Search

1. Critical Accounting Judgements and Key Sources of Estimation Uncertainty

Judgements and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management have not made any individual critical accounting judgements that are material to the Group other than the disclosure judgement outlined below.

As noted in the accounting policy, in line with industry practice, the Group treats cash paid in respect of land, including the settlement of land creditors, as operating rather than financing cashflows. This is a judgement as, whilst the repayment profile of land creditors is important in assessing the Group’s liquidity and timing of future cash outflows, the Directors believe that settlement of the land creditors is an operating cashflow on the basis that land purchases are integral to the Group’s working capital management. 

Management considers the key sources of estimation uncertainty relate to:

Carrying value of inventories and cost of sales recognition

The Group carries inventories at the lower of cost and net realisable value less cash on account.

Due to the nature of development timescales, it is routinely necessary to estimate costs to complete and future revenues and to allocate non-unit specific development costs between units legally completing in the current financial year and thereby impacting current year cost of sales and in future periods. A full review of the net realisable value of inventories was undertaken by the Group as at 28 June 2020 and this requires Management to use its judgement and experience in assessing any impairment provisions that may be required.

If there are significant movements in UK house prices or development costs compared to Managements' expectations then further impairments or reversal of impairments already made may be needed.

Pensions

The Group has utilised assumptions including a rate of return on assets, mortality assumptions and a discount rate having been advised by its actuary. To the extent that such assumed rates are different from what actually transpires, the retirement benefit obligations of the Group would change. A sensitivity analysis is included on page 147.

The primary risks the Group is exposed to by the defined benefit pension scheme are the movement in corporate bond yields, the market’s long-term expectations for inflation and movement in mortality rates. The scheme closed to future accrual with effect from 1 March 2012. See Note 7e.

2. Revenue and Operating Profit

a. Revenue

An analysis of the Group's revenue is as follows:

2020
£m 
2019
£m 
Revenue from the sale of new housing 1,332 2,091
Revenue from the sale of land 7 21
1,339 2,112

b. Operating Profit

Note 2020
£m 
2019
£m 
Operating profit is stated after charging:
Inventories expensed in the year  14 1,027 1,526
Amortisation 8 - -
Depreciation - Property, plant and equipment 9 4 3
Depreciation - Lease right of use assets 3 -
Research and development expenditure  - 1
Auditors’ remuneration – fees payable to the Company’s Auditors for audit services (i)  - -
                                        – fees payable to the Company’s Auditors for other services (ii)  - -

Fees payable to the Company’s Auditors comprise:

(i) fees payable for the audit of parent company and consolidated financial statements £50,000 (2019: £30,000) and fees payable for the audit of the Company’s subsidiaries pursuant to legislation £150,000 (2019: £147,750).

(ii) Auditors’ remuneration for other services comprised £36,895 (2019: £20,000) in respect of an independent review of the half-yearly financial statements (Audit related assurance services), £nil (2019: £9,100) in respect of iXBRL tagging (Taxation compliance services) and £nil (2019: £1,130) in respect of 'PwC Inform', an on-line technical accounting guide (other services).

Amounts receivable by the Group's auditor in respect of pension services performed for the pension trustees is £40k (2019: £24k).

The 2020 ratio of non-audit fees to audit fees is 1:5.42 (2019: 1:5.88).

3. Net Financing Costs

2019
£m 
2018
£m 
Interest payable on bank loans (5) (2)
Imputed interest on deferred land creditors (5) (6)
Financial costs (10) (8)
Other interest receivable 2 3
Financial income 2 3
Net financing costs (8) (5)

4. Income Tax Expense

2020
£m 
2019
£m 
Current tax charge
UK Corporation Tax in respect of current year 27 77
Adjustment in respect of prior years (4) -
Current tax charge 23 77
Deferred tax
Origination and reversal of temporary differences 1 -
Adjustment in respect of prior years 3 -
Deferred tax charge 4 -
Total income tax charge income statement 27 77
Reconciliation of tax charge for the year
Profit before tax 140 406
Tax calculated at UK Corporation Tax rate at 19.0% (2018: 19.0%) 27 77
Tax charged for the year 27 77
Deferred tax recognised directly in equity
Relating to pension scheme - (1)
- (1)

Current income tax charge in the Company is £1m (2019: credit of £3m).

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

5. Dividends

The following dividends were paid by the Group:

2020
£m
2019
£m
Prior year final dividend per share of 20.5p (2019: 19.0p); Current year interim dividend per share of nil pence (2019: 10.0p) 72 107
B share dividend nil pence (2019: 30.15p) - 111
72 218

6. Earnings Per Ordinary Share

The basic earnings per share calculation for the 52 weeks ended 28 June 2020 is based on the weighted average number of shares in issue during the period of 343m (2019: 356m) excluding those held in trust under the Redrow Long Term Incentive Plan (9m shares (2019: 9m shares)), which are treated as cancelled.

Diluted earnings per share has been calculated after adjusting the weighted average number of shares in issue for all potentially dilutive shares held under unexercised options.

