Countryside Properties : Annual Report 2017 and AGM 2018

15 December 2017

COUNTRYSIDE PROPERTIES PLC (THE 'COMPANY')

ANNUAL REPORT AND FINANCIAL STATEMENTS 2017

The following documents have today been posted or otherwise made available to shareholders:

· Annual Report 2017

· Notice of Annual General Meeting

· Proxy Form

· Electronic Communications Letter

In accordance with Listing Rule 9.6.1R, a copy of each of these documents has been uploaded to the National Storage Mechanism and will be available for viewing shortly at http://www.morningstar.co.uk/uk/NSM.

The above documents may be viewed online at http://investors.countryside-properties.com/reports-and-presentations and http://investors.countryside-properties.com/shareholder-information/agm respectively.

A condensed set of the Company's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in the Company's Preliminary Results Announcement on 22 November 2017. That information together with the information set out below, which is extracted from the Annual Report 2017, constitute the material required by Disclosure Guidance and Transparency Rule 6.3.5R which is required to be communicated to the media in full unedited text through a Regulatory Information Service. This announcement is not a substitute for reading the full Annual Report 2017. Page and note references in the text below refer to page numbers in the Annual Report 2017. To view the preliminary announcement, slides of the results presentation and the webcast please visit http://investors.countryside-properties.com/reports-and-presentations.

Enquiries: Tel: [phone]

Ian Sutcliffe - Group Chief Executive

Rebecca Worthington - Group Chief Financial Officer

Victoria Prior - Investor Relations & Strategy Director

OPTIMISING OUR RISK MANAGEMENT PROCESS

Countryside has policies and procedures in place for the timely identification, assessment and prioritisation of the Group's material risks and uncertainties. This section describes how these risks are identified, managed and mitigated appropriately in order to deliver the Group's strategic objectives.

How We Manage Risk

Risk identification and management is built into every aspect of Countryside's daily operations, ranging from the appraisal of new sites, assessment of the prospects of planning success, building safely and selling effectively to achieve long-term success through the property market cycle. Risk management is built into standardised processes for each part of the business at every stage of the housebuilding process. Financial risk is managed centrally through maintenance of a strong balance sheet, forward selling new homes and the careful allocation of funds to the right projects, at the right time and in the right locations. Risk management also includes the internal controls described within the Corporate Governance Report on pages 46 to 51.

The Risk Management Committee normally meets every quarter to review the Group's risk register.

The Group's risk register is maintained to record all principal risks and uncertainties identified in each part of the business. A member of the Executive Committee is allocated, as appropriate, as the 'risk owner' for each risk. The risk owners call upon the appropriate expertise to conduct an analysis of each risk, according to a defined set of assessment criteria which includes:

· How does the risk relate to the Group's business model and/or strategy?

· What is the likelihood of the risk occurring?

· What is the potential impact were the risk to occur?

· Would the consequences be short, medium or long-term?

· What mitigating actions are available and which are cost effective?

· What is the degree of residual risk and is it within the Group's risk appetite parameters?

· Has the risk assessment changed and what is expected to change going forward?

The Risk Management Committee reviews the assessments made, compares it to the Group's appetite for each risk, reviews the current level of preparedness and determines whether further actions or resource are required. In reviewing and agreeing the mitigating actions, the Risk Management Committee considers the impact of risks individually and in combination, in both the short and the longer- term.

Our Approach to Risk

The Board - Role and responsibilities

· Sets the Group strategy

· Determines the Group's risk policy and the procedures that are put in place to mitigate exposure to risk

· Regularly monitors Group risks

· Reviews the effectiveness of the Group's risk management and internal control procedures

Audit Committee - Role and responsibilities

· Has delegated responsibility from the Board to oversee risk management and internal controls

· Monitors the integrity of the Group's financial reporting process

· Monitors the effectiveness of the Internal Audit function and the independence of the external audit

Risk Management Committee - Role and responsibilities

· Determines the appropriate controls for the timely identification and management of risk

· Manages the Group's risk register

· Monitors the effective implementation of action plans

· Reviews reports from the Internal Audit function

Internal Audit - Role and responsibilities

· Undertakes independent reviews of effectiveness of internal control procedures

· Reports on effectiveness of management actions

· Provides assurance to the Audit Committee

Executive Committee - Roles and responsibilities

· Responsible for identification of operational and strategic risks

· Responsible for ownership and control of specific risks

· Responsible for establishing and managing the implementation of appropriate action plans

