Countryside Properties : Financial Document

COUNTRYSIDE PROPERTIES PLC

Unaudited results for the six months ended 31 March 2021

13 May 2021

Solid revenue growth; further investment in Partnerships

Countryside, a leading UK home builder and regeneration partner, today announces its unaudited results for the six months ended 31 March 2021.

Results highlights
	HY 2021	HY 2020	Change
Completions	2,591	2,271	+14%
Adjusted revenue1	£755.0m	£530.9m	+42%
Adjusted operating profit2	£78.6m	£55.3m	+42%
Adjusted operating margin3	10.4%	10.4%	+0bps
Adjusted basic earnings per share4	11.1p	9.1p	+22%
Return on capital employed5	8.9%	25.8%	-
Reported revenue	£661.0m	£481.2m	+37%
Reported operating profit	£24.7m	£41.0m	(40)%
Net cash/(debt)6	£105.9m	£(127.7)m	+£233.6m
Basic earnings per share	6.1p	8.1p	(25)%

Highlights

• Group completions up 14%, with adjusted revenue up 42%, driven by increased private for sale completions
• Adjusted operating profit up 42%
• Net cash of £106m: £109m net investment in Partnerships in the first half; further net investment of £100m expected in the second half, executing our medium term growth plans
• Provision of £25m for remedial work on historical high-rise developments
• New sustainability approach with our pathway to net zero carbon to be published in the second half of 2021
• 5 star HBF rating for the second year, with ongoing commitment to build quality
• Good progress on internal reorganisation to facilitate housebuilding separation

Outlook

The net reservation rate for the last six weeks has been strong at 0.82 and we are over 90% forward sold across all tenures for the year. At the end of March the total forward order book stood at £1,203m supporting delivery in the second half, despite delays in the planning system as a result of the pandemic. There is no change to the Board's expectations for the full year.

Iain McPherson, Group Chief Executive, said:

"We have seen a good recovery from 2020, with trading in line for the full year. We remain focused on executing our growth plans in Partnerships, with investment into three new operating regions and a strong bid pipeline, in line with our longer term plans. Our track record working with partners across Local Authorities, Housing Associations and private homeowners, together with our framework agreements and forward order book, position us well to deliver our medium-term growth targets."

Our half year results presentation will be webcast and available via conference call at 8.30am on Thursday 13 May followed by Q&A. Please register for the webcast at https://investors.countrysideproperties.com

The conference call dial in details are:

Tel: + 44 20 3936 2999

PIN: 457640

Enquiries:

Countryside Properties PLCTel: [phone]

Iain McPherson - Group Chief Executive

Mike Scott - Group Chief Financial Officer

Victoria Prior - Managing Director, Corporate Affairs

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COUNTRYSIDE PROPERTIES PLC

Unaudited results for the six months ended 31 March 2021

Brunswick Group LLP	Tel: [phone]
Nina Coad
Robin Wrench

Note to editors:

Countryside is the UK's leading mixed-tenure developer through its two divisions, Partnerships and Housebuilding.

Countryside's Partnerships division was established over 30 years ago, specialising in estate regeneration, with operations in London, the South East, the South West, the North West, the Midlands and Yorkshire. It works mainly on public sector owned and brownfield land, in partnership with local authorities and housing associations to develop private, affordable and PRS homes. It recently established an advanced modular panel manufacturing capability to improve quality, reduce build times and directly manage supply to sites. Its developments around London include large scale urban regeneration projects at Beam Park, Rainham, Acton Gardens, Ealing and Rochester Riverside, Medway, as well as typically smaller sites with a mix of settings in our regions outside of London.

Countryside's Housebuilding division benefits from an industry leading strategic land bank which is focused around outer Lond on and the Home Counties. It builds family homes, with a focus on placemaking and selling to local owner occupiers. Its developments include a number of large-scale projects including Beaulieu Park, Essex and Springhead Park, Ebbsfleet.

For further information, please visit the Group's website: www.countrysideproperties.com

Cautionary statement regarding forward-looking statements

Some of the information in this document may contain projections or other forward-looking statements regarding future events or the future financial performance of Countryside Properties PLC and its subsidiaries (the Group). You can identify forward -looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could", "may" or "might", the negative of such terms or other similar expressions. Countryside Properties PLC (the Company) wishes to caution you that these statements are only predictions and that actual events or results may differ materially. The Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Group, including among others, general economic conditions, the competitive environment as well as many other risks specifically related to the Group and its operations. Past performance of the Group cannot be relied on as a guide to future performance.

"Countryside" or the "Group" refers to Countryside Properties PLC and its subsidiary companies.