For the 52 weeks ended 28 June 2020
Earnings
£m 
Number
of shares
millions
Per share
pence 
Basic earnings per share  113 343 32.9
Effect of share options and SAYE  - 2 (0.1)
Diluted earnings per share 113 345 32.8
For the 52 weeks ended 30 June 2019
Earnings
£m 
Number
of shares
millions
Per share
pence 
Basic earnings per share  329 356 92.3
Effect of share options and SAYE  - 2 (0.3)
Diluted earnings per share  329 358 92.0

7. Employees

a. Cost (including Directors)

Group Company
2020
£m 
2019
£m
2020
£m
2019
£m
Wages and salaries 104 109
3 3
Social security costs 15 15
1 1
Other pension costs  10 10
- -
Share-based payments  5 7
- 1
134 141
4 5

b. Number

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

Group Company
2020
Number 
2019
Number
2020
Number
2019
Number
Directors and administrative staff 946 896
8 8
Other personnel 1,418 1,408
- -
2,364 2,304 8 8

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:

2020
£m
2019
£m
Salaries and short-term employee benefits 4 5
Share-based payments 1 2
5 7

Detailed disclosure of Directors’ emoluments and interests in shares are included in the Directors’ Remuneration Report on pages 78 to 100, 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.

2020
2019
Options granted during the year 791,921 712,217
Date of grant  1 January 2020
1 January 2019
Fair value at measurement date  £2.17 £2.03
Share price  £6.18 £5.78
Exercise price  £4.94 £4.62
Option life (contract length)  3/5 years
3/5 years
Expected dividend yield 3.38% 3.38%
Risk free interest rate  1.5% 1.5%

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 11 September 2019 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.

2020
2019
Options granted during the year 456,376 335,604
Date of grant  11 September 2019 10 September 2018
Fair value at measurement date  £5.945 £5.97
Share price  £5.945
£5.97
Exercise price  £0.00 £0.00
Expected volatility N/A* N/A*
Option life 3 years 3 years
Expected dividend yield N/A N/A
Risk free interest rate  N/A* N/A*

* 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 11 September 2019 comprises £5.945 in respect of non-market based performance conditions.

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.

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.

2020
Tranche 1
2020
Tranche 2
2019
Tranche 1 
2019
Tranche 2
Options granted during the year 488,481 488,611 575,210
575,349
Date of grant  11 September 2019
11 September 2019 10 September 2018
10 September 2018
Fair value at measurement date  £5.945 £5.945
£5.97
£5.97
Share price  £5.945
£5.945
£5.97
£5.97
Exercise price  £0.00 £0.00 £0.00 £0.00
Expected volatility N/A* N/A*
N/A* N/A*
Option life 1 year 2 years
1 year 2 years
Expected dividend yield N/A N/A
N/A
N/A
Risk free interest rate  N/A* N/A*
N/A* N/A*

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

Share options outstanding

The following share options were outstanding at 28 June 2020:

Type of scheme Date of grant Number of options 2020 Number of options 2019 Exercise price 
Long Term Share Incentive 2016 12 September 2016  - 308,714 -
Long Term Share Incentive 2017 15 November 2017 278,973 321,012 -
Long Term Share Incentive 2018 10 September 2018 291,354 335,604 -
Long Term Share Incentive 2019 11 September 2019 434,929 - -
Deferred Bonus Incentive 2012 – Tranche 1 23 October 2012  4,656 4,656 -
Deferred Bonus Incentive 2012 – Tranche 2 23 October 2012  4,656 4,656 -
Deferred Bonus Incentive 2013 – Tranche 1 24 September 2013  4,642 4,642 -
Deferred Bonus Incentive 2013 – Tranche 2 24 September 2013  4,642 4,642 -
Deferred Bonus Incentive 2014 – Tranche 1  8 September 2014  3,615 3,615 -
Deferred Bonus Incentive 2014 – Tranche 2 8 September 2014  3,615 10,133 -
Deferred Bonus Incentive 2015 – Tranche 1  14 September 2015  3,089 18,055 -
Deferred Bonus Incentive 2015 – Tranche 2  14 September 2015  3,090 18,059 -
Deferred Bonus Incentive 2016 – Tranche 1  12 September 2016  16,780 45,774 -
Deferred Bonus Incentive 2016 – Tranche 2  12 September 2016  19,318 59,868 -
Deferred Bonus Incentive 2017 – Tranche 1  11 September 2017 18,553 56,651 -
Deferred Bonus Incentive 2017 – Tranche 2 11 September 2017 40,249 378,972 -
Deferred Bonus Incentive 2018 – Tranche 1 10 September 2018 61,991 554,139 -
Deferred Bonus Incentive 2018 – Tranche 2 10 September 2018 418,050 554,270 -
Deferred Bonus Incentive 2019 – Tranche 1 11 September 2019 419,794 - -
Deferred Bonus Incentive 2019 – Tranche 2 11 September 2019 419,904 - -
Save As You Earn  1 January 2015 - 137,678 £2.21
Save As You Earn  1 January 2016 55,899 85,540 £3.70
Save As You Earn  1 January 2017 93,139 768,706 £3.20
Save As You Earn  1 January 2018 533,938 635,764 £4.90
Save As You Earn 1 January 2019 510,860 665,318 £4.62
Save As You Earn 1 January 2020 688,326 - £4.94

The total share options outstanding at 28 June 2020 under the LTIP, Deferred Bonus Incentive Plan and the Save As You Earn schemes represent 1.2% of the issued share capital (2019: 1.4%).


