b. Operating Profit

Fees payable to the Company’s Auditors comprise:

(i) fees payable for the audit of parent company and consolidated financial statements £30,000 (2018: £30,000) and fees payable for the audit of the Company’s subsidiaries pursuant to legislation £147,750 (2018: £157,000).

(ii) Auditors’ remuneration for other services comprised £20,000 (2018: £20,000) in respect of an independent review of the half-yearly financial statements (Audit related assurance services), £9,100 (2018: £9,100) in respect of iXBRL tagging (Taxation compliance services) and £1,130 (2018: £1,130) in respect of 'PwC Inform', an on-line technical accounting guide (other services).

Current income tax credit in the Company is £3m (2018: £nil).

Information on the impact of future tax rate changes is included in note 11.

The Board made an additional cash return of 30 pence per share through a B share scheme. Each shareholder at the record date was issued with one B share for every existing ordinary share held at the time. Barclays Bank PLC (or a subsidiary thereof) (acting as principal, and not as agent, nominee or trustee for Redrow plc) made an offer to purchase the B shares for an amount of 30 pence per B share (free of all expenses and commissions). The company accepted the offer on behalf of shareholders and paid a single dividend to Barclays as holder of all the B shares of 30.15p per share.

The Board decided to propose a final dividend of 20.5p per share in respect of 2019 (£72m (2018: 19.0p, £70m)). The dividend has not been provided for and there are no income tax consequences.

b. Number

The monthly average number of persons employed by the Group was:

c. Key management remuneration

Key management personnel, as defined under IAS 24 ‘Related party disclosures’, are identified as the Executive Management Team and the Non-Executive Directors.

Summary key management remuneration is as follows:

In addition, the Redrow Staff Pension scheme paid £15,756 (2018: £15,246) to The Steve Morgan Foundation on behalf of Steve Morgan in his capacity as an active Scheme pensioner.

Detailed disclosure of Directors’ emoluments and interests in shares are included in the Directors’ Remuneration Report on pages 60 to 79, which form part of these financial statements.

d. Share-based payments

Save As You Earn Share Option scheme (SAYE)

The Redrow plc SAYE scheme is open to all employees and share options can be exercised either three or five years after the date of grant, depending on the length of the savings contract. The SAYE schemes are not subject to performance conditions.

The SAYE schemes have been valued using the Black-Scholes pricing model.

The expected volatility on SAYE schemes is based on the historic volatility of the Group’s share price over periods equal to the length of the savings contract.

Long Term Incentive scheme (LTIP)

Except in specified circumstances, options granted under the scheme are exercisable between three and ten years after the date of grant.

Options granted under the LTIP on 10 September 2018 were granted to a limited number of Senior Executives. The scheme is discussed in greater detail within the Directors’ Remuneration Report.

The LTIP has been valued using the Black-Scholes pricing model.

* For nil-cost awards not subject to a market based condition, volatility and risk free rate are not applicable.

The fair value at the measurement date of the LTIP granted on 10 September 2018 comprises £5.97 in respect of non-market based performance conditions.

The fair value at the measurement date of the LTIP granted on 15 November 2017 comprises £5.20 in respect of non-market based performance conditions.

Deferred Bonus Incentive (DBI)

Grants under the DBI were limited to Senior Management. Except in specified circumstances options granted under the scheme are exercisable between one and ten years after the date of grant for Tranche 1 and between two and ten years after the date of grant for Tranche 2 and are not subject to performance conditions.

The DBI has been valued using the Black-Scholes pricing model.

* For nil-cost awards not subject to a market based condition, volatility and risk free rate are not applicable.

Company Share Option Plan (CSOP)

Grants under the CSOP were limited to Senior Management. Except in specified circumstances, options granted to those other than the Executive Directors are exercisable between three and ten years after the date of grant and are not subject to performance conditions.

Share options outstanding

The following share options were outstanding at 30 June 2019:

The total share options outstanding at 30 June 2019 under the LTIP, Deferred Bonus Incentive Plan, Company Share Option Plan and the Save As You Earn schemes represent 1.4% of the issued share capital (2018: 1.4%).

Movements in the year

The number and weighted average exercise prices of share options is as follows:

The weighted average share price at the date of exercise of share options exercised during the year was £6.07 (2018: £6.21).

The options outstanding at 30 June 2019 had a range of exercise prices of £nil to £4.90 (2018: £nil to £4.90) and a weighted average remaining contractual life of 5.3 years (2018: 5.5 years).

