framework across the Group, especially down at grass root levels, where emerging risks are typically identified first.

 

Urban&Civic's size and regional office network provide an opportunity to collate, assess and mitigate risks effectively, but only if supported by effective communication and reporting up, down and across the Group. The EMC, through its composition in part, has assisted greatly in improving communication around the Group.

 

Risk management structure

The Board has ultimate responsibility for risk management and internal control, with a particular focus on defining the Group's risk appetite, regularly assessing and monitoring the Group's principal risks and reviewing reports produced by internal auditors, (Grant Thornton) on internal controls and risk reports from the EMC and business segment subcommittees.

 

The Audit Committee reviews the adequacy and effectiveness of the Group's financial and non-financial internal controls and risk management systems on behalf of the Board. The Audit Committee also monitors and reviews the external audit, including the auditor's report and sets the programme for internal audit.

 

The Executive Directors, with the assistance of the EMC, design and manage the internal controls and risk management systems, ensuring that risk registers and risk reporting are maintained throughout the year. The EMC further relies on business segment subcommittees to help fulfil its risk reporting responsibilities by maintaining live operational risk registers.

 

Key features of Urban&Civic's risk management framework

•     Clear and well communicated risk management framework and structure (including roles and responsibilities)

•     Board and Audit Committee review risk (including key risk registers) and internal controls at each meeting

•     Annual review (or more frequent if appropriate) by Board, Audit Committee and EMC of risk appetite and corporate (top-down) risk registers

•     Bi-monthly review (or more frequent if appropriate) of project risk registers by EMC and business segment subcommittees

•     Open door policy to all employees, which aids early identification and resolution of issues

•     Clear reporting lines and delegated authorities

•     Formal and informal opportunities for intra-group debate and communication

•     Sensibly paced systems evolution - avoids shocks to the control framework

•     Maintenance of a stable senior management team

•     Robust and regular reporting systems (operational and financial as well as risk)

•     Appropriate training

•     Identify and communicate the process for risk event acceleration outside the formal regular procedures

•     Ensure employees understand and have confidence in the Group's whistleblowing policy

 

Risk management framework components

The principal components of the Group's risk management framework comprise the risk appetite table and risk heat map (see below), risk summary (which highlights Group-wide risk items requiring further consideration and risk profile over time), risk registers (including key risk register, full risk register, development/asset risk registers and corporate risk register) and associated scoring matrices.

 

The following table summarises the Board's risk appetite and risk behaviour across the Group's identified risk areas.

 

Risk description

Risk appetite

Risk behaviour

Change in risk appetite in the year

External environment

High

The Group is prepared to operate in a volatile environment, but only when enhanced returns in the longer term compensate for increased risk. Long-term viability is a key override.

Operational strategy

Moderate/high

The Group's strategy is enshrined in its investment decisions and investment thresholds and structures.

Operations

Low

The Board seeks to deliver developments effectively, complying with all legislation and avoiding actions that could adversely impact performance or reputation.

Finance

Low

The Group will seek to put in place non or limited recourse funding lines, with non-onerous covenants (on a flexed basis) and will not seek to borrow to service land (except through infrastructure loans provided by Homes England.

People

Low

The Group cannot function without a motivated and well trained workforce and aims to recruit, train, retain and promote staff, ensuring a succession plan is in place.

 

As previously noted, a key component of the Group's risk management framework is the maintenance of risk registers for each project and business area, which are used to revise and inform corporate level registers that are periodically reviewed by the Board. The corporate-level registers typically include around 30 risks and, in line with last year, the most recent ten key risks (planning being added) are set out on the following pages.

 

Impact of risk

Controls and mitigation/action

Typical risk indicators

Movement description

Risk rating

after mitigation

R1. Market risk - External environment

 

The business model may be affected by external factors such as economic conditions, the property market, the quoted property sector and political and legislative factors, such as changes in tax or planning policy. Adverse changes in market conditions and the economic environment increase the risk of a decline in shareholder returns, even though investment opportunities may be more evident.