Key Areas of Focus during 2017

Data Protection

Given that the EU's Data Protection Regulation ('GDPR') takes effect from 25 May 2018, the
business-wide objective of ensuring all business divisions are in compliance in advance of the deadline has been overseen by the Risk Management Committee during 2017. The process commenced with an internal audit of the Group's state of readiness, followed by the development and implementation of an operational road map, using the findings of the audit, to embrace GDPR and develop sustainable privacy with respect to Countryside's employees, customers and suppliers.

Cyber

Recognising that cyber risk continues to grow as a leading issue for all organisations, there has been a significant focus during 2017 on reviewing the Group's material IT controls, policies and procedures to ensure their resilience to support business performance. The Board received a presentation on the mitigating actions being undertaken and an assessment of the Group's state of preparedness on 27 July 2017. A case study of the work undertaken to address cyber risk is set out on page 54.

Market

The Board, Executive Committee and Risk Management Committee have spent considerable time during 2017 to ensure that the Group's mixed-tenure approach and product mix are best suited to ensure we maintain affordability and serve the areas of strongest demand. In order to better monitor potential changes in market risk, management has expanded the range of third party data it reviews (such as the monthly Barclays UK spend trend) and increased the use of third party market assessments in advance of all major new projects.

Board, Audit and Risk Management Committee responsibility

The Audit Committee reviewed the Group's risk register and the assessment of the Group's principal risks and uncertainties prepared by the Risk Management Committee at its meetings in July and October 2017. The Audit Committee also considered the effectiveness of the Group's systems, and has taken this into account in preparing the Viability Statement on the previous page.

The Audit Committee reported on its findings at the Board's July and October meetings, in order to support it in making its confirmation that it had carried out a robust assessment of the principal risks.

Principal risks and uncertainties

The Group's principal risks are monitored by the Risk Management Committee, the Audit Committee and the Board. The table below sets out the Group's principal risks and uncertainties and mitigation.

Our strategic priorities - Key

1 - Growth; 2 - Returns; 3 - Resilience

RISK	DESCRIPTION	MITIGATION
1	Adverse macroeconomic conditions* (change during year-increase) (Link to Strategy-1/2/3)
	A decline in macroeconomic conditions, or conditions in the UK residential property market, can reduce the propensity to buy homes. Higher unemployment, interest rates and inflation can affect consumer confidence and reduce demand for new homes. Constraints on mortgage availability, or higher costs of mortgage funding, may make it more difficult to sell homes.	Funds are allocated between the Housebuilding and Partnerships businesses. In Housebuilding, land is purchased based on planning prospects, forecast demand and market resilience. In Partnerships, contracts are phased and, where possible, subject to viability testing. In all cases, forward sales, cash flow and work in progress are carefully monitored to give the Group time to react to changing market conditions.
2	Adverse changes to Government policy and regulation* (change during year-increase) (Link to Strategy-1/2)
	Adverse changes to Government policy in areas such as tax, housing, the environment and building regulations may result in increased costs and/or delays. Failure to comply with laws and regulations could expose the Group to penalties and reputational damage.	The potential impact of changes in Government policy and new laws and regulations are monitored and communicated throughout the business. Detailed policies and procedures are in place to address the prevailing regulations.

