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Countrywide plc Annual Report 2015
Bringing people and
property together
We have unparalleled coverage of the UK
property market and are uniquely placed to
support our customers across the residential
and commercial property markets.
No.1
the largest property
services group
12,000+
employees across the UK
1,200+
locations across a network
of over 55 brands
Through our unique combination of national scale and local reach, we offer a breadth of
products and services across the Group, providing all our customers with a comprehensive
range of solutions to meet their individual property needs. We are proud of our position,
have achieved great success and are on course now to deliver our bold ambition for growth
with our Building our Future strategy.
WHAT WE’VE ACHIEVED
Market-leading positions and a strong platform for growth:
SOLD
£19.0 billion
worth of property sold –
more homes in the UK
than anyone else
£12.2 billion
of mortgages completed.
Largest single mortgage
broker in the UK
74,500
properties under
management. Largest player
in a fragmented market
Strategic report
Corporate governance
Financial statements
Highlights
Strategic report
01 Highlights
02 At a glance
04 Chairman’s review
05 Chief executive’s review
07 Building our Future
10 Our strategy
14 How we run our business
16 Our markets
18 Risk and risk management
24 Segmental review
24 Retail
26 London
28 Financial Services
30 B2B
33 Group financial review
36 Corporate sustainability
Corporate governance
41 Chairman’s introduction
to corporate governance
42 Board of directors
44 Corporate governance statement
46 Report of the Nomination Committee
48 Report of the Audit and Risk Committee
54 Directors’ remuneration report
67 Directors’ report
70 Directors’ responsibilities statement
Financial statements
72
Independent auditor’s report
77 Consolidated income statement
78 Consolidated statement
of comprehensive income
79 Consolidated statement of changes
in equity
80 Consolidated balance sheet
81 Consolidated cash flow statement
82 Notes to the financial statements
121 Independent auditor’s report
123 Company balance sheet
124 Notes to the Company
financial statements
128 Appendix
131 Company information
132 Forward-looking statements
133 Awards
Mixed performance in line with expectations
with momentum building into 2016.
Total income (£m)
733.7
+4%
Adjusted EBITDA1 (£m)
113.0
-7%
702.2
733.7
584.8
121.1
113.0
86.6
2013
2014
2015
2013
2014
2015
Operating profit (£m)
Adjusted basic EPS2 (£m)
53.8
-37%
32.2
-12%
84.9
36.7
32.2
56.0
53.8
24.4
2013
2014
2015
2013
2014
2015
FINANCIAL HIGHLIGHTS
• Group income up 4% to £733.7 million with decline in estate agency and
lettings profitability resulting in EBITDA reducing 7% to £113.0 million
• Market-beating performance from financial services and surveying
• Encouraging progress in commercial
• Consolidation in lettings with investment in acquisitions and core platform
• Challenging sales market as pace of change created some disruption
in estate agency
• Resilient performance in London
• Value of diversification evident by performance across the portfolio
• Final dividend held at 10.0 pence per share
• Proceeds of £19.1 million from part disposal of Zoopla holding to be returned
to shareholders by way of a share buyback programme
• New banking facilities agreed (£340 million RCF) to provide greater flexibility
on timing of investments
1 Earnings before interest, tax, depreciation, amortisation, exceptional items, contingent consideration, share-based payments
and share of profits from joint venture, referred to hereafter as ‘EBITDA’.
2 Adjusted earnings is calculated on profit for the year before exceptional items, amortisation of acquired intangibles,
contingent consideration and share-based payments (net of taxation).
View our website:
www.countrywide.co.uk
Annual Report 2015 Countrywide plc
01
At a glance
OUR BREADTH OF OFFERING
We cover all areas of the UK property market – residential and commercial
COMMERCIAL PROPERTY
CONSULTANCY
With 33 offices and 1,400 employees,
Lambert Smith Hampton is one of the largest
commercial property consultancies in the UK.
RESIDENTIAL PROPERTY FUND
We have partnered with Hermes
Investment Management to create the
pre-eminent residential property fund.
RESIDENTIAL DEVELOPMENT
SOLUTIONS
We are the UK’s largest land and new
homes agency selling over 5,100 new
home units in 2015.
SURVEYING SERVICES
We are one of the UK’s largest
employers of residential surveyors
and valuers in the UK and an
appointed valuer to all major lenders.
SALES
We are an award winning estate agent
with over 900 branches operating
throughout the UK.
LETTINGS
As the UK’s largest letting agent we
have a network of over 600 branches
throughout England, Scotland and Wales.
ASSET MANAGEMENT
We managed the sale of over 3,400
residential properties on behalf of
corporate clients in 2015.
AUCTIONS
As one of the country’s leading property
auctioneers we sell residential, commercial,
industrial, agricultural properties and land
by auction.
ESTATE MANAGEMENT
We offer an array of specialist
property services to clients
to meet their individual needs.
FINANCIAL SERVICES
As the UK’s third largest mortgage
distributor we arranged 1 in 16 of all
mortgages arranged in the UK in 2015.
CONVEYANCING SERVICES
We are one of the UK’s largest
transactional conveyancers and work
with some of the largest conveyancers
in the UK.
Read how we run
our business page 14
02
Countrywide plc Annual Report 2015
Strategic report GEOGRAPHICAL RANGE – RESIDENTIAL AND COMMERCIAL
We operate across the UK residential property market and focus on having the
right brand in the right location to reach all our customers across all price points.
42
branches
in Scotland
165
branches
in the North
125
branches in
the Midlands
43
branches
in Wales
Network of over
55
brands
33
commercial
offices in the UK
and Ireland
126
branches
in the East
M25
173
branches in
South East
Belfast
commercial
office
Dublin
commercial
office
148
branches in
South West
Branch numbers as at 31 December 2015.
LONDON
The London division incorporates
a number of key Countrywide brands,
including Hamptons International
and John D Wood & Co.
279
branches
in London
Annual Report 2015 Countrywide plc
03
Financial statementsCorporate governanceStrategic report Chairman’s review
Confident in the Group’s position
to deliver in 2016 following a
transformative year in 2015
IN SUMMARY
• Significant period of change in the market
and our business
• New management and divisional structure in
place with four business units focused around the
customer (Retail, London, Financial Services, B2B)
• Proactive action taken on cost while protecting
key investments
• Clear strategic vision communicated
to the business
In my second and final term as chairman
of the Group, I am reporting following a
significantly tougher year both for the market
and Countrywide. 2015 was an uncertain
year and we know that uncertainty does
not breed confidence, a necessary factor
to provide stimulus to the UK housing
transaction market. The May general
election was the most uncertain election
in a generation and the anticipated
post-election boost never materialised.
2015 results delivered income growth of
4% to £733.7 million but EBITDA fell to
£113.0 million. While lower than 2014’s
performance, with poorer results in sales
and lettings, these figures highlight the
benefits we continue to derive from our
broadly based diversification strategy with
42% of Group EBITDA being delivered from
Lettings and Commercial, our key recurring
revenue streams. Other contributors to
growth were our Financial Services and
Surveying teams, two areas of the business
which outperformed the market in 2015.
In 2015, we confirmed that there would be
no change to the underlying dividend policy
which would target a payout ratio of 35–45%
of the annual reported Group profits after
tax but before amortisation. In recent years,
the Group has paid 40% and I can confirm
that the 2015 cash payment will be held at
the previous year’s level. In February 2016,
we sold 8,659,302 Zoopla shares realising
£19.1 million which will be returned to
shareholders by way of a share buyback
programme. We continue to hold 9,234,473
Zoopla ordinary shares. The Board has the
potential to re-introduce special dividends
from 2017.
As announced on 11 February 2016,
I am pleased that Peter Long will take over
as non-executive chairman following the
Company’s Annual General Meeting on
27 April 2016. I am proud of my tenure at
Countrywide and it was always my intention
to only remain as chairman for a period of
two years. I believe the time is now right to
depart, with the arrival of Peter who brings
a strong customer focus and a wealth of plc
board experience, which will complement the
Board’s expertise and add value to Countrywide
as it delivers its customer-centric strategy.
As noted in our January 2016 Trading
Update, the Group achieved an encouraging
performance in Q4 of 2015. While it is too
early to accurately predict how the residential
transactions market will perform in 2016,
trends are encouraging with momentum
building and strong pipelines. At this stage
in the year, I am confident that the Group
is in a good position to deliver in line with
the Board’s expectations.
Grenville Turner
Chairman
25 February 2016
04
Countrywide plc Annual Report 2015
Strategic report Chief executive’s review
Foundations in place for future
resilience and growth
IN SUMMARY
• Fragile consumer confidence in the housing market
• Focus on execution, regaining and growing market
share and accelerating proposition improvements,
including multichannel
• Growth in core lettings business, building on
improvements in service
• Driving value from early progress in financial
services, valuations and commercial
Market 2015
It has been an uncertain year for the UK
property market and all the stakeholders it
impacts. Our sector has seen another year
of record low interest rates, a housing market
very short of supply and a step up in tax
changes impacting both the higher priced
home and second home markets negatively.
Market data available for 2015 highlights
the impact of changing dynamics in the
residential property market, with transaction
levels across the country running lower than
the previous year. Market volumes for 2015
are expected to be 3–4% below 2014
and in the region of 970,000–980,000
transactions at year end, which is still far short
of a normalised run rate by historic standards.
Our markets page 16
The negative trend in mortgage approvals at
the end of 2014 impacted transaction levels
in the first half of 2015 which, together with
the potential uncertainty over the outcome
of the general election in May, created
sluggishness in market trends during the
first half of 2015, as both buyers and
sellers delayed decisions to move. Further,
the anticipated bounce in the second half of
the year following the outcome of the most
uncertain general election in a generation
failed to materialise as consumer confidence
remained fragile. This manifested most acutely
in a lack of stock as the number of properties
coming to the market ran significantly below
last year. That pressure on market volumes
continued throughout 2015.
While the aspiration towards home
ownership remains a core part of the UK
consumer landscape, the property market
continues to evolve to reflect changing
consumer priorities. This is particularly
evident in the growth of the private rented
housing market, where demand remains
strong. Although throughout 2015, tenants
also showed a lower propensity to move with
average tenures extending to 17.1 months
up from 15.5 months in 2012.
Our performance
The challenging market in sales impacted
our performance and this, coupled with
the significant change agenda we’ve
driven, resulted in a tough year for our
Retail Sales division.
Our London sales business showed
tremendous resilience though and, despite
operating in the market which saw the most
acute impact from changes to stamp duty,
grew its market share and revenues.
Our Lettings business in London also grew
whilst our decision to invest further for the
future in core systems, people and service
slowed, for now, the rate of growth in our
Retail Lettings business across the rest of
the UK.
Encouragingly, we delivered exceptionally
strong performance in both Financial Services
and Surveying as they outperformed the
markets. Another strong year in our Commercial
business saw profits grow in both the core
and acquired businesses. The balance of
recurring revenues in that business reached
70%, a pleasing achievement as we seek
to limit volatility in both our residential and
commercial revenue streams.
2015 was a transformative year for the Group
and set us on the right path to achieve our
ambitious goals for 2020. Through our people,
we set our Building our Future strategy
and continued our successful acquisition
programme, while providing resilience for
the Group’s future through investment in
transformation, people capability and risk
management. We also focused on creating
industry-leading capabilities in research and
analytics to capitalise on the value of our
unique data and insight into the market
through our unparalleled national footprint.
Annual Report 2015 Countrywide plc
05
Financial statementsCorporate governanceStrategic report We are confident that our relentless focus on
delivering our purpose of putting people and
property together will yield strong progress
in 2016 and there is no change to our current
financial outlook for 2016. The market’s volatility
is unlikely to subside in 2016, so navigating
external challenges while delivering a first
class service for our customers will be crucial.
Our ambition to be the most recommended
company in the property sector is clear and
embraced by all colleagues across the Group.
We look forward to building on the early
momentum evident at the beginning of 2016
as we create a strong and thriving business
delivering enduring returns for our shareholders,
customers and colleagues alike.
Alison Platt
Chief executive officer
25 February 2016
This strategic report was approved by the
Board of directors on 25 February 2016
and signed on its behalf by:
Chief executive’s review continued
Diversified business continues
to provide resilience.
Alison Platt
Chief executive officer
We believe we are superbly placed to
capitalise on a mortgage market that is shifting
further toward an intermediary model, with
expectations that more than 70% of the total
mortgages written in 2016 will be brokered.
Our 600+ field force of mortgage consultants
are targeted to deliver record performance
driven by improved lead management, better
data utilisation and a new front-end operating
system, which is being rolled out as we
enter 2016.
Our relationships with our main partners
remain core to our strategy. The high street
banks view us as the distributors for their
mortgage products but also their partner in
risk management through valuations. Equally
key are developers and house builders and
the creation of Countrywide Residential
Development Solutions has given us a
platform through which to grow in the new
homes space. We expect to add capability
here through acquisition as we seek to
expand in this critical area.
Outlook
We continue to be prudent in our assumptions
for growth in the residential housing market
in 2016 and our focus will be driving our
own growth through regaining share and
attracting new customers through better
propositions. We remain of the view that
the drivers of demand for the private rental
sector remain strong and will drive further
growth. The impact of the increased tax
burden for buy-to-let landlords and second
home owners has yet to play out in the market,
but in a low interest rate environment, yields
in the buy-to-let sector, particularly outside
London, remain attractive. Enabling institutional
investment to create high quality built-to-rent
stock remains high on our agenda, and our
residential investment fund, in partnership
with Hermes Investment Management, goes
from strength to strength with schemes in
Manchester and Liverpool now exchanged
and a second round of fundraising underway.
Our performance continued
2015 also saw us complete the most
significant customer research programme
Countrywide has ever undertaken, involving
more than 3,000 customers across sales
and lettings. The insight from that research
coupled with our data has informed our new
propositions and service offerings, which will
be trialled across three of our brands in the
second quarter of 2016. These propositions
will reflect our customers’ desire to use multiple
channels (online, telephone and branch
network) and use enabling technology whilst
accessing the experience and expertise that
our UK-wide network of people bring.
Core to delivery of our new multichannel
propositions will be the development of our
digital capabilities, organically and through
investments and partnerships.
To date in 2016, we have made investments
in innovative proptech firms focused on
improving customer experience. We are the
lead strategic partner with Fixflo, the leading
24/7 property repair reporting system, and
have also taken a significant minority stake
in an early stage start-up platform in the
self-serve lettings market.
Hand in hand with investing to grow our
business organically, our approach to
acquisitions remains in line with our strategy.
Our focus has been to strengthen our presence
in strategic locations across the UK and we
remain committed to delivery of our target
hurdles and returns. In 2015, we acquired
30 lettings businesses, including some key
targets in Liverpool, York and Bristol. This
focus on key cities will continue in 2016.
2016 – year of execution
2016 is all about execution as we begin
to realise the benefits of our strategy.
Diversification of our business model will
continue as we increase resilience across
residential and commercial. Operating Retail
as a single structure for core sales and lettings
is building momentum with encouraging signs
as we enter 2016 with a growing pipeline in
sales, improving conversion rates and rising
landlord retention. Our focus now is on
capitalising on this fast start to 2016, ensuring
we take advantage of early strong winds in
the market.
06
Countrywide plc Annual Report 2015
Strategic report Read more on pages 08 to 15
Financial statementsCorporate governanceStrategic report Building our Future
We embarked on our Building our Future strategy as we
recognised that there was a real opportunity for us to become
the first choice for customers and, that by being their first
choice, we can take this business to a brilliant future and
change the face of the sector.
STO M ER S
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O W W E R U N OUR BUSINES
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Bringing
Bringing
people and
people and
property
property
together
together
H
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F
O
R
WARD
S
A
P
OUR FOUNDAT I O N S
OUR PORTFO L I O
OUR PURPOSE
Bringing people and
property together
We have a clear purpose, guided by our
vision and supported by our values.
08
Countrywide plc Annual Report 2015
Strategic report
OUR VISION
OUR VALUES
1
2
Recommended
more than any other company
in the property sector.
Recognised
as one of the best places to work
in the UK.
3
Transforming
the reputation of our industry.
4
Celebrated
for excellent sustainable
financial performance.
Responsible
We do the right thing. We listen,
take time to understand and
always tell the truth.
Personal
We are a people business.
We care about our customers
and each other. We have fun.
Straightforward
We keep it simple, dealing with
the complicated things so our
customers don’t have to.
Passionate
We love working with property
and we work hard, knowing
what we do really matters.
OUR STRATEGY
HOW WE RUN
OUR BUSINESS
Our intent is to increase our resilience to the sales cycle
volatility and broaden the Group’s business to deliver a strong
future and sustainable long term value for our shareholders.
Four customer-centric business units, combining local brands
with a national operating model to support customers through
their end-to-end property journey. We are investing in core
capabilities, including IT, talent management, risk management
and data and analytics to ensure we have the foundations
to be able to move at pace.
Our strategy page 10
How we run our business page 14
Annual Report 2015 Countrywide plc
09
Financial statementsCorporate governanceStrategic report Our strategy
In 2015 we completed a fundamental review of our strategy, analysing our markets, our performance and our
customers, to define where and how we will win in the future. As a result we are focused on three key areas:
• delivering a better, more personalised customer experience;
• creating an internal environment for great people to flourish; and
• aligning our portfolio to where the growth is.
From 2015
To 2020
• Pockets of brilliance in customer
service
• The most recommended company
in the property sector
• Business processes that work for
us but not always our customers
• Differentiation through the quality
of our people and our multichannel
experience to deliver personal
connection, convenience and
tailored customer journeys
• People attrition levels in line with industry
norms (high across the industry)
• Recognised as one of the best places
to work in the UK
• Engaged customer-facing people, but
challenges around ‘tools to do the job’
• Training and professional development
that is the envy of the industry
• High performance culture
• Largest, most diversified UK property
company, operating in residential and
commercial markets
• Double the size of the business
• Increased resilience to residential
transaction market cycles (with c.50%
from Commercial and Lettings)
• Aligned to the demand-side drivers
of future growth
Our customers
Our people
Our portfolio
Evidence from our top performing branches already demonstrates how a great experience for our
customers and our people drives commercial success.
For example, analysis across our 2015 network showed that the top 10% of branches (compared
to Countrywide average):
• achieved >10% market share growth and were more profitable;
• had the best Net Promoter Scores and 40% fewer vendor withdrawals; and
• were driven by 2x people retention and 40% longer average tenure.
These top 10% performing branches were across brand, region and price point, demonstrating the
huge opportunity for us to share best practices to create lasting differentiation from competitors.
10
Countrywide plc Annual Report 2015
Strategic report Our customers
Our 2020 ambition to be ‘the most recommended company in the property
sector’ means putting customers at the heart of our business. In 2015, we carried
out our largest piece of customer research ever (>3000 people) to identify their
unfulfilled needs and sharpen our customer segmentation – this insight will be the
foundation for everything we do as we centre the business around our customers.
1
Deliver what we say
we are going to do
2
Personalise our
customers’ journey
Trust, reliability, efficient communication, personal
connection – the same core needs are common across
customer segments, and the industry as a whole is not
delivering consistently. We will be known for delivering
what we say we will. We are investing in our recruitment
model, our training, and our IT infrastructure to deliver
a better customer experience across all our channels.
Our breadth of services provides a strong platform
to support customers throughout their whole property
journey. It is essential we deliver great communications
at key handover points as they avail of services across
the Group during their property journey.
Property transactions are often complicated and emotional
journeys, and all customers are different. We need to better
understand each customer at the start of their journey so
that our services and engagement style match their needs.
We will tailor the journey to give customers more choice
– choice of product, choice around how they interact
with us, and choice in where they value support and
where they want to take more control themselves.
3
Differentiate in
multichannel offering
4
Measure the
right things
Customer expectations for digital solutions are set by
leaders outside of our sector. The future is not a binary
choice between online and offline – success requires
multichannel enablement and human support with the
customer at the centre. We stepped up our investment
in developing new digital features which will go live in
2016. Our strategic ventures group has identified key
investment/partnership opportunities for us which will
be announced in 2016.
In a competitive marketplace, the reputation of our people
and our brands is what drives customers to choose us ahead
of others to partner with them in their property journey.
We are rolling out Net Promoter Score (NPS) at branch,
regional and business unit level, which is core to how we
manage and reward our people. We are already seeing an
upward trend in business areas where NPS is established.
Customers at the heart
of our business
Annual Report 2015 Countrywide plc
11
Financial statementsCorporate governanceStrategic report Our strategy continued
Our people
Great people plus a great environment will deliver a world-class experience
for our customers.
It is only by investing in our people and ensuring they have the right tools
to do their jobs in a safe, positive and developmental environment that
we can be recognised as one of the best places to work in the UK.
1
Our great people
2
Developing a high
performance culture
3
Developing and
training our talent
To be the most recommended company
in the property sector, our people need to
be connected to our purpose, be inspired
to be the best they can be, and feel valued,
engaged and committed to providing a
brilliant and personalised customer experience.
Great people only flourish with great leaders.
To enable our leaders to be effective, we held
a series of events with our top 100 leaders
in November and December 2015 to provide
them with the tools and techniques to lead
their teams, focusing on driving performance.
To expect this of our people they need to have
a great experience from the moment they
consider joining Countrywide and throughout
their career with us. From recruitment to
onboarding to training, we will engage our
people at every single touchpoint of this
journey to communicate our values, deepen
their understanding of customer needs and
set expectations of excellence.
In 2016, we have plans to roll out the
programme to the wider leadership team
to enable a consistent approach to
performance management.
New apprenticeship and graduate recruitment
schemes are in place across the Group
with particularly successful programmes
in surveying and conveyancing, alongside
City & Guilds accredited training for employees
within our retail operations. This includes
the opportunity of sponsorship to achieve
recognised professional qualifications that
are relevant to our sector. We provide full
visibility of who we are and expertise we
have through our online Register of Property
Agents (www.agencypro.co.uk). The Register
provides assurance that our people meet
the requisite standards of professionalism
that our customers will expect when we
advise them.
Read more on our sustainability
page 36
12
Countrywide plc Annual Report 2015
Strategic report Our portfolio
Our growth agenda is aligned with demand-side trends, addresses areas
where we are under-represented and reduces cyclical exposure to UK
residential property sales.
Our goal is to double the size of the business by 2020, by focusing on:
1
Financial Services
2
London
3
Retail
Grow existing customer value
• We are the UK’s largest single
mortgage broker
• There is a huge opportunity for us to fulfil
potential value of our existing customer
base, particularly in remortgages
• Financial Services is one of the main ways
we can maintain a customer relationship
between transactions, growing customer
lifetime value
Become market leader
• In sales, we are no.1 in upper and lower
bands, but no.2 in £350k–£1 million
(largest market segment)
Double our profits in lettings
• The private rental sector now represents
60% of all moves, compared to 37% ten
years ago
• London is 21% of the country’s private
rental sector; we grew Lettings >40% in the
last three years but our share is still <5%
• Opportunities to increase penetration of
mortgages, insurance and conveyancing
by tailoring product offering and service to
meet the needs of our London customers
• We have headroom for growth in a fragmented
market and a proven acquisition model
Regain lost share in estate agency
• We will strengthen our multichannel
offer and better align our marketing
with vendor needs
• Investment in people and processes will
drive better conversion of opportunities
to instructions and lower withdrawal rates
4
Land and
new homes
Capitalise on Countrywide Residential
Development Solutions
(CWRDS) opportunities
• Recognised need for new homes and
Government drive to build c.250k new
homes per year
• There are few genuinely vertically
integrated players in the land and
new homes space
• We have expertise from land sourcing,
planning and valuation support, through
to downstream sales, lettings handover
and property management
5
Commercial
6
Cities
Become a top five UK player
• The market is likely to consolidate and
we have a strong platform offering ideal
opportunities for growth
Strong record in acquisitions
• 2015 – acquired businesses in key
cities including Nottingham, Birmingham
and Manchester
• Strengthening Commercial increases
our mix of recurring revenues
• 2016 – M&A pipeline is strong with
imminent acquisitions in key city locations
• Synergies with residential, especially
in CWRDS
13
Financial statementsCorporate governanceStrategic report How we run our business
We manage the Group through four
customer-centric business units:
SOLD
Retail
Bringing our sales and lettings
businesses together
We are the UK’s only national estate agency, selling
approximately 1 in 15 properties, and we are
also the UK’s largest letting agent.
London
Defined in one business unit, recognising
distinct characteristics of London market
Our London business unit (BU) consists of approximately
400 Estate Agency and Lettings operations, spread
across 250 physical locations.
Read more in our segmental review
page 24
Read more in our segmental review
page 26
What makes us different...
Local brands, national
operating model
• We have a network of over 50 Retail
brands with local heritage plus shared
support infrastructure (e.g. centralised
online marketing and regional property
management centres) to capture scale
benefits and enable branches to focus
on selling.
• Retail and London operating strategies
are tightly aligned: best practices are
transferred, selective back-office
infrastructure is shared, and a few
brands span both Retail and London
(e.g. Bairstow Eves).
Supporting customers through
the end-to-end property journey
• We are involved from property search through
to placing the key in the purchaser’s hand and
beyond. We aim to help customers sell or let
faster with higher odds of the transaction
going through smoothly through providing
financial services, surveys and conveyancing
as well as a joined-up approach for buy-to-let.
• This also generates significant cross-sell
revenue from Retail and London into
Financial Services and B2B, and there is
more to go for if we can truly operate as
one Countrywide.
Operating as one talent pool
• We actively encourage leaders moving
between business lines to build their
careers and strengthen both their
relationships and knowledge through
referrals and enable integrated solutions
to meet our customers’ needs.
14
Countrywide plc Annual Report 2015
Strategic report Financial Services
Clear and distinct mortgage, insurance
and protection business
We have a dedicated network of over 650 mortgage
consultants operating under the Countrywide brand,
and in Mortgage Intelligence we own one of the most
successful networks in the UK with over 400 advisors.
B2B
Includes surveying, conveyancing,
commercial and a unified Land &
New Homes team
As one of the largest property businesses serving corporate
clients in the UK, we serve most major lenders, investors,
house builders, commercial businesses, corporations, local
authorities and housing associations.
Read more in our segmental review
page 28
Read more in our segmental review
page 30
...makes us stronger
Leveraging our
data and insight
Acquisitions
Diversification
• Our scale and breadth of offering gives us
unique data sets on property trends and
customer behaviour, which we integrate
and analyse through a central research
and analytics team.
• This data powers strategic decisions
at national and branch level, as well as
providing distinctive research content
to raise our profile as a leading voice
in the industry.
• We have a track record of identifying
and executing acquisitions, ranging
from consolidation of small/medium-size
lettings agencies through to expanding
into new markets (e.g. entering commercial
via acquiring Lambert Smith Hampton).
• We look to drive operational synergies
quickly, while celebrating the best
practices and best people of companies
we acquire, to continually strengthen the
Group’s capabilities.
• Countrywide is the most diversified
pure UK property services firm.
• Broadening our business mix has
helped us reduce reliance on a volatile
transactions market, while retaining
operational gearing to capitalise on
any upside.
Read more on our markets
page 16
Annual Report 2015 Countrywide plc
15
Financial statementsCorporate governanceStrategic report Our markets
A look back over the past twelve
months and a look forward to what
2016 has in store.
The sales market of 2015
2015 was year of two halves, the second
being much busier than the first. Figures
from the Land Registry show that the number
of housing transactions was down 7% in the
first six months of 2015 against the previous
year. The latest data (to the end of October)
shows a drop of 6% compared to 2014 and
the full year is expected to reflect a decline
of around 3–4%.
From June 2015 mortgage approvals for house
purchases began to pick up, a precursor to
the growth in the number of transactions later
on, with the number of mortgage approvals
tending to feed into transactions about two
months later. Halfway through the year,
data from the Royal Institution of Chartered
Surveyors began to show the ratio of sales
to stock starting to rise, highlighting that
demand for property was outpacing the
number of homes on the market.
For Countrywide the pick-up in activity after
the summer coincided with a drop-off in the
number of homes for sale. 2015 ended with
22% fewer homes on the market with stock
scarcity continuing to drive vendor expectations
upwards. Just 4% of sellers reduced the price
of their home in December, the smallest number
in any month since the late 2013 boom.
A strong start to 2016 points to further price
and volume growth over the rest of the year.
Although we expect the number of transactions
to continue growing, we should not get carried
away. There are still a number of hurdles such
as: the tighter regulations on credit which
have made mortgages less accessible; the
issue of affordability, particularly in London
and the South; and also the likelihood of
interest rates rising at some point in the
future. But, overall, the story for transactions
looks positive, if still a little uncertain.
The rental market of 2015
Rents for newly let homes continued to grow
in the UK in 2015 albeit at a slower pace
than in 2014. Average UK rents grew by
3.1% in 2015 taking the average monthly
rent to £919. Rents rose in all regions of the
country with the East of England seeing the
highest growth, 6.5%, and the Central London
market seeing the smallest with 0.5% growth.
The slowdown in growth in Central London
in part indicates the continuing pressures
facing that market. It is more influenced by
global demand and the uncertainty in the
global financial markets has led to subdued
demand. Additionally, sustained rental
growth during 2012 and 2013 has made
Central London look expensive in comparison
to fringe locations. Greater London as a whole
also saw a slowdown in its growth but rents
still rose by 4.7%. As rents have risen in
recent years, tenants have increasingly taken
advantage of cheaper areas in Outer London
or further afield in the commuter belt.
Falling numbers of homes available to rent
and increasing demand from tenants were
the defining features of the rental market
over the course of last year, putting upward
pressure on rents. This imbalance between
supply and demand has intensified competition
for homes in the market. The average property
is now let within 20 days of being instructed,
two days quicker than in 2014.
2016 holds complications for the sector as
the Government sets its sights on boosting
homeownership. The additional 3% stamp
duty charge, stricter regulation and changes
to tax relief from 2017 onwards will all take
their toll on investor sentiment and impact
behaviour. With stock at a premium, the smaller
landlords who decide to sell up will add
upward pressure to rents, although any rises
will be tempered by affordability pressures.
A look forward to 2016
Risks and opportunities in 2016
Looking forward to the rest of 2016, there is
a raft of new issues to deal with, all creating
risks and opportunities in the housing market.
Economic conditions are hugely important and
we have seen the pace of economic growth
pick up – and then wane in 2015 as the UK
struggles to get a more balanced recovery.
The global economy cannot be ignored –
uncertainty in China led the Chancellor to
talk of nasty cocktails of events which could
derail the UK recovery in 2016. And then
there is the Brexit debate – will Britain leave
the EU and will that mean more austerity
but with higher interest rates?
The answers will become clear in due
course, but it is not all gloomy. There is more
Government policy aimed at housebuilding
with new housing zones dotted across the
country and the extension of Help to Buy,
including the very generous 40% deposit
London Help to Buy scheme, which should
help to stimulate buyer activity and
boost transactions.
Higher interest rates are
not such a threat to owners
Interest rates are expected to increase towards
the end of the year but it is unlikely to cause
many problems in the housing market. There
are few signs of mortgage distress and more
than half of owners will not be affected by rate
changes because they either own outright or
are on a fixed rate loan. The market will not
be derailed by floods of distressed sales.
And even when rates do rise the likelihood
is they will do so very slowly and won’t go
above 3%. Even allowing for a widening
of mortgage margins that keeps mortgage
rates low by historical standards, it keeps
opportunities alive for new transactions.
16
Countrywide plc Annual Report 2015
Strategic report But what about the buy-to-let
and investor market?
Buy to let lending has been supporting the
market while movers have been absent since
2008. In Q3 2015, lending to investors was
up 10% compared with just a 0.4% increase
in lending to owners. Returns on property
have been better than other investments on
rental yield alone. But with expected capital
growth in the equation, actual returns have
been much higher.
The addition of a 3% stamp duty surcharge
will reduce yields, but yields are still above
returns on other safe assets, so it is not clear
whether that alone will dissuade new entry.
Choices are more likely to be affected by
expectations of future price growth and the
availability of the extra cash up front.
The effect on yields is spread geographically
due to differences in house prices. But even
in London, where prices and hence the stamp
duty bills are highest and yields are affected
most, that does not mean that demand will
collapse. Indeed it presents opportunities
for other buyers. London Help to Buy will
support demand for new property and, with
London’s economy and its house prices so
far ahead of other parts of the country, there
is still high demand for rental homes, making
it an attractive income-generating asset.
LONDON LEAVERS
As the gap between prices in London
and the South East has grown, so has the
temptation for Londoners to cash in on
record house prices and move out of the
capital. With expectations of future house
price growth in London easing, many
chose 2015 to make their move.
It is part of the natural cycle that households
move as their priorities change. There
are lots of reasons why: schools, lifestyle,
more flexible working and many more.
In 2015 63,000 Londoners acted on
these and bought homes outside the
capital, a two-thirds increase on the
38,000 in 2014. Many were in their
30s and 40s in search of more space
and a different lifestyle, but 2015 saw a
large number of first-time buyers moving
out too. Affordability in London is more
constrained than ever, so many who want
to buy their first home are looking to less
expensive areas outside of the city.
Almost 90% of households leaving London
moved to other areas in the South of
England – a total of 53,000 homes, up
from 33,500 in 2014. That has always
been the most common place for
Londoners to move to, but increasingly
they are searching out homes in areas
further away, particularly in relatively
more affordable markets in the Midlands
and the North. In 2015 the number of
homes bought by Londoners in the
Midlands increased by 165%, while
in the North it increased by 90%.
The flow of Londoners purchasing homes
outside of the capital will continue to
characterise the market in 2016 and
drive growth in the commuter belt.
As Londoners make their moves, they
will support price growth in the South.
London leavers
South
Midlands
North
Wales
Scotland
Homes bought in 2014
Homes bought in 2015
Year-on-year increase
33,500
53,000
58%
2,000
5,300
165%
2,000
3,800
90%
200
250
25%
450
850
89%
Average price 2015 (£)
415,000
180,000
171,000
182,000
173,000
Where London Help to Buy is affordable to local buyers
Affordable
Unaffordable
Annual Report 2015 Countrywide plc
17
Financial statementsCorporate governanceStrategic report Risk and risk management
To achieve our vision, we recognise that we must create
and protect value for all our shareholders. We see risk
management as being an integral component of this.
The Group recognises that the successful management of risk
as part of our everyday activities is essential to support the
achievement of our strategic objectives. This includes both current
risks and those associated with the implementation of future strategy.
Risk management lies at the heart of what we do and is a source of
value creation, making it a key component of the Group’s strategic
agenda. The Board seeks to ensure that the Group identifies and
manages all risks accordingly, either to create additional value for
its stakeholders or to protect value through the mitigation of any
potentially adverse effects. A summary of the principal risks and
uncertainties facing the Group is provided on page 21.
The Group’s risk management function and framework
During 2015, we have invested in our risk and compliance
infrastructure with the appointment of a Group chief risk and
compliance officer and key risk team members. Additionally, we
have taken the opportunity to review the governance structure of our
management, executive management and Board-level Committees.
The Group has implemented a revised risk management framework
(RMF) which builds on existing practices and seeks to establish
a coherent and interactive set of arrangements and processes to
support the effective and consistent management of risk throughout
the Group. The outputs of the RMF provide assurance that risks
are being appropriately identified and managed and that an
independent assessment of management’s approach to risk
management is being performed.
COUNTRYWIDE’S RISK MANAGEMENT FRAMEWORK
During the year, the Group has continued to strengthen and embed
the components of the RMF to ensure that they are aligned with
our strategy and external best practice. The eight components of
the RMF are shown in the diagram below:
1
Risk
strategy
8
Risk
assurance
Purp o s e
Str
a
t
e
g
y
Our
customers
7
Risk monitoring
and reporting
6
Risk
control
18
Countrywide plc Annual Report 2015
Our
people
Our
portfolio
V
i
si
o
n
5
Risk
assessment
V alues
4
Risk
identification
2
Risk
governance
3
Risk
culture
Strategic report 1 Risk strategy
5 Risk assessment
A comprehensive view of how risk management is incorporated
consistently across all levels of the business to support informed
decision making. During the year we established the Group’s risk
strategy and a risk appetite framework to guide and inform our
strategic decision making which comprises a series of macro-level
risk appetite statements proportionate to the nature, scale and
complexity of risks faced by our business.
A standardised assessment framework is used to evaluate our risk
exposure at both business unit and overall Group level, enabling
a consistent and relative measurement of our top risks at both
levels. This assessment capability allows us to anticipate, respond
and continually adapt to the changing risk landscape and ensure
a comprehensive line of sight through reporting through the
Group’s governance structure from the business unit leadership
teams up to the Group Risk and Audit Committee and the Board.
2 Risk governance
6 Risk control
Responsibility for approving, establishing and maintaining the RMF
rests with the Board. During the year we made enhancements to
the Group’s governance arrangements to align with our organisational
redesign from Board through to management committee level.
There is a clear organisational structure in place with documented,
delegated authorities and responsibilities from the Board to the
chief executive and the Executive Committee.
The RMF is underpinned by the operation of a three-lines-of-defence
model with clearly defined roles and responsibilities for statutory
boards and their committees, management oversight committees,
Group Risk and Group Internal Audit.
Please see the next page for the three-lines-of-defence.
Controls operate across the business at entity level through
policies and associated control standards, and locally through
individual business unit control environments. During the year
we have identified risk champions throughout the organisation
and risk sponsors, held workshops to identify requirements
and established risk registers at business unit level.
3 Risk culture
Operating principles and expectations for risk management
are driven by a clear tone from the top. During the year we
have established clear leadership expectations and a common
understanding of what it means for our leadership community
in respect of their role in owning and managing risks within the
Countrywide Group. The work we have undertaken to define
the Group’s purpose, vision and values provides the compass for
the Group’s risk culture. The foundation of effective day-to-day
management of risk is in the way we do business and the culture
of our team.
7 Risk monitoring and reporting
Monitoring and reporting of the Group’s risk exposures is
undertaken through management committees. The Group Risk
and Audit Committee receives a consolidated risk report on
a quarterly basis, detailing the risks facing the Group and the
expected six-month position against a series of planned mitigating
actions. The Group Risk and Audit Committee is also provided
with regular reports on the activities of the Group Risk and
Compliance function.
4 Risk identification
8 Risk assurance
Effective risk management requires that the Group has a complete
and robust understanding of the risks it faces, which are defined in
our risk universe. Tools exist to support the identification of short
and long term risks and during the past year we have raised our
collective awareness of our material risk exposures, their
management and ownership.
Assurance on the management of risk is provided across the
three-lines-of-defence model. Management committees consider
outputs from reviews performed by the first line (e.g. quality assurance
results and management reviews), second line (e.g. risk reviews
conducted in relation to specific themed areas) and the third line
via reporting provided by Internal Audit on the results of findings
from individual audits and progress in implementing agreed
management actions. The results of this assurance activity are
reported to the relevant level within the Group.
Further detail on the three-lines-of-defence model are provided on
the next page.
Annual Report 2015 Countrywide plc
19
Financial statementsCorporate governanceStrategic report Risk and risk management continued
THREE LINES OF DEFENCE
1 First line of defence
2 Second line of defence
3 Third line of defence
Under the first line of defence, management
of risk is delegated from the Board to the
Group chief executive officer, Executive
Committee members and through to business
unit senior managers. Business unit management
leadership teams are responsible for ensuring
the risks associated with their business’
activities are identified, assessed, controlled,
monitored and reported.
The second line of defence consists of activities
covered by Group Risk, Legal, HR, Finance, IT
and other ‘control’ departments. The second
line sets the strategy and policy for the
management of specific risks and monitors
and facilitates the implementation of effective
risk management practices and assists risk
owners in reporting adequate information.
The third line of defence provides independent
verification of the adequacy and effectiveness
of the internal controls and risk management.
This is provided by the Group Risk and
Audit Committee, which is supported by
Internal Audit.
Underpinning the Countrywide RMF is the ‘Three-lines-of-defence’ model:
Third line of defence
• Review 1st and 2nd lines
• Provide an independent
perspective and challenge
the process
• Objective and other assurance
Second line of defence
• Oversee and challenge
risk management
• Provide guidance and direction
• Develop and oversee RMF
First line of defence
• Deliver day-to-day
risk management
• Follow the Group RMF
• Apply internal controls
and risk responses
Countrywide plc Board
Remuneration Committee
Audit and Risk Committee
Nomination Committee
Executive Committee
Executive Risk Committee (ERC)
Group Risk and
Compliance Committee
Group H&S
Committee
Group Information
Security Committee
Retail leadership team
London leadership team
Financial Services
leadership team
B2B leadership team
Viability statement
Assessment of prospects
Taking account of the Group’s current position and the potential impact
of the principal risks detailed opposite, the directors have assessed
the prospects of the Group over a three-year period, which aligns
with the Group’s business planning and budgeting cycle.
The directors’ overall assessment has been informed by the inputs to,
and outputs from, the Group’s RMF as described above. In particular:
• the executive team undertook an assessment of the risks reported
to the Board contained within the quarterly risk report;
• those risks were considered against their relative impact and
likelihood to determine which risks were deemed to be principal
risks to the Group;
• the Group’s business planning model was then used to consider
the Group’s exposure to our principal risks on two fronts:
• business as usual ‘trend-related’ risk – i.e. those risks which are
progressive in their nature. In this respect we have assessed the
Group’s viability against two market risk scenarios: an aggressive
but short term house price crash/decline in transactional volumes
with a slow return to growth; and a slower, yet continuing, decline
in house prices/transactional volumes.