The expected life used in the models has been adjusted, based on best estimates, to reflect exercise restrictions and behavioural considerations.

The charge to income in relation to equity settled share-based payments in the year is £7m (2018: charge £9m).

1 In respect of pensions in excess of the guaranteed minimum pension earned prior to 30 June 2006.

2 In respect of pensions in excess of the guaranteed minimum pension earned after 30 June 2006. Other pension increases are valued in a consistent manner.

The mortality tables used in the actuarial valuation were as follows (which make allowance for projected further improvements in mortality):

For male and female members:    SAPS CMI_2018 1.50% Long Term Trend (2018: SAPS CMI_2017 1.25% Long Term Trend)

The life expectancies implied by these tables for typical members are:

It has been assumed that the majority of members will commute part of their pension in return for a tax free cash sum on retirement.

The total assets, the split between the major asset classes in the Scheme, the present value of the Schemes’ liabilities and the amounts recognised in the balance sheet are shown below:

The defined benefit obligation can be approximately attributed to the scheme members as follows:

All benefits are vested at 30 June 2019 (unchanged from 30 June 2018).

The total amounts credited/(charged) against income in the year were as follows:

The amount included in the balance sheet arising from the (deficit)/surplus in respect of the Group’s defined benefit section is as follows:

Sensitivity of key assumptions

The table below gives a broad indication of the impact on the IAS 19R numbers to changes in assumptions and experience (away from the assumptions shown on page 110). All figures are before allowing for deferred tax.

b. Investments in joint ventures

(i) £4m of the loans to joint ventures are secured (2018: £4m). 

The Group’s joint venture investments are:

• its 50% shareholding in the ordinary share capital of Menta Redrow Limited and Menta Redrow (II) Limited, both companies incorporated in Great Britain with a 30 June year end. Menta Redrow Limited and Menta Redrow (II) Limited were formed to pursue redevelopment opportunities in Croydon.

c. Investments in subsidiary undertakings

The principal subsidiary company is Redrow Homes Limited. All subsidiary companies are incorporated in Great Britain except Redrow Homes (Park Heights) Limited which is incorporated in Jersey. A full list of subsidiary undertakings as at 30 June 2019 is shown on page 116. The capital of all the subsidiary companies, consisting of ordinary shares, is wholly owned by HB (HDG) Limited which in turn is wholly and directly owned by Redrow plc.

The principal activity of Redrow Homes Limited, Redrow Real Estate Limited, Redrow Regeneration plc, The Waterford Park Company Limited and The Waterford Park Company (Balmoral) Limited is residential development. The principal activity of Harrow Estates plc is land acquisition, development and resale. HB (HDG) Limited is an intermediate holding company. St David's Park Limited principal activity is business park maintenance services. Those subsidiaries marked with * are non-trading.

All the subsidiaries registered office is Redrow House, St David’s Park, Flintshire, CH5 3RX apart from those marked (i) and (ii) whose registered offices are as follows:

(i) c/o TLT LLP, 140 West George Street, Glasgow, G2 2HG
(ii) 13 Castle Street, St. Helier, Jersey, JE4 5UT

The Group has no material unrecognised deferred tax assets.

A Corporation Tax rate of 20% from 1 April 2016 was substantively enacted on 2 July 2013. Changes to reduce the Corporation Tax rate to 19% from 1 April 2017 and to 18% from 1 April 2020 were substantively enacted on 26 October 2015. A further change to reduce the rate to 17% from 1 April 2020 was substantively enacted on 6 September 2016. Deferred tax balances have been valued at 17%.

Trade receivables due after more than one year are stated after an allowance of £5m has been made (2018: £7m) in respect of expected credit losses. This allowance is based on an estimate of default rates. £1m provision was made during the year (2018: £nil). £nil was utilised (2018: £1m). £nil provision was released during the year (2018: £nil) but £3m provision was transferred to be held against current trade assets (2018: £nil). Current trade assets are therefore stated after an allowance of £3m (2018: £nil) in respect of expected credit losses.

Trade and other receivables due between one and two years are £3m (2018: £2m), between two and five years are £6m (2018: £6m) and due in more than five years are £nil (2018: £nil). The Group holds a charge over the underlying assets. At the balance sheet date, there is no material difference between the fair value of trade and other receivables and their carrying values as shown in the balance sheet.

