Countryside Partnerships Annual Report 2016

FY2016 Annual Report · Countryside Partnerships

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ANNUAL REPORT 2016

COUNTRYSIDE
IS A LEADING UK HOME BUILDER
SPECIALISING IN PLACEMAKING
AND URBAN REGENERATION

Welcome to our Annual Report.

2016 marks an important milestone
in our journey with our listing on the
London Stock Exchange. Since Countryside
was founded in 1958, we have maintained
a belief that placemaking is more than
geography. It is both a practice and a
philosophy. A place to us is as much
about the feeling people experience in
our homes as it is the physical buildings.
We recognise that choosing a place to
live is just as much an emotional decision
as a financial one.

As we enter the next phase of growth,
our philosophy remains unchanged.
We have secured a leading position, with
our strategic land bank and relationships
with regeneration partners, that helps
create a distinct advantage in the market
and long-term growth for our business.

Ian Sutcliffe
Group Chief Executive

Read our Group Chief Executive’s review
on pages 6 and 7

CONTENTS

STRATEGIC REPORT

HOUSEBUILDING

PARTNERSHIPS

BEAULIEU, ESSEX

WICKHURST GREEN, WEST SUSSEX

ST. PAUL’S SQUARE, LONDON

HOUSEBUILDING

PARTNERSHIPS

GOVERNANCE

FINANCIAL STATEMENTS

ABODE, CAMBRIDGE

KINGS PARK, ESSEX

STRATEGIC REPORT
2 Group at a glance

4 Highlights

5 Chairman’s statement

6 Group Chief Executive’s Review

8 Our markets

10 Business model

12 Strategy

14 Key performance indicators

18 Operational Review:

18 Housebuilding

22 Partnerships

26 Group Chief Financial
Officer’s Review

30 Our people

32 Sustainability report

36 Risk management

GOVERNANCE

40 Chairman’s introduction

to governance

42 Board of Directors

44 Corporate governance report

47 Report of the

Audit Committee

51 Report of the

Nomination Committee

52 Directors’ Remuneration

Report

70 Directors’ report

73 Directors’ Responsibility

Statement

FINANCIAL STATEMENTS

Independent Auditor’s Report

79 Consolidated statement
of comprehensive income

80 Consolidated statement
of financial position

81 Consolidated statement
of changes in equity

82 Consolidated cash
flow statement

83 Notes to the consolidated
financial statements

PARENT COMPANY
FINANCIAL STATEMENTS

117 Independent Auditor’s Report

119 Parent company statement

of financial position

120 Parent company statement
of changes in equity

121 Notes to the parent company

financial statements

IBC Shareholder information

Visit us online at investors.
countryside-properties.com

COUNTRYSIDE PROPERTIES PLC

STRATEGIC REPORT

GROUP AT A GLANCE

CREATING PLACES
PEOPLE LOVE

Our balanced business

We are a leading UK home builder and urban regeneration partner
with two balanced businesses: Housebuilding and Partnerships.

HOUSEBUILDING

PARTNERSHIPS

Our Housebuilding business develops private and affordable
homes on land owned or controlled by the Group, located
around London and the South East of England. It operates
under the Countryside and Millgate brands.

Our Partnerships business specialises in urban regeneration of public
sector land, delivering private and affordable homes in partnership
with local authorities and housing associations. It operates in and
around London, the North West of England and the West Midlands.

– Industry-leading land bank

– South East-focused placemaking

– Capital-light and low risk model

– Relationship-led business with 30-year track record

– 89 per cent of land strategically sourced

– Strong political support for regeneration

– Excellent visibility of outlet growth

– Significant visibility of work and growing pipeline

Read more about our Housebuilding division
on pages 18 to 21

Read more about our Partnerships division
on pages 22 to 25

ADJUSTED REVENUE1

ADJUSTED
OPERATING PROFIT2

£427.1m

£777.0m

£349.9m

£66.8m

£122.5m

£55.6m

LAND BANK

TNAV3

19,322

27,204
plots

7,881

£431.8m

£537.4m

£105.6m

1. Adjusted revenue includes the Group’s share of the revenue of joint ventures of £105.7m (2015: £68.3m).

2. Adjusted operating profit includes the Group’s share of the operating profit of associate and joint ventures of £25.3m (2015 £16.7m) and excludes non-underlying items of £9.9m (2015: £6.6m).

3. Tangible net asset value is defined as net assets excluding intangible assets of £58.9m (2015: £59.5m) net of deferred tax of £3.5m (2015: £4.3m). In 2015, the mandatory redeemable preference

shares and accrued return of £375.2m were also excluded.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNORTH WEST
– Established Partnerships

business

– Low-rise standard house types

– Increasing Private Rental
Sector (“PRS”) presence

– Focused on Liverpool

and Manchester

SOUTH EAST
– Established Housebuilding and

Partnerships businesses

– Strong commuter locations

– 50-mile radius from London

– No Central London exposure

We have a balanced business with two
differentiated, complementary divisions
and a clear strategy for growth over
the medium term. Growth in the
Housebuilding division is underpinned
by the Group’s industry-leading
strategic land bank of 19,322 plots.
89 per cent of this land is strategically
sourced via options and conditional
contracts with an average 10 per
cent discount to open market value.

The Partnerships model complements
the Housebuilding division with a low
risk, capital-light model building homes
on public sector land, typically local
authority estate regeneration and
brownfield sites. The Group has a
strong track record of partnership
development and has an excellent
pipeline of future work of 14,504
plots including those at preferred
bidder stage.

NUMBER OF ACTIVE SITES:

HOUSEBUILDING

PARTNERSHIPS

COUNTRYSIDE PROPERTIES PLC

STRATEGIC REPORT
HIGHLIGHTS

Operational and financial highlights

– Completions up 12 per cent to 2,657 homes (2015: 2,364 homes)

– Private average selling price (“ASP”) up 21 per cent to £465,000 (2015: £385,000)

– Sales rates have remained healthy at 0.78 (2015: 0.76)

– Open sales outlets are up 48 per cent at 43 (2015: 29)

– Forward sales up 64 per cent to £225.4m (2015: £137.5m)

– Total land bank increased to 27,204 plots (2015: 26,213 plots)

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ADJUSTED REVENUE1
£m

£777.0m
+26.2%

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RETURN ON
CAPITAL EMPLOYED3
%

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26.8%
+210bps

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ADJUSTED
OPERATING PROFIT
£m

£122.5m
+34.3%

TANGIBLE NET
ASSET VALUE
£m

£537.4m
+63.3%

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ADJUSTED
OPERATING MARGIN
%

15.8%
+100bps

LAND BANK
plots

27,204
+3.8%

FY15

FY16

HOUSEBUILDING

PARTNERSHIPS

Read more on our KPIs
on pages 14 to 17

– Reported revenue up 23 per cent to £671.3m (2015: £547.5m)

– Reported operating profit up 29 per cent to £87.3m (2015: £67.9m)

– Net cash of £12.0m (2015: £59.5m net debt)

– Basic earnings per share 13.6p (2015: 4.4p)

1. Adjusted revenue includes the Group’s share of the revenue of joint ventures of £105.7m (2015: £68.3m).

2. Adjusted operating profit includes the Group’s share of the operating profit of associate and joint ventures of £25.3m (2015: £16.7m) and excludes non-underlying items of £9.9m (2015: £6.6m).

3. Adjusted operating profit divided by capital employed as defined on page 29.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.com

CHAIRMAN’S STATEMENT

A YEAR OF
SIGNIFICANT PROGRESS

“ We are delighted with the performance of the Group in 2016, delivering solid growth and
a strengthened balance sheet and marking our return to the London Stock Exchange.
We enter the 2017 financial year in a strong position with an industry-leading land bank and
record private forward order book. Our strategy remains to deliver growth, increasing returns
and capital efficiency from our balanced business models of Housebuilding and Partnerships.
We see significant growth opportunities in Partnerships with increased estate regeneration
in London and geographic expansion into the West Midlands, while our increased scale and
operational efficiency in Housebuilding continues to improve operating margins.”

2016 PERFORMANCE
2016 has been another year of significant progress
for the Group. It marked increased activity for both
our Partnerships and Housebuilding divisions and
the return of the business to the London Stock
Exchange in February 2016. I am delighted to report
strong results for the year, with a 12 per cent
increase in completions to 2,657 homes and a
34 per cent increase in adjusted operating profit
to £122.5m.

At 30 September 2016 we had 43 sales outlets,
14 more than the year before. We have a further
29 sites under construction, which, when combined
with a strong sales rate and record private forward
order book, gives us excellent visibility over our
growth plans for the coming year.

More detailed information on our financial
performance can be found on pages 26 to 29.

STRONG BALANCE SHEET
We have significantly strengthened our balance
sheet during 2016. We raised £114m of net primary
proceeds in new share capital when we listed on
the London Stock Exchange in February. Then in
May 2016 we successfully refinanced our debt
facilities, securing a new £300m revolving credit
facility together with a further £100m accordion
facility at a lower interest cost. Our financial
strength positions us well to deliver the growth
strategy set out at our Initial Public Offering (“IPO”).
At the year end we had net cash of £12.0m.

WELL POSITIONED FOR GROWTH
We welcome the Government’s commitment
to housing and particularly to urban regeneration,
which is a key differentiator of our business. Our
track record in delivering regeneration projects
across London and the North West of England
over the last 30 years positions us well to help
local authorities meet their housing needs. We
continue to work in partnership with both private
and public sector landowners to develop new
communities and undertake urban regeneration.

on track to deliver our medium term targets of
over 3,600 completions per year, an adjusted
operating margin of over 17 per cent and
improvement in return on capital employed
(“ROCE”) to over 28 per cent.

RETURNS TO SHAREHOLDERS
Our share price has held up well since our flotation,
despite the turbulence in the market. From our
IPO date of 17 February 2016 to the end of our
financial year on 30 September 2016 we delivered
a total shareholder return of 7.9 per cent.

We have recommended our first dividend of
3.4 pence per share. Subject to approval at the
AGM on 26 January 2017, the dividend will be
paid on 3 February 2017 to shareholders
registered at 13 January 2017.

We have set a target dividend pay-out ratio of
30 per cent of adjusted earnings as we look to
use the remaining profits to reinvest in growth,
while maintaining a broadly debt-neutral strategy.

CORPORATE GOVERNANCE
During the year we continued to strengthen our
corporate governance ensuring that the financial,
operational and qualitative measures required
to operate our business and manage the risks
are in place.

More information can be found within our
Corporate Governance Report on pages 44 to 46.

OUR PEOPLE
Our people are essential to delivering our
strategy. At 30 September 2016 we had 1,087
employees across the business, an increase of
25 per cent over the prior year. 70 per cent of
our employees subscribed to our Save As You
Earn scheme and will therefore participate in
our growth.

I would like to thank each and every one
of our employees for their hard work during
the course of the year.

While we are mindful of the medium-term
uncertainty over the United Kingdom’s exit from
the European Union, our targets, as outlined at
our IPO, remain unchanged. We remain firmly

David Howell
Chairman
28 November 2016

STRATEGIC REPORTGROUP CHIEF EXECUTIVE’S REVIEW

FIRMLY ON TRACK TO DELIVER
ON OUR GROWTH TARGETS

The Group continues to make progress with its strategic objectives
of sector-leading growth, superior returns and building resilience
through the cycle.

GROUP STRATEGY
The Group continues to make progress with its
strategic objectives of sector-leading growth, top
quartile returns and building resilience through
the economic cycle. We deliver this strategy through
our two balanced operating divisions of Housebuilding
and Partnerships, both of which offer strong growth
through differentiated models that manage capital
efficiency and risk. We deliver well designed properties
at a wide range of price points, from properties
aimed at first-time buyers to our premium brand
Millgate homes.

Our Housebuilding model is based on an
industry-leading strategic land bank, all of which
is located in economically resilient markets within
50 miles of London but without exposure to the
Central London market. Almost 90 per cent of our
Housebuilding land bank is strategically sourced via
long-term planning promotion, which ensures over
20 years’ visibility of future supply, together with
an average 10 per cent discount to the prevailing
open market value. Additionally, as 67 per cent
of this land is controlled via options or conditional
contracts, it ensures both balance sheet efficiency
and flexibility through the cycle.

Our Partnerships division operates in the outer
boroughs of London, the North West of England
and, from the 2017 financial year, the West Midlands.
Like Housebuilding, it delivers private and affordable
homes on larger sites, typically public sector
brownfield sites or local authority estate
regeneration. The land is sourced via public
procurement or direct negotiation and is typically
low value being developed in partnership with
local authorities, housing associations or Private
Rental Sector (“PRS”) providers. As such, it is a
low capital model offering strong returns and the
flexibility of long-term development agreements,
many with phased viability and priority returns.
The division has an excellent track record of
winning new work, reflecting over 30 years of
experience on over 45 regeneration schemes,
strong relationships with local authorities and
expertise in placemaking. Typically we secure
around 40 per cent of bids we submit, which
gives significant visibility of future work, with a
current pipeline (land bank plus preferred bidder)
of over seven years.

We aim to maintain the balance between our two
divisions depending on market conditions, delivering
over 80 per cent of our private for sale homes below

the £600,000 Help-to-Buy threshold. We have a
strong land bank in both divisions but will look to add
selectively to this, particularly in the Partnerships
division, where we seek to expand our footprint
within our existing geographic areas of operation.

OVERVIEW OF THE MARKET
2016 was another positive year for the housebuilding
sector, with strong customer demand underpinned
by a structural shortage in housing, supportive
Government policy and favourable mortgage lending
conditions. The demand for all tenures of housing,
particularly in London and the South East, continues
to be strong and resilient. Political support from
all parties in the form of Help-to-Buy and planning
policy reform has both stimulated demand for
homes and enabled a greater supply of land
for development.

The availability of public sector land has also increased,
with estate regeneration opportunities in London
expanding significantly as local authorities seek to
monetise their assets and improve their housing stock.
The mortgage market has also improved over the
past 12 months, with a wider range of products,
low interest rates and stable valuation metrics.

There is evidence of the housing market feeling
the stress of increased taxation, with the revised
Stamp Duty Land Tax rates having a negative
impact on higher value homes and Buy-to-Let
properties particularly in the second hand
market. This has been more than offset by the
growth of Help-to-Buy in the new build market
under the £600,000 value threshold.

The immediate impact of the EU Referendum in
June 2016 was relatively short-lived, with cancellation
rates running higher directly before and after the
vote. Visitor levels remained solid throughout and
net reservations returned to their previously strong
performance within a month of the Referendum.
The medium-term impact of the Referendum as
EU exit terms are negotiated is yet to be seen.

PERFORMANCE
Both operating divisions have performed well in
the past 12 months.

Overall, the Group has grown strongly, with total
completions up 12 per cent to 2,657 (2015: 2,364)
on the back of construction site starts and open
sales outlets. This, combined with a 21 per cent
increase in Group private average selling price
(“ASP”) to £465,000 (2015: £385,000), resulted

countryside-properties.com£225.4m

of private sales in our
forward order book
up 64 per cent

£465,000

private average 21 per cent
increase in selling price in 2016

open sales outlets at
30 September 2016 an increase of
48 per cent

in a 26 per cent increase in adjusted revenue
to £777.0m (2015: £615.8m). On a reported
basis, revenue increased 23 per cent to £671.3m
(2015: £547.5m) Our reservation rate per open
sales outlet remained steady at 0.78 (2015: 0.76)
despite the increased number of sales outlets
at 43 (2015: 29) and a short period of more
cautious consumer behaviour around the
EU Referendum. At 30 September 2016 we
had a further 29 sites under construction.

Our Housebuilding division performed
well, with total completions up 20 per cent at
783 homes versus 653 in 2015. Private ASP increased
14 per cent to £665,000 (2015: £583,000) largely
driven by product mix and underlying house price
inflation, particularly in the London commuter
markets. We saw particular strength in the mid
priced market and we continue to plan our product
to ensure it remains affordable for local people.
Despite a tougher market above £1m, our premium
brand Millgate delivered another strong performance
with 81 private completions in the year, up from
52 in 2015.

We started on 15 new Housebuilding sites during
the year, including two new phases at Beaulieu in
Chelmsford, one of our key strategic sites, and three
new sites in our Southern Housebuilding region
as we expand our operations there.

Our Partnerships division delivered a strong
performance, with total completions up 10 per cent
at 1,874 homes versus 1,711 homes in 2015. The
Partnerships private ASP rose sharply, up 27 per cent
to £307,000 (2015: £242,000), driven by site mix,
the effect of placemaking as we continue with our
large estate regeneration projects and house price
inflation in the sub £600,000 price points. During
the year we delivered homes on a number of key
regeneration schemes, including St. Paul’s Square in
Bow and Brook Valley Gardens in Barnet, and are
now on site with four different phases at our
flagship site in Acton.

PRS homes delivered the largest element of growth
for our Partnerships North region in partnership
with Sigma Capital Group and we continue to see
PRS as an important method for meeting housing
demand across the country. In total, we started
work on 21 new Partnerships sites during the year.
We see increasing demand for us to work
in partnership to regenerate public sector land
delivering mixed-tenure communities evidenced by
us winning bids during the year which will deliver

6,434 plots. These included Beam Park (Dagenham),
Rochester (Kent), Hounslow (London) and a number
of smaller sites in our Partnerships North region.

At Group level, adjusted gross margin improved
30bps to 21.9 per cent (2015: 21.6 per cent).
Adjusted operating margin improved further, up
100bps to 15.8 per cent (2015: 14.8 per cent),
due to greater scale and overhead efficiency.
When combined with the additional volume, this
has delivered a 34 per cent increase in adjusted
operating profit to £122.5m (2015: £91.2m).
On a reported basis, operating profit increased
29 per cent to £87.3m (2015: £67.9m). Improved
capital efficiency, combined with stronger earnings,
have resulted in return on capital employed increasing
to 26.8 per cent, up 210bps on the prior year
(2015: 24.7 per cent).

During the course of the year we experienced
between three per cent and five per cent build
cost inflation, initially as a result of higher labour
costs, although these eased somewhat in the
second half of the year. We continue to build on
our strong relationships with our supply chain.
By giving them excellent visibility over future
workload, we are able to deliver efficiencies for
both parties, which helps control our build costs.

The quality of our business has also been maintained
throughout this period of growth. Our health and
safety Accident Incident Rate was 305 (2015: 265)
and our National House Building Council (“NHBC”)
reportable items were 0.23 (2015: 0.22) per home.
Both of these measures are significantly ahead of
the industry benchmarks. Our customer service
has improved over the prior year, with our NHBC

Recommend a Friend score now standing at
84.8 per cent (2015: 82.7 per cent).

OUTLOOK
Current trading remains robust with sales rates
and values above year end numbers. The markets
in which we operate have recovered post the EU
Referendum and we continue to trade well. We
remain successful at winning new Partnerships work
and we had 6,623 plots with preferred bidder status
compared with 2,957 plots a year earlier. Additionally
we are working on a potential bid pipeline of a
further 33,515 plots. Reservations remain robust and
any softness in higher price points has been more
than compensated for by our lower priced homes
and our Partnerships division, which performed
strongly during the year. Across the Group we
continue to open new sites, with 43 open sales
outlets at year end and a further 29 sites under
construction, giving us great visibility over delivery in
2017. We have started the year with a record private
forward order book up 64 per cent and continued
strong demand which gives us great confidence in
delivering both our growth plans for 2017 and our
medium term targets.

We remain firmly on track to deliver our medium
term targets of over 3,600 total completions
per year, an adjusted operating margin of over
17 per cent and an improvement in return on
capital employed to in excess of 28 per cent.

Ian Sutcliffe
Group Chief Executive
28 November 2016

BEAULIEU,
CHELMSFORD
– 700 acres

– 3,660 new homes

– Delivery: 2014 to 2027

COUNTRYSIDE PROPERTIES PLC

STRATEGIC REPORT
OUR MARKETS

THE UK HOUSING MARKET

Demand for all tenures of housing, particularly in London and the South East,
continues to be strong and resilient. Political support through Help-to-Buy and
planning policy reform has both stimulated demand and ensured greater supply
of land for development.

The UK housing market has been in a long-term
position of structural undersupply as the number
of new homes built has failed to keep pace with
the number of new household formations and the
replacement of redundant stock (see chart 1).

Over the past few years there has been a recovery
in the housing market driven by wider economic
recovery, increased access to low cost mortgage
financing, improved availability of land through the
planning process and Government support for
the housing sector. These remain key drivers for
the market over the longer term with the outlook
strong in the near term.

INCREASING DEMAND FOR HOUSING
Mortgage availability and affordability
One of the leading indicators for UK housing activity
is the level and value of mortgage approvals.
Seasonally adjusted mortgage approvals remain
well below peak levels at around 835,000 approvals
over the 12 months to 30 June 2016 versus 1.4 million
in the comparable period in 2007 (see chart 2).

Since the low point in gross mortgage lending
of £144bn in 2009, the Council of Mortgage
Lenders reported a pick-up to £220bn in 2015,
which remains significantly below the peak of
£363bn in 2007.

House price inflation (“HPI”)
UK house prices have increased by 5.0 per cent
over the past 12 months as demand for housing has
remained strong, albeit with some significant
regional variances. On average, house prices have
risen by 7.3 per cent per annum over the past 20
years (see chart 3).

POLITICAL SUPPORT FOR THE UK
HOUSEBUILDING SECTOR AND, IN
PARTICULAR, URBAN REGENERATION
REMAINS STRONG
Since the creation of the National Planning Policy
Framework in 2012 and the introduction of
Help-to-Buy in 2013, there has been strong
and consistent political support for housebuilding
in the UK.

Help-to-Buy
Help-to-Buy equity share is designed to encourage
home ownership in the UK. Under the scheme,
buyers put down a minimum five per cent deposit
and the UK Government provides an equity loan
of up to 40 per cent inside London and 20 per cent
outside of London up to a maximum purchase
price of £600,000. The property must be a new
build home and the buyer’s only home. Funding for
the scheme has been increased a number of
times since the initial launch in April 2013 and
currently runs through to 2021. The Help-to-Buy
mortgage guarantee scheme will be concluded at
the end of 2016. This scheme provided support
for homeowners seeking a 95 per cent mortgage;
however, this has been replaced by the mortgage
lenders and had little take-up.

STRUCTURAL UNDERSUPPLY ACROSS UK HOUSING MARKET
’000
35

The Government also launched the Help-to-Buy
ISA scheme on 1 December 2015, through which
the Government will provide a bonus of £50 for
every £200 saved up to a maximum bonus of
£3,000, payable on purchase of a new home.

Planning
The Government announced several planning
reforms in its 2015 report “Fixing the foundations:
Creating a more prosperous nation” including
tightening planning performance by punishing
local authorities that make 50 per cent or fewer
planning decisions on time, introducing a dispute
resolution mechanism for section 106 agreements,
and announcing an intent to not proceed with
the zero carbon Allowable Solutions carbon
offsetting scheme. In addition, initiatives such
as the National Planning Policy Framework have
made the planning system less complex and are
ensuring greater land supply.

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37% shortfall
from current

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STRUCTURAL UNDERSUPPLY ACROSS UK MARKET

MORTGAGE APPROVAL

Chart 1

Private housing

Chart 2

Aﬀordable housing

Barker review recommendation

Source: 2004 Barker Review

STRUCTURAL UNDERSUPPLY ACROSS UK HOUSING MARKET
’000
400,000

MONTHLY MORTGAGE APPROVALS
’000
160

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350,0,00

300,000

Private housing

Aﬀordable housing

UK QUARTERLY HOUSE PRICE INFLATION (HPI)

200,000

150,000

100,000

50,000

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0
2

2
1
0
2

3
1
0
2

4
1
0
2

5
1
0
2

6
1
0
2

Private housing

Aﬀordable housing

Barker review recommendation

Source: Department for Communities and Local Government and 2004 Barker report

Source: Bank of England

STAMP DUTY CHANGES

Old stamp duty eﬀective rate

New stamp duty eﬀective rate

Purchase price £m

UK QUARTERLY HOUSE PRICE INFLATION

Source: Bank of England

Source: Nationwide

STAMP DUTY CHANGES

Old stamp duty eﬀective rate

New stamp duty eﬀective rate

Purchase price £m

STAMP DUTY CHANGES

Source: Nationwide

Old Stamp Duty eﬀective rate

New Stamp Duty eﬀective rate

Purchase price £m

Source: HM Revenue & Customs

UK QUARTERLY HOUSE PRICE INFLATION
%
30

-10

-20

ﬀ

MORTGAGE APPROVALS
’000
9
160
0
0
2

3
1
0
2

5
1
0
2

6
1
0
2

1
1
0
2

2
1
0
2

COUNTRYSIDE PROPERTIES PLC

140

120

100

-10

-20

ﬀ

Old Stamp Duty eﬀective rate

New Stamp Duty eﬀective rate

Purchase price £m

Source: HM Revenue & Customs

STRUCTURAL UNDERSUPPLY ACROSS UK MARKET

MORTGAGE APPROVAL

‘000

Private housing

Aﬀordable housing

STAMP DUTY CHANGES

UK QUARTERLY HOUSE PRICE INFLATION (HPI)

1
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

7
0
0
2

8
0
0
2

‘000

160

140

120

100

-10

-20

ﬀ

‘000

160

140

120

100

-10

-20

ﬀ

countryside-properties.com

STRUCTURAL UNDERSUPPLY ACROSS UK MARKET

MORTGAGE APPROVAL

42%

of completions were through
Help-to-Buy

1,127

9
7
9
1

3 per cent increase in
private completions

1
8
9
1

3
8
9
1

5
8
9
1

7
8
9
1

9
8
9
1

1
9
9
1

3
9
9
1

5
9
9
1

7
9
9
1

Private housing

Aﬀordable housing

738

1
0
0
2

3
0
0
2

5
0
0
2

9
9
9
1

7
0
0
2

60 per cent increase in
Barker review recommendation
PRS homes

Source: 2004 Barker Review

STRUCTURAL UNDERSUPPLY ACROSS UK HOUSING MARKET
’000
35

37% shortfall
from current

9
0
0
2

1
1
0
2

3
1
0
2

5
1
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

Private housing

Aﬀordable housing

UK QUARTERLY HOUSE PRICE INFLATION (HPI)

1
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

STRUCTURAL UNDERSUPPLY ACROSS UK MARKET

MORTGAGE APPROVAL

‘000

STAMP DUTY CHANGES

Private housing

Aﬀordable housing

‘000

160

140

120

100

-10

-20

ﬀ

‘000

160

140

120

100

-10

-20

ﬀ

UK QUARTERLY HOUSE PRICE INFLATION (HPI)

5
1

Old stamp duty eﬀective rate

Purchase price £m

STAMP DUTY CHANGES

MONTHLY MORTGAGE APPROVALS
’000
160

140

100

120

37% shortfall
from current

Stamp Duty
Over recent years there have been a number
of changes to Stamp Duty Land Tax (“SDLT”),
which is payable on the purchase of a residential
property over £125,000 in the UK. Before
December 2014 there was a tiered system where
the effective tax rate stepped up at different
thresholds. This was subsequently replaced by a
blended rate system with higher tax rate payable
on properties above £1m (see chart 4). The
Government further reformed the system in the
2015 Autumn Statement, increasing SDLT by a
further three per cent for purchasers of
Buy-to-Let or second homes.

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

5
0
0
2

7
0
0
2

9
0
0
2

3
1
0
2

1
1
0
2

5
1
0
2

Barker review recommendation

Source: 2004 Barker Review

UK QUARTERLY HOUSE PRICE INFLATION
%
30

STRUCTURAL UNDERSUPPLY ACROSS UK HOUSING MARKET
’000
35

8
0
0
2

5
1
0
2

6
1
0
2

4
1
0
2

3
1
0
2

2
1
0
2

1
1
0
2

0
1
1
2

30
9
0
0
2

Affordable homes
The Affordable Homes Programme was established
in 2008 to increase the supply of new affordable
homes in England, with the majority of required
homes for affordable rent. It is currently in its
third round of funding, which covers the period
from 2015–2018. It will provide £2.9bn of funding,
£1.7bn of which is available for the delivery of
165,000 new affordable homes outside London
and £1.25bn for the delivery of 45,000 new
affordable homes in Greater London.

3
0
0
2

7
0
0
2

1
9
9
1

3
9
9
1

5
9
9
1

7
8
9
1

1
8
9
1

5
8
9
1

3
8
9
1

9
7
9
1

2
1
0
2

8
0
0
2

1
1
0
2

6
1
0
2

5
1
0
2

9
0
0
2

3
1
0
2

9
8
9
1

1
0
0
2

9
9
9
1

7
9
9
1

Private housing

Aﬀordable housing

Regeneration
The UK Government announced in January 2016
that it will seek to regenerate some of England’s
most run-down housing estates, following a report
by Savills which stated that approximately 50,000
new homes are needed in London over each of
MONTHLY MORTGAGE APPROVALS
the next 20 years to make up for past shortfalls
’000
160
in housing supply and to meet new demand.
According to Savills, the regeneration of these
140
housing estates has the potential to provide
120
somewhere between 190,000 and 500,000 homes,
of which between 54,000 and 360,000 would be
100
new, representing a significant increase over the
number of existing homes. In its statement, the UK
Government announced the formation of a new
Estate Regeneration Advisory Panel and committed
£140.0m to help fund regeneration of these estates.

EU Referendum
On the 23 June 2016, the UK population voted to
MARKET OPPORTUNITIES
leave the EU. As a result there was a short-term
Strength in the market under
impact on consumer confidence which led to a
£600,000
temporary increase in cancellation rates. Visitor
The segment of greatest demand in the
levels and gross reservations remained unchanged
housing sector remains first-time buyers.
through that period and within a month of the vote,
Historically, new build has accounted for
trading was back to normal with virtually all
around 10 per cent of all first-time buyer
cancelled reservations resold.
transactions, with the remainder in the
second-hand market. With growing new
The wider impact of the Brexit vote is unknown
build supply and Government support for
and could result in some uncertainty while the
the sector in the form of Help-to-Buy,
terms of exit are negotiated. A devaluation of
coupled with strong demographic demand,
Sterling will have an impact on imported materials,
Source: Bank of England
the share of first-time buyers has grown
such as timber and steel, and any restrictions on
and now represents 49 per cent of
EU labour may cause delays to developments
Countryside’s private completions.
and potential cost increases.

1
0
0
2

2
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

2
1
0
2

3
1
0
2

4
1
0
2

3
0
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2

4
0
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0
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2

6
0
0
2

7
0
0
2

6
1
0
2

5
1
0
2

0
0
0
2

Nearly all first-time buyer transactions are
below the £600,000 Help-to-Buy maximum
value, with the increased equity share to
40 per cent in London further boosting this
demand. Our geographic presence in strong
commuter markets and outer London
Boroughs continues to make our homes
good value in comparison to neighbouring
higher priced areas. Managing our product
mix to meet location, affordability and
Government support is therefore critical
to delivering both increased completions
and price growth.

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

2
1
0
2

3
1
0
2

4
1
0
2

5
1
0
2

6
1
0
2

0
0
2

5
2

0
3

2
9
9
1

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

6
3
9
9
New stamp duty eﬀective rate
9
9
1
1

4
9
9
1

5
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

2
1
0
2

3
1
0
2

4
1
0
2

5
1
0
2

6
1
0
2

Source: Nationwide

Chart 3

Source: Bank of England

Chart 4

UK QUARTERLY HOUSE PRICE INFLATION
%
30

STAMP DUTY CHANGES
%
10

-10

-20

e
t
a
r

x
a
t

e
v
i
t
c
e
ﬀ
E

-10

-20

Old stamp duty eﬀective rate

New stamp duty eﬀective rate

Purchase price £m

2
9
9
1

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

2
1
0
2

3
1
0
2

4
1
0
2

5
1
0
2

6
1
0
2

0
0

5
0

0
1

5
1

0
2

5
2

0
3

Old Stamp Duty eﬀective rate

Purchase price £m
New Stamp Duty eﬀective rate

Source: Nationwide

Source: HM Revenue & Customs

COUNTRYSIDE PROPERTIES PLC

STAMP DUTY CHANGES
%
10

ﬀ

Old Stamp Duty eﬀective rate

New Stamp Duty eﬀective rate

Purchase price £m

Source: HM Revenue & Customs

STRATEGIC REPORT

BUSINESS MODEL

CAPITAL EFFICIENCY
DRIVING RETURNS

We have a balanced and flexible business model with our strategic land-led
Housebuilding division and the lower risk Partnerships division.

Our key resources

Our balanced business model

LAND
Excellent visibility of future
growth with embedded value
from strategic land and long-term
development agreements

PEOPLE
Highly experienced and motivated
employees together with strong
supply chain relationships

PARTNERSHIPS
Enduring relationships with local
authorities, housing associations
and major land owners

REPUTATION
Built on transparency, proven
development expertise and
delivery through the cycle

FINANCIAL STRENGTH
Strong balance sheet with low
obligations and debt capacity
if required

HOUSEBUILDING
INVESTMENT IN GROWTH ACHIEVING
MARGIN PROGRESSION

– Focused on outer London and the South East

– Industry leading strategically sourced land bank of 19,322 plots

– Flexibility and balance sheet efficiency from controlled and

optioned land

– Strong average selling prices from placemaking

– Operating efficiency from increasing scale

Read more about our Housebuilding division
on pages 18 to 21

PARTNERSHIPS
LOW RISK MODEL WITH HIGH RETURN
ON CAPITAL EMPLOYED

– Public sector land-led development

– Strong relationships with local authorities built over 30 years

– Reputation for placemaking urban regeneration and

community focus

– Low risk model with priority profits and phased viability

– Strong visibility of future work with further

growth opportunities

– Political support from both central and local Government

Read more about our Partnerships division
on pages 22 to 25

COUNTRYSIDE PROPERTIES PLC

countryside-properties.com“We are firmly on track to deliver the ambitious growth
targets we set out at IPO in February 2016.”

Ian Sutcliffe
Group Chief Executive

The outcomes we delivered

2,657

homes completed

£122.5m

adjusted operating profit

26.8%

return on
capital employed

10 years

of production visibility
in land bank

PLACES
PEOPLE
LOVE

25%

increase in workforce

85%

of customers would
recommend us to a friend

0.23

NHBC Reportable
Items per home

13 years

running Accident Incident
Rate below industry
benchmark

COUNTRYSIDE PROPERTIES PLC

STRATEGIC REPORT
STRATEGY

BUILDING ON OUR STRATEGY

Delivering sustainable growth and superior returns
from our balanced business model.

Our strategic priorities

Our approach

GROWTH
Sector-leading growth.

– Growth in open sales outlets

– Sales rates maintained at top of range

– Industry-leading private average selling price

– Increased efficiency from greater scale

– Revenue growth from volume and value

RETURNS
Superior return on capital.

– Gross margin maintained

– Improved operational efficiency

– Adjusted operating margin growth

– Capital-light model gives higher returns

– Dividend policy supports growth and capital discipline

RESILIENCE
Through the cycle performance.

– Balanced business between Housebuilding

and Partnerships

– Mixed-tenure development, with PRS and affordable homes

– Low gearing and land creditors

– Flexible land bank based on options

– Strong pipeline of partnership work which

underpins growth

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comKey performance indicators (“KPIs”)
Our KPIs align our performance and accountability to our strategy of sector-leading growth, superior returns on capital and through the cycle resilience.

Quality KPIs
Three non-financial KPIs measure the quality of the Group’s performance.
These KPIs are relevant across all three strategic priorities:

Read about our key performance indicators
on pages 14 to 17

– NHBC Reportable Items

– Accident Incident Rate

– NHBC recommend a friend

Our priorities in 2017

KPIs to measure success

– Continue to grow the number of sales outlets

– Maintain sales rates on all sites

– Ensure affordability by reducing ASPs

– Maintain gross margin from cost control

– Profit growth based on increased revenue

– Completions

– Adjusted revenue

– Adjusted operating profit

– Increase efficiency from greater scale

– Improve operational efficiency to reduce costs

– Maintain asset turn to improve returns

– Grow tangible net asset value from greater earnings

– Grow the dividend from increased earnings

– Adjusted operating margin

– Tangible net asset value

– Return on capital employed

– Continue to manage a balanced business

– Reduce reliance of private sale through mixed tenure

– Maintain low gearing and land creditors

– Continue to expand Partnerships pipeline

– Maintain land bank and increase pull through of land

– Gearing

– Land bank

COUNTRYSIDE PROPERTIES PLC

STRATEGIC REPORT
KEY PERFORMANCE INDICATORS

TRACKING PROGRESS,
REWARDING PERFORMANCE

Our KPIs help us to measure our strategic progress.

These KPIs are the key measures
of success and cover three
strategic priorities.

Our strategic priorities

1 GROWTH

RETURNS

RESILIENCE

FINANCIAL KPIs

Completions

Adjusted revenue

Definition
The number of homes sold in the
financial year, including our share of
associate and joint ventures’ completions.
For private completions, this is the number
of legal completions during the year.
For affordable and PRS homes and
design and build contracts, this represents
the equivalent number of units sold based
on the proportion of work completed
under a contract during the year.

Performance
Completions increased by 12.4 per cent
in 2016 as our number of open sales
outlets increased from 29 to 43 during
the year.

Definition
Revenue consists of sale proceeds for
private units, affordable homes and PRS
and design and build units as well as the
proceeds from land and commercial sales.
Adjusted revenue includes our share of
revenue from our joint ventures.

Performance
Adjusted revenue increased by 26.2 per
cent to £777.0m in 2016 (2015: £615.8m)
as we increased the number of private
and affordable completions and the
average selling price of our private
homes increased to £465,000
(2015: £385,000).

COMPLETIONS
#

2,657
+12.4%

7
5
6
2

4
6
3
2

5
1

6
1

ADJUSTED REVENUE
£m

£777.0m
+26.2%

0
7
7
7

8
5
1
6

5
1

6
1

Link to strategy

COUNTRYSIDE PROPERTIES PLC

countryside-properties.com

Adjusted
operating margin

Adjusted
operating profit

Tangible net
asset value

Definition
Adjusted operating profit divided by
adjusted revenue.

Performance
Greater scale and improved operational
efficiency, as we increased the number
of active sites to 72 in 2016 (2015: 68),
led to a 100bps improvement in adjusted
operating margin to 15.8 per cent
(2015: 14.8 per cent).

Definition
Group operating profit including our
proportionate share of our associate
and joint ventures’ operating profit
and excluding the impact of
non-underlying items.

Performance
A 100bps improvement in adjusted
operating margin from 14.8 per cent to
15.8 per cent combined with additional
completion volumes resulted in a
34.3 per cent increase in adjusted
operating profit to £122.5m
(2015: £91.2m).

Definition
Net assets excluding intangible assets
net of deferred tax.

Performance
During the year we reinvested the £114m
net proceeds raised on IPO to accelerate
the growth of our business. Tangible
net asset value increased by £208.4m
as a result of the Group’s expansion.

8
5
1

8
4
1

5
1

6
1

ADJUSTED OPERATING MARGIN
%

15.8%
+100bps

ADJUSTED OPERATING PROFIT
£m

£122.5m
+34.3%

5
2
2
1

2
1
9

5
1

6
1

TANGIBLE NET ASSET VALUE
£m

£537.4m
+63.3%

4
7
3
5

0
9
2
3

5
1

6
1

Link to strategy

COUNTRYSIDE PROPERTIES PLC

STRATEGIC REPORT

KEY PERFORMANCE INDICATORS
CONTINUED

FINANCIAL KPIs CONTINUED

NON-FINANCIAL KPIs

Return on capital
employed

Definition
Adjusted operating profit divided by the
average of opening and closing tangible
net operating asset value (“TNOAV”).
TNOAV is calculated as TNAV
excluding net debt or cash.

Performance
ROCE improved during the year as a
result of the 100bps increase in underlying
operating profit margin to 15.8 per cent
(2015: 14.8 per cent). This, together
with our continued focus on capital
efficiency, which maintained asset turn
at 1.7x (2015: 1.7x), resulted in a 210bps
increase in ROCE to 26.8 per cent.

Gearing

Land bank

Definition
Net debt divided by net assets.

Performance
Gearing has reduced during the year as
a result of the growth in the business,
balance sheet expansion and the
primary proceeds raised during the
IPO in February 2016.

Adjusted gearing, which includes land
creditors, was 15.1 per cent in 2016
(2015: 34.0 per cent).

Definition
The number of plots owned or
controlled by the Group on which
homes can be built.

Performance
During the year, our land bank increased
by a net 991 plots as we added a number
of new sites to our land bank in the
Housebuilding division and maintained
our Partnerships division land bank.

RETURN ON
CAPITAL EMPLOYED %

3
5
1

26.8%
+210bps

GEARING
%

(2.0)%

8
6
2

7
4
2

5
1

6
1

5
1

)
0
2
(

6
1

Link to strategy

COUNTRYSIDE PROPERTIES PLC

LAND BANK
#

27,204 plots
+3.8%

4
0
2
7
2

3
1
2
6
2

5
1

6
1

Link to strategy

countryside-properties.com

NHBC Reportable
Items (“RIs”)

Accident Incident Rate
(“AIR”)

NHBC recommend
a friend

Definition
Defects reported per plot at National
House Building Council (“NHBC”)
inspections at key build stages.

Performance
During the year, our average reportable
items per home was 0.23, which
was broadly flat on the prior year
(2015: 0.22). The Group remains
well below the NHBC benchmark
of 0.27 at 30 September 2016.

Definition
The number of accidents per 100,000
people employed during the financial year.

Performance
The Group’s accident rate has increased
during the year due to the increased
number of active sites and associated
increase in the numbers of staff and
sub-contractors on site. The Group
remains well below the Health and
Safety Executive benchmark AIR of
421 for the year ended 30 September
2016 (2015: 412) and the HBF Major
Housebuilders’ AIR of 361. The Group’s
AIR has been consistently below the
industry rate for the past 13 years.

Definition
The percentage of customers returning
an NHBC post-completion customer
care survey who would recommend
a friend.

Performance
During the year we have continued
to focus on delivering great customer
service to the people who buy our
homes. This has included training
all Housebuilding staff in customer
service and improving our home
handovers to customers. This has
helped Countryside to maintain its
four star builder status under the
NHBC’s customer care framework.

