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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 CONSOLIDATED

PRINCIPAL CONSOLIDATED ACCOUNTING POLICIES sales and the actions successfully deployed during the Group’s closure of its operations in March 2020. The effects have been modelled without assumption of Government assistance during this period. The Directors have taken into their considerations the national restrictions currently in place at the date in February 2021. In all scenarios, including the reasonable worst case, the Group is able to comply with its financial covenants, operate within its current facilities, and meet its liabilities as they fall due. Accordingly, the Directors consider there to be no material uncertainties that may cast significant doubt on the Group’s ability to continue to operate as a going concern. They have formed a judgement that there is a reasonable expectation that the Group, and Company have adequate resources to continue in operational existence for the foreseeable future, being at least 12 months from the date of signing of these Financial Statements. For this reason, they continue to adopt the going concern basis in the preparation of these Financial Statements. Adoption of IFRS 16 IFRS 16 is a new accounting standard that is effective for the year ended 31 October 2020. The Group have applied IFRS 16 at 1 November 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognised in retained earnings at the date of initial application. Refer to the accounting policy for leases for details of the different accounting policies applied in each financial year. See notes 14 and 26 for details of the impact of IFRS 16 at 1 November 2019. Basis of consolidation The Group financial statements incorporate the results of Keystone Midco Limited, its subsidiary undertakings and the Group’s share of the results of joint ventures and associates. (a) Subsidiaries Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Business combinations are accounted for using the acquisition method. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred, and the equity interests issued by the Group in exchange for control of the acquiree. Consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition related costs are expensed in administrative costs as incurred. All identifiable assets and liabilities acquired, and contingent liabilities assumed are initially measured at their fair values at the acquisition date. The excess of the consideration transferred and the amount of any non-controlling interest as compared with the Group’s share of the identifiable net assets are recognised as goodwill. Where the Group’s share of identifiable net assets acquired exceeds the total consideration transferred, a gain from a bargain purchase is recognised immediately in the income statement after the fair values initially determined have been reassessed. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment. Accounting policies of acquired subsidiaries are changed where necessary to ensure consistency with accounting policies adopted by the Group. Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. They are initially measured at the non-controlling interests’ share of the net fair value of the assets and liabilities recognised. Subsequent to acquisition, non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling interests’ share of the changes in equity since the date of the combination. (b) Joint ventures Joint ventures are accounted for using the equity method. Under the equity method of accounting, interest in joint ventures is initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. Where the Group’s share of losses exceeds its equity accounted investment in a joint venture, the carrying amount of the equity interest is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations. Appropriate adjustment is made to the results of joint ventures where material differences exist between a joint venture’s accounting policies and those of the Group. The Group determines at each reporting date whether there is any objective evidence that the investment in the joint venture is impaired. If this is the case, the Group calculates the amount of the impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the income statement adjacent to its share of profit/(loss) from associates. Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. (c) Associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method, applying the same policy as set out for joint ventures above. 74 KEEPMOAT.COM

FINANCIAL REVIEW Segmental reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker who is responsible for allocating resources and assessing performance of the operating segments has been identified as Keepmoat Group’s executive directors. Revenue and profit recognition Revenue is recognised based on indicators of control, rather than solely when risks and rewards are transferred. This can lead to differences in revenue recognition on certain sites, based on the specific contractual arrangements in place. Primarily, for those sites in respect of which stage payments are received from registered providers for the provision of housing or where the Group undertakes development contracts, revenue is recognised based on stage of completion rather than on legal completion. The directors consider the provision of land and residential properties to represent a single performance obligation which represents a judgement taken in the application of IFRS 15. Sale of housing to open market customers Revenue and profits associated with the sale of housing to private open market customers are recognised in the statement of comprehensive income on legal completion. Revenue in respect of the sale of residential properties is recognised at the fair value of the consideration received or receivable on legal completion. Open market sale plots are recognised at the agreed sales price deemed to be fair value. In certain instances, property may be accepted in part consideration for a sale of a residential property. The fair value established is reduced for estimated costs to sell. Net sale proceeds generated from the subsequent sale of part exchange properties are recorded as an adjustment to cost of sales. The original sale is recorded in the normal way, with the fair value of the exchanged property replacing cash receipts. Part exchange properties are held within Inventories at net realisable value until subsequent sale. Sale of housing to registered provider customers and associated development contracts with stage payments The Group constructs and sells residential properties and undertakes associated development activities under longterm contracts with customers. Such contracts are entered into before construction of residential properties or associated development activities begin. Under the terms of the contracts, the Group is continually restricted from redirecting the properties or development works to another customer and has an enforceable right to payment for work done. Revenue from construction of residential properties and associated development activities is therefore recognised over time based on a certified monthly valuation of work performed or the assessed physical stage of completion at the balance sheet date. The directors consider that this method is an appropriate measure of the progress towards complete satisfaction of these performance obligations under IFRS 15. On the balance sheet, the Group reports the net contract position for each contract as either an asset or a liability. A contract represents an asset where costs incurred plus recognised profits (less recognised losses) exceed progress billings; a contract represents a liability where the opposite is the case. Sale of housing to registered provider customers without stage payments Revenue and profits associated with these activities are recognised in the statement of comprehensive income on legal completion as this is the point at which control is passed from the Group to the purchaser. Profit recognition Gross profit is recognised for all house sales (to open market customer and to registered providers) and associated development activities, when the related revenue is recognised in accordance with the Group’s revenue recognition policy, based on the latest forecast for the gross margin expected to be generated over the life of the development or phase of the development. The expected gross margin to be generated from each development is calculated as an output of a development valuation completed using latest selling prices and forecasts of all land and construction costs associated with that development. The application of a whole site margin to determine development profitability is a judgement taken in the application of IFRS 15. Exceptional items Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount. Goodwill Goodwill arises on business combinations and represents the excess of the fair value of the consideration given over the fair value of the Group’s share of the identifiable net assets acquired at the acquisition date. It is recognised as an asset and reviewed for impairment at least annually or when there is a triggering event, by considering the net present value of future cash flows. For the purposes of testing for impairment, the carrying value of goodwill is compared to its recoverable amount, which is the higher of the value in use and the fair value less costs to sell. Any impairment is charged immediately to the income statement. Where the fair value of the consideration given is less than the fair value of the Group’s share of the identifiable net assets acquired, the difference is immediately recognised in the income statement as a gain from a bargain purchase. ANNUAL REPORT & FINANCIAL STATEMENTS 2020 75