Both of these scenarios included the relative knock-on impact of
a reduction in EBITDA within our agency operations and to other
cross-related areas of the business; and
• event-related ‘shock’ risk – i.e. where the crystallisation of a
particular principal risk results in a one-off cash flow impact which
the Group would need to be able to absorb in a specific period.
In considering which principal risks to consider for this scenario
we sought to identify the most severe, yet plausible, scenarios
as opposed to modelling each less impactful principal risk; and
• the directors then considered the financial and operational impact
of these severe, but plausible, scenarios to determine their overall
effect on the Group’s financial position. This assessment was considered
against the Group’s expected financial position, existing banking
facilities and potential management actions.
Viability statement
Based on their assessment of prospects and viability above, the directors
confirm that 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 three-year period ending 31 December 2018.
The directors also considered it appropriate to prepare the financial
statements on the going concern basis, as explained in the basis of
preparation paragraph in note 2 of the accounts.
20
Countrywide plc Annual Report 2015
Strategic report
PRINCIPAL RISKS AND UNCERTAINTIES FACING THE GROUP
The directors confirm 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 table below sets out the
principal risks faced by the Group, together with mitigating factors and
associated commentary on any changes in risk profile.
Risk and impact
Mitigation
Change
Commentary
Market risk
The UK housing market is highly
cyclical and historically has been
central to the strength of the UK
economy. Changes in volumes
and price are immediately realised
in the results of the business,
within both the Estate Agency
business and also sales of
complementary services
throughout other areas of
the Group.
The impact of changes in the
global economy cannot be
ignored and could have an
adverse effect on the UK
housing market.
We carry out continuous high level reviews
of the market, forward indicators and
diversity of our products and services
as part of our distribution strategy.
For example, we continue to strengthen
our Lettings and Commercial operations
which, by their nature, are more stable
and counter-cyclical to the housing market.
Increase
A core component of our business strategy
is to continue with selective acquisitions in
existing core markets, particularly in lettings
and commercial. During 2015 we have
continued to acquire. These developments
continue to increase resilience of revenue
streams and diversity of our offerings.
An ongoing programme of acquisitions
is planned for the forthcoming year.
The core driver for the housing market remains
supply. The legacy of the drop in new build
following the onset of the global financial
crisis is now hitting home, with both the
sales and letting markets continuing to
show demand outstripping supply on a
month-by-month basis.
Loss of a major business partner or outsourcing partner
There are a number of important
commercial relationships which
affect more than one area of
the business. The loss of key
customers or contracts, or
significant reduction in volumes
combined with pressure on fees,
would have a significant impact
on our profitability. The failure of
a significant supplier could impair
our ability to operate effectively.
We centralised the team responsible for
liaising with key customers and developing
new contracts. The operating divisions
carry out regular reviews with key clients at
different levels of management. Reviews at
leadership team level between the client
and B2B business unit/Countrywide plc
also take place. We operate appropriate
contingency measures in the event of
supplier collapse. The key partner alliances
in place and the confidence that these
partners have in us mean that we have
significant resilience to loss.
No change
We continue to benefit from strong relationships
with our corporate partners and we have
retained, as well as won, a number of
contracts with key clients. We were selected
by Santander as one of its formal valuation
partners from 1 January 2015 and both
Nationwide and HSBC have also chosen
to renew their contracts with us.
Annual Report 2015 Countrywide plc
21
Financial statementsCorporate governanceStrategic report Risk and risk management continued
Risk and impact
Mitigation
Change
Commentary
IT infrastructure and information security
Dependence on efficient systems
for operational performance and
financial information would be
impacted by significant failures
or interruptions to IT services.
Data security is also essential
to the secure processing,
storage and transmission of
routine personal, confidential
and proprietary information.
There has been significant continual
investment to support operational
expansion and as part of the planned
transformation and maintenance of
operational systems and infrastructure.
Routine penetration testing is also
conducted in respect of data security.
No change
The transition of our IT infrastructure via
outsourcing to CGI has continued throughout
2015. Additionally, we commissioned an
independent strategic review of the full
IT infrastructure during 2015 and, as a
result of this work, have a full roadmap
of development and optimisation work
scheduled for 2016 and the coming years.
The Information Security Steering Committee
has met regularly throughout the year in
order to co-ordinate information security best
practice and to ensure continuing accreditation
within business to business operations.
Business continuity plans and key systems
are in place and we hold ISO 27001 certification
across a number of our key business areas.
Decrease
Focus on this area has been maintained
during 2015 with additional ongoing reviews
of our audit process to identify further
improvements.
Risk management remains a top priority for
us and has additional benefits in demonstrating
to clients the quality of professional advice
and services we deliver.
No change
We have continued to monitor embedded
controls and conduct independent
management reviews across our divisions.
We ensure that where best practice
developments emerge these are shared
within the Group and implementation
plans are developed accordingly. In addition,
we adopt recommendations arising from
internal and external reviews.
Professional indemnity exposure
The previous downturn in the UK
housing and commercial markets
and the impact of sub-prime
lending exposed the Group to
a higher level of professional
insurance claims within the
Surveying services.
Monitoring arrangements include operational
controls implemented for review of surveyor
outputs and targeted use of automated
valuation models in perceived higher
risk cases, as well as maintenance of risk
management arrangements. In respect of
legacy issues, we continue to review the
judgements and estimates underpinning the
existing professional indemnity provision.
We carry a different professional indemnity
insurance arrangement for our commercial
business, Lambert Smith Hampton, as
potential individual exposures could be
larger. By doing this we protect our overall
Group cover and effectively ring fence
commercial risks delivering a financially
beneficial position for the Group overall.
Financial misstatement and fraud risk
Material financial misstatement
may arise due to error or fraud,
in the form of fraudulent financial
reporting or misappropriation of
assets. Reputational damage and
inappropriate decision making
data availability to management
may arise from non-fraudulent
misstatement in financial reports
and financial loss to the Group
may occur as a result
of misappropriations.
Embedded financial controls, incorporating
appropriate segregation of duties, operate
within the businesses to ensure robust
preventative and detective controls are in
place. Independent financial reviews are
undertaken within the operational divisions
as an additional, high level, detective control.
These reviews are also supplemented by
centralised monitoring of financial
performance against budgets and
operating targets.
Misappropriation of funds is mitigated by
centralised treasury monitoring of all bank
accounts, with embedded operational
controls ensuring appropriate delegation
of authority, restricted access to accounts
and appropriate segregation of duties and
mandated dual authorisation controls.
22
Countrywide plc Annual Report 2015
Strategic report Risk and impact
Mitigation
Change
Commentary
Competitive landscape
Countrywide operates across a
range of highly competitive
markets, some of which are
experiencing changes in the
traditional operating models.
Competition could lead to a
reduction in market share and/or
a decline in revenues.
Increase
Our business strategy concentrates on
promoting our strengths of bringing people
and property together while focusing on
customer choice through, for example,
digitised solutions as a complementary
element of our service offering.
Our focus continues to comprise the
retention of both existing customers
as well as engaging with new customers
by ensuring that our service offering
evolves and improves to meet and
exceed expectations in the market.
Our extensive research across over 3,000
customers indicates that there are a full
range of customer needs and that the vast
majority are looking for digital solutions to
help them with parts of the customer journey
rather than a pure digital interaction.
We are continuing to evolve our proposition
with customer needs and we continually
collect information on competitor activity.
Our management structure allows this
competitor intelligence to be fed back to
management accurately and quickly so
that the Company can rapidly consider
appropriate responses.
Regulatory compliance
Failure to meet current or increased
legal or regulatory requirements
could result in reputational and
financial damage, including
withdrawal of authorisation or
licences for the conduct of
business streams.
Expertise within the operational divisions is
also supported by centralised legal and
compliance teams which closely monitor
existing business practices and any reform
proposals. Employees receive appropriate
training and our managers attend industry
forums and Government consultations.
Robust complaints management systems
are in place across all operating divisions,
with root/cause analysis in place.
No change
The first phase of the EU Mortgage Credit
Directive (MCD), in force from 1 March 2016,
will impact on lenders, but not to the degree
that the Mortgage Market Review (MMR) of
2014 did. The MCD changes will be assimilated
within the business in accordance with the plan.
We maintain close links and open dialogue
with our regulatory bodies and have continued
to monitor regulatory developments and
their impacts across our divisions, developing
implementation plans accordingly and
adopting recommendations arising from
external reviews.
Where necessary, we deploy specialist
external resource to supplement our
in-house expertise on regulatory change.
Annual Report 2015 Countrywide plc
23
Financial statementsCorporate governanceStrategic report Segmental review
Retail
We are already in the enviable position
of being the leading player across
estate agency and lettings in the UK
market and in Retail we will leverage
our scale and incredible expertise
to deliver significant future growth.
Sam Tyrer
Managing director, Retail
HIGHLIGHTS
• LaunchPad – our innovative tablet
technology speeds properties to
market and streamlines operations
• Continued selective and
strategic acquisitions
• Multiple awards, including The Sunday
Times Lettings and Estate Agency
of the Year
• New Starts programme continues
to build profitability
Operating review
Estate Agency: the number of properties
coming to market did not meet our forecast
in 2015 and overall exchanges were 9%
down on 2014. Demand was also subdued
with the number of potential homebuyers
registered down 7% year on year at 912,000,
although we did see some evidence of
improving demand towards the end of the
year. We continued to improve productivity
and agreed sales on a higher proportion
of our new instructions in the year.
The new instructions market remained
extremely competitive with the pure play online
agents being the most visible. This resulted
in our average instructed fee decreasing by
3% despite our improved customer proposition
and market appraisal focus.
Lettings: the market was stable through
2015 and demand continued to outstrip
supply, with more than twelve people
registering an interest in every property.
We agreed 42,600 lettings in 2015 with
prime properties being let most quickly.
The Countrywide Rental Index, published
monthly, has shown that the rent for new
lets increased by 4.1% nationally in 2015
reflecting the continued strong demand
in this sector.
Supply in the South of England started
recovering in Q4 and by the end of the year
was back at the 2014 level. In addition, monthly
rents increased most in the South West
(up 6.2%), demonstrating that there is still
demand for good properties with more than
15 applicants per available property. In the
Midlands there was a mixed supply across
the regions. Midlands West and East were
stable, while Midlands Central and North
had fewer rental properties compared to 2014.
Monthly rent in the East of England saw the
second highest increase in the country – up
5.8% – while the Midlands and Wales grew
by 2.8% and 1.8% respectively. In the North
and Scotland, rental properties remained in
short supply and rent only increased by 2.5%.
Despite this, the number of applicants remained
high in the North with an increase from eight
to ten applicants for each available property.
We remain committed to using the leading
portals Rightmove and Zoopla whilst also
giving our customers the widest possible
exposure to other digital platforms, including
our own websites.
We also improved the customer experience by:
• introducing innovative tablet technology
– LaunchPad – which has dramatically
improved productivity by improving the
speed of taking properties to market;
• improving landlord retention through
improved customer service and increased
resource in our property management
and customer care teams; and
• enhancing our online tools. Our landlord
portal has made it easier for clients to do
business with us and tenants are now also
able to complete referencing online.
24
Countrywide plc Annual Report 2015
Strategic report Acquisition remains an important part of
our strategy and during 2015 we acquired
27 businesses, including a number of large
businesses and brands. We aim to increase
our market presence in areas where we
are under-represented and, in 2015, we
significantly increased our presence in the
Liverpool region with the acquisition of two
businesses, Clive Watkins and Sutton Kersh.
The largest acquisition of 2015 was the
John Francis network of 21 branches in
South Wales, which has given us great scope
to expand and develop this market.
Plans for 2016
The Retail business unit has a combined force
of 4,800 people across 822 branches and
61 brands, giving us a unique opportunity
to delight our customers and enhance their
property experience whether they are a
landlord, tenant, vendor or potential buyer.
We have focused on ensuring our business
structures are set up to deliver the ambitious
plans we have for 2016, all of which put the
customer at the heart of what we do and
help us to double the size of our business
by 2020.
Outlook
With a stable interest rate outlook and some
improvement in new build numbers, the level
of transactions in the market is expected to
grow gradually into 2016. With our continued
focus on growing market share, we expect to
move forward positively in 2016.
KPIs
Total income (£m)
254.5
-4%
Adjusted EBITDA (£m)
House exchanges (number)
43.3
-26%
265.7
254.5
231.7
58.6
37.5
43.3
50,396
-9%
55,422
49,356
50,396
Residential properties
under management (number)
60,272
+7%
56,204
60,272
44,640
2013
2014
2015
2013
2014
2015
2013
2014
2015
2013
2014
2015
Case
study
Landlord retention
During 2015 a decision was made to be much more proactive in
terms of contacting landlords at various stages of their customer
journey. The objective of this contact strategy was not only to reduce
customer attrition but also to identify touchpoints where we could
enhance our service delivery and embed this into the business
through coaching and development.
The customer care team was established in the North by Kerry Tipper,
who set some clear targets and objectives around an effective contact
strategy, a more robust complaint handling process and strengthening
the relationship and working practices between the property management
centres and the branches they supported. The customer care team is
five strong and makes regular calls to new and long-standing
Countrywide landlords in order to understand any issues and address
them before they escalate. The results this team has delivered are
tangible and year on year our landlord retention has increased by
48%. Following the success of this initiative the concept has been
extended to other parts of the country.
Kerry Tipper, director of customer care, says: 'The decision to set up
a customer care team has been hugely beneficial. We had insufficient
focus on the retention of occupied units and our approach to complaints
handling was inconsistent and at times not conciliatory enough.
'We mapped the customer journey and agreed that contacting landlords
four months into a tenancy meant that we were more likely to pick up
issues before they became complaints.
Kerry Tipper
‘Where complaints have arisen we have used our customer feedback
in a constructive manner to adapt working practices where necessary
and also coach our teams to handle complaints more effectively and
more consistently.
'The key to the success of this team has been the relentless focus on
communication with our customers and then using this feedback in
a constructive manner to develop our people and our business.'
Annual Report 2015 Countrywide plc
25
Financial statementsCorporate governanceStrategic report Segmental review continued
London
Our plans are ambitious for London,
Europe’s largest property market.
We plan to capitalise on this growth
opportunity using our stable of strong
brands, our unparalleled distribution
network and our brilliant people.
Graham Bell
Managing director, London
HIGHLIGHTS
• Successful acquisitions last year –
Greene & Co, John Curtis, Vanet
Property Asset Management
• Lettings fees grew year on year
to £56 million with tenancies
growing 3%
• Significant growth in the London
residential sales pipeline, up year
on year by 22%
• Strong performance in premium house
sales above £2 million, outperforming
the London residential sales market
Operating review
2015 saw a significant amount of change
with the creation of a new London business
unit. Servicing the largest and one of the
most diverse residential property markets
in the world, Countrywide’s London business
unit has been divided up into four business
areas, each focusing on distinct segments:
Bairstow Eves & Mann, Mid-market and Growth,
Premier and City, and Hamptons International.
It now has more than 250 branches which
incorporate over 420 sales and lettings
operations across 20 high street brands, and
2,600 people who generated £178 million
of income in 2015 and £34 million of
EBITDA. The breadth of our offer in London,
coupled with the strength and robustness
of market-leading brands, give us a great
platform for growth over the next few years.
A strengthening economy, low interest rates
and new Government schemes aimed at
helping first-time-buyers continued to support
demand in the core London market in 2015.
However, the supply of housing stock was
restricted, with a 6% fall in the number of
homes coming onto the market. As a result
of this demand and supply imbalance, prices
across London continued their upward path,
albeit at a more modest rate than in 2014,
to finish the year at £507,000, and the number
of sales in the capital fell by 10% from 2014
levels. Rents increased by 4.7% over 2015
to finish the year at an average of £1,292
per month.
As predicted the first half of 2015 was quiet
in the lead up to the general election in May.
In addition to this, the 2014 stamp duty
changes resulted in a noticeable slowdown
in the sales market at the upper end throughout
2015. This is an area where Countrywide is
a leading player with brands including
John D Wood and Hamptons. Despite the
market for house sales over £2 million being
down by 26% year on year, Countrywide
London, as a whole, outperformed the market
with £2 million plus sales down 6% from
437 to 409, demonstrating the strength of
these brands and our network. Total 2015
annual revenues across the London division
were 3% higher than in 2014, with profits
8% lower due to the additional cost base
taken on as a result of the acquisitions and
new branch openings. The impact of the
depressed upper end of the housing market,
combined with house price inflation in Outer
London and the mid-market, meant that our
average sales fee increased by 5%. Whilst
total lettings fees grew year on year by 1%,
the mix of lettings between Central London
and Outer London resulted in the average
letting fee decreasing by 2%.
Preparation for growth
In 2015, we continued with our strategy
of making acquisitions in sectors of the
market where we identify growth opportunities.
Acquisitions in the year included Greene & Co,
a leading business in the mid-market in
North London, John Curtis in Harpenden
and Wheathampstead, as well as Vanet Property
Asset Management, based in Docklands.
We also opened new Hamptons branches
in Earlsfield and Headington. All of these
acquisitions and new branches have performed
in line with expectations so far. Greene & Co.
have added to our sales and lettings growth
in the mid-market and our wider London
lettings revenues grew by 9% as a result
of an increase in our lettings footprint from
branch expansion and the acquisition
of specialist lettings businesses.
26
Countrywide plc Annual Report 2015
Strategic report Our International department grew in 2015
with affiliations established in the Algarve,
Portugal; Costa Blanca, Spain; Tuscany and
Umbria, Italy; and Valais Canton, Switzerland.
Hamptons international have the largest
UK-based international property portal
containing over 100,000 listings and over
7,000 international partner offices. This
number has been as high as 130,000 in
peak season. In mid-2015 John D Wood & Co.
launched an international offering, working
with the already established Hamptons
International team.
Outlook
Whilst it remains to be seen if the EU
referendum will have an impact on Central
London house sales, we expect to see a
gradual improvement in sales transactions
in the upper end of the London sales market
in 2016, as vendor and purchaser expectations
continue to align. Growth in transactions and
prices in the Outer London regions should
continue, as people move from central areas
to wider London boroughs and commuter
zones when buying or ‘trading up’, driven by
affordability. This trend will play well to our
diversified network strength across all sectors
and regions of the London property market.
The London lettings market is a robust one
and is continuing to evolve and grow. 29% of
households rent in London compared to 18%
nationally and people are increasingly ‘on the
move’, in and out of the capital. London now
represents 34% of the UK rental market by
number of lets. To service this demand, further
expansion of our London-based lettings
business remains a priority.
KPIs
Total income (£m)
Adjusted EBITDA (£m)
178.0
+3%
34.2
-8%
172.6
178.0
166.0
35.5
37.1
34.2
House exchanges
(number)
Residential properties
under management (number)
11,819
-11%
12,954
13,338
11,819
14,588
+16%
12,600
10,640
14,588
2013
2014
2015
2013
2014
2015
2013
2014
2015
2013
2014
2015
Old Church Park development, Romford
Case
study
NU Living is a design-led innovative developer with an ethical stance,
committed to putting customers first. All NU Living profits are reinvested
to fund regeneration and development of exemplary, affordable new
homes. The NU Living Old Church Park development in Romford is a
development of one and two bedroom apartments, many with gated
parking. Each apartment is comprehensively equipped to fulfil the
demands of modern living. With great rail and bus links owners can
easily commute to London and the City. Romford itself is a thriving
town where many successful businesses are located and the
Queen’s Hospital is also close by.
In April 2015 Steve Lillistone, business development director, and his
Countrywide Residential Development team received an instruction
to market Phase 3 of Old Church Park, Romford. Steve’s aim was to
host a very successful launch on behalf of the developer and his first
step was to devise a site-specific launch plan, and join up all the
relevant teams from within Countrywide.
Steve brought a number of his colleagues together to ensure that
he could produce a ‘full service solution’ for his client. He met with
his colleagues from the East London and Essex-based networks of
Countrywide estate agents Abbotts and Bairstow Eves to discuss the
marketing plan for the properties. Next he brought in John Taylor, area
manager of Countrywide Financial Services for North and East London.
He also spoke with the relevant Countrywide Lettings teams to ensure
that any buy-to-let investors could receive advice on the launch day.
Steve’s approach meant the whole team knew what steps would need
to be taken to deliver a successful launch for our client.
The lead up to the launch took just under two weeks, during which
Abbotts and Bairstow Eves worked tirelessly to ensure they delivered
a highly successful sales and marketing campaign around the launch
of the Old Church Park development.
On the launch day in May 2015, 18 plots out of 84 were released by
NU Living. The Countrywide marketing efforts were apparent as the
queue started to build from 5.45 am.
Linda Faucher, sales and marketing director of NU Living, said: 'It became
obvious to us that we would probably need to release further units
on the launch day given the amount of interest in the development.'
The Countrywide Financial Services team was also on site on the
launch day to ensure that it could assist NU Living applicants with
their mortgage applications.
'We have worked with NU Living since 2010; I am delighted that we
co-ordinated services from other parts of Countrywide to ensure we
delivered the best possible service to our client,' said Jon Taylor, area
manager, Countrywide Financial Services. 'Out of all the applications
we made, 20 of them were through the Government-backed Help to
Buy scheme.'
The development was sold out due to the reservations taken over the
launch weekend and the ongoing marketing over the following few
weeks. This was a great result for both NU Living and for Countrywide.
Annual Report 2015 Countrywide plc
27
Financial statementsCorporate governanceStrategic report Segmental review continued
Financial Services
Excellent mortgage growth
exceeds the market.
Peter Curran
Managing director, Financial Services
HIGHLIGHTS
• The Financial Services division
continues as the third largest
mortgage distributor in the UK,
with approximately 6% of the UK
mortgage market
• 11% EBITDA growth
• Strong mortgage growth from
Mortgage Intelligence and Slater Hogg,
increasing 30% and 16% year on
year respectively
• In our field sales force, productivity
per mortgage consultant has increased
by 8% year on year with a 4%
reduction in heads
• 12% increase in protection revenues
• 9,500 customers referred to our
conveyancing business, generating
£3 million in revenue
Operating review
Mortgage market conditions in the first half
of 2015 were subdued, with gross lending
trailing 1% behind the prior year. The
anticipated slowdown prior to the general
election and weak lending in the first quarter
alone led most market commentators to
downgrade their expectation of the year’s
outturn. However, the lending markets
picked up across the summer, matching
levels of activity not seen since 2008.
Continued strong growth in the second half
of the year was equally encouraging and the
market finished at £220 billion, reflecting 8%
year-on-year growth.
The potential for interest rate rises also
continued throughout the year, but ultimately
the long-expected increase did not materialise.
This ensured that our customers continued
to enjoy low interest rates on their mortgages;
however, our remortgage opportunity was
diminished by a relative lack of consumer
appetite to lock in low interest rates before
any increases in the base rate.
Despite the challenging market conditions
in the first half of the year, our written
mortgage performance has been encouraging,
with overall growth by value and excellent
performance from both Mortgage Intelligence
and Slater Hogg, delivering 30% and 16%
mortgage growth, respectively.
The Government’s autumn statement
introduced an increased stamp duty charge
for buy-to-let investors, effective April 2016,
and we observed an increase in buy-to-let
activity in the last quarter of the year. Regardless
of the proposed changes in stamp duty, we
continue to identify this sector as an area
of growth, given expectations of continued
strengthening in private rentals, and the
associated contribution that non-institutional
investors have to make in this space.
This year we have achieved encouraging
results from both our core protection and
general insurance sales, with 8% growth in
customers buying protection products and
4% overall growth in our general insurance
book. Our strong relationship continues with
our core general insurance partner, AXA,
and, as such, we have agreed a new contract
to enable us to deliver high quality general
insurance products to our customers.
Adverse weather conditions in the latter part
of 2015, especially with regard to the flooding
in Northern England, has resulted in lower
profitability of the underlying contract in
comparison with the prior year; however,
we are proud that our customers received
swift and decisive care from our partner’s
claims handling team.
Preparation for growth
As part of the Group’s Building our Future
strategy the Financial Services business unit
has been preparing for growth, through the
restructure of the executive team, and we
are continuing a further series of senior
appointments to strengthen our capability.
Our plans for 2016 focus around growing
customer value, through various communication
channels and ensuring that our diverse
customer base benefits from the best mortgage
opportunities in the market place. We aim to
maintain a regular dialogue with our existing
customers in order to fulfil their needs as
their circumstances evolve.
28
Countrywide plc Annual Report 2015
Strategic report We intend to transform the Countrywide
mortgage experience and we are in the final
stages of testing our new point-of-sales system.
We plan to roll out the new software to our
mortgage consultants in early 2016, enabling
them to provide high quality advice in a
flexible, efficient and user-friendly way, whilst
giving access to the full suite of premium
protection and general insurance products
from our partners.
KPIs
We are focused on building the best team
through investing resources in the training
and development of our existing sales force
and are in the process of supporting our
consultants through the recruitment of
additional first line of defence field-based
compliance staff.
Outlook
The continued Bank of England decisions
to hold base interest rates steady provide
borrowers with shelter from interest rate
instability in the near to medium term and,
given the momentum of the mortgage
market in late 2015, we expect to see
continued uplift in trading in 2016.
Total income (£m)
Adjusted EBITDA (£m)
81.0
+6%
20.7
+11%
76.4
81.0
67.7
20.7
18.6
14.2
Total mortgages arranged
(number)
75,939
+8%
70,529
75,939
60,640
Mortgage value (£bn)
12.2
+18%
12.2
10.3
8.3
2013
2014
2015
2013
2014
2015
2013
2014
2015
2013
2014
2015
Case
study
Looking after our customers
People have mortgages for an average of 24 years, giving us an excellent
opportunity to build a life-long relationship with our customers. We are
good at working with new customers, but we recognise that there is
a huge opportunity for us to grow our market share in the remortgage
market too, which is up 31% by value (H2 2014 v H2 2015).
The remortgage market is highly competitive, which means that existing
homeowners are in a great position to benefit from some excellent
offers available at low interest rates. With this in mind Leah Emery,
regional sales manager in the Midlands, and her team started sharing
their success stories about finding the best products for their customers.
Very often we have been able to make huge cost savings on behalf
of our customers:
• This year Mazar Singh, one of our mortgage consultants, saved
a customer £57,100 by reducing their mortgage term by eight
years. In the process he also reduced their monthly payments
by £13 with no remortgage fees at all from the bank.
• David Smith, another one of our mortgage consultants, worked with
a customer who had found a remortgage online for a 30-year term
and a £500 set up fee. David was able to listen to our customer’s needs
and find an improved deal, reducing the term to 25 years and having
no remortgage fees to pay! The customer was delighted. We are
really proud that through David’s expertise, our customer found
an even better deal and ended up saving £78,500 in the process.
• This fantastic work continues into 2016 and we are delighted to
report that David was able to save a recent remortgage customer
£180,000 over the term of their mortgage. The customer is over
the moon as he can now afford to save and be mortgage free
straight after the fixed rate finishes.
We put the customer at the heart of everything we do and our continued
focus on listening to and satisfying their needs, coupled with our
innovative approach in the remortgage market, will bring further
opportunities in 2016. Savings that we can make on remortgages
then help our customers to afford better protection both for their
life assurance and general insurance needs – ultimately an
excellent outcome for our customers and a great way to build
those life-long relationships.
Annual Report 2015 Countrywide plc
29
Financial statementsCorporate governanceStrategic report
Segmental review continued
B2B
Our B2B businesses provide dedicated
support to a diverse range of private
and public sector businesses and banks
throughout the UK. By strengthening our
partnerships with corporate clients we
know we can better meet their needs.
Paul Creffield
Managing director, B2B
HIGHLIGHTS
• Strong performance from Surveying
Service business delivering 12%
revenue growth and 34% increase
in EBITDA contribution
• Residential development solutions
performance grew with the addition
of Ikon Consultancy and new homes
hubs from Greene & Co.
• A strong underlying performance
from Lambert Smith Hampton was
strengthened by the acquisition
of three businesses in 2015 plus
excellent results from Ireland, which
became the most profitable region
outside London
Professional Services
The Professional Services division of B2B
includes Surveying Services with the addition
of Hamptons Valuations; Conveyancing
Services; Estate and Asset Management
taken from the Lettings and Estate Agency
divisions; and Property Auctions from
Estate Agency.
2015 was an excellent year for our Surveying
Services business delivering sustainable growth
in revenue and EBITDA year on year. Increased
mortgage approvals drove £3.8 million
additional contribution while productivity
gains augmented results by a further
£1.0 million after bearing the cost of our
graduate training programme. Our qualified
surveyor headcount has risen to 405 and
we are continuing to recruit into our graduate
programme. Risk management and quality of
advice to all clients remain top priorities and
we are pleased to report that our risk and
compliance initiatives implemented over the
past few years have resulted in significantly
fewer valuation and defects claims. We are
also pleased to confirm that both Nationwide
Building Society and HSBC have renewed
long term valuation contracts with us reflecting
the quality and level of service we continue
to deliver.
Conveyancing Services has seen a year
of change, with moves affecting the panel
management business and internal business
generation teams connected with our Retail
and London businesses. 2015 has seen
fewer instructions which have impacted
on revenue and EBITDA, but plans have
been set to significantly increase instructions
going forward. Nevertheless, our pipelines
remain robust. The main highlight for 2015
has been the continued recruitment of new
lawyers into training programmes so that we
can adequately service volumes of expected
instructions and the successful roll out of
our upgraded software operating system,
Visual Files.
We have aligned our Leasehold Management
business with our Asset Management business
under a single managing director going
forward with a plan to continue our growth
in this important area. However, 2015 proved
a challenging year for Asset Management as
the repossessions market in 2015 declined
by 51%, impacting results.
Our Professional Services division comprises
well established businesses and management
teams who have contributed to the Building
our Future strategy. Our plans for the future
seek to drive increased Group value from
Conveyancing by working with our partners
in Retail, London and Financial Services to
deliver an excellent service for home movers
and we will continue our focus on the quality
of service and reducing the potential for future
claims. We are also researching new survey
products for consumers and cementing our
position as a leader in the market.
30
Countrywide plc Annual Report 2015
Strategic report Residential Development Solutions
Countrywide Residential Development Solutions
comprises the former Land & New Homes
businesses reported in Estate Agency and
Hamptons together with Preston Bennett, the
leading new homes business acquired at the
beginning of 2014. In 2015 we acquired
Ikon Consultancy, a residential and mixed-use
consultancy focused on providing a range of
high quality added value services to private,
public and housing association clients working
across the wider regeneration sector, and a
new homes hub from Greene & Co.
Performance was varied across the network
in 2015. Strong results in London and Preston
Bennett, together with the addition of Ikon and
the Greene & Co hub, were offset by weaker
performances in the regions, which are heavily
reliant on the Group’s branch network.
Developing a full service offering for developer
clients, particularly SMEs, is a core strategy
within Building our Future. Combining our
resources in this area and forging even greater
links with our Commercial team will allow us
to present a joined up full service proposition
from land acquisition and sale, viability studies,
design and development, planning and
consultancy services, including valuation,
project management and conveyancing
right through to marketing and sale of the
completed units.
Moving into 2016 we are rolling out the
successful new homes sales hub operating
model, focusing our teams on client relationship
development. Our data indicates that we are
2.5 times more likely to sell a home via the
hub model than the distributed branch network.
Furthermore, the average development sold
through our hubs is 67 units compared to
the average of nine-unit developments sold
via the branches. These large-scale sites
deliver economies of scale and attract more
large developments.
Also we are pleased to announce the
acquisitions of Lanes Property Agent (Cheshunt)
and Lanes Land in January 2016, a land and
new homes businesses operating in Enfield
and Hertford, for £2.8 million. Complementing
Preston Bennett’s geographical reach in the
northern home counties, this business sits
squarely within our hubs’ operating strategy.
We consider the new homes market to be
a big opportunity in the UK underpinned by
the Government’s desire to build one million
new homes by 2020. We will continue to grow
our business in this area by opening hubs
and acquiring specialist businesses to support
our overall proposition.
Gross income summary
Survey and valuation
Conveyancing
Other professional services
Professional Services
Land & New Homes
Commercial
Total gross income generated by B2B clients
Income passed to other business units
2015
£’000
2014
£’000
Change
%
66,295
32,206
14,417
112,918
27,736
101,686
242,340
(23,289)
59,241
33,161
17,060
109,462
23,023
72,798
205,283
(22,968)
12
(3)
(15)
3
20
40
18
1
20
B2B net income
219,051
182,315
Lambert Smith Hampton
2015 was the second full year for the
business post-acquisition as part of the
Countrywide Group.
The year was notable on many fronts including
very healthy year-on-year improvement in
terms of both revenue and EBITDA growth
of 65%. This has been supported by our
acquisition programme in the sector and
healthy commercial markets both in London
and the regions, which aligns well with the
business’ regional footprint. The core business
purchased in 2013 continued to grow steadily
throughout the year. Excluding the contributions
from the acquired businesses the like-for-like
revenue grew by 6% to £73 million with
EBITDA contribution rising by 5%. The
Northern Ireland team, acquired in 2014,
was perfectly placed to provide transactional
and consultancy services to existing Lambert
Smith Hampton clients, making Ireland the
second most profitable region.
Lambert Smith Hampton continued in 2015
to execute upon its strategy, which includes
both building upon its core service lines and
strengthening by acquisition where we cannot
develop easily through organic growth.
Our three acquisition highlights in 2015 were:
• ES Group, a well respected, 260-strong
consultancy-led business with a major
presence in many UK regions. The firm is
a market leader in providing valuation and
corporate recovery advice to banks and
accountancy firms and is also at the
forefront of the fast-growing alternatives
market, particularly in hotels, healthcare
and education.
• Tushingham Moore, which is the largest
retail property specialist outside of London.
Their team of consultants has provided
expert integrated agency offering to the
retail industry for over 20 years. Not only
will Tushingham Moore increase Lambert
Smith Hampton’s retail and leisure profile
across the UK, it will deliver synergy
opportunities via our shopping centre
management expertise in our Belfast office.
• Douglas Newman Good Commercial,
one of the most respected commercial
property advisors in Ireland. The business
manages over 2 million sq ft of assets,
generating income in excess of €45 million
each year. Key clients include AIB, Bank of
Ireland, Grant Thornton, NAMA, State Street
and Tesco. Coupled with our market leading
commercial presence in Northern Ireland
this significantly strengthens our presence
across many markets.
Our Commercial strategy is twofold. Building on
the opportunities presented by the acquisitions,
Lambert Smith Hampton will drive organic
growth in retail and leisure industries and
increasing its reach in Ireland. Meanwhile, the
business will continue to search for suitable
complementary businesses to acquire to
strengthen its product and service range for
clients. We will continue to grow our Lambert
Smith Hampton commercial business by
focusing on building recurring revenue streams
attached to the consultancy side of the
business. Our strategy remains to recruit top
quality professionals to enhance our existing
service offerings and acquire value-accretive
commercial businesses that either provide
us with complementary service opportunities
or enable us to grow service lines where
recruitment has been difficult and demand
is high, such as building consultancy.
Outlook
We will continue to drive value for the Group
through our strong businesses underpinned
by resilient corporate relationships,
significant recurring revenue streams
and scalable opportunities.
Annual Report 2015 Countrywide plc
31
Financial statementsCorporate governanceStrategic report Segmental review continued
B2B continued
KPIs
Total income (£m)
Adjusted EBITDA (£m)
219.1
+20%
32.3
+51%
Surveys and valuations
(number)
357,033
219.1
182.3
116.6
21.4
13.4
32.3
+7%
330,121
332,290
357,033
2013
2014
2015
2013
2014
2015
2013
2014
2015
Conveyances completed
(number)
34,851
-4%
33,285
36,441
34,851
Exchanges – new homes
(number)
Corporate properties under
management (number)
5,187
+11%
4,172
32,049
5,187
4,690
-6%
35,656
34,164
32,049
2013
2014
2015
2013
2014
2015
2013
2014
2015
Victoria Centre
Our Lambert Smith Hampton Belfast office was established following
our acquisition of BTW Shiells, Northern Ireland’s leading advisor, in
June 2014. The LSH Belfast office provides a full Asset and Property
Management service on behalf of Commerz Real for Victoria Square,
Northern Ireland’s prime retail scheme – attracting footfall of
185,000 a week.
The retail-led mixed-use scheme is located in the heart of Belfast, with
a lettable area of 921,358 sq ft, including a 229,547 sq ft two-level
basement car park of 954 spaces, operated by Q Park. The centre
comprises four trading levels and includes 99 units and restaurants,
and an eight-screen cinema operated by Odeon. Anchored by House
of Fraser, the centre boasts an unrivalled mix of high-end fashion retailers
and iconic brands such as Apple, River Island, and Tommy Hilfiger.
The unique aspect of Victoria Square in Northern Ireland is that it is a
place to shop, relax, live and work, with the centre including a residential
element of 106 apartments. Victoria Square is a ‘neighbourhood’ and
the dome covered public space is a hub connecting the walkways on
the River Lagan, the rejuvenated Cathedral Quarter, and the city centre.
We’ve thrived from the opportunity to work this asset and improve
the shopping and leisure experience for both the local community and
the wider area. In 2015, we installed free public WiFi to benefit the
community and managed an annual rent roll of just over £16 million,
with 25 retail units let since our appointment, including Samsung,
Five Guys, and STA Travel. We completed rental negotiations as part
of proactive asset management to ensure retention of key brands,
and delivered lease renewal and lease re-gears, including full shop
refits. We also retendered two main service contracts for Cleaning,
Security and Associated Services and Mechanical, Electrical and
32
Countrywide plc Annual Report 2015
Case
study
Victoria Centre
Associated Services, achieving cost savings and enabling us to bring
in over £2 million through full service charge management.
We’re delighted to work with Commerz Retail, and we are currently
advising on an internal signage package for the centre and assisting
with climate improvement proposals for reduction of wind and rain
through the open streetscape.
The integration of BTW Shiells has proved truly fruitful, with fantastic
partnerships such as this enabling our further growth in Ireland,
including the acquisition of Douglas Newman Good Commercial
in July 2015. We believe that this work further consolidates LSH’s
position as the number one firm providing trusted on-the-ground
advice in every part of the country.
Strategic report Group financial review
We delivered a mixed performance in
challenging market conditions, whilst laying
down the foundations for future progress in line
with our strategy. We have continued to acquire
and integrate businesses during 2015 and
we have put in place the financing we need
to achieve the next phase of our strategy.
Jim Clarke
Group chief financial officer
Segmental results*
Retail
London
Financial Services
B2B
Central Services
Total Group
Total income
EBITDA
2015
£’000
2014
£’000
Variance
%
254,451
177,982
80,994
219,051
1,258
265,651
172,635
76,439
182,315
5,161
733,736
702,201
(4)
3
6
20
(76)
4
2015
£’000
43,343
34,162
20,709
32,302
(17,539)
58,621
37,107
18,586
21,363
(14,574)
112,977
121,103
2014
£’000
Variance
%
(26)
(8)
11
51
(20)
(7)
* Previously reported results for 2014 have been restated to align with the new segmental structure.
Introduction
Countrywide delivered a mixed performance
in a challenging period which saw the impact
on our estate agency business of lower
levels of housing transactions than in 2014.
We have continued to invest both organically
and non-organically throughout the year to
ensure we have the foundation for future
growth. The benefits of this strategy are
evident in the performance from both our
Financial Services and Surveying Services
(B2B) businesses where prior investments
in resource capacity have produced results
which are ahead of their respective markets.
Our intent, as laid out in our Building our Future
strategy, is to increase our resilience to the sales
cycle volatility, both organically and through
acquisition, and broaden the Group’s business
to deliver a strong future and sustainable
long term value for our shareholders.
Accordingly, we have put in place the financing
we need to fund our planned growth, having
agreed a new banking facility in February 2016.
Our strategy requires an increase in net
debt levels, as we invest in the organic and
non-organic elements required to keep us
on target to achieve our 2020 objectives.
Results
• Group income was 4% higher at
£733.7 million (2014: £702.2 million)
reflecting growth in three of the four
business units.
• EBITDA declined by 7% to £113.0 million
(2014: £121.1 million) principally as a
result of challenging conditions in the
residential estate agency market and
investment in our lettings business.
Our business units reported improvements
in income, with the exception of Retail
where challenging market conditions were
exacerbated by the disruption of restructuring
during the year. In Retail, 2015 has been a
period of consolidation and investment in
our estate agency and lettings operations,
with significant acquisition investment in the
latter to provide foundations for the next
stage of our growth. However, Financial
Services and Surveying Services (within B2B)
delivered market-beating performances, with
encouraging progress from our Commercial
operations within B2B. Our central costs are
likely to increase in coming years as the
Group continues to grow.