3
2
0

2
2
0

REPORTABLE ITEMS
#

0.23
+4.5%

5
6
2

5
0
3

ACCIDENT INCIDENT RATE
#

7
2
8

8
4
8

CUSTOMER RECOMMEND
A FRIEND SCORE %

305
+15.1%

84.8%
+210bps

5
1

6
1

5
1

6
1

5
1

6
1

Link to strategy

COUNTRYSIDE PROPERTIES PLC

STRATEGIC REPORT

OPERATIONAL REVIEW: HOUSEBUILDING

UNLOCKING EMBEDDED VALUE
Leading strategic land bank

Our Housebuilding division is well positioned with its industry-leading strategic land bank and expertise
in placemaking. It performed well with total completions up 20 per cent to 783 homes in 2016.

19,322

plots in our Housebuilding
land bank

89%

of the land bank is
strategically sourced

SIGNIFICANT LAND BANK IN PLACE
– 19,322 plots owned or controlled in South East England

– Gross margin target of 24 per cent (including 1–2 per cent

from option discounts to open market value)

– 89 per cent of the land bank has been strategically sourced

ESTABLISHED PLATFORM FOR GROWTH
– Selling from 25 open sales outlets at 30 September 2016

– Further nine sites under construction

– 1,931 additional plots secured in FY16

STRONG VISIBILITY OVER PRODUCTION
– 92 per cent of next three years’ volume owned or controlled

– 81 per cent of next three years’ volume has planning permission

1
7
2
4

7
0
3
3

8
6
6

6
1
5

5
1

6
1

5
1

6
1

ADJUSTED REVENUE
£m

ADJUSTED
OPERATING PROFIT £m

£427.1m
+29.2%

£66.8m
+29.5%

8
1
3
4

1
3
8
2

7
7
1

6
6
1

5
1

6
1

5
1

6
1

TANGIBLE NET
ASSET VALUE £m

RETURN ON
CAPITAL EMPLOYED %

£431.8m
+52.5%

17.7%
+110bps

OPERATIONAL REVIEW: HOUSEBUILDING
CONTINUED

SUNDRIDGE PARK
Set in 275 acres of
Kentish parkland

– Luxury development

of 41 homes

– Delivery: 2015 to 2017

Help-to-Buy continues to be an important
mechanism for purchasers, with the increase in
the London Help-to-Buy threshold to 40 per cent
in February further supporting the new build market.

The planning environment remains broadly positive
with the Government having introduced a variety
of reforms over the past two years including
initiatives such as the National Planning Policy
Framework, which has made the planning system
less complex and is ensuring greater land supply.

OUR PERFORMANCE
During 2016, our Housebuilding division continued
to grow well, underpinned by strong customer
demand for quality homes, particularly in the
Home Counties and outer London Boroughs.
Total completions were up 20 per cent to
783 units (2015: 653 units).

Total private completions of 499 units were up
nine per cent (2015: 456) driven by sales across
a range of sites with particular contributions from
our sites in Cambridge, Harold Wood, Little Hollows
and St Luke’s Park in Essex, and Wickhurst Green
in West Sussex. Our premium brand, Millgate,
delivered significant growth in private homes of
over 50 per cent which, along with an improvement
in product mix, contributed to a 14 per cent
increase in the Housebuilding private ASP to
£665,000 (2015: £583,000).

Affordable completions of 284 units were higher
than the prior year (2015: 192 homes) as a result
of the mix of sites in the period.

We continued to develop out our legacy sites at
Harold Wood, Essex and Horsted Park, Kent in
the period, delivering 127 homes from the two sites
combined with a further 505 homes planned
between now and 2020, which is the expected
completion for those sites. Demand for these
sites remains strong with good transport links
at both locations.

LAND BANK
During the year we acquired 14 Housebuilding
sites with a total of 1,931 plots, taking our
Housebuilding land bank to 19,322 plots at
30 September 2016 (2015: 18,410). We continue
to focus on maintaining balance sheet flexibility,
with only 6,388 plots directly owned (2015: 4,993)
and the remainder either controlled or under
option agreements.

We were successful on a number of planning
applications, with planning gains on 1,289 plots
during the year including 800 plots at one of our
strategically sourced sites in Maidstone, Kent.

In addition to new sites coming through our pool
of option agreements, during the year we bought
out our joint venture partner, Land Securities, at
our Springhead development at Ebbsfleet in Kent.
This gives us control over more than five years’
worth of production at that site. We also continue
to look at land sales where developing the site
is not part of our core offering (for example
commercial developments or where we are a
smaller partner). During 2016 we completed
three significant land sales at Bury St Edmunds
(Suffolk), Bicester Village (Oxfordshire) and
Medipark (Cambridge).

STRATEGY
Our Housebuilding operations develop medium
to larger-scale sites, providing private and affordable
housing on land owned or controlled by the Group.
Operations are focused on the outer London
Boroughs and the South East of England,
predominantly in the London commuter towns.

Within our Housebuilding division, we look to
maintain our industry-leading strategic land bank
with almost 90 per cent of our land strategically
sourced at 30 September 2016. In total we had
19,322 plots within our Housebuilding land bank
(2015: 18,410) of which only 33 per cent was
owned outright with the rest controlled by either
option agreements or conditional contracts.
This provides flexibility, creates value through
embedded discounts to open market value
and enhances the efficiency of the balance sheet,
while still giving us strong visibility of future work.

MARKET
During the year, in the markets in which we
operate, we continued to see strong demand
for new housing outstripping supply, particularly
in the outer London Boroughs and commuter
towns. We saw a dual speed market, segmented
by price band rather than by geographic location,
with product under £600,000 delivering strong
price growth, both as a result of demand for
our product and the support of Help-to-Buy.
Above £600,000, house price inflation was
more muted as trade-up from the second-hand
market became more difficult and affordability
became stretched.

Despite the differentiation in house price inflation,
sales rates were strong throughout the first half
of the year at all price points. This continued into
the second half with no real impact seen from
the changes in Buy-to-Let investor Stamp Duty
in April 2016, given our relatively limited exposure
to that market. The period immediately before
and after the EU Referendum saw a short-term
increase in cancellations impacting our net
reservation rate. This was largely confined to the
London and commuter markets, with little or no
impact in the regions.

OUR HOUSEBUILDING
DIVISION CONTINUED
TO GROW WELL,
UNDERPINNED BY
STRONG CUSTOMER
DEMAND FOR
QUALITY HOMES.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comLAND BANK SOURCE

MARKET VALUE
9%

LEGACY LAND
2%

Total plots
19,322

BEAULIEU, ESSEX
A major new district for Chelmsford.

STRATEGIC LAND
89%

– 700 acres

LAND BANK OWNERSHIP

CONTROLLED
(COND. CONTRACTS)
7%

CONTROLLED
(OPT. AGREEMENTS)
60%

Total plots
19,322

OWNED
33%

OUTLOOK
We started on 15 new Housebuilding sites
(2015: 31) during the period, taking us to 34 active
sites of which 25 had open sales outlets as at
30 September 2016 (2015: 17). This gives us great
visibility over delivery for 2017. We continue to
actively manage the mix of product that we have
on site to make sure it is affordable for local people.
We are currently replanning phases at Beaulieu,
Chelmsford, and Great Kneighton, Cambridge, to
ensure product and price points fit with demand.

We expanded our position in Kent with a larger
office at Sevenoaks for our Southern region. This
business has more than doubled in size over the
past three years with further new sites due to
come on stream during the course of 2017
and 2018.

19.9%

increase in completions
in 2016

– 3,660 new homes and in excess of 118 acres of parks and open spaces

– 24 acres providing employment, leisure, retail and new railway station

– Delivery: 2014 to 2027

Located north west of Chelmsford, Beaulieu is designed to be a major new district for the
city of Chelmsford, comprising approximately 3,660 new homes on the 700-acre site. Beaulieu
has a landscaped master-planned setting that will include a new business park, community centre,
schools, shops, railway station and local road improvements including links to the A12 dual carriageway.

Beaulieu is being undertaken in joint venture with London & Quadrant (“L&Q”), with profits
split between the two parties. During 2016, the joint venture delivered 119 new homes,
as well as starting on site on the neighbourhood centre, due for delivery in 2017.

The initial site was strategically sourced in 1988 and was added to under multiple
option agreements from 2000 to 2007. The Group commenced development of Beaulieu
in November 2014 and sales began in August 2015. The site currently has two open sales
outlets and is on site with three different phases. The tenure mix is 73 per cent private
housing and 27 per cent affordable housing.

COUNTRYSIDE PROPERTIES PLC

STRATEGIC REPORT
OPERATIONAL REVIEW: PARTNERSHIPS

EXCELLENT VISIBILITY
Strong land bank underpins future growth

Our Partnerships model is a resilient, low-risk, low-capital model where
we look to develop regeneration projects in partnerships. Total completions
were up 10 per cent at 1,874 homes (2015: 1,711 homes).

14,504

plots in land bank or at
preferred bidder status

40%

historical win rate for bids
in which we participate

SIGNIFICANT VISIBILITY OVER PRODUCTION
– Current land bank of 7,881 plots

– Further 6,623 plots awarded as preferred bidder

– More than seven years at current production

– Low planning risk

ESTABLISHED PLATFORM FOR GROWTH
– Selling from 18 open sales outlets at 30 September 2016

– Further 20 sites under construction

– 6,434 additional plots awarded in FY16

STRONG PIPELINE OF FUTURE WORK
– Further 33,515 plots identified as bid opportunities

– Historical win rate of 40 per cent

– Significant market opportunity

9
9
4
3

1
5
8
2

6
5
5

6
9
3

5
1

6
1

5
1

6
1

ADJUSTED REVENUE
£m

ADJUSTED
OPERATING PROFIT £m

£349.9m
+22.7%

£55.6m
+40.4%

6
5
0
1

9
5
4

5
1

6
1

7
0
7

4
9
6

5
1

6
1

TANGIBLE NET
ASSET VALUE £m

RETURN ON
CAPITAL EMPLOYED %

£105.6m
+130.1%

70.7%
+130bps

OPERATIONAL REVIEW: PARTNERSHIPS
CONTINUED

In our Northern business, the supply of public
sector land remains solid with a strong pipeline
of opportunities for mixed-tenure developments,
particularly those that incorporate PRS homes.

As with our Housebuilding division, demand
for private for sale homes was robust across all
geographies and reservation rates were strong
throughout the year, aside from a temporary
increase in cancellation rates in the South during
the period immediately before and after the EU
Referendum. Our Northern business did not
experience any EU Referendum-related
cancellations. Similarly, we saw particular strength
in the price bands below £600,000 in the South,
which represents nearly all our product in our
Partnerships division, and below £300,000 in the
North West of England.

OUR PERFORMANCE
Our Partnerships business delivered an excellent
performance during 2016, setting the pace for delivery
in 2017. Total completions were up 10 per cent
to 1,874 units (2015: 1,711 units) driven by
significant growth in affordable completions up
17 per cent, as expected, with the private element
of delivery on those sites planned for 2017.
A large element of the growth in affordable
completions came from our Northern business
where we continue to develop our partnership
with Sigma Capital Group for PRS homes. During
the year we delivered 725 PRS homes for Sigma
with a further 975 identified plots within our
land bank. The delivery of PRS homes, alongside
private for sale homes, continued to be successful
during the year. We adopted a similar tenure-blind
approach to elsewhere in the business, including

9.5%

increase in completions

at Norris Green Village (Liverpool) where we
delivered 135 PRS units in 2016 alongside the sale
of 35 private homes.

Total private completions of 628 units were broadly
flat on the prior year (2015: 634) with a strong
increase in private ASP of 27 per cent to £307,000
(2015: £242,000). This large increase was as a
result of house price inflation, with the majority
of product sitting in the sub £600,000 price bracket,
the regeneration effect, along with a change in
mix of sites with more in outer London Boroughs
than satellite towns. Major schemes in the year
included Acton (Ealing), St. Paul’s Square (Bow)
and Brook Valley Gardens (Barnet), with Acton
and St. Paul’s Square also expected to be a
significant part of 2017 delivery, particularly
for the private units.

BROOK VALLEY
GARDENS
First class for
family living

– Five phases

– 600 new homes

– Delivery: 2013 to 2025

STRATEGY
Our Partnerships division specialises in medium
to large-scale urban regeneration of public sector
land delivering private and affordable homes.
It operates primarily in and around London and
in the North West of England, with a new office
opened in Wolverhampton in 2016 to service
the West Midlands conurbations from 2017.

Our Partnerships model is a resilient, low-risk,
low-capital model where we look to develop
regeneration projects in partnerships, predominantly
with public sector landowners, such as local
authorities and housing associations. We have a
track record of delivering more than 45 regeneration
projects over 30 years, making us one of the most
experienced deliverers of regeneration in the UK.
Developments are mixed tenure in nature with a
focus on delivering tenure-blind private,
affordable and Private Rental Sector (“PRS”)
homes in line with the Group’s placemaking
ethos.

The business models in the North and South are
based on the needs of the local areas and therefore
differ in product mix but are based on the same
principles. Our Northern business builds largely
low-rise timber-framed family houses whereas
our Southern business often operates in more
space constrained environments with a mix of
mid-rise apartment blocks and family housing.

MARKET
During the year we saw significant interest in
our regeneration offering, with the need for
more housing in the London regions in particular,
highlighted by a Savills report commissioned by the
UK Government and published in January 2016.
At the time of the publication, the UK Government
announced that it will seek to regenerate some of
England’s most run-down housing estates. It stated
that 50,000 additional new homes are needed in
London alone over each of the next 20 years to
make up for past shortfalls in housing supply and
to meet new demand. To support this, the
formation of a new Estate Regeneration Advisory
Panel and £140m of funding to regenerate these
estates was announced.

WE HAVE HAD AN
OUTSTANDING YEAR
FOR WINNING NEW
WORK IN OUR
PARTNERSHIPS DIVISION
WITH 6,434 PLOTS
AWARDED.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comACTON GARDENS, LONDON
One of the largest regeneration
schemes of its kind.

– Over 2,800 new homes (50 per cent affordable)

– New social and community facilities centred around 55,000 sq ft hub

– Delivery: 2010 to 2026

Located across the railway bridge from Chiswick, the South Acton estate is one of the largest
estates to be regenerated in Britain. At the time we started on site, the estate was riddled
with decaying properties and antisocial behaviour. It neither looked nor felt safe.

We are now six years into a 16-year project with over 500 homes completed or underway.
We are working with the London Borough of Ealing, L&Q and local residents. The project
involves an investment of around £840m over 21 phases of development, with over 500 staff
working on site at any one time. Creative placemaking is at the heart of the project’s design
and delivery.

The masterplan includes plans for over 2,800 homes to replace the pre-existing 1,800 largely
socially rented homes. The scheme has a target of 50 per cent affordable housing, and
tenure-blind design and management.

The community is key to the delivery of the scheme, with residents given a say in how the
masterplan is developed and delivered, along with a number of community initiatives to help
enhance local residents’ lives. To date, 46 projects have been funded through the “community
chest” initiative, where £50,000 per annum is allocated for initiatives such as after school clubs
and IT training. In addition, the project allows for £3.5m of funding for local infrastructure
including schools and healthcare facilities as well as better public spaces, with new public
parks equivalent to two football pitches planned.

During 2016, the joint venture delivered 233 new homes, winning both the Regeneration Award
and a project award at the Housing Design Awards 2016. It is currently active on four different
phases, including the central plaza, which will include a youth centre, a shop and other
community facilities.

LAND BANK
As at 30 September 2016, our Partnerships division
had 7,881 plots within the land bank (2015: 7,803)
with a further 6,623 plots at preferred bidder
status (2015: 2,957). We have had an outstanding
year for winning new work in our Partnerships
division with 6,434 plots awarded as preferred
bidder. These included 2,781 plots at Beam Park
(Dagenham), 1,262 plots at Rochester (Kent),
and 288 plots at Hounslow (London) all for our
Partnerships South business. Our Partnerships
North business also had a strong year for bid
success, albeit sites typically tend to be medium
sized with the award of 284 plots at Western
Avenue (Liverpool) and our first two sites in the
West Midlands totalling 367 plots combined.

In addition to where we have been awarded preferred
bidder status we have identified a further 33,515
plots in our current bid pipeline (2015: 15,487)
providing excellent visibility of future work and
growth opportunity across all our geographies.

OUTLOOK
We continue to see increased growth opportunity
in the Partnerships division. We have maintained our
historic bid win rate at 40 per cent and now have
over seven years of future work secured.
Furthermore the bid pipeline has grown to 33,515
plots. The public sector seeks to regenerate Local
Authority housing estates and brownfield land. We
see continued demand for our homes both from
private for sale, PRS and affordable. This mixed
tenure approach is both accelerating delivery in the
short term and also providing resilience in the
medium term.

LAND BANK PLUS
PREFERRED BIDDER

DEV. AGREEMENTS
5,830 plots

OWNED LAND
2,051 plots

Total plots
14,504

PREFERRED BIDDER
6,623 plots

FUTURE
OPPORTUNITIES

FUTURE BIDS
22,122 plots

BIDS IN PROGRESS
11,393 plots

Total plots
33,515

COUNTRYSIDE PROPERTIES PLC

STRATEGIC REPORT
GROUP CHIEF FINANCIAL OFFICER’S REVIEW

A YEAR OF STRONG
PERFORMANCE

We have delivered a strong set of results since listing, with both
divisions performing well, and we remain firmly on track to deliver
the medium-term targets set out at IPO.

TRADING PERFORMANCE
Total completions were up 12 per cent to 2,657 homes (2015: 2,364 homes)
which, combined with an increase in private average selling price (“ASP”)
of 21 per cent to £465,000 (2015: £385,000), increased adjusted revenue
by 26 per cent to £777.0m (2015: £615.8m). Statutory revenue increased
by 23 per cent to £671.3m (2015: £547.5m). The difference between the
adjusted and reported measures reflects the proportionate consolidation
of the Group’s joint ventures.

Our continued focus on operational efficiency as well as the divisional mix
of the business resulted in an increase in adjusted operating margin up 100bps
to 15.8 per cent (2015: 14.8 per cent) and a 34 per cent increase in adjusted
operating profit to £122.5m (2015: £91.2m). Statutory operating profit increased
by 29 per cent to £87.3m (2015: £67.9m). The difference between the adjusted
and reported measures reflects the proportionate consolidation of the Group’s
associate and joint ventures and non-underlying items relating to the Group’s
IPO and legacy management incentive plan, partially offset by the reversal
of a receivable impairment.

Group
Another year of strong growth saw total completions of 2,657 homes
(2015: 2,364 homes), up 12 per cent year on year.

Private unit completions increased by 3 per cent to 1,127 homes
(2015: 1,090 homes). Private ASP increased 21 per cent to £465,000
(2015: £385,000), driven by a greater proportion of our private sales
being in the Housebuilding division. Within the Partnerships division, there
was a higher proportion of private homes delivered in Greater London
compared to the prior year. In both divisions, growth has been strongest
at the lower price points, particularly below £600,000, with house price
inflation on a like-for-like basis steady at 6 per cent (2015: 6 per cent).

Affordable completions were up 22 per cent in the period to 1,415 homes
(2015: 1,161 homes). Within this, Private Rental Sector (“PRS”) sales were
up 60 per cent to 738 homes (2015: 461 homes) due to the increased
number of PRS homes delivered in the North West with our strategic
partner Sigma Capital Group (“Sigma”). Design and Build completions were
broadly flat at 115 homes (2015: 113 homes).

As a result, total adjusted revenue increased by 26 per cent to £777.0m
(2015: £615.8m). On a reported basis, revenue increased by 23 per cent
to £671.3m (2015: £547.5m).

Private forward sales were up 64 per cent to a record £225.4m (2015: £137.5m),
reflecting robust trading through the summer months and the continued
strength of the market at price points below £600,000.

countryside-properties.com26.8%

return on capital employed,
up 210bps

£537.4m

tangible net asset value,
up 63 per cent

(2)%

gearing at
30 September 2016

Our reservation rate per open sales outlet remained steady at 0.78 (2015:
0.76) with the uplift in revenue driven by the increased number of sales outlets
at 43 (2015: 29). The introduction of 40 per cent Help-to-Buy in London from
February 2016 helped sustain reservation rates and whilst we saw a short-term
increase in cancellations following the EU Referendum in June 2016, our net
reservation rate returned to normal levels after a few weeks and, with
cancelled reservations resold, this has had no impact on results for the year.

Adjusted gross margin (including the Group’s share of associate and joint venture
gross profit) increased by 30bps to 21.9 per cent (2015: 21.6 per cent), in
particular supported by regeneration schemes in the outer London Boroughs.
This, together with tight cost control as the business grew, resulted in an uplift
in adjusted operating margin of 100bps to 15.8 per cent (2015: 14.8 per cent).

The significant investment made in new offices and increased headcount in
previous years has now slowed and should aid future operating margin accretion.

Adjusted operating profit increased by 34 per cent to £122.5m (2015: £91.2m),
as a result of the increased scale of the business and margin accretion discussed
above. Within this, land sales contributed £10.6m (2015: £0.2m), including a
number of overage receipts with a further £5.9m (2015: £11.3m) delivered
through commercial sales.

On a reported basis, operating profit increased by 29 per cent to £87.3m
(2015: £67.9m) with the difference to adjusted profit being the impact
of significant growth at key sites, including Acton Gardens, London, and
Beaulieu Park, Chelmsford, which took place in joint ventures.

After raising £114m of net primary proceeds in the IPO, we successfully
refinanced the business, signing a £300m revolving credit facility in May 2016
on enhanced terms. We ended the year with net cash of £12.0m (2015: net
debt £59.5m) and expect lower interest costs in 2017.

Housebuilding
Our Housebuilding division continued its growth trajectory as we saw customer
demand maintained throughout the year. Total completions were up 20 per cent
to 783 homes (2015: 653 homes) as we opened additional sales outlets during
the year. As a result, adjusted revenue increased by 29 per cent to £427.1m
(2015: £330.7m).

Private completions increased by nine per cent on 2015 to 499 (2015: 456),
at an ASP of £665,000 (2015: £583,000). We continued to see strength in
the market at prices below £600,000 with Help-to-Buy supporting the market
at this level. At higher prices, particularly over £1m, the market has been more
challenging, although sales volumes in this price band were ahead of 2015.

Affordable revenue increased by 68 per cent to £44.6m (2015: £26.5m),
with completions of 284 (2015: 192) and an increase in ASP up 13 per cent
to £157,000 from £139,000.

Housebuilding adjusted gross margin reduced by 90bps to 22.4 per cent
(2015: 23.3 per cent) as we incurred additional costs at our joint venture
with Annington Developments Limited at Mill Hill, London, following the
insolvency of a principal sub-contractor. We were able to offset this
reduction by tight control of overheads, resulting in adjusted operating
margin remaining steady at 15.6 per cent (2015: 15.6 per cent).

With growth in sales, we delivered a 30 per cent uplift in adjusted operating
profit to £66.8m (2015: £51.6m). Housebuilding represented 55 per cent
of Group adjusted operating profit in 2016 (2015: 57 per cent).

In the second half of the year, we completed the buyout of our joint venture
partner, Land Securities, at our development in Springhead, Kent, giving us greater
flexibility to develop the site. To date we have developed almost 300 homes
at the site with plans for a further 500 homes.

On a reported basis, Housebuilding revenue increased by 28 per cent to £358.1m
(2015: £278.7m) with growth coming from the increased number of open sales
outlets and house price growth. Reported Housebuilding operating profit
increased to £48.5m (2015: £38.0m).

Partnerships
Our Partnerships division has had a strong year, with total completions
up 10 per cent to 1,874 homes (2015: 1,711 homes) and adjusted revenue
up 23 per cent to £349.9m (2015: £285.1m). A combination of site mix
and underlying house price inflation in the period resulted in an increase
in private ASP of 27 per cent to £307,000 (2015: £242,000).

Private completions of 628 homes were down one per cent on the prior
period (2015: 634 homes). This reflects the mix of sites in the period and
we would expect the growth rate in private homes to increase in 2017 as
schemes such as St. Paul’s Square, Bow and East City Point, Canning Town
deliver a full year of production. Affordable completions were up substantially
at 1,131 homes (2015: 969 homes). These affordable completions included the
delivery of PRS housing in our ongoing partnership with Sigma in the North
West which contributed 725 completions (2015: 461).

Adjusted gross margin was up 160bps to 21.3 per cent (2015: 19.7 per cent)
due to the impact of site mix together with house price inflation. Adjusted
operating profit of £55.6m was up 40 per cent in the period (2015: £39.6m),
with our operations in the South performing particularly well. The increase
in gross margins, combined with a tight focus on divisional cost control,
resulted in adjusted operating margin increasing by 200bps to 15.9 per cent
(2015: 13.9 per cent). Partnerships represented 45 per cent of Group
adjusted operating profit in 2016 (2015: 43 per cent).

Demand for our product has remained strong, particularly at lower price points
and in London following the introduction of the Government’s 40 per cent
Help-to-Buy scheme from February 2016, which has improved affordability
of housing.

We made good progress in identifying new opportunities to expand our
Partnerships model into the West Midlands, where we will shortly begin
development of our first site of 186 homes at Rowley Regis. We opened
an office in Wolverhampton in the summer and we have continued to
control overheads by utilising resources from our Partnerships business
in the North West to develop these opportunities.

On a reported basis, Partnerships revenue increased by 17 per cent to
£313.2m (2015: £268.7m) with of sales from St. Paul’s Square, Bow and
continued strong performance from other Partnerships sites. Partnerships
reported operating profit increased to £51.3m (2015: £33.8m).

COUNTRYSIDE PROPERTIES PLC

STRATEGIC REPORT
Net finance costs

Year ended 30 September 2016

Bank loans and overdrafts

Interest on mandatory redeemable
preference shares

Fair value losses on financial instruments

Unwind of discount

Amortisation of debt finance costs

Interest receivable

Underlying net finance costs

Impairment of capitalised arrangement fees

Net finance costs

2016
£’000

5,211

2015
£’000

6,312

16,495

40,961

—

4,094

824

(1,458)

25,166

3,177

28,343

406

2,523

1,113

(824)

50,491

—

50,491

Countryside expects net finance costs in 2017 to be lower than 2016,
reflecting lower debt levels and interest rates following the IPO.

Taxation
The income tax charge was £17.3m (2015: £8.2m), with an underlying tax
rate of 21.8 per cent (2015: 24.2 per cent) and, on a reported basis, an
effective tax rate of 22.0 per cent (2015: 29.2 per cent).

The underlying rate has reduced predominantly due to a reduction in disallowable
expenditure during the year, mainly in relation to finance costs connected
to the mandatory redeemable preference shares. The underlying tax rate
reconciles to the reported rate as follows:

Year ended 30 September 2016

Underlying profit before tax,
and tax thereon

Adjustments, and tax thereon, for:

Profit
£’000

Tax
£’000

Rate
%

93,911

20,518

21.8

Advisory fees

Receivable impairment

(10,561)

(852)

2,590

518

Share based payments in respect of the
pre-listing management incentive plan

(1,910)

—

Impairment of capitalised
arrangement fees

(3,177)

(635)

Taxation on associate and joint ventures
included in underlying profit before tax

(2,276)

Profit before tax and tax thereon

78,577

17,273

22.0

In 2017, Countryside expects the underlying tax rate to be broadly in line
with the UK statutory corporation tax rate.

Non-underlying items

Year ended 30 September 2016

Recorded within operating profit:

2016
£’000

2015
£’000

Underlying tax rate

GROUP CHIEF FINANCIAL OFFICER’S REVIEW
CONTINUED

TRADING PERFORMANCE CONTINUED
Non-underlying items
During the year, the Group engaged in corporate activity in relation to the
listing of its ordinary shares on the London Stock Exchange. Advisory costs
of £10.6m (2015: £1.7m) were incurred in relation to this activity. These
costs primarily relate to the fees of professional advisors.

The non-recurring charge of £2.7m in the year to 30 September 2015 related
to the non-cash impairment of a receivable which management believed to be
irrecoverable. Subsequent to the year end, substantially all of this amount was
received in cash by the Group, resulting in a reversal of the impairment
of £2.6m in 2016.

In the year ended 30 September 2013, a management incentive plan (“Plan”)
was approved in which certain senior employees of Countryside Properties
(UK) Limited, a subsidiary company, were invited to acquire shares issued by
OCM Luxembourg Coppice Holdco S.à r.l.. Further shares were issued under
the Plan during the years ended 30 September 2014 and 2015.

£1.9m was charged to the income statement in the year ended
30 September 2016 (2015: £1.3m) in respect of non-cash accounting
charges related to the Plan, including £1.0m (2015: £Nil) which arose as
a result of the IPO.

The Group entered into a new debt facility with four lending banks in May 2016.
As a result of the new facility, the previous facility was repaid in full in May 2016
and the capitalised arrangement fees of £3.2m relating to the previous facility
were expensed within finance costs.

A total tax credit of £1.0m (2015: £1.4m) in relation to all of the above
non-underlying items was included within taxation in the income statement.

Advisory fees

10,561

1,698

Receivable (reversal)/impairment
of impairment

Share based payments in respect of the
pre-listing management incentive plan

Other

Sub-total

Recorded within finance costs:

Impairment of capitalised arrangement fees

Total non-underlying items

(2,590)

2,677

1,910

—

9,881

3,177

13,058

1,310

870

6,555

—

6,555

Net finance costs
Net finance costs were £28.3m (2015: £50.5m). £16.5m (2015: £41.0m) of
finance costs in relation to mandatory redeemable preference shares issued
to the Group’s previous owner were incurred prior to the Group’s IPO in
February 2016. On IPO, these preference shares and all accrued interest
were repaid in full.

Interest on bank debt decreased by £1.1m to £5.2m (2015: £6.3m), reflecting
both lower levels of debt during the year following the receipt of £114.0m of
net primary proceeds on IPO and lower borrowing costs in the Group’s new
debt facility. The interest cost associated with the new facility will be lower
than under the previous facility, reflecting the Group’s new status as a listed
entity and lower market rates. The interest rate on the Group’s debt is variable,
based on LIBOR and the Group’s gearing ratio as measured quarterly.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comEarnings per share (“EPS”)
Adjusted basic earnings per share increased by 196 per cent to 16.3 pence
(2015: 5.5 pence) reflecting the increase in underlying operating profit during
the year, together with a decrease in the underlying tax rate.

As a result of the capital restructuring performed in February 2016 at
the time of the IPO, the number of shares in issue is 450 million. For the
purposes of the EPS calculation, the number of shares in issue in 2015 is
assumed to be 450 million (for further details refer to Note 10 to the
financial statements). For the purposes of the EPS calculation, the number of
shares in issue in 2015 is assumed to be 450 million.

The weighted average number of shares in issue was 450 million
(2015: 450 million).

Basic earnings per share was 13.6 pence (2015: 4.4 pence). Basic earnings
per share is lower than underlying basic earnings per share due to the effect
of non-underlying items that are excluded from adjusted results.

Dividend
The Board has recommended a final dividend of 3.4 pence per share (2015: Nil),
representing a payout of 30 per cent of adjusted profit after tax for the second
half of the financial year. This will be paid on 3 February 2017 to shareholders
on the Register of Members at the close of business on 13 January 2017,
subject to approval by shareholders at the AGM.

The proposed final dividend was recommended by the Board on
28 November 2016 and, as such, has not been included as a liability
as at 30 September 2016.

In 2017, Countryside intends that the dividend will represent 30 per cent
of adjusted profit after tax.

Statement of Financial Position
As at 30 September 2016, TNAV was £537.4m (2015: £329.0m), an increase
of £208.4m, which was mainly attributable to the receipt of primary proceeds
on IPO and retained earnings.

As we continued to grow the business, inventory grew by £144.1m to
£583.6m (2015: £439.5m) and we were active on 72 sites at 30 September 2016
(2015: 68 sites). Investments in associate and joint ventures also grew to
£59.1m (2015: £54.3m), principally due to activity at Acton Gardens in
West London, Beaulieu in Chelmsford and Five Oaks Lane at Chigwell
in Essex.

Improving returns
By continuing to focus on the efficiency of our build programmes, we maintained
asset turn (defined as adjusted revenue divided by average TNAV excluding
net cash or debt) at 1.7 times for the financial year (2015: 1.7 times). This,
together with the adjusted operating margin improvements, helped our return
on capital employed increase by 210bps to 26.8 per cent (2015: 24.7 per cent),
despite our significantly higher level of investment in sites.

Return on capital employed

Year ended 30 September 2016

2016

2015

Adjusted operating profit (£’000)

122,468

91,166

Average capital employed1 (£’000)

456,988

368,494

Return on capital employed (%)

26.8%

24.7%

52-week ROCE movement to
30 September 2016

210bps

1 Capital employed is defined as TNAV excluding net cash or debt.

Financing
On 11 May 2016, the Group signed a new £300m revolving credit facility
agreement. The agreement has a variable interest rate based on LIBOR and
expires in May 2021, although the Group has the opportunity to extend the
term of the facility by a further two years. As a result of the signing of the
new facility agreement, the unamortised arrangement fee for the previous
facility of £3.2m (2015: £Nil) was expensed to the income statement as a
non-underlying finance cost.

Cash flow

Summary cash flow statement

Year ended 30 September 2016

2016
£’000

2015
£’000

Cash (used in)/generated from operations

(14,892)

29,819

Interest and tax paid

(20,015)

(13,683)

(Increase)/decrease in loans to associate
and joint ventures

Dividends received from joint ventures

Net proceeds from the issue of shares

(30,977)

13,632

125,390

1,480

6,682

206

Repayment of borrowings

(140,006)

(13,000)

Other net cash (outflows)/inflows

(2,006)

1,821

Net (decrease)/increase in cash
and cash equivalents

(68,874)

13,325

As we have continued to grow the Group, our net investment in working
capital increased by £107m (2015: £39m) which, when offset by retained
earnings and other non-cash items, resulted in £14.9m of cash being used
by the Group’s operations.

£114m of net primary proceeds were raised in the IPO in February 2016.
These proceeds were used to repay the Group’s debt facility and to accelerate
a number of developments, including our joint ventures at Acton Gardens,
West London, and Beaulieu, Chelmsford.

Rebecca Worthington
Group Chief Financial Officer
28 November 2016

COUNTRYSIDE PROPERTIES PLC

STRATEGIC REPORT
OUR PEOPLE

PUTTING PEOPLE AT THE
HEART OF OUR BUSINESS

Our people are our greatest resource and without them we
would not be able to build sustainable communities where
people want to live.

PEOPLE ARE OUR
GREATEST RESOURCE
Countryside wants to attract and retain the
best people in the housebuilding sector to deliver
our strategy. We believe that our people truly
differentiate us from our competitors. In the last
two years, we have nearly doubled our employee
numbers and now have over 1,000 people working
for us. Our employee turnover of 17.5 per cent
is in line with the rest of the construction sector.
Our aim is to “grow our own” as much as we can,
together with a healthy balance of new recruits.

OUR PEOPLE ARE HIGHLY ENGAGED
In 2016 we ran the Group’s inaugural all-employee
survey, and over 80 per cent of our people
responded. Our overall engagement score of
81 per cent positions us in the upper quartile
for UK employers as a whole. From this, we
believe that our people feel valued, well led
and excited about the future.

UPPER QUARTILE
EMPLOYEE ENGAGEMENT

Employee
engagement
81%

INAUGURAL ALL-EMPLOYEE
SURVEY RESULTS

Feel that trust and values are considered important

Feel that personal growth and development are valued

Are satisfied with manager effectiveness

Feel their safety is valued

85%

71%

75%

89%

In order to take action as a result of the survey,
we will be tackling three main areas:

– encouraging a more flexible approach to

working hours;

– promoting inter-departmental teamwork; and

– putting greater emphasis on reward

for performance.

COUNTRYSIDE PROPERTIES PLC

PRIDE IN THE
JOB AWARDS
The National House Building
Council (“NHBC”) awarded a
Pride in the Job Seal of Excellence
Award to Thomas Moore, our
Senior Site Manager at Abode in
Cambridge. Thomas also received
an NHBC Health & Safety Award.

Dave Parry, Mick Montgomery,
Charlie Barbara and David Taylor,
together with their respective
teams, also received a Pride in the
Job Award for their outstanding
quality of workmanship.

countryside-properties.comWE WANT OUR PEOPLE TO
CHOOSE THE RIGHT BENEFITS
FOR THEM AND THEIR FAMILIES
At Countryside we are committed to providing
an inclusive working environment where
everyone feels valued and respected.

Recognising the diversity of our employee base,
our approach to reward is centred on choice.
Over four in ten of our people selected at least
one flexible benefit this year. These benefits range
from buying and/or selling days of annual leave,
through reduced fees on life, dental and travel
insurance, to participation in the Government’s
Cycle to Work scheme.

For those of our employees who qualify for a
car or cash allowance, we have a sector-leading
fleet proposition. This focuses on offering our
employees choice based on their lifestyle, while
remaining environmentally conscious by capping
our CO2 emissions.

HUMAN RIGHTS
Our policies and procedures are designed to ensure
we comply with UK law and best practice guidelines,
including areas such as business conduct, equal
opportunities, anti-corruption, whistleblowing
and countering modern slavery and human trafficking.
Our contracts explicitly oblige suppliers to meet
all current employment legislation.

HEALTH AND SAFETY
Countryside conducts its business with due regard
for the health, safety and welfare of its employees,
contractors, clients, visitors and members of the
public. We develop a positive culture towards health
and safety throughout our operations and as a
minimum we observe all the requirements of the
Health and Safety at Work etc. Act, 1974 at all times.

Countryside operates a comprehensive Health
and Safety Management system (fully registered
to OHSAS 18001) and we are committed to
continual improvement through a comprehensive
training programme and by actively encouraging
feedback from all levels of our workforce. Regular
on-site inspections are carried out internally by the
Group’s qualified health and safety professionals.
The day-to-day management of these activities is
overseen by the Group’s Head of Health and Safety.

The Company Secretary is the Executive Committee
member responsible for health and safety
throughout the Group.

7/10

of our people participated in
our SAYE scheme

COUNTRYSIDE PROPERTIES PLC

GENDER DIVERSITY

BOARD OF DIRECTORS

MALE
5

FEMALE
3

Female
37.5%

SENIOR MANAGEMENT

MALE
166

FEMALE
27

Female
14%

TOTAL WORKFORCE

MALE
752

FEMALE
335

Female
31%

WE INVESTED MORE IN OUR PEOPLE
LAST YEAR THAN EVER BEFORE
We have launched a new Group-wide approach
to succession and talent management as part of
our “grow our own” people strategy. We overhauled
our training proposition and significantly improved
the quality and quantity of delivery, particularly
around induction, customer service, sales and
leadership. In the last year alone, over 200 of our
line managers have received refresher training
focusing on recruiting and managing their team’s
performance. We are committed to developing
our people at all levels of the organisation through
both leadership and vocational training. Building
a pipeline of talent is critical to our success.

OUR APPROACH TO FUTURE
TALENT HAS IMPROVED
Our two-year graduate programme is proving
very successful. We again increased our graduate
intake in 2016, and launched a construction
management training programme to meet our
future site management needs. The first entrants
onto this programme will join us early in 2017.

OUR PEOPLE ARE
OUR SHAREHOLDERS
In February 2016, soon after IPO, we launched
our first all-employee share plan which was
significantly oversubscribed. 70 per cent of our
employees signed up to buy shares in the newly
created listed company under the terms of the
scheme described on page 114.

At the same time, we also offered our first
Long Term Incentive Plan to our Director
population as a retention tool for this key
population. With the launch of these two
share plans, we believe we offer a highly
market-competitive reward package.

STRATEGIC REPORT
SUSTAINABILITY REPORT

PLACES PEOPLE LOVE

We are passionate about creating places where people
aspire to live, that deliver enduring value and where people
feel a true sense of belonging.

From the character of the homes we build to the
planning of environments and considerate use of
materials, our creative approach to placemaking
ensures we have a positive impact on all those
who live in and around our developments.
We create places people love.

– Sustainability – to strive for

continual environmental performance
improvement, thereby reducing the
Group’s environmental impacts.

– Community – to promote and build

sustainable communities.

STRATEGY
We contribute to the creation and improvement
of residential communities and workplaces in an
environmentally and socially responsible, sensitive
and sustainable manner. To achieve this the Group’s
corporate policies and values are implemented
throughout the business at all stages of the
development process, ensuring we continue to
manage our sustainability impacts and “future-proof”
our business. Our key policies include:

– climate change;

– environmental;

– health and safety;

– procurement;

– quality management; and

– sustainable development.

To deliver high levels of financial and sustainable
returns for our shareholders, our sustainability
strategy focuses on four key priority objectives:

– Management – to apply sound social,
environmental and quality management
systems across the Group’s operations.

– Social and ethical – to strive for continuous

health and safety improvement and to
promote social and ethical best practice.

Positively, we continue to make good progress
in achieving our sustainability objectives
with an 96 per cent achievement in 2016
(2015: 90 per cent). In addition we made £2.5m
in sustainability-related savings during the reporting
period. Our five-year track record can be found
in the Group’s Sustainability Report 2016
www.countryside-properties.com/about-us/
who-we-are/sustainability.

In addition to the management of material
business risks and uncertainties by the Group
and its divisions, an Environmental Aspects,
Impacts and Legislation Register is maintained
at Group level and is used by the divisions
to inform and manage project risks. Overall
responsibility for risk is managed by the Board
and our Risk Management Committee. Oversight
of more detailed aspects is managed through
the Health and Safety and Environmental and
Quality Committees.

OUR SUSTAINABILITY
This is our 16th year of sustainability reporting
– the longest in our sector. Since 2000 we have
received 360 awards for our design and sustainability
practices, which highlights our approach and
commitment to sustainable development.
Through regenerating existing neighbourhoods
or creating new communities, we are developing
places that are socially inclusive and have lower
environmental impacts than existing areas.

COUNTRYSIDE PROPERTIES PLC

ACTON GARDENS
COMMUNITY CENTRE

96%

of our sustainability objectives
were achieved in 2016

DESIGN
We believe in a design-led approach, creating visually
attractive and innovative homes whilst ensuring
the quality and practicality of the completed
product. The Group is committed to adding value
through placemaking and long-term partnerships.
We continue to hold more Housing Design Awards
than any other developer.