 

• Strategy is considered at each Board meeting and specifically at the annual business strategy meeting.

• Consideration when making decisions is given to external markets, dynamics and influences.

• Press, economic data subscriptions, industry forums and adviser updates are used to keep executives up to date in respect of external markets.

• Regional focus and local knowledge in areas with strong underlying economics (such as job creation) mitigate the impact of market and economic shocks.

• Increased focus on putting in place sales contracts with contractual annual minimums in respect of the Group's most prominent segment: strategic land.

• Prior to investment, detailed due diligence and financial appraisals are rigorously carried out and flexed to establish the financial outcome on a downside-case basis.

• Business plan and rolling long-term cash flow forecasts with detailed sensitivity analysis.

• Ongoing monitoring with the assistance, when required, of appropriate professional advisers (tax, accounting, regulatory and company law).

• Reduced sales rates (homes and serviced land parcels) and prices.

• Increasing interest rates (affecting mortgage affordability and cost of Group debt).

• Relevant legislation enactment.

• Falling share price or real estate indices (indicative of reducing investor appetite).

• Increased construction costs (inflation).

• The well publicised ongoing Brexit negotiations have introduced uncertainty into the market, irrespective of whether any of the finally agreed trading arrangements with the European Union are ultimately damaging to the UK economy. This could lead to potential home buyers postponing their decision to purchase a new home, which in turn could impact not only the timing of currently contracted serviced land receipts, but also the behaviour of the Group's customers (housebuilders), thereby increasing market risk correspondingly.

• Pending political comment/legislation (such as formal Government response to the Letwin Review due February 2019) increases uncertainty and therefore market risk.

Significant or major

 

Increase in risk

R2. Strategic risk - Operational strategy

 

Implementing a strategy inconsistent with market environment, skillset and experience of the business could devalue the Group's property portfolio, have an adverse impact on the Group's cash flows and consequently erode total shareholder return.

 

• Board meetings are held at two monthly intervals to review progress against objectives and, where necessary, to update strategy.

• The Board annually approves a business plan and reviews rolling longer-term cash flow forecasts with detailed sensitivity analysis. These are reviewed against the Group's KPIs and revised where necessary.

• For assets under development, budgets are prepared and approved by the Board, costs are periodically monitored by the Board, the Executive Management Committee and subcommittees and remedial actions identified, approved and implemented where necessary.

• Material capital commitments, which have not previously been approved in the Group business plan require additional Board approval.

• Employ suitably qualified and experienced staff.

• Adverse variances to forecast (revenue and costs).

• Reductions in independent valuations.

• Litigation.

• Contingency utilisation.

• Covenant breaches.

• Executive Management Committee and subcommittees now embedded across the Group, which has improved oversight, reporting and governance.

• Third party internal auditor reviews in respect of the Group's IT systems, budgeting and forecasting processes and joint venture arrangements have provided additional assurance.

• Improvements to Board reporting packs have been made, including more detailed and longer duration Group business plans, more focused project monitoring reports and clearer bottom-up linked risk reporting.

 

  All noted improvements have    led the Board to conclude     that strategic risk has   reduced when compared to   last year.

 

Moderate

 

Decrease in risk

R3. Legal and regulatory risk - Operational strategy

 

Non-compliance with laws and regulations could result in project delays, failure to obtain planning consents, financial penalties and reputational damage.

 

•  The Group employs highly qualified and experienced staff, and specialist consultants where appropriate, to ensure compliance with laws and regulations.

•  Calendar/diary of important dates maintained.

•  Key reports and announcements reviewed in draft by Board/Audit Committee.

•  Training and continuing professional development undertaken.

•  Board review of UK corporate governance compliance.

•  Regular Board/Audit Committee updates and training on regulatory obligations.

•  Litigation.

•  Investigations/enquiries (HMRC or Health and Safety Executive, for example).

