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Keepmoat Annual Report 2020

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Keepmoat has released its Group financial results for the year ending 31 October 2020.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 19– Retirement benefit liability (continued) Year ended 31 October 2020 Year ended 31 October 2019 THE NET FUNDING STATUS OF THE PLAN IS AS FOLLOWS: £’000 £’000 Present value of scheme liabilities and net funding status (6) (13) Defined contribution schemes The pension cost charged to the income statement in respect of the defined contribution scheme during the year was £1,773,000 (Year to 31 October 2019 £1,542,000) representing contributions payable in the year. Contributions due to the defined contribution schemes at the yearend were £136,089 (31 October 2019: £137,503). 20 – Share based payments The Group operates a Long-Term Incentive Plan (LTIP), open to the Executive Directors and senior management with awards being made at the discretion of the Board of Directors. Awards under the plan are subject to being in service and an increase in the value of the group up to an exit event occurring. The fair value of the LTIP units was determined using the Black-Scholes model to determine the increase in value of the Group liability using the following inputs as at 31 October 2020: Tranche 1 Tranche 2 Date of grant 1 April 2019 3 November 2019 Options granted 41,478 19,329 Expected volatility 51.63% 51.63% Risk free interest rate (0.04)% (0.04)% Valuation model Black – Scholes Black – Scholes Contracted life from 1 April 2019 5 November 2019 Number of options Outstanding at 1 November 2019 41,478 Granted during the year 19,329 Outstanding at 31 October 2020 60,807 Total expenses arising from LTIP units recognised during the year were as follows: Year ended 31 October 2020 Year ended 31 October 2019 £’000 £’000 Charge to income for the current year 1,548 545 There were no LTIP units vested in the current year (as at 31 October 2019: none vested). The liability that has accrued to date under the scheme is included within current liabilities (note 15). 100 KEEPMOAT.COM

FINANCIAL REVIEW 21 – Contingent liabilities The Group has entered into performance guarantees in the normal course of business which, at 31 October 2020, amounted to £22.7m (31 October 2019: £14.0m). In the opinion of the directors, no loss will arise in respect of these guarantees. The Group has given guarantees in respect of the bank borrowings in addition to performance and other guarantees. At 31 October 2020 the Group had bank borrowings under the revolving credit facility of £nil (31 October 2019: £7,500,000) and bank overdrafts of £254,000 (31 October 2019: £6,311,000). The Group therefore had undrawn facilities totalling £74,746,000 (31 October 2019: £41,189,000). The guarantees are in the form of floating charges over the assets of certain Group companies. The Group is party to the Keystone Midco Limited Group (“Midco Group”) senior facility agreement whereby the Midco Group has a revolving credit facility of £75,000,000. At 31 October 2020 the Midco Group was in a net cash position (31 October 2019: net cash position). 22 – Financial instruments Capital risk management The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders by ensuring that the Group maintains sufficient liquidity to sustain its present and forecast operations. The Group monitors current and forecast cash liquidity and bond liquidity against available facilities to ensure that there is sufficient capacity to meet requirements for the foreseeable future. As part of its covenants, the Group also measures its leverage requirement as a ratio of adjusted EBITDA to net debt. The leverage covenant requirement reduces over time. At 31 October 2020, the ratio of 1.95 for the year was within the required ratio of 5.03 (at 31 October 2019, the ratio of 1.96 for the year was within the required ratio of 5.44). Financial risks and management The Group’s principal financial instruments comprised a term, RCF facility, bank loans, development land payables, subordinated shareholder loan notes, and cash. The main purpose of these financial instruments and to raise finance for the Group’s operations. The Group has other financial instruments including trade receivables and trade payables, which arise directly from operations. No trading in financial instruments has been undertaken. The Group has exposure to a variety of financial risks through the conduct of its operations. The Board reviews and agrees policies for managing risk as well as specific policies and guidelines. The key financial risks resulting from the Group’s use of financial instruments are credit risk, liquidity risk and market risk. a) Credit risk Credit risk is the risk of financial loss to the Group if a customer fails to meet its contractual obligations mainly arising on the Group’s trade receivables and amounts due from construction contract customers. The Group’s exposure to credit risk is limited for open market housebuilding activities as the Group typically receives cash at the point of legal completion of its sales. The credit risk on registered provider sales depends on the individual characteristics of the counterparty many of whom are in the public sector or are funded by the public sector (e.g. housing associations). The Board consider that the credit rating of these customers is good and the credit risk on outstanding balances to be low and no provision is held against these balances (31 October 2019: £nil). The Group does not have any concentration of risk in respect of amounts due from construction contract receivables or trade receivable balances, with receivables spread across a wide range of customers. ANNUAL REPORT & FINANCIAL STATEMENTS 2020 101