In February 2016 the RICS published professional
guidance on “Placemaking and Value”. The research
found that placemaking does add commercial value.
However, there is considerable disparity in the size
of the premium, of between 5 and 56 per cent.
This also varies between different dwelling types.
Greater premiums are achievable in areas that already
have higher local embedded new-build values.

OUR CREATIVE
APPROACH TO
PLACEMAKING ENSURES
WE HAVE A POSITIVE
IMPACT ON ALL THOSE
WHO LIVE IN AND
AROUND OUR
DEVELOPMENTS.

countryside-properties.comOur values

ASPIRATIONAL
We build homes people aspire to
live in and a company people aspire
to be part of.

SUSTAINABLE
We ensure the long-term future of
our developments, our people and
our Company through our thinking
and approach.

PARTNERING
We collaborate with our partners to
achieve shared goals, mutual success
and places of exceptional quality.

INTEGRITY
We deliver our promises and hold
ourselves to a high standard of
personal conduct.

RESPECTFUL
We respect everyone we work
with, the communities which
we develop and the future we
contribute to building.

EXCELLENCE
We strive for excellence and
continuous improvement in
every endeavour.

COUNTRYSIDE PROPERTIES PLC

The findings reflect the Group’s strategy of
developing in the right locations with design
quality at the heart of our approach. Countryside
was involved in three of the five featured schemes
and each demonstrated strong uplifts in values
compared to other homes in the locality.

To ensure that our business model is fit
for purpose, we hold a range of corporate
memberships and participate in a range of
committees and forums, including, for example:

– Future of London;

– the Home Builders Federation (“HBF”)
and associated working groups; and

– NHBC Expert Panel.

These alliances provide us with the opportunity
to discuss, share and influence best practice in
our industry, with Government, experts and
interested parties.

MANAGEMENT
Management systems
In accordance with our approach to continuous
improvement, the Group is fully accredited to
ISO 9001 (Quality), ISO 14001 (Environmental)
and BS OHSAS 18001 (Health and Safety)
standards – each standard is independently
verified. We are working towards recertification
(November 2016) against the newly revised and
updated ISO 9001 and 14001 standards.

Legal compliance
Since 2004, we have received zero prosecutions
against our environmental and health and
safety practices.

For the 13th consecutive year Countryside’s
Accident Incident Rate (“AIR”) continues to be
lower than the Industry average.

During the reporting period it averaged 305
(2015: 265) reportable incidents per 100,000
employees, compared with the National Incident
Rate of 421 (2015: 412).

Awareness and communication
of sustainability issues
We monitor our progress against four key priority
objectives twice annually, through environmental
representatives in all areas of the business and via
our Environment and Health and Safety Committees,
to ensure they are fit for purpose for the duration
of the business plan.

Our people receive information and guidance about
our policies, processes, procedures and their
responsibilities through monthly staff presentations,
new starter induction days, training courses and
toolbox talks, as well as via our intranet.

ENVIRONMENT
Our approach to environmental sustainability is
informed by our values, compliance requirements
and the needs of our stakeholders. This applies to
all aspects of our business and involves setting key
objectives and measuring performance against
them in order to ensure continual improvement.

Waste
The Group is implementing more stringent practices
and commercially focused systems in order to
recycle more and reduce waste going to landfill.
For the reporting period a 10 per cent reduction,
7.9T/m2 (2015: 8.8T/m2), was achieved.

STRATEGIC REPORT
A cost benefit analysis of the remaining suggestions is being developed. During 2016, a Carbon
Reduction Commitment report was undertaken by Oaktree for the period of its ownership
of the Group.

Water usage
We monitor water usage in the Group’s offices. Our water usage in our offices has decreased to 4,242m3
(2015: 4,779m3). This equates to a reduction of 33.6 per cent per employee.

OUR GREENHOUSE GAS EMISSIONS
During the year we collated our energy usage for the Scope one, two and three activities as illustrated
by the tables below, to demonstrate our GreenHouse Gas (“GHG”) impacts.

Office activities
For the reporting period, we cut our office-based CO2 emissions by 25.3 per cent per employee.

Scope 1

Scope 2

Total GHG

Gas
kWh

Gas
CO2e(kg)

Total
CO2e(kg)
per head*

Electricity
kWh

Electricity
CO2e(kg)

Total
CO2e(kg)
per head*

Total
CO2e(kg)

Total
CO2e(kg)
per head*

940,247

173,005

159

1,290,908

542,457

499

715,462

658

Business travel – Scope 3
Our overall fleet CO2 emissions increased to 1,858 tonnes from 1,485 tonnes in 2015. This equates to
1.71 tonnes of CO2 per person (2015: 1.82), a decrease of six per cent.

kWh

7,555,351

CO2e(kg)

1,858,011

Total CO2e(kg) per head*

1,709

Site activities
This is the first full year that site energy activities have been recorded.

Scope 1

Gas
kWh

Gas
CO2e(kg)

Gas oil
kWh

Gas oil
CO2e(kg)

Total
kWh

Total
CO2e(kg)

Total
CO2e(kg)
per m2

2,193,480

403,965

8,523,068

2,352,426

10,716,548

2,756,391

9.89

Electricity
kWh

1,954,542

Scope 2

Electricity
CO2e(kg)

814,010

Total
CO2e(kg) per m2

2.92

Intensity measure kg CO2e/m2 based on developed area of 278,732m2 in period (GIA).

* Based on 1,087 employees.

Scope 1: These are emissions that arise directly from sources that are owned or controlled

by the Group, for example from fuels used in generators and plants on our sites.

Scope 2: These are the emissions generated by purchased electricity consumed by the Group.

Scope 3: These emissions are a consequence of the activities of the Group but occur from
sources not owned or controlled by the organisation. This includes emissions
associated with business travel.

SUSTAINABILITY REPORT
CONTINUED

ENVIRONMENT CONTINUED
Resource use
At Countryside we want to partner with our supply
chain in an open, co-operative and collaborative
manner. Partners enjoy a number of preferential
terms which also enables us to:

– aid design development and minimise direct

and indirect waste;

– maximise value engineering and minimise

resource use;

– reduce critical path programme; and

– assist in planning of associated health,

safety and sustainability risk assessments.

Ecology
Our commitment to being a placemaker helps
us establish coherent ecological networks that
are more resilient to current and future climate
change pressures. During 2016, 82 per cent
(2015: 51 per cent) of our projects were on
brownfield land, which is a positive improvement
and is indicative of the make-up of our land bank.

To manage local risks, qualified ecologists undertook
full ecological surveys as part of the site evaluation
process on 97.8 per cent (2015: 97.4 per cent)
of our projects. Ecological protection and design
features are incorporated to create quality of
place, and to improve sales values and the
desirability of the homes.

Transport
We encourage the use of sustainable transport
modes by providing an increasing number
of cycling facilities and electric charging points
at our developments. In 2016 95.6 per cent
(2015: 89.7 per cent) of our schemes were
located within 1km of a public transport node
and 83.3 per cent (2015: 82.1 per cent) are
within 500m. Good locations and model choice
are proven to help residents minimise their
environmental footprint.

Energy
The energy efficiency of the homes we have
built – as measured by the Standard Assessment
Procedure (“SAP”) – continues to be above
the national standards at an average rating of
85.45/100 (2015: 84.84/100). The average SAP
rating for new homes in England was 81.5/100.

Non-operational performance
In addition to reducing the impacts of
the communities and homes that we
develop, we continue to improve our
non-operational performance.

The Group complied with the Energy Savings
Opportunity Scheme during this reporting
period. Several opportunities for improvement
have been implemented.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.com
Sustainability highlights

ISO 9001
(quality)

ISO 14001
(environmental)

BS 18001
(health and safety)

7.9t/m2

waste on site
(a reduction of 10 per cent
on 2015)

95.6%

of our sites within 1km
of public transport

prosecutions for health,
safety or environmental
violations

PLACES
PEOPLE
LOVE

85.45%

energy efficiency of our homes
(SAP benchmark: 81.5 per cent)

658CO2e(kg)

carbon per head office employee
(a reduction of 25.3 per cent on 2015)

12.8CO2e(kg)
per m2

carbon intensity on site
(first year measured)

97.8%

of our sites have full
ecological survey

Download our sustainability report
countryside-properties.com/
about-us/who-we-are/
sustainability/

COUNTRYSIDE PROPERTIES PLC

STRATEGIC REPORT
RISK MANAGEMENT

PRINCIPAL RISKS
AND UNCERTAINTIES

Countryside has policies and procedures in place for the timely identification,
assessment and prioritisation of the Group’s material risks and uncertainties.
This section describes how these risks are identified, managed and mitigated
appropriately in order to deliver the Group’s strategic objectives.

HOW WE MANAGE RISK
Risk identification and management is built into every aspect of Countryside’s
daily operations, ranging from the appraisal of new sites, assessment of the
prospects of planning success, building safely and selling effectively to achieve
long-term success through the property market cycle. Risk management is built
into standardised processes for each part of the business at every stage of
the housebuilding process. Financial risk is managed centrally through
maintenance of a strong balance sheet, forward selling new homes and the
careful allocation of funds to the right projects, at the right time and in the
right locations. Risk management also includes the internal controls described
within the Corporate Governance Report on page 48.

The Risk Management Committee normally meets every quarter to review
the Group’s risk register. Given the uncertainty leading up to the outcome
of the EU Referendum on 23 June 2016, on the UK’s continuing membership
of the European Union, additional meetings were held by members of the
Risk Management Committee to agree appropriate mitigating actions should
they be required.

More detail on the Risk Management Committee’s assessment
of the impact of the EU Referendum vote is on the next page.

The Group’s risk register is maintained to record all principal risks and
uncertainties identified in each part of the business and an appropriate
“risk owner” for each risk. The risk owners conduct an analysis of each
risk, according to a defined set of assessment criteria which includes:

BOARD AND AUDIT COMMITTEE RESPONSIBILITY
The Audit Committee reviewed the Group’s risk register and the assessment
of the Group’s principal risks and uncertainties prepared by the Risk Management
Committee at its meetings in February and July 2016. The Audit Committee
also considered the effectiveness of the Group’s systems, and has taken
this into account in preparing the Viability Statement on the next page.

The Audit Committee reported on its findings to the Board at the Board’s
July and September meetings, in order to support it in making its confirmation
that it had carried out a robust assessment of the principal risks. The table
on pages 38 to 39 of the report sets out the Group’s principal risks and
uncertainties, mitigation and any change during the period.

The Board

– determines the Group’s approach to risk, its policies and the procedures

that are put in place to mitigate exposure to risk.

Audit Committee

– has delegated responsibility from the Board to oversee risk management and

internal controls;

– reviews the effectiveness of the Group’s risk management and internal

– How does the risk relate to the Group’s business model and/or strategy?

control procedures; and

– What is the likelihood of the risk occurring?

– What is the potential impact were the risk to occur?

– monitors the effectiveness of the Internal Audit function and

the independence of the external audit.

– Would the consequences be short, medium or long term?

Risk Management Committee

Internal Audit

– What mitigating actions are available and which are cost effective?

– What is the degree of residual risk and is it within the Group’s risk

appetite parameters?

– Has the risk assessment changed and what is expected to change

going forward?

The Risk Management Committee reviews the assessments made,
compares it to the Group’s appetite for each risk, reviews the current
level of preparedness and determines whether further actions or resource
are required. In reviewing and agreeing the mitigating actions, the Risk
Management Committee considers the impact of risks individually and
in combination, in both the short and the longer term.

– is responsible for the effective
maintenance of the Group’s
risk register;

– undertakes independent reviews

of effectiveness of internal
control procedures;

– oversees the management of risk;

– monitors risk mitigation and

controls; and

– monitors the effective

implementation of action plans.

– reports on effectiveness of
management actions; and

– provides assurance to the

Audit Committee.

Executive Management

– is responsible for identification of operational and strategic risks;

– is responsible for ownership and control of specific risks; and

– is responsible for establishing and managing the implementation of

appropriate action plans.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comVIABILITY STATEMENT
The following statement is made in accordance with the UK Corporate
Governance Code (September 2014) (the “Code”) provision C.2.2. After
considering the current position of the Company, the Directors have
assessed the prospects and viability of the Company over a three-year period
to September 2019. In making this statement, the Board has performed
a robust assessment of the principal risks facing the Company, including
those risks that would threaten Countryside’s business model, future
performance, solvency or liquidity. The principal risks facing Countryside
and how the Company addresses such risks are described in the Strategic
Report and the key risks are summarised on pages 38 to 39 (Principal
Risks and Uncertainties).

Although longer-term forecasts are prepared to support the strategic planning
process, the nature of the risks and opportunities faced by the Group limits
the Directors’ ability to reliably predict the longer term. Accordingly, a
three-year horizon is used to allow for a greater degree of certainty in
our assumptions.

The Directors’ assessment includes a financial review, which is derived from
the Group’s annual strategic forecasts and identifies divisional business
performance, expected cash flows, net debt headroom and funding covenant
compliance throughout the three years under review. These forecasts also
incorporate severe but plausible downside case scenarios, illustrating the
potential impact upon viability of one or more of the Group’s principal risks
crystallising during the period, both individually and in combination. As disclosed
in the financial statements, Countryside recently entered into a new debt
facility with its funding banks, which is available throughout the three-year
period under review.

A number of reasonable assumptions are included within these
assessments, including:

– the assumption that funding facilities will continue to be available or renewed

on the same or similar basis throughout the period under review;

– the assumption that, following a material event, the Group would adjust
its strategy accordingly to preserve cash. This would include, inter alia,
suspending the purchase of land, changing the build profile of existing
developments or adjusting Group dividend policy;

– the assumption that counterparties including local authorities and

housing associations honoured the phased viability terms and conditions
contained in a number of the Group’s Partnerships contracts; and

– the assumption that the Group will be able to effectively mitigate risks

through enacted or available actions, as described in the “Principal Risks
and Uncertainties” section of this report.

The sensitivity analysis is performed based on assumptions modelled on
the 2007 to 2009 period, adjusted for changes in Countryside’s business
divisions, during which the housebuilding sector saw significant reductions
in sales rates and average selling prices and illiquidity in the land market
during a prolonged economic recession. It considers all of our principal
risks, although our assumption that we will be able to effectively mitigate
some of our risks leads to a greater emphasis on those risks that are
beyond our control (such as external macroeconomic factors).

Having had due regard to the sensitivity analysis, the Directors have
concluded that we do not face a risk to our viability except in the event
of highly improbable combinations of material events within the
three-year window.

Based on this conclusion, the Directors have a reasonable expectation that
the Company will be able to continue in operation and meet its liabilities as
they fall due over the period of the assessment.

Ian Sutcliffe
Group Chief Executive
28 November 2016

COUNTRYSIDE PROPERTIES PLC

REFERENDUM ON 23 JUNE 2016 ON THE UK’S
CONTINUING MEMBERSHIP OF THE
EUROPEAN UNION
Given the considerable uncertainty in the lead up to the EU Referendum
vote, members of the Risk Management Committee met with the
senior management of all business divisions to ensure that appropriate
mitigation plans were agreed, and ready for implementation if required,
to mitigate the full range of possible Brexit vote outcomes foreseen
by some commentators.

The uncertainty in the market leading up to the EU Referendum
vote lasted for two to three weeks after the vote. This impacted
customer confidence and, while visitor levels and gross reservations
remained largely unchanged, we did experience higher levels of
cancellations and some price renegotiation. However, this period
was relatively short-lived and we have experienced good trading
conditions from August onwards.

The wider economic impacts of the EU Referendum vote may also
be felt by the housebuilding industry in future, such as a slowdown
in economic growth, higher imported material costs and possible
restrictions on foreign labour. However, all of these risks are
monitored and will be mitigated where possible by the Risk
Management and Executive Committees with the appropriate
action being taken in a timely manner.

STRATEGIC REPORT
RISK MANAGEMENT
CONTINUED

PRINCIPAL RISKS AND UNCERTAINTIES FACING THE GROUP
The Group’s principal risks are monitored by the Risk Management Committee, the Audit Committee and the Board.

The table below sets out the Group’s principal risks and uncertainties.

Principal risks

Risk mitigation

Change over year

Adverse macroeconomic conditions

A decline in macroeconomic conditions, or conditions in the
UK residential property market, can reduce the propensity
to buy homes. Higher unemployment and/or interest rates
affect consumer confidence and can reduce demand for new
homes. Constraints on mortgage availability, or higher costs
of mortgage funding, may make it more difficult to sell homes.

Funds are allocated between the Housebuilding and
Partnerships divisions. In Housebuilding, land is purchased
based on planning prospects, forecast demand and market
resilience. In Partnerships, contracts are phased and, where
possible, subject to viability testing. In all cases, forward sales,
cash flow and work in progress are carefully monitored to
give the Group time to react to changing market conditions.

Adverse changes to Government policy and regulation

Adverse changes to Government policy in areas such as tax,
housing and the environment may result in increased costs
and/or delays. The discontinuation of Government-backed
purchase assistance programmes may adversely affect the
Group’s sales.

The potential impact of changes in Government policy and
new laws and regulations are monitored and communicated
throughout the business.

Build cost inflation

Build costs may increase beyond budget due to the
reduced availability of skilled labour, increases in
sub-contractor or material costs, errors, omissions
or unforeseen technical conditions.

Use of standard house types is optimised and designed
to maximise buying power. Use of strategic suppliers to
leverage volume price reductions and minimise unforeseen
disruption. Robust contract terms to control costs.

Programme delay (including rising project complexity)

Poor project forecasting, unforeseen operational delays due
to technical issues, disputes with third party contractors or
suppliers, bad weather or changes in purchaser requirements
may cause delay or potentially termination of a project.

The budgeted programme for each site is approved by
the divisional board before acquisition. Sites are managed
as a portfolio to control overall Group delivery risk.
Weekly monitoring at both divisional and Group level.

Inability to source and develop suitable land

Competition or poor planning may result in a failure to
procure land in the right location, at the right price and
at the right time.

A robust land appraisal process ensures each project is
financially viable and consistent with the Group’s strategy.

Increase

No change

Our strategic priorities

1 GROWTH

RETURNS

RESILIENCE

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comPrincipal risks

Poor sales performance

Risk mitigation

Change over year

Poor forecasting of market demand, or inability to react
quickly enough to changes in market demand, in terms of
product, location, time and price will impact the Group’s
competitiveness and reduce sales or sales prices.

Market demand for design, product type and price is assessed
for each potential site prior to acquisition. Forward sales are
monitored closely to react to changing market conditions.

Product quality declines

Failure to deliver high quality product and customer service
may reduce sales, adversely affect the Group’s brand and
reputation and potentially lead to third party liabilities.

Standard house types and strategic suppliers are used to
maximise maintenance of Group standards. Regular quality
reviews are performed at each stage of construction.
Customer surveys are conducted on handover of homes
and results are analysed to improve product quality.

Inability to attract and retain talented employees

Inability to attract and retain highly skilled, competent
people at all levels could adversely affect the Group’s
results, prospects and financial condition.

Remuneration packages are regularly benchmarked against
industry standards to ensure competitiveness. Succession
plans are in place for all key roles within the Group. Exit
interviews are used to identify any areas for improvement.

Delays or refusals in planning

Failure to secure timely planning permission on economically
viable terms is critical to the value of the Group’s land bank.

A planning and risk assessment is conducted prior to any
land purchase. Strong relations are maintained with local
communities, the local authority and planning officers to
best understand underlying policy and planning prospects.

Inadequate health, safety and environmental procedures

A deterioration in the Group’s health, safety and
environmental standards could put the Group’s employees
and contractors or the general public at risk of injury or
death and could lead to litigation or penalties or damage
the Group’s reputation.

Procedures, training and reporting are all carefully monitored
to ensure that high standards are maintained. An environmental
risk assessment is carried out prior to any land acquisition.
Appropriate insurance is in place to cover the risks
associated with housebuilding.

No change

COUNTRYSIDE PROPERTIES PLC

STRATEGIC REPORT
CHAIRMAN’S INTRODUCTION TO GOVERNANCE

COMMITTED TO
GOOD GOVERNANCE

On behalf of the Board,
I am very pleased to present
Countryside’s first Corporate
Governance Report since listing
on the London Stock Exchange
on 17 February 2016.

DEAR SHAREHOLDERS,
Countryside is committed to the highest standards
of corporate governance. We believe that strong
governance is a necessary component for delivering
long-term performance to our shareholders. This
report sets out our approach to governance, and
how our governance framework supports our
wider strategy (which is set out in the Strategic
Report on pages 12 and 13).

In 2016 our main areas of focus at Board level were:
to ensure robust systems of corporate governance
for a listed company were in place; to design a detailed
succession plan, with the support of the Nomination
Committee (see page 51); and to run a competitive
tender for external auditors (see page 47).

In accordance with the Code, we have set out
a review of our compliance with the Code in
the Corporate Governance Report (see page 44),
including an overview of the role and responsibilities
of the Board, its Committees and the
Executive Committee.

PRINCIPAL AREAS OF BOARD FOCUS:

November 2015

March 2016

– Approval of 2015 year-end results

February 2016

– Intention to float and pricing

– Housebuilding (Southern) site visits

countryside-properties.com“I am delighted to confirm that no significant issues were raised and the
view of the Board is that the governance structure, together with the Board
and its Committees, all continue to operate effectively, with a positive
and open culture.”

David Howell
Chairman

BOARD AND COMMITTEE EFFECTIVENESS
In 2016 a Board and Committee evaluation was carried out. Given it is
the Group’s first year since listing, the decision was made to conduct an
internal review, led by me and assisted by the Company Secretary. I am
delighted to confirm that no significant issues were raised and the view
of the Board is that the governance structure, together with the Board
and its Committees, all continue to operate effectively, with a positive and
open culture. The review process is described in more detail on page 45.

I am satisfied that the Non-Executive Directors, all of whom are standing
for re-election at the forthcoming Annual General Meeting, continue to be
effective and show a high level of commitment to their roles.

INDEPENDENCE OF DIRECTORS
The Board reviewed the independence of all Non-Executive Directors
(excluding the Chairman) at the Board meeting on 26 July 2016 and
determined that they all continue to be independent, with the exception
of Federico Canciani and James van Steenkiste, who both hold the position
of Managing Director at Oaktree Capital Management L.P., a substantial
shareholder of the Company. The Board is satisfied that I, as Chairman,
was independent upon appointment.

David Howell
Chairman
28 November 2016

COMPLIANCE WITH THE CODE
From the date of admission to the premium list of the London Stock
Exchange (“LSE”), Countryside has complied with all the provisions of
the Code, save that, excluding the independent Non-Executive Chairman,
the Board currently has only three Non-Executive Directors who it considers
to be independent. This constitutes non-compliance with Code provision
B.1.2, which recommends at least half the Board, excluding the Chairman,
comprise Independent Non-Executive Directors. The Board believes that
the current composition of the Board, comprising two Executive Directors
and six Non-Executive Directors, brings to the Board a desirable range
of skills and experience in light of the Company’s challenges and opportunities
following admission to the LSE, while at the same time ensuring that
no individual (or small group of individuals) can dominate the Board’s
decision making.

Oaktree currently have two Non-Executive Directors appointed to
the Board, neither of whom are independent. Oaktree’s right to make
such appointments are set out in the Relationship Agreement, as
described on page 45. As and when Oaktree reduces its shareholding
in Countryside, their right to make appointments shall reduce to one
Director (below 25 per cent shareholding) or no Directors (below
10 per cent). Countryside shall be compliant with provision B.1.2 as
soon as Oaktree has only one Director appointed to the Board.

May 2016

June 2016

July 2016

September 2016

– Review of Group strategy

– Succession planning

– Housebuilding (Millgate) site visits

– Approval of half-year results

– Review of health and safety

– Review of principal risks

– Partnerships (North) site visits

– Selection of external auditors following

– Approval of 2017 budget

competitive tender process

– Review of the impact of

EU Referendum

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE
BOARD OF DIRECTORS

OUR LEADERSHIP TEAM

Countryside operates through its Board of Directors with
day-to-day operation conducted by the Executive Committee.

David Howell
Non-Executive Chairman

Ian Sutcliffe
Group Chief Executive

Rebecca Worthington
Group Chief Financial Officer

Richard Adam
Senior Independent
Non-Executive Director

Appointment date

December 2015

Skills

David Howell joined the Group in
April 2014 as a Non-Executive
Director of Copthorn Holdings
Limited and was appointed
Non-Executive Chairman of that
company in January 2015.

He is a chartered accountant with
extensive experience working across
a number of different industry
sectors as either an executive or
non-executive director. His last
three executive roles were as
Chairman of Western & Oriental plc,
Chief Financial Officer and a member
of the Board of lastminute.com plc
and Group Finance Director of
First Choice Holidays plc. He also
was a Non-Executive Director of
The Berkeley Group Holdings plc
for over ten years where he chaired
the Audit Committee until 2014.

External appointments

November 2015

December 2015

Ian Sutcliffe joined the Group in
October 2013 as Executive Chairman
of Copthorn Holdings Limited and was
appointed Group Chief Executive in
January 2015.

He previously held a number of
senior roles at Shell before being
appointed UK Managing Director
of George Wimpey and subsequently
UK Chief Executive and a Board
member of Taylor Wimpey. He
followed this with a similar role
at SEGRO, before becoming Chief
Executive of Keepmoat Limited.

Rebecca Worthington joined the
Group in August 2015 as Chief
Financial Officer of Copthorn
Holdings Limited.

She qualified as a chartered accountant
with PricewaterhouseCoopers LLP
in 1997. She subsequently worked at
Quintain Estates and Development plc
for 15 years, first as Finance Director
and latterly as Deputy Chief Executive.
Following that she spent two years
as Chief Executive of Lodestone
Capital Limited, a business advising
on operational real estate assets.

Rebecca was a Non-Executive
Director and Chairman of
the Audit Committee of
Aga Rangemaster Group plc
until 23 September 2015.

Ian is a Non-Executive Director of
Ashtead Group plc.

Rebecca is a Non-Executive Director
of Hansteen Holdings plc.

Richard Adam joined the Group in
April 2015 as a Non-Executive Director
of Copthorn Holdings Limited.

He is a chartered accountant with
nearly 30 years of experience as
finance director of private and listed
businesses having gained a wealth
of experience from executive and
non-executive roles spanning the
media, infrastructure, construction
and services sectors. He was
previously Group Finance Director
of Associated British Ports Holdings
plc and a Non-Executive Director
of SSL International plc, where
he also served as Chairman
of the Audit Committee.

Richard is the Group Finance
Director of FTSE 250 support
services business Carillion plc
and a Non-Executive Director and
Chairman of the Audit and Risk
Committee of Countrywide plc.

Committee membership

– Remuneration Committee

– Executive Committee

– Remuneration Committee

– Nomination Committee (Chair)

COUNTRYSIDE PROPERTIES PLC

– Nomination Committee

– Audit Committee (Chair)

countryside-properties.comAmanda Burton
Independent Non-Executive
Director

Federico Canciani
Non-Executive Director

Baroness Morgan of Huyton
Independent Non-Executive
Director

James Van Steenkiste
Non-Executive Director

Appointment date

December 2015

Skills

December 2015

Amanda Burton joined the Group
in October 2014 as a Non-Executive
Director of Copthorn Holdings Limited.

Federico Canciani joined the Group in
April 2013 as a Non-Executive Director
of Copthorn Holdings Limited.

Baroness Morgan joined the Group
in October 2014 as a Non-Executive
Director of Copthorn Holdings Limited.

James Van Steenkiste joined the Group
in April 2013 as a Non-Executive
Director of Copthorn Holdings Limited.

She joined Clifford Chance LLP in 2000
where she left in December 2014 as
their Global Chief Operating Officer.
Prior to this, she was at Meyer
International plc where she was
a Director and Chairman of its Timber
Group. She also served nine years on
the Board at Galliford Try plc as a
Non-Executive Director from 2005
and as Senior Independent Director
from 2008.

His prior experience includes
corporate finance and mergers and
acquisitions with Goldman Sachs
International in London and private
equity positions with Nomura
Principle Finance Group and
Terra Firma Capital Partners Limited.
He received a Laurea Degree in
Business Administration from the
Universitá Commerciale Luigi
Bocconi in Milan, Italy, in 1999.

She had a long and successful career
in central Government, serving as
Director of Government Relations
at 10 Downing Street from 2001 to
2005. Prior to this, she was Political
Secretary to the Prime Minister from
1997 to 2001 and was appointed
Minister for Women and Equalities
in 2001. She was made a life peer
in the same year. She previously
served as a Board member for
the Olympic Delivery Authority,
as Chairman of Ofsted and as a
member of the advisory committee
of Virgin Group Holdings Limited.

He has previously worked for
UBS Warburg LLC as an investment
banking analyst, gaining experience
in financings, restructurings, leveraged
buy-outs, recapitalisations and mergers
and acquisitions. He has also worked
at Donaldson, Luftkin & Jenrette
as an investment banking analyst.
He received a BBA degree from the
School of Business Administration
at the University of Michigan.

External appointments

Amanda is a Non-Executive Director
of Monitise plc, HSS Hire Group plc
and Skipton Building Society and
Chairman and Trustee of Battersea
Dogs and Cats Home.

Committee membership

Federico is a Managing Director of
Oaktree, having joined the firm in 2006
from Matlin Patterson Advisors
(Europe) LLP. He is a Director
of Breeze Midco (TNC) Limited
and Breeze Bidco (TNC) Limited.

Baroness Morgan is a Non-Executive
Director of Dixons Carphone plc, an
advisor to the board of the children’s
charity ARK, Vice Chairman of King’s
College, London, and a trustee of a
number of charities.

James is a Managing Director of
Oaktree, having joined the firm in
2002. He is a Non-executive Director
of Bavaria Yachtbau, Pegasus Life
Limited, Silver Holdings AS, Saloro SL
and Accord Bidco Limited.

– Remuneration Committee (Chair)

– Nomination Committee

– Remuneration Committee

– Nomination Committee

– Audit Committee

– Nomination Committee

– Audit Committee

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE
CORPORATE GOVERNANCE REPORT

BOARD ROLE AND COMPOSITION

The Board is ultimately accountable and responsible
for the performance and affairs of the Company.
The Board is responsible for reviewing and guiding
corporate strategy, the establishment of key policies
and objectives, understanding the key risks faced by
the Company and determining the risk tolerance
of the Company and the processes in operation to
mitigate these. The Board has overall responsibility
for the management of the Company in order to
maximise shareholder value. In discharging its
responsibilities, the Board is supported by its
management together with specialist Committees.
In compliance with the Code, the Board has
established three committees: an Audit Committee,
a Nomination Committee and a Remuneration
Committee. The terms of reference for each
Committee were last approved by the Board
on 25 October 2016.

Each Committee works from terms of
reference which are reviewed annually and
are available on the Company’s website:
investors.countryside-properties.com

These Committees have appropriately skilled
members, senior management participation
and access to specialist advice when considered
necessary. The minutes of the Audit, Nomination
and Remuneration Committee meetings are sent
to all Directors and oral updates are given at
Board meetings. The Audit Committee Report
(which includes an overview of the Company’s
control and risk management framework) can be
found on pages 47 to 50. Page 51 describes the
remit and activities of the Nomination Committee.
The activities of the Remuneration Committee
are described in the Directors’ Remuneration
Report on page 52.

The Executive Committee comprises Ian Sutcliffe
as Group Chief Executive, Rebecca Worthington
as Group Chief Financial Officer, Richard Cherry
as CEO of the Partnerships division, Graham
Cherry as CEO of the Housebuilding division and
David Simpson as Managing Director of Millgate.
This Committee has over 100 years of combined
housebuilding experience, giving it in-depth
knowledge of the issues to consider when
making decisions regarding operational and
investment matters.

COUNTRYSIDE PROPERTIES PLC

COMPOSITION OF THE BOARD

Split of Directors

Length of tenure at date of this report

Non-Executive Directors
6

Executive Directors
2

1-2 years

2-3 years

>3 years

Board
members

THE ROLE AND RESPONSIBILITIES OF THE BOARD AND ITS COMMITTEES

All Committees will meet not less than twice a year.

The Board
Board responsibilities and activity, reported on page 45

Audit
Committee

Nomination
Committee

Remuneration
Committee

Role and responsibilities
– Monitoring the integrity of

the Group’s financial statements

– Reviewing significant accounting

and reporting judgements

– Reviewing the effectiveness
of the internal audit and
external audit process

Role and responsibilities
– Determining the structure, size
and composition of the Board

– Making recommendations in
relation to the re-election of
Directors retiring by rotation

– Conducting performance
evaluations of Directors

– Reviewing the Group’s

– Succession planning

procedures for detecting and
preventing fraud, bribery and
the governance of anti-money
laundering systems and controls

Report on page 47

Report on page 51

Role and responsibilities
– Recommending to the Board
the Company’s policy on
executive remuneration

– Setting overarching principles,
parameters and governance
framework of the Group’s
remuneration policy

– Determining the individual
remuneration and benefits
package of each of the
Company’s Executive Directors
and its Company Secretary

Report on page 52

Executive Committee
See Countryside website: www.countryside-properties.com

Risk Management
Committee

Health and Safety
Committee

Environment
Committee

Role and responsibilities
– Determining the policy,

objectives and targets for
the Group’s health and safety
compliance and performance

– Ensuring adequate training
and communication to
achieve the Group’s health
and safety objectives

Role and responsibilities
– Determining the policy,

objectives and targets for
the Group’s environmental
compliance and performance

– Ensuring adequate training
and communication to
achieve the Group’s
environmental objectives

Role and responsibilities
– Monitoring and assessing the
effectiveness of the Group’s
risk and control processes

– Co-ordinating the
implementation by
management of Group
policies on risk and control

– Overseeing the administration
of the Group’s insurance
arrangements, providing
assurance to the Audit
Committee that such
monitoring and assessment of
the Group’s internal control
systems is being undertaken

countryside-properties.comREVIEW OF BOARD EFFECTIVENESS
The 2016 Board and Committee evaluation process
started with a written questionnaire for all Directors,
followed by individual interviews during which Board
members were invited to evaluate and comment on
the operation of the Board and its Committees.
The Chairman and the Company Secretary met
to discuss the results of the process and a report
was submitted to the Board setting out the
principal issues raised and suggesting appropriate
action points. The principal issues raised in the
2016 performance evaluation were discussed at
the September 2016 Board meeting. Based on
the feedback received, the Board concluded that
the Board and its Committees continue to operate
effectively. A list of specific actions was agreed to
address the comments made by Directors, including
the continued development of the Non-Executive
Directors’ detailed knowledge of the businesses
operated by the Group through a programme of
regular business reviews. During the 2016 evaluation
process, the Non-Executive Directors (in the absence
of the Chairman) met with Richard Adam, as Senior
Independent Non-Executive Director, to review
the performance of David Howell during 2016.
Richard Adam later debriefed the Chairman. All
Non-Executive Directors and the Chairman then
met to evaluate the performance of the Group
Chief Executive, Ian Sutcliffe. Finally, the Group
Chief Executive joined the meeting to brief the
Board on the performance of the Group Chief
Financial Officer, Rebecca Worthington. The
performance of the Non-Executive Directors during
2016 was reviewed by David Howell, taking into
account the views of the other Directors.

ADDITIONAL INFORMATION
Information on the impact on the Company as
required by the Takeover Directive, and information
required under the Disclosure and Transparency
Rules, is given in the Directors’ Report (see pages
70 to 72) and forms part of this Corporate
Governance Report.

THE BOARD
Board composition
The Board consists of eight Directors, comprising
a Non-Executive Chairman, two Executive Directors
and five further Non-Executive Directors.
Richard Adam is the Senior Independent Director.
David Howell, our Chairman, and Richard Adam
are available to shareholders who have concerns
that cannot be addressed through the normal
channels. For further information about
communication between the Board and shareholders,
please refer to communication with shareholders
on page 46. The Board has recruited Non-Executive
Directors of a high calibre with broad commercial
and other relevant experience. Non-Executive
Directors are expected to bring objectivity and
independence of view to the Board’s discussions,

BOARD AND COMMITTEE ATTENDANCE
The number of Board and Committee meetings attended by each Director during the 2016
financial year is as follows:

Number of meetings held1

David Howell

Ian Sutcliffe

Rebecca Worthington

Richard Adam

Amanda Burton

Federico Canciani

Baroness Morgan

Board

15/15 ²

16/16

15/16 ³

15/15 ²

James Van Steenkiste

11/15 4

Audit
Committee

Remuneration
Committee

Nomination
Committee

Overall
attendance

—

4/4

—

4/4

—

6/6

—

6/6

—

6/6

—

3/3

—

2/25

3/3

—

100%

94%

100%

73%

1. The number of meetings held reflects the Board and Committee meetings of Copthorn Holdings Limited from 1 October 2015
to 17 December 2015 and the Board and Committee meetings of Countryside Properties PLC from 14 December 2015 to
30 September 2016.

2. For the Board meeting of Countryside Properties PLC on 14 December 2015 the only two Directors were Ian Sutcliffe

and Rebecca Worthington.

3. Following her appointment in August 2015, Rebecca Worthington was unable to attend the Board meeting in October 2015

due to a prior business commitment.

4. James Van Steenkiste was unable to attend four meetings due to business commitments.

5. Richard Adam was appointed a member of the Nomination Committee after the meeting on 8 December 2015.

and to help provide the Board with effective
leadership in relation to the Company’s strategy,
performance, management risk and people
management as well as ensuring high standards
of financial probity and corporate governance.
Countryside believes that the Board has the
appropriate balance of skills, experience,
independence and knowledge of the Group to
support the long-term success of the Company.

Relationship Agreement with Oaktree
For so long as Oaktree qualifies as a “controlling
shareholder” according to the Listing Rules (LR
6.1.4D), the Company is required to have in place
a written and legally binding agreement which is
intended to ensure that Oaktree complies with
the independence provisions set out in LR 6.1.4D.
Details of the Relationship Agreement entered
into with Oaktree are set out in the Directors’
Report on page 70.

Full details of the schedule of matters
reserved for decision by the Board
and the responsibilities delegated to the
Board Committees can be found here:
investors.countryside-properties.com

Role and responsibilities of the Board
The Board is collectively responsible to shareholders
for creating and sustaining shareholder value through
the management of the Group’s businesses, and
for the long-term success of the Group. It sets
the Group’s strategic plan and budgets, monitors
their implementation and, with the assistance
of the Audit Committee, ensures that Executive
Management maintains a system of internal
operational, financial and regulatory controls that
identify and manage appropriately the risks set
out on pages 38 to 39.

Summary of matters
reserved for the Board
The Board has a formal schedule of matters reserved
for its decision, which includes the approval of
half-year and full-year financial statements, changes
to the Group’s capital structure and significant
investments, contracts, acquisitions, mergers and
disposals. These reserved matters were last
reviewed by the Board on 25 November 2016.
Other specific responsibilities are delegated to
the Board Committees, which operate within
clearly defined terms of reference.

The roles of the Chairman
and Group Chief Executive
The roles of the Chairman and the Chief Executive
are clearly segregated and the division of responsibilities
between them is set out in writing and was last
agreed by the Board on 25 October 2016.

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE
CORPORATE GOVERNANCE REPORT
CONTINUED

THE BOARD CONTINUED
The roles of the Chairman
and Group Chief Executive continued
The Chairman is responsible for leadership of the
Board, and ensuring its effectiveness by facilitating
debate and the contribution of Non-Executive
Directors. Meeting agendas are set by collaboration
between the Chairman, the Group Chief Executive
and the Company Secretary. The Group Chief
Executive is responsible for running Countryside’s
business and providing strategic leadership to the
Group, in consultation with the Board.

Directors’ induction,
training and development
Countryside has a structured induction
programme for all newly appointed
Non-Executive Directors which includes visits
to the business divisions and their respective
management teams in each of Countryside’s
business sectors and meetings with members
of the Executive Committee. Newly appointed
Directors have access to the Company Secretary’s
assistance both in orientation and guidance around
the Countryside Group, in addition to the exposure
gained at regular Board meetings.

All Directors receive ongoing updates on the
Company’s projects and activities and on legal
and regulatory changes. In 2016 this included
briefings on the requirements (and implementation)
of the Modern Slavery Act, the Market Abuse
Regime and compliance obligations of a listed
company, and monitoring the Company’s
risk management framework.

Details of proxy voting by shareholders,
including votes withheld, will be made
available on request and will be placed on
the Company’s website following the AGM.
www.countryside-properties.com

Formal papers are circulated to the Directors
before each Board meeting, which enable them
to make an informed decision on the issues under
consideration. In addition to formal Board meetings,
during 2016 the Chairman maintained regular
contact with the Group Chief Executive, the
Group Chief Financial Officer and other members
of Executive Committee to discuss specific issues.
The Company Secretary acts as an advisor to the
Board on matters concerning governance and
ensures compliance with Board procedures. All
Directors had access to the Company Secretary’s
advice and during 2016 this was sought from
time to time. Directors may also take independent
professional advice at the Company’s expense.
In the event that any Director has concerns about
the running of the Company, or a proposed action,
which cannot be resolved within the Board forum,

COUNTRYSIDE PROPERTIES PLC

such concerns may be reflected in the Board minutes.
Minutes of each Board meeting are circulated by
the Company Secretary following the meeting
to allow such comments to be raised.

Communications with shareholders
The Board places importance on communication
with shareholders and gives them the opportunity
to meet the Chairman and Directors as appropriate.
Shareholders will continue to be given the
opportunity to meet the Chairman and Directors
in the coming 12 months. Arrangements can be
made for major shareholders to meet with any
newly appointed Directors. The Company’s
investor relations team organises an ongoing
programme of dialogue and meetings between
the Group Chief Executive and the Group
Chief Financial Officer and institutional investors,
fund managers and analysts. Brokers’ reports
and investors’ feedback are circulated regularly
to the Board, which discusses these and any other
key matters relating to investors. In each case the
Board, in conjunction with advisors where
appropriate, determines the strategy to
address significant issues raised.

The Company’s Annual General Meeting
(“AGM”) on 26 January 2017 will provide a valuable
opportunity for the Board to communicate with
private investors. We encourage shareholders to
attend the meeting and to ask questions of any
of the Directors following the conclusion of the
formal part of the meeting.

