NOTES TO THE HALF-YEARLY FINANCIAL STATEMENTS

Note 1. Accounting Policies 

Basis of preparation

The condensed consolidated half-yearly financial information for the half-year ended 31 December 2017 has been prepared on a going concern basis in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, ‘Interim financial reporting’ as adopted by the European Union. The half-yearly condensed consolidated report should be read in conjunction with the annual consolidated financial statements for the year ended 30 June 2017, which have been prepared in accordance with IFRSs as adopted by the European Union.
These half-yearly financial results do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. These condensed half-yearly financial statements have been reviewed, not audited. Audited statutory accounts for the year ended 30 June 2017 were approved by the Board of Directors on 4 September 2017 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph, and did not contain any statement under section 498 of the Companies Act 2006.

The principal accounting policies adopted in the preparation of this consolidated half-yearly report are included in the annual consolidated financial statements for the year ended 30 June 2017. These policies have been consistently applied to all the periods presented. The Group adopted no new standards, amendments or interpretations during the half-year ended 31 December 2017.

The preparation of condensed half-yearly financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may subsequently differ from these estimates. In preparing these condensed half-yearly financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual consolidated financial statements for the year ended 30 June 2017.

After making due enquiries and in accordance with the FRC’s ‘Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009’, the Directors have a reasonable expectation that the Group has adequate resources to continue trading for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the condensed consolidated half-yearly financial statements.

The main operation of the Group is focused on housebuilding. As it operates entirely within the United Kingdom, the Group has only one reportable business and geographic segment. There is no material difference between any assets or liabilities held at cost and their fair value.

Standards and interpretations in issue but not yet effective

• IFRS 15, 'Revenue from contracts with customers’. IFRS 15, Revenue from contracts with customers' is a converged standard from the IASB and FASB on revenue recognition. The standard will improve the financial reporting of revenue and improve comparability of the top line in financial statements globally. It is more prescriptive in terms of what should be included within revenue than IAS 18 'Revenue'. Published May 2014, effective date: annual periods beginning on or after 1 January 2018. The Group continues to assess the impact of the standard on the Group.

The Group does not expect this standard to effect the statement of cashflows nor does the Group expect the implementation of this standard to have a material impact on profit.

• Amendment to IFRS 15, 'Revenue from contracts with customers’. Published April 2016, effective date: Annual periods beginning on or after 1 January 2018.

• IFRS 9 ‘Financial instruments’. This standard replaces the guidance in IAS 39. Published July 2014, effective date: annual periods beginning on or after 1 January 2018. The Group is still assessing the full impact of this standard but does not currently expect its implementation to have a material impact on reported results.

• IFRS 16 ‘Leases’. This standard replaces the current guidance in IAS 17 and is a far-reaching change in accounting by lessees in particular. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts. The IASB has included an optional exemption for certain short-term leases and leases of low-value assets; however, this exemption can only be applied by lessees. For lessors, the accounting stays almost the same. However, as the IASB has updated the guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts), lessors will also be affected by the new standard. At the very least, the new accounting model for lessees is expected to impact negotiations between lessors and lessees. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Published January 2016, effective Annual periods beginning on or after 1 January 2019 with earlier application permitted if IFRS 15, ‘Revenue from Contracts with Customers’, is also applied. The Group has a number of operating leases, mainly in relation to cars and some office properties which the Group currently anticipates will be required to be brought onto the balance sheet together with the corresponding assets. The Group does not expect the net impact on profit to be significant.

Principal risks and uncertainties

As with any business, Redrow plc faces a number of risks and uncertainties in the course of its day to day operations.

The principal risks and uncertainties facing the Group are outlined within our half-yearly report 2018.

Note 2. Income Taxes

Income tax charge is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year (19.0% (2017: 19.75%)).

Note 3. Dividends

A dividend of £41m was paid in the six months to 31 December 2017 (six months to 31 December 2016: £22m).

Note 4. Earnings per share

The basic earnings per share calculation for the six months ended 31 December 2017 is based on the weighted number of shares in issue during the period of 362m (31 December 2016: 363m) excluding those held in trust under the Redrow Long Term Incentive Plan, 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.

Note 5. Pensions

The amounts recognised in respect of the defined benefit section of the Group's Pension Scheme are as follows:

Note 6. Inventories

Note 7. Land Creditors (Included in Trade and Other Payables)

Note 8. Analysis of Net Debt

Note 9. Bank Facilities

At 31 December 2017, the Group had total unsecured bank borrowing facilities of £353m, representing £350m committed facilities and £3m uncommitted facilities.

On 31 January 2018, the Group reduced its committed syndicated loan facility to £250m and extended its maturity from March 2020 to December 2022.

Note 10. Issued Share Capital

Note 11. Contingent Liabilities

Performance bonds, financial guarantees in respect of certain deferred land creditors and other building or performance guarantees have been entered into in the normal course of business.

Note 12. Related Parties

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:

Note 13. General Information

Redrow plc is a public limited company incorporated and domiciled in the UK and has its primary listing on the London Stock Exchange.

The registered office address is Redrow House, St David’s Park, Flintshire, CH5 3RX.

Financial Calendar

Interim dividend record date - 6 April 2018
Interim dividend payment date - 4 May 2018
Announcement of results for the year to 30 June 2018 - 4 September 2018
Circulation of Annual Report - 21 September 2018
Final dividend record date - 21 September 2018
Annual General Meeting -7 November 2018
Final dividend payment date - 13 November 2018

Note 14. Shareholder Enquiries

The Registrar is Computershare Investor Services PLC. Shareholder enquiries should be
addressed to the Registrar at the following address:

Registrars Department
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ

Shareholder helpline: 0370 707 1257