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FULL YEAR FINANCIAL RESULTS TO 30 SEPTEMBER 2014

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15/12/2014

 

Strong operating performance with record forward order book

Full Year Financial Results to 30 September 2014

Results highlights

  • Completions up 44.4% at 2,034 (2013 : 1,409)
  • Revenue up 46.0% to £448.9 million (2013 : £307.6 million)
  • Operating profit up 114.5% to £53.4 million (2013 : £24.9 million)
  • Operating margin 11.9% (2013 : 8.1%)
  • ROCE at 16.4% (2013 : 9.4%)
  • Record private forward sales position up 179.1% at £137.3 million (2013 : £49.2 million)


Positioned for growth

  • Land bank of 23,990 plots (2013 : 23,495) with 13,408 plots with planning consent (2013 : 14,303)
  • 83% of private land strategically sourced, focused on South East England
  • Innovative partnership model delivering excellent returns
  • Acquisition of Millgate, excellent geographical and product fit, now fully integrated, delivering around £1 million of annualised cost synergies
  • Refinancing completed in June 2014, providing a 5 year £200 million revolving credit facility
  • Governance strengthened with three new Non-Executive Directors, and the addition of three new Managing Directors in the business
  • On track for medium term growth objectives of 3,500 to 4,000 completions per year; operating margin growth of between 16% and 18% and improvement in ROCE to 24%-28%


Outlook and current trading

  • Robust current trading with sales rates and values in line with expectations
  • Cancellation rates remain very low with reduced requirement for incentives
  • Little exposure to build cost inflation in the current year

 

Ian Sutcliffe, Executive Chairman, said:

"Countryside has made excellent progress in a year of substantial change. We have achieved strong revenue growth and improved operating margin, which has led to a significant improvement in profit and return on capital.


Additionally we have strengthened our business considerably by the integration of the Millgate acquisition and have successfully refinanced our debt. We have added three new Non Executive Directors to improve governance and three new Managing Directors to grow the business.


We enter the new year with a record order book, robust trading and a strongly positioned
land bank, which gives us confidence in the continued growth of the business."

Notes to Editors

Countryside is a subsidiary of Copthorn Holdings Limited.
All financial numbers given within this announcement include Group Share of joint ventures and associates


About Countryside

Countryside is a private housebuilder, completing 2,034 new homes in the past year. The Group’s principal areas of operation are in London, the South East and North West of England. It focuses on creating communities from both strategic land and public sector partnerships, delivering private and affordable housing.

 

STATEMENT


Strong financial performance

Having joined the business on 1 October 2013 I am delighted to report that we have made excellent progress during the financial year, with strong revenue and profit growth, together with the acquisition and integration of Millgate Developments into our business. We have strengthened the balance sheet by refinancing our debt to both extend maturity and improve flexibility. The wider economic and political outlook has been favourable and we were well placed to take advantage.


We have grown volumes and enhanced our capital discipline. We completed 44% more private and affordable homes at 2,034 (2013 : 1,409) an increase of 625 homes over 2013. Group turnover for the financial year increased by 46% to £448.9 million (2013 : £307.6 million). Operating profit has more than doubled to £53.4 million compared to £24.9 million earned in 2013, with an increase of 152% in profit before tax to £12.6 million (2013 : £5.0 million). ROCE improved from 9.4% to 16.4%.


Millgate acquisition

On 4 June 2014, the Group acquired Millgate Developments Limited, a housebuilding business focused on development of premium properties, primarily west of London. During the period from acquisition, the Millgate business contributed turnover of £13.3 million, generating operating profit of £1.9 million and retained profits of £0.5 million.


An industry leading land bank

The owned or controlled land bank stands at 23,990 (2013 : 23,495) plots, of which 13,408 (2013 : 14,303) have planning consent. This represents over 10 years’ worth of production at current levels and has either been acquired at historic market cost or secured at a discount to its future market value. The land bank is predominately located in the South East of England in areas of high economic resilience. This has given us a tremendously strong base for future growth and, while we will continue to add to it where we have the opportunity, we have no requirement to pay inflated prices.