Directors’ interests
Under Countryside’s Articles of Association, the
Board may authorise any actual or potential conflicts
of interest for Directors. Each Director provides
the Company Secretary with information regarding
any actual or potential interests that may conflict
with those of Countryside, such as other
directorships, and any other potential interests
that each thinks may cause a conflict requiring
prior Board authorisation on an annual basis.
If the circumstances of any of these disclosed
interests change, the relevant Director is required
to update the Company Secretary promptly.
The register setting out each Director’s current
disclosures (where relevant) was last reviewed
and approved by the Board at its meeting on
25 October 2016. In each such situation, the
Director under consideration did not vote on
the matter. The Board will continue to review
the register of interests regularly to ensure the
authorisations, and any conditions attached to
them, are appropriate for the relevant matter
to remain authorised. The Company Secretary
maintains a list of all authorisations granted to
Directors, setting out the date of authorisation
and its expiry, scope and any limitations imposed
(as applicable).

Tenure, election and
re‑appointment of Directors
All Non-Executive Directors, including the
Chairman, have three-year appointments from
17 December 2015. All Non-Executive Director
appointments may be terminated by either party
upon three months’ (or in the case of David Howell,
six months’) written notice, or by shareholder
vote at an AGM. The Non-Executive Directors
do not have any entitlement to compensation
if their office is terminated. Full details of the
remuneration of the Non-Executive Directors can
be found on page 63 of the Remuneration Report.
Under the Articles of Association, all Directors
are subject to re-election at the AGM at intervals
of no more than three years. At its meeting on
25 October 2016, the Board agreed that all
Directors will be put forward for election at
the 2017 AGM. The Board believes that each
of the Directors makes a valuable contribution
to Countryside and supports their election
in each case.

INVESTOR
ENGAGEMENT TIMELINE
The investor relations team, at the direction
of the Board, has primary responsibility for
managing the day-to-day communications
with our investors and market analysts. This
year, the team has supported the Chairman,
the Group Chief Executive, the Group Chief
Financial Officer and other members of the
Board and senior management to conduct
a series of shareholder briefings as follows:

– October 2015–January 2016: various

pre-IPO education meetings and site visits
to Acton, London;

– 26 January 2016–11 February 2016: the

IPO management roadshow;

– May 2016: the half-year results roadshow;

– 10 June 2016: the City analyst education

presentation;

– June 2016: presentation at Peel Hunt’s
“Building, Infrastructure and Support
Services Conference”;

– 6 September 2016: Numis hosted

investors’ lunch; and

– 13 September 2016: participation at
JP Morgan’s small/mid cap conference.

Various other individual meetings and site
visits with investors were hosted by various
Directors and senior managers.

countryside-properties.comREPORT OF THE AUDIT COMMITTEE

REPORT OF THE
AUDIT COMMITTEE

DEAR SHAREHOLDERS,
I am pleased to present Countryside’s first report since
flotation in February 2016 as Chairman of the Audit Committee.
The Audit Committee’s role is to protect the interests of
shareholders by ensuring sound control of the Group, the
integrity of published financial information and an effective
audit process.

As required by the Code, and to ensure the Company receives
the best audit service, we ran a competitive tender for the
external audit during the year. The Audit Committee reviewed
three high quality proposals from Ernst & Young, KPMG
and PwC, deciding ultimately to recommend the
re-appointment of PwC. This decision will be put to
shareholders for approval at the AGM in January 2017.

During 2016 the Audit Committee focused on the financial
policies and procedures of the Group prior to the IPO. Post
IPO, the Audit Committee continued to focus on areas of key
accounting judgement, particularly the valuation of inventory
and shared equity, the presentation of non-underlying items
and taxation matters and the recognition of gross profit.
We have also worked on the identification and management of
risks for the Group, and the work of the internal and external
auditors in giving assurance over the Group’s internal control
environment. Further details about these activities can be
found in the report overleaf.

Richard Adam
Chairman of the Audit Committee
28 November 2016

A PRINCIPAL ACTIVITY
IN 2016 WAS THE
MANAGEMENT OF THE
COMPETITIVE TENDER
PROCESS FOR THE
GROUP’S EXTERNAL
AUDITORS, THE RESULT
OF WHICH WAS THE
RE-APPOINTMENT
OF PwC.

COUNTRYSIDE PROPERTIES PLC

Committee Chairman
Richard Adam

Other members
Amanda Burton
Sally Morgan

Meetings held

Role and responsibilities
of the Audit Committee:
– Monitoring the integrity of the Group’s financial

statements and formal announcements

– Reviewing significant accounting and

reporting judgements

– Monitoring and reviewing the effectiveness of the

company’s internal audit function

– Making recommendations in relation to the

appointment, re-appointment and removal of
the external auditor

– Monitoring auditor independence

– Developing and implementing policy on the

engagement of the external auditor to supply
non-audit services

– Reviewing the Group’s risk management framework

and key internal controls

– Reviewing the Group’s procedures for detecting and
preventing fraud, bribery and the governance of
anti-money laundering systems and controls

The Committee’s terms of reference are available at:
investors.countryside-properties.com

Areas of focus in 2016
Prior to the Company’s flotation in February 2016, the
Audit Committee’s main focus was in reviewing the Group’s
financial policies and procedures in anticipation of the IPO.
Since then, the additional areas of focus for the Audit
Committee were to review the judgements and estimates
relating to the Group’s half-year results, consider various
accounting and taxation matters, review the forecasts and
sensitivity tests related to the Group’s Viability Statement,
overseeing the tender for the provision of external auditor
services and review the Group’s risk management
framework and key internal controls.

GOVERNANCE
REPORT OF THE AUDIT COMMITTEE
CONTINUED

COMPOSITION
During 2016, the composition of the Audit Committee
complied with the Code and comprised three
Independent Non-Executive Directors: Richard
Adam, Amanda Burton and Sally Morgan. The
Board considers Richard Adam, the Chairman,
to have recent and relevant financial experience
working with financial and accounting matters.
The Audit Committee maintains a formal agenda
for each year to ensure compliance with the
requirements of the Code, and met three times since
17 December 2015 when the Audit Committee
for the Group parent was established in advance
of the listing of Countryside Properties PLC.

Details of attendance at the Audit Committee
meetings during the 2016 financial year are set
out on page 49.

INTERNAL CONTROLS
The Board, assisted by the Audit Committee, is
responsible for regularly reviewing the operation
and effectiveness of the Group’s internal controls.
The internal control system is designed to manage
rather than eliminate the risk of failure to achieve
business objectives and can only provide reasonable,
and not absolute, assurance against material
errors, losses or fraud. The Board is also responsible
for ensuring that appropriate systems are in place
to enable it to identify, assess and manage key
risks. The financial reporting process and control
system (which includes the preparation of the
consolidated financial statements) is monitored
and maintained through the use of internal control
frameworks which address key financial reporting
risks, including risks arising from changes in the
business or accounting standards. Effectiveness is
assessed through self-certification and independent
testing of the controls.

WHISTLEBLOWING
The Group’s whistleblowing policy is supported
by an external helpline. All cases of whistleblowing
are investigated by the Company Secretary and the
results of any investigations are reported to the
Audit Committee. The Committee is satisfied that
the policy and its administration remain effective.

RISK MANAGEMENT
The successful management of risk is critical to
achieve Countryside’s strategic objectives. The
Board has delegated responsibility for reviewing
and maintaining effective risk management systems
and internal controls to the Audit Committee.
Day-to-day management of the Group’s risk
management framework is conducted by the Risk
Management Committee. Its membership and
role are detailed on page 44. The Board reviews
the Group risk register annually, with the last
review occurring on 26 July 2016. In managing
risk we analyse the nature and extent of risks and

COUNTRYSIDE PROPERTIES PLC

consider their likelihood and impact, both on an
inherent and a residual basis, after taking account
of mitigating controls. This allows us to determine
how we should manage each risk in order to
achieve our strategic objectives.

At the quarterly meetings of the Risk Management
Committee, management discusses the key risks
along with the mitigating action plans. Following
sign off by the Executive Committee, the output
of this review is presented to the Audit Committee.
The Group’s key risk management procedures
have been in place throughout 2016 and up to
the date of approval of this Annual Report.

OVERVIEW OF RISK
MANAGEMENT PROCESS
Internal control
The Group’s key internal control procedures
include the following:

– Review of the Group’s strategy and the

performance of principal subsidiaries, through
a comprehensive system of reporting based
on variances to annual budgets, key performance
indicators and regular forecasting.

– A quarterly business review for each business
division. This covers financial performance, a
detailed range of strategic risks, opportunities
and KPI metrics which measure the overall
performance of the business sector. This process
also identifies the key operational issues and
actions required to address any deficiencies.

– Well defined Group policies and processes,
communicated through the Group Financial
Reporting Procedures Manual and the intranet,
and a defined process governing the approval of
sales opportunities and capital expenditure.

– A defined organisational structure with

appropriate delegation of authority across
all levels of the organisation.

– Formal authorisation procedures for all

investments with clear guidelines on appraisal
techniques and success criteria.

– Formal authorisation procedures for all
significant sales opportunities and bid
management, with clear guidelines on success
criteria and contracting practices.

The Audit Committee has, on behalf of the Board,
conducted an annual review of the effectiveness of
the Group’s internal control systems for 2016 and
the period prior to approval of this Annual Report.
The Audit Committee reported its findings to the
Board at the November 2016 Board meeting. It
considered all material controls in accordance with
the Turnbull guidance. Following this review no
significant weaknesses or failings were identified and
noted improvement areas are being addressed by
management. The internal control environment will

continue to be monitored and reviewed by the
Board and the Audit Committee.

FAIR, BALANCED AND
UNDERSTANDABLE
At the request of the Board, the Audit Committee
considered whether the 2016 Annual Report was
fair, balanced and understandable and whether
it provided the necessary information for the
shareholders to assess the Group’s performance,
business model and strategy. The Audit Committee
took into account its own knowledge of the Group,
its strategy and performance in the year and
comprehensive reviews undertaken at different
levels in the Group to ensure consistency and
overall balance. A similar detailed review undertaken
by the senior management and the external
auditors was also taken into account by the
Audit Committee.

Prior to the publication of both the half and
full-year results for the Group, the Audit
Committee undertook a detailed assessment of the
appropriateness of the adoption by the Group of
the going concern basis in the preparation of the
financial statements. For further information in
respect of the going concern, please refer to the
Directors’ Report on page 72.

Shortly before publication of the full-year financial
results for 2016, the Audit Committee undertook
a detailed assessment of the Viability Statement
and recommended to the Board that the Directors
can believe that they have a reasonable expectation
that the Company will be able to continue in
operation and meet its liabilities as they fall due
over the three-year period of their assessment.
For the detailed Viability Statement, please refer to
our risk section on page 37 of the Strategic Report.

INTERNAL AUDIT
The work performed by Deloitte, which performs
the service of the Group’s Internal Audit department,
focuses on areas of greatest risk to the Group,
including those matters identified through the
risk management framework and any significant
change projects occurring within the business. The
objective of Internal Audit is to provide independent
assurance to the Audit Committee over the financial,
operational and compliance controls and to assist
the Audit Committee in its assessment of the
effectiveness of internal controls. Internal Audit
reports directly to the Group Chief Financial Officer,
but has the right to report to the Audit Committee
Chairman independently of the Executive Directors.
All significant Internal Audit reports are reviewed by
the Executive Committee and the Audit Committee
and all reports are made available to the external
auditors. During the year the Audit Committee
approved the internal audit plan, reviewed the
findings from audits and monitored the follow-up
of actions identified in audits.

countryside-properties.comOVERSIGHT OF THE EXTERNAL AUDIT
PricewaterhouseCoopers LLP (“PwC”) has been
the auditor of the Company since its incorporation
in November 2015 and of the Group for more
than 20 years.

The Committee’s oversight of the external auditor
includes reviewing and approving the annual
audit plan. In reviewing the plan, the Committee
discusses and challenges the auditor’s assessment
of materiality and financial reporting risk areas
most likely to give rise to material error.

PwC reported to the Board and confirmed its
independence in accordance with ethical
standards and that it had maintained appropriate
internal safeguards to ensure its independence
and objectivity.

EXTERNAL AUDIT TENDER PROCESS
The Company confirms that it complied with
the provisions of the Competition and Markets
Authority’s Order for the financial year
under review.

In accordance with the requirements of the Audit
Directive (2014/56/EU), the Audit Committee
published a request for proposal to provide external
audit and audit-related services to Countryside
and its Group subsidiaries for the financial year
commencing on 1 October 2016.

The applicant firms participating in the tender
process were required to submit their written
proposals against the following criteria:

– team competence and rapport;

– audit quality;

– transition planning;

– service approach;

– communication; and

– fees.

As Deloitte are engaged to provide internal audit
services, they were excluded from the tender,
with Ernst & Young, KPMG and PwC responding to
the tender request following the public invitation
posted on the Group’s website.

The tender process involved a review of the
Company’s financial data (set up in a data room),
visits to key sites in each business region and meetings
with Executive Committee members, the Chairman,
the Audit Committee Chairman and other senior
management leading the finance, tax, treasury
and legal functions. Each firm presented to a
sub-committee of the Audit Committee consisting
of the Audit Committee Chairman, the Chairman,
the Group CFO and the Group Financial Controller.
The sub-committee also reviewed the written
proposals and feedback from all of the meetings
described above. The sub-committee unanimously

COMMITTEE ATTENDANCE
The number of Audit Committee meetings
attended by each member during the 2016
financial year is as follows:

Audit
Committee

Overall
attendance

Number of
meetings held1

Richard Adam

Amanda Burton

Baroness Morgan

4/4

100%

1. The number of meetings held reflects the Committee meetings
of Copthorn Holdings Limited from 1 October 2015
to 17 December 2015 and the Committee meetings of
Countryside Properties PLC from 17 December 2015
to 30 September 2016.

agreed to recommend the re-appointment of PwC
as the Group’s external auditors for the 2017 audit.

The sub-committee presented their recommendation
to the Audit Committee meeting on 26 July 2016.
Factors which the Audit Committee took into
account when approving the proposal to re-appoint
PwC included that the lead audit partner was very
experienced and had worked with other companies
in the sector, that the lead partner would be new
to the Company following the rotation of the existing
audit partner, and the depth and quality of PwC’s
proposed service, including communication and
audit strategy.

The Board approved this recommendation at its
meeting on 26 July 2016 and a resolution will be
put to the 2017 AGM for approval by shareholders.

NON-AUDIT SERVICES POLICY
The total of non-audit fees paid to PwC during
the year is set out in the table opposite. In order
to maintain its independence and objectivity, PwC
undertook its standard independence procedures
in relation to each of these assignments. The Audit
Committee has received a report at each meeting
describing the extent of such services provided
by PwC.

The award of non-audit services to the Company’s
external auditors is subject to controls agreed by
the Audit Committee to monitor and maintain
the objectivity and independence of the external
auditors. In order to comply with the Ethical Standard
for Auditors, issued by the Financial Reporting
Council on 17 June 2016, the Audit Committee
considered, and approved, a revised policy for auditor
independence and the provision of non-audit
services at its meeting on 4 October 2016. The
policy provides details of permitted, prohibited
and audit-related services in accordance with the
Ethical Standards and requires further Audit

During the year the Group obtained the
following services from the Group’s auditors
as detailed below:

2016
£’000

2015
£’000

Fees payable to the
Group’s auditor and
its associates for the
audit of parent and
consolidated financial
statements

Fees payable to the
Group’s auditor and
its associates for
other services:

– Audit of subsidiary

companies

– Audit of Joint ventures

– Audit related services

– Tax advisory services

– Other advisory

services

– Audit related
assurance and
transaction services in
relation to the IPO

139

126

—

294

229

121

—

1,283

698

1,815

1,413

Committee approval when non-audit fees reach
70 per cent of the anticipated audit fees over the
next three years, although this limit will not formally
apply to the Group until 1 October 2019.

ANNUAL EVALUATION OF AUDIT
COMMITTEE PERFORMANCE
As part of the overall Board evaluation process,
the Audit Committee reviewed its effectiveness
during 2016. This evaluation considered areas such
as its composition, its effectiveness in reviewing the
work of the internal and external auditors and the
Group’s internal control systems, the quality of
reporting and the management of risk. No significant
issues were raised and the Audit Committee
concluded that it continues to operate effectively.

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE
REPORT OF THE AUDIT COMMITTEE
CONTINUED

AREAS OF SIGNIFICANT JUDGEMENT CONSIDERED
BY THE AUDIT COMMITTEE IN 2016
In addition to the IPO and non-underlying items, the Audit Committee considered the following matters in respect of the Group’s financial statements,
based upon its interaction with both management and the external auditors during the year.

SIGNIFICANT MATTERS CONSIDERED

OUR RESPONSE TO THESE MATTERS

Gross profit recognition
As disclosed in Note 1 to the financial statements, gross profit is recognised
as homes are sold based on a profit margin for the development taken
as a whole. Calculating this margin includes forecasting revenue and
costs for the development as well as allocating land and infrastructure
costs on a pro-rata basis.

Profit recognition in relation to commercial land transactions can be
subjective and dependent on contractual terms.

The accuracy of allocation is monitored at Board level via the monthly
management accounts and quarterly forecasts, with any judgements
being discussed with the Audit Committee.

Carrying value of inventory
Inventory is material to the Group’s balance sheet and there is a risk that
the carrying value will exceed its net realisable value, particularly
in challenging market conditions.

Management regularly reviews the carrying value of all sites under development
and other inventory such as undeveloped land. These reviews have
regard to the latest cash flow forecasts for the relevant development or
land parcel and comparable market valuations for land where applicable.

Carrying value of shared equity loans
The Group’s shared equity loan portfolio is held at fair value as an
available for sale financial asset. The fair value is calculated using a
discounted cash flow forecast based on likely future redemptions and
defaults, taking into account future house price inflation and discounted
using an interest rate equivalent to a second charge mortgage.

Management reviews the carrying value regularly and takes into account
third party evidence where available.

Viability Statement testing
The Viability Statement testing performed by management was based
on the latest available three-year forecast. To ensure that the financial
position of the Group was robust, downside sensitivity testing was
performed by applying a range of overlays including reduced sales rates
and average selling prices, a reduction in land sales and reduced affordable
housing sales. We also included operational inefficiency downsides
including delays to the delivery of key sites and enhanced cost inflation.

Each of the above assumptions was based on management’s assumption
of a reasonable downside outcome.

The Audit Committee has reviewed and approved the Group’s accounting
policy in relation to profit recognition.

The external auditors regularly examine the allocation of revenue and costs
as a routine part of the external audit and no significant issues have been
identified in this regard.

The Audit Committee considered management’s review of the carrying
value of inventory and the appropriateness of the level of provisions held.

The external auditors reported on this matter to the Audit Committee
at the half-year review and again for the final audit.

The Audit Committee was satisfied that the carrying value of inventory
is appropriate.

The Audit Committee reviewed the fair value methodology and the assumptions
applied in determining the fair value of the shared equity portfolio and has
agreed that the carrying value is appropriate.

The valuation methodology has also been audited by the external auditors.

The Audit Committee reviewed the assumptions applied by management
in arriving at the conclusion on the Group’s viability and agreed that they
were reasonable.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comREPORT OF THE NOMINATION COMMITTEE

REPORT OF THE
NOMINATION COMMITTEE

DEAR SHAREHOLDERS,
The report below describes the main responsibilities of the
Nomination Committee and how it achieved these in 2016. I would
like to draw your attention to what we achieved in 2016 and what
we will focus on in 2017.

Following the Company’s listing on the London Stock Exchange in
February 2016, the Nomination Committee’s main focus in 2016 was
to monitor the functioning of the Board and to satisfy itself that
the Board had the right balance of skills and experience to enable
it to provide leadership and accountability. It was therefore
pleasing to see that the feedback from the Board effectiveness
evaluation process (which you can read about on page 45)
provided confirmation that the Board, and the Board Committees,
continue to operate effectively. The Board is responsible for
succession generally, but the Nomination Committee will advise
the Board on appropriate succession planning in the year ahead.

David Howell
Chairman of the Nomination Committee
28 November 2016

REVIEW OF BOARD COMPOSITION
The Nomination Committee leads the process for all Board
appointments and is responsible for reviewing candidates and
making a final recommendation to the Board, in compliance with
the Code. The Nomination Committee also reviews the structure,
size and membership of the Board itself, as well as Board
Committees from time to time, to ensure an appropriate mix of
experience and skills, as well as the orderly refreshing as required.
During 2016, the composition of the Nomination Committee
complied with the Code, comprising a majority of independent
Non-Executive Directors.

The Nomination Committee recognises that diversity, in all its
dimensions, across an organisation, including at Board level, is
important to support innovation, strategic development and
operational efficiency. The Nomination Committee will consider
candidates for appointment as Non-Executive Directors from a
wider pool, including those with limited (or no) listed company
experience. It is not the Board’s policy to have specific voluntary
targets, but it will continue to recruit Board members based on
skills and experience, having regard to the requirements of the Code
in respect of diversity, including gender.

The Nomination Committee meets at least once a year. During
2016 it met three times, to agree a succession plan strategy for
the Directors and senior management, and to review the findings
of the 2016 Board and Committee evaluation. The Nomination
Committee also reviewed the composition of the Audit Committee
and reviewed the Board diversity policy for submission to the Board.

While no new appointments were made during 2016, there is a
rigorous and transparent procedure for appointments to the Board
and its Committees, involving undertaking an assessment of the
skills and capabilities required, drafting a description of the role,
and carrying out an assessment of potential candidates, before
making a recommendation to the Board.

Committee Chairman
David Howell

Other members
Amanda Burton
Sally Morgan
Federico Canciani
Richard Adam

Meetings held

Role and responsibilities of the Nomination
Committee:
– Determining the structure, size and composition of

the Board

– Making recommendations in relation to the
re-election of Directors retiring by rotation

– Conducting performance evaluations of Directors

Activity in 2016
– Evaluating the balance of skills, knowledge and

diversity of experience of the Board and, in light of
such evaluation, preparing descriptions of the role and
the capabilities required for any appointment

– Ensuring that plans are in place for orderly succession
for appointments to the Board and senior management,
to retain an appropriate balance of skills and experience
within Countryside and on the Board

The Nomination Committee’s terms of reference are
located on Countryside’s website at:
investors.countryside-properties.com

Areas of focus in 2016
Following the Company’s flotation in February 2016, the
principal area of focus for the Committee has been
reviewing succession planning and talent development.

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE
REPORT OF THE
NOMINATION COMMITTEE
CONTINUED

DIRECTORS’ REMUNERATION REPORT

INTRODUCTION
TO THE DIRECTORS’
REMUNERATION REPORT

ANNUAL EVALUATION OF
NOMINATION COMMITTEE
PERFORMANCE
As part of the overall Board evaluation process,
the Nomination Committee reviewed its effectiveness
during 2016. This evaluation considered areas
such as adherence to its terms of reference and
whether it was operating effectively to keep under
review the leadership needs of the Company. No
significant issues were raised and the Nomination
Committee concluded that it continues to
operate effectively.

Details of the Nomination Committee’s meetings
during the 2016 financial year are set out below.

COMMITTEE ATTENDANCE
The number of Nomination Committee
meetings attended by each member during
the 2016 financial year is as follows:

Nomination
Committee

Overall
attendance

Number of
meetings held1

David Howell

Richard Adam

Amanda Burton

Federico Canciani

Baroness Morgan

3/3

2/2 ²

3/3

100%

1. The number of meetings held reflects the

Committee meetings of Copthorn Holdings Limited
from 1 October 2015 to 17 December 2015 and the
Committee meetings of Countryside Properties PLC
from 17 December 2015 to 30 September 2016.

2. Richard Adam was appointed a member of the
Nomination Committee after the meeting on
8 December 2015.

THE NOMINATION
COMMITTEE’S FOCUS
IN 2016 HAS BEEN
SUCCESSION
PLANNING AND
TALENT DEVELOPMENT
FOR THE SENIOR
MANAGEMENT TEAM.

COUNTRYSIDE PROPERTIES PLC

OUR POLICY AIMS TO
ALIGN MANAGEMENT
AND SHAREHOLDERS’
INTERESTS AND TO
ATTRACT AND RETAIN
EXECUTIVES OF THE
HIGHEST CALIBRE.

DEAR SHAREHOLDERS,
On behalf of the Board I am pleased to present
the first Directors’ Remuneration Report of the
Remuneration Committee (“Committee”)
following the IPO on 17 February 2016.

THE WORK OF THE
REMUNERATION COMMITTEE
The year ended 30 September 2016 was a major
milestone in Countryside’s history. In anticipation
of the IPO, the Committee undertook a detailed
review of the Company’s remuneration policy.
A key driver in the review was to determine
an appropriate remuneration policy for a listed
company whilst ensuring continued emphasis
on those values which have been fundamental
to the Company’s success.

COMMITTEE ATTENDANCE
The number of Remuneration Committee
meetings attended by each member during
the 2016 financial year is as follows:

Remuneration
Committee

Overall
attendance

Number of
meetings held1

David Howell

Richard Adam

Amanda Burton

Baroness Morgan

6/6

100%

1. The number of meetings held reflects the

Committee meetings of Copthorn Holdings Limited
from 1 October 2015 to 17 December 2015 and the
Committee meetings of Countryside Properties PLC
from 17 December 2015 to 30 September 2016.

Committee Chairman
Amanda Burton

Other members
David Howell
Sally Morgan
Richard Adam

Meetings held

Role and responsibilities of the
Remuneration Committee:
– Recommending to the Board the Company’s

policy on executive remuneration

– Setting overarching principles

and parameters and the governance
framework of the Group’s
remuneration policy

– Determining the individual remuneration
and benefits package of each of the
Company’s Executive Directors and
its Company Secretary

The Remuneration Committee’s
terms of reference are located
on Countryside’s website at:
investors.countryside-properties.com

Areas of focus in 2016
The principal additional area of focus for the
Committee during 2016 has been leading
the competitive tender for the appointment
of the Group’s remuneration advisors, following
the re-appointment of PwC as Group auditors.
This necessitated replacing PwC as remuneration
advisors. The Remuneration Committee
received three competitive tenders, from which
a recommendation to appoint New Bridge
Street was made to the Board.

countryside-properties.comINTRODUCTION

TO THE DIRECTORS’

REMUNERATION REPORT

OBJECTIVES OF THE
REMUNERATION POLICY
The Company’s aim is to attract, retain and motivate
the best talent to help ensure continued growth
and success as it enters the next stage of its
development. The proposed policy is designed to:

– align the interests of the Executive Directors,
senior executives and employees with the
long-term interests of shareholders and
strategic objectives of the Company;

KEY PAY OUTCOMES DURING 2015/16
The post-IPO remuneration arrangements for Executive Directors were agreed during the review
detailed above and consist of:

– salaries set at a broadly mid-market rate, taking into consideration experience and performance;

– competitive pension and benefits provision;

– an annual bonus plan with deferral of a proportion in shares;

– a performance share plan with the ability to impose a two-year post-vesting holding period;

– the opportunity to participate in all-employee share plans; and

– support a high performance culture with

– share ownership guidelines.

Countryside has had an incredibly successful year, reflected in the Group’s strong growth in completions,
adjusted operating profit and return on capital employed. As a result of this strong performance,
100 per cent of the maximum annual bonus has been awarded to the Executive Directors.

HOW DID WE PERFORM IN 2015/16?
Our performance against our key performance indicators is set out in the Strategic Report on
pages 14 to 17.

Annual bonus

Adjusted operating profit target
Adjusted operating margin target
Personal performance

2015/16 pay-out

2014/15 pay-out

60%
20%
20%

100%
—
—

Full details of the targets and performance against them are provided in the Annual Report on Remuneration
(see page 63).

The first Long Term Incentive Plan (“LTIP”) awards were granted in February 2016, subject to performance
against stretching targets, being relative total shareholder return (“TSR”), return on capital employed
(“ROCE”) and tangible net asset value (“TNAV”).

appropriate reward for superior performance
without creating incentives that will encourage
excessive risk taking or unsustainable
Company performance;

– enable the Company to recruit and retain

individuals with the ability to lead the Group
on its ambitious growth path; and

– ensure that our remuneration structures are

transparent and easily understood.

THE STRATEGIC CONTEXT
2016 has been a momentous year for Countryside,
seeing its return to the London Stock Exchange in
an IPO in February 2016. The Group has continued
to perform strongly during the year, delivering a
12 per cent increase in completions together with
a 34 per cent increase in adjusted operating profit
to £122.5m (2015: £91.2m) and a 210bps increase
in return on capital employed to 26.8 per cent
(2015: 24.7 per cent). The Group remains firmly
on track to deliver its medium-term growth targets.

The Group’s remuneration policy reflects a
desire to attract and retain high calibre talent
to enable the Group to achieve its growth plans,
whilst rewarding management in a way which
ensures the alignment of interests with the
Group’s shareholders.

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
CONTINUED

How much were the Executive Directors paid in 2015/16?

Ian Sutcliffe
£’000

Salary1
488

Benefits
17

Pension2
179

Annual bonus
607

’15/16

’14/15

Salary
433

Benefits
17

Pension
87

Annual bonus
400

Rebecca Worthington
£’000

Total
1,291

Total
937

’15/16

’14/153

Salary
300

Salary
50

Fixed pay

Performance-related pay

Salary

Benefits

Pension

Annual bonus

Benefits
18

Pension
53

Annual bonus
70

Total
441

Total
57

Benefits
2

Pension
5

1. The amounts disclosed in this table relate to the cash received during the financial years presented. The amount charged to the consolidated statement of comprehensive income is shown in the single

figure of remuneration table on page 63.

2. The annual bonus payment in respect of the 2014/15 financial year was paid in 2015/16 and attracted a pension salary supplement of 12 per cent, the rate applicable to that financial year.

3. From date of appointment on 1 August 2015.

REMUNERATION POLICY FOR 2016/17

Summary of remuneration policy

Element

Base salary

Pension

Policy summary

Base salaries will be set based on the market value of the role and the experience and performance of the individual.

The Company will provide either contributions to the Company defined contribution pension scheme or a pension salary supplement.

Annual bonus

A maximum award of 150 per cent of salary.

The annual bonus is paid annually and is dependent on achievement of financial and other strategic performance metrics
over the financial year.

Two-thirds of amounts earned are paid in cash, with one-third deferred as shares for a period of three years.

Long Term Incentive Plan
(“LTIP”)

A maximum award of 200 per cent of salary.

LTIP awards will vest subject to stretching targets which may include relative TSR, ROCE and TNAV.

The Committee has discretion to introduce a post-vest holding period and whilst it is not anticipated that this will be
used in the first or second years following IPO, the Committee reserves the right to exercise discretion in future years.

The Committee reviewed the salaries of the Executive Directors in September 2016 and awarded salary increases of 3 per cent with effect from 1 October 2016,
in line with the wider employee base. In addition, Executive Directors will be awarded the maximum bonus opportunity of 150 per cent and LTIP of 200 per cent
of base salary. The structure of the annual bonus and LTIP will remain unchanged in 2017. The annual bonus targets will be based on adjusted operating profit,
Group return on capital employed and personal performance. LTIP targets will continue to be based on return on capital employed, tangible net asset value
and relative total shareholder return.

CONCLUSION
The Committee recognises the importance of developing a close relationship with shareholders in facilitating the work of the Committee in developing
the remuneration policy. In September 2016, we communicated the terms of the remuneration policy to our major shareholders in order to obtain
their comments. We will continue to ensure that our remuneration policy is both aligned with shareholders’ interests, and attracts and retains executives
of the required calibre to ensure the Company’s continued success. On behalf of the Committee, I welcome your feedback and ask for your support at
the forthcoming Annual General Meeting.

Amanda Burton
Chairman of the Remuneration Committee
28 November 2016

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comREMUNERATION POLICY REPORT

SUMMARY OF REMUNERATION FOR 2015/16 –
ALIGNMENT BETWEEN PERFORMANCE AND PAY

appropriate reward for superior performance without creating incentives
that will encourage excessive risk taking or unsustainable Company performance.

In 2016, the meetings of the Committee covered the following key areas:

– benchmarking of senior management remuneration;

– consideration and approval of the 2016 LTIP and 2016 Save As You Earn

Overall remuneration levels have been set at a level that are considered by
the Committee to be appropriate for the size and nature of the business.
All variable pay awards are subject to malus and clawback provisions in
accordance with the requirements of the UK Corporate Governance Code.

(“SAYE”) plan;

– determination of LTIP recipients, grant level and targets;

– determination of bonus targets and awards;

– determination of annual salary increases for the Group; and

– consideration of structures and measures for the 2016/17 annual bonus.

OVERVIEW OF REMUNERATION POLICY
The Company’s remuneration policy was reviewed fully prior to listing, in
accordance with current regulation and guidance, in order to ensure the
remuneration policy in place was appropriate for a listed company.

The Company’s aim is to attract, retain and motivate the best talent to help
drive continued growth and success as it enters the next stage of its development
operating as a listed company.

Our remuneration policy aims to align the interests of the Executive Directors,
senior executives and employees with the long-term interests of
shareholders. It aims to support a high performance culture with

DIRECTORS’ REMUNERATION POLICY
The following table summarises the key components of the Executive Director
and Non-Executive Director remuneration arrangements, which will form part
of the remuneration policy subject to formal approval by shareholders at the
first AGM of the Company following Admission in accordance with the
regulations set out in the Large and Medium-sized Companies and Groups
(Accounts and Report) (Amendment) Regulations 2013. It is intended that this
policy will apply for three years from that date, and that it will continue to be
operated for the period from admission to that meeting.

The details of the Group’s Executive Director and Non-Executive Director
remuneration for the financial year, including the operation of the Group’s
incentive plans and payments made under them, will be set out each year in
an Annual Report on Remuneration contained in the Group’s Annual Report,
as required by the Regulations.

The table below sets out the key elements of the policy for Executive
Directors, including the rationale for their use and details of their operation:

EXECUTIVE
DIRECTORS

Objective and link
to strategy

Base salary

Recognises the market
value of an Executive
Director’s role, skill,
responsibilities,
performance and
experience.

Other benefits

Provides a
market-competitive
package.

Operation

Maximum opportunity

Performance measures
and assessment

Salaries are normally reviewed annually, with any changes
effective as of 1 October each year.

Current salaries, effective from 1 October 2016, are as follows:

Chief Executive: £515,000

Group Chief Financial Officer: £309,000

Salaries are set by reference to a market benchmark based on
companies of a comparable size operating in a similar sector.
Salary reviews will also take into consideration an individual’s
performance, responsibility levels and internal relativities.

There is no formal
maximum salary other
than where there is
a change of role or
responsibility and
increases will normally
be only for inflation
and/or in line with the
wider workforce.

Not applicable.

Benefit values vary
year on year depending
on premiums and the
maximum potential value
is the cost of the provision
of these benefits.

Reviewed periodically to ensure benefits remain
market competitive.

The main benefits currently provided include:

– car or car allowance;

– life, personal accident, disability and health insurance;

– Directors’ and officers’ insurance; and

– other benefits, including flexible benefits, as provided from
time to time, for example where a Director relocates.

Executive Directors are eligible for other benefits which are
introduced for the wider workforce on broadly similar terms.

In addition, reasonable business expenses and any tax
thereon may be reimbursed by the Company.

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
CONTINUED

DIRECTORS’ REMUNERATION POLICY CONTINUED

EXECUTIVE
DIRECTORS
CONTINUED

Objective and link
to strategy

Annual bonus
scheme

The annual bonus is
designed to incentivise
the Executive Directors
to deliver against
goals linked to the
Company’s strategy.

Long-term alignment
with shareholder
interests is ensured
through the
deferral element.

Long Term
Incentive Plan
(“LTIP”)

The LTIP is designed
to incentivise Executive
Directors to successfully
deliver the Company’s
objectives over the
longer term and
to create alignment
with investors over
this period.

Operation

Maximum opportunity

Performance measures
and assessment

Bonus awards will be granted annually.

The performance period is one financial year with
pay-outs determined by the Committee following the
year end, based on achievement against a range of
performance targets.

Up to two-thirds of the bonus award will be paid out in
cash with the remainder deferred into shares for a period
of three years (subject to continued employment). Bonuses
relating entirely to periods prior to admission will not be
subject to deferral.

Malus and clawback arrangements will apply to annual
bonus awards enabling the reduction in vesting or recovery
of amounts paid in certain circumstances.

Maximum opportunity:
150 per cent of salary.

Participants may be
entitled to dividends
or dividend equivalents
on the deferred shares
representing the value
of dividends paid during
the deferral period.

Awards of shares that vest three years from the date
of grant subject to achievement against performance
measures, measured over a three-year period. Awards
are subject to malus and clawback provisions enabling
the reduction in vesting or recovery of amounts paid
in certain circumstances.

The Committee retains the flexibility to incorporate
a two-year post-vest holding period as part of the LTIP
in which Executive Directors will not be permitted to sell
vested shares. This would take the total period from grant
to release of LTIP shares to five years. The Committee does
not anticipate operating this period in the first or second
cycle of awards under the plan.

The maximum LTIP award
level is 200 per cent of
base salary.

Participants may at the
Committee’s discretion
receive dividends or
dividend equivalents
representing the value
of dividends paid during
the performance period
on LTIP awards.

Performance targets will be set
by the Committee annually
based on a range of financial
and strategic measures selected
to reflect the in-year goals of
the business and its longer-term
strategy and KPIs. At least
50 per cent of the bonus will
be based on financial measures
in any year.

Targets are normally set on a
sliding scale, with no more than
25 per cent of the maximum
typically payable at threshold
performance and 50 per cent of
the maximum typically payable
for on-target performance.

LTIP performance will be
assessed against a mix of
metrics that will include a
balance between financial and
shareholder metrics. For the
awards granted on IPO and
2017 awards these are:

– TSR measured against

a broad-based
comparator group;

– TNAV; and

– ROCE.

Targets are set on a sliding scale
with no more than 25 per cent
of each element vesting at
threshold performance.
The Committee will review
and set weightings for
measures and appropriate
targets before each grant.

The Committee may change
the balance of the measures,
or use different measures
for subsequent awards
as appropriate.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comDIRECTORS’ REMUNERATION POLICY CONTINUED

EXECUTIVE
DIRECTORS
CONTINUED

Objective and link
to strategy

Pension

To aid retention
and to provide
competitive levels of
retirement benefit.

Save As You Earn
plan (“SAYE”)

The purpose of this
plan is to encourage all
employees to become
shareholders in the
Company and thereby
align their interests
with shareholders.

Shareholding
guidelines

To align Executive
Directors’ interests
with those of our
long-term shareholders
and other stakeholders.

Operation

Maximum opportunity

Performance measures
and assessment

Pension contributions will be made into the Company’s
defined contribution scheme.

Alternatively, a participant may receive a cash allowance
in lieu of pension (typically in the scenario where they have
reached the lifetime allowance for pension tax relief set
by HMRC).

The maximum
contribution or
equivalent allowance
of up to 25 per cent
of base salary for the
Chief Executive and
17.5 per cent for the CFO.

Not applicable.

Executive Directors are able to participate in
HMRC-approved savings-based share plans available
to all employees of the Company.

Executive Directors will be eligible to participate in any
all-employee share plan operated by the Company on the
same terms as other eligible employees.

Maximum participation
levels will be set based on
the applicable limits set by
HMRC from time to time.

Not applicable.

Executive Directors are expected to build a holding in
the Company’s shares to a minimum value of two times
their base salary.

Not applicable.

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
CONTINUED

NOTES TO THE POLICY TABLE
For the avoidance of doubt, in approving this Directors’ remuneration policy,
authority is given to the Company to honour any commitments entered
into previously with Directors.

Malus and clawback
The circumstances in which malus and clawback may apply include a material
misstatement of the Company’s accounts, error in assessment of performance
or calculation of the number of awards, individual gross misconduct or
conduct resulting in reputational damage to the Group.

Performance measures and targets
The short and long-term incentive plans have a number of different financial
performance measures aligned to the performance of the Company. Targets
will be set with reference to prior year performance, budget and brokers’
forecasts (and other external market expectations). Performance targets will
be set so as to be achievable but representing stretching performance for
the business.

Annual bonus performance metrics are determined at the start of each
financial year based on the key business priorities for the year ahead.
The majority will be linked to a profit metric as this is the primary indicator
of our sustainable growth. The target ranges for the measures used in the
annual bonus scheme are considered to be commercially sensitive at the
start of the financial year and prospective disclosure is not in the interest
of shareholders. Other than in exceptional circumstances where elements
remain commercially sensitive, actual targets, performance achieved and
awards made will be published at the end of the performance periods so
shareholders can fully assess the basis for any pay-outs.

LTIP metrics are determined at the time of grant. Performance measures
for the initial awards were selected to support the Company’s long-term

strategy. Future metrics will align our long-term goal of value creation
for shareholders through strong underlying financial growth. The metrics for
the first awards were relative TSR, TNAV and ROCE. It is intended that the
targets for the 2017 LTIP awards will be based on the same metrics.

Discretion
The Remuneration Committee retains discretion over certain elements of
the policy as set out in the report including the operation of the variable
incentive schemes. The Committee may adjust elements of the plans
including, but not limited to:

– participation;

– the timing of the grant of award and/or payment;

– the size of an award (up to plan limits) and/or payment;

– in exceptional circumstances, to grant and/or settle an LTIP award in cash;

– discretion relating to the measurement of performance in the event of a

change of control;

– determination of a good leaver (in addition to any specified categories)

for incentive plan purposes;

– adjustments required in certain circumstances (e.g. rights issues,

corporate restructuring and special dividends); and

– the ability to recognise exceptional events within existing

performance conditions.

Should any such discretion be exercised, an explanation would be provided
in the following Annual Report on Remuneration and may be subject to
shareholder consultation as appropriate.

NON-EXECUTIVE DIRECTOR REMUNERATION POLICY
The Board as a whole is responsible for setting the remuneration of the Non-Executive Directors, other than the Chairman, whose remuneration is
determined by the Committee and recommended to the Board. The table below sets out the key elements of the policy for Non-Executive Directors:

Objective and link to strategy Operation

Maximum potential value

Fees

Core element of
remuneration, set at a level
sufficient to attract and retain
individuals with appropriate
knowledge and experience in
organisations of broadly similar
size and complexity.