Movements in the year

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

Number
of options
2020
Weighted
average
exercise price
2020
Number
of options
2019 
Weighted
average
exercise price
2019 
Long Term Share Incentive scheme:
Outstanding at the beginning of the year 965,330 - 805,536
-
Lapsed during the year (139,100) - -
-
Exercised during the year (277,350) - (175,810)
-
Granted during the year 456,376 - 335,604
-
Outstanding at the end of the year 1,005,256 - 965,330
-
Exercisable at the end of the year - - -
-
Deferred Bonus Incentive scheme: 
Outstanding at the beginning of the year 1,718,132 - 1,847,474
-
Lapsed during the year (236,191) - (285,500)
-
Exercised during the year (1,012,389) - (994,401)
-
Granted during the year 977,092 - 1,150,559
-
Outstanding at the end of the year 1,446,644 - 1,718,132
-
Exercisable at the end of the year 204,572 - 230,751
-
Save As You Earn scheme: 
Outstanding at the beginning of the year 2,293,006 £4.04 2,334,500
£3.66
Lapsed during the year (442,661) £4.51 (295,938)
£4.08
Exercised during the year (760,104) £3.02 (457,773)
£2.98
Granted during the year 791,921 £4.94 712,217
£4.62
Outstanding at the end of the year  1,882,162 £4.72 2,293,006
£4.04
Exercisable at the end of the year  16,927 £3.20 12,604 £3.70

The weighted average share price at the date of exercise of share options exercised during the year was £6.67 (2019: £6.07).

The options outstanding at 28 June 2020 had a range of exercise prices of £nil to £4.94 (2019: £nil to £4.90) and a weighted average remaining contractual life of 5.6 years (2019: 5.3 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 £5m (2019: charge £7m).

e. Retirement benefit schemes

The Redrow Staff Pension Scheme comprises of a defined benefit scheme. The Company also offers a defined contribution scheme to employees. The defined benefit scheme was closed to new entrants from July 2006, having been closed to all but a limited number of agreed new entrants from October 2001. The defined benefit scheme was closed to future accrual with effect from 1 March 2012.

The Scheme operates within the frameworks of the applicable pension’s legislation and is regulated by the Pensions Regulator. The Scheme is managed by a board of Trustees who act in line with legislation and the provisions set out within the Trust Deed and Rules which underpin the day-to-day operation of the Scheme. The Trustees' overarching aim is to ensure that there are sufficient monies available to pay members benefits when they fall due. The Trustees work in collaboration with the Company to manage the risks that this aim might not be met.

The total pension charge for the year was £9m (2019: charge of £16m). A credit of £1.0m related to the defined benefit section of the Scheme (2019: charge of £7m), with £nil being charged to the income statement (2019: charge of £nil) and a credit of £1m to the statement of comprehensive income (2019: charge of £7m). The charge arising from the defined contribution section was £10m (2019: £9m). There were no significant events during the year to report (i.e. plan amendments, curtailments or settlements).

Triennial valuation

A full independent triennial actuarial valuation of the defined benefit section of the Scheme was undertaken at 1 July 2017 using the Projected Unit Method. As at 1 July 2017, in the opinion of the Actuary, there was a deficit of £15m in the defined benefit section of the Scheme, based on the Trustees’ technical provisions assumptions with the Scheme’s assets representing 90% of the Scheme’s technical provisions. As at 1 July 2017 the value of the defined benefit section of the Scheme’s assets was £126m. The previous triennial valuation was undertaken as at 1 July 2014 and reported a deficit of £20m.

Defined benefit scheme – IAS 19R valuation

Redrow recognises all actuarial gains and losses for its defined benefit plan in the period in which they occur, outside the income statement, in the statement of comprehensive income.

This disclosure relates to the defined benefit section of the Scheme. The Scheme’s assets are held separately from the assets of Redrow and are administered by the trustees and managed professionally.

The latest formal actuarial valuation of the defined benefit section was carried out at 1 July 2017. This valuation has been updated to 28 June 2020 by a qualified actuary for the purposes of these financial statements.

The Group agreed a recovery plan for the 1 July 2014 actuarial valuation: it agreed to contribute £1.1m per annum to the Scheme from 1 July 2014 to 30 June 2020 and £1.5m per annum from 1 July 2020 to 30 June 2026. During the 2017 financial year, the Group agreed to increase its contributions to £3.0m per annum from 1 January 2018. As a result, the Group expects to contribute £3.0m to the Scheme in the year ending 30 June 2021.

The major financial assumptions used in arriving at the IAS 19R valuation were:

2020 2019
Long-term rate of increase in pensionable salaries n/a n/a
Rate of increase of benefits in payment (lesser of 5% per annum and RPI)*
2.9% 3.1%
Rate of increase of benefits in payment (lesser of 2.5% per annum and RPI)** 2.0% 2.1%
Discount rate  1.6% 2.3%
Inflation assumption – RPI  3.1% 3.3%
                                    – CPI  2.3% 2.3%

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

** 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.

On 11 March 2020, the Chancellor of the Exchequer and UK Statistics Authority jointly issued a consultation on changing the Retail Price Index (RPI) formula. They intend to amend the RPI index to reflect the Consumer Price Index including Housing (CPIH).

We have assessed the likely outcome of the Consultation, which we believe to be that the RPI formula will change to be the same as the CPIH formula, from 2030, and considered the inflation assumptions above in the light of this. As the CPI inflation assumption is only of relevance to deferred members of the scheme whose average term to retirement is c10 years, we consider it appropriate to maintain our current approach to deriving CPI.