3	Constraints on construction resources* (change during year-no change) (Link to Strategy-1/2)
	Costs may increase beyond budget due to the reduced availability of skilled labour, or shortages of sub-contractors or building materials at competitive prices to support the Group's growth ambitions. The Group's strategic geographic expansion may be at risk if new supply chains cannot be established.	Optimise use of standard house types and design to maximise buying power. Use of strategic suppliers to leverage volume price reductions and minimise unforeseen disruption. Robust contract terms to control costs.
4	Programme delay (rising project complexity) (change during year-no change) (Link to Strategy-1/2)
	Failure to secure timely planning permission on economically viable terms or poor project forecasting, unforeseen operational delays due to technical issues, disputes with third party contractors or suppliers, bad weather or changes in purchaser requirements may cause delay or potentially termination of project.	The budgeted programme for each site is approved by the Divisional Board before acquisition. Sites are managed as a portfolio to control overall Group delivery risk. Weekly monitoring at both divisional and Group level.
5	Inability to source and develop suitable land (change during year-no change) (Link to Strategy-1/2)
	Competition or poor planning may result in a failure to procure land in the right location, at the right price and at the right time.	A robust land appraisal process ensures each project is financially viable and consistent with the Group's strategy.
6	Inability to attract and retain talented employees* (change during year-no change) (Link to Strategy-1/2/3)
	Inability to attract and retain highly skilled, competent people at all levels could adversely affect the Group's results, prospects and financial condition.	Remuneration packages are regularly benchmarked against industry standards to ensure competitiveness. Succession plans are in place for all key roles within the Group. Exit interviews are used to identify any areas for improvement.
7	Inadequate health, safety and environmental procedures (change during year-no change) (Link to Strategy-2)
	A deterioration in the Group's health, safety and environmental standards could put the Group's employees and contractors or the general public at risk of injury or death and could lead to litigation or penalties or damage the Group's reputation.	Procedures, training and reporting are all carefully monitored to ensure that high standards are maintained. An environmental risk assessment is carried out prior to any land acquisition. Appropriate insurance is in place to cover the risks associated with housebuilding.

Brexit

Note: The Risk Management Committee's review of risk, including the principal risks, takes into account the known and forecast developments flowing from plans being made for the UK's planned exit from membership of the European Union by March 2019 ('Brexit'). Brexit affects many of the principal risks, but particularly those marked with an asterisk.

RELATED PARTY TRANSACTIONS

Transactions with Group joint ventures and associate

	Joint ventures		Associate
	2017 £m	2016 £m	2017 £m	2016 £m
Sales during the year	24.0	26.2	1.1	0.7
At 1 October Net (repayments)/advances during the year	84.2 (16.6)	62.1 22.1	- -	- -
At 30 September	67.6	84.2	-	-

Included within the advances movement are non-cash items of £(0.7)m (2016: £(0.7)m) relating to deferred revenue and £1.1m (2016: £(1.3)m) relating to joint ventures reporting net liabilities.

The transactions noted above are between the Group and its joint ventures and associate whose relationship is described in Note 13 and Note 14 respectively.

Sales of goods to related parties were made at the Group's usual list prices. No purchases were made by the Group from its joint ventures or associate. The amounts outstanding ordinarily bear no interest and will be settled in cash.

Remuneration of key management personnel

The aggregate remuneration of the Executive Committee, who are considered to be key management personnel of the Group, was £7.1m (2016: £6.1m). During the year, the Executive Committee was expanded as described on page 44.

Transactions with key management personnel

In 2014, properties were sold at market value by the Group to parties related to key management personnel who continue to lease them back to the Group. Payments under those leases were made to the individuals as follows:

· Close family members of Ian Sutcliffe received £17,250 (2016: £17,250)

· A company of which Graham Cherry, a member of the Group's Executive Committee, is a Director and shareholder received £21,000 (2016: £21,000).

In 2016 a close family member of Ian Sutcliffe jointly purchased a property from Acton Gardens LLP, an entity in which the Group has a 50 per cent interest, at market value of £530,000.

In 2016 a close family member of Ian Sutcliffe and a close family member of Graham Cherry were employed by a subsidiary of the Group. Both individuals were recruited through the normal interview process and are employed at salaries commensurate with their experience and roles. The combined annual salary and benefits of these individuals is less than £100,000 (2016: less than £100,000).

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union and Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group and Parent Company for that period. In preparing the financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· state whether applicable IFRSs as adopted by the European Union have been followed for the Group financial statements and United Kingdom Accounting Standards, comprising FRS 102, have been followed for the Company financial statements, subject to any material departures disclosed and explained in the financial statements;

· make judgements and accounting estimates that are reasonable and prudent; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Parent Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Parent Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

The Directors are also responsible for safeguarding the assets of the Group and Parent Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Parent Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Parent Company's performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the Board of Directors section, confirms that, to the best of their knowledge:

· the Parent Company financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', and applicable law), give a true and fair view of the assets, liabilities, financial position and loss of the Company;

· the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

· the Directors' Report includes a fair review of the development and performance of the business and the position of the Group and Parent Company, together with a description of the principal risks and uncertainties that it faces.