Income statement, cash flow
and balance sheet items
Depreciation and amortisation
We continue to show separately the
depreciation and amortisation that relates
to assets purchased for use in the business
and amortisation arising on those intangible
assets that have been recognised as a result
of business combinations. The underlying
depreciation and amortisation charge increased
by £5.9 million, the principal drivers of
which were increases of: £1.5 million and
£2.7 million for computer software and
hardware, respectively, as a result of the
strategic investment to replace our
infrastructure through the seven-year
outsourcing partnership with CGI which
commenced in 2012; and £1.4 million
in respect of leasehold improvements
as a result of the programme of branch
refurbishments. Amortisation of intangible
assets recognised through business
combinations has increased by £1.1 million
as a result of the incremental rate of growth
in acquisitions during the year.
Annual Report 2015 Countrywide plc
33
Financial statementsCorporate governanceStrategic report Group financial review continued
Income statement, cash flow
and balance sheet items continued
Depreciation and amortisation continued
Whilst we expected amortisation charges
to increase due to our acquisition strategy,
it should be noted that £6.6 million of the
annual charge relates to intangible assets
recognised in 2007, when the Group was
taken private, which will end in 2017.
Share-based payments
Share-based payment charges are also
reported separately on the face of the
profit and loss account. The most significant
element of this charge relates to a specific
scheme established at the point of the IPO in
2013 when 7.2 million options were granted
to employees who were former equity holders
of Countrywide Holdings, Ltd under the IPO
Plan. The majority of these nil-cost options
vested based on adjusted Group EBITDA
for 2014 in March 2015 (80%) and the
residual balance due to directors will vest
in March 2016. The charge to the income
statement in 2015 was £3.3 million
(2014: £10.6 million).
In addition, we also operate annual grants
under a three-year Long Term Incentive Plan
(LTIP) to senior managers which commenced
in September 2013. These are nil-cost options
which will vest subject to certain performance
criteria disclosed within the remuneration report.
The credit for the year was £0.5 million
(2014: £2.1 million charge) as performance
targets were not met. Our SIP scheme also
has a three-year vesting period and, having
only commenced in October 2013, the cost
is incrementally growing and will build over
time to around £0.9 million in 2016.
Contingent consideration
As a result of an increasing number of
acquisitions during the year that, for commercial
reasons, comprise a significant element of
employment-linked contingent consideration,
which is deemed remuneration under IAS19
‘Employee benefits’, we have decided to report
these costs, amounting to £8.9 million,
separately from underlying profits with further
details in notes 6 and 29 ‘employees and
directors’ and ‘acquisitions during the year’,
respectively, as the short term impact on the
underlying business results would be material
and distort underlying business performance.
Each of these contingent consideration
arrangements require the vendors to remain
in employment and, as such, have been treated
as a post-combination employment expense,
have been excluded from consideration, and
are being accrued over the relevant periods
of one to three years specific to each of
the agreements.
Some of this contingent consideration is also
subject to performance conditions being
satisfied, with target EBITDA levels which
must be achieved in order to realise the
full payment, with a reduced payment made
if targets are not fully met. Accruals for
contingent consideration will therefore be
reviewed at each period as future earn-out
assumptions are revisited and any credits
to the income statement in respect of
downward revisions to estimates would
be reported in the same way.
Exceptional items
We have reported net exceptional costs of
£13.6 million, which comprises non-recurring
costs of £16.1 million principally arising
as a result of the strategic restructuring
undertaken during the year, offset by
£2.5 million of deferred income in respect
of our contract with Zoopla (which ended
at 31 December 2015).
Exceptional costs related to the strategic
restructuring undertaken during the year
have been analysed in further detail within
note 10, but principally comprise: £6.1 million
impairment charges from writing down a
number of brands which have been rationalised
as part of our review of the London market
place; £3.3 million in respect of redundancy
costs as a result of the costs incurred in
implementing the new organisational design,
with related recruitment costs of £0.5 million;
and £3.3 million in respect of consultancy
costs. A number of property restructuring
costs were also incurred as a result of our
strategic decision to bring our teams
together in Oxford Street. However, the
dilapidations and onerous leases costs
of mothballing other offices has largely been
offset by the £0.8 million profit generated by
the sale of our Grosvenor Square leasehold,
resulting in a net cost of £0.4 million. The
net cash spend in 2015 on the strategic
restructuring was £6.9 million.
Professional indemnity claims
During 2015 we received, as expected,
reduced numbers of professional indemnity
valuation claims and achieved significant
successes in a number of challenging cases.
The majority of claims received continue
to relate to the period 2004 to 2008 and
most are over six years since the survey was
performed. The underlying trend of valuation
claims arising since 2009 is very low and
below those experienced before the decline
in the property market. This is testament to
the enhanced risk and compliance monitoring
implemented over the past few years.
Estimating the liability for PI claims is highly
judgemental, especially as we are now
dealing with the more complicated cases.
We have updated our financial models to
reflect the latest inputs and trends and taken
advice from our panel of lawyers in respect
of open claims. During 2015 our experience
was in line with expectation and the provision
is unwinding as planned. While sensitivities
have been applied to these models, any
significant change in claims experience could
have an impact on results, good or bad.
Finance charges
During 2015, our drawdown on bank
borrowing facilities increased from £120 million
to £200 million. Consequently, our finance
costs have increased by £0.8 million and are
now incurred at a margin of 1.75% over LIBOR.
Taxation
Our total tax charge for 2015 of £5.9 million
(2014: £11.7 million) represents an effective
tax rate of 12.5% (2014: 14.7%). The principal
reasons for the lower effective rate are: the
impact of the future reduction in the tax rate
in restating deferred tax liabilities generated
a £3.3 million tax credit; and realisation of
share-based tax relief of £1.7 million.
Countrywide’s business activities operate
predominantly in the UK. All businesses are
UK tax registered apart from small operations
in Hong Kong and Ireland. We act to ensure
that we have a collaborative and professional
relationship with HMRC and enjoy a low
risk rating. We conduct our tax compliance
with a generally low risk approach whilst
endeavouring to maintain shareholder value
and optimise tax liabilities. Tax planning is
done with full disclosure to HMRC when
necessary and being mindful of reputational
risk to the Group. Transactions will not be
undertaken unless they have a business
purpose or commercial rationale.
34
Countrywide plc Annual Report 2015
Strategic report Shareholders’ funds amounted to £544.6 million
(2014: £531.6 million) giving balance sheet
gearing of 25% (2014: 16%). Net debt
represented 21% of the Group’s market
capitalisation at 31 December 2015, and
163% of the Group’s adjusted EBITDA for
the year.
Committed bank facilities
The Group’s available bank facilities
(excluding overdraft arrangements available)
at 31 December 2015 comprised a
£250 million RCF repayable in March 2018.
In February 2016, the Group increased its
borrowing capacity to facilitate the strategic
plans announced during 2015. We have
renegotiated our existing £250 million RCF,
to a £340 million RCF with the existing
lenders and accompanying £60 million
accordion facility repayable in 2020.
The basic terms of the facility remain unchanged
although there is greater flexibility on the
leverage covenant levels. It is our intention
to take advantage of the current interest
swap rates to fix a significant proportion
of this facility.
Dividend policy
There has been no change to the Group’s
previously stated policy (as detailed in the
chairman’s statement within the 2014 annual
report) in respect to normal dividends,
which will remain unchanged at 35–45% of
underlying profit after tax. Underlying profits
are illustrated separately on the face of
the income statement and are measured as
profit after tax but before exceptional items,
amortisation of acquired intangibles, contingent
consideration and share-based payments.
This policy aligns with the Group’s strategic
plan, which requires an increased level of
investment to deliver significant EBITDA
growth and enhance shareholder returns.
In February 2016, we sold 8,659,302
Zoopla shares realising £19.1 million, which
will be returned to shareholders by way of
a share buyback programme. We continue
to hold 9,234,473 Zoopla ordinary shares.
The Board has the potential to re-introduce
special dividends from 2017.
In addition to our corporation tax contribution,
our businesses generate considerable tax
revenue for the Government in the UK. For
the year ended 31 December 2015, we will
pay corporation tax of £8.5 million (2014:
£17.2 million) on profits for the year, we collected
employment taxes of £172 million (2014:
£132 million) and VAT of £99 million (2014:
£95 million), of which the Group has incurred
£61 million and £2.5 million (2014: £47 million
and £1.9 million) respectively. Additionally
we have paid £12 million (2014: £11.0 million)
in business rates and collected £35.5 million
(2014: £42.6 million) of stamp duty land tax
though our conveyancing business.
Cash flow
Net cash generated from operating activities
decreased by £22.8 million to £65.2 million
for the year (2014: £88.0 million), representing
29.7 pence per share (2014: 40.1 pence).
Both years have been impacted by payments
to settle PI claims. Payments in 2015 were
lower than expectations at £10.8 million
(2014: £14.4 million) principally due to the
timing of settlements.
Capital expenditure
Total capital expenditure on tangible
assets in the year amounted to £19.7 million
(2014: £23.9 million), principally relating
to the programme of planned branch
refurbishments, and an additional £5.4 million
(2014: £6.1 million) has been incurred
on software, which has been treated
as an intangible asset.
Net assets
At 31 December 2015, our net assets
per issued share were £2.48, a total of
£544.6 million (2014: £531.6 million) and an
increase of £13.0 million, or 2%, driven by
a post-tax profit for the year of £41.8 million,
offset by dividend returns to shareholders
of £32.9 million.
In February 2016, we sold around 50% of
our holdings in Zoopla Property Group plc
and the £19.1 million proceeds will be
returned to shareholders. We will continue
to monitor opportunities with regard to
our remaining stake.
Net debt
At 31 December 2015 we had cash balances
of £24.3 million (2014: £28.6 million) and
a £200 million revolving credit facility (RCF)
drawn down (2014: £100 million term loan
and £20 million revolving credit facility
drawn) and finance leases of £10.1 million
(2014: £12.3 million). (Full details of net debt
are shown in note 21.) The £81.8 million
increase in net debt arose principally as a
result of net outflow on acquisitions amounting
to £62.9 million during the year.
Whilst there are always potential risks (see our
principal risks detailed below) and constraints
associated with dividend resources to deliver
any dividend policy, the key judgements
exercised in relation to the current year
dividend proposal, which aligns with the
stated dividend policy and will be subject
to approval at the AGM, have been:
• distributable profits: the parent company
balance sheet (see page 123) demonstrates
significant headroom in terms of available
distributable profits, providing coverage of
both the proposed dividend and additional
headroom for future delivery of normal
dividends under the stated policy;
• availability of cash: the parent company
can access available cash within the Group
by the declaration of dividends within
underlying subsidiaries (which also
generates further distributable profits at
the parent company level) or by choosing
to call in intercompany balances or accessing
external funding (undrawn facilities of
£50 million at 31 December 2015); and
• debt covenants: the Group has sufficient
headroom for both the proposed dividend
and additional headroom for future delivery
of normal dividends under the stated policy.
The Board has recommended a final
dividend of 10.0 pence (net) per share
(2014: 10.0 pence), giving a total 2015
dividend of 15.0 pence (net) per share
(2014: 24.0 pence, including a 9.0 pence
special dividend). Subject to approval at the
AGM, to be held on 27 April 2016 the dividend
will be paid on 5 May 2016 to shareholders
on the register at 29 March 2016.
Jim Clarke
Chief financial officer
25 February 2016
Annual Report 2015 Countrywide plc
35
Financial statementsCorporate governanceStrategic report Corporate sustainability
We believe that great people plus a great environment
will deliver a world-class experience for our people
and our customers.
Our people
To achieve our vision, our customers need
to be at the heart of everything we do. For
this to happen all of our people need to be
connected to our purpose, inspired to be the
best they can be, feel valued, engaged and
committed to providing a brilliant customer
experience. To expect this of our people we
need to make sure that they have a great
experience from the moment they consider
joining Countrywide and throughout their
career with us. To do this we will engage
our people at every single touchpoint of
this journey, building our employee value
proposition, communicating clearly, bringing
our values to life and creating an environment
where people can excel.
Developing a high performance culture
To support our leaders to effectively lead
through organisational change, embed our
values and drive business performance, we
held a series of senior leadership events in
November and December 2015.
The first event on leading change through
culture and values helped leaders understand
more about their own leadership brand,
examining culture and behaviours to
positively reflect our values in the actions
and conversations we have with our people
and customers.
I’ve grown as a person
and leader through this
training and it’s completely
changed the way I now
approach meetings and
lead my teams. I’ve already
seen improvements in how
the team engages and
collaborates as a result.
The second event ‘conducting powerful
conversations’ was a practical event which
provided leaders with the tools, techniques
and mindsets to conduct powerful
conversations with their teams, focusing
on driving performance.
13 workshops were held over a seven-week
period, reaching over 100 leaders across
the business.
We now plan to roll out an adapted
version to the wider leadership team
to enable a consistent approach to
performance management.
Development and training
New apprenticeship and graduate recruitment
schemes continue to deliver across several
divisions of the Group, alongside City & Guilds
accredited training for employees within our
retail operations. This includes the opportunity
of sponsorship to achieve recognised
professional qualifications that are relevant
to our sector. We provide full visibility of
who we are and expertise we have through
our online Register of Property Agents
(www.agencypro.co.uk). The Register provides
assurance that our people meet the requisite
standards of professionalism that our customers
will expect when we advise them and represent
their interests during one of the most significant
transactions that they are likely to undertake
in their lifetime.
Making sure we attract the best talent is
fundamental to the continued growth of
Countrywide. It is only by investing in our
people and ensuring they have the right
tools to do their job in a safe and positive
environment that we can be recognised
as one of the best places to work in the UK.
LISTENING TO OUR PEOPLE – MYCOUNTRYWIDE SURVEY
In 2015 we completely overhauled our
employee engagement survey, aligning
it to our Building our Future strategy, to
provide more insightful data across our
strategic focus areas and support clear
action planning.
Over 9,000 employees shared their feedback.
That is an increase of 9% compared to
2014 and over 1,000 more responses
giving us a better understanding of how
people truly feel working for Countrywide.
Overall our engagement score increased
to 70% compared to 2014. Over 75% of
those surveyed felt inspired by our purpose
and understood our strategy – both showing
strong increases on 2014 results.
Only through taking action on the feedback
received and working together to make
the right improvements can we deliver
performance improvements. We are
determined to improve again in 2016 with
a mid-year pulse survey to track the impact
of our action plans. Across Countrywide
we will continue to listen to our people and
make the changes that bring us ever closer
to being recognised as one of the best
places to work in the UK.
9,000+
employees shared
their feedback
36
Countrywide plc Annual Report 2015
Strategic report Being the Countrywide Great Tour Ambassador is an
experience I’ll never forget. I met loads of Countrywide
colleagues, all tackling massive personal goals and
with smiles on their faces (most of the time!) in aid
of some fantastic causes. I’ve made friends for life
over the 64 days and I truly appreciate the support
I received from my family and Countrywide
throughout – it was awesome.
James Dowling
Our Countrywide Great Tour Ambassador
Communication
Through impactful, clear, and honest
communication we connect our people to
our purpose and inform, engage and inspire
them. To do this we work collaboratively with
our leadership teams across Countrywide
providing insight, guidance, expertise and
tools to support performance and drive
business growth.
Our Communication Business Partners provide
a deep understanding of how employees
think, feel and act across our four business
units (BU) of Retail, London, B2B and
Financial Services.
From newsletters to events, people roadshows
to video interviews, we use the most relevant
channels to reach all our employees and will
continue to expand our reach in 2016 with
the launch of a new Group-wide intranet.
Our people are also encouraged to become
shareholders in the Company. The Group
Share Incentive Plan (SIP) has been running
successfully since its inception in October
2013. It is open to all employees with more
than 18 months’ continuous service and the
Company gives one matching share for every
two shares purchased by the employee
(within the maximum investment terms
established by HMRC).
Employee engagement –
The Great Tour
In the Summer of 2015 we were thrilled to
support The Great Tour, in tandem with CTC,
the national cycling charity. Britain’s ultimate
cycling challenge is a 64-day circumnavigation
of coastline starting in Holyhead and
finishing in Anglesey, a route which covers
6,800 kilometres. As lead sponsor we were
able to provide a fantastic opportunity for
people to take part no matter what level their
fitness, connecting with colleagues from all
over our business to complete the challenge.
Over 300 riders from Countrywide took part
in The Great Tour, participating in every single
stage of the event, with many more supporting
along the way. Six charities partnered with
the cycling event: Alzheimer’s Society;
Leukaemia and Lymphoma Research;
Macmillan Cancer Support; Action for A-T;
Anthony Nolan; and CTC. We raised over
£35,000 for these fantastic causes.
Charitable giving
Countrywide supports a workplace charitable
giving scheme so that employees can donate
to their favourite charities tax efficiently through
payroll deduction, donating over £18,000
£70,000+
has been raised by our employees
for local charities and communities
in 2015
during 2015. Countrywide also supports two
national charities – Shelter (helping the
homeless) and Cancer Research UK.
The subsidiary businesses are also
encouraged to support causes within their
local communities, and employees from
across the country participated in a number
of local initiatives. We operate in local markets,
our people are local and our brands are
local, making our contribution to the local
community an important part of our
charitable giving.
Equal opportunities
We are committed to a policy of equal
opportunity and diversity in employment and
recognise that this is essential to ensuring
the success and growth of the organisation.
To this end, we make every effort to select,
recruit, train and promote the best candidates
for the job.
Annual Report 2015 Countrywide plc
37
Financial statementsCorporate governanceStrategic report Corporate sustainability continued
GENDER DIVERSITY
Directors
3
6
Senior management*
26
76
Employees
7,023
5,777
Female
Male
* ‘Senior management’ comprises employees with
responsibility for planning, directing or controlling
the activities of the Group or a strategically
significant part of it. (Directors of subsidiary
companies are included only to the extent that
the subsidiary is significant in the context of the
Group as a whole.)
Equal opportunities continued
To treat all employees and applicants fairly,
regardless of race, gender, marital status, age,
nationality, ethnic origin, religious belief, sexual
orientation or disability, and to ensure that no
employee suffers harassment or intimidation.
Employment opportunities are available to
disabled persons in accordance with their
abilities and aptitudes on equal terms with
other employees. If an employee becomes
disabled during employment, we make every
effort to enable them to continue employment
by making reasonable adjustments in the
workplace and retraining for alternative work
where necessary.
Human rights
While the Group is accountable to investors,
we take into account the interest of all our
stakeholders, including our employees, our
customers and our suppliers, as well as the
local community and the environment in
which we operate.
Countrywide’s reputation is one of its key assets
and, as a major player in the UK property
services sector, adhering to the highest
standards of integrity, personal conduct,
ethics and fairness is deemed to be of
vital importance.
Due to the regulatory requirements in the UK
we have judged that human rights are not a
material risk for the business. We do, however,
work closely with our third-party external
suppliers to ensure their human rights and
ethics policies are aligned with those of
Countrywide. Our support function in India,
WNS, has a foundation called WNS Cares
Foundation. It takes care of providing
38
Countrywide plc Annual Report 2015
education and a lot of other facilities and
benefits to the children in the society. This
foundation exists in all the countries WNS
operates from and is actively involved in
child education. More information on the
foundation can be found by visiting
www.wnscaresfoundation.org.
Health and safety
The health and safety, welfare and wellbeing
of employees is of paramount importance
to us. It is our policy to create and improve
standards of health and safety, which will
lead to the avoidance and reduction of risks
and ensure that the Company complies with
all health and safety legislation. A detailed
health and safety policy statement is held
at all branch premises and displayed on
the notice boards.
Information security
We are committed to ensuring the integrity
and security of business information, with
particular attention given to personal and
sensitive data where inappropriate use or
inadequate maintenance and safeguarding
could have serious repercussions.
Our policies and procedures are based
on requirements for a secure operating
environment, an assessment of the risks that
the Group faces and relevant legal and best
practice requirements. We have achieved,
and maintain, the ISO 27001 accreditation
in our major business to business operating
divisions and aspire to operate in line with
the International Standard for Information
Security Management, ISO 27001, in all of
our major retail operations.
During 2015 we recycled over
876 tonnes
of rubbish
Environmental matters
Environmental savings make good business
sense. Our primary objective is to minimise
our carbon footprint and any negative impact
we have on the environment. We recycled
over 876 tonnes of rubbish during 2015.
We are committed to the following:
• to meet or exceed the requirements
of relevant legislative, regulatory and
environmental codes of practice;
• to identify, reduce and dispose of waste
arising from our operations in a manner
that minimises harm to the environment and
prevents pollution of land, air and water;
• to reduce the consumption of energy and
water and use renewable and/or recyclable
resources wherever practicable;
• to encourage our suppliers and
subcontractors to implement good
environmental practices and procedures
which support our own objectives
and targets; and
• to take responsibility for the maintenance
and revision of our environmental policy,
which is reviewed on a regular basis, in order
to set environmental objectives and targets
for continuous improvement, as we recognise
the need for sustainable development.
Strategic report Employees are encouraged
to dispose of all paper
waste in secure bins,
of which
100%
is recycled
THE FOLLOWING INITIATIVES ARE IN PLACE:
• We use printing paper which is chlorine
free and carries the FSC Kitemark and
which is compliant with ISO 9001:2008,
ISO 14001:2004 and is OHSAS
80001:2007 certified. We currently
recycle 80% of paper across the Group.
• We launched local initiatives to ensure
branches recycle office waste and our
head office recycles all waste and uses
fair trade produce. We are working in
partnership with a waste management
provider with the aim to increase our
recycling volumes to zero waste to
landfill by the end of 2017.
• Employees are encouraged to dispose
of all paper waste in secure bins, 100%
of which is recycled.
• We recycle used printer cartridges
and mobile phones. 95% of our toner
cartridges are recycled in partnership
with our printer suppliers.
• Epayslips were introduced for all Group
employees in 2010, which reduced
our carbon footprint and print and
postal costs.
• With effect from July 2011, we opted to
ensure that all newly ordered Company
vehicles had a CO2 emission of no
greater than 160gsm. This was further
reduced to a cap of 130gsm on the
introduction of a new fleet policy in
January 2013.
• In 2011 we launched a Cycle to Work
scheme, in order that employees can tax
efficiently purchase bicycles for cycling
to work.
• During 2013 we introduced a half hourly
meter pilot to monitor and reduce
electricity usage and also commenced
a voltage optimisation pilot to reduce
energy consumption.
Greenhouse gas emissions
For our greenhouse gas emissions
disclosures, please see the directors’
report on page 69.
Annual Report 2015 Countrywide plc
39
Financial statementsCorporate governanceStrategic report Corporate
governance
41 Chairman’s introduction to corporate governance
42 Board of directors
44 Corporate governance statement
46 Report of the Nomination Committee
48 Report of the Audit and Risk Committee
54 Directors’ remuneration report
67 Directors’ report
70 Directors’ responsibilities statement
Chairman’s introduction to corporate governance
We continued to strengthen
corporate governance as reflected
in the Board effectiveness review.
Your Board remains strongly committed to ensuring
that Countrywide maintains and continuously
improves the structures and processes required
to underpin the effective delivery of its growth
strategy. We believe that good governance is an
essential part of the way we conduct our business
on a daily basis, while maintaining effective risk
management, control and accountability.
Dear shareholder
Your Company continues to be led by a strong
and balanced Board, which is well qualified
to challenge, motivate and support the
management of the business. In the 2014
annual report, the Group announced the
start of a strategic review (‘Building our Future’)
which commenced implementation in the first
half of 2015. The Group now has a revised
corporate strategy for the years to 2020.
The Board was necessarily closely involved
in the formulation and approval of the strategy,
which the executive team is now tasked with
delivering for shareholders and stakeholders.
Whilst there have been no changes in the Board
during 2015, I indicated my desire to step down
from the role of chairman once a successor
was identified and in post. The Board authorised
the Nomination Committee to engage in
the search and selection process for a new
chairman and this activity commenced in the
final quarter of 2015. Further details on this
process and external support are detailed
in my report of the Nomination Committee
on page 46. On 11 February, the Company
announced that I will retire as non-executive
chairman, and we will confirm the new
appointment of Peter Long as chairman at
the Annual General Meeting on 27 April 2016,
subject to FCA approval.
The Nomination Committee will continue
to review the composition of the Board to
ensure that we have the right balance of skills,
experience, diversity and independence to
support the future development of the Group.
The Board acknowledges the insights to
be gained from an external evaluation of
its effectiveness and that of its Committees
for helping to identify key areas for future
improvement or focus. A Board evaluation
review was commissioned during 2015, led
by myself and facilitated by Lintstock Limited,
an independent corporate advisory firm.
The initial phase of this review has concluded
during February 2016 and the process is
discussed in further detail on page 47.
The Board understands the importance of
presenting a fair, balanced and understandable
assessment of the Group’s position and
prospects and of the importance of effective
reporting, risk management and internal
control procedures. As part of the strategic
planning process, the Group reviewed its
risk appetite and ensured that there were
governance improvements to align our risk
and internal audit capabilities as detailed
within the Audit and Risk Committee report
on pages 48 to 53. The appointment of
a chief risk and compliance officer, with
appropriate levels of additional dedicated
resource, and the appointment of Deloitte LLP
as the Group’s internal auditor using a full
outsourced model (following a period of
co-sourcing), provided an integrated
assurance plan and a more co-ordinated
approach to the Group’s risk management
and audit activities.
Your Board is fully committed to supporting
both the principles and application of best
practice in corporate governance. I believe
that we continued to strengthen effective
corporate governance procedures during
2015 and these will underpin the continued
success of the Group.
Future priorities
As chairman, my main responsibility is to lead
the Board and ensure that it is operating
effectively and focusing its time, energy and
attention on the right areas. Following the
recent completion of the externally facilitated
Board effectiveness review, we will agree a
set of priorities against which we will report
progress in future years to ensure that we,
as a Board, are leading from the front in
providing the right example for Countrywide.
I am pleased that Peter Long has accepted
the role of chairman and would like to welcome
him to Countrywide. Peter is chairman of
Royal Mail plc and is a member of TUI AG’s
supervisory board, having previously held
a variety of senior roles in the travel and
leisure sector. He was formerly senior
independent non-executive director of
RAC plc (2001–2005) and Rentokil Initial plc
(2005–2014), and was also non-executive
director of Debenhams plc (2006–2009).
Peter brings a strong customer focus and
a wealth of plc board experience.
Grenville Turner
Chairman
25 February 2016
Annual Report 2015 Countrywide plc
41
Financial statementsCorporate governanceStrategic report Board of directors
As at the date of signing the directors’ report,
the following people were directors of the Company:
Grenville Turner
Chairman
Peter Long
Chairman designate
Independent
non-executive director
Alison Platt
Chief executive officer
David Watson
Deputy chairman
and senior independent
non-executive director
Jim Clarke
Chief financial officer
N
None
None
NA
R
None
Jim joined the Group in
November 2007. He was
previously finance director
and company secretary of
JD Wetherspoon and has
previously worked for
David Lloyd Leisure
(a division of Whitbread plc)
and HP Bulmer Holdings
plc. Jim is a graduate of
Stirling University and he
qualified as a chartered
accountant in 1984.
Peter was appointed
non-executive director
of the Company on
11 February 2016.
Peter will take over as
non-executive chairman
following the Company’s
AGM on 27 April 2016,
subject to FCA approval.
Peter is chairman of Royal
Mail plc, and having ceased
to be joint chief executive
of TUI AG, with effect from
9 February 2016 is a
member of TUI AG's
supervisory board. Prior
to this, he held a variety
of senior roles in the travel
and leisure sector. He was
formerly senior independent
non-executive director
of RAC plc (2001–2005)
and Rentokil Initial plc
(2005–2014). He was also
a non-executive director
of Debenhams plc
(2006–2009).
Grenville joined the Group
in August 2006 and became
Group chief executive in
January 2007. Taking the
Group private in 2007,
he then led the Group’s
return to the public market
in 2013 and became
non-executive chairman
on 1 September 2014.
Grenville has almost 40
years’ experience in retail
banking and the property
sector. Past directorships
have included Rightmove.
co.uk, St James’s Place Plc,
Sainsbury’s Bank Plc and
Realogy, the largest realtor
in the US. In addition to
being non-executive
chairman of Countrywide
plc, Grenville is currently
chairman of Knightsbridge
Student Housing Ltd,
Titlestone Ltd and
Bellpenny Ltd. He is also
a non-executive director
of Zoopla Property Group,
English National Ballet
and DCLG. Grenville is
a qualified chartered
banker and holds an
MBA from Cranfield
School of Management.
David joined the Group
in September 2013 as
non-executive director
of the Company (and was
previously chairman of the
Audit and Risk Committee
before being appointed as
deputy chairman). David is
currently a non-executive
director of Charles Taylor
plc, Kames Capital plc,
Hermes Fund Managers
Limited and T R Property
Investment Trust plc. He
chairs the audit committees
of Charles Taylor plc,
Hermes Fund Managers
Limited and T R Property
Investment Trust plc. He
has extensive industry and
accounting experience.
David has had a
distinguished career as
a finance director. Most
recently he was finance
director for the general
insurance division of Aviva
and prior to that he held
various other senior
financial roles at Aviva as
well as Prudential Group
and NatWest Markets. David
is a chartered accountant
and a graduate of City
University Business School.
Alison joined the Group in
September 2014. Alison
was previously managing
director at Bupa, responsible
for international development
markets, and has held
a range of senior posts
including chief operating
officer of the UK private
hospitals business at Bupa
and a number of key
positions in British Airways.
In June 2012 Alison joined
the board of Cable & Wireless
Communications plc as
a non-executive director,
and between 2009 and
2013 Alison was chair of
‘Opportunity Now’, which
seeks to accelerate change
for women in the workplace.
Alison was also a non-
executive director of the
Foreign & Commonwealth
Office (FCO) between 2005
and 2010, and in the 2011
New Year Honours Alison
was appointed a CMG for
her services to the board
of the FCO.
In January 2016, the
Board also announced
the appointment of
Alison as an independent
non-executive director to
the Board of Tesco PLC with
effect from 1 April 2016.
42
Countrywide plc Annual Report 2015
Corporate governance Chairman
Executive directors
Independent non-executive directors
Non-independent non-executive director
1
2
6
1
Cathy Turner
Independent
non-executive director
Richard Adam
Independent
non-executive director
Jane Lighting
Independent
non-executive director
Rupert Gavin
Independent
non-executive director
Caleb Kramer
Non-executive director
A
N
R
A
N
R
A
N
R
N
R
None
Jane was appointed
non-executive director of
the Company in June 2014.
She has spent her career in
broadcast media, including
chief executive officer of
Channel 5 Broadcasting for
five years until 2008. She
was formerly non-executive
director at Paddy Power plc
and a senior independent
director at Trinity Mirror and
is currently a Trustee of the
Royal Television Society.
Rupert was appointed
non-executive director of
the Company in June 2014.
He is chairman of the Board
of Trustees of Historic Royal
Palaces, and he has a range
of board positions, at both
chairman and director level
in a variety of businesses,
with a strong consumer bias.
Most recently he was chief
executive officer of Odeon
and UCI Cinemas Group
between 2005 and 2014.
He was previously at the BBC
where he was chairman
and chief executive of BBC
Worldwide and also at BT
where he was managing
director of the consumer
division, prior to which he
was at the Dixons Stores
Group latterly as deputy
managing director.
Caleb Kramer joined the
Group in May 2009 and
was appointed as a director.
He is a managing director
and portfolio manager
(Europe) at Oaktree Capital
Management (UK) LLP.
Prior to joining Oaktree in
2000, Caleb co-founded
Seneca Capital Partners LLC,
a private equity investment
firm. From 1994 to 1996,
Caleb was employed by
Archon Capital Partners,
an investment firm. Prior
to 1994, Caleb was an
associate in mergers and
acquisitions at Dillon Read
and Co. Inc. and an analyst
at Merrill Lynch and Co. Inc.
Caleb received a BA degree
in economics from the
University of Virginia.
Richard was appointed
non-executive director of
the Company in June 2014
and chairman of the
Company’s Audit and Risk
Committee in August 2014.
A chartered accountant
qualifying with KPMG in
1982, Richard has nearly
30 years’ experience as a
finance director of private
and listed businesses. Since
April 2007 Richard has
been group finance director
of Carillion plc and before
that of Associated British
Ports Holdings plc. Richard
is also senior independent
non-executive director of
Countryside Properties plc
where he chairs the audit
committee. He was
previously non-executive
director and chairman of
the audit committee of
SSL International plc.
Richard is a graduate of
the University of Reading.
Cathy was appointed
non-executive director
of the Company and
chairman of the Company’s
Remuneration Committee
on 31 July 2013. She
is also a non-executive
director and chairman of
the remuneration committee
of Aldermore PLC. She is
an honorary fellow of
UNICEF UK and a member
of the board of the Royal
College of Art. She
has extensive industry
experience working with
Deloitte & Touche, Ernst &
Young and Towers Watson
in her early career. She
subsequently joined
Barclays PLC, where she
was a member of the group
executive committee with
responsibility for human
resources, corporate
affairs, strategy and brand
and marketing. During her
time with Barclays she was
also director of investor
relations for four years and
had extensive experience
in remuneration in her
many roles. She was chief
administrative officer of
Lloyds Banking Group PLC.
Cathy is a graduate of the
University of Lancaster.
Key to Committee membership:
A Audit and Risk Committee
N Nomination Committee
R Remuneration Committee
Chairman of Committee
Annual Report 2015 Countrywide plc
43
Financial statementsCorporate governanceStrategic report
Corporate governance statement
Introduction
This corporate governance report intends to give shareholders a clear understanding
of Countrywide’s corporate governance arrangements and their operation within the Group
during the year, including an analysis of the level of compliance with the principles of the
UK Corporate Governance Code ('the Code') issued by the Financial Reporting Council
in September 2014. The Code can be viewed at www.frc.org.uk.
Specific decisions reserved for the Board are summarised as follows:
Responsibility
Specific actions during the year
Strategy and
direction
Approval of strategy
and annual budgets.
Authorisation of
acquisition and
disposal activity.
Risk management
and accountability
controls
Approval of financial
statements, other
updates to the market
and recommendations
on dividends.
Approval of authority
levels and financial
and treasury policies.
Review of internal
control arrangements
and affirmation
of risk management
strategies.
Review of internal
control and risk
management,
including health
and safety.
Governance
Appointments to
and removals from
the Board.
Terms of reference for
and membership of
the Board.
Review of governance
arrangements.
The roles of chairman and chief executive are
separated, clearly defined and approved by the
Board. A copy of the division of responsibilities
between the roles of the chairman and the
chief executive is available to view on the
corporate governance section of the
Company’s website.
The Board delegates matters to the three
Board Committees (Audit and Risk, Nomination,
and Remuneration), in line with their terms of
reference and the formal schedule of matters
reserved for Board approval. Further information
on the work of these Committees during the
year can be found in each of their separate
reports following this corporate governance
introduction and the specific terms of reference
for each of the Committees can be found on
the governance section of our website. The
Board delegates the detailed implementation
of matters approved by the Board and the
day-to-day operational aspects of the
business to the executive directors.
Effectiveness
The Board and its Committees continue
to benefit from an appropriate balance of
expertise, experience, independence and
knowledge of the Group and its business
sectors. At 31 December 2015, the Board
comprised two executive and seven
non-executive directors.
The Nomination Committee considers
the skill set and sector experience of the
Board, appointments to the Board, director
development and succession planning.
Details of these activities and the process
of Board evaluation and development are
discussed in the Nomination Committee
report on pages 46 to 47.
The Board has ten scheduled meetings
during the year; additional meetings are
arranged if required. The Board Committee
meetings are scheduled around the regular
Board meetings. The directors’ attendance
at the scheduled Board meetings and Board
Committee meetings is shown in the table
opposite. Attendance is expressed as the
number of meetings that each director
attended out of the number they were
eligible to attend as chairmen or Committee
members (i.e. excluding attendance where
this was by invitation only).
Compliance with the 2014 Code
The directors have considered the contents
and requirements of the Code and note the
following instance of non-compliance: the
appointment of Grenville Turner as chairman
on 1 September 2014, having held the position
of chief executive officer immediately prior
to that date, results in non-compliance with
provision A.3.1 of the Code that a chief
executive should not go on to be chairman of
the same company. Additional counterbalances
have been identified in the report of the
Nomination Committee on page 46. (Whilst
Grenville did not meet the independence
criteria set out in B.1.1 of the Code on
appointment, following his appointment
the test of independence is not appropriate
in relation to the role of chairman.)
The corporate governance report includes
pages 44 to 53. Additional information
in respect of the operation, and terms of
reference, of the Remuneration Committee
is included within the separate directors’
remuneration report.
The role of the Board, decision
making and division of responsibilities
The Board provides leadership to the Group
and is collectively responsible for the long term
success of the Company. It sets the strategy
and oversees its implementation, ensuring that
acceptable risks are taken and appropriate
governance structures and controls are in
place. It ensures that the right people and
resources are in place for the Group to meet
its objectives, review management performance
and deliver long term value to shareholders
and other stakeholders.
In pursuit of these leadership objectives,
the Board retains control of key decisions
and has in place a formal schedule of matters
specifically reserved for its approval which
can be found at www.countrywide.co.uk/
investor-relations/corporate-governance/.
The Board retention of decision making and
control of these key areas ensures effective
stewardship and risk management by providing
integrated reporting, e.g. in respect of strategic
priorities and associated risk and mitigating
governance controls.
44
Countrywide plc Annual Report 2015
Corporate governance Director
Date of appointment
Grenville Turner2
Alison Platt
Jim Clarke
Caleb Kramer1
David Watson2
Cathy Turner
Richard Adam
Jane Lighting1
Rupert Gavin1
Peter Long
19 February 2013
1 September 2014
28 December 2012
19 February 2013
2 September 2013
31 July 2013
9 June 2014
9 June 2014
25 June 2014
11 February 2016
Board
meetings
Audit and Risk
Committee
meetings
Nomination
Committee
meetings
Remuneration
Committee
meetings
10/10
10/10
10/10
7/10
10/10
10/10
10/10
9/10
9/10
n/a
—
—
—
—
4/4
4/4
4/4
3/4
—
n/a
1/2
—
—
—
1/2
2/2
2/2
2/2
2/2
n/a
—
—
—
—
4/4
4/4
4/4
3/4
4/4
n/a
1 Caleb Kramer was engaged in various overseas activities which meant that his attendance at Board meetings was intermittent. Rupert Gavin and Jane Lighting were also absent from
each of the specific meetings above due to unexpected, unavoidable personal commitments.
2 Grenville Turner and David Watson were not present at the second Nomination Committee meeting as a result of the formation of a separate independent sub-committee.
The Company maintains directors’ and officers’ liability insurance cover for its directors and officers. The Company has made qualifying
third-party indemnity provisions (as defined in the Companies Act 2006) for the benefit of its directors during the year; these provisions
remain in force at the date of this report.
Independence
The Code notes that the Board should identify
in the annual report each non-executive director
that it considers to be independent. Excluding
the chairman, each of the non-executive
directors is considered to be independent,
with the exception of Caleb Kramer as he
holds the position of managing director at
Oaktree Capital Management (UK) LLP, a
substantial shareholder of the Company. As
stated above, Grenville Turner was not deemed
to be independent prior to his appointment
as chairman on 1 September 2014.
The Code recommends that at least half the
Board, excluding the chairman, should comprise
non-executive directors determined by the
Board to be independent. Excluding the
chairman, there are six (of a possible seven)
non-executive directors determined to be
independent and two executive directors,
and therefore the Board complies with
recommendation B.1.2. Similarly, the
composition of the three Board Committees
complies in all respects with the independence
provisions of the Code.
Accountability
The Board remains committed to presenting
a fair, balanced and understandable assessment
of the Group’s position and prospects and
of the importance of effective reporting, risk
management and internal control procedures.
Both the Audit and Risk Committee and the
Board received drafts of the annual report to
facilitate review and provide an opportunity
for challenge and discussion.
The Board is responsible for determining
the nature and extent of the significant risks
it is willing to take in achieving its strategic
objectives. Principle risks associated with the
Group’s business are summarised on pages 21
to 23 of the strategic report. The Board has
an Audit and Risk Committee which monitors
and reports on the Group’s risk management
systems. The Audit and Risk Committee
also considers how the Board should apply
corporate reporting and internal control
principles and is responsible for maintaining
an appropriate relationship with the Group’s
auditor, PricewaterhouseCoopers LLP.
The report of the Audit and Risk Committee
is set out on pages 48 to 53.
Remuneration
Details relating to the Company’s policy on
remuneration together with the level and
components of remuneration available to
the Company’s directors are provided in
the Remuneration Committee’s report
on pages 54 to 66.
Dialogue with shareholders
As chairman, I ensure that the views of
shareholders are communicated to the Board
as a whole and offer non-executive directors
the opportunity to attend discussions with
major shareholders. David Watson, as senior
independent director, attends a significant
number of these meetings to ensure that he
develops a balanced understanding of any
issues arising and can provide context back
to the Board Committees (as he sits on all
three Committees).
We actively seek channels through which
to engage with investors and during 2015
the Company undertook a wide variety
of investor relations activities. Institutional
shareholders represent the largest group
of shareholders and much of the activity is
focused on this group. The chief executive
officer and chief financial officer host or attend
the majority of the events held, whilst key
senior executives also participate in meetings
and activities with institutional shareholders.
