1. Accounting Policies

BASIS OF PREPARATION

The condensed consolidated half-yearly financial information for the half-year ended 31 December 2018 has been prepared on a going concern basis in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS34, ‘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 2018, which have been prepared in accordance with IFRSs as adopted by the European Union.

This half-yearly financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. This condensed half-yearly financial information has been reviewed, not audited. Audited statutory accounts for the year ended 30 June 2018 were approved by the Board of Directors on 3 September 2018 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 condensed half-yearly financial information are included in the annual consolidated financial statements for the year ended 30 June 2018. The accounting policies are consistent with those followed in the preparation of the financial statements to the year ended 30 June 2018 with the exception of two new accounting standards which have been adopted by the Group from 1 July 2018.

IFRS 15, ‘Revenue from contracts with customers’ is a converged standard of IAS 18 'Revenue', IAS 11 'Construction Contracts' and a number of revenue-related interpretations from the IASB and FASB on revenue recognition. The standard is more prescriptive in terms of what should be included within revenue, and is effective for the year ending 30 June 2019.

The Group currently recognises revenue in respect of the sale of residential housing, residential land and of commercial land and developments on legal completion. This will not change under IFRS 15 as control on these, including for example revenue of housing association funded contracts for homes passes on completion of the finished units.

The Group does not currently recognise revenue on the proceeds from the disposal of properties taken in part exchange against a new home.  The net profit or loss on disposal is shown within gross profit.  The gross proceeds and net profit/loss are immaterial.  This treatment will be unchanged under IFRS 15 as the Group considers properties taken in part exchange to be incidental to its main activity and therefore outside the scope of IFRS 15.

IFRS 9 ‘Financial instruments’ replaces the guidance in IAS 39 and is effective for the year ending 30 June 2019. It affects the classification, measurement, impairment and de-recognition of financial instruments.  The Group has reviewed its existing classification and confirmed that most financial assets will continue to be recognised at amortised cost, with other financial assets being classified at fair value through the profit or loss.  The Group reviews the future recoverability of debtors, most of which is from housing associations which are government funded, in assessing exposure to expected credit loss.  Given the nature of the receivables and lack of significant exposure to expected credit loss, the impact on Group profits of adopting IFRS 9 is immaterial.

There were no other key judgements or estimates made in assessing the impact of IFRS 15 and 9 on the Group.

The preparation of condensed half-yearly financial information 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 this condensed half-yearly financial information, 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 2018.

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 information.

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. After considering the requirements of IFRS 15 to present disaggregated revenue, the Group does not believe there is any disaggregation criteria applicable to its 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 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 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 2019. We have reviewed the risks pertinent to our business in the six months to 31 December 2018 and which we believe to be relevant for the remaining six months to 30 June 2019. The only material changes from those outlined in our Annual Report 2018 are that economic uncertainty has increased with the possibility of a 'no-deal Brexit' and the risk of the withdrawal of the Help To Buy Scheme has receded with the extension of the scheme having been announced by the Government. 

9. Bank Facilities

At 31 December 2018, the Group had total unsecured bank borrowing facilities of £253m, representing £250m committed facilities and £3m uncommitted facilities.

The Group's syndicated loan facility matures in December 2022.

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.

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:

Related party transactions were carried out with Steve Morgan during the period for a total consideration of £0.2m (2018: £0.2m) primarily relating to donations to The Steve Morgan Foundation.

The Group did not undertake any material transactions with Menta Redrow Limited or Menta Redrow (II) Limited. The Group's loans to its joint ventures are summarised below:

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

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