Fee levels are sufficient to attract
individuals with appropriate
knowledge and experience.

Non-Executive Directors are paid
a base fee and additional fees for
chairmanship of Committees and
the role of Senior Independent
Director. In exceptional
circumstances, fees may also be
paid for additional time spent on
the Company’s business outside of
normal duties.

Fees are reviewed each year, with any increases normally effective from
1 October.

Any increases in fees will be determined based on time commitment and
will take into consideration the level of responsibility and fees paid in other
companies of comparable size and complexity, e.g. median fee levels of
comparable companies within the FTSE 250 (excluding investment trusts).

Non-Executive Directors do not receive any variable remuneration element
or receive any other benefits, other than being covered for disability benefits
under the Company’s insurance whilst travelling on Company business.

The Company will pay reasonable expenses incurred by the Chairman and
Non-Executive Directors. The Company may also provide limited hospitality
and selected benefits and settle any tax thereon provided that this is in
connection with the performance of their role.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comAPPROACH TO RECRUITMENT REMUNERATION
The Committee’s approach to recruitment remuneration is to pay no more than is necessary to attract candidates of the appropriate calibre and experience
needed for the role. The remuneration package for any new recruit would be assessed following the same principles as for the Executive Directors, as set
out in the remuneration policy table.

Where an existing employee is promoted to the Board, the Executive Director policy would apply. Historic entitlements would continue to be honoured
and allowed to pay out on their original terms, and will be fully disclosed in the Annual Report on Remuneration at the relevant time.

The table below summarises our key policies with respect to recruitment remuneration:

Remuneration element

Recruitment policy

Base salary and benefits

Pension

Annual bonus

The salary level will be set taking into account a number of factors, including market practice, the individual’s
experience and responsibilities and other pay structures within Countryside and will be consistent with the
salary policy for existing Executive Directors. Starting salaries may therefore be set below the market level
and, subject to performance, increased by more than inflation as the employee gains experience over time.

The Executive Director will be eligible to receive benefits in line with Countryside’s benefits policy as set out
in the remuneration policy table.

An Executive Director will be able to participate in Countryside’s defined contribution pension scheme,
or receive cash allowance in lieu of pension benefits in line with policy for existing Directors.

An Executive Director will be eligible to participate in the annual bonus scheme as set out in the
remuneration policy table.

The maximum opportunity will be no more than 150 per cent of salary, as per the policy for existing
Executive Directors.

Depending on the timing of the appointment, the Committee may deem it appropriate to set different annual
bonus performance conditions for Executive Directors for the first year of appointment.

Long-term incentives

An Executive Director will be eligible to participate in Countryside’s Long Term Incentive Plan as set out
in the remuneration policy table.

Share buy-outs/replacement awards

Relocation policies

The maximum opportunity offered may be up to 200 per cent of salary, as per the policy for existing
Executive Directors.

An LTIP award can be made shortly following an appointment (assuming the Company is not in a closed period).

The Committee’s policy is to not provide buy-outs as a matter of course. However, should the Committee
believe it necessary to grant awards to replace awards from a previous employer, the Committee will seek
to structure any replacement awards such that overall they are no more favourable than the awards due to
be forfeited.

In determining the quantum and structure of any buy-out, the Committee will take into account the fair
value and, as far as practicable, the timing and performance requirements of remuneration foregone.

Where possible, existing arrangements will be used, although the Committee may also make use of the flexibility
provided by the Listing Rules to make awards without prior shareholder approval in unusual circumstances.

Should relocation of a newly recruited Executive Director be required, reasonable costs associated with
this relocation will be met by the Company. Such relocation support could include but not be limited to
payment of legal fees, removal costs, temporary accommodation/hotel costs, a contribution to Stamp Duty,
replacement of non-transferable household items and related taxes incurred. In addition, and in appropriate
circumstances, the Committee may grant additional support in relation to the payment of school fees.

The Company’s policy when setting fees for the appointment of new Non-Executive Directors is to apply the policy which applies to current
Non-Executive Directors.

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
CONTINUED

SERVICE AGREEMENTS AND COMPENSATION FOR LOSS OF OFFICE
When setting notice periods, the Committee has regard to market practice and corporate governance best practice. Our policy is that notice periods for
Executive Directors should be no greater than 12 months. Both the Group Chief Executive and the Group Chief Financial Officer have contracts with
notice periods of 12 months from either side. The notice period for Non-Executive Directors is three months, save in the case of the Chairman whose
notice period is six months.

The Non-Executive Directors do not have service contracts but are appointed under letters of appointment which provide for a review after an initial
three-year term with the possibility of annual renewal. All service contracts and letters of appointment are available for viewing at the Company’s registered
office and at the AGM.

When approving any termination payments for a departing director the Committee will always seek to minimise cost to the Company whilst complying
with the contractual terms and seeking to reflect the circumstances in place at the time.

The Committee reserves the right to make additional payments where such payments are made in good faith in discharge of an existing legal obligation
(or by way of damages for breach of such an obligation) or by way of settlement or compromise of any claim arising in connection with the termination
of an Executive Director’s office or employment and may provide assistance with outplacement costs.

The table below sets out, for each element of total remuneration, the Company’s policy on payment for loss of office in respect of Executive Directors and
any discretion available to the Committee. Broadly, treatment will depend on the circumstances of departure and in particular whether a leaver is a “good
leaver”. For a “good leaver” the following will normally apply:

Remuneration element

Treatment on cessation

Salary, benefits and pension

Received for the notice period or payment in lieu of notice. Statutory redundancy payments as appropriate.

Annual bonus

No entitlement to a bonus; however, a pro-rata bonus may be paid following the end of the financial year
in which they leave.

Deferred bonus

Vesting of deferred bonus shares on cessation.

LTIP

The rules of the LTIP set out the treatment of good leavers. In summary, awards will normally vest on the
normal vesting date and be subject to pro-rating, although the Committee has discretion to allow awards
to vest on cessation and to waive pro-rating where it feels it is appropriate to do so.

The Committee may pay any statutory entitlements or settle compromise claims in connection with a termination of employment, where considered in the
best interests of the Company.

CHANGE OF CONTROL
On a change of control of the Group, the following provisions would apply to Executive Directors:

Remuneration element

Treatment on change of control

Salary, benefits and pension

Received for the notice period or payment in lieu of notice if notice is given. Statutory redundancy payments
as appropriate.

Annual bonus

No entitlement to a bonus; however, a pro-rata bonus may be paid following the end of the financial year
in which they leave.

Deferred bonus

Vesting of deferred bonus shares.

LTIP

The rules of the LTIP set out the treatment on a change of control. However, in summary, awards will normally
vest at the date of change of control and normally be subject to pro-rating, although the Committee has
discretion to waive pro-rating where it feels it is appropriate to do so.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comDIRECTORS’ SERVICE CONTRACTS AND LETTERS OF APPOINTMENT
Executive Directors also receive life assurance, private health insurance and car allowances. Both Executive Directors will offer themselves for re-election
at the first Annual General Meeting following the Initial Public Offering in January 2017.

Executive Directors

Date
of current contract

Payment
in lieu of notice

Pension

Restrictive covenants

Notice
(Executive/Company)

Ian Sutcliffe

29 January 2016

Rebecca Worthington

29 January 2016

12 months’ salary
and benefits

25% of salary
and only as a
cash allowance

17.5% of salary
and only as
a pension
contribution

Non-compete (6 months)
Non-poaching (12 months)
Non-solicit (12 months)

12 months/
12 months

Non-Executive Directors

David Howell

Richard Adam

Amanda Burton

Baroness Sally Morgan

Federico Canciani

James Van Steenkiste

Date of appointment
to the Board

Date of current letter
of appointment

Unexpired term of
appointment

14 December 2015

2 years, 1 month

17 December 2015

2 years, 1 month

17 December 2015

2 years, 1 month

17 December 2015

2 years, 1 month

17 December 2015

2 years, 1 month

17 December 2015

2 years, 1 month

The Non-Executive Directors are entitled to claim out of pocket expenses incurred in the performance of their duties and payment in lieu of notice where
notice is served. They are not entitled to participate in the Company’s share, bonus or pension schemes. The notice period for Non-Executive Directors is
three months, save in the case of the Chairman whose notice period is six months.

STATEMENT OF CONSIDERATION OF EMPLOYMENT CONDITIONS ELSEWHERE IN THE GROUP
Whilst the Committee does not consult directly with employees on Executive Directors’ remuneration, the Committee does receive updates regarding
remuneration for employees across the Company. This is considered when determining the remuneration for the Directors.

DIFFERENCES IN REMUNERATION POLICY BETWEEN EXECUTIVE DIRECTORS AND OTHER EMPLOYEES
The policy described above applies to the Group’s Executive Directors. The principles of the policy are designed with due regard to employees across
the Group. Variable remuneration, particularly the LTIP, is restricted to the most senior employees in the Company who may directly influence Company
performance. However, the Committee is committed to promoting a culture of widespread share ownership, including the provision of an all-employee
share scheme.

POLICY IN RESPECT OF EXTERNAL BOARD APPOINTMENTS FOR EXECUTIVE DIRECTORS
It is recognised that external non-executive directorships may be beneficial for both the Company and the Executive Director concerned. At the discretion
of the Board, Executive Directors are permitted to retain fees received in respect of any such non-executive directorship.

STATEMENT OF CONSIDERATION OF SHAREHOLDER VIEWS
The Committee is committed to maintaining a dialogue with our shareholders and we welcome their feedback. Any feedback received will be considered
as part of the Committee’s annual review of remuneration policy. Dialogue with prospective shareholders in the lead-up to the Group’s IPO was an intrinsic
part of its success and underpinned our remuneration policy. The share incentive and bonus schemes were designed with simplicity and shareholder preference
in mind, and we received no adverse comment from shareholders about our proposed plans/schemes. We have continued our dialogue with shareholders
during the year and have had no adverse comments from shareholders about our policy or remuneration payments.

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
CONTINUED

APPLICATION OF REMUNERATION POLICY

Ian Sutcliﬀe

Rebecca Worthington

2,500

2,000

0
0
0
£

’

1,500

1,000

500

£1,305
20%

30%

51%

£661

100%

£2,463

42%

31%

27%

2,500

2,000

1,500

1,000

500

Minimum

Target

Maximum

£381

100%

Minimum

£767
20%
30%

50%

Target

£1,463

42%

32%

26%

Maximum

Fixed

Bonus

LTIP

Fixed

Bonus

LTIP

The assumptions noted for “on-target” performance in the graph above are provided for illustration purposes only:

Minimum: fixed pay only (salary + benefits + pension).

Target: fixed pay + 50 per cent pay-out of the annual bonus entitlement (75 per cent of salary) + 25 per cent vesting of the LTIP (50 per cent of salary).

Maximum: fixed pay + 100 per cent pay-out of the annual bonus (150 per cent of salary) + 100 per cent vesting of the LTIP (200 per cent of salary).

– Salary levels are based on those as at 1 October 2016.

– The value of benefits is that disclosed in the single figure for 2015/16.

– Pension is 25 per cent of salary (excluding bonus) for Ian Sutcliffe and 17.5 per cent of salary (excluding bonus) for Rebecca Worthington.

– Amounts have been rounded to the nearest £1,000 and for simplicity the value of SAYE, in which all employees may participate on the same terms, is excluded.

– No account has been taken of share price growth or dividends on share awards.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comANNUAL REPORT
ON REMUNERATION

SINGLE TOTAL FIGURE OF REMUNERATION (AUDITED)
The table below sets out a single remuneration figure for Executive and Non-Executive Directors for all qualifying services for the year ended
30 September 2016:

Salary/fees
£’000

Benefits 1
£’000

Pension
£’000

Annual
bonus 2
£’000

Long-term
incentives
£’000

Executive Directors

Ian Sutcliffe4

Rebecca Worthington3,4

Non-Executive Directors

David Howell

Richard Adam

Amanda Burton

Baroness Sally Morgan

Federico Canciani

James Van Steenkiste

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

488

433

300

135

—

179

—

731

607

450

—

Total
£’000

1,415

1,144

821

127

135

—

1. Benefits include both cash and non-cash benefits, which are valued at their taxable amount. For Ian Sutcliffe this includes a car allowance (£1,325 per month) and private medical insurance (£1,390 per annum).

For Rebecca Worthington this includes a car allowance (£1,325 per month) and private medical insurance (£1,738 per annum).

2. The annual bonus relates to performance during the financial year and the cash element is paid in December in the following financial year.

3. Rebecca Worthington joined the Company in August 2015. Remuneration reflected in the table above in relation to 2015 reflects the remuneration received in the period from appointment

to 30 September 2015.

4. The Executive Directors are entitled to retain fees earned from non-executive appointments outside the Company. Ian Sutcliffe served as a Non-Executive Director of Ashtead Group plc during the

year and received £60,000 for his services (2015: £59,000). Rebecca Worthington served as a Non-Executive Director of Aga Rangemaster Group plc and Hansteen Holdings plc and received £50,060
for her services.

Further details of each element of the Executive Directors’ remuneration package are set out on pages 55 to 57.

ANNUAL BONUS TARGETS AND OUTCOMES (AUDITED)
The table below sets out the 2015/16 bonus targets and outcomes relating to the annual bonus figures shown in the single figure in the table above.
The Committee was satisfied that these payments fairly reflected Group performance in the year.

The annual bonus targets were set to focus management on the growth of the business in line with our strategy and on improving operational efficiency
to increase operating margins.

Performance required

2015/16 measure

Threshold

Target

Maximum

Achieved

Adjusted operating profit (60% weighting)

Adjusted operating margin (20% weighting)

Personal performance (20% weighting)

£109m

14.5%

Partly
achieved

£115m

15.0%

£121m

15.5%

£122.5m

15.8%

Achieved

Fully met

Pay-out level
(maximum payout
for measure)

60%

20%

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
CONTINUED

ANNUAL BONUS TARGETS AND OUTCOMES (AUDITED) CONTINUED
During 2016 the Board took the strategic decision to rephase a number of sites, which included sites that are now to be built out, rather than sold.
This had the effect of deferring £5m of profit in relation to those sites from 2016 to 2017. The Board believed that this change was in the best interests
of shareholders and, accordingly, the Remuneration Committee decided to adjust the threshold, target and maximum bonus targets downwards by £5m
for the year. The Committee further decided that an equivalent upward adjustment should be made in the 2017 bonus scheme. The Board believes that the
revised targets are no less challenging than the original targets.

The personal performance targets and out-turn for each Director are summarised in the table below:

Ian Sutcliffe

To deliver a successful IPO

To manage external stakeholders effectively for the benefit of the
Group

To develop and implement a talent management and succession plan
for key positions in the Group

Rebecca Worthington

To deliver a successful IPO

To perform a review of the Group’s key systems and processes

To develop and implement a talent management and succession plan
for key positions in the finance function

Weighting

Performance
against target

Outcome

Pay-out level
(percentage of
maximum payout
for measure)

The IPO was
smoothly delivered, on time
and with good take-up of the
offering against a challenging
market backdrop

Relationships with
shareholders and others
were built, maintained
and further developed in
accordance with the Group
Board’s agreed strategy

A comprehensive plan was
developed for all senior
Group executive positions
which was approved by the
Nomination Committee

33%

Fully met

33%

Fully met

33%

Fully met

33%

Weighting

Performance
against target

Outcome

Pay-out level
(percentage of
maximum pay-out
for measure)

The IPO was
smoothly delivered, on time
and with good take-up of the
offering against a challenging
market backdrop

A detailed plan was
developed which was ready for
implementation ahead of plan

All key roles have been
successfully recruited
during the year and a
robust succession plan has
been developed

33%

Fully met

33%

Fully met

33%

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comANNUAL BONUS TARGETS AND OUTCOMES (AUDITED) CONTINUED
Bonus payments vest in a straight line between threshold and maximum. No bonus is paid if performance falls below the threshold adjusting operating
profit measure. For Executive Directors and certain members of the Group Operational Board, one-third of bonus payments are deferred in shares which
vest after three years. The deferred shares have no performance conditions, but the individual must remain employed by the Group. There was no award
under the Deferred Bonus Plan during the year.

The breakdown of the cash and deferred elements of the annual bonus is set out in the table below:

Ian Sutcliffe

Rebecca Worthington

Total

To be paid in cash

To be deferred in shares

% of salary

% of bonus

731,096

450,000

150

487,397

300,000

243,699

150,000

SHARE SCHEME INTERESTS AWARDED DURING THE YEAR (AUDITED)
The Executive Directors were invited to participate in the Company’s SAYE scheme at an exercise price of £1.92, a 20 per cent discount to the market price
on grant. As discussed above, the Directors will participate in a Deferred Bonus Plan where a portion of the annual bonus will be deferred in shares.

The table below summarises the awards granted to each Director during the year ended 30 September 2016.

Ian Sutcliffe

Rebecca Worthington

Scheme

Date of grant

Granted

Number outstanding
at 30 September 2016

SAYE

16 March 2016

7,500

The Executive Directors were invited to participate in the Company’s Long Term Incentive Plan (“LTIP”) in line with our remuneration policy and an
award equivalent to 200 per cent of salary was made to each Director. The table below sets out further details of the Executive Directors’ participation in the LTIP:

There is no minimum value guaranteed on vesting.

Date of grant

Award

Type No. of shares

Value of
the award 1

% of salary

Performance
conditions

Performance
period

Ian Sutcliffe

Rebecca Worthington

18 February
2016

Performance

Nil cost

416,667

£1,000,000

200

Performance

Nil cost

250,000

£600,000

200

35% target ROCE 2
35% target TNAV 3
30% relative TSR 4

35% target ROCE
35% target TNAV
30% relative TSR 4

Three years ending
30 September 2018

1. Calculated based on a closing mid-market share price of 240 pence per share on 17 February 2016.

2. Return on capital employed.

3. Tangible net asset value.

4. Relative total shareholder return compared to a comparator group comprised of the FTSE 250 index, excluding investment trusts.

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE

DIRECTORS’ REMUNERATION REPORT
CONTINUED

VESTING CRITERIA FOR THE 2015/16 LTIP AWARDS
The vesting criteria for LTIP awards made in the year ended 30 September 2016 are set out below:

Performance condition

ROCE: Return on capital employed achieved in the year ending 30 September 2018

TNAV: Tangible net asset value as at 30 September 2018

Threshold
(25% vesting)

Target
(50% vesting)

Maximum
(100% vesting)

27.0%

£707m

28.0%

£744m

29.0%

£781m

For each of the performance conditions outlined above, vesting occurs on a linear basis between threshold and target and between target and maximum.

Performance condition

Threshold
(25% vesting)

Maximum
(100% vesting)

Relative TSR: Relative TSR of the Company compared to a comparator group comprised of the FTSE 250,
excluding investment trusts measured over the three years ending 30 September 2018

Median of the
comparator group

Upper quartile of the
comparator group

The relative TSR performance condition vests on a linear basis between threshold and maximum.

TOTAL PENSION ENTITLEMENTS (AUDITED)
Executive Directors are eligible to participate in the Countryside Pension Plan, a defined contribution arrangement, and Rebecca Worthington is a member
of the plan. Ian Sutcliffe does not participate in the plan and receives cash in lieu of pension benefits. In respect of ongoing pension benefits, Ian Sutcliffe receives
a salary supplement of 25 per cent of salary in lieu of pension. Rebecca Worthington receives employer pension contributions of 17.5 per cent of salary
subject to personal contributions of 5 per cent of salary.

None of the Executive Directors had a prospective entitlement to a defined benefit pension plan by reference to qualifying services.

DIRECTORS’ SHAREHOLDINGS (AUDITED)
Under the terms of their service contracts, Executive Directors are required to hold shares in the Company to the value of 200 per cent of annual salary
within five years of their appointment. Non-Executive Directors are expected to hold shares in the Company to the value of 50 per cent of annual salary
within five years of their appointment.

Measure

Ian Sutcliffe

Rebecca Worthington

David Howell

Richard Adam

Amanda Burton

Baroness Sally Morgan

Federico Canciani

James Van Steenkiste

Total share
interests at
30 September 2016

Shares held,
including connected
persons, at
30 September 2016

Outstanding
LTIP share awards at
30 September 2016

Outstanding
SAYE options at
30 September 2016

Shareholding
(excluding
outstanding
LTIP and SAYE) as a
percentage of salary 1

5,880,715

764,477

17,000

9,445

9,823

9,444

—

5,456,548

506,977

17,000

9,445

9,823

9,444

—

416,667

250,000

Nil

7,500

Nil

1,026

279

—

1. Assumes closing mid-market share price on 30 September 2016 of 242.8 pence per share.

There has been no change in the Directors’ interests in the ordinary share capital of the Company between 30 September 2016 and the date of this report.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comLOSS OF OFFICE PAYMENTS OR PAYMENTS TO PAST DIRECTORS (AUDITED)
There were no payments to past Directors or payments for loss of office for Directors of the Company during the year (2015: £Nil).

APPLICATION OF THE POLICY IN 2016/17
Base salary
Salaries were reviewed with effect from 1 October 2016 with increases of 3 per cent awarded in line with the wider workforce.

Ian Sutcliffe

Rebecca Worthington

2015/16

£500,000

£300,000

2016/17

£515,000

£309,000

% increase

PENSION AND BENEFITS
As described in the policy report, Ian Sutcliffe and Rebecca Worthington will receive a pension contribution of 25 per cent and 17.5 per cent of base salary
respectively. No other elements of remuneration are pensionable.

Annual bonus
Both Executive Directors are eligible to receive up to 150 per cent of base salary. The metrics and their weightings for 2017 are as follows:

Metric

Adjusted operating profit

Return on capital employed

Personal objectives

% of maximum bonus

Note: Details of the targets for each metric are commercially sensitive and will not be disclosed prospectively.

Long Term Incentive Plan
The Committee intends to grant both Executive Directors awards at a level of 200 per cent of salary shortly following the announcement of the 2016 results.
The proposed performance metrics and their weightings are set out below:

Relative Total Shareholder Return
(30% of awards)

Tangible Net Asset Value
(35% of awards)

Return on Capital Employed
for year ending 30 September 2019
(35% of awards)

TSR vs
FTSE 250

Pay-out
(% of element)

TNAV in FY19
(£m)

Pay-out
(% of element)

ROCE in FY19
(%)

Pay-out
(% of element)

Below threshold

Below median

Threshold

Target

Maximum

Median

—

Upper quartile

—

100

<820

820

863

906

100

<28.0

28.0

29.0

30.0

100

For each performance condition, vesting occurs on a linear basis for performance between each point. Performance is measured over three financial years
to 30 September 2019.

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE

DIRECTORS’ REMUNERATION REPORT
CONTINUED

PENSION AND BENEFITS CONTINUED
Fees for the Chairman and the Non-Executive Directors
The fee structure and levels were reviewed on Admission. The fees for the Chairman will increase to £175,000 when the shareholding of Oaktree Capital
Management falls below 30 per cent. The fees of other Non-Executive Directors will not be revised again until October 2017. A summary of current annual
fees is shown below:

Role

Chairman

Non-Executive Director

Additional fees:

Senior Independent Director

Audit Committee Chairman

Remuneration Committee Chairman

PERFORMANCE GRAPH AND TABLE

Fee
(£’000)

150

125

100

)
£
(

e
u
a
V

50
February
2016

March
2016

April
2016

May
2016

June
2016

July
2016

August
2016

September
2016

October
2016

Countryside Properties

FTSE 250

Group Chief Executive pay table

Financial year

2015/16

Name

Ian Sutcliffe

Total remuneration
£’000

Annual bonus
as % of maximum

Vesting of LTIP
as % of maximum

1,415

100

Not relevant

The annual change in base salary, benefits and annual variable pay is as follows:

Group Chief Executive

Average of all employees

Increase in base salary 1
%

Increase in benefits
%

Increase in annual variable pay
%

12.7

4.8

None

51.8

2.4

1 As disclosed in the Company’s IPO Prospectus, Ian Sutcliffe’s base salary increased from £450,000 to £500,000 in advance of the IPO in February 2016.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.com
PERFORMANCE GRAPH AND TABLE CONTINUED
The relative importance of remuneration in relation to other significant uses of the Group’s cash is outlined below:

Total staff costs

Adjusted profit after tax

Taxation paid

Interest paid

2016
£m

70.8

73.2

12.8

7.2

2015
£m

61.1

24.8

8.0

5.6

DILUTION
The Group’s share plans comply with the Investment Association’s guidelines on dilution limits of 5 per cent in ten years for discretionary schemes
and 10 per cent in ten years for all schemes. As at 30 September 2016, the Group has utilised 2.7 per cent of the 10 per cent in ten years limit and
1.8 per cent of the 5 per cent in ten years limit.

REMUNERATION COMMITTEE
The Remuneration Committee assists the Board in determining its responsibilities in relation to remuneration, including making recommendations
to the Board on the Company’s policy on executive remuneration, setting the overarching principles, parameters and governance framework of the
Group’s remuneration policy and determining the individual remuneration and benefits package of each of the Company’s Executive Directors and its
Company Secretary.

The Remuneration Committee will also ensure compliance with the UK Corporate Governance Code in relation to remuneration. The UK Corporate
Governance Code provides that a remuneration committee should comprise at least three members who are Independent Non-Executive Directors
(other than the Chairman).

ADVISORS
During the financial year PricewaterhouseCoopers LLP (“PwC”) and New Bridge Street (“NBS”), part of Aon Hewitt plc, provided independent advice
to the Committee; NBS was appointed by the Committee following Admission. Neither NBS nor Aon provide any other services to the Company. The
Committee is satisfied that the advice received by NBS in relation to executive remuneration matters during the year was objective and independent. Terms
of engagement are available on request from the Company Secretary. Both PwC and NBS are members of the Remuneration Consultants’ Group and abide
by the Remuneration Consultants’ Group Code of Conduct, which requires its advice to be objective and impartial. The fees paid to PwC for advice during
the year were £109,000 (excluding VAT). There were no fees paid to NBS for providing advice in relation to executive remuneration during this financial
year. The advice provided primarily related to assisting with the Directors’ Remuneration Report and communication of the post-IPO remuneration
practices.

STATEMENT OF SHAREHOLDER VOTING
As Countryside has not held an AGM since Admission no voting outcomes are available. Details of remuneration-related voting outcomes will be published
in next year’s Directors’ Remuneration Report.

APPROVAL
This report and policy was approved by the Board of Directors on 28 November 2016 and signed on its behalf by:

Amanda Burton
Chairman of the Remuneration Committee

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE
DIRECTORS’ REPORT

DIRECTORS’ REPORT

The Directors present their report and the audited ﬁnancial statements
of Countryside Properties PLC (the “Company”) and its subsidiaries
(together the “Group”) for the year ended 30 September 2016.

The Directors’ Report comprises pages 70 to 72 of this report, in addition to the sections of
the Annual Report incorporated by reference, including the Board biographies, the Corporate
Governance Report, the Audit Committee Report, the Nomination Committee Report and the
Directors’ Remuneration Report.

In accordance with the UK Financial Conduct Authority’s Listing Rules (LR 9.8.4C), the information
to be included in the Annual Report and Accounts, where applicable, under LR 9.8.4, is set out in
this Directors’ Report, with the exception of the information set out in the table below, which can
be found at the location specified.

Listing rule

LR 9.8.4 (4)

LR 9.8.4 (11)

LR 9.8.4 (14)

Information

Location

Details of long-term incentive schemes as
required by LR 9.4.3, regarding information
about the recruitment of a director

Details of contracts for the provision of services
to the Company by a controlling shareholder

Details of transactions with controlling
shareholders

Not applicable

GENERAL INFORMATION
Countryside Properties PLC is a public limited
company, listed on the London Stock Exchange,
incorporated and domiciled in the UK. The registered
address of the Company is Countryside House,
The Drive, Brentwood, Essex CM13 3AT. The
Company acts as the holding company and
ultimate parent for the Group.

PRINCIPAL ACTIVITIES AND
STRATEGIC REPORT
Countryside is a UK home builder and urban
regeneration partner operating in London and
the South East of England and with a presence in
the West Midlands and the North West of England.
We operate through two divisions: Housebuilding
and Partnerships. Our Strategic Report on pages
2 to 39 sets out detailed information on the Group
and its strategy, its principal activities, the operation
of the businesses and the results and ﬁnancial
position for the year ended 30 September 2016.
Information on the principal risks and uncertainties
facing the Group, trends and economic factors
impacting the business and likely future developments
can also be found in the Strategic Report.

DIRECTORS AND THEIR INTERESTS
There were no changes to the Board during the
reporting period and up to the date of this report.
For more details on the members of the Board,
see page 42 to 43. The Corporate Governance
Report on page 44 gives more information on
how the Board functioned during the year.
The Directors’ interests in the shares and share
options of the Company are shown on page 66
of the Remuneration Report.

SIGNIFICANT CONTRACTUAL
AGREEMENTS
The Strategic Report describes the most
important customer and supplier contracts
and other arrangements essential to the Group.
We do not consider ourselves to be dependent
on any single contractual agreement. Countryside
entered into a new £300m revolving credit facility
on 12 May 2016. The facility will expire in May 2021
and has the potential to be extended by a further
year on each of the first and second anniversaries
of signing with the banks’ consent.

RELATIONSHIP AGREEMENT WITH
CONTROLLING SHAREHOLDERS
Where a listed company has a controlling
shareholder, it is required to have in place at all
times a written and legally binding agreement
which is intended to ensure that the controlling
shareholder complies with the independence
provisions set out in LR 6.1.4D. A “controlling
shareholder” is defined as any person who
exercises or controls on their own, or together
with any person with whom they are acting in
concert, 30 per cent or more of the votes able
to be cast on all or substantially all matters
at general meetings of a company. LR 6.1.4D
requires that the agreement must contain
undertakings that:

(a) transactions and arrangements with the
controlling shareholder (and/or any of its
associates) will be conducted at arm’s length
and on normal commercial terms;

(b) neither the controlling shareholder nor any of
its associates will take any action that would
have the effect of preventing the listed company
from complying with its obligations under the
Listing Rules; and

(c) neither the controlling shareholder nor any of
its associates will propose or procure the proposal
of a shareholder resolution which is intended
or appears to be intended to circumvent the
proper application of the Listing Rules.

The Board confirms that, in accordance with the
Listing Rules, on 29 January 2016, the Company
entered into such an agreement (the “Relationship
Agreement”) with, among others, OCM Luxembourg
Coppice Topco S.Á R.L. and various Oaktree
funds* (together, the “Oaktree Shareholders”)
who currently have a combined total holding
of approximately 56 per cent of the Company’s
voting rights. Under the terms of the Relationship
Agreement, the Oaktree Shareholders have agreed
to the independence obligations contained in the
Relationship Agreement.

The Oaktree funds are: Oaktree Opportunities Fund VIIIb, L.P.,
Oaktree Opportunities Fund VIIIb, (Parallel), L.P., Oaktree
Opportunities Fund IX, L.P., Oaktree Opportunities Fund IX
(Parallel), L.P., Oaktree Opportunities Fund IX (Parallel 2), L.P.,
Oaktree European Principal Fund III, L.P. and Oaktree
European Principal Fund III (Parallel), L.P.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comThe Board confirms that, since the entry into the
Relationship Agreement on 29 January 2016 until
14 November 2016, being the latest practicable
date prior to the publication of this Annual Report:

(i) the Company has complied with the

independence provisions included in the
Relationship Agreement; and

(ii) so far as the Company is aware, the

independence provisions included in the
Relationship Agreement have been complied
with by the Oaktree Shareholders and
their associates.

As there are no controlling shareholders of the
Company other than the Oaktree Shareholders
(if and when they have an interest exceeding
30 per cent), there is no need for the Relationship
Agreement to require the Oaktree Shareholders
to procure compliance by any third parties with
the independence provisions of the
Relationship Agreement.

SIGNIFICANT AGREEMENTS –
CHANGE OF CONTROL
Upon a change of control of Countryside
Properties PLC, a number of signiﬁcant
agreements take effect, alter or terminate
as follows:

– Revolving credit facility: Under the terms of
the £300m revolving credit facility, entered
into on 12 May 2016, and provided by a syndicate
of banks to Countryside Properties PLC, the
lenders may, following such change in control,
elect to continue to provide such facility, or
alternatively cancel it and require all monies
borrowed under such facility to be repaid.

– Directors and employees: There are no
agreements between the Company and
its Directors or employees providing for
compensation for loss of ofﬁce or employment
that occur because of a takeover bid or
change of control.

EQUAL OPPORTUNITIES
The Group is committed to employment policies
which follow best practice based on equal
opportunities for all employees, irrespective of
gender, race, nationality, colour, disability, marital
status, sexual orientation, age or religion. All
decisions relating to employment practices are
objective, free from bias and based upon work

SUBSTANTIAL SHAREHOLDINGS
At 14 November 2016, being the latest practicable date prior to the publication of this Annual
Report, the Company has been notified of the following interests amounting to three per cent
or more of the voting rights in the issued share capital of the Company:

Non-controlling interest

Interest in Countryside subsidiaries

56.1%

6.0%

4.0%

INDEPENDENT AUDITORS
The Board is satisfied that PricewaterhouseCoopers
LLP (“PwC”) remained independent for the purpose
of the 2016 audit. During 2016 the Company
initiated a competitive tender process for the
audit contract. A number of contending candidates
were invited to tender for the role of auditors
of the Company. After a thorough review of
the potential candidates, the Audit Committee
concluded that PwC was the most suitable
provider. Upon the Audit Committee’s
recommendation, the Board approved the
recommendation and the re-appointment
of PwC will be presented to shareholders for
approval as the Company’s auditors at the 2017
Annual General Meeting. Information about
non-audit services obtained from PwC can be
found in the Audit Committee Report on page 47.

CORPORATE GOVERNANCE
A report on Countryside’s corporate governance
framework, together with its compliance with the
principles and provisions of the UK Corporate
Governance Code, can be found in the Corporate
Governance Report on page 44. The Corporate
Governance Report forms part of this Directors’
Report and is incorporated into it by cross-reference.

OCM Luxembourg Coppice Topco s.a.r.l.

Aviva Investors

Members of senior management

criteria and individual merit. The Group’s policy
is to offer appropriate training and career
development to disabled persons that are, as far
as possible, identical to other employees and in
line with best practice. In the event of a member
of staff becoming disabled, the Group makes
every effort to continue employment, arrange
appropriate retraining and offer opportunities for
promotion. For more information on our diversity
statistics, please refer to the “Our People”
section on page 30.

EMPLOYEE INVOLVEMENT
The Group systematically provides employees
with information on matters of concern to them,
consulting them or their representatives regularly,
so that their views can be taken into account when
making decisions that are likely to affect their
interests. Employee involvement in the Group is
encouraged, a common awareness on the part of
all employees of the financial and economic factors
affecting the Group plays a major role in maintaining
the Group’s customer-focused approach. For more
information on how the Group engages its
employees, refer to page 30 of the report. For
more information on how employees can participate
in the Group’s performance through membership
of the LTIP and SAYE employee share schemes,
refer to page 114 of the report.

POLICY ON FINANCIAL INSTRUMENTS
The policy with respect to ﬁnancial instruments is
covered in the accounting policy (Note 3) to the
ﬁnancial statements. The notes to the financial
statements include the Company’s policies and
processes for managing its capital; its financial risk
management objectives; details of its financial
instruments and hedging activities; and its
exposures to credit risk and liquidity risk.

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE
DIRECTORS’ REPORT
CONTINUED

POLITICAL CONTRIBUTIONS
The Group does not make political contributions.

DIVIDEND
The Directors recommend the payment of a final
dividend of 3.4 pence (no prior year is available for
comparison) per ordinary share which, if approved
by shareholders at the Annual General Meeting, will
be paid on 3 February 2017 to those shareholders
on the register at the close of business on
13 January 2017.

POWER OF THE DIRECTORS
Subject to the Company’s Articles of Association,
the Companies Act and any directions given by
the Company by special resolution, the business
of the Company will be managed by the Board
which may exercise all powers of the Company.

DIRECTORS’ INDEMNITIES
By means of a Deed of Indemnity entered into
separately by the Company and each Director,
there is a qualifying third party indemnity provision
(as per the Companies Act 2006) that provides,
for the ﬁnancial year ended 30 September 2016
and as at the date of this document, that the Company
may pay for Directors’ indemnities out of its own
assets. The Company has obtained directors’
and ofﬁcers’ insurance for this purpose.

SHARE CAPITAL
At the date of this report, 450,000,000 ordinary
shares (the same number as at Admission to the
London Stock Exchange) of £0.01 each have been
issued, are fully paid up and are admitted to trading
on the London Stock Exchange. The Company’s
Articles of Association, copies of which can be
obtained from the Company’s website, set
out the rights and obligations attaching to the
Company’s ordinary shares, as well as the powers
of the Company’s Directors.

Details of employee share schemes are provided
in Note 30 to the Group financial statements.

PURCHASE OF THE COMPANY’S
OWN SHARES
During the course of the reporting period, the
Company made no purchases of its own shares in
accordance with the authority granted at Admission.

STATEMENT OF DISCLOSURE OF
INFORMATION TO AUDITORS
Each Director of the Company confirms that, as
far as each Director is aware, there is no relevant
audit information of which the Company’s auditors
are unaware and that each of the Directors has
taken all the steps they ought to have taken individually
as a Director in order to make themselves aware
of any relevant audit information and to establish
that the Company’s auditors are aware of
that information.

GOING CONCERN
The Directors have reviewed the liquidity
position of the Group for the 12-month period
from 28 November 2016. The cash ﬂows of the
Group have been assessed against the Group’s
available sources of ﬁnance on a monthly basis to
determine the minimum and maximum expected
levels of headroom. Based on this analysis and
an assessment of the potential cash risks, the
Directors have a reasonable expectation that
the Group has adequate resources to continue
in operational existence for at least 12 months
from the date of this report. The Group
therefore continues to adopt the going concern
basis in preparing its consolidated ﬁnancial
statements. The Directors’ Viability Statement
can be found in the Strategic Report on page 37.

An outlook statement can be found in the Group
Chief Executive’s Review on page 7.

CARBON EMISSIONS
Details of the Group’s approach to the environment,
including information in relation to its carbon
emissions, are set out in the section headed
“Environment” on page 33, forming part of the
Sustainability Report of the Annual Report on
page 32.

WE HAVE DEVOTED
SIGNIFICANT TIME AND
EFFORT TO ENSURE
GROUP COMPLIANCE
WITH RECENT
LEGISLATION, SUCH AS
THE MODERN SLAVERY
ACT AND THE MARKET
ABUSE REGIME.

ANNUAL GENERAL MEETING
The Annual General Meeting of the Company
will be held at Linklaters LLP, One Silk Street,
London EC2Y 8HQ at 2.30 pm on 26 January 2017.
The notice convening the meeting, together with
details of the business to be considered and
explanatory notes for each resolution, is
distributed separately to shareholders. It
is also available on our website.

By order of the Board

Gary Whitaker
Company Secretary
28 November 2016

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comDIRECTORS’ RESPONSIBILITY STATEMENT

DIRECTORS’
RESPONSIBILITY STATEMENT

The Directors are responsible for preparing the Annual Report,
the Directors’ Remuneration Report and the financial statements
in accordance with applicable law and regulations.

The Directors are responsible for the maintenance
and integrity of the Company’s website. Legislation
in the United Kingdom governing the preparation
and dissemination of financial statements may
differ from legislation in other jurisdictions.

The Directors consider that the Annual Report
and Accounts, taken as a whole, is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Company’s
performance, business model and strategy.

Each of the Directors, whose names and functions
are listed on page 42 to 43 of the Annual Report,
confirm that, to the best of their knowledge:

– the Group financial statements, which have
been prepared in accordance with IFRSs as
adopted by the EU, give a true and fair view
of the assets, liabilities, financial position and
profit of the Group; and

– the Directors’ Report contained on page 70
of the Annual Report includes a fair review
of the development and performance of the
business and the position of the Group,
together with a description of the principal
risks and uncertainties that it faces.

By order of the Board

Ian Sutcliffe
Group Chief Executive
28 November 2016

Rebecca Worthington
Group Chief Financial Officer
28 November 2016

Company law requires the Directors to prepare
financial statements for each financial year. Under
that law the Directors have prepared the Group
financial statements in accordance with International
Financial Reporting Standards (“IFRSs”) as adopted
by the European Union, and the parent company
financial statements in accordance with Financial
Reporting Standard 102 (FRS 102) the financial
reporting standard applicable in the UK and
Republic of Ireland (FRS 102).

Under company law the Directors must not
approve the financial statements unless they are
satisfied that they give a true and fair view of the
state of affairs of the Group and the Company
and of the profit or loss of the Group for that
period. In preparing these financial statements,
the Directors are required to:

– select suitable accounting policies and then

apply them consistently;

– make judgements and accounting estimates

that are reasonable and prudent;

– state whether IFRSs as adopted by the European
Union and FRS 102 have been followed, subject
to any material departures disclosed and
explained in the Group and parent company
financial statements respectively;

– notify its shareholders in writing about the
use of disclosure exemptions, if any, of FRS
102 used in the preparation of the parent
financial statements; and

– prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business.

The Directors are responsible for keeping
adequate accounting records that are sufficient to
show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the
financial position of the Company and the Group
and enable them to ensure that the financial
statements and the Directors’ Remuneration
Report comply with the Companies Act 2006
and, as regards the Group financial statements,
Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the
Company and the Group and hence for taking
reasonable steps for the prevention and detection
of fraud and other irregularities.

COUNTRYSIDE PROPERTIES PLC

GOVERNANCE
INDEPENDENT AUDITOR’S REPORT
to the members of Countryside Properties PLC

REPORT ON THE GROUP FINANCIAL STATEMENTS

Our opinion
In our opinion, Countryside Properties PLC’s Group financial statements (the ‘financial statements’):

– Give a true and fair view of the state of the Group’s affairs as at 30 September 2016 and of its profit and cash flows for the year then ended;

– Have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the European Union; and

– Have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.

What we have audited
The financial statements, included within the Annual Report and Financial Statements (the ‘Annual Report’), comprise:

– The consolidated statement of financial position as at 30 September 2016;

– The consolidated statement of comprehensive income for the year then ended;

– The consolidated cash flow statement for the year then ended;

– The consolidated statement of changes in equity for the year then ended; and

– The notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements. These are
cross‑referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted by the European Union
and applicable law.