Shareholder relations are given high priority by
the Board. The prime means of communication
with the majority of our shareholders is via
the interim and annual reports, supplemented
by interim trading updates, which aim to
provide shareholders with a clear understanding
of the Group’s activities and results. General
presentations are given to both shareholders
and analysts following the publication of
the interim and annual results and at other
appropriate points, e.g. Capital Markets Day
in October 2015, to share the strategic plans
and offer an opportunity to engage with the
business unit managing directors and other
senior executives.
Constructive use of the AGM
Shareholders have the opportunity to address
questions to the chairman and the chairmen
of the Audit and Risk, Remuneration and
Nomination Committees at the AGM, where
all directors will be in attendance. All
shareholders are encouraged to attend
the AGM. Shareholders wishing to lodge
questions in advance of the AGM, or to
contact the Board at any other time, are
invited to do so by writing to the company
secretary at the registered address given
on page 131.
Grenville Turner
Chairman
25 February 2016
Annual Report 2015 Countrywide plc
45
Financial statementsCorporate governanceStrategic report Report of the Nomination Committee
2015 saw the Committee focus
on Board evaluation and succession
planning, including my own desire
to step down as chairman.
Dear shareholder
2015 saw the Committee focus on Board
evaluation and Board Committee composition
and succession planning, including my own
desire to step down as chairman.
Role and responsibilities
The Committee is responsible for ensuring
that the composition of the Board and its
Committees is appropriate and enables it to
function effectively. This requires evaluation
of the balance of skills, experience, knowledge
and diversity and the resultant identification
of any gaps, either in the short, medium or
longer term, and recommendations to address
these. Succession planning for key Board
positions forms part of our wider remit and,
as such, we have insight into the Group’s
Leadership and Development Programme.
We are also responsible for agreeing the
annual Board effectiveness review process
and monitoring any actions arising.
Committee composition
The membership of the Committee, together with appointment date, is set out below:
Member
Nomination Committee member since
Grenville Turner (chairman)
Cathy Turner
David Watson
Richard Adam
Rupert Gavin
Jane Lighting
1 September 2014
31 July 2013
2 September 2013
9 June 2014
25 June 2014
9 June 2014
There has been no change in composition of
the Committee during the year. We therefore
remained in full compliance with the Code
recommendation that a majority of members
should be independent non-executive
directors throughout the year.
Attendance by members at the meetings
is shown on page 45.
The Committee’s work
The Committee held two formal meetings
during 2015 which were to commence
the process for the Company’s appointment
of a new chairman. The main matters that
the Committee considered during the year
are described on the following page.
The Committee’s terms of reference
are available at:
www.countrywide.co.uk/investor-
relations/corporate-governance
Board and Committee composition
The matter considered by the Committee in
its meeting in October 2015 was in light of
my decision to step down as non-executive
chairman. The Board authorised the Committee
to establish a sub-committee, excluding me
due to having a potential conflict of interest,
to engage in the search and selection
process for a new chairman. Cathy Turner
was appointed to chair the sub-committee
and lead the process of identifying a suitable
successor as chairman.
In this initial meeting to commence the search
process, the Committee considered the skills
and experience desired in my successor
and prepared a candidate profile. The
sub-committee appointed an independent
search and selection agency, Ridgeway
Partners, to assist in the search for suitable
candidates. Ridgeway Partners has no prior
connection with the Group. An initial list of
potential candidates was presented to the
non-executive directors for consideration
and discussion. Following this first scoping
meeting, which I had been invited to attend
and comment on alongside the other
directors, I then stepped down from active
participation and formal decision making
and did not form part of the sub-committee
tasked with locating and appointing
my successor.
46
Countrywide plc Annual Report 2015
Corporate governance Following interviews by Ridgeway Partners,
this initial list was reduced to a shortlist of
three potential external candidates who were
initially interviewed by Cathy Turner and
Alison Platt. At their meeting in December
2015, the sub-committee considered this
final shorter list of preferred candidates.
In making their recommendations to the Board
in 2016, the sub-committee specifically
considered the existing non-executive
experience and skill sets and the desirable
experience in suitable candidates to ensure
the right mix of skills and experience as the
Company evolves. The sub-committee chairman
led the selection process, interviewing
a selection of shortlisted candidates and
proposing a narrower list of possible appointees
to be interviewed by the remainder of the
Board. Following these interviews, and based
upon a combination of feedback from all of
the interviewers, the sub-committee met to
agree the preferred candidate and proposed
remuneration terms. The remuneration terms
were formulated using independent data
provided to the sub-committee by New
Bridge Street (advisors to the Remuneration
Committee) and an annual fee of £180,000
was agreed. The sub-committee chairman
made recommendations to the Board
based upon the consensus expressed
by all interviewers.
The Company believes that diversity of
experience and approach, including gender
and race diversity, amongst Board members
is of great importance and it is the Company’s
policy to give careful consideration to issues
of Board balance and diversity when making
new appointments. The search for candidates
and any subsequent appointments are,
therefore, made purely on merit regardless
of gender, race, religion, age or disability
in order to secure an appropriate balance
of skills and attributes that are needed to
ensure effective stakeholder engagement
and deliver the business strategy.
Given our commitment to appointing the
best people and ensuring that all employees
have an equal chance of developing their
careers within the Group, we do not think
it is appropriate to set targets for Board
appointments. As gender diversity remains
a topic of significant discussion, we note that
three of the nine members of our Board are
female. In addition to Board diversity, we
believe in promoting diversity at all levels
of the organisation and further details of our
workforce diversity are set out on pages 37
and 38.
Following appointment to the Board, all
directors received a tailored induction
programme, providing an opportunity to gain
an understanding of the Group business and
organisation, operations and governance
environment, allowing them maximise their
contributions to the Board as quickly as
possible. Key stages of the induction
programme are: provision of documents in
relation to the Board, strategy, performance
and corporate governance; meetings with
the executive directors to gain an overview
of the business, current trading and key
commercial issues; meetings with other
directors and senior executives to discuss
commercial issues and projects; and site
visits, as required, to key locations to
gain an understanding of the business
and operations.
All directors are also offered subsequent
training to suit their needs and continuous
professional development requirements.
All directors also have access to the advice
and services of the company secretary in
addition to access to independent professional
advice at the Company’s expense where they
judge it necessary to discharge their duties
as directors.
The more strategic issue of succession planning
for executive and non-executive roles was
also considered as part of the wider Building
our Future strategic review and associated
restructuring of the executive team during
the year. As part of the organisational redesign,
core skills and capabilities were reviewed
against the requirements of the Group and
candidates for key positions were interviewed
and assessed by Talent Q, an external advisory
company with no connection to the Group,
to conclude independent assessments prior
to appointment and ensure the development
of executive strength within the Group.
In addition, we have also invested in our senior
management development programme during
the year. To support our leaders to effectively
lead through organisational change, embed
our values and drive business performance,
we held a series of senior leadership events
in November and December 2015 in addition
to an ongoing programme of leadership
skills training.
Board effectiveness
At the start of the year, an internal evaluation of
the performance of the Board, its Committees,
the directors and the chairman was conducted
using an internal questionnaire process, as
previously adopted. For the Board itself, this
process was led by the chairman and included
separate discussions with each director as
required to follow up on specific feedback
and is supported on an ongoing basis by
the practice of the chairman meeting with
the non-executive directors, without the
executive directors being present, following
each Board meeting. In respect of evaluation
of the performance of the chairman, this was
conducted by the deputy chairman by
discussion with each of the non-executive
directors without the chairman or executive
directors being present. For the Board
Committees the process was collated
by the company secretary and responses
and actions were discussed and agreed
at the respective Committees.
During the year, the Board appointed an
independent agency, Lintstock, to conduct
a formal externally facilitated evaluation of
the performance of the Board, its Committees,
the directors and the chairman in compliance
with the Code recommendation for triennial
external evaluation. Lintstock have no prior
connection with the Group.
The Board has instructed Lintstock to provide
a phased three-year plan:
• 2015: during November 2015,
questionnaires were distributed to all
directors to cover: full Board review; individual
performance review; chairman review;
and review of each of the three Board
Committees. These questionnaires were
also supplemented to include Lintstock
interviews with each of the directors;
• 2016: completion of questionnaires
as detailed above; and
• 2017: completion of questionnaires
as supplemented again by Lintstock
and interviews with each of the directors.
By 2017, following the appointment of
a new chairman during 2016, the Board
memberships will have been in operation
for a full year and will thus provide a well
grounded base of experience to refresh
an effective discussion of opportunities
to improve Board effectiveness.
As the initial phase of this process has
concluded in such close proximity to
preparation of the annual report, with the
final report due to be tabled for Board
consideration on 30 March 2016, details
of the conclusions from the external
Board evaluation process and resultant
recommendations, and progress against these,
will be provided in our 2016 annual report.
Following the internal performance evaluation
conducted during the year, I am pleased
to confirm the effective performance of
each non-executive director and the time
commitment of each non-executive director.
I am therefore confident that each of them
would be in a position to discharge their duties
to the Company in the coming year and,
accordingly, as detailed in the notice of the
AGM, all directors will stand for re-election.
Grenville Turner
Chair of the Nomination Committee
25 February 2016
Annual Report 2015 Countrywide plc
47
Financial statementsCorporate governanceStrategic report Report of the Audit and Risk Committee
Members of the Committee have
continued to take an active role
in overseeing the business and have
benefited from continued improvement
in the control and risk framework.
The Committee’s terms of reference
are available at:
www.countrywide.co.uk/investor-
relations/corporate-governance
Dear shareholder
I am pleased to report how the Committee
discharged its responsibilities during the
2015 financial year, setting out the key
tasks undertaken and major areas of activity.
Members of the Committee have continued
to take an active role in overseeing the business
and the risks and challenges it faces and
have benefited from continued improvement
in the control and risk framework following:
the appointment of Deloitte as internal
auditor in the first quarter of 2015; and
the appointment of the Group chief risk
and compliance officer during the second
quarter of 2015.
Role and responsibilities
The Committee’s role is to assist the Board in
fulfilling its financial oversight responsibilities by:
• assessing the integrity of the Group’s financial
reporting and satisfying itself that any
significant financial judgements made
by management are sound;
• evaluating the effectiveness of the Group’s
risk management systems and internal
controls; and
• scrutinising the activities, performance,
independence and effectiveness of
the auditor.
The assurance framework required by the
Committee is provided by complementary
contributions from management reports,
internal and external audit reports, and
risk management and compliance reports.
However, as chairman of the Committee
I have also held meetings with the
Company’s internal (Deloitte) and external
(PricewaterhouseCoopers LLP) auditors,
the chief financial officer, the chief risk and
compliance officer and senior members of
the Group finance department, and other
senior executives in which key issues relevant
to the Committee’s work were discussed.
I will be available at the Annual General
Meeting to answer any questions about the
work of the Committee.
Richard Adam
Chair of the Audit and Risk Committee
25 February 2016
48
Countrywide plc Annual Report 2015
Corporate governance At the request of the Board, the Committee
also considered whether the 2015 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 Committee took into account
its own knowledge of the Group, its strategy
and performance in the year; internal
verification of the factual content within the
document; comprehensive reviews undertaken
at different levels in the Group to ensure
consistency and overall balance; and the
detailed review by senior management and
the external auditor. After careful review
and consideration of all relevant information,
the Committee was satisfied that, taken as
a whole, the annual report is fair, balanced
and understandable and has affirmed that
view to the full Board.
Prior to the publication of both the half and
full-year results for the Group, the 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 69.
Prior to the publication of the full-year results
for 2015, the 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 20 of the strategic report.
How the Audit and Risk Committee works
Committee composition
The membership of the Committee, together with appointment date, is set out below:
Audit and Risk Committee
member since
9 June 2014
9 June 2014
31 July 2013
2 September 2013
The agendas for the four scheduled meetings
of the Committee during 2015 were organised
around the Company’s reporting schedule. The
chairman of the Committee reports at each
subsequent Board meeting on the business of
the Committee meeting and recommendations
made by the Committee. The main matters
that the Committee considered during the
year are described below.
Financial reporting and
significant judgements
Financial reporting
The Board and the Committee have reviewed
this annual report, the half-year financial
statements, as well as the going concern basis
of preparation of the Group’s consolidated
financial statements at these points, in particular
the underlying assumptions and sensitivities.
We considered the presentation of the financial
statements and, in particular, the compliance
with financial reporting and disclosure
requirements associated with the Group’s
premium listing. In respect of each of these
matters, the Committee reviewed papers
presented by management and discussed
critical judgements and estimates inherent
within the conclusions, providing challenge
where necessary. The Committee also reviewed
the reporting from the external auditor,
incorporating accounting and reporting
matters, internal control findings and their
management representation letter to ensure
that these matters had been considered and
consistent conclusions had been reached.
The Committee assesses whether suitable
accounting policies have been adopted and
whether management has made appropriate
estimates and judgements. The Committee
also considered the Group’s existing tax
strategy and concluded that management’s
current approach remained appropriate.
Member
Richard Adam (chairman)
Jane Lighting
Cathy Turner
David Watson
There have been no changes to the
composition of the Committee during 2015
and therefore the Committee remained in full
compliance with the UK Corporate Governance
Code (‘the Code’) recommendation of a
minimum of three independent non-executive
directors throughout the year.
The Code requires at least one member of
the Committee to have recent and relevant
financial experience. Two members of the
Committee (Richard Adam and David Watson)
are considered by the Board to have
competence in accounting and recent and
relevant financial experience. Both have
professional qualifications with the Institute
of Chartered Accountants of England and
Wales. The biographies of each member
of the Committee are set out on pages 42
to 43.
Attendance by members at the meetings
is shown on page 45. Meetings were
held at key times within the reporting and
audit calendar and were also attended by
the chief financial officer, the Group chief
risk and compliance officer, the Group
financial controller, the company secretary
and the Group’s external auditor,
PricewaterhouseCoopers LLP (PwC). In
addition, internal risk management and
compliance representatives and other advisors,
including the Group’s outsourced internal audit
providers, Deloitte, were invited to attend.
The Committee held regular private sessions
with both the external and internal auditors
which were not attended by management.
The Committee’s work
The Committee has an annual work plan,
developed from its terms of reference, with
standing items that the Committee considers
at each meeting in addition to any matters
that arise during the year. In addition to its
annual performance evaluation, undertaken
as part of the wider external Board evaluation
process, the Committee carried out a review
of its terms of reference to align with best
practice and developments in the UK
Corporate Governance Code.
Annual Report 2015 Countrywide plc
49
Financial statementsCorporate governanceStrategic report Report of the Audit and Risk Committee continued
Financial reporting and significant judgements continued
Financial reporting continued
Accounting judgements and estimates
In the year under review, the Committee considered the following significant matters, which include an element of judgement, in relation to
the financial statements.
Matter
Action the Committee has taken
Professional indemnity
provisions
Given the materiality of the professional indemnity provision, the Committee receives regular updates on the
status of the provision which includes the status of existing claims, including legal updates on those cases which
are individually significant, and the number and nature of new claims arising.
At the year end, we reviewed the methodology and resultant professional indemnity provision prepared by
management and compared the emerging pattern of settled claims to assess whether the methodology and
assumptions remained appropriate.
Where management has updated its financial models to reflect the latest inputs and trends, and to accommodate
aged claims where there is limited prior experience on which to statistically model outcome, as well as taking into
account available information in respect of all open claims, we have provided robust challenge to any underlying
assumptions adopted in respect of claim rates, claim liability rates, average loss per claim and provisions on
discrete cases of significance based on current legal advice.
The Committee concluded that the methodology and assumptions adopted were reasonable, but note that evaluating
these potential liabilities is highly judgemental and in smaller populations of claims, including older, more complex
cases, estimates can be significantly affected by the outcome, good or bad, of a limited number of claims.
Accordingly additional sensitivity disclosures have been provided in note 3.
Management provided the Committee with a paper supporting the carrying value of the goodwill and, where relevant,
the brand names in each of the cash generating units of the Group. Following the restructuring undertaken during
the year, London business unit management conducted a review of brands and concluded an initial rationalisation
of brand usage. As a result, management had identified that a charge of £6.1 million was required to write off the
brand names, which would cease usage entirely and impair those which would only be supported by a lower
number of branches.
We reviewed the discounted cash flows and sensitivities prepared by management, discussing assumptions
adopted and resultant levels of headroom. Based on the work performed, the Committee concurred that:
• a prudent approach underpinned the conclusion of no impairment being required in respect of goodwill; and
• the impairment charge of £6.1 million identified by management in respect of brand names was appropriate
and, having arisen as a result of the strategic review, concluded as part of the restructuring during the second
half of the year, would be disclosed as an exceptional charge.
During 2015, the Group continued to acquire companies and standalone lettings books as part of its ongoing
programme of growth of lettings activity. In addition, acquisitions continued in other business units and some
of these acquisitions have incorporated contingent consideration, rather than solely deferred consideration,
which is linked to future performance as well as the continued employment of the vendors.
We reviewed a management paper summarising the acquisitions undertaken during the year, which noted that:
• these acquisitions all followed existing models and methodologies in relation to the fair valuation of intangible
assets. We were therefore satisfied with the fair value accounting approach and intangible asset valuations
proposed by management; and
• a number of the acquisitions included contingent consideration that was linked to both the future performance
of the business and the continued employment of the vendors. Given the materiality of these costs, which require
accounting as deemed remuneration, management proposed disclosure of the contingent consideration as
an employment cost, but isolated from underlying earnings for transparency and comparability between years.
We discussed the classification and disclosure proposed by management and concurred with the columnar
presentation adopted on the face of the income statement.
As a result of the Group strategic restructuring during the year, material sums have been expended in a number
of areas which have been deemed as exceptional items.
Management compiled a summary demonstrating the nature of the expenditure, and the rationale for presenting
these items as exceptional.
We reviewed this summary, providing challenge to management to demonstrate the robust classification of items
as exceptional, including consistency of the application of the term to the treatment of debits and credits. Following
discussion, including with the external auditor at the February Committee meeting, we were satisfied with the
judgement exercised in the presentation and disclosure of exceptional items.
For more detail in respect of exceptional items see note 10.
Impairment of goodwill
and intangibles with
an indefinite life
Acquisition accounting
including assignment
of fair values and the
treatment of contingent
consideration
Presentation
and disclosure of
exceptional items
50
Countrywide plc Annual Report 2015
Corporate governance The accounting treatment of all significant issues
and judgements was subject to review by the
external auditor. For further information on the
critical accounting estimates and assumptions
refer to the notes of the consolidated financial
statements on page 87. For a discussion
of the areas of particular audit focus by the
auditor, refer to pages 73 to 74 of the
independent auditor’s report.
Risk management and internal control
The Board recognises that the successful
management of risk as part of our everyday
activities is essential to support the achievement
of our strategic objectives. Through delegation
by the Board the Committee is responsible
for reviewing and monitoring the effectiveness
of the Group’s risk management systems
and internal control. Operation of the Group’s
risk management framework, as detailed
on page 18, which is designed to support
consistent and effective management of risk
throughout the Group is overseen by an
oversight structure, as detailed on page 20,
which includes the Committee.
The Board has an ongoing process to identify,
evaluate and manage the significant risks faced
by the Group. This was in place throughout
the year and up to the date of the approval
of the annual report. This process is regularly
reviewed by the Board and accords with
UK Corporate Governance Code guidance.
Management is responsible for the identification
and evaluation and management of significant
risks applicable to its areas of the business
together with the design, operation and
monitoring of suitable controls to manage
risks to an acceptable level. These risks are
assessed on a continual basis at business
unit leadership meetings and updated
accordingly in the Board risk report.
The Committee considered, discussed and
made decisions in relation to a range of risk
and internal control-related matters during
the course of the year, the most significant
of which are outlined below:
• reviewed the outputs of a review into the
Group’s risk management practices and
approved the revisions to the Group’s risk
management framework;
• reviewed, and recommended to the Board
for approval, changes to the Committee’s
terms of reference and calendar of duties;
• reviewed proposals for the approval of the
Group’s risk strategy, risk appetite and policy
framework, for implementation in 2016;
• reviewed the quarterly Countrywide Group
Risk Report from the Group Executive Risk
Committee on the ‘top risks’ facing the
Group, the relative assessment of impact
and likelihood and actions underway/
taken to deliver target risk ratings in a
six-month horizon;
• approved the strategic internal audit plan,
outlining those areas to be covered by the
work of internal audit during 2015–2017
and monitored the progress against the
plan at each meeting. This included updates
on management actions relating to findings
and the closure of recommended actions.
The Committee also receives and approves
updates on changes to the plan for the
forthcoming year;
• approved the appointment of Deloitte LLP
as the Group’s internal auditor using a full
outsourced model, following the annual
review of the effectiveness of the Group’s
internal audit function and a period of
co-sourcing, under the direction of the
Group chief risk and compliance officer;
• received updates from the Group chief
risk and compliance officer in relation
to the Group’s FCA regulated operations,
including regulatory relationship matters
and outputs from the Financial Services
business unit’s internal audit committee;
After careful review
and consideration of all
relevant information, the
Committee was satisfied
that, taken as a whole,
the annual report is
fair, balanced and
understandable and
has affirmed that view
to the full Board.
• approved the 2016 Group risk function plan,
outlining the objectives and activities of the
Group Risk function for the forthcoming year;
• monitored the risks and associated
controls over the financial reporting
processes, including the process by which
the Group’s financial statements are
prepared for publication;
• reviewed reports from the external auditor
on any issues identified during the course
of its work, including a report on control
weaknesses identified;
• reviewed, and recommended for approval,
the Group’s risk management disclosures
for inclusion within the annual report and
accounts, including the consideration of
the Group’s ‘viability statement’ as required
under the Code; and
• reviewed arrangements by which employees
have access to a confidential whistle-blowing
hotline operated by an independent third
party and received reports arising from
this activity.
Annual Report 2015 Countrywide plc
51
Financial statementsCorporate governanceStrategic report Report of the Audit and Risk Committee continued
A copy of our non-audit services
policy is available on our website at:
www.countrywide.co.uk/investor-
relations/corporate-governance
Oversight of the external audit
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. PwC operates
a five-year rotation policy for audit partners
for a listed entity and, as a result of this policy,
following the publication of our 2014 results
Chris Burns became the new Group audit
partner in succession to Darryl Phillips. Before
completely relinquishing his responsibilities
in relation to the Group’s audit, Darryl Phillips
attended the Company’s AGM in April 2015.
Chris Burns and members of his team attended
each of the Committee’s meetings during 2015.
Assignments awarded to PwC have been,
and are, subject to controls by management
that have been agreed by the Committee
to monitor and maintain the objectivity
and independence of the external auditor.
A copy of the non-audit services policy is
available on our website at www.countrywide.
co.uk/investor-relations/corporate-governance,
providing details of prohibited, audit-related and
permitted services. The policy requires approval
by the chief financial officer of any work
undertaken by PwC and mandates Committee
approval, prior to the commencement of
work, of all non-audit assignments with an
individual fee above a de minimis threshold
of £50,000, or going beyond an aggregate
annual spend of £100,000.
The total of non-audit fees and audit fees paid
to PwC during the year is set out in the table
below. In order to maintain its independence
and objectivity, PwC undertook its standard
independence procedures in relation to these
engagements. The Committee received a
report at each meeting from management
and PwC regarding the extent of non-audit
services performed.
Matter
Audit-related assurance services
Accounting advisory services
Tax advisory services
Due diligence on acquisition targets
Review of risk and governance structure
Access to PwC inform
Non-audit fees
2015
£’000
44
11
9
—
—
—
64
Audit fees (excluding audit-related assurance services)
606
2014
£’000
44
—
60
97
19
1
221
556
52
Countrywide plc Annual Report 2015
Corporate governance Annual evaluation of
Committee performance
As part of the overall Board evaluation process,
the Committee reviewed its performance for
2015. This evaluation considered areas such
as the Committee’s processes and support,
its time management and composition,
its effectiveness in reviewing the work of
internal and external audit and in reviewing
the internal control systems, the quality
of reporting and management of risk and
confirmed that the Committee continues
to be highly effective in undertaking
its responsibilities.
During the year, the Board appointed an
independent agency, Lintstock, to conduct
a formal externally facilitated evaluation
of the performance of the Board and its
committees, as noted in our Nomination
committee report. Since the initial phase
of this process has concluded in such close
proximity to the preparation of the annual
report, full details of the priorities determined
for the Committee will be provided in our
2016 annual report.
The Competition and Markets Authority (CMA)
issued The Statutory Audit Services for Large
Companies Market Investigation (Mandatory
Use of Competitive Tender Processes and
Audit Committee Responsibilities) Order 2014
(‘the Order’) in September 2014 applicable
to financial years beginning on or after
1 January 2015. Our statement of compliance
with the provisions of the Order in the
current year is as follows:
• the last competitive tender process for
an auditor appointment was undertaken
in 2007 and resulted in the appointment
of PwC;
• the Company proposes that it will complete
the next competitive tender process during
2017, which is deemed to be in the best
interest of the shareholders in order to
allow full consideration of and preparation
for the tender process;
• the statutory audit fee and the scope of
the statutory audit have been approved
between the Committee and the auditor;
• the Committee has influenced the
appointment of the successor to the
audit engagement partner and only it has
concluded on his progression in the role
during 2014–2015, permitting this without
recourse to a competitive tender process;
• only the Committee will initiate and
supervise the planned competitive tender
process and make recommendations to
the Board in respect of any subsequent
auditor appointments; and
• the Committee authorises, prior to the
commencement of work, the provision
of non-audit services by the incumbent
auditor subject to a pre-approval of permitted
non-audit services with an individual fee
above a de minimis threshold of £50,000,
or going beyond an aggregate annual
spend of £100,000 (full details of the
policy are available on our website at
www.countrywide.co.uk/investor-relations/
corporate-governance).
Amounts paid to PwC were reported to and
considered by the Committee. Non-audit
fees incurred in 2015 represent 10% of
the recurring base audit fee, falling below
the 70% cap set by the European Union)
and will remain subject to scrutiny and
approval by the Committee.
We also continued the formal framework to
conduct our review of the effectiveness of
the external audit process and audit quality
and applied this to the completion of the 2015
Group audit cycle. The framework takes the
form of an annual questionnaire covering
all key aspects of the audit, including the
effectiveness of contribution of divisional
and Group management to the audit process,
and is completed by each member of the
Committee and by the chief financial officer.
Feedback is also sought from other members
of the Group finance team, divisional
management and the Group chief risk and
compliance officer. Based on responses to
the questionnaires, management produces
a report for detailed consideration by the
Committee. The feedback from this process
is considered by the Committee and is
provided to the auditor and to management,
with action plans developed accordingly
and reviewed by the Committee. In addition,
the Committee considers the findings of the
Audit Quality Review team’s report into the
conduct of PwC audits generally.
In its evaluation of the external audit function,
the Committee concluded that it was satisfied
with the work of PwC and that PwC continued
to be effective, objective and independent.
Accordingly, the Committee recommended
to the Board the reappointment of PwC and
for this to be put forward to shareholders
at the 2015 AGM. At the AGM in 2015,
99.54% (2014: 97.24%) of votes cast by
shareholders were in favour of reappointing
PwC as auditor.
The Code requires that the external audit
contract should be put out to tender at least
every ten years. As PwC was appointed as
auditor to the Company in 2007, and has not
been subject to a retender for the contract
since then, the Committee intends to put the
contract out to tender during 2017. However,
we may put the audit out to tender at any
time before a regulatory retendering date
if we were to conclude that this is in the
Group’s interest. There are no contractual
obligations restricting our choice of external
auditor and no auditor liability agreement
has been entered into.
Annual Report 2015 Countrywide plc
53
Financial statementsCorporate governanceStrategic report Directors’ remuneration report
Annual statement
Our remuneration decisions, in a
challenging year, demonstrate our
commitment to operating a strong
pay-for-performance culture.
Dear shareholder
On behalf of the Board, I am pleased to present
our directors’ remuneration report for the
year ended 31 December 2015.
This directors’ remuneration report is divided
into the following three sections:
• this annual statement: summarising and
explaining the major decisions on, and any
substantial changes to, the directors’
remuneration in the year;
• the remuneration policy report: setting out
the basis of remuneration that has applied
since approval at the 2014 AGM; and
• the annual report on remuneration: explaining
the remuneration earned by the directors
in the year ended 31 December 2015 and
a statement as to how the remuneration
policy will be implemented in 2016.
The remuneration policy is subject to a binding
vote every three years (sooner if changes are
made to the policy). The Committee considers
that the policy, approved by shareholders at
the 2014 AGM, continues to be appropriate
and therefore no changes have been made
since shareholder approval. The annual
report on remuneration is subject to an
annual shareholder advisory vote and will
be presented to shareholders at the AGM
on 27 April 2016.
I hope that you find this report informative in
respect of how we remunerate and incentivise
our directors through a remuneration policy
that is supportive of, and aligned to, the
Company’s strategic aims and objectives.
The Committee’s terms of reference
are available at:
www.countrywide.co.uk/investor-
relations/corporate-governance
Adjusted EBITDA1 (£m)
Adjusted basic EPS2 (£m)
Total ordinary dividends3 (p)
113.0
-7%
32.2
-12%
15.0
0%
121.1
113.0
36.7
32.2
15.0
15.0
86.6
24.4
8.0
2013
2014
2015
2013
2014
2015
2013
2014
2015
1 Earnings before interest, tax, depreciation, amortisation, exceptional items, contingent consideration, share-based payments and share of profits from joint ventures, referred to hereafter as ‘EBITDA’.
2 Adjusted earnings is calculated on profit for the year before before exceptional items, amortisation of acquired intangibles, contingent consideration and share-based payments (net of taxation).
3 Including proposed final dividend of 10.0 pence (net) per share.
54
Countrywide plc Annual Report 2015
Corporate governance 2015 performance and reward
During 2015, against the challenging backdrop
of less than expected residential sales volumes,
Group EBITDA of £113.0 million for the year
ended 31 December 2015 was 7% below
the £121.1 million EBITDA achieved in 2014,
which was the most profitable year in the
Group’s history.
Remuneration is weighted towards variable
pay, dependent on performance. This ensures
that there is a clear link between the value
created for shareholders and the amount
paid to our executive directors. Performance
is assessed against a range of financial
and longer term returns, ensuring value is
delivered to shareholders and participants
are rewarded for the delivery of the key
strategic objectives of the Group, specifically
growth and returns on a sustained basis.
In addition, assessment of qualitative measures
and personal contributions are considered
as well as financial outturn in determining
annual bonuses.
The key remuneration outcomes for executive
directors in respect of 2015 were:
• following a detailed review, the base salary
of the chief financial officer was increased
from £300,000 to £340,000, effective
from 1 June 2015, reflecting his increased
responsibilities in the revised organisational
structure implemented to align with
the strategy;
• 41.7% of maximum annual bonus (one-third
to be delivered in shares), reflecting the
lower level of financial performance of
the Group and the partial achievement
of specific executive team objectives
aligned to the Group’s strategy. For details
of the 2015 bonus arrangements please
see page 62 of the annual report on
remuneration; and
• 0% current expectation of vesting of 2013
LTIP awards for Jim Clarke and Grenville
Turner (who was chief executive officer
at the grant date) on 6 September 2016.
This expected vesting level is directly linked
to the challenging performance conditions
attached to these awards which are based
on EPS performance conditions measured
over the three years to 31 December 2015
and relative TSR performance conditions
measured over the three years to
18 March 2016.
Remuneration policy for 2016
The Committee regularly reviews the
remuneration policy for the executive directors
and senior managers to ensure it is transparent
and aligned to the interests of shareholders;
it is weighted to incentivise sustainable
performance; it is structured to ensure higher
rewards are only achieved for exceptional
performance against challenging targets;
and encourages an appropriate level of risk
taking commensurate with the risk profile of
the business. There have been no changes
to the Board during 2015 and the Committee’s
most recent conclusions are that the existing
remuneration policy remains appropriate and
should continue to operate for 2016.
The key points to note are as follows:
• recognising the increase awarded to the
chief financial officer during 2015, and the
chief executive officer’s salary positioning,
there will be no increase in base salary
levels of executive directors;
• benefits and pension provision are
considered to be at appropriate levels;
• the structure and quantum of the annual
bonus, with one-third of any award deferred
into shares, continues to work well. As such,
the 2016 annual bonus framework will
remain largely consistent with the 2015
annual bonus, incorporating both financial
(70% of the award) and strategic/personal
targets (30% of the award). The strategic/
personal targets will align with the strategic
objectives of the Group and represent both
customer and personal outcomes; and
• the long term incentive grant policy,
whereby nil-cost awards are granted
annually with vesting based on delivering
growth in earnings per share (two-thirds)
and relative total shareholder return
(one-third) performance conditions and
continued service, provides a strong
alignment between the senior executive
team and shareholders. Reflecting the
Committee’s desire to incentivise delivery
of the ambitious strategy, LTIP awards of
187.5% of salary and 162.5% of salary
will be granted in 2016 to the chief
executive officer and chief financial officer
respectively. These awards are within the
maximum LTIP limit of 200% of salary
approved by shareholders.
The Committee believes that the current
remuneration policy continues to incentivise
the delivery of strong yet sustainable financial
results and the creation of shareholder value.
However, as the policy will come to the end
of its three-year shareholder approved life
at the 2017 AGM, the Committee will carry
out a detailed review of the policy in the
second half of 2016 and consult with major
shareholders and representative bodies
on the Committee’s conclusions.
Further details on how the current policy will
be applied in practice for the 2016 financial
year are set out in the annual report on
remuneration on page 61.
Shareholder support
The Committee was delighted to receive
positive support from 96% of the shareholders
who voted on our 2014 remuneration report
(the annual statement and annual report on
remuneration) at the AGM on 29 April 2015.
We remain committed to ongoing engagement
with our shareholders and take an active
interest in their views and voting on this
remuneration report.
Cathy Turner
Chair of the Remuneration Committee
25 February 2016
Annual Report 2015 Countrywide plc
55
Financial statementsCorporate governanceStrategic report Directors’ remuneration report continued
Remuneration policy report
Introduction
With effect from its approval at the Company’s
first AGM on 30 April 2014, this policy report
sets out the framework that shapes the
Company’s remuneration strategy for an
anticipated period of three years, ensuring
that the structure and levels of executive
remuneration continue to remain appropriate
for the Company. We have chosen to repeat
the remuneration policy report in line with
best practice and to ensure transparency
even though continued presentation is
not required.
The following section explains:
• our remuneration strategy and policy;
• how this strategy is reinforced by
alignment of key components of our
remuneration packages;
• why we have selected the performance
criteria for variable pay; and
• other information required to provide the
wider Group context for the directors’
service agreements.
Remuneration strategy
Our remuneration strategy is underpinned
by remuneration packages that are designed
to motivate high performing people to
deliver our strategy. These packages:
• are transparent and aligned with the
interests of our shareholders;
• are weighted to incentivise performance
over the short and long term;
• are structured to ensure higher rewards are
only achieved for exceptional performance
against challenging targets; and
• encourage management to adopt a level
of risk commensurate with the risk profile
of the business as approved by the Board.
Summary remuneration policy
The Committee remains of the view that the remuneration policy continues to be appropriate and therefore there has been no change to the
policy from the prior year (and indeed the 2014 AGM). The key components of the remuneration packages offered to our directors are as follows:
Future policy table
Component
Purpose/link to strategy
Operation
Opportunity
Applicable performance measure
Salary and fees
• To aid the recruitment, retention and motivation
• Fixed annual sum normally payable monthly and
of high performing people
reviewed annually
• To reflect their experience and importance
to the business
Benefits
• To provide support and protection and the
ability to focus on effective delivery
Annual bonuses
• To incentivise the delivery of stretching short
term business targets and strategic and/or
personal objectives
• To recognise performance through variable
remuneration, allowing flexible control of the
cost base and response to market conditions
• Review reflects changes in scope of role and responsibility,
personal and Group performance increases throughout the
rest of business
• Salary of newly appointed directors may be phased to take
account of experience
• Benefits currently include company car allowance, private
medical insurance and life assurance. Other benefits may be
provided where appropriate
• All measures and targets are reviewed and set by the
Committee at the beginning of the year and payments
determined after the year end, based on performance
against targets
• One-third of any bonus payable from 2014 will normally
be deferred into options/awards over ordinary shares with
a three-year vesting period
• Non-pensionable
• Dividend equivalent payments (cash and/or shares) may be
payable on awards to the extent they vest
Long Term Share
Incentive plans
• To incentivise value creation over the long
term and reward execution of our strategy
• To align the long term interest of directors
and shareholders
• To promote retention
• Annual grant of awards
• Structured as nil-cost options/conditional awards
• Non-pensionable
• Dividend equivalent payments (cash and/or shares)
may be payable on awards to the extent they vest
Grant policy
• Up to 150% of salary per annum
Maximum limit
• 200% of salary per annum
Exceptional limit
• 300% of salary per annum
56
Countrywide plc Annual Report 2015
• The maximum annual salary increase will not normally exceed the average increase which
• n/a
applies across the wider workforce
• The Committee is guided by the general increase for the broader employee population but may
decide to award a lower increase or a higher increase for executive directors to recognise, for
example, an increase in the scale, scope or responsibility of the role, to apply salary progression
for a newly appointed director and/or to take account of relevant market movements
• n/a
• 120% of salary
• n/a
• Majority (if not all) based on
financial targets
• Minority based on personal/
strategic targets
• Malus and clawback provisions
operate for deferred bonuses
• Earnings per share, financial
targets and/or total shareholder
return-related targets
• 25% vests at threshold increasing
to 100% vesting at maximum
• Malus and clawback provisions
operate
Corporate governance Statement of employment conditions
elsewhere in the Company
The remuneration policy described within
this report provides an overview of the
structure that operates for the most senior
executives in the Group. The remuneration
policy for the executive directors is more
heavily weighted towards variable pay than
for other employees to make a greater part
of their pay conditional on the successful
delivery of the business strategy.
This aims to create a clear link between
the value created for shareholders and the
remuneration received by the executive
directors. When setting the policy for
remuneration for the executive directors
the Committee takes into account the
overall approach to reward for employees
in the Group, including consideration of
salary increases for the general employee
population (disclosed in the annual report
each year); overall spend on annual bonus;
Group-wide benefit offerings; and any
other relevant factors as determined
by the Committee.
Although the Company has not carried out
a formal employee consultation regarding
Board remuneration (policy or implementation),
in accordance with prevailing commercial
practice, it does comply with regulations and
practices regarding employee consultation
more broadly. The Group head of human
resources ensures that the Committee is
made aware of any relevant employee
feedback regarding the Company’s
remuneration policy.
Further information about our engagement
with employees across the Group is provided
on page 36 of the annual report.
Statement of consideration
of shareholder views
The Company welcomes dialogue with its
shareholders and, in the event that material
changes to the policy are proposed, will consult
with major shareholders and representative
bodies in advance of changes being made.