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_2019 1.50% Long Term Trend (2019: SAPS CMI_2018 1.5% Long Term Trend)

The life expectancies from age 65 implied by these tables for typical members are:

Pensioner currently aged 65: Male 22.0 years Female 23.9 years 
(2019: Male 21.9 years) (2019: Female 23.9 years)
Future pensioner currently aged 40: Male 24.1 years Female 26.2 years 
(2019: Male 24.2 years) (2019: Female 26.2 years)

It has been assumed that members take 80% of the maximum tax-free cash available to them at the point they retire via commutation of their pension; this is based on the current commutation factors in use for the defined benefit scheme.


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:

Group and Company
2020
£m
Quoted
market price in
active market 
2020
£m
No quoted
market price in
active market 
2020
£m
Total
2019
£m
Quoted
market price in
active market 
2019
£m
No quoted
market price in
active market 
2019
£m
Total 
Equities 62 - 62 53 - 53
Debt instruments 84 - 84 67
- 67
Real estate 2 - 2 2 - 2
Investment funds 4 - 4 - - -
Other 6 - 6 13
- 13
Cash 12 - 12 11
- 11
Insurance policies - 3 3 - 2 2
Total market value of assets 170 3 173 146
2 148
Present value of obligations (151) (130)
Surplus in the Scheme 22 18

The Scheme’s assets are invested in such a way so as to ensure that the assets are sufficient and appropriate to meet the associated liabilities as they fall due. In selecting the assets, consideration is given to the nature of the liabilities and the investment strategy of the Scheme includes an allocation to liability driven investments to mitigate the impacts of changes in interest rates and inflation on both the assets and liabilities.

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

2020
2019
Deferred members 72 71
Pensioner members 28 29
100 100

All benefits are vested at 28 June 2020 (unchanged from 30 June 2019).

Following a High Court ruling on 26th October 2018, at the 2019 year-end the Company made an allowance within the defined benefit obligation for the estimated liabilities associated with the requirement to provide equalised benefits to male and female members in respect of Guaranteed Minimum Pensions (GMPs); otherwise known as ‘GMP Equalisation’. GMP Equalisation is an issue that impacts all defined benefit schemes that were contracted out of the State additional second pension between 17 May 1990 and 5 April 1997. For the DB Scheme, the additional liability in respect of GMP Equalisation is broadly 0.5% of the defined benefit obligation and continues to be included in this figure.


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

Group and Company
2020
£m
2019
£m
Amounts included within the income statement: 
Administrative expenses 
Past service costs - (1)
Net interest on defined benefit liability  - 1
- -
Amounts recognised in the statement of comprehensive income: 
Return on scheme assets excluding interest income  24 13
Actuarial movements arising from changes in demographic assumptions  (1) -
Actuarial movements arising from changes in financial assumptions  (22) (20)
1 (7)
1 (7)

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

Group and Company
2020
£m
2019
£m
Balance sheet surplus
At start of year 18 22
Amounts credited/(charged) against statement of comprehensive income 1 (7)
Employer contributions paid 3 3
At end of year  22 18
Changes in the present value of the defined benefit obligation: 
At start of year 130 111
Past service cost - 1
Interest expense 3 3
Benefit payments (5) (5)
Actuarial movements arising from changes in demographic assumptions
1 -
Actuarial movements arising from changes in financial assumptions  22 20
At end of year  151 130
Changes in the fair value of the Scheme’s assets: 
At start of year 148 133
Interest income 3 4
Return on scheme assets excluding interest income  24 13
Normal employer contributions  3 3
Benefit payments  (5) (5)
At end of year  173 148

The scheme rules permit the refund of any surplus to the Company with no restrictions. The surplus has therefore been recognised in full in the Group and Company balance sheets and there is no requirement to restrict the surplus nor to recognise any additional liability in respect of agreed deficit contributions.

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 144. All figures are before allowing for deferred tax.

Item Approximate impact
2020
Approximate impact
2019
Present value of defined benefit obligation (£m) 
Discount rate -25 basis points  160.2 136.9
Discount rate +25 basis points  143.3 123.0
Price inflation rate -25 basis points  144.9 123.2
Price inflation rate +25 basis points  157.4 136.7
Post-retirement mortality assumption -1 year age adjustment  156.6 133.9
Weighted average duration of defined benefit obligation (in years) 
Discount rate -25 basis points  22.5
21.3
Discount rate +25 basis points  22.2 21.5

8. Intangible Assets

The Group
Goodwill
£m
Software
£m
Total
£m
Cost
At 2 July 2018 1 3 4
Additions - - -
At 30 June 2019 1 3 4
Additions  - - -
Disposals - (1) (1)
At 28 June 2020 1 2 3
Accumulated amortisation 
At 2 July 2018 - 2 2
Charge - - -
At 30 June 2019 - 2 2
Charge  - - -
Disposals - (1) (1)
At 28 June 2020 - 1 1
Net book value 
At 28 June 2020 1 1 2
At 30 June 2019 1 1 2
At 1 July 2018 1 1 2

9. Property, Plant and Equipment

The Group
Freehold property
£m
Plant and machinery
£m
Fixtures
and fittings
£m
Total
£m
Cost
As at 2 July 2018 17 3 9 29
Additions 2 - 2 4
At 30 June 2019 19 3 11 33
Additions 5 - 2 7
Disposals - - (2) (2)
At 30 June 2020 24 3 11 38
Accumulated depreciation
At 2 July 2018 4 3 7 14
Charge  1 - 2 3
At 30 June 2019 5 3 9 17
Charge 1 - 3 4
Disposals - - (2) (2)
At 28 June 2020 6 3 10 19
Net book value 
At 28 June 2020 18 - 1 19
At 30 June 2019 14 - 2 16
At 1 July 2018 13 - 2 15