Innovative place making


We continue to work in partnership with both private and public sector landowners to develop new communities and urban regeneration. The quality of our placemaking and house design continues to differentiate us from the market and achieve consistently higher selling prices than our competitors. Our average selling price in 2014 was £311,000 versus £258,000 in 2013. Our reputation for place making gives us an advantage with both planners and housing associations.


Established team

We have a long tenured and experienced workforce whose expertise and commitment remain a source of competitive advantage. Our relationships extend into our supply chain and subcontractor base, whose loyalties have been built up over a number of years. We adopt an organic approach to developing our own people and investing in their development.


Strengthening of the Board

We have appointed three new Non-Executive Directors, David Howell, in April, Baroness Sally Morgan, and Amanda Burton in October 2014, all of whom are already adding new perspectives and immense value to the Board. Additionally we have strengthened the business in a number of areas including three new Managing Directors and key appointments in finance, HR and legal teams.


Our Strategy

The Group’s principal objective is to deliver sustainable growth in shareholder value throughout the economic cycle. We aim to maximise returns and shareholder value whilst retaining a balanced risk portfolio.


Our people are a key differentiator and we are committed to attracting, retaining, developing and rewarding our staff to maintain this advantage. We remain dedicated to adding value through place making and long-term partnerships and we aim to be the partner of choice for both private and public sector landowners.


We believe in a design-led approach, creating visually stimulating, practical and innovative homes that are the cornerstone of our developments. We create imaginative solutions for each development using both traditional and contemporary design, with the appropriate use of local building materials. This approach helps us when promoting planning permissions and attracts new landowners keen to benefit from the Group’s experience and track record.


a) Land

The size, location and embedded value of the Group’s land bank is key to our future success. We have focused our activity on London and the South East of England in areas of robust economic activity. Our land is typically derived from long-term planning promotions or development agreements with public sector land. We secure large privately owned sites in the best locations through the use of options and conditional contracts and use our expertise to develop them through the planning process.


b) New Homes & Communities

We provide private and affordable housing on larger-scale developments of privately-owned or controlled land. We assemble land holdings and provide infrastructure to enable a coherent master plan for these sites. The majority of these developments are low to midrise, making use of a wide range of tried and tested design and construction techniques. This provides predictable cost outturns and customer satisfaction as well as managing the Group’s capital exposure.


c) Partnerships

We work in partnership with local authorities and housing associations to develop private and affordable housing in areas of urban regeneration. This provides another source of prime development land, particularly in the London boroughs. These longer-term partnership projects reduce our exposure to volatile London land prices and include phased viability to mitigate financial risk. The Group has a strong reputation for delivering such projects and is seen as a key player within this expanding sector.


d) Millgate

Acquired in 2014, this stand-alone division delivers our premium housing product in affluent locations. It produces executive housing and upscale apartments typically on sites of less than 40 units. The Millgate brand is synonymous with high-specification and quality of build, which we do not intend to dilute.


e) Commercial Development and Contracting

We undertake these activities as part of our larger place making developments. We restrict our activity to areas of our expertise such as land development, the provision of infrastructure or delivering low-rise housing. We ensure all activities in this area balance profit and risk in an appropriate manner.


Balance sheet

On 4 June 2014, the Company signed a new £200 million Revolving Credit Facility for five years expiring June 2019.


The Group’s balance sheet is well positioned. Following the recapitalisation and refinancing of the business, the Group’s balance sheet is in a strong position to support growth. As at 30 September 2014, the Group had net bank borrowings of £81.3 million (2013 : £40.2 million) well within the current facility.


Outlook and current trading

Current sales reservation rates remain in line with expectations at 0.78 per outlet per week. Average selling prices remain robust and are 3% ahead of H2 2014. The use of incentives and cancellation rates remain low. Build costs have risen in line with industry projections but we have little exposure to further rises in the current year as 85% of our subcontractor packages have now been placed. Whilst the general election is expected to bring some slow-down in sales rates and planning approvals, we see broad cross-party support for the housing sector, which ultimately should be beneficial for the business.


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