Our audit approach
Context
Countryside Properties PLC is a British housebuilder and urban regeneration company listed on the London Stock Exchange. The Group is wholly
UK based, operating in London and the South East of England, and with a presence in the North West of England through its Partnerships division.

The Group is dependent on macroeconomic factors as well as the conditions of the UK residential property market. The Group may be particularly adversely
affected by any factor that reduces sales prices or transaction volumes or presents constraints in the supply chain in the UK residential property market. This
was particularly relevant for our work in the areas of margin forecasting and the valuation of inventory.

Overview

– Overall Group materiality: £4.6m, which represents 5 per cent of profit before tax, adjusted for

non‑underlying items.

Materiality

– The Group operates in two business segments, Partnerships and Housebuilding, as set out in the
Annual Report (refer to pages 18 to 25). Each of the operating segments is broken down into
a number of reporting units which are consolidated into the Group financial statements along
with central reporting entities.

– Reporting units from both segments were included in the scope of our work and the Group

audit team performed an audit of the financial information at each of these locations.

– In both segments we focused on auditing the complete financial information of the larger

reporting units to give us appropriate coverage. We performed audit work over the complete
financial information of reporting units which accounted for approximately 99.7 per cent of
the Group’s revenues and 98.8 per cent of the Group’s profit before tax.

– Included in the coverage above, the central reporting entities and group functions, together

with the parent company, were subject to a full scope audit.

Audit scope

Areas of focus

– Cost forecast and margin estimates.

– Land and stock valuation.

– Commercial transactions (land).

– Accounting for the IPO & related non‑underlying items.

– Shared equity valuation.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comREPORT ON THE GROUP FINANCIAL STATEMENTS CONTINUED
Our audit approach continued
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’).

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked
at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of Management override of internal controls,
including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified as ‘areas
of focus’ in the table below. We have also set out how we tailored our audit to address these specific areas in order to provide an opinion on the financial
statements as a whole, and any comments we make on the results of our procedures should be read in this context. This is not a complete list of all risks
identified by our audit.

Area of focus

How our audit addressed the area of focus

Cost forecast and margin estimates
Refer to Note 3 (Accounting policies) and Note 2 (Critical accounting policies).

The Group’s margin recognition framework is based on the margin forecast for each
site. These margins, which drive the recognition of costs as each unit is sold, reflect
estimated selling prices and costs for each development. This process is effectively
a method of allocating the total forecast costs, representing both land and build
costs of a development over each individual unit.

There is a risk that the margin forecast for the site and the margin subsequently
recognised on each unit sale is not appropriate and reflective of the actual final
profit margin that will be recognised on a development.

We consider the appropriate margin recognition across the life of the site to be
the most significant financial reporting risk for the Group, principally due to the
high level of Management judgement involved in the accounting for the Group’s
developments given that sales prices and build costs are inherently uncertain
and are influenced by changes in external market factors, such as the availability
of mortgages or build cost inflation.

Land and stock valuation
Refer to Note 3 (Accounting policies) and Note 2 (Critical accounting policies).

Inventory is comprised of land held for development, work in progress, raw
materials and completed units/part‑exchanged properties.

Inventory is the most significant balance in the consolidated statement of financial
position and is held at the lower of cost and net realisable value (‘NRV’). The NRV
of each development is forecast and monitored as described in the area of focus
above and is therefore subject to the same key assumptions. Due to the influence of
the same external factors and the cyclical nature of the housing industry, with
periodic downturns in customer demand, there is a risk that the calculation of the
development’s NRV, being the margin the development is forecast to make over its
lifecycle based upon forecast sales prices and build costs, may be subject to
estimation error leading to inventory being held at an incorrect value and an
unrecorded impairment charge.

Commercial land transactions
Refer to Note 3 (Accounting policies).

The Group enters into commercial land transactions from time to time. The nature
of these transactions can be complex and bespoke. The format of the agreements
introduces potential accounting complexities in order to appropriately reflect the
terms of the agreements.

Due to their complex nature, we focused on them to ensure that the accounting
reflected the underlying agreements.

We evaluated and tested Management’s forecasting and monitoring controls for the sites
(including the margin), noting that Management’s forecasts are prepared, monitored and
updated in accordance with the documented controls.

We held discussions with Management to understand the status and progress of a sample of sites.

We assessed the appropriateness of certain underlying assumptions within the forecasts,
including sales prices, land costs and build costs and assessed Management’s historic forecasting
accuracy. We did not identify any sites where we considered the underlying assumptions
in the forecast to be inappropriate.

We assessed the historical accuracy of Management’s forecasting through review of actual
margins achieved on completed sites compared to initial expected margins, noting no
significant adverse trends.

We checked the consistent application of the margin recognition framework through
analysing the margins recognised on different phases within the same sites. We obtained
evidence for any variances.

We tested a sample of sales prices to cash receipts to support the revenue recognised
noting no material exceptions.

We tested a sample of costs incurred to third party supplier invoices noting no material exceptions.

We obtained an understanding of Management’s process for preparing a site forecast,
consistent with the risk associated with the margin forecasting and recognition process.
The site forecast, which is used to recognise margin in the consolidated income statement,
also calculates the NRV of the site. Consistent with the risk associated with the margin
forecasting and recognition, we evaluated Management’s controls over the approval of the
initial forecasts and the monitoring of updates required to the forecasts over the course of
the site’s life, noting no significant instances where controls were not operating as stated.

We considered margins for all major sites to identify those with low or eroding margins, due
to specific issues or underperformance. We discussed the identified sites with Management,
including considering the level of provisions, if any, held against these sites and corroborated
the explanations with available external evidence in respect of the carrying value of inventory.

We also assessed the historical accuracy of Management’s forecasting as set out in the
area of focus on cost forecasts and margin estimates.

We discussed the planning status and strategic plans for sites with Management. We
confirmed the composition of the inventory balance, specifically the level and ageing
of completed but unreserved units, to understand if completed stock is held at the
appropriate NRV. We did not note a significant number of aged, completed but
unreserved units which needed further follow up.

Based on the procedures performed, we did not identify any sites where we determined that
additional impairments were required in the year, above those already booked by Management.

We held discussions with Management to understand the substance of material
commercial land transactions.

Where applicable, we reviewed Management’s papers on the proposed accounting
treatment of the transactions.

We substantively tested material or complex land acquisitions through examination of
contracts and agreements to check that the acquisition and subsequent overage terms
have been identified and accounted for appropriately, and that all the related liabilities have
been properly recorded in the financial statements.

Where relevant we agreed cash payments and receipts to completion statements and
bank statements.

We assessed the accounting treatment of the transactions against relevant accounting
standards.

We were satisfied that Management had appropriately accounted for these transactions.

COUNTRYSIDE PROPERTIES PLC

FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT CONTINUED
to the members of Countryside Properties PLC

REPORT ON THE GROUP FINANCIAL STATEMENTS CONTINUED
Our audit approach continued
The scope of our audit and our areas of focus continued

Area of focus

How our audit addressed the area of focus

Accounting for the IPO and related non-underlying items
Refer to Note 3 (Accounting policies).

As a result of the flotation of the business in February 2016, a number of changes
to the Group structure occurred. As the associated accounting entries arising are
material in size and outside the ordinary course of business, we considered there to
be a risk around the accounting for these transactions.

As part of the flotation process, significant costs were incurred by the Group.

Separately identifying and disclosing items as non‑underlying on the face of the
consolidated income statement requires judgement as such presentation could be
misleading to investors.

There is the potential for Management bias, as well as the inappropriate inclusion of
inconsistent transactions or those that should be deemed part of ordinary ongoing
Group activity.

In auditing the accounting treatment of the flotation, we:

–

discussed the accounting transactions with Management and assessed them for
reasonableness;

corroborated the accounting entries posted by Management to those arising from the
transaction; and

traced significant monetary transactions to bank statements and contractual
agreements.

We were satisfied that the significant transactions associated with the restructuring as a
result of the IPO has been appropriately accounted for.

In auditing the appropriateness of the classification of items as non‑underlying items for
external reporting purposes, we:

–

gained an understanding from Management of the nature of the transactions and
amounts presented as non underlying items to understand Management’s rationale;

discussed the rationale behind Management’s classification and assessed the
appropriateness of the transactions recognised as non‑underlying items using our
knowledge of the business, inquiries of Management, examination of documents
supporting the strategic change and related reorganisation, and through consideration
of expenses that are typically connected with restructuring activities.

assessed the completeness and balance of non‑underlying items through identifying
other large or unusual items in underlying profit, considering potential disclosure
where significant.

agreed a sample of expenses invoices, and verified payments made to bank statements
to conclude on the existence and accuracy of classification.

Inspected the consistency with which items are classified as non‑underlying as presented
by Management. We were satisfied that the classification, judgements and disclosures
made by Management are appropriate and in line with the Group accounting policy
on non‑underlying items.

Shared equity valuation (available for sale financial assets)
Refer to Note 3 (Accounting policies) and Note 2 (Critical accounting policies).

We evaluated and tested the mechanics of the calculation to check the correct application
of the underlying assumptions and accuracy of the calculation, noting no material exceptions.

The Group has advanced loans to homebuyers to assist them in the purchase
of their property under shared equity schemes. These loans are held as available
for sale financial assets in the balance sheet and are held at fair value.

The valuation method for these assets is not capable of being based on observable
market data and therefore the valuation model is highly subjective to Management
judgement and estimates, including expected house price movements, credit risk of
borrowers, discount rates (which incorporate purchaser default rates), recoverability
and expected timing of receipt.

Changes in the assumptions used can have a material impact on the fair value of
these assets.

We tested movements in the underlying loans during the year, such as redemptions and obtained
examples of the original loan agreements to verify terms of the loans used within the calculation.

Through discussion with Management and review of the calculation we understood
the key assumptions included within the calculation including expected house price
movements, discount rates, recoverability and expected timing of receipt.

We corroborated these assumptions by comparing those selected by Management to
comparable discount rates used by similar companies, and our own independent research
on house prices and redemption rates.

In addition to re‑performing Management’s sensitivities we performed our own
sensitivities based upon our own independent research to ascertain the extent to which
reasonable adverse changes would, either individually or in aggregate, materially change
the valuation of the assets. Our sensitivities noted no reasonable likely scenario that
would result in a material change to the valuation.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comREPORT ON THE GROUP FINANCIAL STATEMENTS CONTINUED
Our audit approach continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking
into account the geographic structure of the Group, the accounting processes and controls and the industry in which the Group operates.

The Group is structured into two segments, Housebuilding and Partnerships. These are then further structured into seven operating divisions, five for
Housebuilding and two for Partnerships. Each of the divisions is broken down into a number of reporting units (which also include joint ventures) that are
consolidated into the Group financial statements, along with the centralised functions.

The reporting units vary in size and we identified 17 reporting units which required an audit of their complete financial information due to their individual
size. These 17 reporting units were all audited by the Group engagement team and, where applicable, included the audit of the joint ventures. In some of the
divisions we audited complete financial information of all the reporting units and in some we focused on the larger reporting units to give us appropriate
coverage. The reporting units where we performed an audit of the complete financial information accounted for 98.8 per cent of the Group’s profit before
tax and 99.7 per cent of the Group’s revenue.

Our audit work at these reporting units, together with the additional procedures performed at Group level on the consolidation, joint venture adjustments,
tax, share based payments and the ‘available for sale financial assets’, gave us the evidence we needed for our opinion on the Group and Company financial
statements as a whole.

Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall Group materiality

£4.6m.

How we determined it

5 per cent of profit before tax, adjusted for non‑underlying items.

Rationale for benchmark applied

Based on our professional judgement, we determined materiality by applying a benchmark of 5% of profit before tax
excluding non‑underlying items. We believe that underlying profit before tax is the most appropriate measure as it
eliminates any disproportionate effect of non‑underlying charges and credits and provides a consistent year‑on‑year
basis for our work.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.2m as well as misstatements below
that amount that, in our view, warranted reporting for qualitative reasons.

Going concern
Under the Listing Rules we are required to review the directors’ statement, set out on page 72, in relation to going concern. We have nothing to report
having performed our review.

Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to the directors’
statement about whether they considered it appropriate to adopt the going concern basis in preparing the financial statements. We have nothing material to
add or to draw attention to.

As noted in the directors’ statement, the directors have concluded that it is appropriate to adopt the going concern basis in preparing the financial
statements. The going concern basis presumes that the Group has adequate resources to remain in operation, and that the directors intend it to do so, for
at least one year from the date the financial statements were signed. As part of our audit we have concluded that the directors’ use of the going concern
basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s ability to
continue as a going concern.

OTHER REQUIRED REPORTING
Consistency of other information
Companies Act 2006 reporting
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared
is consistent with the financial statements.

ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:

– Information in the Annual Report is:

– Materially inconsistent with the information in the audited financial statements; or
– apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired

in the course of performing our audit; or

– otherwise misleading.

– The statement given by the directors on page 73, in accordance with provision C.1.1 of the UK Corporate Governance
Code (the ‘Code’), that they consider the Annual Report taken as a whole to be fair, balanced and understandable and
provides the information necessary for members to assess the Group’s position and performance, business model and
strategy is materially inconsistent with our knowledge of the Group acquired in the course of performing our audit.

We have no exceptions
to report.

– The section of the Annual Report on page 47, as required by provision C.3.8 of the Code, describing the work of the

Audit Committee does not appropriately address matters communicated by us to the Audit Committee.

We have no exceptions
to report.

COUNTRYSIDE PROPERTIES PLC

FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT CONTINUED
to the members of Countryside Properties PLC

OTHER REQUIRED REPORTING CONTINUED
The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity
of the Group
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to:

– The directors’ confirmation on page 36 of the Annual Report, in accordance with provision C.2.1 of the Code, that

they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten
its business model, future performance, solvency or liquidity.

– The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.

– The directors’ explanation on page 37 of the Annual Report, in accordance with provision C.2.2 of the Code, as to how
they have assessed the prospects of the Group, over what period they have done so and why they consider that period
to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.

We have nothing material to
add or to draw attention to.

Under the Listing Rules we are required to review the directors’ statement that they have carried out a robust assessment of the principal risks facing the
Group and the directors’ statement in relation to the longer‑term viability of the Group. Our review was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process supporting their statements; checking that the statements are in alignment with the
relevant provisions of the Code; and considering whether the statements are consistent with the knowledge acquired by us in the course of performing
our audit. We have nothing to report having performed our review.

Adequacy of information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information and explanations we require
for our audit. We have no exceptions to report arising from this responsibility.

Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified by law are not
made. We have no exceptions to report arising from this responsibility.

Corporate governance statement
Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to ten further provisions of the Code. We have
nothing to report having performed our review.

RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT
Our responsibilities and those of the Directors
As explained more fully in the directors’ responsibility statement set out on page 73, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the
Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:

– Whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed;

– The reasonableness of significant accounting estimates made by the directors; and

– The overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements, and evaluating
the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for
us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non‑financial information in the Annual Report to identify material inconsistencies with the audited financial statements
and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

OTHER MATTER
We have reported separately on the Company financial statements of Countryside Properties PLC for the year ended 30 September 2016 and on the
information in the Directors’ Remuneration Report that is described as having been audited.

Christopher Burns (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
28 November 2016

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2016

Revenue

Cost of sales

Gross profit

Administrative expenses

Group operating profit

Analysed as:

Adjusted Group operating profit

Less: share of associate and joint ventures’ operating profit

13, 14

(25,260)

Less: non‑underlying items

Group operating profit

Finance costs

Analysed as:

Adjusted finance costs

Less: non‑underlying finance costs

Finance costs

Finance income

Share of post‑tax profit from associate and joint ventures

13, 14

Note

2016
£’000

2015
£’000

671,258

547,486

(527,200)

(431,690)

144,058

115,796

(56,731)

(47,870)

87,327

67,926

122,468

(9,881)

91,166

(16,685)

(6,555)

87,327

67,926

(30,518)

(52,294)

(27,341)

(52,294)

(3,177)

—

(30,518)

(52,294)

2,175

19,593

78,577

(17,273)

1,803

10,584

28,019

(8,186)

61,304

19,833

61,074

19,623

230

210

61,304

19,833

Profit before income tax

Income tax expense

Profit for the year

Profit is attributable to:

– Owners of the parent

– Non‑controlling interests

Other comprehensive income

Items that may be reclassified to profit and loss

(Decrease)/increase in the fair value of available‑for‑sale financial assets

(1,501)

443

Total comprehensive income for the year

Total comprehensive income for the year attributable to:

– Owners of the parent

– Non‑controlling interest

Earnings per share (expressed in pence per share):

Basic

Diluted

Revenue and operating profits arise from the Group’s continuing operations.

59,803

20,276

59,573

230

20,066

210

59,803

20,276

13.6

4.4

COUNTRYSIDE PROPERTIES PLC

FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2016

Assets

Non-current assets

Intangible assets

Property, plant and equipment

Investment in joint ventures

Investment in associate

Available‑for‑sale financial assets

Deferred tax assets

Trade and other receivables

Current assets

Inventories

Trade and other receivables

Cash and cash equivalents

Total assets

Liabilities

Current liabilities

Overdrafts

Trade and other payables

Current income tax liabilities

Provisions

Non-current liabilities

Borrowings

Trade and other payables

Provisions

Total liabilities

Net assets

Equity

Share capital

Share premium

Reserves

Equity attributable to owners of the parent

Equity attributable to non‑controlling interest

Total equity

The notes on pages 83 to 116 form part of these financial statements.

These financial statements were approved by the Board of Directors on 28 November 2016.

On behalf of the Board

I Sutcliffe
R Worthington
Directors

COUNTRYSIDE PROPERTIES PLC

Note

2016
£’000

2015
£’000

58,923

2,659

53,907

5,235

8,665

3,318

10,782

59,453

2,406

50,097

4,164

10,535

5,606

15,355

143,489

147,616

583,602

147,912

38,301

439,542

105,450

80,835

769,815

625,827

913,304

773,443

(26,340)

—

(177,441)

(181,140)

(6,090)

(818)

(4,043)

(1,144)

(210,689)

(186,327)

—

(423,842)

(109,044)

(148,930)

(685)

(1,110)

(109,729)

(573,882)

(320,418)

(760,209)

592,886

13,234

4,500

—

1,075

587,923

11,907

592,423

463

13,001

233

592,886

13,234

countryside-properties.com
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2016

Note

Share
capital
£’000

Share
premium
£’000

Retained
earnings
£’000

Available‑for‑sale
financial assets
(Note 15)
£’000

Equity
attributable
to owner
£’000

Non‑controlling
interest
£’000

Total
equity
£’000

870

(10,591)

1,122

(8,581)

(8,558)

At 1 October 2014

Comprehensive income

Profit for the period

Other comprehensive income

Total comprehensive income

Transactions with owners

Share‑based payment expense
pre‑IPO

Proceeds from issue of shares

Total transactions with owners

At 30 September 2015

Comprehensive income

Profit for the period

Other comprehensive income

Total comprehensive income

Transactions with owners

Share‑based payment expense –
pre‑IPO

Share‑based payment expense –
post‑IPO, net of deferred tax

Group reorganisation

Total transactions with owners

At 30 September 2016

—

205

19,623

—

19,623

1,310

—

1,310

—

443

—

19,623

443

20,066

1,310

206

1,516

210

—

210

—

19,833

443

20,276

1,310

206

1,516

1,075

10,342

1,565

13,001

233

13,234

61,074

—

(1,501)

61,074

(1,501)

61,074

(1,501)

59,573

—

1,910

1,278

4,481

4,500

(1,075)

513,255

(1,075)

516,443

—

587,859

1,910

1,278

516,661

519,849

—

230

—

230

—

61,304

(1,501)

59,803

1,910

1,278

516,661

519,849

592,423

463

592,886

COUNTRYSIDE PROPERTIES PLC

FINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 September 2016

Cash (used in)/generated from operations

Interest paid

Tax paid

Net cash (outflow)/inflow from operating activities

Cash flows from investing activities

Purchase of intangible assets

Purchase of property, plant and equipment

Proceeds from disposal of available‑for‑sale financial assets

Acquisition of subsidiary (net of cash acquired)

(Increase)/decrease in loans to associate and joint ventures

Interest received

Dividends received from associate and joint ventures

Net cash (outflow)/inflow from investing activities

Cash flows from financing activities

Proceeds from issue of ordinary shares

Transaction costs from issue of ordinary shares

Borrowing facility arrangement fee

Proceeds from borrowings

Repayment of borrowings

Net cash outflow from financing activities

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

Note

2016
£’000

(14,892)

(7,239)

(12,776)

2015
£’000

29,819

(5,648)

(8,035)

(34,907)

16,136

(743)

(925)

2,925

(1,951)

(30,977)

1,464

13,632

(16,575)

130,000

(4,610)

(2,776)

91,340

—

(1,514)

2,511

—

1,480

824

6,682

9,983

206

—

(231,346)

(13,000)

(17,392)

(12,794)

(68,874)

80,835

13,325

67,510

Cash and cash equivalents at the end of the period

11,961

80,835

COUNTRYSIDE PROPERTIES PLC

countryside-properties.com
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 September 2016

1. GENERAL INFORMATION
Countryside Properties PLC is a public limited company incorporated and domiciled in the United Kingdom whose shares are publicly traded on the
London Stock Exchange. The Company’s registered office is Countryside House, The Drive, Brentwood, Essex CM13 3AT.

The Group’s principal activities are building new homes and regeneration of public sector land.

The parent company financial statements are on pages 117 to 124.

Initial Public Offering (“IPO”)
The Company listed its shares on the London Stock Exchange on 17 February 2016.

These are the first full set of consolidated financial statements of Countryside Properties PLC following the reorganisation of the Group to facilitate the IPO.
The reorganisation is described below.

The consolidated financial statements have been prepared under the merger method of accounting because the transaction under which the Company became
the holding company of OCM Luxembourg Coppice Midco S.à r.l. (“Midco”) was a Group reconstruction with no change in the ultimate ownership of the
Group. All the shareholdings in Midco were exchanged via a share‑for‑share transfer on 11 February 2016. The Company did not actively trade at the time.

The result of the application of the capital reorganisation is to present the financial statements as if the Company had always owned the Group – the
financial statements, including comparatives, have been presented as a continuation of Midco. The prior year financial statements for Midco are available in
the Prospectus, prepared for the purpose of the IPO, which is available on the Group’s website: investors.countryside‑properties.com.

Group reorganisation
The principal steps of the Group reorganisation were as follows:

The Company was incorporated on 18 November 2015 as a public company limited by shares in the United Kingdom, with share capital of £1, consisting of
one ordinary share with a £1 nominal value. On 19 November 2015, the Company issued a further nine ordinary shares and 50,000 redeemable preference
shares, each of £1.

The Company became the ultimate holding company of the Group with Midco becoming the Company’s direct subsidiary on 11 February 2016 by way of a
share‑for‑share exchange. The insertion of the Company as a new holding company constitutes a Group reorganisation and the transaction is accounted for
as a capital reorganisation and merger relief applied in accordance with Section 612 of the Companies Act 2006.

The balance of outstanding mandatory redeemable preference shares of £287m and the associated accrued return of £111m as of 16 February 2016 was
transferred from the holders (being OCM Luxembourg Coppice Topco S.à r.l., being an entity controlled by Oaktree Capital Management L.P., and certain
members of the Group’s management) to the Company in exchange for 392 million ordinary shares in the Company, each of £1.

Under merger relief the shares issued in this transaction were recorded in the consolidated statement of financial position at the nominal value of the shares
issued plus the fair value of any additional consideration, which was recorded as a merger reserve in the Group financial statements. The assets and liabilities
of the subsidiaries are consolidated at book value in the Group financial statements and the consolidated reserves of the Group are adjusted to reflect the
statutory share capital, share premium and merger reserve of the Company as if it had always existed.

On 17 February 2016 the Company issued 57,777,778 additional shares, each of £1, for consideration of £130m, the balance being recorded as share
premium, in an IPO. As permitted by Section 610(2b) of the Companies Act 2006, £4.6m of the IPO costs have been charged to the share premium
account. The mandatory redeemable preference shares were redeemed on IPO.

On 9 March 2016, the Company undertook a court‑approved capital reduction, in which the nominal value of the ordinary shares was reduced to £0.01
each, which had the effect of reducing the merger reserve and share premium arising on IPO to £Nil.

2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group’s financial statements under International Financial Reporting Standards (“IFRS”) requires the Directors to make estimates
and assumptions that affect the application of policies and the reported amounts of assets, liabilities, income, expenses and related disclosures.

Critical accounting judgements
In the process of applying the Group’s accounting policies, which are described in Note 3, the Directors have made no individual judgements that have
a significant impact on the financial statements, apart from those involving estimates which are described below.

Key sources of estimation uncertainty
Estimates and underlying assumptions affecting the financial statements are based on historical experience and other relevant factors and are reviewed on
an ongoing basis. This approach forms the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other
sources. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based or as a result of new
information. Such changes are recognised in the year in which the estimate is revised.

The key assumptions about the future and key sources of estimation uncertainty that have a risk of causing a material adjustment to the carrying value
of assets and liabilities are described below.

Estimation of site profitability
In order to determine the profit or loss that the Group recognises on its developments and construction contracts in a specific period, the Group allocates
the total cost of each development, and construction contract between the proportion completing in the period and the proportion to complete in a future
period. The assessment of the total costs to be incurred requires a degree of estimation due to the long‑term nature of the Group’s activities and because
actual costs are subject to market fluctuations. Group management has established internal controls to review and ensure the appropriateness of estimates
made on an individual contract basis.

COUNTRYSIDE PROPERTIES PLC

FINANCIAL STATEMENTS
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES CONTINUED
Key sources of estimation uncertainty continued
Carrying value of inventory
Inventory generated through the normal course of business is recorded at the lower of cost and net realisable value. A financial appraisal is prepared and
updated monthly for each development, which records an estimate of future revenues and expenditure. As both future cost and sales prices fluctuate in line
with local market conditions, significant adverse variances in either costs or sales prices estimates could lead to an impairment of inventory. In circumstances
where forecast revenues are lower than anticipated expenditure, an inventory provision is made. This inventory provision may be reversed in future periods
when there is evidence of improved selling prices or reduced expenditure forecast on a development.

Available-for-sale financial assets
Available‑for‑sale financial assets comprise loans that have been advanced to homebuyers to assist in their purchase of property under historical shared
equity schemes. The loans are secured by either a first or second charge over the property and are either interest free or have interest chargeable from
the fifth year onwards.

The loans are held at fair value, which is based on an estimate of the future cash flows from the loans. The estimate considers the value of the property
based upon market conditions, including potential future house price increases, and possible borrower default. The loans are discounted at an interest rate
equivalent to that which would be payable for loans made against property by a third party.

3. ACCOUNTING POLICIES
Basis of preparation
These financial statements for the year to 30 September 2016 are those of the Company and all of its subsidiaries. It has been prepared in accordance with
the IFRS as endorsed by the European Union, IFRS Interpretations Committee (“IFRS IC”) interpretations and those parts of the Companies Act 2006
applicable to companies reporting under IFRS.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.

These financial statements have been prepared on a going concern basis, in Sterling and rounded to the nearest thousand pounds under the historical cost
convention, except for available‑for‑sale financial assets and share‑based payments.

Going concern
The Group’s business activities, together with the factors likely to affect its future development, are set out in the Strategic Report on pages 2 to 39.
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described on pages 26 to 29 of the Strategic Report.
Further disclosures regarding borrowings are provided in Note 23.

As described in the Viability Statement, the Directors have assessed the prospects and viability of the Company over a three‑year period to September 2019.
The Board has performed a robust assessment of the principal risks facing the Company, including those risks that would threaten Countryside’s business
model, future performance, solvency or liquidity.

New standards, amendments and interpretations
With the exception of the above, no new standards, amendments or interpretations effective for the first time for the financial year beginning on 1 October 2015
have had a material impact on the financial statements.

During the IFRS period the Interpretations Committee received a request to clarify an issue related to IAS 32: Financial Statements: Presentation in connection
with whether particular cash pooling arrangements meet the requirement for off‑setting in accordance with IAS 32. Following the observations published by the
Interpretations Committee the Group has reassessed the treatment of its cash pooling arrangements and concluded that the comparative financial information
should be represented compared to the financial information for the year ended 30 September 2015 and 30 September 2014 as disclosed in the Prospectus.

The impact of this change is that the amount of cash previously reported at 30 September 2015 of £354,000 (2014: £172,000) has increased by £80,481,000
(2014: £67,338,000) to £80,835,000 (2014: £67,510,000) and borrowings which were previously reported at £343,361,000 (£2014: 433,746,000) have increased
by a corresponding amount to £423,842,000 (2014: £366,408,000). This also had the impact of increasing the amount of cash and cash equivalents reported
in the cash flow statement from £354,000 to £80,835,000. There was no impact on the consolidated statement of comprehensive income.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 20163. ACCOUNTING POLICIES CONTINUED
New standards, amendments and interpretations continued
The following amendments to standards and interpretations which will be relevant to the preparation of the Group’s financial statements have been issued,
but are not effective and have not been early adopted for the financial year beginning 1 October 2016:

– IFRS 9 ‘Financial Instruments’, on ‘Classification and Measurement’ (effective 1 October 2018). This is the first part of a new standard on classification
and measurement of financial assets that will replace IAS 39. IFRS 9 has two measurement categories: amortised cost and fair value. All equity instruments
are measured at fair value. A debt instrument is at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows
represent principal and interest. Otherwise it is at fair value through profit or loss. Amortised cost accounting will also be applicable for most financial
liabilities, with bifurcation of embedded derivatives. The main change is that in cases where the fair value option is taken for financial liabilities, the part
of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates
an accounting mismatch.

– IFRS 15 ‘Revenue from Contracts with Customers’ (effective 1 October 2018). This standard will replace both IAS 18, which covers contracts

for goods and services, and IAS 11, which covers construction contracts. The basis for IFRS 15 is revenue is now recognised when control of a good
or service is transferred to a customer, which replaces the existing treatment of risks and rewards. Under the new standard, revenue is also allocated
to separate performance obligations under a contract and revenue is recognised once the performance obligations are met.

– IFRS 16 'Leases' (effective 1 October 2019) redefines how an entity will recognise, measure, present and disclose leases. The standard requires lessees

to recognise all leases as assets, unless the underlying asset has a low value, or the lease term is one year or less. IFRS 16 replaces IAS 17.

– Amendments to IAS 7 and IAS 12 (effective 1 October 2018). These amendments require additional disclosures in the statement of cash flows

and recognition of deferred tax assets for unrealised losses respectively.

– Amendment to IFRS 2 (effective 1 October 2018). This amendment clarifies the measurement for cash‑settled, share‑based payments and the
accounting for modifications that change an award from cash settled to equity settled. It also introduces an exception to the principles in IFRS 2
that will require an award to be treated as if it was wholly equity settled, where an employer is obliged to withhold an amount for the employee's
tax obligations associated with a share‑based payment and pay that amount to the tax authority.

– Amendment to IFRS 15 (effective 1 October 2018). These amendments comprise clarifications of the guidance on identifying performance obligations,

accounting for licences of intellectual property and the principal versus agent assessment (gross versus net revenue presentation).

There are no IFRSs or IFRS IC interpretations that are not yet effective that would be expected to have a material impact on the Group for the financial
year beginning 1 October 2016.

The Group has not applied the following amendments to standards which are EU endorsed but not yet effective:

– Amendments to IFRS 11: Accounting for Acquisitions of Interest in Joint Operations

– Amendments to IAS 1: Disclosure Initiative

– Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation

– Amendments to IAS 27: Separate Financial Statements on the Equity Method

– Annual Improvements to IFRSs 2014 Cycle

The Group is currently considering the impact of these amendments on the Group; however, it is anticipated they will be minimal and effects will principally
relate to the amendment of current disclosures.

Basis of consolidation
Subsidiaries are entities which the Group has the power to control. The Group controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to govern the financial and operating policies so as to obtain economic benefits from its activities.
The financial statements of subsidiaries are consolidated in the financial statements using the acquisition method of accounting from the date on which
control is obtained up until the date that control ceases.

Non‑controlling interests in the results and equity of subsidiaries are shown separately in the income statement, the statement of changes in equity and
statement of financial position.

Where the accounting policies of a subsidiary or equity‑accounted investee do not conform in all material respects to those of the Group, adjustments
are made on consolidation to reflect the accounting policies of the Group.

Intragroup transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated in preparing the financial
statements. Gains arising from transactions with joint arrangements and associate are eliminated to the extent of the Group’s interest in the entity.

COUNTRYSIDE PROPERTIES PLC

FINANCIAL STATEMENTS
3. ACCOUNTING POLICIES CONTINUED
Associate and joint ventures
An associate is an entity over which the Group is in a position to exercise significant influence but does not exercise control or joint control. Investments in
associates are accounted for using the equity method.

The Group has applied IFRS 11 to all joint arrangements. Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint
ventures depending on the contractual rights and obligations of each investor. Joint ventures are accounted for using the equity method.

Under the equity method of accounting, interests in the associate and joint ventures are initially recognised at cost and adjusted thereafter to recognise the
Group’s share of the post‑acquisition profits or losses and movements in other comprehensive income. When the Group’s share of losses in an associate or
joint venture equals or exceeds its interests in the associate or joint venture, the Group does not recognise further losses, unless it has incurred obligations
or made payments on behalf of the associate or joint venture.

Unrealised losses arising on transactions between the Group and its associate and joint ventures are eliminated unless the transaction provides evidence
of an impairment of the asset transferred.

The Group funds its associate and joint ventures through a combination of equity investment and shareholder loans. The Directors review the recoverability
of investments and shareholder loans for impairment annually. Where an investment is held in an associate which has net liabilities, the investment is held at
£Nil and other long‑term interests, such as shareholder loans, are reduced by the value equal to the net liabilities, unless it has incurred legal or constructive
obligations or made payments on behalf of its associate or joint ventures.

Business combinations
All acquisitions are accounted for using the acquisition method of accounting. The cost of an acquisition is the aggregate of the fair values of the assets
transferred, liabilities incurred or assumed and equity instruments issued at the date of acquisition. The consideration transferred includes the fair value
of the asset or liability resulting from a deferred and contingent consideration arrangement.

Costs directly relating to an acquisition are expensed to the income statement. The identified assets and liabilities and contingent liabilities are measured at
their fair value at the date of acquisition. The excess of cost of acquisition over the aggregate fair value of the Group’s share of the net identified assets plus
identified intangible assets is recorded as goodwill.

Intangible assets
Goodwill
Goodwill represents the excess of the consideration on acquisition of a subsidiary over the interest in net fair value of the identifiable net assets and
contingent liabilities acquired. If the total consideration transferred is less than the fair value of the net assets acquired, the difference is recognised directly
in the income statement.

An impairment review is carried out annually or when circumstances arise that may indicate an impairment is likely. The carrying value of goodwill is compared
to its recoverable amount being the higher of its value in use and its fair value less costs of disposal. Any impairment is charged immediately to the income
statement and is not subsequently reversed.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (“CGUs”), or groups
of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the
lowest level within the entity at which the goodwill is monitored for internal management purposes.

Brands
The Group carries assets on the balance sheet for brands that have been acquired. Internally generated brands are not recognised. Cost is determined at
acquisition as being directly attributable cost or, where relevant, by using an appropriate valuation method. Acquired brands are tested for impairment when
a triggering event is identified. Acquired brands are amortised over a period of 20 years.

Software
Computer software that generates an economic benefit of greater than one year is recognised as an intangible asset and carried at cost less accumulated
amortisation. Computer software costs that are recognised as assets are amortised on a straight line basis over their economic useful life of four years.
These are reviewed for impairment at such time as there is a change in circumstances by which the carrying value may no longer be recoverable.

Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any applicable impairment losses.

Depreciation is charged at rates to write off the cost of the asset on a straight line basis over the estimated useful life of the asset. The applicable annual
rates are:

– Plant and machinery

20 per cent to 25 per cent

– Fixtures and fittings

10 per cent

The Group does not own any land or buildings considered to be non‑trade related.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

Financial assets
The Group classifies its financial assets in the following categories:

– loans and receivables; and

– available for sale.

The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at
initial recognition. Financial assets are derecognised only when the contractual rights to the cash flows from the financial asset expire or the Group transfers
substantially all risks and rewards of ownership.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 20163. ACCOUNTING POLICIES CONTINUED
Financial assets continued
Loans and receivables
Loans and receivables are non‑derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included
in current assets, except for those with maturities greater than 12 months after the end of the reporting period. These are classified as non‑current assets.
The Group’s loans and receivables comprise “trade and other receivables” and “cash and cash equivalents” in the Consolidated Statement of Financial Position.

Available-for-sale financial assets
Available‑for‑sale financial assets are non‑derivative assets that are either designated in this category or not classified in any of the other categories. They are
included in non‑current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.

Equity share scheme loans are classified as available‑for‑sale financial assets and are initially recorded at fair value net of transaction costs. Fair value is assessed
annually with gains and losses being recognised directly in the Consolidated Statement of Other Comprehensive Income until the loan is repaid. The loans
are discounted at an interest rate equivalent to market rate. On repayment the accumulated fair value, which had been recognised in the Consolidated
Statement of Changes in Equity, is recognised in the Income Statement. If a loan is determined to be impaired, any impairment loss is recognised immediately
in the Income Statement.

Increases in the fair value of available‑for‑sale assets are initially deferred and recorded within reserves. Reductions in the fair value of available‑for‑sale assets
are recorded as a reduction in reserves, to the extent available, with any additional reduction recorded in the Income Statement. The net deferral of
increases in fair value are disclosed in the available‑for‑sale reserve.

Inventories
Inventories are normally stated at cost (or fair value if acquired as part of a business combination) and held at the lower of cost and net realisable value.
Costs comprise direct materials, applicable direct labour and those overheads incurred to bring the inventories to their present location and condition.
Net realisable value represents estimated selling price less all estimated costs to sell, including sales and marketing costs.

Land options purchased are initially stated at cost. Option costs are written off over the remaining life of the option and are also subject to impairment review.
Impairment reviews are performed when circumstances arise which indicate an impairment is likely, such as a refusal of planning permission. Any impairments
are recognised immediately in the income statement.

Land inventory is recognised when the substantial risks and rewards of ownership transfer to the Group after unconditional exchange of contracts.
Where land is purchased with deferred payment terms, a corresponding liability is recognised within trade and other payables.

Pre‑contract expenditure is capitalised where it is probable that a contract will be signed or otherwise is recognised as an expense within costs of sales
in the Income Statement.

Provisions for inventories are made, where appropriate, to reduce the value of inventories and work in progress to their net realisable value.

Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less any provision for impairment. A provision for impairment
is established when the carrying value of the receivable exceeds the present value of the future cash flows discounted using the original effective interest
rate. The carrying value of the receivable is reduced and any impairment loss is recognised in the Income Statement. If collection is expected in one year
or less (or in the normal operating cycle of the business if longer), receivables are classified as current assets. If not, they are classified as non‑current assets.

Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and other short‑term deposits held by the Group with maturities of three months or less.
Bank overdrafts are classified within current liabilities.

Trade payables
Trade payables on normal terms are not interest bearing and are stated initially at their fair value and subsequently amortised cost.

Where land is purchased on deferred settlement terms the land and associated liability are discounted to their fair value. The discount to fair value is amortised
over the period of the credit term and charged to finance costs using the effective interest rate method. Changes in estimates of the final payment due are
capitalised into inventory and, in due course, to cost of sales in the Income Statement.

Trade payables also include liabilities in respect of land overage where the Group is committed to make contractual payments to land vendors related to
the performance of the development in the future. Land overage is estimated based on expected future cash flows in relation to relevant developments and,
where payment will take place in more than one year, is discounted.

Deposits received from customers relating to sales of new properties are classified within current trade payables.

Trade payables are classified as current liabilities if payment is due within one year or less. If not, they are classified as non‑current liabilities.

Borrowings
Interest‑bearing bank loans and overdrafts are recorded initially at their fair value and bank loans are reported net of direct transaction costs to the extent
that borrowings are available for offset. Such instruments are subsequently carried at their amortised cost and finance charges, including premiums payable
on settlement or redemption, are amortised over the term of the instrument using the effective interest rate method. The excess of unamortised borrowing
costs is disclosed within prepayments.

Bank loans are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the
date of the statement of financial position. Overdrafts are classified as current liabilities.

Provisions
Provisions are recognised when the Group has a present legal obligation as a result of a past event which it is probable will result in an outflow of economic
benefits that can be reliably estimated. Where the effect of the time value of money is material, the provision is discounted at the pre‑tax discount rate that
reflects the risks specific to the liability. Provisions for onerous leases are recognised when the foreseeable net cash outflows on a lease exceed the benefits
derived from the lease which has more than one year before expiring or option to exercise a break.

COUNTRYSIDE PROPERTIES PLC

FINANCIAL STATEMENTS
3. ACCOUNTING POLICIES CONTINUED
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in share premium as a deduction from
the proceeds.

Where any Group company holds shares in the Company’s equity share capital, the consideration paid, including any directly attributable incremental costs,
is deducted from equity until the shares are cancelled or reissued.

Mandatory redeemable preference shares
Mandatory redeemable preferred shares were interest‑bearing financial liabilities which were recorded at their fair value. Such instruments are carried at their
amortised cost with returns recognised over the term of the instrument using the effective interest rate method. The Mandatory Redeemable Preference
Shares were all settled as part of the pre‑IPO reorganisation as described in Note 1.

Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally enforceable right to offset
the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

Revenue
Revenue comprises the fair value of the consideration received or receivable, net of applicable value added tax, Stamp Duty Land Tax, rebates and discounts
and after eliminating sales within the Group. Revenue and profit are recognised as set out below.

Private housing
Revenue is recognised in the income statement on legal completion at the fair value of the consideration received.

Part exchange
In certain instances, property may be accepted in part consideration for a sale of a residential property. The fair value is established by independent surveyors,
reduced for cost to sell. Net proceeds generated from the subsequent sale of part‑exchange properties are recorded as a reduction to cost of sales.
The original sale is recorded in the normal way, with the fair value of the exchanged property replacing cash receipts.