The Committee remains of the view that the remuneration policy continues to be appropriate and therefore there has been no change to the
policy from the prior year (and indeed the 2014 AGM). The key components of the remuneration packages offered to our directors are as follows:
Summary remuneration policy
Future policy table
Component
Purpose/link to strategy
Operation
Opportunity
Applicable performance measure
Salary and fees
• To aid the recruitment, retention and motivation
• Fixed annual sum normally payable monthly and
of high performing people
reviewed annually
• To reflect their experience and importance
to the business
• Review reflects changes in scope of role and responsibility,
personal and Group performance increases throughout the
rest of business
• Salary of newly appointed directors may be phased to take
account of experience
• The maximum annual salary increase will not normally exceed the average increase which
applies across the wider workforce
• n/a
• The Committee is guided by the general increase for the broader employee population but may
decide to award a lower increase or a higher increase for executive directors to recognise, for
example, an increase in the scale, scope or responsibility of the role, to apply salary progression
for a newly appointed director and/or to take account of relevant market movements
Benefits
• To provide support and protection and the
ability to focus on effective delivery
• Benefits currently include company car allowance, private
medical insurance and life assurance. Other benefits may be
• n/a
provided where appropriate
Annual bonuses
• To incentivise the delivery of stretching short
term business targets and strategic and/or
• All measures and targets are reviewed and set by the
Committee at the beginning of the year and payments
personal objectives
determined after the year end, based on performance
• To recognise performance through variable
remuneration, allowing flexible control of the
cost base and response to market conditions
• One-third of any bonus payable from 2014 will normally
be deferred into options/awards over ordinary shares with
against targets
• 120% of salary
a three-year vesting period
• Non-pensionable
• Dividend equivalent payments (cash and/or shares) may be
payable on awards to the extent they vest
Long Term Share
Incentive plans
• To incentivise value creation over the long
term and reward execution of our strategy
• Annual grant of awards
• To align the long term interest of directors
and shareholders
• Non-pensionable
• To promote retention
• Dividend equivalent payments (cash and/or shares)
may be payable on awards to the extent they vest
• Structured as nil-cost options/conditional awards
Grant policy
• Up to 150% of salary per annum
Maximum limit
• 200% of salary per annum
Exceptional limit
• 300% of salary per annum
• n/a
• Majority (if not all) based on
financial targets
• Minority based on personal/
strategic targets
• Malus and clawback provisions
operate for deferred bonuses
• Earnings per share, financial
targets and/or total shareholder
return-related targets
• 25% vests at threshold increasing
to 100% vesting at maximum
• Malus and clawback provisions
operate
Annual Report 2015 Countrywide plc
57
Financial statementsCorporate governanceStrategic report Directors’ remuneration report continued
Remuneration policy report continued
Summary remuneration policy continued
Future policy table continued
Component
Purpose/link to strategy
Operation
Opportunity
Applicable performance measure
Pensions
• To help recruit and retain high
performing executives
• Participation into a money purchase pension scheme and/or
cash equivalent
• Directors will receive a pension contribution appropriate to their role
• To reward continued contribution to the
business by enabling executive directors
to build long term savings
All Employee
Share Plans
• To encourage all employees to make a long
term investment in the Company’s shares
in a tax efficient manner
• Share Incentive Plan and/or Save As You Earn Plan as per
HMRC-approved rules
• Consistent with prevailing HMRC limits
Share ownership
guidelines
• To provide close alignment between the
longer term interests of directors and
shareholders in terms of the Company’s
growth and performance
• Executive directors to retain no less than 50% of net of tax
shares from vesting of share options/awards until such time
as a shareholding equivalent in value to 100% of base salary
has been achieved
• n/a
Non-executive
directors
• To provide fees reflecting time commitments
and responsibilities of each role, in line with
those provided by similarly sized companies
• Cash fee paid on a monthly basis
• Fees are reviewed annually
• There is no prescribed maximum fee increase
• The Committee is guided by market rates, time commitments and responsibility levels
• No additional fees are payable for membership of Board Committees, though additional
fees are paid for specific additional responsibilities such as chair of Audit Committee,
chair of Remuneration Committee and senior independent director
• n/a
• n/a
• n/a
• n/a
Notes to summary policy table
1 A description of how the Company intends to implement the remuneration policy for 2016 is set out in the following annual report on remuneration.
2 The annual bonus is primarily focused on Group EBITDA to reflect how successful the Group has been in managing its operations.
3 The long term incentive performance measures, currently EPS and TSR targets, have been selected to reward significant long term returns to shareholders and long term financial growth.
EPS growth is derived from the audited financial statements. Targets take account of internal strategic planning and external market expectations for the Company. Only modest rewards
are available for achieving threshold performance with maximum rewards requiring substantial out-performance of challenging strategic plans approved at the start of each year.
4 The Committee operates incentive arrangements for executive directors in accordance with their respective rules and the Listing Rules and HMRC rules where relevant. The Committee,
consistent with market practice, retains discretion over a number of areas relating to the operation and administration of the plan rules. These include (but are not limited to) the following:
• who participates;
• the timing of the grant of award and/or payment;
• the size of an award (up to plan/policy limits) and/or a payment;
• the result indicated by the performance conditions;
• discretion relating to the measurement of performance in the event of a change of control or reconstruction;
• 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 adjust existing performance conditions for exceptional events so that they can still fulfil their original purpose.
5 For the avoidance of doubt, in approving this directors’ remuneration policy, authority was given to the Company to honour any commitments entered into with current or former directors
(such as the payment of a pension or the vesting or exercise of past share awards).
Illustration of the application of the remuneration policy
Our aim is to ensure that superior rewards are only paid for exceptional performance, with a substantial proportion of executive directors’
remuneration payable in the form of variable, performance-related pay. The charts that follow illustrate the opportunity at different levels
of performance for the remuneration policy.
58
Countrywide plc Annual Report 2015
Corporate governance Summary remuneration policy continued
Future policy table continued
Component
Purpose/link to strategy
Operation
Opportunity
Applicable performance measure
Pensions
• To help recruit and retain high
performing executives
• Participation into a money purchase pension scheme and/or
cash equivalent
• Directors will receive a pension contribution appropriate to their role
• To reward continued contribution to the
business by enabling executive directors
to build long term savings
in a tax efficient manner
All Employee
Share Plans
• To encourage all employees to make a long
term investment in the Company’s shares
• Share Incentive Plan and/or Save As You Earn Plan as per
HMRC-approved rules
• Consistent with prevailing HMRC limits
Share ownership
guidelines
• To provide close alignment between the
longer term interests of directors and
• Executive directors to retain no less than 50% of net of tax
shares from vesting of share options/awards until such time
shareholders in terms of the Company’s
as a shareholding equivalent in value to 100% of base salary
growth and performance
has been achieved
• n/a
Non-executive
directors
• To provide fees reflecting time commitments
and responsibilities of each role, in line with
those provided by similarly sized companies
• Cash fee paid on a monthly basis
• Fees are reviewed annually
• There is no prescribed maximum fee increase
• The Committee is guided by market rates, time commitments and responsibility levels
• No additional fees are payable for membership of Board Committees, though additional
fees are paid for specific additional responsibilities such as chair of Audit Committee,
chair of Remuneration Committee and senior independent director
• n/a
• n/a
• n/a
• n/a
£2,444
44%
£1,925
35%
30%
28%
£676
100%
35%
28%
£2,500
£2,000
s
0
0
0
£
’
£1,500
£1,000
£500
£0
Fixed pay
Bonus
LTIP
£1,091
32%
31%
37%
£1,367
40%
30%
30%
£406
100%
The scenarios adopt the following assumptions:
• fixed pay consists of base salary as at 1 January
2016, benefits and pension allowances. The value
of benefits has been estimated;
• on-target performance is based on the value of
fixed pay plus on-target incentive pay, based on
83% of the maximum bonus and 62.5% of the
maximum long term incentive award values;
• maximum performance is based on the value of fixed
pay plus maximum incentive pay (i.e. a 120% of
base salary annual bonus and, for 2016, a
187.5/162.5% of salary LTIP award); and
• no assumptions have been made as to the share
price growth and any dividend accrual has been
excluded from the above.
Below target
Target
Maximum
Below target
Target
Maximum
Chief executive officer
Chief financial officer
Recruitment of executive directors and promotions
When setting the remuneration package for
a new executive director, the Committee will
apply the same principles and implement the
policy as set out in the table on pages 56 to 59.
Base salary will be set at a level appropriate
to the role and experience of the director
being appointed. This may include setting
a below-market salary with an agreement
on future increases up to a market rate,
in line with increased experience and/or
responsibilities, subject to performance,
where this is considered appropriate. Our
policy on maximum annual bonus and LTIP
awards would apply.
In relation to external appointments, the
Committee may structure an appointment
package that it considers appropriate to
recognise awards or benefits forfeited on
resignation from a prior position, taking into
account timing and valuation and other
specific matters it considers relevant. This
may take the form of cash and/or share
awards. The maximum payment under any
such arrangements (which may be in addition
to normal variable remuneration) would be
no more than the Committee considers is
required to provide reasonable compensation
to the incoming director and would not go
beyond a like-for-like compensation. If a
director is required to relocate in order to
take up the position, the Company may
consider reasonable relocation, travel,
subsistence and any other incidental payments
as appropriate. Any such payments will be
at the discretion of the Committee.
In the case of an employee who is promoted
to the position of director, it is the Company’s
policy to honour pre-existing commitments
in accordance with their terms.
Annual Report 2015 Countrywide plc
59
54 COUNTRYWIDE PLC ANNUAL REPORT 2014
Financial statementsCorporate governanceStrategic report
Directors’ remuneration report continued
Remuneration policy report continued
Service agreements and letters of appointment
Each of the executive directors’ service agreements is for a rolling term and may be terminated by the Company or the director by giving
twelve months’ notice.
The non-executive directors of the Company (including the chairman) do not have service agreements. The independent non-executive
directors are appointed by letters of appointment and have an initial two-year term. Caleb Kramer’s services are provided to the Company
under an agreement between the Company and Oaktree Capital Management (UK) LLP which runs for an initial period of three years.
The initial terms of the non-executive directors’ positions are subject to their re-election by the Group’s shareholders at the AGM.
The dates of appointments of the non-executive directors in office as at 31 December 2015 are set out below:
Non-executive director
Grenville Turner
David Watson
Cathy Turner
Richard Adam
Rupert Gavin
Jane Lighting
Caleb Kramer
Commencement date of original term
Unexpired term as at
27 April 2016 AGM
1 September 2014
2 September 2013
31 July 2013
9 June 2014
25 June 2014
9 June 2014
19 March 2013
4 months
n/a
n/a
1 month
1 month
1 month
n/a
Individuals will be subject to re-election at the 2016 AGM.
The directors’ service agreements and letters of appointment are available for inspection at the Company’s registered office and will be available
at the AGM.
Policy on payment for loss of office
If an executive director’s employment is
terminated, in the absence of a breach of
service agreement by the director, the Company
may (although it is not obliged to) terminate
the director’s employment immediately by
payment of an amount equal to the basic
salary and specified benefits (including
pension scheme contribution or equivalent
salary supplement payment) in lieu of the
whole or the remaining part of the notice
period. Discretionary bonus payments will
not form part of any payments in lieu of
notice. An annual bonus may be payable
with respect to the period of the financial
year served, although it would be paid in
cash and pro-rated for time and paid at the
normal payout date. Payments in lieu of
notice may be paid in monthly instalments
over the length of the notice period with
such instalments to be reduced or to cease
upon the director receiving payment from
a new position.
Any share-based entitlements granted to
an executive director under the Company’s
share plans will be determined based on
the relevant plan rules.
The default treatment under the LTIP is that
any outstanding awards lapse on cessation
of employment. However, in certain prescribed
circumstances, such as ill health, injury or
disability, retirement, transfer of the employing
company outside of the Group or in other
circumstances at the discretion of the
Committee, ‘good leaver’ status may be applied.
For good leavers, awards will normally vest
on the normal vesting date, subject to the
satisfaction of the relevant performance
conditions and reduced pro-rata to reflect
the proportion of the performance period
actually served. However, the Committee has
discretion to determine that awards for good
leavers vest at cessation and/or to disapply
time pro-rating. In the event of death, awards
will normally vest on the date of death subject
to performance conditions and time pro-rating,
although the Committee has discretion to
determine that awards vest at the normal
vesting date and/or to disapply time pro-rating.
The default treatment under the IPO options,
the rules of which were drafted to replicate
the pre-admission long term incentive plan
(see annual report on remuneration), is that
any outstanding awards lapse on cessation
of employment. However, in certain prescribed
circumstances, such as death, permanent
disability, retirement, transfer of the employing
company outside of the Group, employment
being terminated within twelve months of a
material acquisition, cessation between the
second and third anniversary of admission
where the chief executive officer or chief
financial officer either receives a payment
in lieu of notice or otherwise leaves without
notice or in other circumstances at the
discretion of the Committee, ‘good leaver’ status
may be applied. For good leavers, awards
will normally vest on the normal vesting date,
subject to the satisfaction of the relevant
performance conditions. Other than where
the chief executive officer or chief financial
officer ceases employment between the
second and third anniversary of admission
in circumstances where the individual
receives a payment in lieu of notice, IPO
options will be reduced pro-rata to reflect
the proportion of the vesting period served,
although the Committee has discretion to
disapply time pro-rating.
The default treatment for deferred bonus
awards is that any outstanding awards vest on
cessation of employment unless cessation is
as a result of dismissal for gross misconduct
or a similar ‘bad leaver’ reason.
External appointment
of executive directors
The Board allows executive directors to accept
appropriate outside commercial non-executive
director appointments provided the aggregate
commitment is compatible with their duties
as executive directors. The executive directors
concerned may retain fees paid for these
services, which will be subject to approval
by the Board. Details of such appointments
and fees retained for 2015 are disclosed
on page 62.
60
Countrywide plc Annual Report 2015
Corporate governance Annual report on remuneration
Implementation of the remuneration policy for the year ending 31 December 2016
Details of how the Committee intends to operate the remuneration policy for directors for the year ending 31 December 2016 are set out below.
Base salary
Base salaries for the executive directors are reviewed annually by the Committee, taking account of the director’s performance, experience
and responsibilities. When determining base salaries, the Committee also has regard to economic factors, remuneration trends and the
general level of salary increases awarded throughout the Group. Current base salaries are as follows:
Alison Platt
Jim Clarke*
1 January
2015
£’000
575
300
1 June
2015
£’000
575
340
1 January
2016
£’000
575
340
* Following a review of Jim Clarke’s performance, role and increased responsibilities following a reorganisation of the Executive Committee during 2015, Jim Clarke’s salary was increased
to £340,000 per annum, effective 1 June 2015. No increases were awarded from 1 January 2016.
Benefits in kind and pension
Executive directors will continue to receive
benefits in kind including a company car
allowance, life assurance, private medical
insurance and permanent health insurance.
Alison Platt and Jim Clarke will receive a salary
supplement in lieu of pension entitlement
of up to 15% of base salary. Following a review,
Jim Clark’s pension was switched from a
contribution to the defined contribution
section of the Group scheme to a salary
supplement and aligned to that provided
to Alison Platt with effect from 1 April 2015.
Annual bonus
For 2016, maximum bonus potential will
continue to be 120% of salary for executive
directors for 2016 and one-third of any
bonus payable will be deferred into
Company shares for a period of three years.
The annual bonus will continue to be based
on Group EBITDA targets. This will comprise
70% of the award. In addition, targets
based on customer satisfaction (15%)
and personal/strategic objectives (15% of
award) will also apply, albeit these targets
will be underpinned by an EBITDA hurdle.
The Committee has chosen not to disclose
the performance targets in advance for 2016
as these include items which the Committee
considers commercially sensitive. Retrospective
disclosure of the targets and performance
against them will be presented in the 2016
annual report on remuneration.
Malus and clawback provisions will continue
to operate in respect of deferred bonus awards.
Long term incentives
The annual award of LTIPs to be granted in
2016 will be assessed over the three-year
performance period from 1 January 2016
to 31 December 2018 and will be subject
to the following targets:
• EPS (two-thirds) – 25% of this part of an
award will vest for EPS growth of 5% per
annum increasing pro-rata to 100% vesting
for EPS growth of 15% per annum; and
Non-executive directors
Non-executive director fee levels for 2016 are as follows:
• relative TSR (one-third) – the Company’s
TSR measured against the constituents of
the FTSE 250 (excluding financial services
companies and investment trusts). 25%
of this part of an award will vest for
performance at median of the comparator
group, increasing pro-rata to 100%
vesting at upper quartile.
Reflecting the Committee’s desire to incentivise
delivery of the ambitious strategy, LTIP awards
of 187.5% of salary and 162.5% of salary
will be granted in 2016 to the chief executive
officer and chief financial officer respectively.
Malus and clawback provisions will operate.
Shareholding guidelines will continue to
operate. Executive directors will be required
to retain no less than 50% of net of tax shares
from vesting of share awards until such time
as a shareholding equivalent in value to
100% of base salary has been achieved.
Director
Grenville Turner
David Watson
Cathy Turner
Richard Adam
Rupert Gavin
Jane Lighting
Caleb Kramer
Committee
chairman role
Chairman, Nomination
Deputy chairman and senior independent director
Remuneration
Audit and Risk
—
—
—
2015
£’000
150
95
55
55
45
45
40
2016
£’000
150
95
55
55
45
45
45
Annual Report 2015 Countrywide plc
61
Financial statementsCorporate governanceStrategic report Directors’ remuneration report continued
Annual report on remuneration continued
Directors’ remuneration for the year ended 31 December 2015 (audited)
The remuneration of the directors for the 2015 and 2014 financial years was as follows:
Salary and fees
Taxable benefits3
Annual bonuses4
Long term incentives8
Pension5
Other6
Total
2015
£’000
2014
£’000
2015
£’000
2014
£’000
2015
£’000
2014
£’000
2015
£’000
2014
£’000
2015
£’000
2014
£’000
2015
£’000
2014
£’000
2015
£’000
2014
£’000
Executive directors
Alison Platt1,2
Grenville Turner2
Jim Clarke
Non-executive directors
Grenville Turner2
Caleb Kramer
David Watson
Cathy Turner
Richard Adam7
Rupert Gavin
Jane Lighting7
Sandra Turner
575
—
323
150
40
95
55
55
45
45
—
192
317
300
50
40
132
55
31
24
25
20
15
—
15
—
—
—
—
—
—
—
—
5
10
15
—
—
—
—
—
—
—
—
288
—
— 253
240
170
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 7,116
— 4,269
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
86
—
45
—
—
—
—
—
—
—
—
29
48
35
—
—
—
—
—
—
—
—
— 329
—
—
—
—
964
555
— 7,744
553 4,859
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
150
40
95
55
55
45
45
—
50
40
132
55
31
24
25
20
1,383 1,186
30
30
458
493
— 11,385
131
112
— 329 2,002 13,535
1 Alison Platt was appointed chief executive officer from 1 September 2014.
2 Alison Platt also acts as a non-executive director for Cable & Wireless Communications plc and retains an annual fee of £65,000. Grenville Turner stepped down from his role as chief
executive officer on 1 September 2014, taking on the role of non-executive chairman from that date. Whilst chief executive of Countrywide plc, Grenville Turner was chairman of Knightsbridge
Student Housing Limited and Bellpenny Limited, and was a non-executive director of Zoopla Property Group Ltd and the Department of Communities and Local Government (DCLG).
During his period as chief executive, he received fees in respect of his role with Knightsbridge Student Housing Limited amounting to £33,333, Zoopla Property Group Ltd of £10,000
and DCLG of £10,000.
3 Benefits consist of the provision of a car allowance, life assurance and private medical and health insurance.
4 Details of the annual bonus targets and payments for 2015 are set out below. In accordance with the remuneration policy, one-third of any bonus is subject to deferral into shares, normally
vesting after three years, subject to continued service. As such, deferred share awards equal to £96,000 and £56,667 will shortly be granted to Alison Platt and Jim Clarke respectively.
5 Alison Platt received a 15% of salary supplement in lieu of pension entitlements. As described above, Jim Clarke received a contribution to the defined contribution section of the Group
scheme of 12% of salary to 31 March 2015 and a 15% of salary supplement thereafter.
6 As described last year, to compensate for lost bonus opportunity in respect of leaving her previous employment, and as agreed as part of her recruitment arrangements and consistent
with the remuneration policy, Alison Platt received a payment of £329,000 following the end of the financial year ended 31 December 2014.
7 Richard Adam and Jane Lighting were appointed on 9 June 2014; Rupert Gavin was appointed on 25 June 2014. Sandra Turner stepped down on 9 June 2014.
8 Long term incentives incorporated as comparatives in the table above were based on expected vesting of the IPO options (based on an 83% vesting level which had been determined on
2014 EBITDA performance criteria). The actual values at vesting of the first 50% crystallising on 18 March 2015 were £4,151,000 and £2,491,000 respectively for Grenville Turner and
Jim Clarke based on the share price at vesting, incorporating the associated cash-settled dividend equivalents. The expected value at vesting of the final 50% crystallising on 18 March 2016
(using the average share price for the three months ended 31 December 2015 of 435 pence), incorporating the value of dividend equivalents, is £3,581,000 and £2,148,000 respectively
for Grenville Turner and Jim Clarke. As such, the total value of the IPO options, based on the actual value of that part of the awards which vested in March 2015 and the estimated value
of those vesting in March 2016 is £7,732,000 and £4,639,000 respectively for Grenville Turner and Jim Clarke.
9 Matching shares are also issued to the eligible executive directors under the share incentive plan (SIP), following the introduction of the employee-wide share incentive plan in 2013.
The aggregate value of these in each year in respect of each executive director is disclosed within the SIP share awards overleaf.
2015 annual bonus award (audited)
Executive directors had the potential to receive an annual bonus of up to 120% of base salary.
Group EBITDA targets (up to 80% of salary)
The primary driver of the award was based on Group EBITDA performance relative to targets set at the start of the financial year. In assessing
the final award, the required Group EBITDA is adjusted up or down dependent upon the actual market size relative to the plan. The market
size is measured based on the independent Land Registry data (as at the end of October 2015) plus full-year indicative estimates after
considering all relevant information on the size of the market, including Bank of England mortgage approval levels, in the final two months of
the year. Group EBITDA is also adjusted for any significant benefit and costs associated with major unplanned initiatives such as acquisitions.
In determining the 2015 annual bonus award, the Committee considered:
• Group EBITDA of £113.0 million, which represents underperformance of the target Group EBITDA of £136.2 million in the plan; and
• a market size estimated to be 3% down on the prior year.
Whilst performance against the original plan would have triggered a bonus of 33% of the maximum under this part of the bonus (i.e. 26% of salary),
the lower than expected market size and adjustment for acquisitions resulted in a flexing upwards of the annual bonus award to 37.5% of the
maximum (i.e. 30% of salary).
62
Countrywide plc Annual Report 2015
Corporate governance The following table illustrates the performance measures and Group targets, their significance in terms of value and the respective outcomes:
Performance required
Measure
Weighting
Threshold
On-target
Maximum
Actual
Payout
Flexed Group EBITDA
66.7%
£106.2m
£132.7m
£146.0m
£113.0m
30% of salary
Strategic targets (up to 40% of salary)
The remaining third of bonus potential was dependent upon an assessment of progress against: the growth strategy; embedding performance
measurement across the organisation; implementing a new organisation structure aligned with strategy; and enhancements to operational
excellence, including IT architecture. After assessing performance, the Committee acknowledged progress in most areas and determined
a bonus of 20% of salary, (50% of the maximum award).
Total award
Performance against the flexed EBITDA targets (for up to 80% of salary) resulted in 37.5% of the maximum award under this element (30% of salary)
while performance against the strategic targets (for up to 40% of salary) resulted in 50% of the maximum payable under this element (20% of salary).
Therefore the total bonus payable was 41.6% of the maximum (50% of salary). In line with the deferral policy, one-third of the bonus award
will be deferred into Company shares for a period of three years.
Vesting of scheme interests in respect of the year ended 31 December 2015 (audited)
Awards granted under the LTIP in September 2013 are due to vest on 6 September 2016 based upon absolute EPS and relative TSR
performance as follows:
Absolute EPS for the three years ended 31 December 2015
36p
44p
32p
Relative TSR for the three years ended 18 March 2016
Median
Upper quartile
Below median*
* Expected based on current performance levels.
Based on the above, none of the outstanding 2013 LTIP awards held by Grenville Turner and Jim Clarke are currently expected to vest.
Threshold target
0% vesting at
or below
Maximum target
100% vesting at
or above
Actual
performance
Vesting %
0%
0%
Scheme interests awarded during the year (audited)
LTIP awards
The following LTIP awards, structured as nil-cost options, were granted to executive directors during 2015:
Executive
Date of grant
Alison Platt
16/03/2015
Jim Clarke
16/03/2015
Basis of
award granted
150% of
salary
130%
of salary
Share price
at date of grant
(pence)
Number
of shares
Face value
of award at grant*
£’000
% of face value
that would vest
at threshold
performance
Vesting
determined by
performance over
Normal vesting
(exercise)
date
527
163,507
862
25%
527
73,934
390
25%
Three-year
period ending
31 December 2017
Three-year
period ending
31 December 2017
16 March 2018
(16 March 2025)
16 March 2018
(16 March 2025)
* Based on the share price at grant multiplied by the number of shares awarded.
Performance targets for these awards are as follows:
• EPS growth (two-thirds) – 25% of this part of an award will vest for achieving a minimum of 10% compound growth per annum in EPS increasing
pro-rata to 100% vesting for achieving 25% compound growth per annum in EPS for the three-year period ending 31 December 2017; and
• relative TSR (one-third) – the Company’s TSR measured against the constituents of the FTSE 250 (excluding financial services companies
and investment trusts). 25% of this part of an award will vest for performance at median of comparator group, increasing pro-rata to 100%
vesting at upper quartile.
Annual Report 2015 Countrywide plc
63
Financial statementsCorporate governanceStrategic report Directors’ remuneration report continued
Annual report on remuneration continued
Outstanding share awards
Alison Platt
LTIP
LTIP
Grenville Turner
IPO options
LTIP
Jim Clarke
IPO options
LTIP
LTIP
Date of
grant
Interest at
1 January
2015
Options/awards
granted during
the year
Options/awards
lapsed during
the year
Options/awards
exercised during
the year
Interest at
31 December
2015
Exercise
price
pence
Expected
exercise/vested
to expiry date
(if appropriate)
08/09/14
246,305
—
16/03/15
—
163,507
—
—
—
—
246,305
163,507
—
—
08/09/17 (08/09/24)
16/03/18 (16/03/25)
18/03/13 1,828,045
— (310,768)
(758,639)
758,638
5.25
Deferred bonus
22/05/15
—
14,660
06/09/13
129,545
—
—
—
—
—
14,660
129,545
—
—
18/03/13 1,096,827
— (186,461)
(455,183)
455,183
5.25
50% 18/03/15
50% 18/03/16
22/05/18
06/09/16 (06/09/23)
50% 18/03/15
50% 18/03/16
06/09/13
70,909
21/03/14
58,735
—
—
Deferred bonus
22/05/15
LTIP
16/03/15
—
—
13,889
73,934
—
—
—
—
—
—
—
—
70,909
58,735
13,889
73,934
—
—
—
—
06/09/16 (06/09/23)
21/03/17 (21/03/24)
22/05/18
16/03/18 (16/03/25)
The executive directors’ interests in ordinary shares of the Company under the SIP as at 31 December 2015 are shown in the table below.
The shares are held under a SIP trust and will vest based on service conditions of continued employment and have a vesting date of a
minimum holding period of three years from each rolling monthly award date.
Jim Clarke
Alison Platt is not eligible to join the SIP scheme until she has completed 18 months’ service.
Total SIP
shares at
1 January
2015
Partnership
shares
purchased
550
362
Matching
shares
awarded
181
Dividend
shares
purchased
Total SIP
shares at
31 December
2015
33
1,126
The matching shares were awarded each month in the ratio of one matching share for every two partnership shares purchased at the prevailing
market price on the date of the award.
Statement of directors’ shareholding and share interests (audited)
The interests of the directors who served on the Committee during 2015 have been subject to audit and are set out in the table below:
Legally owned
LTIP awards
IPO options
31 December
2015
31 December
2014
Unvested
Vested
Unvested
Vested
SIP matching
share awards
restricted
DSBP options
(unvested)
Total
31 December
2015
Shareholding
guideline
2
(100% of salary)
Alison Platt
Jim Clarke
Grenville Turner
David Watson
Cathy Turner
Richard Adam
Rupert Gavin
Jane Lighting
Caleb Kramer
41,700
—
1,088,596 1 1,088,596
171,529 1 1,071,524 1
12,578 1
9,747
10,000
4,550
9,500
—
16,370 1
9,747
10,000
6,500
9,500
—
409,812
203,578
129,545
—
—
—
—
—
—
—
—
—
455,183
— 758,638
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
364
—
—
—
—
—
—
—
— 451,512
13,889 1,761,610
14,660 1,074,372
16,370
9,747
10,000
6,500
9,500
—
—
—
—
—
—
—
313%
2,066%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1 Includes jointly controlled shares held by close family members.
2 Actual beneficial share ownership as a percentage of salary calculated as at, and based on, the share price of 3.99 pence on 31 December 2015.
There have been the following changes in the interests of any director between 1 January 2016 and the date of this report:
• purchase of SIP partnership shares by Jim Clarke (79 shares); and
• issue of SIP matching share awards to Jim Clarke (40 shares).
64
Countrywide plc Annual Report 2015
Corporate governance Payments to past directors and payments for loss of office (audited)
No payments have been made for loss of office.
Performance graph and table
)
£
(
l
e
u
a
V
190
180
170
160
150
140
130
120
110
100
90
18 March 2013
31 December 2013
31 December 2014
31 December 2015
Countrywide plc
Countrywide plc
(net total return index)
FTSE 250
(excluding investment trusts)
FTSE 250
(excluding investment trusts – total return index)
Source: Datastream
The graph shows the value, by 31 December 2015, of £100 invested in Countrywide plc in March 2013 (IPO) compared with the value of
£100 invested in the FTSE 250 Index (excluding investment trusts). In the opinion of the directors, this index (excluding investment trusts) is
the most appropriate peer group and also closely aligns with the comparator group used for the LTIP plans, which comprises the FTSE 250
Index excluding investment trusts and financial services companies.
The table below sets out the details for the director undertaking the role of chief executive officer:
Year
2015
2014
2014
2013
2012
2011
2010
2009
Alison Platt
Alison Platt1
Grenville Turner2
Grenville Turner
Grenville Turner
Grenville Turner
Grenville Turner
Grenville Turner
Chief executive
officer single
figure of total
remuneration
£’000
Annual bonus
payout against
maximum
%
Long term incentive
vesting rates
against maximum
opportunity
%
964
555
7,744
1,015
914
689
892
972
42
n/a
67
83
83
46
79
100
n/a
n/a
83
n/a
n/a
n/a
n/a
n/a
1 Alison Platt was appointed chief executive officer from 1 September 2014.
2 Grenville Turner stepped down as chief executive officer with effect from 1 September 2014.
Percentage change in remuneration of director undertaking the role of chief executive officer
The table below shows the percentage change in remuneration of the director undertaking the role of chief executive officer and the
Company’s employees as a whole between the years 2015 and 2014:
Salary and fees
All taxable benefits
Annual bonuses/variable pay
Percentage increase in
remuneration in 2015 compared
with remuneration in 2014
Chief executive
officer
0%
0%
n/a *
Average pay
based on all
Countrywide
employees
6.6%
0.5%
(0.6)%
* Excluding her buyout arrangement in respect of her previous employment, Alison Platt was not entitled to receive a Countrywide annual bonus for 2014 given that she joined the Group
part-way through the year (1 September 2014).
Annual Report 2015 Countrywide plc
65
Financial statementsCorporate governanceStrategic report
Directors’ remuneration report continued
Annual report on remuneration continued
Relative importance of spend on pay
The following table shows the Company’s actual spend on pay (for all employees) relative to dividends, tax and retained profits:
Employee costs
Dividends
Tax charge
Retained profits
2015
£’000
2014
£’000
Change
%
418,583
32,944
5,942
8,407
392,794
43,889 *
11,712
23,588
7
(25)
(49)
(64)
* Incorporating a special divided of 9.0 pence (net) per share amounting to £19,750,000. The underlying dividend level has therefore remained constant between 2014 and 2015 at 15.0 pence
per share (including proposed dividends).
The Remuneration Committee and its composition
The Committee’s composition, responsibilities and operation comply with the principles of good governance (as set out in the UK Corporate
Governance Code). The full terms of reference of the Committee are available on request to shareholders and on the Company’s website at
www.countrywide.co.uk. The terms of reference are reviewed annually by the Board and, if necessary, updated.
The membership of the Committee, together with appointment date, is set out below:
Member
Cathy Turner (chairman)
Richard Adam
Rupert Gavin
Jane Lighting
David Watson
Remuneration Committee
member since
31 July 2013
9 June 2014
25 June 2014
9 June 2014
2 September 2013
There have been no changes to the composition of the Committee during the year. Attendance by members at the meetings is shown on
page 45. All members of the Committee are considered independent non-executive directors.
The chairman of the Committee reports on the Committee’s activities to the Board at the meeting immediately following the Committee meeting.
Consideration by the directors of matters relating to directors’ remuneration
Membership of Board Committees that considered remuneration (both the Remuneration Committee and the Nomination Committee (when
directors are appointed)) are disclosed within the corporate governance section of the annual report. Invitations to attend are also extended
to executive management where appropriate. The Committee received advice on remuneration from New Bridge Street, part of AON plc,
during 2015. New Bridge Street is not connected to the Group, is a member of the Remuneration Consultants Group and a signatory to
its Code of Conduct, and in 2015 received fees of £55,455 (2014: £30,140) in connection with its work for the Committee.
Shareholder voting and engagement
At the Company’s AGM held on 29 April 2015, the resolutions in respect of the remuneration report and the remuneration policy were as follows:
Votes withheld
Total votes cast
Votes against
Votes for
Resolution
Number of
shares
% of
shares voted
Number of
shares
% of
shares voted
% of issued
share capital
Number of
shares
Approval of remuneration report
182,351,729
95.62%
8,358,993
4.38%
87.46%
1,321,677
While the Committee was pleased with the level of shareholder support at the 2015 AGM, indicated by the level of votes in favour of the
remuneration report resolution, and the improved degree of participation in voting, it will continue to listen to and engage with shareholders
with regard to all aspects of the Company’s remuneration report and related policy.
Approval
This report was approved by the Board of directors on 25 February 2016 and signed on its behalf by:
Cathy Turner
Chair of the Remuneration Committee
66
Countrywide plc Annual Report 2015
Corporate governance
Directors’ report
Group directors’ report for the year ended 31 December 2015
The directors present their report and the audited consolidated financial statements for the year ended 31 December 2015. The review of the
business, future developments and outlook, as well as specific disclosures in relation to employee policies, are contained within the strategic
report and are incorporated into the directors’ report by cross-reference.
Information about the use of financial instruments by the Company and its subsidiaries and financial risk management policies are given
in notes 33 and 34 to the financial statements.
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
Pages 63 to 64 of the directors’
remuneration report
Details of contracts for the provision
of services to the Company by a
controlling shareholder
Details of transactions with
controlling shareholders
Page 60 of the directors’ remuneration report
Page 120 (note 35 to the accounts)
General information
Countrywide 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 included in note 1 to the financial statements.
Dividends
The directors recommend the payment of a final dividend of 10.0 pence (net) per share. Subject to approval at the AGM, the dividend will be
paid on 5 May 2016 to shareholders on the register at 29 March 2016. Together with the interim dividend of 5.0 pence (net) per share paid
on 9 October 2015, the total dividend in respect of the year is, therefore, 15.0 pence (net) per share (2014: 24.0 pence (net) per share,
inclusive of a special dividend of 9.0 pence (net) per share paid in September 2014).
Capital structure
Details of the issued share capital are shown in note 26 to the Group financial statements on page 110 of this annual report. The Company
has one class of ordinary share which carries the right to one vote at a general meeting of the Company and has no right to fixed income.
There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of
the Articles of Association and prevailing legislation. The directors are not aware of any agreements between holders of the Company’s shares
that may result in restrictions on the transfer of shares or on voting rights.
Details of employee share schemes are provided in note 27 to the Group financial statements. Shares held by the Group Employee Benefit
Trust abstain from voting.
Purchase of the Company’s own shares
Further to the shareholders’ resolutions passed at the Company’s AGM held on 30 April 2014, during the first quarter of 2015 the Company
purchased 1,465,000 ordinary shares with a nominal value of £14,650, and representing 0.66% of the Company’s called up ordinary share
capital, for a consideration of £6,773,000. The reason for the purchase was to improve the return available to shareholders and enhance earnings
per share. All shares purchased by the Company during 2014 and 2015 were then used to settle the IPO options vesting in March 2015.
At the end of the year, the directors had authority, under a shareholder resolution approved at the AGM on 29 April 2015, to make one or more
market purchases of its ordinary shares, limited to: a maximum number of 21,506,296 ordinary shares; a minimum price (exclusive of expenses)
of the nominal value; and a maximum price of 5% above the average market value for the preceding five business days or the higher of the
price of the last independent trade and the highest current independent bid on the trading venues where the purchase is carried out at the
relevant time. This authority expires at the conclusion of the AGM on 27 April 2016.
As a routine matter, the Company will be seeking to have this authority renewed at the 2016 AGM.
Annual Report 2015 Countrywide plc
67
Financial statementsCorporate governanceStrategic report Directors’ report continued
Substantial shareholdings
At 24 February 2016, being the latest practicable date prior to the publication of this annual report, the Company had been notified of the
following interests amounting to 3% or more of the voting rights in the issued share capital of the Company.
Shareholder
Oaktree Capital Management
Franklin Templeton Investment Management
Fidelity Worldwide Investment
Harris Associates LP
Jupiter Asset Management
Number of shares
% holding
65,196,855
24,564,302
23,333,447
13,127,700
7,910,494
29.68
11.18
10.62
5.98
3.60
Relationship agreement with controlling shareholders
Any person who exercises or controls on their own, or together with any person with whom they are acting in concert, 30% or more of the
votes able to be cast on all or substantially all matters at general meetings of a company are known as ‘controlling shareholders’. The Financial
Conduct Authority’s Listing Rules require companies with controlling shareholders to enter into a written and legally binding agreement which
is intended to ensure that the controlling shareholder complies with certain independence provisions. 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 19 March 2013, the Company entered into such an agreement (the ‘Relationship
Agreement’) with, among others, OCM Luxembourg Castle Holdings S.Á R.L. and OCM Luxembourg EPF III Castle Holdings S.Á R.L. (together,
the ‘Oaktree Shareholders’) who currently have a combined total holding of approximately 29.68% of the Company’s voting rights but who,
during the course of 2015, did by virtue of our buyback programme have a holding exceeding 30%. Under the terms of the Relationship
Agreement, Oaktree have agreed to the independence obligations contained in the Relationship Agreement.
The Board confirms that, since the entry into the Relationship Agreement on 19 March 2013 until 25 February 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 Oaktree 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%), 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.
Appointment and removal of directors
Directors may be appointed by the Company by ordinary resolution or by the Board. The Company may, by special resolution, remove
any director before the expiration of their period of office.
Powers of the directors
Subject to the Articles, the Companies Act and any directions given by the Company by special resolution, the business of the Company
will be managed by the Board who may exercise all the powers of the Company.
Amendment of Articles
The Articles may be altered by special resolution, in accordance with the Companies Act.
Directors and directors’ interests
The directors of the Company who were in office during the year and up to the date of the signing of the financial statements are disclosed
on pages 42 to 43 and their interests in the shares of the Company are disclosed on page 64.
Directors’ indemnities
The Company has made qualifying third-party indemnity provisions (as defined in the Companies Act 2006) for the benefit of its directors
during the year; these provisions were in force during the financial year and remain in force at the date of this report.
68
Countrywide plc Annual Report 2015
Corporate governance Auditor and disclosure of information to auditor
All directors at the date of approval of this annual report confirm that:
• so far as the directors are aware, there is no relevant information of which the Company’s auditor is unaware; and
• the directors have taken steps that they ought to have taken as directors in order to make themselves aware of any relevant audit
information and to establish that the Company’s auditor is aware of any such information.
The auditor, PricewaterhouseCoopers LLP, has expressed its willingness to continue in office as auditor and a resolution to reappoint
PricewaterhouseCoopers LLP will be proposed at the forthcoming AGM.
Corporate governance
The Company’s statement on corporate governance can be found in the corporate governance statement on pages 44 to 45 of this
annual report. The corporate governance statement forms part of this directors’ report and is incorporated into it by cross reference.
Going concern
The Board seeks to present a balanced and understandable assessment of the Group’s position and prospects. In order to satisfy themselves
that the Company has adequate resources to continue in operational existence for the foreseeable future, the directors have reviewed detailed
assumptions about future trading performance and cash flow projections within the Group’s current three-year plan. This, together with available
market information and the directors’ knowledge and experience, has given them the confidence to continue to adopt the going concern basis
in preparing the financial statements.
Post-balance sheet events
Particulars of important post-balance sheet events of the Company are set out in note 36 to the Group financial statements on page 120
of this annual report and are incorporated into this directors’ report by cross-reference.
Greenhouse gas (GHG) emissions
GHG emissions data for the year 1 January to 31 December
Scope 1
Controlled vehicle fleet
Scope 2
Electricity and heat purchased for own use
Tonnes of CO2e*/£m revenue
Tonnes of CO2e*
2015
2014
5,175
6,725
12,422
16,237
23.9
32.7
* CO2e is a universal unit of measurement used to indicate the global warming of GHG expressed in terms of the global warming potential of one unit of carbon dioxide.
We have reported on all of the emission sources required under the Large and Medium-Sized Companies and Groups (Accounts and Reports)
Regulations 2008 as amended in August 2013. We have used the operational control consolidation method. These sources fall within our
consolidated financial statements, but exclude non-wholly owned subsidiaries and joint ventures.
We have used the GHG Protocol Corporate Accounting and Reporting Standard (revised edition) and emission factors from the UK
Government’s GHG Conversion Factors for Company Reporting 2015 to calculate the above disclosures.
AGM notice
Accompanying this report is the notice of the AGM which sets out the resolutions for the meeting, together with an explanation of them.
By order of the Board
Gareth Williams
Company secretary
25 February 2016
Annual Report 2015 Countrywide plc
69
Financial statementsCorporate governanceStrategic report Directors’ responsibilities statement
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.
Having taken advice from the Audit and Risk
Committee, the directors consider that the
annual report, 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.
Directors’ statement pursuant to the
Disclosure and Transparency Rules
Each of the directors, whose names and
functions are listed within the corporate
governance statement, confirm that, to the
best of each person’s knowledge and belief:
• the Group financial statements, 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 strategic report contained in 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.
The directors are responsible for the
maintenance and integrity of the Group
website, www.countrywide.co.uk. Legislation
in the UK governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
The directors are responsible for preparing the
annual report, the directors’ remuneration
report and the financial statements in
accordance with applicable law and regulations.