•  Frequency of reportable incidents.

•  Penalties.

•  Despite increased regulation over a number of operational areas, no change to the legal and regulatory risk rating has been made as the Board is satisfied that the impact of an event remains unaltered and controls in place remain effective.

•  Revised working practices as a result of the new GDPR were introduced in the year with the assistance of a third party adviser. A new internal data protection manager has been appointed to ensure compliance.

•  Additional staff training around health and safety and bribery, amongst other matters, has gone some way to ensuring an understanding of increased legislation.

Insignificant or slight

 

No change

R4. Competition risk - Operational strategy

 

Competition in the market could result in assets being acquired at excessive prices, potential assets not being acquired because pricing is too high or developments commencing at the wrong point in the cycle.

 

• Use of experience and expertise in determining suitable offer prices and optimal project timings to maximise returns.

• Assessment of the threats of competition before acquiring assets (such as competing sites close to a proposed acquisition that might impact the Group's intended strategy).

• Ratio of successful to unsuccessful acquisition bids.

• Adverse variances to forecast (revenue and costs).

• Significant or persistent abortive costs.

 

• Our competitors continue to benefit from strong cash generation and capital availability, particularly in strategic land and land promotion sectors.

• The Master Developer role is becoming more understood (there have been a number of public declarations over the last 12 months from both public and private bodies interested in becoming Master Developers), which would potentially impact the Group's ability to acquire suitable sites at acceptable price points.

• The risk rating has not changed by virtue of the Board considering that the Group will continue to enjoy early mover advantage, at least over the short to medium term.

Moderate

 

No change

R5. Financial risk - Finance

 

Lack of funding, cost overruns or failure to adhere to loan covenants could result in financial loss or affect the ability to take advantage of opportunities as they arise.

 

• Detailed annual business plan prepared, approved and regularly monitored by Board and Executive Management Committee.

• Continuous monitoring of capital and debt markets (with advisers).

• Maintenance of relationships with lenders and investors.

• Review of principal terms of prospective loans and ongoing monitoring of covenants/ requirements to ensure compliance.

• Increased gearing levels beyond Group-set targets.

• Covenant breaches.

• Reduced deal flow.

 

• Improved management reporting and increased human resources continue to reduce monitoring risk (as evidenced by an internal audit review on budgeting and forecasting during the financial year).

• Additional contractual minimums with housebuilders at the Group's strategic land sites continue to improve certainty over short-term cash receipts (subject to on-going viability of the counterparty housebuilder).

• Reduced commercial portfolio has increased financial risk when compared to last year, as the Group becomes more strategic land focused.

• Strategic land sites passing or approaching peak equity reduces ongoing financial risk.

• Revolving credit facility reduced maturity increases risk (although credit-approved terms for five-year extension now received and facility in documentation).

• Although the risk rating after mitigation remains low, there has been on balance an increase in the year for the reasons set out above.

Insignificant or slight

 

Increase in risk

R6. Delivery risk - Operations

 

Ineffective delivery of projects could lead to delays, reduced build quality and cost pressures.

 

• Projects are monitored on an ongoing basis by the Board, Executive Management Committee and subcommittees.

• Internal development and project management teams manage project delivery.

• Fixed price contracts are used where appropriate.

• Third party internal audit review of project delivery mechanisms.

• Customer/subcontractor complaints.

• Adverse budget variances.

• Delayed completion dates.

• Adverse audit findings.

• The Group's approach to delivery remains largely unchanged, although the Group has accepted and implemented internal audit recommendations (none of which were significant) around project delivery and introduced enhanced monitoring and governance procedures, which were demanded by increased development levels.

 

Insignificant or slight

 

No change

R7. Health and safety risk - Operations

 

Serious injury and loss of life could lead to development site closure, delays and cost overruns, as well as reputational damage and Directors' liability.

 

• Health and safety procedures are reviewed by third party health and safety advisers and the Group appoints principal contractors and principal designers in line with Construction (Design and Management) Regulations.