Cash incentives
Cash incentives are considered to be a discount from the purchase price offered to the acquirer and are therefore accounted for as a reduction to revenue.

Land and commercial sales
Revenue is recognised when substantially all of the risks and rewards of ownership of the land or commercial property transfer to the buyer, generally
when there is an unconditional exchange of contracts. Revenue is measured as the fair value of consideration received or receivable.

Affordable housing contracts and design and build contracting
Contract revenue and costs are recognised in accordance with IAS 11 ‘Construction Contracts’.

Where the outcome of a long‑term contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the
contract activity at the balance sheet date. This is normally measured by surveys of work performed to date. Variations in contract work, claims and
incentive payments are included to the extent that it is probable that they will result in revenue and they are capable of being reliably measured.

Where the outcome of a long‑term contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it
is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract
costs will exceed total contract revenue, the expected loss is recognised immediately in the income statement within cost of sales.

Project management services
Revenue earned for the provision of project management services, typically to the Group’s joint ventures and associate, are recognised on an accruals
basis in line with the underlying contract.

Cost of sales
For sales of private housing, the Group determines the value of inventory charged to cost of sales based on the total budgeted cost of developing a site.
Once the total expected costs of development are established they are allocated to individual plots to achieve a build cost per plot. These costs are recognised
within cost of sales when the related revenue is recognised in accordance with the Group’s revenue recognition policy.

To the extent that additional costs or savings are identified as the site progresses, these are recognised over the remaining plots unless they are specific
to a particular plot, in which case they are recognised in the income statement at the point of sale.

For land and commercial property sales, cost of sales represents the carrying value of the related inventory on the Group’s balance sheet and this is recognised
within cost of sales when revenue is recognised in accordance with the Group’s revenue recognition policy.

As outlined above, costs in relation to the sale of affordable housing and design and build contracts are recognised in accordance with IAS 11.

Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.

Rentals payable and incentives receivable under operating leases are recognised on a straight line basis over the term of the relevant lease.

Finance costs and finance income
Borrowing costs
Borrowing costs in relation to the Group’s debt facility are recognised on an accruals basis. Also included in borrowing costs is the amortisation of fees
associated with the arrangement of the financing. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are
accounted for on an accruals basis in the income statement using the effective interest method and are added to the carrying amount of the instrument
to the extent that they are not settled in the period in which they arise.

The Group does not capitalise borrowing costs into developments.

Unwind of discounting
The finance cost associated with the time value of money on discounted receivables and payables is recognised within finance costs as the discount unwinds
over the life of the relevant item.

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 20163. ACCOUNTING POLICIES CONTINUED
Current and deferred income taxation
Income tax comprises current and deferred tax.

Current taxation
The current tax payable is based on taxable profit for the period which differs from accounting profit as reported in the Income Statement because it excludes
items of income or expense that are taxable or deductible in other years and those items never taxable or deductible. The Group’s liability for current tax
is measured using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements
and the corresponding tax rates used in the computation of taxable profit, and is accounted for using the balance sheet liability method.

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future
taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in
a transaction which affects neither the taxable profit nor the accounting profit.

Deferred tax is calculated at the substantively enacted tax rates that are expected to apply to the period when the asset is realised or the liability is settled
based upon tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is charged or credited in comprehensive income,
except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity, or items charged or credited
directly to other comprehensive income, in which case the deferred tax is also recognised in other comprehensive income.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and
when the Group intends to settle the balances on a net basis.

Segment reporting
Segment reporting is presented in the consolidated financial statements in respect of the Group’s business segments. Segmental reporting reflects the Group’s
management structure and primary basis of internal reporting.

Segmental results include items directly attributable to the segment, as well as those that can be allocated on a reasonable basis.

The chief operating decision‑maker (“CODM”) has been identified as the Group’s Executive Committee. The CODM reviews the Group’s internal reporting
in order to assess performance and allocate resources. The CODM assesses the performance of the operating segments based on underlying operating
profit and tangible net operating asset values (“TNOAV”).

Pension obligations
The Group operates a defined contribution pension scheme. A defined contribution plan is a pension plan under which the Group pays fixed contributions
to a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all
employees the benefits relating to employee service in the current and prior periods.

The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when
they fall due.

Share-based payments
The Group provides benefits to employees (including Directors) of the Group in the form of equity‑settled and cash‑settled share‑based payment
transactions, whereby employees render services in exchange for rights over shares. For equity‑settled share‑based payments, the fair value of the employee
services rendered is determined by reference to the fair value of the shares awarded or options granted, excluding the impact of any non‑market vesting
conditions. All share options are valued using an option‑pricing model (Black Scholes or Monte Carlo). This fair value is charged to the income statement
over the vesting period of the share‑based payment scheme.

For cash‑settled share‑based payments, the fair value of the employee services rendered is determined at each balance sheet date and the charge recognised
through the income statement over the vesting period of the share‑based payment scheme, with the corresponding increase in accruals. The value of the charge
is adjusted in the income statement over the remainder of the vesting period to reflect expected and actual levels of options vesting, with the corresponding
adjustments made in equity and accruals.

Countryside Properties PLC invoices its subsidiary undertakings an amount equivalent to the fair value of the grant by the Company of options over its
equity instruments to the employees of subsidiaries. The fair value of employee services received, measured by reference to the grant date fair value, is
recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.

Adjusted measures
Certain items which do not relate to the Group’s underlying performance are presented separately in the Income Statement as non‑underlying items where,
in the judgement of the Directors, they need to be disclosed separately by virtue of their nature, size or incidence in order to obtain a clear and consistent
presentation of the Group’s underlying business performance. As these non‑underlying items can vary significantly from year to year they create volatility
in reported earnings. In addition, the Directors believe that in discussing the performance of the Group, the results of joint ventures and associate should
be proportionally consolidated, including the Group’s share of revenue, operating profit and TNOAV given their importance to the Group’s operations.

As such, the Directors believe that the “adjusted revenue”, “adjusted Group operating profit” and “adjusted basic and diluted earnings per share” measures
presented provide a clear and consistent presentation of the underlying performance of the Group’s ongoing business for shareholders. Adjusted Group
operating profit is not defined by IFRS and therefore may not be directly comparable with the “adjusted” or “underlying” profit measures of other companies.

Examples of material and non‑recurring items which may give rise to disclosure as non‑underlying items are:

– fees incurred in relation to business combinations or capital market transactions;

– adjustments to the statement of financial position that do not relate to trading activity such as the recognition and reversal of non‑trade impairments; and

– accelerated write‑off of unamortised issue costs on the re‑financing of borrowings.

COUNTRYSIDE PROPERTIES PLC

FINANCIAL STATEMENTS
3. ACCOUNTING POLICIES CONTINUED
Adjusted measures continued
Share‑based payment charges in respect of the pre‑IPO Management Incentive Plan established during the year ended 30 September 2013 in connection
with the acquisition of Copthorn Holdings Limited and its subsidiary companies by Oaktree Capital Management LLC are also treated as a non‑underlying
item. This allows the underlying performance of the Group to be measured from period to period, due to that fact the full benefits of owning these shares
are crystallised only following an exit event, such as the IPO.

Adjusted Group operating profit is one of the key measures used by the Board to monitor Group’s performance.

Dividends
Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Dividends payable are recorded in the period in which they are approved or paid, whichever is earliest.

4. SEGMENTAL REPORTING
Segmental reporting is presented in respect of the Group’s business segments reflecting the Group’s management and internal reporting structure and is on
the basis on which strategic operating decisions are made by the Group’s Chief Operating Decision‑Maker (“CODM”). The Group’s two business segments
are Housebuilding and Partnerships.

The Housebuilding division develops large‑scale sites, providing private and affordable housing on land owned or controlled by the Group, primarily around
London and in the South and East of England, operating under both the Countryside and Millgate brands.

The Partnerships division specialises in medium to large‑scale housing regeneration schemes delivering private and affordable homes in partnership with
public sector land owners and operates primarily in and around London, the North West of England and the West Midlands.

Segmental adjusted operating profit and segmental operating profit includes items directly attributable to a segment as well as those that can be allocated
on a reasonable basis. Central head office costs have been allocated between the segments using a percentage of revenue basis. Items below Group
operating profit have not been allocated.

Segmental net assets and tangible net operating asset value includes items directly attributable to the segment as well as those that can be allocated on a
reasonable basis with the exception of intangibles, mandatory redeemable preference share (including the return) and net bank loans (excluding unamortised
bank loan and arrangement fees).

Countryside operates entirely within the United Kingdom.

(a) Segmental income statement

Year ended 30 September 2016

Adjusted revenue including share of joint ventures’ revenue

Share of joint ventures’ revenue

Revenue

Segment result:

Adjusted operating profit including share of operating profit from associate and joint ventures

Less: share of operating profit from associate and joint ventures

Less: non‑underlying items

Operating profit/(loss)

Year ended 30 September 2015

Group revenue including share of joint ventures’ revenue

Share of joint ventures’ revenue

Revenue

Segment result:

Total operating profit including share of operating profit from associate and joint ventures

Less: share of operating profit from associate and joint ventures

Less: non‑underlying items

Operating profit/(loss)

Housebuilding
£’000

Partnerships
£’000

Group items
£’000

Total
£’000

427,113

349,869

(69,027)

(36,697)

358,086

313,172

66,829

(18,326)

55,639

(6,934)

—

776,982

(105,724)

671,258

122,468

(25,260)

—

2,590

(12,471)

(9,881)

48,503

51,295

(12,471)

87,327

Housebuilding
£’000

Partnerships
£’000

Group items
£’000

Total
£’000

330,701

285,139

(51,958)

(16,396)

278,743

268,743

51,562

(13,565)

—

39,604

(3,120)

(2,678)

—

(3,877)

615,840

(68,354)

547,486

91,166

(16,685)

(6,555)

37,997

33,806

(3,877)

67,926

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 20164. SEGMENTAL REPORTING CONTINUED
(b) Segmental capital employed

Year ended 30 September 2016

Net assets1

TNOAV2

Year ended 30 September 2015

Net assets/(liabilities)1

TNOAV2

Housebuilding
£’000

Partnerships
£’000

Group items
£’000

Total
£’000

422,175

103,301

67,410

592,886

422,175

103,301

—

525,476

Housebuilding
£’000

Partnerships
£’000

Group items
£’000

Total
£’000

334,321

54,179

(375,266)

13,234

334,321

54,179

—

388,500

1. Group items includes intangible assets of £58.9m (2015: £59.4m) (net of deferred tax of £3.5m (2015: £4.3m)) and net cash/(debt) of £12.0m (2015: debt £59.5m) (excluding unamortised bank loan
arrangement fees of £2.5m (2015: £3.5m) and, in 2015, mandatory redeemable preference shares and outstanding returns in respect of the mandatory redeemable preference shares of £375.2m.

2. TNOAV is calculated as net assets/(liabilities) excluding the Group items described above.

Year ended 30 September 2016

Investment in associate

Investment in joint ventures

Share of post‑tax profit from associate and joint ventures

Capital expenditure – property, plant and equipment

Capital expenditure – software

Acquisitions

Depreciation and amortisation

Share‑based payments

Year ended 30 September 2015

Investment in associate

Investment in joint ventures

Share of post‑tax profit from associate and joint ventures

Capital expenditure – property, plant and equipment

Depreciation and amortisation

Share‑based payments

Housebuilding
£’000

Partnerships
£’000

Group items
£’000

Total
£’000

5,235

47,460

13,005

508

—

2,293

369

—

6,447

6,588

417

—

302

—

743

—

1,273

3,035

Housebuilding
£’000

Partnerships
£’000

Group items
£’000

4,164

47,143

7,581

813

189

—

2,954

3,003

701

163

—

1,201

1,310

5,235

53,907

19,593

925

743

2,293

1,944

3,035

Total
£’000

4,164

50,097

10,584

1,514

1,553

1,310

COUNTRYSIDE PROPERTIES PLC

FINANCIAL STATEMENTS
5. EMPLOYEES AND DIRECTORS
(a) Staff costs for the Group during the year

The aggregate remuneration for the employees and Directors of the Group comprised:

Salaries

Social security costs

Pension costs (Note 5b)

Share‑based payments – pre‑IPO (Note 30)

Share‑based payments – post‑IPO (Note 30)

Compensation for loss of office

2016
£’000

2015
£’000

58,246

51,637

6,935

2,630

1,910

1,124

—

5,375

1,995

1,310

—

750

70,845

61,067

The average monthly number of employees (including Directors) for the period for each of the Group’s principal activities was as follows:

Housebuilding and development

Head office

2016
Number

2015
Number

886

124

1,010

704

107

811

(b) Retirement benefits
All the Group’s employees are entitled to join the Group’s defined contribution schemes, which are invested with Aegon. Annual contributions to these
plans charged against income amounted to £2,630,000 (2015: £1,995,000), of which £197,000 (2015: £172,000) was outstanding at 30 September 2016.

Aggregate emoluments

(d) Emoluments of the highest paid Director

Aggregate emoluments

2016
£’000

2,517

2016
£’000

1,415

2015
£’000

1,462

2015
£’000

1,144

(e) Key management compensation
The following table details the aggregate compensation paid in respect of the members of the Executive Committee of the Board of Directors, including
the Executive Directors.

Wages and salaries

Accrued retirement benefits

Termination payment

Share‑based payments

2016
£’000

4,470

111

—

1,474

6,055

2015
£’000

4,356

130

750

1,123

6,359

Compensation for loss of office of £750,000 paid in the year ended 30 September 2015 is considered to be a non‑underlying item (Note 6b).

The Group does not operate any defined benefit pension schemes. Pension costs under defined contribution schemes are included in the accrued
retirement benefits disclosed above. The disclosures of shares granted under the long‑term incentive schemes are included in Note 30(b).

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 2016
6. GROUP OPERATING PROFIT
(a) Group operating profit is stated after charging/(crediting)

Staff costs

Depreciation of property, plant and equipment

Amortisation of intangible assets

Provisions/(reversal of provision) for inventories

Inventories expensed to cost of sales

Operating leases

Auditors’ remuneration (see below)

During the year the Group obtained the following services from the Group’s auditors as detailed below:

Fees payable to Group’s auditor and its associates for the audit of parent and consolidated financial statements

Fees payable to Group’s auditor and its associates for other services:

– Audit of subsidiary companies

– Audit of Joint ventures

– Audit‑related services

– Tax advisory services

– Other advisory services

– Audit related assurance and transaction services in relation to the IPO

(b) Non-underlying items

Non‑recurring items:

Advisory costs

(Reversal)/impairment of non‑trade receivable

Share‑based payments – pre‑IPO

Change of Board Director

Total non-underlying items included within administrative expenses

Impairment of unamortised loan arrangement fees

Total non-underlying items

Note

2016
£’000

2015
£’000

70,845

61,067

671

1,273

635

352

1,201

(352)

523,674

423,881

4,205

1,815

2016
£’000

139

126

—

121

1,283

1,815

2016
£’000

10,561

(2,590)

1,910

—

9,881

3,177

13,058

3,435

1,413

2015
£’000

294

229

—

698

1,413

2015
£’000

1,698

2,677

1,310

870

6,555

—

6,555

Advisory fees
During the years ended 30 September 2016 and 2015, the Group engaged in corporate activity in relation to the listing of its ordinary shares on the London Stock
Exchange. Advisory costs of £10,561,000 (2015: £1,698,000) were charged to the consolidated statement of comprehensive income in relation to this activity.
Additionally, as disclosed in Note 1, £4,610,000 of IPO‑related costs were charged to the share premium account. These costs primarily relate to the fees of
professional advisors.

Impairment of non-trade receivable
The non‑recurring charge of £2,677,000 relates to the impairment of a receivable during the prior year which management believed to be irrecoverable.
During the year £2,590,000 has been received in cash resulting in partial reversal of the impairment.

Share-based payments – pre-IPO
In the year ended 30 September 2013, a Management Incentive Plan (the “Plan”) was approved by the Board in which certain senior employees
of Countryside Properties (UK) Limited, a subsidiary company, were invited to acquire shares issued by OCM Luxembourg Midco S.à r.l. The Directors
believe that this Plan should be treated as a non‑underlying item, as this allows the underlying performance of the Group to be measured from period
to period. No awards under the Plan have been made since the IPO.

£1,910,000 was charged to the consolidated statement of comprehensive income in the year ended 30 September 2016 (2015: £1,310,000) in respect
of charges related to the Plan.

COUNTRYSIDE PROPERTIES PLC

FINANCIAL STATEMENTS
6. GROUP OPERATING PROFIT CONTINUED
(b) Non-underlying items continued
Impairment of unamortised loan arrangement fees
As described in Note 23, the Group refinanced in May 2016. As a result, unamortised debt finance costs in relation to the previous facility as at the refinancing
date of £3,177,000 were expensed as a non‑underlying finance cost.

Change of Board Director
During the year ended 30 September 2015, £870,000 of costs were incurred in relation to the resignation and appointment of Chief Financial Officers
of Copthorn Holdings Limited. This amount includes compensation for loss of office of £750,000 and £120,000 of recruitment costs.

Taxation
A total tax credit of £969,000 (2015: £1,419,000) in relation to all of the above non‑recurring items was included within taxation in the income statement.

(c) Non-GAAP performance measures
The Directors believe that adjusted revenue (including share of revenue from associate and joint ventures), adjusted operating profit (including share of
operating profit from associates and joint ventures) and underlying diluted and basic earnings per share measures presented provide a clear and consistent
presentation of the underlying performance of the Group’s ongoing business for shareholders. These are not measures that are defined by IFRS and
therefore may not be directly comparable with the adjusted or underlying profit measures of other companies.

The following table reconciles revenue to adjusted Group revenue:

Revenue

Add: share of revenue of joint ventures

Adjusted Group revenue

The following table reconciles operating profit to adjusted Group operating profit:

Operating profit

Add: non‑underlying items

Add: share of operating profit of associate and joint ventures

Adjusted Group operating profit

7. FINANCE COSTS

Bank loans and overdrafts

Interest on mandatory redeemable preference shares

Fair value losses on financial instruments

Unwind of discount

Amortisation of debt finance costs

Adjusted finance costs

Write off unamortised debt arrangement fees

The mandatory redeemable preference shares accrued interest annually until redemption in February 2016 (Note 23).

8. FINANCE INCOME

Interest receivable

Unwind of discount

COUNTRYSIDE PROPERTIES PLC

2016
£’000

671,258

105,724

2015
£’000

547,486

68,354

776,982

615,840

2016
£’000

87,327

9,881

25,260

122,468

2016
£’000

5,211

16,495

—

4,811

824

27,341

3,177

2015
£’000

67,926

6,555

16,685

91,166

2015
£’000

6,312

40,961

406

3,502

1,113

52,294

—

30,518

52,294

2016
£’000

1,458

717

2,175

2015
£’000

824

979

1,803

Note

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 2016
9. TAXATION

Analysis of charge for the year

UK corporation tax

Current period

Adjustments in respect of prior periods

Total UK current tax

Foreign tax

Luxembourg corporation tax

Total current tax

Deferred tax (Note 16)

Origination and reversal of temporary differences

Other differences

Total deferred tax

Income tax expense

2016
£’000

14,811

14,894

2015
£’000

8,087

(200)

7,887

(63)

14,831

7,890

2,988

(546)

2,442

553

(257)

296

17,273

8,186

Changes to the UK corporation tax rates were substantively enacted as part of the Finance Bill 2015 on 26 October 2015. These include reductions to the
main rate to 19 per cent from 1 April 2017 and to 18 per cent from 1 April 2020. Deferred taxes at the balance sheet date have been measured using these
enacted rates and reflected in these financial statements.

The tax assessed for the year is higher than the standard rate of corporation tax in the United Kingdom, which is 20 per cent (2015: 29.22 per cent being
the statutory rate in Luxembourg).

The table below shows the reconciliation of profit before tax to the income tax expense.

Profit before income tax

Tax calculated at the parent entity rate of tax: 20 per cent (2015: 29.22 per cent)

Adjustments to deferred tax due to reduction in UK tax rates

Associate and joint venture tax

Deferred tax charged directly to reserves

Adjustments in respect of prior periods

Expenses not deductible for tax

Temporary timing differences

Deferred tax not recognised

Transfer pricing adjustments

Foreign tax

Overseas subsidiaries taxed at different rates

Income tax expense

2016
£’000

2015
£’000

78,577

28,019

15,715

782

8,187

—

(1,286)

(3,093)

154

(1,558)

2,889

(332)

(222)

1,194

(63)

—

(477)

2,482

(48)

—

3,728

(2,596)

17,273

8,186

Adjustments in respect of prior periods
In both years presented, the adjustments relate to the finalisation of entity tax computations following the signing of the Group financial statements.

Expenses not deductible for tax
These items in both years largely relate to disallowable costs incurred in relation to the IPO, principally legal and advisory fees.

Transfer pricing adjustments
These adjustments in both years relate to the disallowable portion of interest costs in relation to loans from the Group’s previous parent entity which
was based in Luxembourg. These loans were repaid in full on IPO.

Income tax charged directly to equity
Income tax of £154,000 (2015: £Nil) was charged directly to equity in relation to share based payments.

COUNTRYSIDE PROPERTIES PLC

FINANCIAL STATEMENTS
10. EARNINGS PER SHARE
Basic and diluted earnings per share are calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary
shares in issue from the date of the IPO to 30 September 2016. The weighted average number of shares for both the current and preceding years has been
stated as if the Group reorganisation had occurred at the beginning of the comparative year. When calculating diluted earnings per share, the weighted average
number of ordinary shares in issue is adjusted to assume conversion of 0.2 million of potentially dilutive ordinary shares. These represent share options
granted to employees under the Group’s Save As You Earn plan.

(a) Basic and diluted earnings per share

Profit from continuing operations attributable to equity holders of the parent (£’000)

Basic weighted average number of shares (millions)

Basic earnings per share (pence per share)

Diluted weighted average number of shares (millions)

Diluted earnings per share (pence per share)

2016

2015

61,074

450.0

13.6

450.2

13.6

19,623

450.0

4.4

450.2

4.4

(b) Adjusted basic and diluted earnings per share
Adjusted Group operating profit represents a key measure for the Group. Adjusted earnings per share excludes non‑underlying items from Group profit as follows:

Profit from continuing operations attributable to equity holders of the parent (£’000)

Add: non‑underlying items net of tax (£’000)

Adjusted profit from continuing operations attributable to equity holders of the parent (£’000)

Basic weighted average number of shares (millions)

Basic adjusted earnings per share (pence per share)

Diluted weighted average number of shares (millions)

Diluted adjusted earnings per share (pence per share)

2016

2015

61,074

12,089

73,163

450.0

16.3

450.2

16.3

19,623

5,136

24,759

450.0

5.5

450.2

5.5

Non‑underlying items net of tax include costs of £13,058,000, net of tax of £969,000 (2015: costs of £6,555,000, net of tax of £1,419,000).

The above analysis represents a non‑GAAP measure which has been included to assist understanding of the Group’s business.

11. INTANGIBLE ASSETS
Movement in intangible assets

Cost

At 1 October 2014 and 30 September 2015

Additions

At 30 September 2016

Accumulated amortisation

At 1 October 2014

Amortisation

At 30 September 2015

Amortisation

At 30 September 2016

Net book value

At 30 September 2016

At 30 September 2015

COUNTRYSIDE PROPERTIES PLC

Software
£’000

Brand
£’000

Goodwill
£’000

Total
£’000

—

743

—

671

—

24,200

37,824

—

62,024

743

24,200

37,824

62,767

1,370

1,201

2,571

1,201

3,772

—

1,370

1,201

2,571

1,273

3,844

20,428

37,824

58,923

21,629

37,824

59,453

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 2016
11. INTANGIBLE ASSETS CONTINUED
Movement in intangible assets continued
Goodwill
Goodwill relates to the acquisition of the Copthorn Holdings Group in April 2013 (£19,297,000) and Millgate Developments in February 2014 (£18,527,000).
Both entities are considered to be cash generating units (“CGUs”). The goodwill balance is tested annually for impairment. The recoverable amount has been
determined as the value in use of the business assessed on the current five‑year cash flow forecasts. These forecasts are based on achieving the Group’s
medium term targets of 17 per cent operating margin and 28 per cent ROCE with appropriate growth rates applied in following years. Cash flow beyond
the five‑year period is extrapolated using a growth rate of 2 per cent. Cash flows generated by both CGUs are discounted using a pre‑tax discount rate of
12.5 per cent, approved by the Board of Directors. The cash flow forecasts are also sensitised for a slowdown in sales and a reduction in selling prices.
Significant headroom exists on all sensitised forecasts given the relative size of goodwill compared to annual operating profits and cash flows.

Brand
Brand relates to both the Countryside brand (£13,500,000), acquired as part of the Copthorn Holdings Group in 2013, and the Millgate brand (£10,700,000),
acquired as part of Millgate Developments Limited in 2014. Both brands have been valued using the income method and are considered to have a useful
economic life of 20 years.

Amortisation expense in respect of the Group’s brands of £1,201,000 (2015: £1,201,000) has been charged to administrative expenses.

12. PROPERTY, PLANT AND EQUIPMENT

Cost

At 1 October 2014

Additions

Disposals

At 30 September 2015

Additions

Disposals

At 30 September 2016

Accumulated depreciation

At 1 October 2014

Depreciation charge for the year

Disposals

At 30 September 2015

Depreciation charge for the year

Disposals

At 30 September 2016

Net book value

At 30 September 2016

At 30 September 2015

Depreciation expense of £671,000 (2015: £352,000) has been charged to administrative expenses.

Plant and
machinery

£’000

Fixtures and
fittings
£’000

Total
£’000

5,597

781

(1,381)

4,997

405

(3)

2,487

733

—

3,220

520

—

8,084

1,514

(1,381)

8,217

925

(3)

5,399

3,740

9,139

4,721

208

(1,381)

3,548

445

(2)

2,119

144

—

2,263

226

—

6,840

352

(1,381)

5,811

671

(2)

3,991

2,489

6,480

1,408

1,251

2,659

1,449

957

2,406

COUNTRYSIDE PROPERTIES PLC

FINANCIAL STATEMENTS
13. INVESTMENT IN JOINT VENTURES
The Directors have aggregated disclosure of joint ventures’ statement of financial position and income statement on the basis that all of the joint ventures
share a similar risk profile. The Group’s aggregate investment in its joint ventures is represented by:

Housebuilding
£’000

Partnerships
£’000

Group
2016
£’000

Housebuilding
£’000

Partnerships
£’000

Group
2015
£’000

Summarised statement of financial position:

Non‑current assets

Current assets

Cash

Current liabilities

Non‑current liabilities

Reconciliation to carrying amount:

At 1 October

Profit for the year

Dividends paid

Capital contribution

Increase/decrease in loans to joint ventures

Additional investment in a joint ventures

Disposal of joint venture

At 30 September

Summarised statement of comprehensive income:

Revenue

Expenses

Operating profit

Finance cost

Income tax

Profit for the year

Group’s share in per cent

Share of revenue

Share of operating profit

Dividends received by the Group

Investment in joint ventures

At 1 October

Share of post‑tax profit

Dividends paid

Other movements

At 30 September

COUNTRYSIDE PROPERTIES PLC

—

808

—

808

393,182

53,254

446,436

372,824

37,370

410,194

336

7,986

8,322

10,950

704

11,654

(37,292)

(7,800)

(45,092)

(42,820)

(16,868)

(59,688)

(261,402)

(40,546)

(301,948)

(247,476)

(15,298)

(262,774)

94,920

12,894

107,814

94,286

5,908

100,194

94,286

23,868

5,908

100,194

13,176

37,044

39,370

14,030

(21,074)

(6,190)

(27,264)

(13,252)

2,757

(2,624)

—

(2,293)

—

2,757

(2,624)

—

(2,293)

—

6,962

47,176

—

6,006

(112)

—

39,384

20,036

(13,364)

—

6,962

47,176

—

94,920

12,894

107,814

94,286

5,908

100,194

138,164

73,284

211,448

104,108

32,600

136,708

(104,742)

(59,416)

(164,158)

(78,432)

(26,360)

(104,792)

33,422

13,868

47,290

(6,130)

(3,424)

(692)

—

(6,822)

(3,424)

25,676

(7,462)

(4,184)

6,240

(234)

—

31,916

(7,696)

(4,184)

23,868

13,176

37,044

14,030

6,006

20,036

50.0%

105,724

23,645

13,632

53,907

50.0%

68,354

15,958

6,682

50,097

2015
£'000

19,692

10,018

(6,682)

27,069

2016
£'000

50,097

18,522

(13,632)

(1,080)

53,907

50,097

The aggregate amount due from joint ventures is £84,543,000 (2015: £62,435,000). The amount due to joint ventures is £310,000 (2015: £318,000).
Transactions between the Group and its joint ventures are disclosed in Note 27.

The table below reconciles the movement in the Group’s net investment in joint ventures:

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 2016

13. INVESTMENT IN JOINT VENTURES CONTINUED
The Group’s investments in joint ventures, all of which are incorporated in the United Kingdom and are accounted for using the equity method, comprise:

Acton Gardens LLP

Brenthall Park (Commercial) Limited

Brenthall Park (Infrastructure) Limited

Brenthall Park (Three) Limited

Brenthall Park Limited

Cambridge Medipark Limited

CBC Estate Management Limited

C.C.B. (Stevenage) Limited

Countryside 27 Limited

Countryside L&Q (Oaks Village) LLP

Countryside Annington (Colchester) Limited (in liquidation)

Countryside Annington (Mill Hill) Limited

Countryside Properties (Accordia) Limited

Countryside Properties (Booth Street 2) Limited

Countryside Properties (Merton Abbey Mills) Limited

Countryside Properties (Salford Quays) Limited

Countryside Maritime Limited

Countryside Neptune LLP

Countryside Zest (Beaulieu Park) LLP

Greenwich Millennium Village Limited

iCO Didsbury Limited

Mann Island Estate Limited

Peartree Village Management Limited

Silversword Properties Limited

The Edge 1A Limited (in liquidation)

Woolwich Countryside Limited

Country of
incorporation

Ownership
interest
%

50.00

33.33

50.00

39.00

50.00

39.00

50.00

Principal activity

Housebuilding

Non‑trading

Dormant

Non‑trading

Commercial

Estate management

Non‑trading

Commercial

Housebuilding

Non‑trading

Housebuilding

Commercial

Estate management

Dormant

Commercial

Non‑trading

COUNTRYSIDE PROPERTIES PLC

FINANCIAL STATEMENTS
14. INVESTMENT IN ASSOCIATE
The Group holds 28.5 per cent of the ordinary share capital with pro rata voting rights in Countryside Properties (Bicester) Limited, a company incorporated
in the United Kingdom, whose principal activity is housebuilding. It is accounted for using the equity method.

The Group’s investment in its associate is represented by:

Summarised statement of financial position:

Non‑current assets

Current assets

Cash

Current liabilities

Non‑current liabilities

Reconciliation to carrying amount:

At 1 October

Profit for the year

Dividends paid

At 30 September

Summarised statement of comprehensive income:

Revenue

Expenses

Operating profit

Finance income

Income tax

Profit for the year

Group’s share in per cent

Share of operating profit

Dividends received by the Group

Investment in associate

The amount due from the associate is £Nil (2015: £Nil).

Transactions between the Group and its associate are disclosed in Note 27.

15. AVAILABLE-FOR-SALE FINANCIAL ASSETS

At 1 October

Additions from acquisitions

(Decrease)/increase in fair value

Unwind of discount

Redemptions

At 30 September

2016
£’000

2015
£’000

1,500

11,156

19,814

—

13,895

19,067

(14,102)

(17,204)

—

(1,147)

18,368

14,611

3,758

31,021

1,986

—

(18,396)

18,368

14,611

17,670

(12,003)

5,667

(1,979)

3,758

28.5%

1,615

—

5,235

2016
£’000

10,535

544

(1,501)

717

13,302

(10,751)

2,551

305

(870)

1,986

28.5%

727

5,243

4,164

2015
£’000

10,862

—

443

515

(1,630)

(1,285)

8,665

10,535

Note

The available‑for‑sale financial assets comprise loans advanced to homebuyers to assist in the purchase of their property under shared equity schemes.
The loans are secured by either a first or second legal charge over the property and are either interest free or have interest chargeable from the fifth year
onwards or tenth year onwards, dependent upon the scheme under which the loans were issued.

The assets are held at fair value, which represents the current market value of the properties held discounted to fair value, based on the redemption date of
the loan. These loans are subject to credit risk, where loans may potentially not be repaid if the borrower defaults on repayment. An adjustment for credit
risk is built into the calculation by using a discount rate equivalent for home loans, which rank behind mortgages. None of these financial assets are either
past due or impaired.

100

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 2016
15. AVAILABLE-FOR-SALE FINANCIAL ASSETS CONTINUED
The estimated value takes into consideration movements in house prices, the anticipated timing of the repayment of the asset and associated credit risk.
As the precise valuation and timing of the redemption of these assets remains uncertain, the Group applies assumptions based upon current market
conditions and the Group’s experience of actual cash flows resulting from these transactions. These assumptions are reviewed at the end of each financial
year as part of the impairment review conducted by the Directors. The difference between the estimated future value and the initial fair value is credited
to finance income over the term of the loan.

Future house price inflation is assumed to be zero (2015: zero). The discount rate applied is 8.5 per cent (2015: 8.5 per cent) which the Directors believe
approximates the cost of a second charge mortgage on similar properties.

If UK house price inflation had been one per cent higher or lower, with all other variables held constant and excluding any effect of current or deferred tax,
the value of shared equity would increase or decrease by £139,000 (2015: £90,000) respectively, whilst if the discount rate used had been one per cent
higher or lower, the value of these financial instruments would decrease or increase by £453,000 (2015: £492,000) and £506,000 (2015: £524,000),
respectively. Changes in economic conditions will change the estimates made, therefore impacting the fair value of these loans.

The inputs used are by nature estimated and the resultant fair value has been classified as Level 3 under the fair value hierarchy.

16. DEFERRED TAX ASSETS

Amounts due to be recovered within one year

Amounts due to be recovered after more than one year

The movement in the year in the Group’s net deferred tax position was as follows:

At 1 October 2014

Charge to Income Statement for the year

At 30 September 2015

Charge to Income Statement for the year

Amount transferred to the Statement of Changes in Equity

At 30 September 2016

2016
£’000

1,811

1,507

3,318

Other
£’000

(34)

(32)

740

154

862

2015
£’000

—

5,606

Total
£’000

5,902

(296)

5,606

(2,442)

154

3,318

Losses
£’000

5,900

(262)

5,638

(3,182)

—

2,456

A deferred tax asset of £2,456,000 (2015: £5,638,000) has been recognised in respect of unutilised losses where realisation of the related tax benefit through
future taxable profits is probable. A deferred tax asset of £862,000 (2015: £32,000 liability) in respect of other short‑term timing differences and share‑based
payments has also been recognised. Temporary differences arising in connection with interests in associate and joint ventures are not significant. No deferred
tax asset has been recognised in relation to losses where it is considered that they are not recoverable in the near future. The Group has unrecognised
deferred tax assets of £1,260,000 on historical losses of £7,413,000 (2015: £1,483,000 on losses of £7,413,000).

17. INVENTORIES

Development land and work in progress

Completed properties unlet, unsold or awaiting sale

2016
£’000

550,620

32,982

2015
£’000

408,700

30,842

583,602

439,542

The value of inventories expensed during the period and included in cost of sales was £523,674,000 (2015: £423,881,000). During the year inventories were
written down through cost of sales by £1,235,000 (2015: £300,000). During the year impairment of inventories, which in previous years amounted to £600,000
(2015: £652,000), has been reversed, due to improved market conditions. During the year provisions of £1,119,000 (2015: £5,546,000) were utilised as
inventory was consumed.

Total provisions against the inventory at 30 September 2016 were £14,560,000 (2015: £15,044,000).

Interest incurred on deferred land purchases amounting to £919,000 (2015: £300,000) was capitalised during the year to inventories.

COUNTRYSIDE PROPERTIES PLC

101

FINANCIAL STATEMENTS
18. CONSTRUCTION CONTRACTS

Contracts in progress at the reporting date:

Amounts due from contract customers included in trade and other receivables

Retentions held by customers for contract work included in trade and other receivables

Revenue generated from contracting activities during the period

19. TRADE AND OTHER RECEIVABLES

Amounts falling due within one year:

Trade receivables

Amounts recoverable on construction contracts

Amounts owed by joint ventures

Other taxation and social security

Other receivables

Prepayments and accrued income

Amounts falling due in more than one year:

Amounts recoverable on construction contracts

Trade receivables

Total trade and other receivables

2016
£’000

2015
£’000

28,121

10,023

12,644

7,099

174,060

149,274

2016
£’000

2015
£’000

12,861

36,736

84,543

—

1,023

12,749

16,500

18,010

62,435

4,819

965

2,721

147,912

105,450

1,408

9,374

10,782

1,733

13,622

15,355

158,694

120,805

The Directors are of the opinion that there are no significant concentrations of credit risk (Note 29). The fair value of the financial assets is not considered
to be materially different from their carrying value. The fair values are based on discounted cash flows and are within Level 3 of the fair value hierarchy.

Trade receivables at year end have been assessed for recoverability. A provision for impairment is made when there is objective evidence of impairment,
which is usually indicated by a delay in the expected cash flows or non‑payment from customers. Trade receivables remaining outstanding past their due
date are £480,000 (2015: £219,000); however, none were impaired.

A provision of £8,000,000 (2015: £8,000,000) has been made against amounts due from Countryside Neptune LLP, a joint venture, to reflect the Directors’
view of the recoverability of this advance.

The other classes within trade and other receivables do not contain impaired assets.

20. CASH AND CASH EQUIVALENTS

Cash and cash equivalents

Overdrafts

Net cash and cash equivalents

2016
£’000

38,301

(26,340)

2015
£’000

80,835

—

11,961

80,835

Cash and cash equivalents of £38,301,000 (2015: £80,835,000) comprise cash and short‑term deposits held, of which £36,578,000 (2015: £80,481,000)
is available to offset against loans drawn under the Group’s revolving credit facility and overdrafts. If these assets were fair valued, they would be considered
as Level 3 under the fair value hierarchy. The carrying amount of these assets is equal to their fair value. At the year end, all financial assets held were
in Sterling.

Cash and cash equivalents available for offset
Within the revolving credit facility the Group has a £30,000,000 overdraft facility which can be drawn by any Group company which is in the pooling
arrangement. Following an IFRS IC clarification in this area, the Group has presented these on a gross basis in the statement of financial position.

102

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 2016
21. TRADE AND OTHER PAYABLES

Amounts falling due within one year:

Trade payables

Accruals and deferred income

Other taxation and social security

Other payables

Advances due to joint ventures

Amounts falling due in more than one year:

Trade payables

Accruals and deferred income

Total trade and other payables

2016
£’000

2015
£’000

99,341

71,299

2,676

3,817

310

114,006

58,229

1,793

6,794

318

177,441

181,140

109,044

—

61,055

87,875

109,044

148,930

286,485

330,070

Trade and other payables principally comprise amounts outstanding for trade purchases and land acquired on deferred terms. The Directors consider that
the carrying amount of trade and other payables approximates to their fair value, as the impact of discounting is not significant.

22. PROVISIONS

At 1 October

Provisions released to the income statement during the year

Provisions utilised during the year

Unwind of discount

At 30 September

Disclosed as current liabilities

Disclosed as non‑current liabilities

2016
£’000

2,254

—

(774)

1,503

818

685

1,503

2015
£’000

5,795

(2,106)

(1,478)

2,254

1,144

1,110

2,254

The provision relates to an onerous lease on a leasehold office property, and is calculated on the estimated cash flows over the remaining length of the
lease, discounted at a risk‑free rate.

COUNTRYSIDE PROPERTIES PLC

103

FINANCIAL STATEMENTS
23. BORROWINGS

Bank loans

Bank loan and arrangement fees

Mandatory redeemable preference shares

2016
£’000

—

2015
£’000

140,000

(3,487)

136,513

287,329

423,842

Bank loans
In May 2016, the Group signed a new £300,000,000 revolving credit facility with Lloyds Bank plc, Barclays Bank PLC, HSBC Bank plc and Santander UK plc.
The agreement has a variable interest rate based on LIBOR and expires in May 2021, although the Group has the opportunity to extend the term of the
facility by a further two years. Subject to obtaining credit approval from the syndicate banks, the Group also has the option to extend the facility by a
further £100,000,000. This facility is subject to both financial and non‑financial covenants and is secured by floating charges over all the Group’s assets.

At 30 September 2015, the Group had a committed bank loan facility of £215,000,000 made available by Lloyds Bank plc, Barclays Bank PLC and Santander UK plc.
This facility was originally £200,000,000 but was extended during 2015. The facility was further extended during 2016 to £265,000,000 and £273,000 of debt
arrangement fees were incurred. This facility was subject to both financial and non‑financial covenants and was secured by fixed charges over the Group’s
property interests and fixed assets and a floating charge over all other assets.

The carrying value of the loans drawn under both the old and new facilities is equal to their fair value. As the impact of discounting is not significant,
the fair values are based on discounted cash flows and are within Level 2 of the fair value hierarchy.

Bank loan arrangement fees are amortised over the term of the facility. As a result of the signing of the new facility agreement, the unamortised loan arrangement
fee for the previous facility of £3,177,000 was expensed to the income statement as a non‑underlying finance cost (Note 6b). £2,776,000 of debt finance costs
were capitalised in relation to the new facility. Of these £241,000 were expensed during the year. At 30 September 2016, unamortised loan arrangement
fees were £2,535,000 (2015: £3,487,000) and £824,000 (2015: £1,113,000) of debt finance costs are included in finance costs (Note 7). As the Group did
not have any debt at 30 September 2016, the unamortised loan arrangement fees are disclosed as a prepayment.

The Group has the following undrawn facilities:

Floating rate:

Expiring after more than one year

Mandatory redeemable preference shares
Mandatory redeemable preference shares were issued as follows:

2016
£’000

2015
£’000

300,000

75,000

– 16 April 2013 – £207,404,865 to OCM Luxembourg Coppice Topco S.à r.l. and £19,944,135 to management

– 3 February 2014 – £54,546,493 to OCM Luxembourg Coppice Topco S.à r.l. and £3,230,558 to management

– 3 November 2014 – £2,203,321 to management

The characteristics of these instruments have determined that they are classed as financial liabilities rather than equity.