1. Adjusted revenue includes the Group's share of revenue from joint ventures and associate of £94.0m (HY 2020: £49.7m).
2. Adjusted operating profit includes the Group's share of operating profit from joint ventures and associate of £21.7m (HY 2020: £9.0m)
   and excludes non-underlying items of £32.2m (HY 2020: £5.3m). Refer to Note 6.
3. Adjusted operating margin is defined as adjusted operating profit divided by adjusted revenue.
4. Adjusted basic earnings per share is defined as adjusted profit attributable to ordinary shareholders, net of attributable taxation, divided by the weighted average number of shares in issue for the period.
5. Return on capital employed ("ROCE") is defined as adjusted operating profit for the last 12 months divided by the average of opening and closing tangible net operating asset value ("TNOAV") for the 12-month period. TNOAV is calculated as net assets excluding net cash or debt less intangible assets net of deferred tax.
6. Net debt is defined as bank borrowings less unrestricted cash. Unamortised debt arrangement fees and lease obligations are not included in net debt.
7. An active site is a site where construction has commenced. An open selling outlet is an active site on which the Group is selling homes.

The Directors believe that the use of adjusted measures is necessary to understand the underlying trading performance of the Group.

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COUNTRYSIDE PROPERTIES PLC

Unaudited results for the six months ended 31 March 2021

Group results for the six months ended 31 March 2021

Performance recovered well in the first half and we continue to make good progress on our key strategic initiatives to support delivery over the medium term. Demand for all tenures of homes was good, underpinned by continued government support for housing. In particular, the private for sale market strengthened since the start of the year. Some delays to the planning process impacted start on site and delivery of Affordable and PRS homes in the first half. Underlying demand for these tenures remains strong and these delays are not expected to impact delivery over the medium-term.

Completions

Total completions increased 14% to 2,591 homes (HY 2020: 2,271 homes), driven by a strong increase in private delivery as we completed on homes deferred as a result of Covid-19 from the prior year. Overall, private completions were 71% higher than last year at 1,289 (HY 2020: 753 homes). Affordable completions were broadly flat at 932 homes (HY 2020: 941 homes) with PRS completions 36% lower at 370 homes (HY 2020: 577 homes), reflecting delays to site starts as we recognise completions on an equivalent unit basis in line with construction activity.

Revenue

Total adjusted revenue increased 42% to £755.0m (HY 2020: £530.9m). On a reported basis, revenue increased

37% to £661.0m (HY 2020: £481.2m).

Private average selling price ("ASP") increased 6% to £389,000 (HY 2020: £368,000) reflecting a higher

proportion of private sales from our Housebuilding sites at 41% (HY 2020: 39%), a greater weighting to the

south in Partnerships and house price inflation ("HPI") of 1.6% (HY 2020: (2.3%)).

Help to Buy usage increased to 62% of private completions (HY 2020: 52%), or 31% of total completions (HY

2020: 17%).

Affordable ASP, at £153,000 was flat on the prior year (HY 2020: £155,000) with PRS ASP increasing 3% to

£149,000 (HY 2020: £144,000) driven mainly by site mix with a greater proportional delivery coming from our Southern Partnerships business where ASPs are higher.

Our net private reservation rate per open sales outlet per week remained within our target range at 0.68 (HY 2020: 0.93), lower than the prior year as expected as a result of our strong forward sales position as we entered the year. Our open sales outlets decreased 7% to 64 (HY 2020: 69) with new sales launches expected during the summer months. Total active sites were down 19% to 112 (H1 2020: 139) reflecting a move away from smaller sites.

Overall, our total forward order book at £1,203m (HY 2020: £1,506m, FY: £1,432m) was 16% lower than the position at the start of the year reflecting the delivery of homes deferred from the prior year as a result of the Covid-19 lockdown and delays to starting on site. Total forward order book is 16% ahead of HY 2019.

Land and commercial sales

Gross profit from land and commercial sales contributed £10.6m (HY 2020: £0.8m). Further land sales are expected to complete in the second half along with a number of small commercial sales.

Operating profit and margin

Adjusted operating profit increased 42% to £78.6m (HY 2020: £55.3m) including the land sales in

Housebuilding. Build cost inflation increased to around 3% (HY 2020: 1%) with inflation seen across several categories including timber and steel and these inflationary pressures are increasing. We continue our focus on operational efficiency to minimise the impact of cost increases through use of standard house types, use of Group buying deals and leveraging our off-site manufacturing capabilities. On a reported basis, operating profit decreased 40% to £24.7m (HY 2020: £41.0m). The difference between adjusted and reported results reflects the proportional consolidation of our joint ventures and associates (see Notes 11 and 12) and exclusion of non- underlying items (see below). Overall, adjusted operating margin remained unchanged at 10.4% (HY 2020: 10.4%) and reported operating margin decreased by 480bps to 3.7% (HY 2020: 8.5%).