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 United Kingdom Generally
Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law).
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 applicable IFRSs as adopted
by the European Union and applicable
UK Accounting Standards have been
followed, subject to any material departures
disclosed and explained in the Group
and parent company financial statements
respectively; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
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Countrywide plc Annual Report 2015
Corporate governance Financial
statements
72 Independent auditor’s report
77 Consolidated income statement
78 Consolidated statement
of comprehensive income
79 Consolidated statement of
changes in equity
80 Consolidated balance sheet
81 Consolidated cash flow
statement
82 Notes to the financial
statements
121 Independent auditor’s report
123 Company balance sheet
124 Notes to the Company
financial statements
128 Appendix
131 Company information
132 Forward-looking statements
133 Awards
Independent auditor’s report
to the members of Countrywide plc
Report on the Group financial statements
Our opinion
In our opinion, Countrywide plc’s Group financial statements (the ‘financial statements’):
• give a true and fair view of the state of the Group’s affairs as at 31 December 2015 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, comprise:
• the Consolidated balance sheet as at 31 December 2015;
• the Consolidated income statement and 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 applicable law and IFRSs as adopted
by the European Union.
Our audit approach
Overview
Materiality
Audit scope
Areas of focus
• Overall Group materiality: £3.1 million (2014: £4.0 million) which represents 5% of the
Group’s profit before tax and exceptional items.
• The Group operates in four operating segments as set out in the Annual Report (refer
to pages 88 to 89). 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 the four operating 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 some of the operating segments we audited complete financial information of all the
reporting units and in others we focused on 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 96% (2014: 97%) of the Group’s revenues and 89%
(2014: 93%) 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.
The areas of focus are:
• Judgements and estimates in relation to professional indemnity provisions;
• Impairment assessment of goodwill and other indefinite life intangible assets;
• Accounting for acquisitions, particularly the identification of intangible assets relating to the
businesses acquired; and
• Classification of exceptional items.
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 opposite. 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.
72
Countrywide plc Annual Report 2015
Financial statements 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
Judgements and estimates in relation
to professional indemnity provisions
Refer to page 50 (Report of the Audit and Risk Committee), page 87 (Critical
accounting estimates and judgements), and pages 105 to 106 (notes).
Professional indemnity (PI) provisions principally relate to the Surveyors
and Lambert Smith Hampton businesses within the Business to Business
operating segment.
In common with other valuers, the Group is subject to significant claims in
relation to incorrect mortgage valuation reports primarily carried out between
2004 and 2007. The Group holds professional indemnity insurance for
such matters, but management uses judgement to estimate the net costs
that will be incurred by the Group. All the claims received are listed and
analysed through the Bordereaux report and the provisions held are based
on experience of settling past claims, discussions with the Group’s insurers
and advice from legal counsel.
The provisions are for both claims already received and claims yet to be
received. The second category requires significant management judgement
given the need to estimate the incidence and amount of future claims.
We focused on this area because the determination of the size of the
provisions held and the likely settlements arising are inherently judgemental.
Impairment assessment of goodwill and other indefinite life
intangible assets
Refer to page 50 (Report of the Audit and Risk Committee), page 87 (Critical
accounting estimates and judgements), and pages 95 to 98 (notes).
We focused on this area due to the size of the goodwill balance (£471.6 million)
across the Group and the value of the other intangible assets, principally
brand names (£183.2 million) which are assumed to have indefinite useful
economic lives.
Following the reorganisation of the Group’s structure, the Cash Generating
Units (CGUs) to which goodwill was previously allocated has been altered
and certain goodwill balances have been reallocated between CGUs.
We note that goodwill allocation requires some judgement.
Management concluded that there is significant headroom between the
recoverable value of the CGUs and their carrying value. However, in
relation to brand names, management has impaired £6.1 million of the
carrying value to reflect the cessation in the use of certain brand names
following a strategy review and reorganisation of the business.
This is an area of focus for us because the assessment of the recoverable
value of the CGUs and brand names involves judgements about the future
results of the business and the appropriate discount rates to apply to the
future cash flows.
Claims received
• We checked that the amounts in the Bordereaux report were appropriately
reflected in the books and records, and tested the mathematical accuracy
of the report and the input data.
• With respect to the input data, we agreed a sample of claims received and
provisions made to the advice from lawyers and correspondence with claimants.
• Open large legal claims were discussed with Group Legal, and appropriate
documentation considered to understand the legal position and the basis of
material risk positions. For large claims, we also compared a sample of historical
provisions to the actual amounts settled, determining that management’s
estimation techniques were satisfactory.
• Management holds a provision above that suggested in the Bordereaux report to
reflect the latest observed trends in claims received and settled, the number of
claims with losses, and the average loss on each claim.
Claims yet to be received
• For claims not yet received but incurred, we evaluated the model and approach
used by the management by testing the mathematical accuracy of the underlying
calculations and satisfied ourselves that the input data used reflected the latest
observed trend of claims of losses and average loss incurred.
From the evidence obtained, we consider the level of provisioning at the balance
sheet date to be reasonable.
CGUs and allocation of goodwill and other indefinite life intangible assets
• We considered whether appropriate CGUs have been identified and we agree
with management’s conclusion that the new CGUs represent the smallest identifiable
group of assets that generate independent cash flows and reflect the level at
which key decisions are undertaken in managing the business.
• We examined the basis used to reallocate the goodwill and other indefinite life
intangible assets to the new CGUs and determined that judgements were
appropriate and supported.
Impairment assessment of goodwill and other indefinite life intangible assets
• We assessed management’s impairment methodology under both the existing
and the re-organised Group structure, as required under IAS 36 ‘Impairment
of Assets’. We evaluated management’s cash flow forecasts, and the process
by which they were drawn up, comparing them to the latest Board approved
budget for consistency and testing the underlying calculations successfully.
• We also challenged the directors’ key assumptions for discount rates and growth
rates by comparing them to historical results and industry comparators. We found
that discount rates are in line with industry comparators that we considered.
• We performed sensitivity analysis around the key drivers of the cash flow forecasts.
Our tests included applying:
• a 5% decrease in EBITDA on current growth forecasts;
• WACC rate increased by 20%; and
• no growth during FY2016 and beyond.
• Having ascertained the extent of change in those assumptions that either
individually or collectively would be required for the goodwill and other indefinite
life intangible assets to be impaired, we considered the likelihood of such a
movement arising and concluded that management’s approach was reasonable
and supported by the available evidence.
• In addition, with respect to brand names, having reviewed the discounted cash
flows prepared, we agree with the impairment charge recognised of £6.1 million
relating to the brand names abandoned as part of the reorganisation of the
Group.
On an overall basis, we agree with management’s view that currently appropriate
headroom exists and no further impairment is required.
Annual Report 2015 Countrywide plc
73
Financial statementsCorporate governanceStrategic report
Independent auditor’s report
to the members of Countrywide plc continued
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 acquisitions, particularly the identification
of intangible assets relating to the businesses acquired
Refer to page 50 (Report of the Audit and Risk Committee), page 87
(Critical accounting estimates and judgements) and page 114 (notes).
During the year the Group continued to make a number of acquisitions
with a total consideration of £76.3 million, some of which is deferred and
contingent on the future performance of the acquired entity. As a result of
these acquisitions, the following intangible assets were recognised:
• customer contracts and relationships (£15.3 million);
• brands (£4.4 million);
• pipeline in the estate agency business (£0.5 million); and
• goodwill (£53.1 million).
Accounting for business combinations can be complex, particularly in
relation to the identification of intangible assets and, accounting for
deferred contingent consideration.
The accounting treatment of intangible assets, including their ongoing
impact on the income statement, varies depending on whether they are
seen as having finite or indefinite useful economic lives, and the estimated
life applied to those with finite lives.
We focused on the judgements management made in these respects,
particularly in relation to the identification of intangible assets and any
estimated deferred consideration where linked to the continued employment
of the vendors and, in certain cases, contingent upon future profitability.
Net assets (excluding intangibles) and consideration
• We obtained all material acquisition agreements and read them to ensure that
we understood the substance of the transaction, including the consideration
and the assets and liabilities acquired.
• We agreed the net assets acquired, which consisted mainly of working capital, by
agreeing them to completion statements or other similar supporting documentation
and confirmed that they had been treated in line with the terms of the contract.
• We tested cash consideration to bank statements and checked that any deferred
consideration had been correctly recognised in line with the acquisition agreements,
with no issues being identified.
• We verified that the contingent employment-linked consideration is appropriately
calculated based on the forecast profit levels and charged to the Income statement
in accordance with IFRS 3 ‘Business Combinations.’
Recognition of Intangibles
• We challenged management on the recognition of brand names, customer
relationships and contracts and were able to corroborate these to customer lists
and the Group’s continued use of the related brand names post-acquisition.
• On a sample basis, we tested the accuracy and completeness of models used
for calculating the separately identified intangible assets by comparing them to
models used on previous acquisitions within the Group and our experience of
other valuation models.
• We also tested the accuracy of the calculation of goodwill arising on the
business combinations and noted no issues.
The recognition of intangible assets is judgemental, but we are satisfied that the
assumptions and models used by management are reasonable and consistent with
prior years. We are satisfied that the treatment of consideration is in line with IFRS 3
and concur with the management assumption that budgeted profit targets will be
met on those acquisitions with deferred contingent consideration.
Classification of exceptional items
Refer to page 50 (Report of the Audit and Risk Committee), page 87 (Critical
accounting estimates and judgements) and page 92 and 93 (notes).
The Group recognised net exceptional items of £13.6 million comprising
the following:
• Strategy and restructuring costs (£14.3 million);
• Acquisition costs of £1.0 million and regulatory settlement costs
of £0.8 million; and
• Zoopla deferred income (£2.5 million).
Separately identifying and disclosing items as exceptional on the face of
the income statement requires judgement as such presentation could be
misleading to investors.
We focused on this judgement, the potential for management bias,
as well as the consistency and accuracy of the amounts disclosed
within exceptional items.
• We assessed the rationale behind management’s classification and the
appropriateness of the transactions recognised as exceptional 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.
• We also assessed the completeness and balance of exceptional items through
identifying other large or unusual items in underlying profit, considering potential
disclosure where significant.
• We agreed a sample of expenses to calculations and invoices, and verified
payments made to bank statements to conclude on the consistency and
accuracy of classification.
In light of the strategic changes and restructuring during the year, we are satisfied
that the classification, judgements and disclosures made by management are
appropriate and in line with the Group accounting policy on exceptional items.
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.
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.
74
Countrywide plc Annual Report 2015
Financial statements
Report on the Group financial statements continued
Our audit approach continued
Materiality continued
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall Group materiality
£3.1 million (2014: £4.0 million).
How we determined it
5% of the Group’s profit before tax and exceptional items.
Rationale for benchmark applied We believe that profit before tax is the primary measure used by the shareholders in assessing the
performance of the Group, and is a generally accepted auditing benchmark. We have excluded the effect
of exceptional items to eliminate their disproportionate effect and provide a consistent year-on-year basis
for our work. We do not exclude the adjusted measures of share-based payment charges, amortisation
and employment linked contingent consideration expenses on the basis that these items recur annually.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £0.2 million
(2014: £0.2 million) 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 69, 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 opinion
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; and
• the information given in the Corporate governance statement set out on pages 44 to 45 with respect to internal control and risk
management systems and about share capital structures 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 70, 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.
We have no exceptions
to report.
• the section of the Annual Report on pages 50 to 51, as required by provision C.3.8 of the Code,
describing the work of the Audit and Risk Committee does not appropriately address matters communicated
by us to the Audit and Risk Committee.
We have no exceptions
to report.
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 21 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.
We have nothing material to
add or to draw attention to.
• the disclosures in the Annual Report that describe those risks and explain how they are being managed
or mitigated.
• the directors’ explanation on page 20 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.
We have nothing material to
add or to draw attention to.
Annual Report 2015 Countrywide plc
75
Financial statementsCorporate governanceStrategic report Independent auditor’s report
to the members of Countrywide plc continued
Other required reporting continued
Consistency of other information continued
ISAs (UK & Ireland) reporting continued
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 Companies Act 2006 we are required to report to you if, in our opinion, a corporate governance statement has not been prepared
by the parent company. We have no exceptions to report arising from this responsibility.
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’ responsibilities statement, 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 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
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 parent company financial statements of Countrywide plc for the year ended 31 December 2015
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
25 February 2016
76
Countrywide plc Annual Report 2015
Financial statements Consolidated income statement
For the year ended 31 December 2015
2015
2014
Pre-exceptional
items,
amortisation,
contingent
consideration
and share-based
payments
£’000
Exceptional
items,
amortisation,
contingent
consideration
and share-based
payments
£’000
Pre-exceptional
items,
amortisation
and share-based
payments
£’000
Exceptional
items,
amortisation
and share-based
payments
£’000
Total
£’000
718,699
15,037
733,736
(405,242)
(20,180)
(215,517)
(914)
—
—
—
718,699
15,037
685,094
17,107
733,736
702,201
—
—
—
(13,341)
(11,178)
—
—
(418,583)
(31,358)
(215,517)
(914)
(378,327)
(14,247)
(202,771)
813
(14,467)
(10,112)
—
—
Note
5
4
6
14, 15
7
17(b)
Total
£’000
685,094
17,107
702,201
(392,794)
(24,359)
(202,771)
813
91,883
(24,519)
67,364
107,669
(24,579)
83,090
—
—
2,534
(16,133)
2,534
(16,133)
—
—
17,098
(15,241)
17,098
(15,241)
91,883
(38,118)
53,765
107,669
(22,722)
84,947
(6,376)
321
(6,055)
85,828
(15,168)
—
—
—
(38,118)
9,226
(6,376)
321
(6,055)
47,710
(5,942)
(5,584)
285
(5,299)
—
—
—
102,370
(21,643)
(22,722)
9,931
(5,584)
285
(5,299)
79,648
(11,712)
70,660
(28,892)
41,768
80,727
(12,791)
67,936
70,243
417
(28,892)
—
70,660
(28,892)
41,351
417
41,768
80,268
459
80,727
(12,791)
—
(12,791)
18.93p
18.82p
67,477
459
67,936
30.84p
30.01p
10
10
4
8
9
11
13
13
Revenue
Other income
Employee benefit costs
Depreciation and amortisation
Other operating costs
Share of (loss)/profit from joint venture
Group operating profit/(loss)
before exceptional items
Exceptional income
Exceptional costs
Operating profit/(loss)
Finance costs
Finance income
Net finance costs
Profit/(loss) before taxation
Taxation (charge)/credit
Profit/(loss) for the year
Attributable to:
Owners of the parent
Non-controlling interests
Profit/(loss) attributable for the year
Earnings per share attributable
to owners of the parent
Basic earnings per share
Diluted earnings per share
The notes on pages 82 to 120 form an integral part of these consolidated financial statements.
Annual Report 2015 Countrywide plc
77
Financial statementsCorporate governanceStrategic report
Consolidated statement of comprehensive income
For the year ended 31 December 2015
Profit for the year
Other comprehensive income
Items that will not be reclassified to profit or loss
Actuarial gain/(loss) arising in the pension scheme
Deferred tax arising on the pension scheme
Items that may be subsequently reclassified to profit or loss
Foreign exchange rate loss
Available-for-sale financial assets:
– Gains arising during the year
– Less reclassification adjustments for gains included in the profit and loss
Other comprehensive income for the year
Total comprehensive income for the year
Attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive income for the year
The notes on pages 82 to 120 form an integral part of these consolidated financial statements.
Note
2015
£’000
2014
£’000
41,768
67,936
25
25
3,248
(650)
2,598
(2,415)
507
(1,908)
17(c)
(255)
(117)
7,836
(237)
7,344
9,942
3,200
(11,076)
(7,993)
(9,901)
51,710
58,035
51,293
417
51,710
57,576
459
58,035
78
Countrywide plc Annual Report 2015
Financial statements
Consolidated statement of changes in equity
For the year ended 31 December 2015
Attributable to owners of the parent
Share
capital
£’000
Share
premium
£’000
Other
reserves
£’000
Retained
earnings
£’000
Note
Non-
controlling
interests
£’000
Total
£’000
Total
equity
£’000
Balance at 1 January 2014
Profit for the year
Other comprehensive income
Currency translation differences
Movement in fair value of
available-for-sale financial assets
Reclassification of gains on
disposal of available-for-sale financial assets
Actuarial loss in the pension fund
Deferred tax movement relating to pension
Total other comprehensive income
Total comprehensive income
Transactions with owners
Share-based payment transactions
Deferred tax on share-based payments
Acquisition of non-controlling interest in subsidiary
Purchase of treasury shares
Dividends paid
Transactions with owners
Balance at 1 January 2015
Profit for the year
Other comprehensive income
Currency translation differences
Realisation of capital reorganisation reserve
on liquidation of Countrywide Holdings, Ltd
Movement in fair value
of available-for-sale financial assets
Reclassification of gains on disposal
of available-for-sale financial assets
Actuarial gain in the pension fund
Deferred tax movement relating to pension
Total other comprehensive income
Total comprehensive income
Transactions with owners
Issue of share capital
Share-based payment transactions
Deferred tax on share-based payments
Liquidation of non-controlling interest in subsidiary
Purchase of treasury shares
Utilisation of treasury shares for IPO options
Dividends paid
Transactions with owners
Balance at 31 December 2015
17(c)
25
25
27
28
12
17(c)
25
25
26
27
28
28
12
2,194 211,841 120,966 185,722 520,723
67,477
67,477
—
—
—
517 521,240
67,936
459
—
—
—
—
—
—
(117)
3,200
(11,076)
(2,415)
507
(9,901)
(117)
3,200
—
—
(117)
3,200
(11,076)
—
—
—
(2,415)
507
(11,076)
(2,415)
507
(7,993)
(1,908)
(9,901)
—
—
—
—
—
—
—
(7,993)
65,569
57,576
459
58,035
—
—
—
—
—
—
— (14,290)
—
11,367
(369)
260
11,367
(369)
260
— (14,290)
(43,889)
— (43,889)
—
—
(260)
11,367
(369)
—
— (14,290)
(44,415)
(526)
— (14,290)
(32,631)
(46,921)
(786)
(47,707)
—
—
—
—
—
—
—
—
—
—
—
—
—
2,194 211,841
—
—
98,683 218,660 531,378
41,351
41,351
—
190 531,568
41,768
417
—
—
—
—
—
—
—
—
(255)
—
(255)
— (92,820)
92,820
—
—
—
—
—
7,836
—
7,836
(237)
—
—
—
3,248
(650)
(237)
3,248
(650)
— (85,476)
95,418
9,942
—
—
—
—
—
—
—
(255)
—
7,836
(237)
3,248
(650)
9,942
—
— (85,476) 136,769
51,293
417
51,710
2
—
—
—
—
—
—
2
(2)
—
—
—
—
—
—
(2)
—
—
—
—
(7,760)
20,035
—
3,226
(767)
50
—
(20,035)
— (32,944)
—
3,226
(767)
50
(7,760)
—
(32,944)
—
—
—
(50)
—
—
(454)
—
3,226
(767)
—
(7,760)
—
(33,398)
12,275
(50,470)
(38,195)
(504)
(38,699)
2,196 211,839
25,482 304,959 544,476
103 544,579
The notes on pages 82 to 120 form an integral part of these consolidated financial statements.
Annual Report 2015 Countrywide plc
79
Financial statementsCorporate governanceStrategic report Consolidated balance sheet
As at 31 December 2015
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investment property
Investments accounted for using the equity method:
Investments in joint venture
Available-for-sale financial assets
Deferred tax assets
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity attributable to the owners of the parent
Share capital
Share premium
Other reserves
Retained earnings
Non-controlling interests
Total equity
Liabilities
Non-current liabilities
Borrowings
Net defined benefit scheme liabilities
Provisions
Deferred income
Trade and other payables
Deferred tax liability
Total non-current liabilities
Current liabilities
Borrowings
Trade and other payables
Deferred income
Provisions
Current tax liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Note
2015
£’000
2014
£’000
14(a)
14(b)
15
16
17(b)
17(c)
24
471,626
239,457
49,974
—
2,305
57,760
10,645
418,496
236,996
45,523
13,235
3,219
33,290
16,215
831,767
766,974
18
19
123,432
24,336
98,644
28,583
147,768
127,227
979,535
894,201
26
28
17(a)
2,196
211,839
25,482
304,959
544,476
103
2,194
211,841
98,683
218,660
531,378
190
544,579
531,568
21
25
23
22
20
24
21
20
22
23
4,586
415
16,899
4,967
4,709
40,669
86,950
5,216
25,457
6,961
4,344
44,858
72,245
173,786
204,662
128,503
4,111
22,336
3,099
44,760
109,312
5,708
22,035
7,032
362,711
188,847
434,956
362,633
979,535
894,201
The notes on pages 82 to 120 form an integral part of these consolidated financial statements.
The financial statements on pages 77 to 120 were approved by the Board of directors and signed on its behalf by:
Jim Clarke
Chief financial officer
25 February 2016
80
Countrywide plc Annual Report 2015
Financial statements
Consolidated cash flow statement
For the year ended 31 December 2015
Cash flows from operating activities
Profit before taxation
Adjustments for:
Depreciation
Amortisation of intangible assets
Share-based payments
Impairment of intangible assets
Profit on disposal of non-current assets
Unrealised gains on revaluation of available-for-sale financial assets
Amortisation of deferred income
Loss/(income) from joint venture
Finance costs
Finance income
Changes in working capital (excluding effects of acquisitions and disposals of Group undertakings):
Increase in trade and other receivables
Decrease in trade and other payables
(Decrease)/increase in provisions
Net cash generated from operating activities
Interest paid
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Acquisitions net of cash acquired
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of non-controlling interest
Proceeds from sale of property, plant and equipment
Proceeds from disposal of business
Proceeds from disposal of available-for-sale financial assets
Capital expenditure/purchase of investment property
Purchase of available-for-sale financial assets
Dividends received
Interest received
Net cash outflow from investing activities
Cash flows from financing activities
Term and revolving facility loan drawn
Financing fees paid
Capital repayment of finance lease liabilities
Dividends paid to owners of the parent
Dividends paid to non-controlling interests
Purchase of own shares
Net cash inflow/(outflow) from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
The notes on pages 82 to 120 form an integral part of these consolidated financial statements.
Note
2015
£’000
2014
£’000
15
14
27
14
10
17(b)
8
9
29
15
14
16
17(c)
17(b)
21
21
12
26
47,710
79,648
14,244
17,114
3,226
6,126
(1,413)
(1,202)
(2,534)
914
6,376
(321)
9,824
14,535
11,367
—
(16,949)
—
(2,534)
(813)
5,584
(285)
90,240
100,377
(14,297)
(2,419)
(8,349)
65,175
(5,213)
(13,687)
(4,119)
(10,309)
2,052
88,001
(5,004)
(15,531)
46,275
67,466
(62,875)
(16,561)
(5,431)
—
3,898
—
383
(171)
(2,438)
—
321
(41,017)
(17,355)
(6,084)
(857)
294
1,959
21,302
(13,017)
(2,186)
507
285
(82,874)
(56,169)
80,000
(1,127)
(5,363)
(32,944)
(454)
(7,760)
45,000
(813)
(4,521)
(43,889)
(526)
(14,290)
32,352
(19,039)
(4,247)
28,583
(7,742)
36,325
19
24,336
28,583
Annual Report 2015 Countrywide plc
81
Financial statementsCorporate governanceStrategic report
Notes to the financial statements
1. General information
Countrywide plc (‘the Company’), and its
subsidiaries (together, ‘the Group’), is the
leading integrated, full service residential
estate agency and property services group
in the UK, measured by both revenue and
transaction volumes in 2015. It offers estate
agency and lettings services, together with
a range of complementary services, and
has a significant presence in key areas and
property types which are promoted through
locally respected brands.
The Company is a public limited company,
which is listed on the London Stock Exchange
and incorporated and domiciled in the UK
(registered number: 08340090). The address
of its registered office is County House,
Ground Floor, 100 New London Road,
Chelmsford, Essex CM2 0RG.
2. Accounting policies
The principal accounting policies applied
in the preparation of these consolidated
financial statements are set out below.
These policies have been consistently
applied to the years presented.
(a) Basis of preparation
The consolidated financial statements have
been prepared under the historical cost
convention, as modified by the revaluation
of available-for-sale financial assets and
financial liabilities at fair value through profit
or loss, and in accordance with International
Financial Reporting Standards (IFRSs) and
IFRS Interpretations Committee (IFRS IC)
as adopted by the European Union and
the Companies Act 2006 applicable to
companies reporting under IFRS.
The preparation of the consolidated financial
information in conformity with IFRS requires
the use of certain critical accounting estimates
and requires management to exercise
judgement in the process of applying the
Group’s accounting policies. The areas involving
a higher degree of judgement or complexity,
or areas where assumptions and estimates
are significant to the consolidated financial
statements, are disclosed in note 3.
(b) Going concern
These financial statements have been prepared
on a going concern basis, which assumes that
the Group will be able to meet its liabilities
when they fall due for the foreseeable future.
The Board of directors has reviewed cash
flow forecasts, which have been stress tested
with various assumptions regarding future
housing market volumes, and concluded that
it is appropriate to prepare the financial
statements on a going concern basis.
82
Countrywide plc Annual Report 2015
(c) New standards, amendments
and interpretations
Standards, amendments and interpretations
effective and adopted by the Group
The annual improvements to existing standards
which are mandatory for the Group for the
first time for the financial year beginning
on or after 1 January 2015 (IFRS 1, IFRS 3,
IFRS 13, IAS 40 and IFRIC 21) have had
no material impact on the Group.
New standards and
interpretations not yet adopted
Certain new accounting standards and
interpretations have been published that
are not mandatory for 31 December 2015
reporting periods and have not been early
adopted by the Group. None of these new
standards or interpretations are expected to
have a material impact on the consolidated
financial statements of the Group, with the
exception of the following:
• Amendments to IAS 19
‘Employee benefits’;
• IFRS 9 ‘Financial instruments’;
• IFRS 15 ‘Revenue from contracts
with customers’; and
• IFRS 16 ‘Leases’.
The directors do not expect that the adoption
of the standards listed above will have a
material impact on the financial statements
of the Group in future periods, except that
IFRS 9 will impact both the measurement
and disclosures of financial instruments,
IFRS 15 may have an impact on revenue
recognition and related disclosures and
IFRS 16 will require virtually all lease contracts
to be recognised on the balance sheet as well
as significant new, enhanced disclosures.
At this stage the Group is not able to estimate
the impact of the new rules on the Group’s
financial statements. The Group will make
more detailed assessments of the impact
over the next twelve months.
(d) Basis of consolidation
Subsidiaries
Subsidiaries are all entities over which the
Group has 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 affect
those returns through its power over the
entity. Subsidiaries are fully consolidated
from the date on which control is transferred
to the Group. They are deconsolidated from
the date that control ceases.
During 2014, the Group consolidated the
results and position of Albion PRS Investments
Unit Trust (see note 16) as the Group controlled
the Unit Trust and had the ability to affect
returns though its power over the Unit Trust.
Further external investment in 2015, and
finalisation of a full and independent fund
structure, removed the ability of the Group
to control the investment from 15 May 2015.
From this date, the property fund units were
transferred to available-for-sale financial
assets with subsequent changes in valuation
being recorded in other comprehensive
income. Please refer to notes 16 and 17
for further information.
The purchase method of accounting is used
to account for acquisitions and the cost of
acquisition is measured as the fair value of
assets given, equity instruments issued and
liabilities incurred. Identifiable assets acquired
and liabilities and contingent liabilities assumed
in a business combination are measured at their
fair value at the acquisition date. Acquisition
costs are written off to the income statement.
The accounting policies of subsidiaries
acquired are changed, where necessary,
to ensure consistency with policies operated
by the Group.
The Group recognises any non-controlling
interest in the acquiree on an acquisition-by-
acquisition basis, either at fair value or at the
non-controlling interest’s proportionate share
of the recognised amounts of the acquiree’s
identifiable net assets. If the business
combination is achieved in stages, the
acquisition date fair value of the acquirer’s
previously held equity interest in the acquiree
is remeasured to fair value at the acquisition
date through profit or loss.
Goodwill is recorded as the excess of the
aggregate of the consideration transferred
and fair value of non-controlling interest over
the fair value of the net identifiable assets
acquired and liabilities assumed. If this
consideration is lower than the fair value
of net assets of the subsidiary acquired, the
difference is recognised in profit or loss.
Transactions with non-controlling interests
that do not result in loss of control are
accounted for as equity transactions – that
is, as transactions with the owners in their
capacity as owners. The difference between
fair value of any consideration paid and the
relevant share acquired of the carrying value
of net assets of the subsidiary is recorded
in equity. Gains or losses on disposals to
non-controlling interests are also recorded
in equity.
Joint ventures
Under the equity method of accounting,
interests in 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 a joint venture equals or
exceeds its interests in the joint venture, the
Group does not recognise further losses
except to the extent that it has incurred
obligations or made payments on behalf of
the joint venture. Accounting policies of the
joint venture are aligned where applicable.
Financial statements 2. Accounting policies continued
(d) Basis of consolidation continued
Transactions eliminated on consolidation
Intra-group balances, and any gains and
losses or income and expenses arising from
intra-group transactions, are eliminated
in preparing the consolidated financial
information. Gains arising from transactions
with jointly controlled entities are eliminated
to the extent of the Group’s interest in the
entity. Losses are eliminated in the same
way as gains, but only to the extent that
there is no evidence of impairment.
(e) Foreign currency translation
The functional currency of the Company is
Pounds Sterling because that is the currency
of the primary economic environment in
which the Group operates. The Group’s
presentational currency is Pounds Sterling.
Transactions and balances
Foreign currency transactions are translated
into the functional currency using the exchange
rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting
from the settlement of such transactions and
from the translation at year-end exchange
rates of monetary assets and liabilities
denominated in foreign currencies are
recognised in the income statement.
Foreign exchange gains and losses that relate
to borrowings and cash and cash equivalents
are presented in the income statement within
‘finance income or costs’. All other foreign
exchange gains and losses are presented in
the income statement within ‘other income’
or ‘other operating costs’.
Group companies
The results and financial position of all the
Group entities (none of which have the currency
of a hyperinflationary economy) that have
a functional currency different from the
presentation currency are translated into
the presentation currency as follows:
• assets and liabilities for each balance sheet
presented are translated at the closing rate
at the date of that balance sheet;
• income and expenses for each income
statement presented are translated at
average exchange rates (unless this average
is not a reasonable approximation of the
cumulative effect of the rates prevailing
on the transaction dates, in which case
income and expenses are translated at the
rate on the dates of the transactions); and
• all resulting exchange differences are
recognised in other comprehensive income.
Goodwill and fair value adjustments arising
on the acquisition of a foreign entity are treated
as assets and liabilities of the foreign entity
and translated at the closing rate. Exchange
differences arising are recognised in equity.
The following exchange rates were applied
for £1 Sterling at 31 December:
Hong Kong Dollars
Euros
Barbadian Dollars
2015
11.49
1.36
—
2014
12.10
1.28
3.12
(f) Property, plant and equipment
Investment property
Investment property, which is property held
to earn rentals or capital appreciation, is
initially measured at cost, including related
transaction costs, and is then stated at fair
value. Changes in the fair value of investment
property are included in profits for the year
to which they relate. The valuation methods
applied are detailed in note 16.
Owned assets
Items of property, plant and equipment are
stated at cost or deemed cost less accumulated
depreciation and impairment losses. Cost
includes the original purchase price of the
asset and the costs attributable to bringing
the asset to its working condition for its intended
use. When parts of an item of property, plant
and equipment have different useful lives, those
components are accounted for as separate
items of property, plant and equipment.
Subsequent costs are included in the asset’s
carrying amount or recognised as a separate
asset, as appropriate, only when it is probable
that future economic benefits associated with
the item will flow to the Group and the cost
of the item can be measured reliably.
Gains and losses on disposals are
determined by comparing the proceeds
with the carrying amount and are recognised
in the income statement.
Leased assets
Leases under which the Group assumes
substantially all the risks and rewards of
ownership of an asset are classified as finance
leases. Property, plant and equipment acquired
under finance leases is recorded at fair value
or, if lower, the present value of minimum
lease payments at inception of the lease,
less accumulated depreciation and any
impairment losses.
Each lease payment is allocated between the
liability and finance charges. The corresponding
rental obligations, net of finance charges,
are included within borrowings. The interest
element of the finance cost is charged to
the income statement over the lease period
so as to produce a constant periodic rate
of interest on the remaining balance of the
liability for each period. The property, plant
and equipment under finance leases is
depreciated over the shorter of the useful
life of the asset and lease term.
Depreciation
Depreciation is charged to profit or loss on a
straight line basis over the estimated useful
lives of each part of an item of property, plant
and equipment. The property, plant and
equipment acquired under finance leases
is depreciated over the shorter of the useful
life of the asset and the lease term. Freehold
land is not depreciated. The estimated useful
lives are as follows:
• Freehold buildings – 50 years
• Leasehold improvements – over the
period of the lease
• Furniture and equipment – three to five years
• Motor vehicles – three to five years
The residual values and useful lives are
reviewed, and adjusted if appropriate,
at each balance sheet date.
(g) Intangible assets
Goodwill
Goodwill has been recognised on acquisitions
of subsidiaries and joint ventures. Goodwill
represents the excess of the cost of an
acquisition over the fair value of the Group’s
share of the net identifiable assets of the
acquiree at the date of acquisition and the
value of the non-controlling interest in the
acquiree. Acquisition costs are written off
to the income statement.
Goodwill is stated at cost less any accumulated
impairment losses. Goodwill is allocated to
cash generating units and is not amortised
but is tested annually for impairment or more
frequently if events or changes in circumstances
indicate potential impairment. The allocation
is made to those cash generating units or
groups of units that are expected to benefit
from the business combination in which the
goodwill arose. The units or groups of units
are identified at the lowest level at which
goodwill is monitored for internal
management purposes.
In respect of joint ventures, the carrying amount
of goodwill is included in the carrying amount
of the investment in the joint venture.
Excess of the acquirer’s interest in the net
fair value of the acquiree’s identifiable assets,
liabilities and contingent liabilities over cost
arising on an acquisition is recognised in
the income statement.
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Financial statementsCorporate governanceStrategic report 2. Accounting policies continued
(g) Intangible assets continued
Other intangible assets
Intangible assets other than goodwill that are
acquired by the Group, principally acquired
brands, customer contracts and relationships,
computer software, pipeline and other
intangibles, are stated at cost less accumulated
amortisation, where charged, and impairment
losses. Brands are considered to have
indefinite lives.
Acquired computer software is capitalised on
the basis of the costs incurred to acquire and
bring to use the specific software. Internal
costs that are incurred during the development
of significant and separately identifiable
computer software for use in the business
are capitalised where the software is integral
to the generation of future economic benefits.
Internal costs that are capitalised are limited
to incremental costs specific to the project.
Other development expenditures that do
not meet the criteria for capitalisation are
recognised as an expense as incurred.
Development costs previously recognised
as an expense are not recognised as an
asset in a subsequent period.
Amortisation
Amortisation is charged to profit or loss on a
straight line basis over the estimated useful
lives of intangible assets unless such lives
are indefinite. The estimated useful lives are
as follows:
• Computer software – one to five years
• Brand names – indefinite life
Assets are tested annually for impairment
or more frequently if events or changes in
circumstances indicate potential impairment.
• Customer contacts and relationships –
five to ten years
• Pipeline (agreed but un-exchanged house
sales at date of acquisition) – three months
• Other intangibles – 25 years
(h) Impairment of non-financial assets
The carrying amounts of the Group’s
non-current assets are reviewed for impairment
annually or whenever events and changes
in circumstances indicate that the carrying
amount may not be recoverable. If any such
indication exists, the asset’s recoverable
amount is estimated.
In respect of goodwill, intangible assets that
have an indefinite useful life and intangible
assets that are not yet available for use, the
recoverable amount is estimated at each
balance sheet date. The recoverable amount
is the higher of fair value less costs to sell
and value in use.
Impairment losses represent the amount
by which the carrying value exceeds the
recoverable amount; they are recognised in
profit or loss. Impairment losses recognised
in respect of cash generating units are allocated
first to reduce the carrying amount of any
goodwill allocated to the cash generating unit
and then to reduce the carrying amount of the
other assets in the unit on a pro-rata basis.
An impairment loss in respect of goodwill is
not reversed. In respect of other assets, an
impairment loss is reversed if there has been
a change in the estimates used to determine
the recoverable amount.
An impairment loss is reversed only to the
extent that the asset’s carrying amount does
not exceed the carrying amount that would
have been determined, net of depreciation
or amortisation, if no impairment loss had
been recognised.
(i) Financial assets
Classification
The Group classifies its financial assets as
loans and receivables and available-for-sale
financial assets. The classification depends
on the purpose for which the financial assets
were acquired. Management determines
the classification of its financial assets at
initial recognition.
Loans and receivables
Loans and receivables are non-derivative
financial assets with fixed or determinable
payments that arise principally through the
provision of services to customers. They
are initially recognised at fair value and are
subsequently stated at amortised cost using
the effective interest method. They are included
in current assets, except for maturities
greater than twelve months after the end of
the reporting period. Loans and receivables
comprise mainly cash and cash equivalents
and trade and other receivables.
Available-for-sale
Available-for-sale financial assets are
non-derivative financial 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 twelve months of the
end of the reporting period.
Available-for-sale (AFS) financial assets are
non-derivatives valued on the following basis
as detailed in note 17.
Gains and losses arising from changes in fair
value are recognised in other comprehensive
income and accumulated in the AFS revaluation
reserve with the exception of impairment
losses which are recognised directly in profit
and loss. Where the investment is disposed
of or is determined to be impaired, the
cumulative gain or loss previously recognised
in the AFS revaluation reserve is reclassified
to profit or loss.
Dividends on AFS equity instruments are
recognised in profit or loss when the Group’s
right to receive the dividends is established.
Recognition and measurement
Regular purchases and sales of financial assets
are recognised on the trade date: the date
on which the Group commits to purchase or
sell the asset. Financial assets are derecognised
when the rights to receive cash flows from
the investments have expired or have been
transferred and the Group has transferred
substantially all risks and rewards of ownership.
Loans and receivables and available-for-sale
financial assets are initially recognised at fair
value. Available-for-sale financial assets are
subsequently carried at fair value. Loans
and receivables are subsequently carried
at amortised cost using the effective
interest method.
Changes in the fair value of monetary and
non-monetary securities classified as
available-for-sale are recognised in other
comprehensive income.
When securities classified as available-for-
sale are sold or impaired, the accumulated
fair value adjustments recognised in equity
are included in the income statement as
‘gains and losses from investment securities’.
Dividends on available-for-sale equity
instruments are recognised in the income
statement as part of other income when
the Group’s right to receive payments
is established.
Impairment of financial assets
Impairment provisions are recognised when
there is objective evidence (such as significant
financial difficulties on the part of the
counterparty or default or significant delay
in payment) that the Group will be unable
to collect all of the amounts due under the
terms receivable, the amount of such a
provision being the difference between the
net carrying amount and the present value
of the future expected cash flows associated
with the impaired receivable.
For trade receivables, which are reported net
of provisions, such provisions are recorded
in a separate provision account with the loss
being recognised within other operating costs
in the income statement. On confirmation that
the trade receivable will not be collectable,
the gross carrying value of the asset is
written off against the associated provision.
In the case of assets classified as available-
for-sale, impairment losses are recognised in
the consolidated income statement and arise
from objective evidence that these assets
have declined in value such as a significant
or prolonged decline in the fair value of the
security below its cost.
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Financial statementsNotes to the financial statements continued 2. Accounting policies continued
(j) Trade and other receivables
Trade and other receivables are recognised
initially at fair value and subsequently measured
at amortised cost less an impairment provision.
A provision for impairment of trade receivables
is established when there is objective evidence
that the Group will not be able to collect all
amounts due according to the original terms
of the receivables. Significant trade receivables
are reviewed for impairment if they are past
due. Trade receivables past due beyond 90
days for individual customers or 180 days
for commercial contracts that are not assessed
to be impaired individually are, in addition,
assessed for impairment on a collective basis.
(k) Cash and cash equivalents
Cash and cash equivalents comprise cash
balances and call deposits with an original
maturity of three months or less. Bank
overdrafts that are repayable on demand
and form an integral part of the Group’s cash
management are included as a component
of cash and cash equivalents for the purpose
of the statement of cash flows and are
presented in current liabilities.
(l) Trade and other payables
Trade and other payables are recognised
initially at fair value and subsequently
measured at amortised cost.
(m) Borrowings
Borrowings are initially recognised at fair
value, net of transaction costs incurred. Such
interest-bearing liabilities are subsequently
measured at amortised cost using the effective
interest rate method, which ensures that any
interest expense over the period to repayment
is at a constant rate on the balance of the
liability carried in the balance sheet. Interest
expense in this context includes initial
transaction costs and premiums payable on
redemption, as well as any interest payable
while the liability is outstanding.