These shares were redeemable on a date to be determined by the issuer, upon liquidation of Midco or on the tenth anniversary of the date of issue,
the mandatory redemption date. Interest on the shares issued on 16 April 2013 accrues annually at 14.5 per cent for the first 12 months from issue,
then 12.0 per cent thereon which is payable on a date determined by the issuer or on the mandatory redemption date. Interest on the shares issued
on 3 February 2014 accrues annually at 15 per cent for the first 12 months from issue, then 12.0 per cent thereon which is payable on a date determined
by the issuer or on the mandatory redemption date.

Redemption of MRPS
As described in Note 1, as part of the reorganisation and prior to IPO, the balance of the mandatory redeemable preference shares of £287.3m and the
associated accrued return of £111.2m as of 16 February 2016 were transferred from the current holders to the Company in exchange for 392,222,212
ordinary shares in the Company.

The fair value of the financial liability is not considered to be materially different from its current value, as the impact of the discount is not significant.
The fair values are based on discounted cash flows and are within Level 3 of the fair value hierarchy.

104

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 2016
24. RESERVES
(a) Share capital

Allotted, issued and fully paid

Ordinary shares of £0.01 each

Ordinary A1 to A5 shares of £0.01 each

Ordinary B1 to B5 shares of £0.01 each

Ordinary C shares of £0.01 each

Ordinary D shares of £0.01 each

Ordinary AA shares of £0.01 each

Ordinary BB shares of £0.01 each

Share premium

Ordinary A shares

Ordinary B shares

Ordinary C shares

Ordinary D shares

Ordinary AA shares

Ordinary BB shares

Number of shares

2016
m

450

—

450

2015
m

—

2016
£’000

4,500

—

4,500

—

2015
£’000

—

844

—

172

1,075

The share capital of the Group represents the share capital of the parent company, Countryside Properties PLC. As described in Note 1, this Company became
the Group’s ultimate parent company on 11 February 2016. Prior to this the share capital of the Group represented the share capital of the previous parent,
OCM Luxembourg Coppice Midco S.à r.l..

Movements in the Company’s share capital from the date of incorporation to year end are described in Note 1. There have not been any other changes
to the Company’s share capital since the steps laid out in Note 1.

All ordinary shares allotted and issued have equal voting rights of one vote per share, with the right to receive dividends if declared.

During the year to 30 September 2015 the following shares were issued:

– 23 October 2014 – 1,520 B shares of £0.01;

– 29 October 2014 – 2,280 B shares of £0.01; and

– 26 May 2015 – 8,016 A shares of £0.01; 1,050 B shares of £0.01; 700 BB shares of £0.01; and 3,100 C shares of £0.01 were issued.

The following describes the nature and purpose of each reserve within shareholders’ equity:

Share premium
The amount subscribed for share capital in excess of nominal value less any costs directly attributable to the issue of new shares.

COUNTRYSIDE PROPERTIES PLC

105

FINANCIAL STATEMENTS
24. RESERVES CONTINUED
(b) Reserves
Cumulative net gains and losses recognised in the Income Statement and Statement of Changes in Equity.

At 1 October 2014

Profit for the period

Share‑based payment

At 30 September 2015

Profit for the period

Other comprehensive income

Share‑based payment

Group reorganisation

At 30 September 2016

25. NOTES TO THE CASH FLOW STATEMENT
Reconciliation of operating profit to cash generated from operations

Cash flows from operating activities

Profit before taxation

Adjustments for:

– Depreciation charge

– Amortisation charge

– Non‑cash items

– Share of post‑tax profit from joint ventures and associate

– Share‑based payment – pre‑IPO

– Share‑based payment – post‑IPO

– Finance costs

– Impairment of debt amortisation fees

– Finance income

– Profit on disposal of available‑for‑sale financial assets

Changes in working capital:

– (Increase)/decrease in inventories

– Increase in trade and other receivables

– Decrease in trade and other payables

– Decrease in provisions for liabilities and charges

Cash (used in)/generated from operations

Non-cash items
Non‑cash items primarily relate to net stock provision expense amounting to £635,000 (2015: credit of £352,000).

Retained
earnings
£’000

(10,591)

19,623

1,310

10,342

61,074

—

3,188

513,255

587,859

Available‑for‑sale
financial
assets
£’000

1,122

443

—

1,565

—

(1,501)

—

Total
reserves
£’000

(9,469)

20,066

1,310

11,907

61,074

(1,501)

3,188

513,255

587,923

Note

2016
£’000

2015
£’000

78,577

28,019

671

1,273

635

352

1,201

(977)

13, 14

(19,593)

(10,584)

1,910

1,124

27,341

3,177

(2,175)

(1,295)

(38,463)

(13,012)

(54,288)

(774)

1,310

—

52,294

—

(1,803)

(1,226)

2,648

(5,589)

(34,348)

(1,478)

(14,892)

29,819

106

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 201626. INVESTMENTS
The Company substantially owns directly or indirectly the whole of the issued and fully paid ordinary share capital of its subsidiary undertakings.
Subsidiary undertakings of the Group at 30 September 2016 are presented below:

Country of
incorporation

Voting rights
%

Principal activity

Direct investment

Copthorn Holdings Limited

OCM Luxembourg Coppice Midco S.à r.l. (in liquidation)

Luxembourg

Indirect investment

Beaulieu Park Limited

Brenthall Park (One) Limited

Cliveden Village Management Company Limited

Copthorn 2009 Limited (in liquidation)

Copthorn Finance Limited (in liquidation)

Copthorn Limited (in liquidation)

Countryside 26 Limited

Countryside 28 Limited

Countryside Build Limited

Countryside Cambridge One Limited

Countryside Cambridge Two Limited

Countryside Commercial & Industrial Properties Limited

Countryside Developments Limited

Countryside Eight Limited

Countryside Four Limited

Countryside Investments Limited

Countryside Properties (Commercial) Limited

Countryside Properties (Holdings) Limited

Countryside Properties (In Partnership) Limited

Countryside Properties (Joint Ventures) Limited

Countryside Properties Land (One) Limited

Countryside Properties Land (Two) Limited

Countryside Properties (London & Thames Gateway) Limited

Countryside Properties (Northern) Limited

Countryside Properties (Southern) Limited

Countryside Residential (South Thames) Limited

Countryside Properties (Special Projects) Limited

Countryside Properties (Springhead) Limited

Countryside Properties (Uberior) Limited

Countryside Properties (UK) Limited

Countryside Residential Limited

Countryside Residential (South West) Limited

Countryside Seven Limited

Countryside Sigma Limited

Countryside Thirteen Limited

Countryside (UK) Limited

Dunton Garden Suburb Limited

Harold Wood Management Limited

Lakenmoor Ltd

100.00

74.90

100.00

Holding company

Dormant

Housebuilding

Dormant

Housebuilding

Dormant

Housebuilding

Dormant

Holding company

Housebuilding

Dormant

Housebuilding

Dormant

Housebuilding

Dormant

Housebuilding

Dormant

COUNTRYSIDE PROPERTIES PLC

107

FINANCIAL STATEMENTS
26. INVESTMENTS CONTINUED

Indirect investment continued

Mandeville Place (Radwinter) Management Limited

Millgate Developments Limited

Millgate Homes Limited

Millgate Homes UK Limited

Millgate (UK) Holdings Limited

Skyline 120 Management Limited

Skyline 120 Nexus Management Limited

Springhead Resident Management Company Limited

South at Didsbury Point Two Management Limited

Trinity Place Residential Management Company Limited

Urban Hive Hackney Management Limited

Wychwood Park Golf Club Limited

Wychwood Park (Holdings) Limited

Wychwood Park (Management) Limited

Country of
incorporation

Voting rights
%

Principal activity

100.00

Estate management

Housebuilding

Dormant

Holding company

Estate management

Dormant

Non‑trading

Estate management

All subsidiaries are fully consolidated, after eliminating intergroup transactions. The non‑controlling interest relates to Countryside Sigma Limited.

27. RELATED PARTY TRANSACTIONS
Transactions with Group joint ventures and associate

Sales during the year

At 1 October

Net advances during the period

At 30 September

Joint ventures

Associate

2016
£’000

26,150

62,117

22,116

84,233

2015
£’000

20,648

45,442

16,675

62,117

2016
£’000

674

—

2015
£’000

1,522

—

The transactions noted above are between the Group and its joint ventures and associate whose relationship is described in Note 13 and Note 14 respectively.

Sales of goods to related parties were made at the Group’s usual list prices. No purchases were made by the Group from its joint ventures or associate.
The amounts outstanding ordinarily bear no interest and will be settled in cash.

Remuneration of key management personnel
The aggregate remuneration of the Executive Committee, who are considered to be key management personnel of the Group, was £6.1m (2015: £6.4m).

Transactions with key management personnel
In 2014, properties were sold at market value by the Group to parties related to key management personnel who continue to lease them back to the Group
as follows:

– Close family members of Ian Sutcliffe received £17,250 (2015: £17,250).

– A company of which Graham Cherry, a member of the Group’s Executive Committee, is a Director and shareholder received £21,000 (2015: £21,000).

In 2016 a close family member of Ian Sutcliffe jointly purchased a property from Acton Gardens LLP, an entity in which the Group has a 50 per cent
interest, at market value of £530,000.

Last financial year, a close family member of Ian Sutcliffe and a close family member of Graham Cherry were employed by a subsidiary of the Group.
Both individuals were recruited through the normal interview process and are employed at salaries commensurate with their experience and roles.
The combined annual salary and benefits of these individuals is less than £100,000 (2015: less than £100,000).

108

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 2016
28. FINANCIAL INSTRUMENTS
The following tables categorise the Group’s financial assets and liabilities included in the Consolidated Statement of Financial Position:

2016

Assets

Available‑for‑sale financial assets

Trade and other receivables

Amounts due from associate and joint ventures

Cash and cash equivalents

2015

Assets

Available‑for‑sale financial assets

Trade and other receivables

Amounts due from associate and joint ventures

Cash and cash equivalents

Any changes in the fair value of derivatives are recorded in the Income Statement.

2016

Liabilities

Overdrafts

Trade and other payables (excluding non‑financial liabilities)

Amount due to joint ventures

2015

Liabilities

Bank loan and finance cost

Mandatory redeemable preference shares

Trade and other payables (excluding non‑financial liabilities)

Amount due to joint ventures

Loans and
receivables
£’000

Available
for sale
£’000

Total
£’000

—

8,665

60,379

84,543

38,301

—

8,665

60,379

84,543

38,301

183,223

8,665

191,888

—

10,535

49,865

62,435

80,835

—

10,535

49,865

62,435

80,835

193,135

10,535

203,670

Other financial
liabilities at
amortised cost
£’000

26,340

214,878

310

241,528

142,355

375,204

177,402

318

695,279

COUNTRYSIDE PROPERTIES PLC

109

FINANCIAL STATEMENTS
28. FINANCIAL INSTRUMENTS CONTINUED
Fair value estimation
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices).

Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The following table presents the Group’s assets that are measured at fair value at 30 September:

2016

Assets

Available‑for‑sale financial assets

2015

Assets

Available‑for‑sale financial assets

Level 1
£’000

Level 2
£’000

Level 3
£’000

Total
£’000

—

8,665

—

10,535

There were no transfers between levels during the period.

The fair value of financial instruments that are not traded in an active market (for example, over‑the‑counter derivatives) is determined by using valuation
techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity‑specific
estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant
inputs is not based on observable market data, the instrument is included in Level 3.

Level 1: None of the Group’s financial instruments are categorised as Level 1.

Level 2: None of the Group’s financial instruments are categorised as Level 2.

Level 3: The key assumptions used in Level 3 valuations include house price movements, the expected timing of receipts, credit risk and discount rates.
Future house price inflation is assumed to be zero (2015: zero). The discount rate applied was 8.5 per cent (2015: 8.5 per cent) which Directors believe
approximates the cost of a second charge mortgage on similar properties. Techniques, such as discounted cash flow analysis, have been used to determine
fair value for the Level 3 financial instruments.

The fair values of the financial instruments that are measured at amortised cost is not shown, because the difference is not material.

29. FINANCIAL RISK MANAGEMENT
The main financial risks associated with the Group have been identified as liquidity risk, interest rate risk, housing market risk and credit risk. The Directors
are responsible for managing these risks and the policies adopted are set out below.

Liquidity risk
The Group finances its operations through a mixture of equity (Company share capital, reserves and retained earnings) and debt (bank loan facilities and, in
2015, mandatory redeemable preference shares). The Group manages its liquidity risk by monitoring its existing facilities for both financial covenant and
funding headroom against forecast requirements based on short‑term and long‑term cash flow forecasts.

110

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 2016
29. FINANCIAL RISK MANAGEMENT CONTINUED
Maturity analysis
The following table sets out the contractual undiscounted maturities including estimated cash flows of the financial assets and liabilities (excluding financial
derivatives) of the Group at 30 September:

2016

Assets

Cash and cash equivalents

Available‑for‑sale financial assets

Trade and other receivables

Amounts due from joint ventures and associate

2016

Liabilities

Overdrafts

Trade and other payables

Amounts due to joint ventures

Provisions

2015

Assets

Cash and cash equivalents

Available‑for‑sale financial assets

Trade and other receivables

Amounts due from joint ventures and associate

2015

Liabilities

Bank loans and finance cost

Mandatory redeemable preference shares

Return on mandatory redeemable preference shares

Trade and other payables

Amounts due to joint ventures

Provisions

Less than
one year
£’000

One to two
years
£’000

Two to five
years
£’000

Over five
years
£’000

Total
£’000

38,301

—

49,597

84,543

172,441

26,340

102,200

310

834

—

1,123

5,913

—

7,036

—

6,003

4,705

—

9,048

164

—

38,301

16,174

60,379

84,543

10,708

9,212

199,397

—

26,340

48,804

75,844

1,568

228,416

—

510

—

159

—

310

1,503

129,684

49,314

76,003

1,568

256,569

80,835

—

34,530

62,435

177,800

2,355

—

6,530

—

6,530

—

10,603

—

13,924

—

80,835

13,924

51,663

62,435

10,603

13,924

208,857

—

140,000

—

118,179

14,665

45,666

318

1,144

—

534

—

621

—

287,329

87,872

12,669

—

142,355

287,329

87,872

191,179

318

2,299

Cash and cash equivalents includes £36,578,000 (2015: £80,481,000) which is available for offset against loans drawn under the Group’s revolving credit facility
and overdrafts.

121,996

15,199

186,287

387,870

711,352

COUNTRYSIDE PROPERTIES PLC

111

FINANCIAL STATEMENTS
29. FINANCIAL RISK MANAGEMENT CONTINUED
Interest rate risk
Interest rate risk reflects the Group’s exposure to fluctuations in interest rates in the market. This risk arises from bank loans that are drawn under the Group’s
loan facilities with variable interest rates based upon UK LIBOR. For the year ended 30 September 2016 it is estimated that an increase by 0.5 per cent
in interest rates would have decreased the Group’s profit before tax by £650,000 (2015: £575,000).

The following table sets out the interest rate risk associated with the Group’s financial liabilities at 30 September 2016:

2016

Liabilities

Bank loans and finance cost

Trade and other payables

Amounts due to joint ventures

2015

Liabilities

Bank loans and finance cost

Mandatory redeemable preferred shares

Return on mandatory redeemable preferred shares

Trade and other payables

Amounts due to joint ventures

Fixed rate
£’000

Floating rate
£’000

Non‑interest
bearing
£’000

Total
£’000

—

26,340

—

26,340

32,180

—

182,698

214,878

310

32,180

26,340

183,008

241,528

—

142,355

287,329

87,872

5,189

—

172,213

318

142,355

287,329

87,872

177,402

318

380,390

142,355

172,531

695,276

The financial assets of the Group amounting to £191,888,000 (2015: £203,670,000) with the exception of cash and cash equivalents amounting to
£38,301,000 (2015: £80,835,000) are all non‑interest bearing.

The Group has no exposure to foreign currency risk.

Housing market risk
The Group is affected by price fluctuations in the UK housing market. These are in turn affected by the wider economic conditions such as mortgage
availability and associated interest rates, employment and consumer confidence. Whilst these risks are beyond the Group’s ultimate control, risk is spread
across business activities undertaken by the Group and the geographic regions in which it operates. We have considered the sensitivity in relation to
available‑for‑sale financial assets, which is detailed in Note 15.

Credit risk
The Group’s exposure to credit risk is limited solely to the United Kingdom for housebuilding activities and by the fact that the Group receives cash at the
point of legal completion of its sales.

The Group’s remaining credit risk predominantly arises from trade receivables and cash and cash equivalents.

Loans receivable from financial assets held for sale are those advanced to homebuyers to assist in their purchase of property under the shared equity
schemes. The loans are secured by either a first or second charge over the property and are held at fair value.

Trade receivables on deferred terms arise from land sales. The amount deferred is secured by a charge over the land until such time payment is received.

Trade and other receivables comprise mainly the amounts receivable from the Homes and Communities Agency in relation to the Help‑to‑Buy scheme,
housing associations, joint ventures and the associate. The Directors consider the credit rating of the various debtors is good in respect of the amounts
outstanding and therefore credit risk is considered to be low.

Cash and cash equivalents and derivative financial instruments are held with UK clearing banks which are either A or A‑ rated.

112

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 2016
29. FINANCIAL RISK MANAGEMENT CONTINUED
Capital management
The Group’s policies seek to protect returns to shareholders by ensuring the Group will continue to trade profitably in the foreseeable future. The Group
also aims to optimise its capital structure of debt and equity so as to minimise its cost of capital. The Group manages its capital with regard to the risks
inherent in the business and the sector within which it operates by monitoring its actual cash flows against bank loan facilities, financial covenants and the
cash flow forecasts approved by the Directors.

Total borrowings

Less: cash and cash equivalents available for offset

Net borrowings

Total equity

Total capital

2016
£’000

—

592,886

2015
£’000

427,329

(80,481)

346,848

13,234

592,886

360,082

30. SHARE-BASED PAYMENTS
The Group recognised £3,034,000 (2015: £1,310,000) of employee costs related to share‑based payment transactions made during the financial year
comprising the pre‑IPO Management Incentive Plan of £1,910,000 and the post‑IPO incentive plan of £1,124,000. Of these, £Nil (2015: £Nil) were cash settled.
A deferred tax asset of £358,000 (2015: £Nil) was recognised in relation to the plan, of which £205,000 was credited to the income statement and £154,000
was credited directly to equity. National Insurance contributions are payable in respect of certain share‑based payment transactions and are treated as
cash‑settled transactions. At 30 September 2016, the carrying amount of National Insurance contributions payable was £218,000 (2015: £Nil).

The Group operates a number of share‑based payment schemes as set out below:

(a) Savings-Related Share Option Scheme
The Group operates a Savings‑Related Share Option Scheme, which is open to all employees with more than three months’ continuous service. This is an
approved HMRC scheme and the first savings contracts were issued during the year.

Under the scheme, participants remaining in the Group’s employment at the end of the three‑year savings period are entitled to use their savings to purchase
shares in the Company at a stated exercise price. Employees leaving for certain reasons are able to use their savings to purchase shares within six months
of their leaving. At 30 September 2016, employees held 650 three‑year savings contracts (2015: nil) in respect of options over 3.0 million shares (2015: nil).
691 employees subscribed to the original offer, representing a participation rate of 70 per cent of eligible employees (2015: nil). A reconciliation of option
movements is shown below.

Outstanding at the beginning of the year

Granted

Forfeited

Exercised

Expired

Outstanding at the end of the year

2016
Number
of options
m

2016
Weighted
average
exercise price
p

—

3.0

(0.2)

—

2.8

—

192

—

192

As the first award of options under the scheme was made during the year, none of the options are currently exercisable. The weighted average remaining
contractual life of share options outstanding at 30 September 2016 was 2.4 years (2015: nil). Details of options at 30 September 2016 are set out below:

Date of grant

16 March 2016

Date of expiry

Exercise price
p

2016
Options
outstanding
m

2015
Options
outstanding
m

March 2019

192

2.8

—

COUNTRYSIDE PROPERTIES PLC

113

FINANCIAL STATEMENTS
30. SHARE-BASED PAYMENTS CONTINUED
(a) Savings-Related Share Option Scheme continued
Options granted during the year were valued using the Black Scholes option‑pricing model. No performance conditions were included in the fair value
calculations. The fair value per option granted during the year and the assumptions used in the calculation are as follows:

Share price at date of grant (p)

Exercise price (p)

Volatility (%)

Option life (years)

Expected dividend yield (%)

Risk‑free rate (%)

Fair value per option (p)

2016

240

192

As the Company had no share price history prior to the grant of the options, the expected volatility is based on the standard deviation of the share prices
of other listed housebuilders for the period immediately prior to the date of grant of award.

The resulting fair value is expensed over the service period of three years, on the assumption that 45 per cent of options will be cancelled over the service
period as employees leave the Sharesave scheme based on the Group’s experience of employee attrition rates.

(b) Long Term Incentive Plan 2016
Under the Long Term Incentive Plan 2016, shares are conditionally awarded to the senior managers in the Company. The core awards are calculated
as a percentage of the participants’ salaries and scaled according to grades. The award granted in 2016 is assessed against ROCE, TNAV and relative total
shareholder return. Straight line vesting will apply if performance falls between two points. Awards are structured as nil‑cost options. Performance will
be measured at the end of the three‑year performance period. If the required level of performance has been reached, the awards vest and the award will
be released. Options granted to acquire the award of shares will expire two years from the vesting date. Dividends will not accrue on the shares that vest.

A reconciliation of the number of shares conditionally allocated is shown below:

Outstanding at the beginning of the year

Granted

Forfeited

Exercised

Expired

Outstanding at the end of the year

2016
Number
of options
m

—

3.8

(0.2)

—

3.6

The weighted average remaining contractual life of share options outstanding at 30 September 2016 was 2.4 years. Details of the shares conditionally
allocated at 30 September 2016 are set out below.

Date of grant

18 February 2016

2016
Options
outstanding
m

3.6

Options to acquire the shares were valued using the following methods:

– for the non‑market‑based elements of the award, a combination of a Black Scholes option‑pricing model together with management’s best estimate

of the future vesting of the options based on current performance expectations; and

– for the relative TSR element of the award, a Monte Carlo simulation.

114

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 201630. SHARE-BASED PAYMENTS CONTINUED
(b) Long Term Incentive Plan 2016 continued
The key assumptions underpinning the Black Scholes model and Monte Carlo simulation were as follows:

Share price at date of grant (p)

Exercise price (p)

Volatility (%)

Option life (years)

Expected dividend yield (%)

Risk‑free rate (%)

Fair value per option – Black Scholes (p)

Fair value per option – Monte Carlo (p)

2016

237

nil

219

140

(c) Legacy Management Incentive Plan
Prior to IPO, Ian Sutcliffe and Rebecca Worthington participated in a Management Incentive Plan (the “Plan”) under which participants were awarded shares
in OCM Luxembourg Coppice Midco S.à r.l. (“Midco”). These interests were purchased at fair value, determined by a third party.

Immediately prior to IPO, any shares in Midco held by the participants were exchanged for new shares in Countryside Properties PLC. On 17 February 2016,
the awards vested when the Company was admitted to the London Stock Exchange. No further performance or employment conditions are attached to
these shares, save for a requirement not to sell for a period of one year following the IPO. The number of shares which vested under the awards are
detailed in the table below. The residual shareholding for Ian Sutcliffe and Rebecca Worthington at 30 September 2016 is disclosed as part of the total
shareholding in the Directors’ Remuneration Report.

Ian Sutcliffe

Rebecca Worthington

Other participants

Number
of shares

7,795,068

724,253

27,980,073

On IPO, as set out in the Prospectus published by the Company, Ian Sutcliffe sold 2,338,520 shares and Rebecca Worthington sold 217,276 shares at the
offer price of 225 pence.

31. ACQUISITION
On 15 April 2016, the Group purchased 50 per cent of the issued share capital of Countryside Properties (Springhead) Limited (“Springhead”), a joint
venture company that it did not already own. This transaction has been accounted for using the acquisition method of accounting, under which the Group
is deemed to have disposed of its 50 per cent holding in the company and immediately to have acquired 100 per cent of the issued share capital.

Springhead is developing land at Springhead Park at Northfleet in Kent. The book value of net assets acquired was also considered to be the fair value of the
net assets acquired, and also equal to the cash consideration paid. As a result no goodwill arose as a result of the transaction.

An analysis of the net assets acquired is set out below:

Available‑for‑sale financial assets

Inventories

Trade and other receivables

Cash and cash equivalents

Trade and other payables

Goodwill

Total

Satisfied by:

Cash

Fair value
£’000

544

11,369

239

342

(10,201)

2,293

—

2,293

The post acquisition revenue and profit of Springhead was immaterial. The impact of the acquisition on a pro‑forma basis for the Group is not material.

COUNTRYSIDE PROPERTIES PLC

115

FINANCIAL STATEMENTS
32. COMMITMENTS AND CONTINGENT LIABILITIES
Operating lease commitments
The Group has various leases under non‑cancellable operating lease agreements. The lease terms are between one and 20 years, and the majority of lease
agreements are renewable at the end of the lease period at market rate.

The Group also leases various vehicles, under cancellable lease agreements. The Group is required to give a six‑month notice for termination of these
agreements. The lease expenditure charged to the income statement during the year is disclosed in Note 6.

At 30 September the future aggregate minimum lease payments under non‑cancellable operating leases were as follows:

Within one year

Later than one year and less than five years

After five years

2016
£’000

4,038

8,453

1,591

2015
£’000

3,041

8,074

2,756

14,082

13,871

Capital commitments
The Group was not committed to the purchase of any property, plant and equipment or software intangible assets at 30 September 2016 (2015: £Nil).

Parent company guarantees
The Group has made parent company guarantees to its joint ventures and associate in the ordinary course of business.

The Group has entered into counter indemnities to banks, insurance companies, statutory undertakings and the National House Building Council in the
ordinary course of business, including those in respect of joint venture partners from which it is anticipated that no material liabilities will arise.

Litigation and claims
The Group is subject to various claims, audits and investigations that have arisen in the ordinary course of business. These matters include but are not
limited to employment and commercial matters. The outcome of all of these matters is subject to future resolution, including the uncertainties of litigation.
Based on information currently known to the Group and after consultation with external lawyers, the Directors believe that the ultimate resolution of these
matters, individually or in aggregate, will not have a material adverse impact on the Group’s financial condition.

33. DIVIDEND
The Board of Directors recommend a final dividend of 3.4 pence per share (2015: Nil pence), amounting to a total dividend of £15.3m (2015: £Nil), which
will be paid on 3 February 2017 to shareholders on the register on 13 January 2017, subject to shareholder approval. The expense has not been recognised
in these financial statements as the shareholders’ right to receive the dividend had not been established at 30 September 2016.

116

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDFor the year ended 30 September 2016
INDEPENDENT AUDITOR’S REPORT
to the members of Countryside Properties PLC

REPORT ON THE PARENT COMPANY FINANCIAL STATEMENTS

Our opinion
In our opinion, Countryside Properties PLC’s parent company financial statements (the “financial statements”):

– give a true and fair view of the state of the parent company’s affairs as at 30 September 2016;

– have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

– have been prepared in accordance with the requirements of the Companies Act 2006.

What we have audited
The financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), comprise:

– the parent company statement of financial position as at 30 September 2016;

– the statement of changes in equity for the period then ended; and

– the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements.
These are cross‑referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is United Kingdom Accounting Standards, comprising
FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law (United Kingdom Generally Accepted
Accounting Practice).

OTHER REQUIRED REPORTING

Consistency of other information
Companies Act 2006 reporting
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial period for which the financial statements
are prepared is consistent with the financial statements.

ISAs (UK & Ireland) reporting
Under International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”) we are required to report to you if, in our opinion, information
in the Annual Report is:

– materially inconsistent with the information in the audited financial statements; or

– apparently materially incorrect based on, or materially inconsistent with, our knowledge of the parent company acquired in the course of performing our

audit; or

– otherwise misleading.

We have no exceptions to report arising from this responsibility.

Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:

– we have not received all the information and explanations we require for our audit; or

– adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not

visited by us; or

– the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Directors’ remuneration
Directors’ remuneration report – Companies Act 2006 opinion
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified by law are not
made. We have no exceptions to report arising from this responsibility.

COUNTRYSIDE PROPERTIES PLC

117

PARENT COMPANY FINANCIAL STATEMENTS

INDEPENDENT AUDITOR’S REPORT CONTINUED
to the members of Countryside Properties PLC

RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT

Our responsibilities and those of the directors
As explained more fully in the directors’ responsibility statement set out on page 73, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view.

This report, including the opinions, has been prepared for and only for the parent company’s members as a body in accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error.
This includes an assessment of:

– whether the accounting policies are appropriate to the parent company’s circumstances and have been consistently applied and adequately disclosed;

– the reasonableness of significant accounting estimates made by the directors; and

– the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements, and evaluating
the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to
draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non‑financial information in the Annual Report to identify material inconsistencies with the audited financial statements
and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course
of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

OTHER MATTER

We have reported separately on the Group financial statements of Countryside Properties PLC for the period ended 30 September 2016.

Christopher Burns (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
28 November 2016

118

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comPARENT COMPANY STATEMENT OF FINANCIAL POSITION
As at 30 September 2016

Fixed assets

Investments

Current assets

Debtors

Creditors: amounts falling due within one year

Net current assets

Total assets less current liabilities

Capital and reserves

Called up share capital

Profit and loss reserves

Total equity

Notes

2016
£’000

727,085

87,497

(83,208)

4,289

731,374

4,500

726,874

731,374

The notes on pages 121 to 124 are an integral part of these financial statements.

The financial statements were approved by the Board of Directors and authorised for issue on 28 November 2016 and are signed on its behalf by:

I Sutcliffe
Director

R Worthington
Director

Company Registration No. 09878920

COUNTRYSIDE PROPERTIES PLC

119

PARENT COMPANY FINANCIAL STATEMENTS
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
For the period ended 30 September 2016

Share
capital
£’000

Profit and
loss reserves
£’000

Total
£’000

—

(11,231)

4,500

738,105

742,605

4,500

726,874

731,374

Balance at 18 November 2015

Period ended 20 September 2016:

Loss for the period

Total comprehensive income for the period

Group reorganisation

Balance at 30 September 2016

120

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comNOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 30 September 2016

1. ACCOUNTING POLICIES
Company information
Countryside Properties PLC was incorporated on 18 November 2015 to serve as a holding company for the purposes of listing on the London Stock Exchange.
Countryside Properties PLC was admitted to the premium segment of the London Stock Exchange on 17 February 2016.

These are the Company’s first financial statements and the first as ultimate holding Company for the Group following the share‑for‑share exchange when
the Company was inserted as the new holding Company of the Group. Further details of the Group reorganisation can be found in Note 1 of the Group
financial statements on page 83. Countryside Properties PLC is a limited company domiciled and incorporated in England and Wales. The registered office
is Countryside House, The Drive, Brentwood, Essex CM13 3AT.

1.1 Accounting convention
These financial statements have been prepared in accordance with FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’
and the requirements of the Companies Act 2006. As the Company has not previously prepared financial statements, no comparatives have been presented,
no transition exemptions or exceptions have been applied and no reconciliations are presented.

FRS 102 allows a qualifying entity certain disclosure exemptions, subject to certain conditions which have been complied with, including notification of,
and no objection to, the use of exemptions by the Company’s shareholders.

The Company has taken advantage of the following exemptions:

i. from preparing a statement of cash flows, on the basis that it is a qualifying entity and the consolidated statement of cash flows, included in these financial
statements, includes the Company’s cash flows;

ii. from the financial instrument disclosures, required under FRS 102 paragraphs 11.39 to 11.48A and paragraphs 12.26 to 12.29, as the information is
provided in the consolidated financial statement disclosures;

iii. from disclosing share‑based payment arrangements, required under FRS 102 paragraphs 26.18(c), 26.19 to 26.21 and 26.23, concerning its own equity
instruments. The Company financial statements are presented with the consolidated financial statements and the relevant disclosures are included therein; and

iv. from disclosing the Company key management personnel compensation, as required by FRS 102 paragraph 33.7.

As permitted by Section 408 of the Companies Act 2006, the parent company’s profit and loss account has not been presented in these financial statements.
The loss for the period since incorporation was £11,231,000.

The financial statements are prepared in Sterling, which is the functional currency of the Company, and are rounded to the nearest thousand pounds.

The financial statements are prepared on a going concern basis under the historical cost convention. The principal accounting policies adopted are set out below.

The Company has not disclosed the information required by regulation 5(1)(b) of the Companies (Disclosure of Auditor Remuneration and Liability
Limitation Agreements) Regulations 2008 as the Group accounts of the Company are required to comply with regulation 5(1)(b) as if the undertakings
included in the consolidation were a single group.

1.2 Going concern
The Group’s business activities, together with the factors likely to affect its future development, are set out in the Strategic Report on pages 2 to 39.
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Chief Financial Officer’s Review on pages
26 to 29 of the Strategic Report. Further disclosures regarding borrowings are provided in Note 23 of the Group financial statements including the impact
of certain sensitivities.

As described in the Viability Statement, the Directors have assessed the prospects and viability of the Group over a three‑year period to September 2019.
The Board has performed a robust assessment of the principal risks facing the Company, including those risks that would threaten Countryside’s business
model, future performance, solvency or liquidity.

Having considered these forecasts, the Directors are satisfied the Group has sufficient liquidity and covenant headroom to enable the Group to conduct
its business and meet its liabilities as they fall due for at least the next 12 months. The Company’s ability to continue as a going concern is inextricably linked
to the results of the Group as a whole. As such, the Directors consider the Company to be a going concern and these financial statements are prepared on
this basis.

1.3 Fixed asset investments
The value of the investment in each subsidiary held by the Company is recorded at cost less any impairment in the Company’s Statement of Financial Position.

A subsidiary is an entity that the Company has the power to control.

1.4 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and other short‑term deposits held by the Company with maturities of three months or less.
Bank overdrafts are classified within current liabilities.

COUNTRYSIDE PROPERTIES PLC

121

PARENT COMPANY FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
For the year ended 30 September 2016

1. ACCOUNTING POLICIES CONTINUED
1.5 Financial instruments
Fair value measurement of financial instruments
The Company has adopted IAS 39 ‘Recognition and Measurement of Financial Instruments’.

Financial assets
Financial assets which primarily represent loans to subsidiary companies and cash are initially recognised at fair value.

Borrowings
Interest‑bearing bank loans and overdrafts are recorded initially at their fair value, net of direct transaction costs. Borrowings are subsequently carried at
their amortised cost and loan arrangement fees are amortised over the term of the instrument. Finance costs associated with each individual drawdown are
expensed over the period of that drawdown.

Borrowings are classified as non‑current liabilities unless the Group has an unconditional right to defer settlement of the liability until the end of the term
of the agreement. Further details of the Company’s bank loans can be found in Note 23 of the Group financial statements.

1.6 Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are
recognised as liabilities once they are no longer at the discretion of the Company.

1.7 Taxation
Current taxation
Income tax for the years presented comprises current and deferred tax.

The current tax payable is based on taxable profit for the period which differs from accounting profit as reported in the Statement of Comprehensive
Income because it excludes items of income or expense that are taxable or deductible in other years and those items never taxable or deductible.
The Group’s liability for current tax is measured using tax rates that have been enacted or substantively enacted by the reporting date.

1.8 Dividend
Dividend distributions to Countryside Properties PLC shareholders are recognised in the Company’s financial statements in the periods in which the final
dividends are approved in the annual general meeting, or when paid in the case of an interim dividend.

1.9 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a
deduction, from the proceeds.

1.10 Related parties
The Group discloses transactions with related parties which are not wholly owned within the same Group. Where appropriate, transactions of a similar
nature are aggregated unless, in the opinion of the Directors, separate disclosure is necessary to understand the effect of the transactions on the Group
financial statements.

2. JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the financial statements requires the Directors to make estimates and assumptions that affect the application of policies and the reported
amounts of assets, liabilities, income, expenses and related disclosures.

Critical accounting judgements
In the process of applying the Company’s accounting policies, which are described above, the Directors have made no individual judgements that have had
significant impact upon the financial information, apart from those involving estimations, which are dealt with below.

Key sources of estimation uncertainty
The estimates and underlying assumptions are based on historical experience and other relevant factors and are reviewed on an ongoing basis. This
approach forms the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Changes in
accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based or as a result of new information. Such
changes are recognised in the year in which the estimate is revised.

The key assumptions about the future and key sources of estimation uncertainty that have a risk of causing a material adjustment to the carrying value
of assets and liabilities are described below.

IPO costs
As permitted by section 610(2b) of the Companies Act 2006, £4.6m of transaction costs in relation to the Group’s IPO were offset against the share
premium of £293.6m created on the issue of new ordinary shares. Management has exercised judgement in assessing the allocation of costs incurred
between share premium and the current period income statement.

Impairment of fixed asset investments
Determining whether fixed asset investments are impaired requires judgement and estimation. The Directors periodically review fixed asset investments
for possible impairment when events or changes in circumstances indicate, in management’s judgement, that the carrying amount of an asset may not be
recoverable. Such indicating events would include a significant planned restructuring, a major change in market conditions or technology and expectations
of future operating losses or negative cash flows. The Company did not record any impairment charges during the period ended 30 September 2016.

122

COUNTRYSIDE PROPERTIES PLC

countryside-properties.com3. EMPLOYEES
The Company had no employees during the year.

4. FIXED ASSET INVESTMENTS

Investment in subsidiary companies

Details of the Company’s subsidiaries at 30 September 2016 are included in Note 26 of the Group financial statements.

5. DEBTORS
Amounts falling due within one year:

Trade debtors

Corporation tax recoverable

Amounts due from subsidiary undertakings

Prepayments

The amounts owed by subsidiary undertakings to the Company are unsecured, repayable on demand and are non‑interest bearing.

6. CREDITORS
Amounts falling due within one year:

Amounts due to subsidiary undertakings

Accruals and deferred income

Bank overdrafts

2016
£’000

727,085

2016
£’000

1,233

83,728

2,535

87,497

2016
£’000

56,340

528

26,340

83,208

The amounts owed by subsidiary undertakings to the Company are unsecured, repayable on demand and are non‑interest bearing.

Bank loans
In May 2016, the Company signed a new £300,000,000 revolving credit facility with Lloyds Bank plc, Barclays Bank PLC, HSBC Bank plc and Santander UK plc.
Further details of this facility is disclosed in note 23 of the Group financial statements.

The overdraft is shown net of £2,535,000 of unamortised borrowing costs.

COUNTRYSIDE PROPERTIES PLC

123

PARENT COMPANY FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
For the year ended 30 September 2016

7. SHARE CAPITAL

Issued, called up and fully paid

Issue of one ordinary share of £1 each in incorporation

Issue of £1 ordinary shares

Capital reduction

At 30 September 2016

2016

Number of
shares

Share capital
£’000

Share premium
£’000

—

449,999,990

450,000

72,222

—

(445,500)

(72,222)

450,000,000

4,500

—

8. COMMITMENTS AND CONTINGENT LIABILITIES
Parent company guarantees
The Company has made parent company guarantees to its associate and joint ventures in the ordinary course of business.

The Company has entered into counter indemnities to banks, insurance companies, statutory undertakings and the National House Building Council in the
normal course of business, including those in respect of joint venture partners from which it is anticipated that no material liabilities will arise.

9. DIVIDEND
The Board of Directors recommend a final dividend of 3.4 pence per share (2015: Nil pence), amounting to a total dividend of £15.3m (2015: £Nil), which
will be paid on 3 February 2017 to shareholders on the register on 13 January 2017, subject to shareholder approval. The expense has not been recognised
in these financial statements as the shareholders’ right to receive the dividend had not been established at 30 September 2016.

124

COUNTRYSIDE PROPERTIES PLC

countryside-properties.comSHAREHOLDER INFORMATION

FINANCIAL CALENDAR 2017

Ex-Dividend Date

Record Date

Payment of final dividend

Annual General Meeting

Trading Update

FOUR YEAR SUMMARY

Adjusted revenue

Adjusted operating profit

Adjusted operating margin

Return on capital employed

Tangible net asset value

Completions

Private average selling price

Sales rates

Open sales outlets

Forward sales

Land bank

OUR ADVISORS

Solicitors
Linklaters LLP
One Silk Street
London
EC2Y 8HQ

Corporate Communications
Brunswick Group LLP
16 Lincoln’s Inn Fields
London
WC2A 3ED

12 January 2017

13 January 2017

3 February 2017

26 January 2017

2016

2015

2014

2013

£777.0m

£122.5m

15.8%

26.8%

£615.8m

£468.7m

£307.6m

£91.2m

£47.1m

£26.2m

14.8%

24.7%

10.0%

15.6%

8.5%

10.4%

£537.4m

£329.0m

£287.8m

£221.7m

2,657

2,364

2,044

1,591

£465,000

£385,000

£329,000

£258,000

0.78

0.76

0.89

£225.4m

£137.5m

£137.3m

27,204

26,213

23,990

0.96

£49.2m

23,495

Chartered Accountants
and Statutory Auditor
PricewaterhouseCoopers LLP
1 Embankment Place
London
WC2N 6RH

Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU

Joint Brokers
Barclays Bank PLC
1 Churchill Place
London
E14 5HP
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT

Countryside Properties plc’s commitment to environmental issues is reflected in this
Annual Report which has been printed on Symbol Matt Plus which is FSC® certified.

It is printed in the UK by using environmental printing technology, and vegetable inks
were used throughout.

The printer is a CarbonNeutral® company. The printer is registered with the
Environmental Management System ISO14001 and are Forest Stewardship Council®
(FSC®) chain-of-custody certified.

The unavoidable carbon emissions generated during the manufacture and delivery of this
document have been reduced to net zero through a verified carbon offsetting project.

Design Portfolio is committed to planting
trees for every corporate communications
project, in association with Trees for Cities.

Countryside House
The Drive
Brentwood
Essex CM13 3AT

Telephone: 01277 260000

Email: group@cpplc.com