AnnualReportFinancialStatments2023

Annual Report &

Annual Report & Financial Statements 2023 Chief Financial Officer’s review Strategic Report Chief Financial Officer’s review The Group has delivered a strong operational and financial performance in the year ended 31 October 2023 (“FY23”) through a period of challenging market conditions for the housebuilding sector. Our multi-tenure Partnership Model has allowed us to respond to the impact of high inflation and high mortgage rates on private buyer confidence, with an increased proportion of completions delivered to our Registered Provider partners through elective, multi-unit deals across all of our regions. This has underpinned the delivery of a record number of completions in the year, with record revenues. Our average selling prices remain affordable for first time buyers and below the average new build selling prices in the regions in which we operate. We have also continued to invest judiciously in new land opportunities, with strong security established for delivery into the next financial year and beyond. The resilience of our Partnership Model and the swift response of our business to changing market conditions has allowed us to maintain our strong balance sheet and robust profits, leaving us well positioned to continue to deliver much needed high-quality, affordable new homes. Financial performance Revenue for the year was £864.6m (2022: £778.1m), an increase of 11.1% driven by a 7.9% increase in the number of homes sold and a 3.4% increase in average selling price (“ASP”). Reduced demand from private buyers in the year was mitigated through our multi-tenure Partnership Model, with the Group delivering over 800 completions to Registered Providers and to the Private Rented Sector through elective, multi-unit deals contracted for in the year. Sales prices have remained firm against an environment of continued build cost inflation. Closing cash and cash equivalents of £163.9m places the Group in a strong financial position to invest in our strategic plans for continued growth in the medium term. Completions⁵ in the year were 4,074, an increase of 7.9% on the prior year (2022: 3,776 homes). Average selling prices increased by 3.4% to £211,000 (2022: £204,000) during the year, reflecting the inflationary environment in the UK housing market at the start of our FY23 year, combined with the effect of mix across tenure and sites. Our delivery to Registered Providers (including elective deals) made up 45.0% of the Group’s volume (2022: 26.9%), reflecting the focus on our mixed tenure Partnership In order to provide clearer visibility of the underlying performance of the Group, the Board elect to measure profits on an adjusted basis alongside other key KPIs as follows: Year ended 31 October 2023 Year ended 31 October 2022 £m £m Revenue 864.6 778.1 Gross profit 167.8 175.9 Adjusted EBITDA (1) 101.4 114.3 Adjusted EBIT (2) 97.4 110.4 Adjusted operating profit (3) 94.3 105.3 Profit before tax 83.2 92.2 Operating cash flows 85.8 (8.1) Completions (5) 4,074 3,776 Model and providing resilience in our build output through FY23. Gross Profit for the Group decreased by 4.0% to £167.8m (2022: £175.9m). The Group’s Gross margin⁴ decreased to 19.4% (2022: 22.6%), as selling price increases at the start of the year slowed and we entered a period of stable sales prices, whilst build cost inflation continued throughout the year, albeit at a lower rate through the second half of FY23. Adjusted EBIT² remained strong in the year at £97.4m (2022: £110.4m) at an EBIT margin of 11.3% (2022: 14.2%) primarily reflecting the lower Adjusted Gross margin. Net financing costs at £11.1m were £2.0m lower than the prior year reflecting primarily a smaller unwind of discount on deferred land payments. As a result, the Group delivered a profit before tax for the year of £83.2m (2022: £92.2m). Financial position At 31 October 2023 the Group had net assets of £470.8m (2022: £397.9m), an increase of 18.3% compared to the prior year. Inventories have decreased by 5.5% to £560.9m (2022: £593.5m). Land inventory represents approximately fortyfive percent of the inventory balance (2022: approximately half). The Group ended the year with net cash (including bank overdrafts) of £163.9m (2022: net cash of £84.5m). The Group was cash generative, with £96.6m generated from operating activities before tax (2022: £2.5m) after investing £3.2m in working capital movements in the year. Net cash outflow from financing activities was £5.4m (2022: outflow of £10.7m). This reflected the payments on leases and loans in the current year. The Group has facilities which include £275.0m, 6% Senior Secured Notes due 2027, which were fully drawn in October 2023. In addition, the Group has a new £70.0m revolving credit facility maturing in 2027 which was undrawn at 31 October 2023. Finance expense and taxation Financing expenses in the year were £11.4m (year ended 31 October 2022: £13.2m) leading to a cash outflow of £nil (year ended 31 October 2022: outflow of £0.7m). The charge includes non-cash amounts of £9.4m (year ended 31 October 2022: £10.5m) in respect of the unwind of discount on deferred land payments. The total tax charge for the year was £13.4m (year ended 31 October 2022: £12.4m tax charge) and was made up of a current tax charge of £13.3m and a deferred tax charge of £0.1m. Working capital The amount of working capital required to service the Group’s operations is closely monitored and controlled and forms a key part of the management information reviewed on a daily, weekly and monthly basis. Current assets mainly comprise trade receivables, work in progress and land held for the development of private housing and affordable housing through partnership schemes. As the Group’s trade receivables relate mainly to public sector and Housing Association clients, there is no significant history of bad or doubtful debts. (1) Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation and share based payment charges (a reconciliation of operating profit to Adjusted EBITDA is provided in note 3). (2) Adjusted EBIT is earnings before interest, tax, amortisation and share based payment charges (a reconciliation of operating profit to Adjusted EBIT is provided in note 3). (3) Adjusted operating profit is stated before amortisation of acquisition intangible assets (a reconciliation of operating profit to adjusted operating profit is shown on the face of the consolidated income statement). (4) Gross margin represents Gross profit divided by Revenue. (5) Completions represent the number of new build homes that we have sold over the applicable period. For private homes this is the number of legal completions during the period. For Registered Provider homes this represents the equivalent number of units sold, based on the proportion of work completed under a contract during the period. 82 KEEPMOAT.COM 83