(n) Options to acquire
non-controlling interests
Options to acquire non-controlling interests
in the future are initially accounted for at fair
value with a corresponding charge directly
to equity. Such options are subsequently
measured at fair value, using the effective
interest rate method, in order to accrete
the liability up to the amount payable under
the option at the date at which it becomes
exercisable. The charge arising is recorded
as a finance cost and the liability is shown
in other financial liabilities. The risks and
rewards of ownership of the non-controlling
interests remain with the sellers and therefore
the non-controlling interest is recognised by
the Group. The put options are contractual
puts at the discretion of the sellers.
(o) Pensions
The Group operates various post-employment
schemes, including both defined benefit and
defined contribution pension plans.
Defined contribution plans
The Group pays fixed contributions to
separately administered pension insurance
plans. The Group has no further obligations
once the contributions have been paid. The
contributions are recognised as an employee
benefit expense when they are due.
Defined benefit plans
The liability recognised in the balance sheet
in respect of defined benefit pension plans
is the present value of the defined benefit
obligation at the end of the reporting period
less the fair value of plan assets. The defined
benefit obligation is calculated annually by
independent actuaries using the projected
unit credit method. The present value of the
defined benefit obligation is determined by
discounting the estimated future cash outflows
using interest rates of high quality corporate
bonds that are denominated in the currency
in which the benefits will be paid and that
have terms to maturity approximating to the
terms of the related pension obligation.
Actuarial gains and losses arising from
experience adjustments and changes in
actuarial assumptions are charged or
credited to equity in other comprehensive
income in the period in which they arise.
Past service costs are recognised
immediately in income.
(p) Share-based payments
The Group operates a number of equity-settled
share-based schemes under which the
Group receives services from employees as
consideration for equity instruments (options)
of the Group. The fair value of the employee
services received in exchange for the grant
of the options is recognised as an expense.
Where the share awards have non-market
related performance criteria the Group has
used the Binomial Lattice and Black Scholes
option valuation models to establish the
relevant fair values. Where the share awards
have TSR market-related performance criteria
the Group has used the Monte Carlo simulation
valuation model to establish the relevant fair
values (see note 27). The resulting values are
amortised through the income statement
over the vesting period of the options and
other grants.
At the end of each reporting period, the Group
revises its estimates of the number of options
that are expected to vest based on the
non-market conditions and recognises the
impact of the revision to original estimates,
if any, in the income statement, with a
corresponding adjustment to equity.
The social security contributions payable in
connection with the grant of the share options
are considered an integral part of the grant
itself, and the charge will be treated as a
cash-settled transaction.
(q) Provisions
A provision is recognised in the balance
sheet when the Group has a present legal
or constructive obligation as a result of a
past event, and it is probable that an outflow
of economic benefits will be required to settle
the obligation. Provisions are determined by
discounting the expected future cash flows
at a pre-tax rate that reflects current market
assessments of the time value of money and,
when appropriate, the risks specific to the
liability. The increase in the provision due to
passage of time is recognised in finance costs.
(r) 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 the employee benefit trust purchases
the Company’s equity share capital (treasury
shares), the consideration paid, including any
directly attributable incremental costs, is
deducted from equity attributable to the
Company’s equity holders until the shares
are cancelled or reissued.
(s) Revenue
Services rendered
Revenue comprises mainly commission and
fees receivable. Commission earned on sales
of residential and commercial property is
accounted for on the exchange of contracts for
such sales. Survey, valuation and conveyancing
fees are accounted for on completion of the
service being provided. Commission earned
on sales of insurance policies, mortgages
and related products is accounted for when
the policies go on risk or the mortgage is
exchanged. The Group offers the following
residential lettings services to customers:
Tenant Introduction, Tenant Renewal, Standard
Lettings (often referred to as Rent Collection),
or a Full Property Management service, plus
a Leasehold Property Management service.
Commissions and fees earned for Tenant
Introduction (or Tenant Renewal) in respect
of securing (or extending) the letting are
recognised in full at the point of delivery
of the service, which is considered to be
when the underlying tenancy agreement
commences. A revenue clawback provision,
based on historical experience, is recognised
for those contracts containing a break clause
and which may require a refund if broken
early. Fees for standard lettings and property
management services, including leasehold
property management services, are recognised
on a straight line basis over the life of the
agreement. Revenue generated by Surveying
Services from panel management contracts
is reported net of any fees paid on behalf of
panel valuers, reflecting the fact that the Group
does not act as the principal in these contracts.
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Financial statementsCorporate governanceStrategic report 2. Accounting policies continued
(s) Revenue continued
Services rendered continued
Revenue in respect of consultancy services
performed is recognised as activity progresses
to reflect the Group’s partial performance of
its contractual obligations. Activity performance
in excess of invoices raised is included within
‘amounts due from customers for contract
work’. Where amounts have been invoiced
in excess of work performed, the excess is
included within ‘amounts due to customers
for contract work’. If the right to consideration
is conditional or contingent on a specified
future event or outcome, the outcome of
which is outside the control of the Group,
revenue is not recognised until that critical
event occurs.
Under certain service contracts, the Group
manages client expenditure and is obliged to
purchase goods and services from suppliers
and recharge them on to the customer at
cost. The amounts charged by suppliers and
recharged to clients are excluded from
revenue and administrative expenses.
Receivables, payables and cash relating to
these transactions are included in the
balance sheet.
Deferred income
Where the Group receives an amount upfront
in respect of future income streams, the value
of the receipt is amortised over the period of
the contract as the services are delivered
and the unexpired element is disclosed in
liabilities as deferred income.
(t) Other income
Other income is recognised when its receipt
is assured and the Group has no further
obligations to any other party in respect
of that income. Rental income from sub-let
properties is recognised in profit or loss on
a straight line basis over the term of the lease.
Lease incentives granted are recognised as
an integral part of the total rental income.
Dividend income is recognised when the
right to receive payment is established.
(u) Operating lease payments
Payments under operating leases are
recognised in profit or loss on a straight line
basis over the term of the lease. Lease
incentives received are recognised in profit
or loss as an integral part of the total
lease expense.
(v) Net finance costs
Finance costs
Finance costs comprise interest payable
on borrowings (including finance lease
commitments), net interest costs on the
pension scheme liabilities, the unwinding
of the discount rates in respect of financial
liabilities and provisions, premiums payable
on settlement or redemption and direct issue
costs. Interest costs accrue using the effective
interest method. Fees paid on the establishment
of loan facilities are recognised as transaction
costs of the loan and amortised over the
period to which the facility relates.
Finance income
Finance income comprises interest receivable
on funds invested. Interest income is recognised
in profit or loss as it accrues using the effective
interest method.
(w) Adjusting items
As permitted by IAS 1 ‘Presentation and
disclosure’ certain items are presented
separately in the income statement as
exceptional 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. Examples of material
and non-recurring items which may give rise
to disclosure as exceptional items include
strategic costs of restructuring existing
businesses, integration of newly acquired
businesses, asset impairments and costs
associated with acquiring new businesses.
The columnar presentation of our income
statement separates exceptional items as well
as adjusting items, specifically amortisation
of intangibles arising on business acquisitions,
contingent consideration and share-based
payments, to illustrate consistently the Group’s
underlying business performance.
(x) Income tax
Income tax comprises current and deferred
tax. Income tax is recognised in profit or loss
except to the extent that it relates to items
recognised in other comprehensive income
or directly in equity, in which case it is
recognised in other comprehensive income
or directly in equity respectively.
Current tax is the expected tax payable on
the taxable income for the year, using tax
rates enacted or substantively enacted at the
balance sheet date, and any adjustment to
tax payable in respect of previous years.
Deferred tax is provided using the balance
sheet liability method, providing for temporary
differences between the carrying amounts
of assets and liabilities for financial reporting
purposes and the amounts used for
taxation purposes.
The following temporary differences are not
provided for: the initial recognition of goodwill;
the initial recognition of other assets or liabilities
that affect neither accounting nor taxable profit;
and differences relating to investments in
subsidiaries to the extent that they are unlikely
to reverse in the foreseeable future. The amount
of deferred tax provided is based on the
expected manner of realisation or settlement
of the carrying amount of assets and liabilities,
using tax rates enacted or substantively
enacted at the balance sheet date.
A deferred tax asset is recognised only to the
extent that it is probable that future taxable
profits will be available against which the asset
can be utilised. Deferred tax assets are reduced
to the extent that it is no longer probable that
the related tax benefit will be realised.
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 deferred income
taxes assets and liabilities relate to income
taxes levied by the same taxation authority
on either the taxable entity or different taxable
entities where there is an intention to settle
the balances on a net basis.
Deferred income tax is provided on
temporary differences arising on investments
in subsidiaries and joint ventures, except for
deferred income tax liability where the timing
of the reversal of the temporary difference
is controlled by the Group and it is probable
that the temporary difference will not reverse
in the foreseeable future.
Additional income taxes that arise from
the distribution of dividends are recognised
at the same time as the liability to pay the
related dividend.
(y) Segment reporting
Operating segments are reported in a manner
consistent with the internal reporting to the
Executive Committee which has been identified
as the chief operating decision maker.
(z) Dividend distribution
Dividend distribution to the Company’s
shareholders is recognised as a liability in
the Group’s financial statements in the period
in which the dividends are approved by the
Company’s shareholders. Interim dividends
are recognised when paid.
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Financial statementsNotes to the financial statements continued 3. Critical accounting
judgements and estimates
The preparation of the Group’s consolidated
financial statements under IFRS requires the
directors to make estimates and assumptions
that affect the reported amounts of assets
and liabilities and the disclosure of contingent
assets and liabilities. Estimates and judgements
are continually evaluated and are based
on historical experience and other factors
including expectations of future events that
are believed to be reasonable under the
circumstances. Actual results may differ
from these estimates, given the uncertainty
surrounding the assumptions and conditions
upon which the estimates are based.
The directors consider that the following
estimates and judgements are likely to have
the most significant effect on the amounts
recognised in the Group’s consolidated
financial statements.
Professional indemnity provisions
When evaluating the impact of potential
liabilities arising from claims against the Group,
the Group takes legal and professional advice
to assist it in arriving at its estimation of the
liability taking into account the probability of
the success of any claims and also the likely
development of claims based on recent trends.
The Group has made provision for claims
received under its professional indemnity
insurance arrangements. The provision
can be broken down to three categories:
• Reserves for known claims: These losses
are recommended by our professional claims
handlers and approved panel law firms
who take into account all the information
available on the claims and recorded on
our insurance bordereaux. Where there is
insufficient information on which to assess
the potential losses, initial reserves may be
set at an initial level to cover investigative
costs or nil. Further provisions are also made
for specific large claims which may be subject
to litigation and the directors assess the
level of these provisions based on legal
advice and the likelihood of success.
• Provision for the losses on known claims
to increase: It can take one to two years
for claims to develop after they are initially
notified to the Group. For this reason,
the Group creates a provision based
on historical loss rates for closed claims
and average losses for closed claims.
• Provision for incurred but not reported
(IBNR): The Group also provides for future
liabilities arising from claims IBNR for
mortgage valuation reports and home buyer
reports performed by Surveying Services.
This provision is estimated on a future
projection of historical data for all claims
received based on the number of surveys
undertaken to date. This projection takes
into account the historic claim rate, the
claim liability rate and the average loss per
claim. In view of the significant events in
the financial markets and the UK property
market in recent years, the directors have
identified a separate sub-population of
claims received which is tracked separately
from the normal level of claims. This
sub-population has been defined as claims
received since 2009 for surveys carried
out between 2004 and 2008.
The estimate of these provisions by their
nature is judgemental. The three key inputs,
claim rate, claim liability rate and average
loss, are very sensitive to any change in trends.
Claim rate – the number of claims received
compared to the number of surveys performed.
During 2015 the number of claims received
continued to decline and were lower than
expected and the claim rate declined for the
first time. Nevertheless, 84% of the claims
received were for surveys over six years old.
While there is very little experience relating
to old claims on which to base any future model
our experience in the second half of 2015
was favourable and we do not foresee any
reason to increase our rates. There is a
possible risk that a significant rise in mortgage
interest rates could lead to an increase in
repossessions and potential losses being
incurred by the lenders. However, since there
are no macro-economic indicators that this
is a reasonable likelihood in the short term,
the directors do not consider it appropriate
to provide for additional claims due to
macro-economic changes. It should be noted
that a 5% increase in the claim rate (which
is applied to all surveys performed between
2004 and 2008) could lead to a £3 million
increase in the provision for future claims.
Claim liability rate – the number of claims
closed with a loss compared to the number
of closed claims.
We achieved a significant number of successes
closing many cases in 2015, several without
loss. The liability rate increased during the
year as those claims remaining in the system
are more likely to suffer a loss. However
since the volume of claims is much smaller,
the impact of this increase was not material.
The liability rate is sensitive to changes in
experience and therefore we have used the
average liability rate for claims closed over
two years as the most appropriate claim liability
rate to estimate the provision for those claims
already received. As the number of open claims
at the end of the year and unreported claims
anticipated is much lower than in previous
years, a 10% increase in the average liability
rate would impact the provision by £0.5 million.
Average loss – the average of total incurred
losses for closed claims.
The average loss in respect of all exceptional
claims received has increased by 6%; however
this has had a small impact on the provision
because a proportion of these losses has been
borne by insurers. However this is the loss
used to estimate the value of unreported claims.
Our experience in respect of the average
loss arising from those claims closed over
the past two years reflects a decline of 9%.
This is the value used to estimate the further
provision required for claims already received.
Overall applying a further 10% increase in the
average loss would increase the total provision
required by £0.6 million, lower than in previous
years owing to the reduced number of claims.
Accounting for acquisitions
The Group accounts for all business
combinations under the purchase method.
Under the purchase method, the identifiable
assets acquired and liabilities and contingent
liabilities assumed are measured at their fair
value at the acquisition date. Judgements
and estimates are made in respect of the
measurement of the fair values of assets
and liabilities acquired and consideration
transferred. Where necessary, the Group
engages external valuation experts to
advise on fair value estimates, or otherwise
performs estimates internally.
Impairment of goodwill and
indefinite lived intangible assets
Determining whether goodwill and indefinite
lived intangible assets are impaired requires
an estimation of the value in use of the cash
generating units to which the assets have
been allocated. Calculating the cash flows
requires the use of judgements and estimates
that have been included in our strategic
plans and long range forecasts. In addition,
judgement is required to estimate the
appropriate interest rate to be used to
discount the future cash flows. The data
necessary for the execution of the impairment
tests are based on management estimates
of future cash flows, which require estimating
revenue growth rates and profit margins.
Further details of impairment reviews are
set out in note 14.
Exceptional items
Certain items are presented separately in the
income statement as exceptional 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.
Further details of material, non-recurring
items the directors have disclosed as
exceptional items, including the strategic
costs of restructuring the business, are
provided in note 10.
Annual Report 2015 Countrywide plc
87
Financial statementsCorporate governanceStrategic report The Executive Committee assesses the
performance of the operating segments
based on a measure of adjusted EBITDA.
This measurement basis excludes the effects
of exceptional items, share-based payment
charges and related National Insurance
contributions, contingent consideration and
income from joint ventures. Finance income
and costs are not allocated to the segments,
as this type of activity is driven by the central
treasury activities as part of managing the
cash position of the Group.
The revenue from external parties reported
to the Executive Committee is measured
in a manner consistent with that in the
income statement.
Revenue and other income from external
customers arising from activities in the UK
was £732,099,000 (2014: £701,710,000)
and that arising from activities overseas was
£1,637,000 (2014: £491,000).
The assets and liabilities for each
operating segment represent those assets
and liabilities arising directly from the
operating activities of each division. Pension
assets and liabilities and liabilities arising
from the term loan and revolving credit
facility are not allocated to operating
segments, but allocated in full to ‘all other
segments’ within the segmental analysis.
Non-current assets attributable to the UK
of £830,828,000 (2014: £766,956,000)
are included in the total assets in the tables
on the following pages. Non-current assets
of £939,000 (2014: £18,000) are attributable
to the overseas operations. The equity
investment in joint venture is disclosed within
‘all other segments’ and is £2,305,000
(2014: £3,219,000).
The available-for-sale financial assets
are disclosed within ‘all other segments’
£52,072,000 (2014: £30,957,000) and
Retail £5,688,000 (2014: £2,333,000).
4. Segmental reporting
Management has determined the operating
segments based on the operating reports
reviewed by the Executive Committee (replacing
the Governance and Performance Committee)
that are used to assess both performance
and strategic decisions. Management has
identified that the Executive Committee
is the chief operating decision maker
in accordance with the requirements
of IFRS 8 ‘Operating segments’.
As part of the Group’s Building our Future
strategy, the Group’s businesses have been
reorganised around customer groups and
geography and the Executive Committee
considers the business to be split into four
main types of business generating revenue:
Retail, London, Financial Services and Business
to Business (B2B), and ‘all other segments’
comprising central head office functions.
There are therefore differences from the
last annual financial statements in the basis
of segmentation and the related basis of
measurement of segment profit or loss. Full
details of the restructuring of the reportable
business segments undertaken in the second
half of 2015, and the resultant impact on
income and EBITDA (including comparative
data), were released in January 2016
and are available on our website at
www.countrywide.co.uk/investor-relations/
results-and-presentations/ as ‘Summary of
segment changes’.
• The branch network now combines estate
agency and lettings operations, enabling
management to focus on delivering
excellent service to our retail customers.
The network has been segregated
between London and the regions (Retail).
• The London business unit (BU) led by
Graham Bell comprises branches in and
around London and the entire Hamptons
International network of branches.
• The Retail BU led by Samantha Tyrer
comprises all other branches across
the United Kingdom.
• The Financial Services BU led by Peter
Curran remains unchanged except to
reflect enhanced conveyancing revenue
from customers introduced by the
consultant network.
• The Business to Business (B2B) BU led
by Paul Creffield brings together all our
lines of business which are delivered to
corporate clients. These include: Surveying
Services which now includes Hamptons
Valuations; Conveyancing Services; Estate
and Asset Management taken from the
Lettings and Estate Agency divisions;
Countrywide Residential Development
Solutions business (CWRDS – comprising
the former Countrywide Land & New Homes
and Hamptons Residential Development
& Investment businesses) from Estate Agency
and Hamptons; Property Auctions from
Estate Agency; and Lambert Smith Hampton.
Conveyancing, Countrywide Residential
Development Solutions, Asset Management
and Property Auctions all use the branch
network to deliver products and services
on behalf of our clients, therefore revenue
is paid across to the other BUs.
The segmental analysis opposite therefore
includes a restatement of the 2014 results
under the revised reporting structure.
The Retail network combines estate agency
and lettings operations. Estate agency
generates commission earned on sales
of residential and commercial property
and Lettings earns fees from the letting
and management of residential properties
and fees for the management of leasehold
properties. The London division revenue is
earned from both estate agency commissions
and lettings and management fees. The
Financial Services division receives commission
from the sale of insurance policies, mortgages
and related products under contracts with
financial service providers. Business to
Business services comprise all lines of
business which are delivered to corporate
clients, including surveying services,
conveyancing services and revenue from
Lambert Smith Hampton. Surveying services
generates surveying and valuation fees
which are received primarily under contracts
with financial institutions with some survey
fees being earned from home buyers.
Conveyancing services generates revenue
from conveyancing work undertaken from
customers buying or selling houses through
our network. Lambert Smith Hampton’s
revenue is earned from commercial property
consultancy and advisory services, property
management and valuation services. Other
income generated by head office functions,
relates primarily to sub-let rental income or
other sundry fees.
88
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 4. Segmental reporting continued
Revenue
Other income
Total income
Inter-segment revenue
Retail
£’000
London
£’000
231,989
6,611
238,600
15,851
170,742
3,814
174,556
3,426
2015
Financial
Services
£’000
75,796
1,186
76,982
4,012
B2B
£’000
239,805
2,535
242,340
(23,289)
Total income from external customers
254,451
177,982
80,994
219,051
All other
segments
£’000
367
891
1,258
—
1,258
(17,539)
(121)
(3,493)
(1,336)
(914)
2,534
(7,049)
All other
segments
£’000
—
5,161
5,161
—
5,161
(14,574)
(10,979)
(1,850)
813
17,098
951
Total
£’000
718,699
15,037
733,736
—
733,736
112,977
(8,947)
(4,394)
(31,358)
(914)
2,534
(16,133)
53,765
321
(6,376)
47,710
Total
£’000
685,094
17,107
702,201
—
702,201
121,103
(14,467)
(24,359)
813
17,098
(15,241)
84,947
285
(5,584)
79,648
43,343
—
(464)
(13,252)
—
—
(844)
34,162
(1,096)
(123)
(4,284)
—
—
(6,768)
20,709
—
(64)
(6,009)
—
—
(393)
32,302
(7,730)
(250)
(6,477)
—
—
(1,079)
28,783
21,891
14,243
16,766
(27,918)
335,495
198,067
110,621
249,566
85,786
979,535
407,453
151,581
225,612
273,232
(622,922)
434,956
5,665
11,170
1,373
—
742
3,877
53,130
25,701
21,417
30,789
7,821
9,551
16,676
5,619
4,741
Retail
£’000
London
£’000
243,413
5,845
249,258
16,393
166,590
3,164
169,754
2,881
—
349
1,875
2014
Financial
Services
£’000
71,476
1,269
72,745
3,694
B2B
£’000
203,615
1,668
205,283
(22,968)
58,621
(2,521)
(9,106)
—
—
—
37,107
(344)
(3,544)
—
—
(1,047)
18,586
(111)
(5,444)
—
—
—
21,363
(512)
(4,415)
—
—
(15,145)
46,994
32,172
13,031
1,291
(8,541)
296,467
140,531
103,231
260,426
93,546
894,201
55,405
21,960
(4,215)
11,493
277,990
362,633
17,647
9,025
7,422
20,168
3,231
5,912
311
343
1,588
600
3,176
1,728
—
1,418
7,650
38,726
17,193
20,300
EBITDA before adjusting items
Contingent consideration*
Share-based payments
Depreciation and amortisation
Share of loss from joint venture
Exceptional income
Exceptional costs
Segment operating profit/(loss)
Finance income
Finance costs
Profit before tax
Total assets
Total liabilities
Additions in the year
Goodwill
Intangible assets
Property, plant and equipment
Revenue
Other income
Total income
Inter-segment revenue
EBITDA before adjusting items
Share-based payments
Depreciation and amortisation
Share of profit from joint venture
Exceptional income
Exceptional costs
Segment operating profit/(loss)
Finance income
Finance costs
Profit before tax
Total assets
Total liabilities
Additions in the year
Goodwill
Intangible assets
Property, plant and equipment
Total income from external customers
265,651
172,635
76,439
182,315
* As a result of an increasing number of acquisitions during 2015 that, for commercial reasons, comprise a significant element of contingent consideration which is deemed remuneration
under IFRS 3 ‘Business combinations’, we have decided to report these costs separately from underlying profits because the short term impact on the underlying businesses would be
material and distort underlying business performance (see note 6).
Annual Report 2015 Countrywide plc
89
Financial statementsCorporate governanceStrategic report 5. Other income
Rent receivable
Dividend income on available-for-sale financial assets
Other operating income
2015
£’000
999
325
13,713
15,037
2014
£’000
1,569
1,395
14,143
17,107
Other operating income comprises a number of items, but principally relates to income arising from client accounting taxation services
and commission earned on energy performance certification.
6. Employees and directors
(a) Employee costs for the Group during the year
Wages and salaries
Contingent consideration deemed remuneration (note 29)
Share options granted to directors and employees (note 27)
Defined contribution pension cost (note 25)
Defined benefit scheme costs
Social security costs
Average monthly number of people (including executive directors) employed:
By business segment
Retail
London
Financial Services
B2B
Head office
2015
£’000
2014
£’000
360,374
8,947
3,372
6,687
193
39,010
336,799
—
12,860
5,637
105
37,393
418,583
392,794
2015
Number
4,734
2,014
968
2,613
219
2014
Number
4,791
1,886
998
2,451
203
10,548
10,329
(b) Key management compensation
The following table details the aggregate compensation paid in respect of the members of the Executive Committee including the executive directors.
Wages and salaries
Short term non-monetary benefits
Share-based payments
Post-employment benefits
Termination costs
2015
£’000
3,490
46
1,605
114
903
6,158
2014
£’000
4,032
52
9,427
134
—
13,645
90
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 7. Other operating costs
Rent
Advertising and marketing expenditure
Vehicles, plant and equipment hire
Other motoring costs
Repairs and maintenance
Trade receivables impairment
Profit on disposal of business
Profit on disposal of available-for-sale financial assets
Profit on revaluation of investment property
Other
Total operating costs
2015
£’000
2014
£’000
27,894
19,932
17,680
14,205
7,839
607
—
(237)
(400)
127,997
27,320
19,698
17,536
13,293
7,081
1,181
(2,133)
—
(218)
119,013
215,517
202,771
Services provided by the Company’s auditor and network firms
During the year the Company (including its overseas subsidiaries) obtained the following services from the Company’s auditor at costs
as detailed below:
Fees payable to the Company’s auditor and its associates for the audit of the consolidated financial statements
Fees payable to the Company’s auditor and its associates for other services:
– the audit of the Company’s subsidiaries
– audit-related assurance services
– non-audit services
– tax advisory services
– services relating to corporate finance transactions entered into or proposed
to be entered into on behalf of the Company
8. Finance costs
Interest costs:
Interest payable on borrowings
Interest payable on revolving credit facility (and previously term loan)
Interest arising from finance leases
Other interest paid
Cash payable interest
Amortisation of loan facility fee
Net interest costs arising on the pension scheme (note 25)
Other finance costs
Non-cash payable interest
Finance costs
9. Finance income
Interest income
2015
£’000
135
471
44
11
9
—
670
2014
£’000
135
421
44
20
60
97
777
2015
£’000
2014
£’000
2
4,573
665
114
5,354
868
154
—
1,022
6,376
2015
£’000
321
141
3,424
581
42
4,188
1,160
158
78
1,396
5,584
2014
£’000
285
Annual Report 2015 Countrywide plc
91
Financial statementsCorporate governanceStrategic report 10. Exceptional items
The following items have been included in arriving at profit before taxation:
Exceptional income
Profit on disposal of available-for-sale financial assets
Deferred income amortisation arising from fair valuation of Zoopla shares crystallised upon the merger in May 2012
Exceptional costs
Strategic and restructuring costs
Redundancy costs
Recruitment costs
Consultancy costs
Profit on sale of leasehold property
Property closure costs
Impairment of brands
Other strategy-related costs
Total strategic and restructuring costs
Regulatory settlement costs (including legal fees)
Insurance claims and litigations
Acquisition expenses
Total exceptional costs
Net exceptional (costs)/income
2015
£’000
2014
£’000
—
2,534
2,534
14,564
2,534
17,098
(3,289)
(478)
(3,288)
836
(1,211)
(6,126)
(669)
(14,225)
(826)
—
(1,082)
—
—
—
—
—
—
—
—
—
(15,241)
—
(16,133)
(15,241)
(13,599)
1,857
2015
Exceptional income
During 2015 there has been continued amortisation of the deferred income in relation to Zoopla Property Group plc warrants which cease
unwind at 31 December 2015 (see note 17(c)).
Exceptional costs
Strategic and restructuring costs
During the year the Group has undertaken the ‘Building our Future’ strategic review and incurred a number of exceptional, non-recurring costs
in relation to the project and related restructuring costs. The principal elements are:
• Following an initial period of organisational design work, a number of redundancies were made throughout the year as the leadership
structure evolved to meet the future needs of the Group. All redundancy costs directly related to this strategic review have been collated and
amounted to £3,289,000. This included the costs of redundancies which were communicated to the individuals prior to 31 December 2015,
and settlements agreed, but whose employment ceases during 2016.
• The organisational redesign also resulted in the creation of a number of posts created to meet the revised needs of the Group. As a result,
recruitment costs of £478,000 were incurred during the year.
• As part of the strategic review, external agencies have been involved where specialists skills have been required. Consultancy costs of £3,288,000
have been incurred in relation to a number of projects that include: strategic support and change management; IT transformation; organisational
redesign; talent development and leadership skills training; and internal communication in support of specific strategic objectives identified.
• The Group decided to rationalise its property footprint in London to integrate the London and B2B teams into our existing commercial and
corporate rented property in Oxford Street. As a result, the Group sold its existing leasehold premises in Grosvenor Square generating a profit
on sale of £836,000 (net of legal costs). Offsetting this profit are costs in relation to exiting additional space in London that was surplus to
requirements. As a result, costs of £1,211,000 were incurred in relation to dilapidations costs, onerous lease provisions and the rental costs
of the additional Oxford Street space during the three-month period of refurbishment and relocation when costs were also being incurred in
the original sites.
• Following the reorganisation of business units, a review of brands was undertaken and as a result of this rationalisation of intended future brand
use an impairment of £6,126,000 was identified (note 14).
Other costs directly related to the strategic review were collated, and whilst individually immaterial, these aggregate to a total cost of £669,000
and principally relate to the costs of strategic sessions and leadership training.
Regulatory settlement costs
On 19 March 2015, the Competition and Markets Authority (CMA) concluded its investigation into an association of estate and lettings agents
in Hampshire. Hamptons Estates Limited was one of three parties forming part of an association that admitted arrangements which had the object
of reducing competitive pressure on estate agents and lettings agents’ fees in the local area in and around Fleet in Hampshire in a period
prior to the Group’s ownership. The exceptional cost above reflects the penalty payable to the CMA and associated legal costs.
Acquisition expenses
The Group incurred acquisition expenses of £1,082,000 across a number of transactions undertaken during the year (note 29).
92
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 10. Exceptional items continued
2014
Exceptional income
During 2014 there was continued amortisation of the deferred income in relation to Zoopla warrants which continue to unwind over the
period to 31 December 2015.
In addition, the Group disposed of a significant proportion of its shareholding in Zoopla Property Group plc as part of the IPO process in June 2014
and the associated profit is disclosed above.
Exceptional costs
As part of the year-end process in 2014, the Group performed a detailed review of the latest data and trends on professional indemnity
(PI) costs and believed that it was prudent to increase the provision for PI claims accordingly. The key elements behind this charge were an
unexpected level of claims brought about under common law outside of the primary statutory limitation period, rather than under contract
law, together with a slight deterioration of claims previously notified and an increase in the average loss per claim. Further information can
be found in note 3 – Critical accounting judgements.
11. Taxation
Analysis of charge in year
Current tax on profits for the year
Adjustments in respect of prior years
Total current tax
Deferred tax on profits for the year
Origination and reversal of temporary differences
Impact of change in tax rate
Adjustments in respect of prior years
Total deferred tax (note 24)
Income tax charge
Tax on items charged to equity
Deferred tax adjustment arising on share-based payments
Tax on items (charged)/credited to other comprehensive income
Deferred tax adjustment arising on the pension scheme assets and liabilities
2015
£’000
8,543
(82)
8,461
1,196
(3,483)
(232)
(2,519)
5,942
2014
£’000
17,241
(701)
16,540
(3,747)
(1,219)
138
(4,828)
11,712
2015
£’000
2014
£’000
(767)
(369)
(650)
507
The tax charge for the year differs from the standard rate of corporation tax in the UK of 20.25% (2014: 21.49%). The differences are explained below:
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by the rate of corporation tax in the UK of 20.25% (2014: 21.49%)
Effects of:
Profits from joint venture
Other expenses not deductible
Permanent difference relating to depreciation not deductible
Tax relief on purchased goodwill
Tax relief on share-based payments charged to equity
Rate change on deferred tax provision
Income not subject to tax due to availability of unprovided losses
Adjustments in respect of prior years
Overseas losses
Total taxation charge
2015
£’000
47,710
9,661
185
1,892
907
(152)
(1,715)
(3,510)
(1,128)
(314)
116
5,942
2014
£’000
79,648
17,116
(175)
1,459
231
(302)
—
(1,219)
(4,850)
(563)
15
11,712
The changes to the main rate of corporation tax for UK companies announced in the Summer 2015 Budget were substantively enacted for
financial reporting purposes in Finance (No 2) Act 2015 on 18 November 2015. The main rate of corporation tax will reduce to 19% from
1 April 2017 and will reduce to 18% from 1 April 2020.
The relevant deferred tax balances have been remeasured using rates applicable to when the balances are expected to unwind.
Annual Report 2015 Countrywide plc
93
Financial statementsCorporate governanceStrategic report 12. Dividends
Amounts recognised as distributions to equity holders in the year:
– final dividend for the year ended 31 December 2014 of 10.0 pence (net) per share (2013: 6.0 pence (net) per share)
– interim dividend for the year ended 31 December 2015 of 5.0 pence (net) per share (2014: 5.0 pence (net) per share)
– special dividend for the year ended 31 December 2015 of nil pence (net) per share (2014: 9.0 pence (net) per share)
Total
2015
£’000
2014
£’000
21,963
10,981
—
13,167
10,972
19,750
32,944
43,889
A final dividend in respect of the year ended 31 December 2015 of 10.0 pence (net) per share, amounting to an estimated total dividend
of £22.0 million, is to be proposed at the Annual General Meeting (AGM) on 27 April 2016. In accordance with IAS 10 ‘Events after the
balance sheet date’, dividends declared after the balance sheet date are not recognised as a liability in these financial statements.
13. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number
of ordinary shares of Countrywide plc.
Profit for the year attributable to owners of the parent
Weighted average number of ordinary shares in issue
Basic earnings per share (in pence per share)
2015
£’000
41,351
2014
£’000
67,477
218,447,386
218,811,538
18.93p
30.84p
For diluted earnings per share, the weighted average number of ordinary shares in existence is adjusted to include all dilutive potential
ordinary shares arising from share options.
Profit for the year attributable to owners of the parent
Weighted average number of ordinary shares in issue
Adjustment for weighted average number of contingently issuable share options
Weighted average number of ordinary shares for diluted earnings per share
Diluted earnings per share (in pence per share)
Adjusted earnings
Profit for the year attributable to owners of the parent
Adjusted for the following items, net of taxation:
Amortisation arising on intangibles recognised through business combinations
Contingent consideration
Share-based payments charge
Exceptional income
Exceptional costs
Adjusted earnings, net of taxation
Adjusted basic earnings per share (in pence per share)
Adjusted diluted earnings per share (in pence per share)
2015
£’000
41,351
2014
£’000
67,477
218,447,386
1,264,900
218,811,538
6,047,243
219,712,286
224,858,781
18.82p
30.01p
41,351
67,477
4,542
8,947
3,628
(2,534)
14,309
70,243
32.16p
31.97p
5,990
—
11,933
(17,098)
11,966
80,268
36.68p
35.70p
94
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 14. Intangible assets
(a) Goodwill
Cost
At 1 January
Arising on acquisitions (note 29)
Disposals
At 31 December
Accumulated impairment (note 14(c))
At 1 January
Charge for the year
At 31 December
Net book amount
At 31 December
(b) Other intangible assets
Cost
At 1 January
Acquisitions through business combinations (see note 29)
Additions
Disposals
2015
Brand
names
£’000
Customer
contracts and
relationships
£’000
218,739
4,446
—
—
110,258
15,287
—
—
Computer
software
£’000
62,748
3
5,431
(15,521)
At 31 December
52,661
223,185
125,545
Accumulated amortisation and impairment losses
At 1 January
Charge for the year
Impairment (note 14)
On disposals
At 31 December
Net book amount
At 31 December
48,315
5,936
—
(15,521)
33,844
—
6,126
—
72,590
10,710
—
—
38,730
39,970
83,300
13,931
183,215
42,245
66
Computer software includes the following amounts where the Group is a lessee under a finance lease:
Cost – capitalised finance lease
Accumulated depreciation
Net book amount
2015
£’000
2014
£’000
835,852
53,130
—
888,982
417,356
—
417,356
797,190
38,726
(64)
835,852
417,356
—
417,356
471,626
418,496
Pipeline
£’000
5,159
534
—
—
5,693
5,159
468
—
—
5,627
Other
intangibles
£’000
Total
£’000
—
—
—
—
—
—
—
—
—
—
—
396,904
20,270
5,431
(15,521)
407,084
159,908
17,114
6,126
(15,521)
167,627
239,457
2015
£’000
6,381
(1,808)
4,573
2014
£’000
6,381
(532)
5,849
Annual Report 2015 Countrywide plc
95
Financial statementsCorporate governanceStrategic report 14. Intangible assets continued
(b) Other intangible assets continued
Cost
At 1 January
Acquisitions through business combinations (see note 29)
Additions
Disposals
2014
Brand
names
£’000
Customer
contracts and
relationships
£’000
216,012
2,727
—
—
102,408
7,850
—
—
Computer
software
£’000
56,856
—
6,104
(212)
At 31 December
62,748
218,739
110,258
Accumulated amortisation and impairment losses
At 1 January
Charge for the year
On disposals
At 31 December
Net book amount
At 31 December
44,083
4,423
(191)
48,315
33,844
—
—
33,844
63,022
9,568
—
72,590
14,433
184,895
37,668
—
Pipeline
£’000
4,647
512
—
—
5,159
4,647
512
—
5,159
Other
intangibles
£’000
Total
£’000
1,272
—
—
(1,272)
381,195
11,089
6,104
(1,484)
—
396,904
187
32
(219)
—
—
145,783
14,535
(410)
159,908
236,996
All amortisation and impairment charges are treated as an expense in the income statement. Brand names are treated as having an indefinite
life, as a result of the fact that the Group will continue to operate these brands into perpetuity, and are therefore subject to annual, or more
frequent, impairment reviews if events or changes in circumstances indicate potential impairment.
A review of brands was undertaken following the reorganisation of the business units. Rationalisation of intended future brand use by the London
business unit has resulted in an impairment charge of £6,126,000 (see note 10). All remaining brands have been reviewed with no further
impairment identified. The carrying amounts of various brand names owned by the Group are disclosed below.
2015
£’000
2014
£’000
17,173
14,464
5,462
9,709
10,071
58,774
6,494
28,377
17,173
14,464
9,418
9,709
10,071
58,774
6,494
28,377
150,524
32,691
154,480
30,415
183,215
184,895
Brand names
Bairstow Eves
John D Wood
Mann & Co
Slater Hogg & Howison
Taylors Estate Agents
Hamptons International
Blundell Property Services
Lambert Smith Hampton
Other brands
Net book value
96
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 14. Intangible assets continued
(c) Impairment
The reorganisation of the Group into four new business units has led to a change in the composition of the Group’s cash generating units
(CGUs), which represent the smallest identifiable group of assets that generate cash flows that are largely independent of the cash flows from
other groups of assets. In accordance with internal management structures, the new CGUs comprise Retail, London and Financial Services,
with the B2B business unit being split further into Professional Services, Countrywide Residential Development Solutions and Commercial.
Management monitors goodwill and intangible assets at this CGU level. In many cases, the operations of the acquired businesses have been
fully integrated with the existing businesses and therefore it is not possible to identify separately the economic flows from those businesses.
Where necessary, assets have therefore been reallocated to the new CGUs that are expected to benefit from the business combination in
which the goodwill or intangible asset arose as follows:
2015
Goodwill
Indefinite life intangible assets
Retail
£’000
168,650
68,054
London
£’000
71,960
86,784
Financial
Services
£’000
87,888
—
Professional
Services
£’000
132,890
—
236,704
158,744
87,888
132,890
2014
Goodwill
Indefinite life intangible assets
Retail
£’000
137,861
68,054
London
£’000
55,284
88,464
Financial
Services
£’000
87,888
—
Professional
Services
£’000
132,890
—
205,915
143,748
87,888
132,890
B2B CGUs
Countrywide
Residential
Development
Solutions
£’000
Commercial
£’000
Total
£’000
775
—
775
9,463
28,377
471,626
183,215
37,840
654,841
B2B CGUs
Countrywide
Residential
Development
Solutions
£’000
Commercial
£’000
Total
£’000
—
—
—
4,573
28,377
418,496
184,895
32,950
603,391
Under IAS 36 ‘Impairment of assets’, the Group is required to:
• review its intangible assets in the event of a significant change in circumstances that would indicate potential impairment; and
• review and test its goodwill and indefinite life intangible assets annually or in the event of a significant change in circumstances.
The 2015 impairment review was performed in accordance with IAS 36 ‘Impairment of assets’ by comparing the carrying amount of each
CGU against its recoverable amount. Given the structural reorganisation during 2015, the impairment review was undertaken on both the
old CGU basis and the new CGU structure.
The recoverable amount of each CGU is based on value-in-use calculations that have been determined from cash flow projections derived
from formally approved strategic budgets and forecasts covering the three-year period from 2016 to 2018 with nil growth for 2019 and 2020.
Growth rates applied within the strategic plan are based on past experience, market data and expectation of future market outlook and
development. For the purpose of the impairment review, to evaluate the recoverable amount of each division, a terminal value has been
assumed from the fifth year and includes a growth rate in the cash flows of 0% into perpetuity. The discount rate used is based on the
Group’s estimated cost of capital.
The main assumptions on which the forecast cash flows are based comprise:
• 3% growth in UK housing volumes in 2016, 2% growth in 2017 and 2018, and 0% growth assumed for subsequent periods;
• a pre-tax discount rate of 9%; and
• the benefits of past restructuring changes which have been taken into account where there is appropriate certainty over cost reductions.