Amounts due from subsidiary companies are unsecured, repayable on demand and carry interest at market rate on trading balances.

Inventories of £1,526m were expensed in the year (2018: £1,375m). Work in progress includes £3m (2018: £2m) in respect of part exchange properties. Land held for development in the sum of £312m is subject to a legal charge as security in respect of deferred consideration (2018: £229m).

Cash on account comprises £32m (2018: £4m) attributable to land and £75m (2018: £69m) attributable to work in progress.

The carrying value of undeveloped land where net realisable value has been determined on the basis of a sale of land in its current state is £nil (2018: £nil).

As discussed in note 1, the Group considers the carrying value of inventories to be a critical accounting judgement.

Other financial liabilities are at amortised cost.

The Group’s activities expose it to a variety of financial risks.

Financial risk management is conducted centrally using policies approved by the Board. Market risk is negligible due to the Group’s limited exposure to equity securities (some limited exposure arises through the Redrow Staff Pension Scheme’s investment portfolio) and the associated price risk. Its foreign exchange exposure is negligible given the nature of the Group’s business and its exclusive UK activities.

For the year ended 30 June 2019, it is estimated that for any incremental general increase of 1% in interest rates applying for the full year the decrease in the Group’s profit before tax would be less than £1m (2018: £1m).

Maturities above include estimated interest payable to the maturity of the facilities.

Maturities above include estimated interest payable to the maturity of the facilities.

The Company was fully compliant with its banking covenants as at 30 June 2019.

At the year end, the Group and Company had £170m (2018: £245m) of undrawn committed bank facilities available.

There is no material difference between the fair value of the bank overdrafts and bank loans and their carrying values as shown in the balance sheet.

d. Maturity of trade and other payables

These represent current liabilities due within one year.

e. Credit risk

Credit risk arises from cash and cash equivalents, including call deposits with banks and financial institutions, derivative financial instruments and trade receivables. It represents the risk of financial loss where counterparties are unable to meet their obligations.

Credit risk is managed centrally in respect of cash and cash equivalents and derivative financial instruments. In respect of placing deposits with banks and financial institutions and funds, individual risk limits are approved by the Board. The table below shows the cash and cash equivalents as at the balance sheet date:

No credit limits were exceeded during the reporting year or subsequently and the Group does not anticipate any losses from non-performance by these counterparties.

There is no specific concentration of credit risk in respect of home sales as the exposure is spread over a number of customers. In respect of trade receivables, the amounts presented in the balance sheet are stated after adjusting for any doubtful receivables, based on the judgement of the Group’s management through using both previous experience and knowledge of the current position of any more substantial receivables.

g. Fair values

At 30 June 2019 there is no material difference between the fair value of financial instruments and their carrying values in the balance sheet.

Amounts due to subsidiary companies are unsecured, repayable on demand and bear interest at market rate on trading balances.

Provisions relate to onerous contracts (in place at June 2009 and viewed as onerous) and maintenance and sundry remedial costs in respect of development activities, which it is assessed will be utilised within four years.

On 8 April 2019, 369,799,941 B shares of 0.1 pence each were allotted and issued to shareholders on the basis of 1 B share for every existing ordinary share of 10 pence each held at the record date. Following the purchase by Barclays of all of the B shares, and payment by the Company of a single dividend to Barclays as holder of all of the B shares, the B shares were reclassified as deferred shares of 0.1 pence and were immediately repurchased and cancelled by the Company.

Alongside the B Share Scheme, on 8 April 2019 the issued share capital of the Company was consolidated. Each shareholder at the record date received 20 new ordinary shares of 10.5 pence each for every existing 21 ordinary shares of 10 pence each held.

On 29 March 2019, in order to ensure that a whole number of new ordinary shares was created following the implementation of the share consolidation, 3 existing ordinary shares were issued by the Company to the Employee Benefit Trust. Following the consolidation, the total number of shares in issue is 352,190,420 ordinary shares of 10.5 pence each.

Options granted to Directors and employees under the LTIP, the CSOP and the SAYE schemes are set out in note 7d.

Other reserves

Other reserves consists of a £7m Capital redemption reserve (2018: £7m) and a £1m Consolidation reserve (2018: £1m).

Undistributable reserves

Other reserves are not available for distribution.

* Includes dividends received from subsidiary companies.

Other reserves

Other reserves consists of a £7m Capital redemption reserve (2018: £7m).

Undistributable reserves

Other reserves are not available for distribution.