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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.

CONSOLIDATED CASH FLOW

CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 October 2020 Note Year ended 31 October 2020 Year ended 31 October 2019 £’000 £’000 Cash flows from operating activities Operating profit 5,213 58,831 Adjustments for: Amortisation of intangible assets 7 301 671 Depreciation of property, plant and equipment 8 1,321 1,054 Depreciation of right-of-use assets 14 3,150 - Loss on disposal of property, plant and equipment 8 15 - Impairment of right-of-use asset 14 596 - Share of results of equity accounted joint ventures and associates 10 (1,009) (47) Increase/(decrease) in provisions 17 532 (1,764) Decrease in retirement benefit obligations 19 (7) - Operating cash flows before changes in working capital 10,112 58,745 Increase in inventories 11 (58,895) (22,490) Increase in receivables 12 749 (3,737) Increase in payables 15 85,376 11,745 Cash flows from operating activities before tax 37,342 44,263 Income tax paid (1,657) (4,635) Total cash flows from operating activities 35,685 39,628 Cash flows from investing activities Purchase of property, plant and equipment 8 (962) (1,539) Purchase intangible assets 7 (336) - Proceeds from disposal of investment property - 60 Interest received 101 179 Total cash flows from investing activities (1,197) (1,300) Cash flows from financing activities Issue of loan to associate company 23 - (5,000) Draw-down of term loan 16 7,500 150,000 Repayment of other loans (5,843) - Draw-down of other loans 2,227 4,671 Sale of equity instruments to non-controlling interest 9 751 490 Repurchase of equity instruments from non-controlling interest 9 - (169) Repayment of shareholder loan 16 - (8,191) Repayment of revolving credit facility 16 (7,500) (30,000) Redemption of senior secured loan notes 16 - (100,000) Issue costs associated with term loan and revolving credit facility 16 (1,174) (8,524) IFRS 16 lease payments (3,453) - Proceeds from the issue of shares 18 7,500 - Interest paid (12,883) (12,311) Total cash flows from financing activities (12,875) (9,034) Total net increase/(decrease) in cash and cash equivalents 21,613 29,294 Cash and cash equivalents at beginning of the year 35,173 5,879 Cash and cash equivalents at the end of the year 56,786 35,173 Included in cash and cash equivalents 13 57,040 41,484 Included within bank overdrafts 13 (254) (6,311) 56,786 35,173 72 KEEPMOAT.COM

PRINCIPAL CONSOLIDATED ACCOUNTING POLICIES FINANCIAL REVIEW Principal consolidated accounting policies for the year ended 31 October 2020 General information Keystone JVco Limited (the Company) is a private limited company incorporated and domiciled in the UK. The address of the registered office is Keystone JVco Limited, The Waterfront, Lakeside Boulevard, Doncaster, DN4 5PL. The nature of the Group’s operations and its principal activities are set out in the directors’ report. The financial statements are presented in pounds sterling because the Group operates exclusively in the United Kingdom. All financial information is rounded to the nearest thousand (£’000) except where otherwise indicated. Basis of preparation These consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The financial statements have been prepared under the historical cost convention except for assets and liabilities recognised at fair value through profit or loss which are stated at fair value. The principal accounting policies applied in the preparation of these consolidated financial statements have been consistently applied to all the periods presented, unless otherwise stated. Going concern At 31 October 2020, Keystone JVco Limited Group (the “Keepmoat Group” or “Group”) held cash and cash equivalents of £56.8m and total loans and borrowings of £165.2m, which consisted of £0.3m of overdraft, bank and other loans of £11.6m and £157.5m of term loan facility that matures in December 2024. Should further funding be required, the Group has a committed £75m RCF (of which £0.2m was utilised at 31 October 2020), subject to compliance with certain financial covenants, of which £15.0m matures in December 2021 and £60.0m matures in June 2024. As such, in consideration of its net current assets of £315.0m, the Directors are satisfied that the Group has sufficient liquidity to meet its current liabilities and working capital requirements. The performance of the Group is dependent upon a number of external factors and the wider macro-economic environment in which it operates. The factors that particularly affect the performance of the Group are described in the strategic report (pages 6 to 52), with the principle risks and uncertainties that may impact the Group outlined (pages 54 to 59). The material factors that may affect the future financial performance of the Group include flat or negative economic growth, buyer confidence, mortgage availability and affordability, new housing supply, falls in house prices or land values and the cost and availability of materials, subcontractors and suppliers. The COVID-19 pandemic gave rise to an increase in the inherent uncertainty in the Group’s assessment of these factors. Since the re-start of construction and sales activity in May 2020 post lockdown, the UK housing market has seen strong demand with reservations and sales recovering to prelockdown levels, and the Group’s construction activity has returned to normal levels and delivery has been aligned to demand accordingly. However, the outlook for the economy remains unclear: unemployment is expected to rise when the Government’s Coronavirus Job Retention Scheme comes to an end in April 2021 and market activity could be affected by the impact of the UK’s new post Brexit trading relationship with the EU. Future outbreaks of COVID-19 and consequent local or national restrictions may cause further disruption to the Group’s activities. The Group has extended its existing super senior revolving credit and fixed term debt facilities by £27.5m during the year to 31 October 2020. Furthermore, the Group received £7.5m of capital investment from its shareholders in July 2020. Under the extension of the super senior revolving credit facility, the Group was bound to a new covenant requiring a minimum of £20m of available liquidity at each month end and £30m of available liquidity at the end of each quarter. This covenant applies from July 2020 until December 2021. The Group’s financial forecasts reflect the Directors considered view of expected performance, based on the information available at the date of signing of these Financial Statements. This includes the ongoing costs of COVID-19 safe working practices implemented by the Group. To assess the Group’s resilience to adverse trading conditions, its financial forecast has been sensitised through a series of scenarios reflecting the principal downside risks for the UK economy and housing market. The scenarios reflect potential downside risks as presented in the latest available external economic forecasts. This exercise included an aggregated reasonable worst-case scenario reflecting a manifestation of the principal risks to a severe but plausible level. This scenario assumed that sales volumes and average selling prices fall below the Group’s forecast levels by 20% and 7.5% respectively, and that the Group’s operations are temporarily disrupted for three months from February 2021 due to a national response to a resurgence of the virus. The effects were modelled over a 15-month period, alongside reasonable mitigation that the Group would expect to undertake in such circumstances, primarily a reduction in investment in inventories in line with the fall in expected ANNUAL REPORT & FINANCIAL STATEMENTS 2020 73