10. Lease Right of Use Assets

THE GROUP
Property
£m 
Photocopiers
£m 
Vehicles
£m 
Total
£m 
Cost
Opening lease right of use asset recognised on adoption of IFRS 16 4 1 3 8
Additions - - 2 2
At 28 June 2020 4 1 5 10
Accumulated depreciation


At 1 July 2019 - - - -
Charge 1 - 2 3
At 28 June 2020 1 - 2 3
Net book value
At 28 June 2020 3 1 3 7
At 30 June 2019 - - - -
2020
£m 
Lease liabilities
Maturity analysis - contractual undiscounted cash flows
Less than one year 3
One to five years 4
More than five years
1
Total undiscounted lease liabilities at 28 June
8

On implementation of IFRS 16 leases, lease payment commitments are reported within trade and other payables.

2020
£m 
Lease liabilities included in the statement of financial position at 28 June
Maturity analysis - contractual undiscounted cash flows
Current 2
Non-current
4

6

2020
£m 
Amounts recognised in profit or loss
Interest on lease liabilities
-
2020
£m 
Amounts recognised in the statement of cash flows
Total cash outflow for leases 3

11. Investments

a. Investments

Group Company
2020
£m 
2019
£m 
2020
£m 
2019
£m 
Joint ventures 9 6 -
-
9 6 - -

b. Investments in joint ventures

Group Company
2020
£m 
2019
£m 
2020
£m 
2019
£m 
Share of joint venture net assets: 
Current assets 8 6
- -
Current liabilities  (3) (2)
- -
Non-current liabilities  (5) (2)
- -
Net assets - 2
- -
Loans from Group companies(i)  9 4
- -
9 6
- -
Share of post-tax profits from joint ventures: 
Revenue - 1
- -
Cost of sales  - (1)
- -
Gross profit  - -
- -
Administrative expenses - - - -
Operating profit  - - - -
Finance costs  - - - -
Profit before tax  - - - -
Taxation - - - -
- - - -

(i) £9m of the loans to joint ventures are secured (2019: £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

Company
£m 
At 1 July 2019 and 28 June 2020 -

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 28 June 2020 is shown on page 151. 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 dormant and exempt from audit.

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

Subsidiaries
Name Company
Number
Name Company
Number
HB (HDG) Limited  1990709 St David’s Park Limited  2479183
Redrow Homes Limited  1990710 PB0311 Limited* 7577839
Harrow Estates plc  6825371 Debut Freeholds Limited* 4638403
Redrow Real Estate Limited 3996541 Tay Homes (Western) Limited* 2806562
Redrow Regeneration plc  5405272 Tay Homes (Northern) Limited*  2708575
Redmira Limited* 7587765 Tay Homes (Midlands) Limited* 2183136
HB (NW) Limited* 1189328 Tay Homes (North West) Limited* 2189721
HB (LCS) Limited (i)* SC38052 Redrow Homes (Park Heights) Limited (ii)* 66240
HB (MID) Limited* 2469449 Redrow Construction Limited* 1375826
HB (SW) Limited* 3522335 Poche Interior Design Limited* 2169473
HB (SWA) Limited* 2230870 Redrow (Shareplan) Limited* 3520984
HB (Y) Limited* 2293006 Cadmoore Limited* 3977222
HB (ESTN) Limited*  4017345 Redrow (Sudbury) Limited* 4558070
HB (WM) Limited* 3379746 The Waterford Park Company Limited 5429823
HB (SM) Limited* 3522321 The Waterford Park Company (Balmoral) Limited 6047122
HB (SN) Limited* 537405 HB (Herne Bay No 1) Limited* 7743649
HB (WC) Limited* 4984069 HB (Herne Bay No 2) Limited* 9163243
HB (WX) Limited* 1940936 Redrow Homes East Midlands Limited* 4219459
HB (EM) Limited* 2827161 Radleigh Construction Limited* 4219460
HB (CD) Limited* 2034733 Radleigh Homes Limited* 4210633
HB (GRPS) Limited* 2898913 Radbourne Edge (Holdings) Limited* 8737345
HB (CPTS) Limited* 1079513 Redrow Langley Limited*  7306461
HB (SE) Limited* 3988594 Radleigh (Hackwood) Limited* 8131049
HB (CSCT) Limited (i)* SC231364
HB (SC) Limited (i)*
SC74732
HB (1995) Limited (i)*
SC155021
Redrow Homes (Wallyford) Limited (i)*
SC205159

12. Deferred Tax Assets and Liabilities

The following are the deferred tax assets and liabilities recognised by the Group and the movements thereon during the current and prior year:

Imputed
interest
£m 
Short-term
temporary
differences
£m 
Total
£m 
Deferred tax assets 
At 2 July 2018 3 1 4
Charge to income  - - -
Charge to equity  - - -
At 30 June 2019 3 1 4
Charge to income  (3) - (3)
Charge to equity  - - -
At 28 June 2020 - 1 1
Employee
benefits
£m 
Short-term
temporary
differences
£m 
Total
£m 
Deferred tax liabilities
At 2 July 2018 (4) (1) (5)
Credit to income - - -
Charge to equity  1 - 1
At 30 June 2019 (3)
(1)
(4)
Charge to income (1) - (1)
Credit to equity  - - -
At 28 June 2020 (4) (1) (5)

The Group has no material unrecognised deferred tax assets.