• Strict adherence to health and safety procedures at operational sites and Group offices.

• Due diligence carried out (including appropriate references) on principal contractor and design consultants prior to appointment.

• Appropriate insurance cover is carried out by either the Group or its contractors.

• Training by third party consultants provided and handbook issued to all employees.

• Monitored policies and procedures.

• Safety log (internal whistleblowing system).

• Litigation.

• Investigations/enquiries.

• Frequency or reportable incidents.

• Penalties.

• Adverse health and safety audit findings.

• Although there have been a number of recent improvements in this key risk area, as explained below, the risk rating is being held until sufficient evidence exists that working practices have embedded Group health and safety policies and procedures fully.

• Progress made in the year included:

• independent review of health and safety policies and procedures;

• health and safety training provided by third party consultant; and

• health and safety booklet (used to aid understanding of Group policy) issued to all staff.    

Moderate

 

No change

R8. Cyber risk - Operations

 

•  Loss of business credibility due to lack of timely, accurate information.

•  Cost of reinstatement.

•  Cost and reputational damage of breaches in data protection regulations.

•   Passwords, protocols and   protections.

•   Physical access to   premises and computer   servers restricted.

•   Firewalls and anti-virus   software with regular   updates.

•   Computer data back-up   and recovery procedures   and periodic testing.

•   Hardware replacement   programme to reduce   vulnerability.

•   Administration rights   restrictions.

•   Server downtime significant.

•   Loss or corruption of data.

•   Data protection investigations/penalties.

•   Stable IT environment   maintained through:

•   introduction of new     hardware replacement   policy;

•   data recovery procedures   tested in the year;

•   periodic review meetings   held with external IT support providers;

•   weekly reports on IT   performance received; and

•   third party internal audit of   IT  systems and procedures   completed.

 

Insignificant or slight

 

No change

R9. People risk - People

 

Over-reliance on key people or inability to attract and retain people with appropriate qualities and skills, making the Group operationally vulnerable in terms of both time delays and replacement cost.

 

•  The Group offers a competitive remuneration package including both long and short-term incentives.

•  Employees generally work on a number of projects across the Group and are not dedicated to one particular site.

•  Short reporting lines and delegated authority ensure staff feel they are contributing to the success of the Group.

•  Nomination Committee reviews succession planning.

•  Appropriate notice periods to minimise disruption.

•  Adequate resourcing.

•  Performance reviews and training.

•  High staff turnover.

•  Critical appraisal feedback.

•  Complaints.

•  Exit interview feedback.

•  Succession plans have been revisited during the year.

•  Fully independent Group-wide remuneration review undertaken, with no significant findings.

•  Annual performance appraisal carried out.

•  Training policy formulated.

 

Generally processes have become more formalised and organised commensurate with growing employee numbers.

 

Insignificant or slight

 

No change

R10. Planning - Operations

Appropriate planning consents are not achieved or are challenged once granted, resulting in:

 

•   loss of promotion   costs;

•   value proposition   not being   maximised;

•   time delay (e.g. from Judicial Review or Call-In), increasing costs or creating other issues within property cycles; and

•   difficulties in arranging finance.

•  Knowledge sharing of internal planning expertise to navigate planning law and regulation.

•  Expert advice obtained before proceeding with planning work.

•  Before significant planning applications are made the Group, together with its advisers, undertake detailed consultations with the relevant planning authority, statutory authorities and other stakeholders.

•  Alternative uses considered in case initial application not achieved.

• Longer than average times to achieve consent.

• Planning budget overruns.

• Increased judicial reviews.

• Inability to finance, build out or sell consented scheme.

•  The business model now has a greater focus on the strategic land and Catesby segments, both of which rely heavily on achieving planning consents, and therefore the impact of this risk has been increased. The planning environment has also become more challenging in the year for Urban&Civic segments.

 

Insignificant or slight

 

Increase in risk

 


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