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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 legal completion of the sale of the asset, is initially recorded at cost including cost directly attributable to enhancing the land value along with any expected overage. Where land is purchased on deferred payment terms, the liability is discounted to fair value with the land recognised at the discounted value in inventories. The liability is presented as “development land payables” within trade and other payables. Pre-contract development expenditure is capitalised into inventories where it is probable that a site will be contracted for development. Regular reviews are completed for impairment in the value of these pre-contact development inventories, and provision made to reflect any irrecoverable element. The impairment reviews consider the likelihood of the development being viable to proceed including the securing of residential planning consent. Part exchange properties are held at the lower of cost and net realisable value and include a carrying value provision to cover the costs of management and resale. Any profit or loss on the disposal of part exchange properties is recognised within cost of sales in the statement of comprehensive income. Cash and cash equivalents In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand. Bank overdrafts are also included, as they are an integral part of the Group’s cash management. In the consolidated balance sheet, bank overdrafts are shown within borrowings in current liabilities. Restricted cash Financial assets include cash receipts related to certain developments held in development specific bank accounts over which third parties hold a charge and joint mandate. The cash in these accounts can be used to finance the investment of work in progress in the specific development to which it relates and become unrestricted on the satisfaction of certain conditions precedent in accordance with the terms of loans or other contractual arrangements relating to the development. Trade payables Trade payables on normal terms are not interest bearing and are stated at their nominal value. Trade payables on extended terms, particularly in respect of land, are recorded at their fair value on the date of acquisition of the asset to which they relate and subsequently held at amortised cost. The discount to the nominal value is amortised over the period of the credit term and charged to finance costs using the effective interest rate. Changes in estimates of the final payment due are taken to inventory (land held for and under development) and in due course, to cost of sales in the income statement. Trade payables also includes overage payable where the Group is committed to make contractual payments to land vendors related to the performance of the relevant development in the future. Overage payable is estimated based on expected future cash flows in relation to relevant developments and, where payment will take place in more than one year, is discounted. Loans and borrowings Interest bearing bank loans, term loans, senior secured notes and other borrowings are recorded initially at their fair value, net of direct transaction and debt issue costs. Such instruments are subsequently carried at their amortised cost and finance charges, including commitment fees, arrangement fees and any other costs directly related to the borrowings are recognised over the term of the instrument using the effective rate of interest. Any instrument repaid before the end of the contractual term will result in any unamortised costs being immediately recognised in the income statement. Equity instruments Equity instruments such as ordinary share capital issued by the Company are recorded at the proceeds received net of directly attributable incremental issue costs. Proceeds are allocated between nominal value and share premium. Income tax Income tax expense represents the current and deferred tax charges. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity. Current tax is the Group’s expected tax liability on taxable profits for the year using tax rates substantively enacted at the reporting date and any adjustment to tax in respect of previous years. Where current tax losses are available but not utilised in the period, a deferred tax asset is recognised to the extent that it is considered recoverable. Taxable profit differs from that reported in the income statement because it is adjusted for items of income or expense that are assessable or deductible in other years or are never assessable or deductible. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax rates used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised in full if future taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the taxable profit nor the accounting profit. Deferred tax assets and liabilities are not discounted and are only offset to the extent that that there is a legally enforceable right to offset current tax assets and liabilities. 78 KEEPMOAT.COM

FINANCIAL REVIEW Government grants Government grants are recognised at fair value when there is reasonable assurance that the Group will comply with the conditions attaching to them and the grants will be received. Grants related to assets are deducted from the carrying amount of the asset and unwound over the useful lives of the related assets. Grants related to income are included within deferred income and subsequently in the appropriate line within the Income Statement, in line with the Group’s revenue recognition policy. Retirement benefit obligations (a) Defined contribution plans Contributions to defined contribution plans are charged to the income statement as they accrue. Differences between contributions payable in the year and contributions actually paid are included within either accruals or prepayments on the balance sheet. The position at the end of the current and prior period was a prepayment. (b) Contractual benefit obligations The Group operates the Keepmoat Limited Group Pension Plan (“KPP”), a defined contribution plan, with assets held in independently administered funds. Some members of the KPP have a contractual promise from the Group, which is separate to the benefits payable by the KPP, being an arrangement between Keepmoat Limited and the applicable employees. The obligation arising under this arrangement has been calculated by a qualified independent actuary and accounted for as a long-term employee benefit. The contractual liabilities are measured using the projected unit actuarial method and are discounted at the current rate of return on a high-quality corporate bond of equivalent term and currency to the liability. Actuarial gains and losses of the contractual liabilities are recognised in the consolidated statement of comprehensive income. Gains and losses arising on curtailment and settlements are taken to the income statement as incurred. Provisions Provisions for remedial contract obligations, vacant property obligations and restructuring costs are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. Share based payments The fair value of cash-settled, share-based compensation plans is recognised as an employee expense with a corresponding increase in liabilities. The fair value is measured as at the date the units are granted and is spread over the period in which the employees become unconditionally entitled to the reward to reflect the actual number of units that vest. At the statement of financial position date, if it is expected that non-market conditions will not be satisfied, the cumulative expense recognised in relation to the relevant units is reversed. Critical accounting estimates and assumptions The preparation of financial statements under IFRS requires the Group’s management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying value of assets and liabilities which are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis and any revisions to them are recognised in the period in which they are revised. The estimates and assumptions that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. Estimation of development profitability The gross profit from revenue generated on each of the Group’s developments in a specific period is based on the latest forecast for the whole site gross profit expected to be generated over the life of that development or phase. The expected gross profit is calculated as an output of development valuations completed using latest selling prices and forecasts of all land and construction costs associated with the development. These calculations of expected gross profits require a degree of estimation due to their long-term nature and are sensitive to future movements in both the estimated cost to complete and expected selling prices. Group’s management has established internal controls to regularly review and ensure the appropriateness of the forecasts and estimates made on an individual development basis. However, a change in estimated gross profits over a number of developments (due, for example, to changes in estimates of costs remaining or a reduction in average selling prices in the private market) could materially affect profitability. As an illustration, a reasonably possible change in profits of 1% across all developments in the year to 31 October 2020 would have reduced gross profit and net assets by an estimated £4.1m. ANNUAL REPORT & FINANCIAL STATEMENTS 2020 79