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. In the Chancellor's Budget on 11 March 2020 it was reconfirmed that the rate of corporation tax will remain at 19% from 1 April 2020. This measure (cancelling the enacted cut to 17%) will be made under a Budget resolution which has statutory effect under the Provisional Collection of Taxes Act 1968. As such, it is substantively enacted on the passing of the resolution. The rate will also stay at 19% for the following year. Deferred tax balances have been valued at 19% (2019: 17%).

13. Trade and Other Receivables

Group Company

2020
£m 
2019
£m 
2020
£m 
2019
£m 
Non-current assets 
Trade receivables (net) - 9
- -
Amounts due from subsidiary companies - - 774 -

- 9
774 -
Current assets 


Trade receivables (net) 25 28
- -
Amounts due from subsidiary companies 
- - 300 890
Other receivables 
8 19
- -
Prepayments 5 1
- -
38 48
300 890

Non-current trade receivables due after more than one year are stated after an allowance of £nil has been made (2019: £5m) in respect of expected credit losses. This allowance is based on an estimate of default rates. £nil provision was made during the year (2019: £1m). £nil was utilised (2019: £nil). £3m provision was released during the year (2019: £nil) and £2m provision was transferred to be held against current trade assets (2019: £3m). Current trade assets are therefore stated after an allowance of £4m (2019: £3m) in respect of expected credit losses with £nil provision utilised (2019: £nil) and £1m provision released (2019: £nil).

Amounts due from subsidiary companies are unsecured, repayable on demand and carry interest at market rate on trading balances. The balance classified as current is anticipated to be repayable within the normal operating cycle of the subsidiary businesses. 

14. Inventories

Group Company

2020
£m 
2019
£m 
2020
£m 
2019
£m 
Land for development 1,538 1,547
- -
Work in progress 972 790
- -
Stock of show homes 
75 67
- -
2,585 2,404
- -

Inventories of £1,027m were expensed in the year (2019: £1,526m). Work in progress includes £1m (2019: £3m) in respect of part exchange properties. Land held for development in the sum of £160m is subject to a legal charge as security in respect of deferred consideration (2019: £312m).

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 £33m (2019: £nil). £35m of impairment costs arising from the strategic decision to scale back our London operations were expensed in the year (2019: £nil).

The Directors consider all inventory to be current in nature as they are expected to be released within the Group's normal operating cycle of c.4 years.

15. Financial Risk Management

The Group’s financial instruments comprise cash and cash equivalents, bank loans and overdrafts, derivative financial instruments and various items included within trade receivables and trade payables which arise during the normal course of business.

The tables that follow provide a summary of financial assets and liabilities by category.

The accounting policies for financial instruments have been applied to the following items:

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.

a. Liquidity risk and interest rate risk

Liquidity risk is the risk that the Group does not have sufficient financial resources to meet its obligations as they fall due. Liquidity risks are managed through the regular review of cash forecasts and by maintaining adequate committed banking facilities to ensure appropriate headroom.

At 28 June 2020, the Group had total unsecured bank borrowing facilities of £366m, representing £363m committed facilities and £3m uncommitted facilities.

The Group’s cash surpluses arise from short-term timing differences. As a consequence the Group does not consider it bears significant risk of changes to income and cash flows as a result of movements on interest rates on its interest bearing assets.

The Group is exposed to interest rate risk as it borrows money at floating rates. The Group’s interest rate risk arises primarily from long-term borrowings. In order to manage its interest rate risk, the Group from time to time enters into simple risk management products, almost exclusively interest rate swaps. All interest rate swaps are sterling denominated. The swaps are arranged so as to match with those of the underlying borrowings to which they relate. There were no interest rate swaps in place in 2020 or 2019.

The following table shows the profile of interest bearing debt together with its effective interest rates.

2020 2019
Effective
interest
rate
Total
£m 
Zero
to one
year
£m 
One
to two
years
£m 
Two
to five
years
£m 
Effective
interest
rate
Total
£m 
Zero
to one
year
£m 
One
to two
years
£m 
Two
to five
years
£m 
Bank loans –
floating rate
2.1 170 - - 170 2.3
80
- - 80
170 - - 170 80
- - 80

For the 52 weeks ended 28 June 2020, 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 c£1m (2019: less than £1m).

b. Maturity of bank loans and borrowings

The maturity of bank loans and borrowings is as below:

The Group
2020 2019
Bank
overdraft
£m 
Bank
loans
£m
Bank
overdraft
£m 
Bank
loans
£m
Due between two and five years - 177 - 85
- 177 - 85

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

The Company
2020 2019
Bank
overdraft
£m 
Bank
loans
£m
Bank
overdraft
£m 
Bank
loans
£m
Due between two and five years - 177 - 85
- 177 - 85

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

The Company was fully compliant with its banking covenants as at 28 June 2020.

At the year end, the Group and Company had £193m (2019: £170m) 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.

c. Amounts due in respect of development land

The Group’s policy permits land purchases to be made on deferred payment terms. In accordance with IFRS 9, the deferred creditor is recorded at fair value and nominal value is amortised over the deferment period via financing costs, increasing the land creditor to its full cash settlement value on the payment date.

The interest rate used for each deferred payment is an equivalent loan rate available on the date of land purchase, as applicable to a loan lasting for a comparable period of time to that deferment.