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COUNTRYSIDE PROPERTIES PLC

Unaudited results for the six months ended 31 March 2021

Non-underlying costs

The quality and safety of the homes we deliver is of the utmost importance to the Group. Since December 2020, EWS1 surveys have identified 20 developments, constructed between 2008 and 2017, where the current building owner believes there are defects in the building which need to be remediated. We have made a provision of £25m (FY 2020: £nil) in respect of these costs.

Total non-underlying costs of £32.2m (HY 2020: £5.3m) also include the ongoing reorganisation of the Group

to support the separation of Housebuilding of £3.3m and other costs of £3.9m (HY 2020: £5.3m) (see note 6 to the financial statements)

In March 2021, the CMA announced that it had commenced the consultation stage of its inquiry into the sale of leasehold properties with which we are fully cooperating.

Assets and liabilities

Inventories increased £25.0m to £1,084.1m (FY 2020: £1,059.1m) during the period. This was driven by our continued investment to support the growth of the Partnerships division with £73.1m spent on land purchases and construction. With the completion of deferred units in Housebuilding, there was a net reduction of £48.1m in inventory.

The right of use asset under IFRS 16 has increased to £67.8m (FY 2020: £26.3m) driven largely by the Bardon

Modular Panel Factory with a corresponding increase seen in lease liabilities to £68.8m (FY 2020: £30.5m).

The Group's investment in joint ventures reduced to £33.8m (FY 2020: £40.9m) as a result of dividends received in the period exceeding the profit generated by the joint ventures.

Net cash/debt

We ended the half with net cash at 31 March 2021 of £105.9m (HY 2020: net debt £127.7m) with £109m investment in Partnerships in the first half and a further net investment of £100m expected in the second half as we continue to execute our growth plans. After the period end, deferred land payments of £58m were made by the Housebuilding division. We expect to end the current financial year with a modest amount of net debt.

Net finance costs were £6.0m (HY 2020: £6.2m), with interest on bank debt decreasing by 32% to £1.3m (HY

2020: £1.9m).

Taxation

The effective tax rate applied to adjusted profit for the period was 19.3% (HY 2020: 17.3%), broadly in line with

the UK headline rate of 19.0%. On a reported basis, the effective tax rate was 17.7% (HY 2020: 16.7%).

Earnings per share

Adjusted basic earnings per share were 11.1 pence (HY 2020: 9.1 pence), reflecting the increase in adjusted earnings in the period, offset by the higher number of shares in issue following the placing in July 2020. On a reported basis, basic earnings per share were 6.1 pence (HY 2020: 8.1 pence).

Group structure and dividend

In December 2020, we announced that we were reviewing the separation of our Housebuilding division. Since that time, we have made excellent progress on the internal reorganisation of the Group. The Group is reviewing the appropriate capital structure and dividend policy for the business going forward and expects to complete this during the second half of the year. The Board has not proposed an interim dividend, pending the outcome of that review.

Group sustainability update

At Countryside we are proud to create places that people love. As well as building quality homes, we focus on critical social and digital infrastructure, transport and green spaces needed to nurture vibrant, connected and healthy communities. We have a responsibility to create a more sustainable world. The places where we live and work have a big impact on our climate and biodiversity.

We will shortly be launching a new sustainability approach that will help tackle some of the big challenges ahead including shortage of affordable homes, becoming a low carbon society and the significant loss of biodiversity in the UK. Our new approach is focused on three key areas:

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COUNTRYSIDE PROPERTIES PLC

Unaudited results for the six months ended 31 March 2021

• The homes we build and our operations;
• Creating sustainable communities leaving a lasting positive legacy; and
• Supporting our people to continue to deliver beautiful places that people love.

In the second half of 2021 we will also announce our Pathway to Net Zero Carbon supported by science-based reduction targets. We are working collaboratively with the industry to meet the Future Homes Standard and the delivery of Net Zero Carbon Ready Homes. We have joined the HBF Future Homes Task Force and become a partner of the Supply Chain Sustainability School as we look to work across the sector to bring government, housebuilders, utility providers, material suppliers and environmental groups together, while also supporting our supply chain.

We continue to support local communities through our £1m Communities Fund, created in 2020 and renewed for a second year, which is specifically aimed at helping the most vulnerable people in the areas where we work. The fund is supported by a team of volunteers within Countryside, who reach out to partners and the local community to identify areas that need support.

Board change

David Howell announced his intention to step down from the Board in 2021. On 13th April 2021 we announced the appointment of John Martin to the Board as Non-executive Chair designate and he succeeded David Howell as Chair on 1 May 2021.

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