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Keepmoat Annual Report 2020

  • Text
  • Lease
  • Keepmoat
  • Strategic
  • Annual
  • Income
  • Assets
  • Limited
  • Homes
  • Statements
  • October
Keepmoat has released its Group financial results for the year ending 31 October 2020.

PRINCIPAL RISKS AND

PRINCIPAL RISKS AND UNCERTAINTIES Risk and description Possible impact Mitigation Movement Land Inability to procure suitable land at appropriate margins. If the Group were unable to secure land it would affect both our volume growth targets and have a detrimental effect on future profitability. Land and partnerships teams are in constant dialogue with our partners over the availability and suitability of land. Thorough due diligence is conducted on all proposed land purchases and is kept under review to ensure investment in land is strategically aligned to our business model. No change. An increased level of economic uncertainty could in principle impact land procurement risk. However, to date we have not seen significant land procurement issues, and the land market remains healthy. Commercial The Group enters into Partnership arrangements for the delivery of high value housing developments, some of which involve joint ventures, through which it incurs commercial risk in relation to the acquisition and execution of those developments. A failure to adequately control project bidding and execution could result in the Group exposing itself to higher levels of risk and lower levels of profitability. The Group operates a clear and robust project bidding and authorisation policy with a high level of scrutiny early in the process. All developments, including joint ventures, are approved by the Group’s Executive Capital Investment Committee, in line with our land acquisition process. The Group undertakes routine and structured project approval and performance reviews, identifying risk and amending the project delivery programme accordingly. No change. Build costs and availability of resources Project delivery is dependent on sub-contractors and material suppliers. Poor or late availability of labour or materials could significantly impact the Group’s ability to operate efficiently and deliver projects on time with high levels of partner and customer satisfaction. The Group maintains strategic supply agreements with major materials suppliers and project scheduling permits material orders to be raised with appropriate lead times for delivery without impacting overall project timescales. A broad subcontractor base delivers services across the Group, with no dependence on any single subcontractor in any region. Continued review and monitoring of supplier and subcontractor performance is conducted. A collaborative approach is taken with suppliers to identify downstream supply chain issues. No change. The full impact of COVID-19 and Brexit is not yet known however, to date we have not seen significant supply issues or price increases in labour or materials. 56 KEEPMOAT.COM

STRATEGIC REPORT Risk and description Possible impact Mitigation Movement Health and safety The safety and wellbeing of Keepmoat’s employees, subcontractors and members of the public is of critical importance to the Group. Inadequate health and safety procedures could lead to injury or death, operational failure and possible significant compensation payments and fines. Policies, procedures, training and reporting are all maintained to industry standard and are carefully monitored to ensure high standards are maintained. The Executive Board considers Health and Safety at every meeting and Senior Management make regular site visits to monitor health and safety standards against the Group’s policies and procedures (in addition to external consultants). The Group has appropriate insurance covering the risks associated with housebuilding. No change. Whilst Health and Safety requirements have increased in the wake of COVID-19, we quickly adapted our existing policies and procedures in line with Government advice and social distancing guidelines and are confident we remain able to build in a safe manner. Financial security The cash flow requirements of the Group’s contracts can be very different, and availability of liquidity is critical to the Group’s ability to grow and deliver successful projects on behalf of clients. A lack of short term liquidity could impact upon the Group’s ability to invest in land & build WIP, constraining growth, or impacting on the ability to pay sub-contractor and material suppliers resulting in a failure to deliver projects to an acceptable standard and on time. The Group maintains strong financial discipline. Cash generation and facility headroom is monitored by robust budgeting, forecasting and cash management disciplines. Regular contact is maintained with investors and lenders to ensure adequate overall bank facilities are in place. A new debt package for the group was secured in December 2018 that provides increased liquidity for the next five years. On 18 March 2020, the Group increased its super senior revolving credit facility by £5.0m, bringing the total limit to £60.0m. The terms of the additional limit are in line with the existing facility. On the 12 June 2020, the Group signed agreements to increase its super senior revolving credit facility by a further £15.0m, bringing the total limit to £75.0m. Strong partner, supplier and subcontractor relationships facilitate the effective management of site level liquidity. Increased. The continued impact of COVID-19 means that short term cash flow management is more important than ever, however strong relationships with our partners/ suppliers/ sub-contractors and lenders means that whilst this risk has increased it has not caused significant disruption. ANNUAL REPORT & FINANCIAL STATEMENTS 2020 57