The maturity profile of the total contracted cash payments in respect of amounts due in respect of land creditors at the balance sheet date is as follows:

Balance
at June
£m 
Total
contracted
cash
payment
£m 
Due
less than
one year
£m
Due
between
one and
two years
£m 
Due
between
two and
five years
£m 
28 June 2020 302 306 186 51 69
30 June 2019 438
446
271
137
38

d. Maturity of trade and other payables

The maturity profile of the total contracted payments in respect of financial liabilities (excluding amounts due on land creditors shown separately in note 15c) at the balance sheet date is as follows:

Balance
at June
£m 
Total
contracted
cash
payment
£m 
Due
less than
one year
£m
Due
between
one and
two years
£m 
Due
between
two and
five years
£m 
Trade and other payables (excluding lease liabilities) 527 527 527 - -
Lease liabilities 6 8 3 2 3
28 June 2020 533
535
530
2
3
Trade and other payables  494 494 494 - -
30 June 2019 494 494 494 - -

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:

Group Company
2020
£m 
2019
£m 
2020
£m 
2019
£m 
Held at Banks with at least an A credit rating per Standard & Poor  44 204
41 212
44 204
41 212

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.

f. Capital management

The Group defines total capital as equity plus net debt where net debt is calculated as total borrowings less cash and cash equivalents.

The Group monitors capital on the basis of the level of returns achieved on its capital base and, with respect to its financing structure, the gearing ratio. This is defined as net debt divided by equity.

The Group’s objective in managing capital is to safeguard its ability to continue as a going concern in order to deliver value to its Shareholders and other stakeholders. The Group operates within policies outlined by the Board in order to maintain an appropriate funding structure. The Board keeps the Group’s capital structure under review.

The total capital levels and gearing ratios as at 28 June 2020 and 30 June 2019 are as follows:

2020
£m 
2019
£m 
Total borrowings 170 80
Less cash and cash equivalents (44) (204)
Net debt/(cash) 126 (124)
Equity  1,626 1,585
Total capital  1,752 1,461
Operating profit adjusted for joint ventures      148 411
ROCE (Operating profit as above as a percentage of opening and closing total capital) 9.2% 28.5%
Gearing ratio  7.7% N/A

g. Fair values

The fair values of financial assets and liabilities is as follows:

The Group
2020
Loans and
receivables
Fair value
£m 
2020
Loans and
receivables
Carrying value
£m 
2019
Loans and
receivables
Fair value
£m 
2019 
Loans and
receivables
Carrying value
 £m 
Assets per the balance sheet 
Non-current trade and other receivables - - 9 9
Current trade and other receivables* 33 33 47 47
Cash and cash equivalents 44 44 204 204
77 77 260 260
* includes £6m in respect of shared equity debtors (2019: £7m).
2020 
Other
 financial
liabilities
Fair value
 £m 
2020
Other
financial
liabilities
Carrying value
 £m 
2020 
Other
financial
liabilities
Fair value
£m 
2019 
Other
financial
liabilities
Carrying value
£m 
Liabilities per the balance sheet 
Bank loans and overdrafts  170 170 80 80
Trade payables and other payables including customer deposits  527 527 494 494
Land creditors  302 302 438 438
Lease liabilities 6 6 - -
1,005 1,005 1,012 1,012

Other financial liabilities are at amortised cost.

The Company
2020
Loans and
receivables
Fair value
£m 
2020
Loans and
receivables
Carrying value
 £m 
2019
Loans and
receivables
Fair value
£m 
2019
Loans and
receivables
Carrying value
£m 
Assets per the balance sheet 
Cash and cash equivalents 41 41 212 212
Amounts due from subsidiary companies (current and non-current) 1,074 1,074 890 890
1,115 1,115 1,102 1,102
2020
Other
financial
liabilities
Fair value
 £m 
2020
Other
financial
liabilities
Carrying value
 £m 
2019
Other
financial 
liabilities
Fair value
£m 
2019
Other
financial
liabilities
Carrying value
 £m 
Liabilities per the balance sheet 
Bank loans and overdrafts  170 170 80 80
Amounts owed to subsidiary companies 14 14 14 14
184 184 94 94

16. Trade and Other Payables

Group Company
2020
£m 
2019
£m 
2020
£m 
2019
£m 
Non-current liabilities 
Amounts due in respect of development land 116 167
- -
Lease liabilities 4 - - -
120 167
- -
Current liabilities 
Trade payables 311 347
- -
Amounts due in respect of development land 186 271
- -
Private customer deposits  38 27
- -
Social customer payments on account 165 107 - -
Amounts owed to subsidiary companies  - - 14 14
Lease liabilities 2 - - -
Other payables 10 7 - -
Other taxation and social security 3 6
- -
Accruals 90 68
12 16
805 833
26 30

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

17. Long-Term Provisions

The Group
Onerous
contracts
£m 
Other
£m 
Total
£m 
At 1 July 2019 1 7 8
Provisions created during the year  - - -
Provisions released during the year  - - -
Provisions utilised during the year  - - -
At 28 June 2020 1 7 8

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.

18. Share Capital

Number of
ordinary shares
As at 1 July 2019 and 28 June 2020 (ordinary shares of 10.5p each) 352,190,420

19. Share Capital, Share Premium Account and Reserves

The Group
Share
capital
£m
Share
premium
account
£m 
Other
reserves
£m 
Retained
earnings
£m 
At 2 July 2018 37 59 8 1,379
Total comprehensive income  - - - 323
Dividends paid  - - - (218)
Movement in respect of LTIP/SAYE  - - - (3)
At 30 June 2019 37 59 8 1,481
Total comprehensive income  - - - 114
Dividends paid  - - - (72)
Movement in respect of LTIP/SAYE  - - - (1)
At 28 June 2020 37 59 8 1,522

Other reserves

Other reserves consists of a £7m Capital redemption reserve (2019: £7m) and a £1m Consolidation reserve (2019: £1m).

Undistributable reserves

Other reserves are not available for distribution.

The Company
Share
capital
£m
Share
premium
account
£m 
Other
reserves
£m 
Retained
earnings
£m 
At 2 July 2018 37 59 7 646
Total comprehensive income* - - - 480
Dividends paid  - - - (218)
At 30 June 2019 37 59 7 908
Total comprehensive income - - - 3
Dividends paid  - - - (72)
At 28 June 2020 37 59 7 839

* Includes dividends received from subsidiary companies.

Other reserves

Other reserves consists of a £7m Capital redemption reserve (2019: £7m).

Undistributable reserves

Other reserves are not available for distribution.

20. Movement in Net (Debt)/Cash

The Group
At 1 July
2019
£m 
Non-cash
movement
£m
Cash flow
 £m 
At 28 June
2020
£m 
Cash and cash equivalents  204
1 (161) 44
Bank loans  (80)
- (90) (170)
Net (debt)/cash 124
1 (251) (126)
The Company
At 1 July
2019
£m 
Non-cash
movement
£m 
Cash flow
 £m 
At 28 June
2020
£m 
Cash and cash equivalents  212
(3) (168) 41
Bank loans  (80)
- (90) (170)
Net (debt)/cash 132
(3) (258) (129)

21. Contingent Liabilities

The Company has guaranteed the bank borrowings of its subsidiaries. Performance bonds and other building or performance guarantees have been entered into in the normal course of business. Management estimate that the bonds and guarantees amount to £170m (2019: £136m) at the year end and consider the possibility of a cash outflow in settlement to be remote.

22. Related Party Transactions

Within the definition of IAS 24 ‘Related party disclosures’, the Board and key management personnel are related parties. Detailed disclosure of the remuneration of the Board is given in the Directors’ Remuneration Report on pages 78 to 100. A summary of remuneration provided to key management personnel is provided in note 7c.

There have been no material transactions with key management personnel. There is no other difference between transactions with key management personnel of the Company and the Group.

The Company funds the operating companies through both equity investment and loans at commercial rates of interest. In addition, the Company provides its subsidiaries with the services of Senior Management, for which a recharge is made to those subsidiary companies based upon utilisation of services.

The amount outstanding from subsidiary undertakings at 28 June 2020 was £1,074m (30 June 2019: £890m). The amount owed to subsidiary undertakings at 28 June 2020 was £14m (30 June 2019: £14m).

The Company provided the Group’s defined benefit pension scheme, as detailed in note 7e. Expected service costs were charged to the operating businesses at cost. There is no contractual arrangement or stated policy relating to the charge. Experience and actuarial gains are recognised in the Company, via the statement of comprehensive income.

During the year, the Group made £4m loan payments to its joint ventures, Menta Redrow Limited and Menta Redrow (II) Limited. It also received a £1m dividend from Menta Redrow Limited. The Group’s loans to its joint ventures are disclosed in note 11.

23. Alternative Performance Measures

Redrow uses a variety f Alternative Performance Measures (APMs) which are not defined or specified by IFRSs but which the Directors believe are pertinent to reviewing the performance of the Group, in conjunction with IFRS defined measures.  

Accident incident rate by site

No. of notifiable accidents in financial year divided by average no. of sites.


Earnings per share (EPS)

Profit attributable to ordinary equity shareholders (excluding exceptional items and deferred tax rate changes) divided by the weighted average no. of ordinary shares in issue during the financial year. See note 6.


HBF customer satisfaction rating

 Independent HBF customer satisfaction rating score.


Land holding years

No. of plots in owned land holdings at June divided by no. of legal completions in financial year.

2020 2019
Owned land holdings at 28 June 2020/30 June 2019 25,130 25,993
Legal completions 4,032 6,443
Land holding years 6.2 4.0

Monies committed to fund improvements in local communities

These reflect committed Section 106 contributions and affordable housing provided in the year

Net Asset Value Per ordinary share

Total net assets at June divided by the number of ordinary shares in issue at June.


Number of trainees

No. of trainees at June as a percentage of employees at June.


Order Book

The value of reserved and exchanged sales which had not legally completed at year end.


private reservation rate

No. of private reservations per week in financial year divided by average no. of sales outlets.


Return on capital employed (ROCE)

Operating profit before exceptional items adjusted for joint ventures as a percentage of opening and closing capital employed. See note 15f.


Return on equity (ROE)

Profit before tax before exceptional items adjusted for joint ventures as a percentage of opening and closing net assets.

2020
£m 
2019
£m 
Net assets at 28 June 2020/30 June 2019 1,626 1,585
Net assets at 30 June 2019/1 July 2018 1,585 1,483
Average net assets 1,606 1,534
Profit before taxation 140 406
Return on equity % 8.7% 26.5%

Revenue

Revenue per consolidated income statement.

Revenue value of private reservations secured in the year

The fair value receivable in the future of private house sales reserved by customers during the year, net of cancellations.


Sales outlets

Average no. of sales outlets open in the year.

Your cookie settings
We use cookies on our site to make sure we give you the best service possible. You may delete or block cookies from this site, but parts may not work. By continuing to use the site, you agree to the use of cookies, alternatively find out more about cookies.