The 2015 goodwill impairment review concluded that the recoverable amount for each CGU to which goodwill is allocated exceeded the carrying
value of each CGU under both the old and the new CGU structures, resulting in no indication of impairment (2014: £Nil).
A similar impairment review of indefinite life intangible assets identified an impairment of £6.1 million (2014: £Nil) against brands as a direct
result of the decision to rationalise intended future brand use within the London business unit following the strategic review and resultant
reorganisation of the Group (see note 10). The strategic review concluded that certain London brands will be abandoned, with the existing
businesses rebranded to other London brand names held by the Group. The impairment review did not identify any further impairment of
CGUs containing indefinite life intangible assets.
The 2014 impairment review was based on cash flows from the five-year approved strategic plan for the period from 2015 to 2019, with a terminal
value from the fifth year and a growth rate of 0% into perpetuity. The discount rate used for the 2014 impairment review was 8%.
Annual Report 2015 Countrywide plc
97
Financial statementsCorporate governanceStrategic report 14. Intangible assets continued
(c) Impairment continued
Cumulative impairments, including the brand impairment identified during the current year combined with previous impairments resulting from the
severe financial crisis that originated in 2008, amount to the following:
Cash generating unit
Retail
London
Financial Services
B2B – Professional Services
B2B – Countrywide Residential Development Solutions
B2B – Commercial
Goodwill
£’000
217,319
45,961
114,076
40,000
—
—
417,356
Brand
names
£’000
Computer
software
£’000
Total
£’000
33,844
6,126
—
—
—
—
39,970
—
—
—
10,500
—
—
251,163
52,087
114,076
50,500
—
—
10,500
467,826
Sensitivity analysis
Management has undertaken sensitivity analyses to determine the effect of changes in assumptions on the outcome of the 2015 impairment
reviews. The key assumptions driving the value-in-use calculations are the discrete growth rates underpinning the cash flow forecasts for each
CGU across the Group, including housing market volumes, financial services transaction volumes and the effects of strategic acquisitions within
each CGU. Management considered various scenarios which concluded that appropriate headroom existed between the recoverable values and
the carrying values of each CGU. In line with the sensitivity analysis undertaken in 2014, an aggressive scenario was also modelled to determine
the impact of applying nil growth rates in 2016 and beyond across all CGUs, but keeping all other cash flows such as capital investment in line
with the strategic plan. This scenario resulted in goodwill allocated to the Retail CGU being impaired by £91 million. Management does not
consider this impairment scenario to be likely; mitigating actions are available should the Group experience a market downturn.
A similar sensitivity analysis conducted at the end of 2014, with nil growth in housing transaction volumes in 2015 and beyond, identified that
goodwill allocated to the B2B Professional Services CGU would be impaired by £37 million largely as a result of increased professional indemnity
liabilities. Management did not consider that impairment scenario to be a likely outcome due to the CGU having secured additional contracts and
having plans in place for improved growth and efficiencies.
Sensitivity analysis has also been undertaken in respect of the discount rate applied within the value-in-use calculations. Significant headroom
remained when different discount rates were applied, resulting in no identification of potential impairment.
15. Property, plant and equipment
Cost
At 1 January
Acquisition of subsidiaries (note 29)
Additions at cost
Disposals
Transfers
At 31 December
Accumulated depreciation
At 1 January
Charge for the year
Disposals
At 31 December
Net book amount
At 31 December
2015
Land and
buildings
£’000
Leasehold
improvements
£’000
Motor
vehicles
£’000
Furniture
and
equipment
£’000
Assets in the
course of
construction
£’000
2,093
—
—
(167)
—
1,926
340
22
(28)
334
32,537
100
2,585
(3,197)
9,439
41,464
18,932
4,038
(644)
22,326
578
4
219
(2)
—
799
57
120
(1)
176
67,904
1,625
6,943
(11,399)
—
65,073
43,789
10,064
(11,370)
42,483
Total
£’000
108,641
1,729
19,688
(14,765)
—
5,529
—
9,941
—
(9,439)
6,031
115,293
—
—
—
—
63,118
14,244
(12,043)
65,319
1,592
19,138
623
22,590
6,031
49,974
Assets in the course of construction with a value of £6,031,000 relate principally to branch refurbishments in progress for which no depreciation
has been charged. Depreciation commences when the asset enters operational use and the asset is transferred to the operational asset category.
98
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 15. Property, plant and equipment continued
Cost
At 1 January
Acquisition of subsidiaries (note 29)
Additions at cost
Disposals
At 31 December
Accumulated depreciation
At 1 January
Charge for the year
Disposals
At 31 December
Net book amount
At 31 December
2014
Land and
buildings
£’000
Leasehold
improvements
£’000
Motor
vehicles
£’000
Furniture
and
equipment
£’000
Assets in the
course of
construction
£’000
2,192
—
—
(99)
28,781
—
4,280
(524)
2,093
32,537
341
23
(24)
340
16,767
2,594
(429)
18,932
444
22
262
(150)
578
14
122
(79)
57
55,001
372
13,835
(1,304)
67,904
37,823
7,085
(1,119)
43,789
—
—
5,529
—
5,529
—
—
—
—
Total
£’000
86,418
394
23,906
(2,077)
108,641
54,945
9,824
(1,651)
63,118
1,753
13,605
521
24,115
5,529
45,523
Furniture and equipment includes the following amounts in respect of computer hardware where the Group is a lessee under a finance lease:
Cost – capitalised finance lease
Accumulated depreciation
Net book amount
2015
£’000
9,683
(5,404)
2014
£’000
12,062
(1,829)
4,279
10,233
The Group leases various assets, principally computer hardware and related costs, under finance lease agreements whose terms are between
three and eight years.
Capital commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred, relating to 2015 and the three subsequent years,
is as follows:
Property, plant and equipment
16. Investment property
At 1 January 2015
Capital expenditure
Change in fair value of investment property
Transfer to available-for-sale assets (see note 17(c))
At 31 December 2015
2015
£’000
2014
£’000
4,437
3,688
£’000
13,235
171
400
(13,806)
—
Investment property acquired, which is property held to earn rentals or capital appreciation, is stated at its fair value. Gains arising from changes
in the fair value of investment property are included in profits for the year to which they relate. On 23 October 2014, the investment property
was transferred into a separate, unlisted, residential property fund, Albion PRS Investments Unit Trust, now renamed Vista UK Residential
Real Estate Unit Trust. In exchange, the Group received units in the property fund. The full independent fund structure, effectively removing
any exercise of control to an independent trustee, was not in operation at the 2014 year end. As a result, the assets were consolidated and
reflected directly within investment property. However, this asset holding was transferred to available-for-sale financial assets on completion
of the independent fund structure and loss of control of the structure in May 2015.
The fair value of the investment property at 31 December 2014 was arrived at on the basis of a valuation carried out at that date by CBRE Limited,
independent valuers not connected with the Group. The valuation conforms to International Valuation Standards. The fair value was determined
based on comparable market transactions on arm’s length terms and was based on the Market Rent valuation technique. The fair value hierarchy
of the investment property has been deemed to be Level 2.
Annual Report 2015 Countrywide plc
99
Financial statementsCorporate governanceStrategic report 17. Investments
(a) Principal subsidiary undertakings of the Group
The Company substantially owns directly or indirectly the whole of the issued and fully paid ordinary share capital of its subsidiary undertakings,
most of which are incorporated in Great Britain, and whose operations are conducted in the United Kingdom. Principal subsidiary undertakings
of the Group at 31 December 2015 are presented below:
Proportion of
ordinary shares
held by
parent
%
Proportion of
ordinary shares
held by
the Group
%
Country of
incorporation
Subsidiary
Countrywide Group plc
Balanus Limited
Retail
Countrywide Estate Agents
London
Hamptons Group Limited
Hamptons Estates Limited
B2B
Lambert Smith Hampton Limited
Lambert Smith Hampton Limited (N Ireland)
Lambert Smith Hampton Limited (Ireland)
Lambert Smith Hampton Group Limited
Countrywide Surveyors Limited
United Surveyors Limited
Countrywide Property Lawyers Limited
TitleAbsolute Limited
Financial Services
Countrywide Principal Services Limited
Slater Hogg Mortgages Limited
Mortgage Intelligence Limited
Mortgage Next Limited
Capital Private Finance Limited
Life and Easy Limited
Nature of business
Holding company
Holding company
Estate Agency and Lettings
UK
UK
UK
Holding company
Estate Agency and Lettings
UK
Hong Kong
Property consultancy
Property consultancy
Property consultancy
Property consultancy
Surveying Services
Surveying Services
Conveyancing Services
Conveyancing Services
Financial Services
Financial Services
Financial Services
Financial Services
Financial Services
Financial Services
UK
UK
Ireland
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
100
A full list of subsidiary undertakings at 31 December 2015 is included within the Appendix. The appendix on pages 128 to 130 forms part of
these financial statements.
Following the liquidation of Countrywide Social Housing Limited during 2015, summary financial information for the remaining subsidiary that
has non-controlling interests is presented below:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net (liabilities)/assets
Revenues
Net profit
Dividends paid
There is no other comprehensive income arising in the above subsidiary in either year.
Capital Private Finance Limited
2015
£’000
138
3
(228)
(89)
(176)
1,961
716
670
2014
£’000
470
5
(209)
(103)
163
1,889
490
435
100
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 17. Investments continued
(b) Interests in joint venture
TM Group (UK) Limited
At 31 December 2015 the Group had a 33% (2014: 33%) interest in the ordinary share capital of TM Group (UK) Limited (TMG), a UK company.
TMG has share capital consisting solely of ordinary shares and is a private company with no quoted market price available for its shares. TMG
is one of the largest companies in the provision of searches to the property companies sector (measured by completed searches). It delivers
a range of property searches and data to land and property professionals in the UK, arranges for property searches directly with specific
suppliers on behalf of its own customers, and has also started to supply IT applications and products to UK mortgage lenders.
There are no outstanding commitments or contingent liabilities relating to the Group’s interest in the joint venture.
During the year, TMG was a joint venture company.
2015
£’000
2014
£’000
At 1 January:
– net assets excluding goodwill
– goodwill
Dividend received
Share of (losses)/profits retained
At 31 December:
– net assets excluding goodwill
– goodwill
1,739
1,480
3,219
—
(914)
825
1,480
2,305
The summarised financial information of TM Group (UK) Limited, which is accounted for using the equity method, is presented below:
Cash and equivalents
Other current assets (excluding cash)
Total current assets
Non-current assets
Current liabilities
Net assets
Net assets adjusted for the percentage of ownership
Income
Depreciation
Expenses (excluding depreciation)
Interest income
Post-tax results
Share of post-tax results
There is no other comprehensive income arising in the joint venture in either year.
2015
£’000
7,465
2,149
9,614
806
(7,946)
2,474
825
61,447
(284)
(63,957)
52
(2,742)
(914)
1,433
1,480
2,913
(507)
813
1,739
1,480
3,219
2014
£’000
5,715
2,474
8,189
712
(3,684)
5,217
1,739
59,283
(166)
(56,726)
48
2,439
813
Annual Report 2015 Countrywide plc
101
Financial statementsCorporate governanceStrategic report 17. Investments continued
(c) Available-for-sale financial assets
At 1 January
Transferred from investment property (see note 16)
Zoopla shares purchased for cash
Zoopla shares acquired on crystallisation of warrants
Disposal of Zoopla shares
Acquisition of shares in unlisted equity and debentures
Increase in fair value through income statement on the date of purchase
Movement in fair value
Amortisation
At 31 December
Available-for-sale financial assets, which are all Sterling denominated, include the following:
Listed equity securities: Zoopla Property Group plc
Unlisted residential property fund units
Unlisted equity
Wimbledon debentures (acquired and amortised over the life of the debenture)
At 31 December
2015
£’000
33,290
13,806
2,090
—
(383)
348
802
7,836
(29)
2014
£’000
42,877
—
2,090
2,835
(17,786)
96
—
3,200
(22)
57,760
33,290
2015
£’000
42,856
14,455
353
96
57,760
2014
£’000
33,165
—
60
65
33,290
In May 2012, Zoopla merged with The Digital Property Group and as a result crystallised some warrants into shares which were due under an
arm’s length commercial agreement. The fair value of these shares was assessed based on the most recent price paid for shares. As a result of
acquiring the additional shares for a nominal price and the fact that these shares were issued to the Group as part of the commercial agreement
signed in 2010 to list the Group’s properties for sale and rent on the Zoopla website, the excess in the assessed fair value of these shares on
initial recognition over the nominal cost has been treated as deferred income and is being released over the period of the contract ended in
2015. The amount released to the income statement is disclosed in note 10 and the amount held on the balance sheet as deferred income
is identified in note 22.
In June 2014, Zoopla plc listed on the London Stock Exchange and as a result crystallised some additional warrants into shares which were
due under a further commercial agreement signed in 2014 to extend the listing period on the Zoopla website. The excess in the assessed
fair value of these shares on initial recognition, over the nominal cost, has been treated as deferred income (£2,835,000) and will be released
over the three-year period of the contract from 2016 to 2018 (see note 22).
There was a transfer of investment property into available-for-sale financial assets during the year arising from the loss of control of the investment
property fund as planned (see note 16). There was a change in valuation technique from that applied at 31 December 2014 and whilst the
fair value of the investment within the investment property fund has remained at Level 2, this is now based on receipt of a net asset valuation
statement from the trustees on a quarterly basis.
18. Trade and other receivables
Amounts falling due within one year
Trade receivables not past due
Trade receivables past due but not impaired
Trade receivables past due but impaired
Trade receivables
Less: provision for impairment of receivables
Trade receivables – net
Amounts due from customers for contract work
Other receivables
Prepayments and accrued income
2015
£’000
2014
£’000
51,361
29,400
3,124
83,885
(3,124)
80,761
2,241
19,413
21,017
123,432
42,512
22,818
4,165
69,495
(4,165)
65,330
1,251
14,243
17,820
98,644
Trade and other receivables are all current and any fair value difference is not material. Trade receivables are considered past due once they
have passed their contracted due date. Significant trade receivables are reviewed for impairment if they are past due. All trade receivables are
reviewed for impairment if they are past due beyond 90 days for individual customers or 180 days for commercial contracts. Further information
in respect of financial assets, including credit risk, is provided in note 34.
102
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 18. Trade and other receivables continued
As at 31 December 2015, trade receivables of £29,400,000 (2014: £22,818,000) were past due but not impaired. These relate to a number
of customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:
Less than 3 months
Over 3 months
2015
£’000
18,417
10,983
29,400
2014
£’000
15,647
7,171
22,818
Trade and other receivables are denominated in Pounds Sterling with the exception of £728,000 (2014: £252,000) which are receivable
in Hong Kong Dollars and Euros.
A summary of the movement in the provision for impairment of receivables is detailed below:
At 1 January
Additional provisions (note 7)
Amounts utilised
At 31 December
2015
£’000
4,165
607
(1,648)
3,124
2014
£’000
3,848
1,181
(864)
4,165
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does
not hold any collateral as security.
19. Cash and cash equivalents
Cash and cash equivalents
Cash at bank and in hand
Short term bank deposits
2015
£’000
2014
£’000
21,246
3,090
24,336
16,578
12,005
28,583
Of the short term bank deposits, a number were interest bearing within the following range: 2015: 0.5%–0.55% (2014: 0.5%–0.55%).
The following amounts were held in foreign currencies:
Hong Kong Dollars
Euros
Barbadian Dollars
20. Trade and other payables
Trade payables
Other financial liabilities
Deferred consideration
Other tax and social security payable
Accruals and other payables
Trade and other payables due within one year
Trade and other payables due after one year
2015
£’000
126
325
—
451
2015
£’000
13,261
2,700
7,987
23,948
31,577
77,687
2014
£’000
134
—
121
255
2014
£’000
13,875
2,560
5,103
21,538
26,988
65,130
133,212
113,656
128,503
4,709
109,312
4,344
133,212
113,656
The principal components of trade and other payables due after one year are payments of £3,099,000 due under bonus awards (2014: £1,171,000)
and accrued National Insurance share-based payment charges of £1,610,000 (2014: £613,000).
Annual Report 2015 Countrywide plc
103
Financial statementsCorporate governanceStrategic report 20. Trade and other payables continued
At 31 December 2015, other financial liabilities include put options of £2,700,000 (2014: £2,560,000) to acquire the non-controlling
interests in an entity acquired in 2011 (see note 17(a)). These financial liabilities are held at the present value of the expected redemption
amount, which is based on management’s expectation of performance, consistent with operating plans approved.
These options are exercisable as follows:
Exercisable in 2016
2015
£’000
2014
£’000
2,700
2,560
The fair value of financial liabilities approximates their carrying value due to short maturities. Financial liabilities are denominated in Pounds Sterling
with the exception of £419,000 (2014: £135,000).
21. Borrowings
Non-current
Bank borrowings
Other loans
Capitalised banking fees
Finance lease liabilities
Current
Bank borrowings
Finance lease liabilities
Total borrowings
Analysis of net debt
Cash and cash equivalents
Capitalised banking fees
Loan notes
Term loan due after one year
Term loan due within one year
Revolving credit facility due within one year
Finance leases due after one year
Finance leases due within one year
Total
2015
£’000
2014
£’000
—
1,000
(1,872)
5,458
4,586
200,000
4,662
204,662
80,000
1,000
(1,613)
7,563
86,950
40,000
4,760
44,760
209,248
131,710
At
1 January
2015
£’000
28,583
1,613
(1,000)
(80,000)
(20,000)
(20,000)
(7,563)
(4,760)
Cash flow
£’000
(4,247)
1,127
—
80,000
20,000
(180,000)
—
5,363
Non-cash
changes
£’000
—
(868)
—
—
—
—
2,105
(5,265)
At
31 December
2015
£’000
24,336
1,872
(1,000)
—
—
(200,000)
(5,458)
(4,662)
(103,127)
(77,757)
(4,028)
(184,912)
Borrowings and other loans
On 6 February 2015 the Company entered into an Amendment and Restatement Agreement relating to the term and revolving credit facility
agreement, originally dated 20 March 2013, which is due to expire in March 2018. The facility is now a £250 million revolving credit facility
(RCF), with no term loan elements, with any outstanding balance repayable in full on 20 March 2018. Interest is currently payable based on
LIBOR plus a margin of 1.75%. The margin is linked to the leverage ratio of the Group and the margin rate is reviewed twice a year (and can
vary between 1.5% and 2.25%). The RCF is available for utilisation subject to satisfying fixed charge and leverage covenants and £80 million
was drawn down during the period.
The unsecured loan notes are non-interest bearing, repayable in 2029, and arose on the purchase of Mortgage Intelligence Holdings Limited.
104
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 21. Borrowings continued
Finance lease liabilities
Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
Gross finance lease liabilities – minimum lease payments:
No later than one year
Later than one year and no later than five years
Future finance charges on finance lease liabilities
Present value of finance lease liabilities
The present value of finance lease liabilities is as follows:
No later than one year
Later than one year and no later than five years
22. Deferred income
Deferred income will unwind as follows:
Within one year
After one year:
Between one and two years
Between two and three years
Between three and four years
2015
£’000
5,026
5,795
10,821
(701)
2014
£’000
5,087
8,444
13,531
(1,208)
10,120
12,323
2015
£’000
4,662
5,458
2014
£’000
4,760
7,563
10,120
12,323
Cash
£’000
3,166
3,077
—
—
3,077
6,243
2015
Non-cash
£’000
945
945
945
—
1,890
2,835
Total
£’000
4,111
4,022
945
—
4,967
9,078
2014
Total
£’000
5,708
4,021
1,995
945
6,961
12,669
The Group recognises deferred income as a result of cash received in advance in relation to certain sales distribution contracts and lease
incentives relating to the Group’s operating leases. The cash received is amortised over the life of the contracts to which they relate.
Non-cash proportion of deferred income relates to unamortised income portion created on acquisition of shares in Zoopla Property Group plc.
This deferred income is being amortised over the period of the commercial agreements which gave rise to these assets (refer to notes 10 and 17).
23. Provisions
At 1 January
Acquired in acquisition (note 29)
Utilised in the year
Charged to income statement
Unwind of discount rate
At 31 December
Due within one year or less
Due after more than one year
Onerous
contracts
£’000
1,145
—
(598)
709
6
1,262
83
1,179
1,262
Property
repairs
£’000
3,870
—
(1,248)
855
—
3,477
1,092
2,385
3,477
2015
Clawback
£’000
3,424
—
(6,920)
7,231
—
3,735
2,478
1,257
3,735
Claims and
litigation
£’000
36,786
—
(10,760)
2,883
—
28,909
18,146
10,763
28,909
Other
£’000
2,267
94
(118)
(391)
—
1,852
537
1,315
1,852
Total
£’000
47,492
94
(19,644)
11,287
6
39,235
22,336
16,899
39,235
Annual Report 2015 Countrywide plc
105
Financial statementsCorporate governanceStrategic report 23. Provisions continued
At 1 January
Acquired in acquisition (note 29)
Utilised in the year
Charged to income statement
Unwind of discount rate
At 31 December
Due within one year or less
Due after more than one year
Onerous
contracts
£’000
1,943
—
(863)
18
47
1,145
423
722
1,145
Property
repairs
£’000
4,276
202
(910)
302
—
3,870
2,021
1,849
3,870
2014
Clawback
£’000
2,857
—
(5,685)
6,252
—
3,424
2,444
980
3,424
Claims and
litigation
£’000
32,909
75
(14,425)
18,227
—
36,786
16,889
19,897
36,786
Other
£’000
3,130
—
(863)
—
—
2,267
258
2,009
2,267
Total
£’000
45,115
277
(22,746)
24,799
47
47,492
22,035
25,457
47,492
The provision for onerous contracts relates to property leases and represents the estimated unavoidable costs of leasehold properties which
have become surplus to the Group’s requirements following the closure or relocation of operations. The provision is based on the present
value of rentals and other unavoidable costs payable during the remaining lease period after taking into account rents receivable or expected
to be receivable from sub-lessees, typically over a five-year period. Provisions are released when properties are assigned or sub-let.
The provision for property repairs represents estimates of the cost to repair existing dilapidations under leasehold covenants, in accordance
with IAS 37 ‘Provisions, contingent liabilities and contingent assets’. The average unexpired lease length of properties against which a provision
has been made is two years.
Clawback represents the provision required to meet the estimated cost of repaying indemnity commission income received on life assurance
policies that may lapse in the two years following issue.
Claims and litigation provisions comprise the amounts set aside to meet claims by customers below the level of any PI insurance excess, the
estimation of IBNR claims and any amounts that might be payable as a result of any legal disputes. The provisions represent the directors’ best
estimate of the Group’s liability having taken professional advice.
In addition to the claims provisions recognised, the Group also provides for future liabilities arising from claims (IBNR) for mortgage valuation
reports and home buyer reports provided by the Surveying Services division. The basis for calculating this provision is outlined further in note 3.
While there are many factors which determine the settlement date of any claims, the expected cash flows are estimated based on the average
length of time it takes to settle claims in the past, which is around two years.
Other provisions mainly comprise items relating to operational reorganisation including some business closure costs and some IT transition
expenses which are expected to be utilised over the next three years.
24. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 18%–20% (2014: 20%).
The movement on the deferred tax account is shown below:
Deferred tax liability at 1 January
Credited to income statement
Acquired on acquisition of subsidiary (note 29)
Disposed on disposal of subsidiary
(Charged)/credited to other comprehensive income
Charged to equity
Net deferred tax liability at 31 December
Deferred tax asset
Deferred tax liability
Net deferred tax liability at 31 December
Deferred tax asset expected to unwind within one year
Deferred tax asset expected to unwind after one year
Deferred tax liability expected to unwind within one year
Deferred tax liability expected to unwind after one year
2015
£’000
(28,643)
2,519
(2,483)
—
(650)
(767)
2014
£’000
(31,507)
4,828
(2,089)
(13)
507
(369)
(30,024)
(28,643)
10,645
(40,669)
16,215
(44,858)
(30,024)
(28,643)
43
10,602
10,645
1,694
14,521
16,215
(1,826)
(38,843)
(1,600)
(43,258)
(40,669)
(44,858)
Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets to the
extent that it is probable that these assets will be recovered through future taxable profits.
106
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 24. Deferred tax continued
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12)
during the year are shown below. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there
is an intention to settle the balances net.
Origination and reversal of temporary differences
Capital allowances
Employee pension liabilities
Share-based payments
Trading losses
Intangible assets
Gain deferred by roll-over relief
Other temporary and deductible differences
Origination and reversal of temporary differences
Capital allowances
Employee pension liabilities
Share-based payments
Trading losses
Intangible assets
Gain deferred by roll-over relief
Other temporary and deductible differences
2015
Asset/
(liability)
£’000
(Charged)/
credited
to income
£’000
Charged to other
comprehensive
income/equity
£’000
6,705
83
1,516
116
(39,782)
(887)
2,225
(30,024)
Asset/
(liability)
£’000
7,535
1,043
5,308
705
(43,970)
(887)
1,623
(28,643)
(787)
(311)
(3,027)
(590)
6,882
—
600
2,767
2014
—
(650)
(767)
—
—
—
—
(1,417)
(Charged)/
credited
to income
£’000
Credited to other
comprehensive
income/(charged
to equity)
£’000
(1,395)
(396)
2,533
(787)
4,123
—
750
4,828
—
507
(369)
—
—
—
—
138
Deferred tax assets have not been recognised in respect of unused capital losses of £19,759,000 (2014: £24,375,000), in respect of non-trading
loan relationships of £106,000 (2014: £629,000), and in respect of trading losses of £49,000 (2014: £248,000). There is no expiry date
attributable to these unrecognised deferred tax assets, but no assets have been recognised as there are currently no expectations of offsetting
income streams arising, with the exception of the value noted below where an identical liability would also be recognised.
Deferred tax liabilities have not been recognised in respect of the tax impact of the unrealised capital gain of £7,473,000 (2014: £5,966,000)
arising from the revaluation of available-for-sale financial assets because the unrecognised losses above would offset any future gain.
25. Post-employment benefits
The Group offers membership of the Countrywide plc Pension Scheme (‘the Scheme’) to eligible employees, the only pension arrangements
operated by the Group. The Scheme has two sections of membership: defined contribution and defined benefit.
Defined contribution pension arrangements
The pensions cost for the defined contribution scheme in the year was £6,687,000 (2014: £5,637,000).
Defined benefit pension arrangements
In the past the Group offered a defined benefit pension arrangement; however, this was closed to new entrants in 1988 and subsequently
closed to further service accrual at the end of 2003. Members of the defined benefit arrangements earned benefits linked to final pensionable
salary and service at the date of retirement or date of leaving the scheme if earlier. The average duration of the defined benefit pension
scheme is 16 years.
The defined benefit pension arrangements provide pension benefits to its members based on earnings at the date of leaving the scheme.
Pensions in payment are updated in line with the minimum of 4% or retail price index (RPI) inflation. The Scheme is established and administered
in the UK and ultimately overseen by the Pensions Ombudsman. The regulatory framework requires the Group to fund the scheme every three
years and for the Group to agree the valuation with the trustees. As such, the funding arrangements were reviewed as part of the recent valuation
(as at 5 April 2015). The Group is responsible for ensuring that pension arrangements are adequately funded and the directors have agreed
a funding programme to bring down the deficit in the defined benefit scheme over the next three years. During the year, the Group paid £1.9 million
(2014: £1.9 million) to the defined benefit scheme. During the year which commenced on 1 January 2016, the employer is expected to pay
contributions of £1.9 million (2015: £1.9 million). Further contributions of £1.9 million will be made in each of the next three years.
Annual Report 2015 Countrywide plc
107
Financial statementsCorporate governanceStrategic report 25. Post-employment benefits continued
Defined benefit pension arrangements continued
The Group’s obligations under the pension arrangements are subject to inherent estimation uncertainty. While the trustees and actuary assess
the value of the scheme assets, and the extent of the liabilities, they are obliged to make a number of assumptions, sensitivities to which are
detailed later on. Furthermore, the scheme assets under defined benefit pension arrangements are exposed to risks in the equities and bond
markets and similarly the liabilities can fluctuate according to gilt or corporate bond rate.
The Scheme assets under defined benefit pension arrangements are held in a separate trustee-administered fund to meet long term pension
liabilities to past and present employees. The trustees are required to act in the best interests of the Scheme’s beneficiaries and they take
independent advice when deliberating matters relating to the Scheme.
The liabilities of the scheme under defined pension arrangements are measured by discounting the best estimate of future cash flows to be
paid out by the scheme using the projected unit method, which is an accrued benefits valuation method.
The defined benefit liabilities set out in this note have been calculated by an independent actuary based on the results of the most recent full
actuarial valuation at 5 April 2015, updated to 31 December 2015. The results of the calculations and the assumptions adopted are shown below.
The Group immediately recognises the actuarial gains and losses directly in other comprehensive income as shown in the consolidated
statement of comprehensive income.
The amounts recognised in the balance sheet are as follows:
2015
£’000
2014
£’000
(47,850)
47,435
(50,740)
45,524
(415)
(5,216)
Present value of
obligation
£’000
Fair value of
plan assets
£’000
(50,740)
—
—
—
(193)
(1,733)
1,700
1,029
(602)
2,496
193
45,524
1,579
1,121
1,900
—
—
—
—
—
(2,496)
(193)
(47,850)
47,435
Present value of
obligation
£’000
Fair value of
plan assets
£’000
(43,581)
—
—
—
(105)
(1,929)
(6,667)
1,437
105
39,143
1,771
4,252
1,900
—
—
—
(1,437)
(105)
(50,740)
45,524
Total
£’000
(5,216)
1,579
1,121
1,900
(193)
(1,733)
1,700
1,029
(602)
—
—
(415)
Total
£’000
(4,438)
1,771
4,252
1,900
(105)
(1,929)
(6,667)
—
—
(5,216)
Present value of funded obligations
Fair value of plan assets
Net liability recognised in the balance sheet
The movement in the defined benefit obligation over the year is as follows:
At 1 January 2015
Expected return on scheme assets
Actuarial gain
Employer contributions
Service cost
Interest cost
Actuarial gain from changes in financial assumptions
Actuarial gain from changes in demographic assumptions
Actuarial loss from changes in experience adjustments
Benefits paid
Expenses
At 31 December 2015
At 1 January 2014
Expected return on scheme assets
Actuarial gain
Employer contributions
Service cost
Interest cost
Actuarial loss from changes in financial assumptions
Benefits paid
Expenses
At 31 December 2014
108
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 25. Post-employment benefits continued
Defined benefit pension arrangements continued
The major categories of scheme assets as a percentage of total scheme assets are:
Cash
UK equities
Overseas equities
UK fixed interest gilts
Corporate bonds
Other – GARS
Other – insured pensioners
2015
%
1
5
6
11
46
11
20
2014
%
1
5
5
12
47
10
20
100
100
Insured pensioners and cash constitute unquoted investments. All other investments are managed funds either quoted directly or comprising
quoted investments. The Group does not have any of its own transferable instruments, property occupied or other assets used held as plan assets.
The amounts recognised in the income statement are:
Current service cost
Net interest cost on pension scheme liabilities (within finance costs)
Total charge to the income statement
The amounts recognised in the statement of comprehensive income are:
Actuarial gain on scheme assets
Actuarial gain/(loss) on scheme liabilities:
Actuarial gain/(loss) from changes in financial assumptions
Actuarial gain from changes in demographic assumptions
Changes due to experience adjustments
Other comprehensive income
Deferred tax adjustment arising on the pension scheme assets and liabilities
Cumulative actuarial loss recognised in the statement of comprehensive income (after tax)
The principal assumptions made by the actuaries were:
Rate of increase in pensions in payment and deferred pensions
– On benefits earned prior to 1 December 1999
– On benefits earned after 1 December 1999
Discount rate
RPI inflation
CPI inflation
Expected net return on plan assets
Cash commutation
Life expectancy at age 65 (years)
– Male pensioner member
– Female pensioner member
– Male pensioner non-member (age 45 now)
– Female pensioner non-member (age 45 now)
2015
£’000
193
154
347
2015
£’000
1,121
1,700
1,029
(602)
3,248
(650)
2,598
(4,529)
2014
£’000
105
158
263
2014
£’000
4,252
(6,667)
—
—
(2,415)
507
(1,908)
(7,127)
2015
2014
4.20%
3.10%
3.70%
2.20%
1.20%
3.50%
20%
22.8
24.7
24.5
26.6
4.15%
2.80%
3.50%
2.85%
1.85%
3.50%
20%
22.8
25.0
24.6
26.9
To develop the expected long term rate of return on assets assumption, the Group considered the current level of expected returns on risk-free
investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio
is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on
the target assets allocation to develop the expected long term rate of return on assets assumption for the portfolio.
Annual Report 2015 Countrywide plc
109
Financial statementsCorporate governanceStrategic report 25. Post-employment benefits continued
Sensitivity analysis
The results of the calculations are sensitive to the assumptions used. The defined benefit obligation position revealed by IAS 19 calculations
must be expected to be volatile, principally because the market value of the assets (with a significant exposure to equities) is being compared
with a liability assessment derived from corporate bond yields. However, the Group has taken steps to mitigate these risks of asset volatility,
including insuring some of the pensioners (as illustrated by the asset portfolio).
The sensitivity analyses (below) are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely
to occur, and changes in some of the assumptions may be correlated. The methods and types of assumptions used in preparing the sensitivity
analysis did not change compared to those disclosed in the Listing Prospectus.
Defined benefit obligation
Discount rate less 0.25%
RPI and linked assumptions plus 0.25%
Members living one year longer than assumed
Defined benefit obligation trends:
Scheme assets
Scheme liabilities
Scheme deficit
Experience (loss)/gain on scheme liabilities
Gain from changes in the demographic assumptions for value
of scheme liabilities
Gain/(loss) from changes in the assumptions for value of scheme liabilities
Experience gain/(loss) adjustments on assets
Defined
benefit obligation
£’000
47,850
49,594
48,042
49,955
Fair value
of assets
£’000
47,435
47,660
47,444
47,974
Deficit
£’000
415
1,934
598
1,981
Change from
disclosed deficit
£’000
—
1,519
183
1,566
2015
£’000
2014
£’000
2013
£’000
2012
£’000
2011
£’000
47,435
(47,850)
45,524
(50,740)
39,143
(43,581)
37,906
(44,518)
38,071
(44,534)
(415)
(602)
1,029
1,700
1,121
(5,216)
(4,438)
(6,612)
(6,463)
—
84
1,156
(24)
—
(6,667)
4,252
1,015
28
(474)
644
(1,150)
(513)
—
(4,237)
1,660
Expected maturity analysis of undiscounted pension benefits at 31 December 2015:
Undiscounted pension benefits
26. Share capital
Called up issued and fully paid ordinary shares of 1 pence each
At 1 January 2015
Share capital issued
At 31 December 2015
Less than
one year
£’000
2,003
Between one
and two years
£’000
Between two
and five years
£’000
Over
five years
£’000
Total
£’000
2,012
6,495
77,901
88,411
Number
£’000
219,444,961
196,873
219,641,834
2,194
2
2,196
The Company acquired 1,465,000 of its own shares through purchases on the London Stock Exchange throughout January and February 2015.
The total amount paid to acquire the shares was £6,773,000. The shares were held as ‘treasury shares’ with those purchased in 2014. The
Company then reissued all of these shares in March 2015 in respect of the IPO option vesting. All shares issued by the Company were fully
paid. An additional 196,873 shares were issued at nominal value to complete the satisfaction of the IPO options crystallising in March 2015.
Where the employee benefit trust purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly
attributable incremental costs (net of income taxes), is deducted from equity attributable to the Company’s equity holders until the shares are
cancelled or reissued. At the year end, 449,172 shares (2014: 225,151 shares), costing £2,241,000 (2014: £1,254,000), were held in
relation to matching shares of the SIP scheme.
110
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 27. Share-based payments
The Group operates a number of share-based payment schemes for executive directors and other employees. The Group has no legal or
constructive obligation to repurchase or settle any of the options in cash. The total cost recognised in the income statement was £3,372,000
in the year ended 31 December 2015 (2014: £12,860,000), comprising £3,226,000 of equity-settled share-based payments, and £146,000
in respect of cash-settled share-based payments for the dividend accrual associated with those options. Employer’s NI is being accrued, where
applicable, at the rate of 13.8% which management expects to be the prevailing rate at the time the options are exercised, based on the
share price at the reporting date. The total NI charge for the year was £1,022,000 (2014: £1,607,000).
The following table analyses the total cost between each of the relevant schemes, together with the number of options outstanding:
IPO plan
Long term incentive plan
Deferred share bonus plan
Share incentive plan
Outstanding at 31 December
2015
2014
Charge
£’000
3,288
(510)
78
516
3,372
Number
of options
(thousands)
1,221
2,033
59
449
3,762
Charge
£’000
10,560
2,097
—
203
12,860
Number
of options
(thousands)
7,185
1,550
—
225
8,960
A summary of the main features of each scheme is given below. The schemes have been split into two categories: executive schemes
and other schemes. For further details on executive schemes, see the remuneration report on pages 54 to 66.
Executive schemes
IPO plan
At the time of the flotation in March 2013, the Company granted nil-cost share options to executive directors and designated senior management
as one-off awards in recognition of the loss of rights under a management incentive package that terminated prior to, and as a result of, the flotation.
50% of the IPO options granted to the executive directors became exercisable on the second anniversary of the date of granting the IPO
option; the remaining 50% of the IPO options become exercisable on the third anniversary of the date of granting the IPO option. IPO options
granted to other participants became exercisable on the second anniversary of the date of granting the IPO option. The number of options
that vested in March 2015 was subject to the performance criterion based on EBITDA for 2014 as well as continued service and the vesting
level achieved was 83%. The same criterion applies to the options that will vest in March 2016.
Long term incentive plan (LTIP)
The LTIP is open to executive directors and designated senior management, and awards are made at the discretion of the Remuneration
Committee. Awards are subject to market and non-market performance criteria and vest over a three-year period.
Deferred share bonus plan (DSBP)
The Group operates a DSBP for executive directors and other senior employees whose bonus awards are settled partly in cash and partly in
nil-cost share options at the discretion of the Remuneration Committee. The number of options that will vest is subject to market performance
criteria over a three-year period and continued service.
Annual Report 2015 Countrywide plc
111
Financial statementsCorporate governanceStrategic report 27. Share-based payments continued
Other schemes
Share incentive plan (SIP)
An HMRC approved share incentive plan was introduced in October 2013. Under the SIP, eligible employees are invited to make regular
monthly contributions into a scheme operated by Capita. Ordinary shares in the Company are purchased at the current market price and
an award of one matching share is made for every two shares acquired by an employee, subject to a vesting period of three years from
the date of each monthly grant.
The aggregate number of share awards outstanding for the Group is shown below:
2015
2014
Executive schemes*
Other schemes
Executive schemes*
Other schemes
IPO
Number
of options
(thousands)
LTIP
Number
of options
(thousands)
DSBP
Number
of options
(thousands)
SIP *
Number
of options
(thousands)
IPO
Number
of options
(thousands)
LTIP
Number
of options
(thousands)
DSBP
Number
of options
(thousands)
SIP *
Number
of options
(thousands)
At 1 January
Granted
Exercised
Lapsed
At 31 December
7,185
—
(4,579)
(1,385)
1,221
1,550
1,130
—
(647)
2,033
—
59
—
—
59
225
228
—
(4)
449
7,185
—
—
—
7,185
758
792
—
—
1,550
—
—
—
—
—
26
199
—
—
225
* Executive schemes are granted at £Nil consideration and SIP matching shares are granted at £Nil consideration.
The IPO options that became exercisable on the second anniversary of the date of granting the IPO were the only scheme exercisable at the
year end.
Share options outstanding at the end of the year have the following expiry date (and all have £Nil exercise prices):
Grant – vest
IPO plan
18 March 2013–18 March 2015/2016
LTIP grants
6 September 2013–6 September 2016
21 March 2014–21 March 2017
8 September 2014–8 September 2017
16 March 2015–16 March 2018
31 March 2015–31 March 2018
21 September 2015–21 September 2018
DSBP
22 May 2015–22 May 2018
SIP
Monthly rolling grants and vesting three years later
Expiry date
Exercise price
pence
2015
2014
Share options (thousands)
18 March 2021
6 September 2023
21 March 2024
8 September 2024
16 March 2025
31 March 2025
21 September 2025
22 May 2025
—
—
—
—
—
—
—
—
—
1,221
7,185
561
363
246
730
24
109
59
758
546
246
—
—
—
—
449
3,762
225
8,960
The following information is relevant to the determination of the fair value of the awards granted during the year under the schemes:
IPO
plan
LTIP
(TSR condition)
LTIP
(EPS condition)
DSBP
Share
incentive plan
Binomial Lattice
350p
0p
2.2 years
1.5%
1.8%
Monte Carlo/
Stochastic
494p–664p
0p
3 years
1.0–3.04%
0.5–0.9%
n/a Statistical analysis
of three years’
share price data
Black Scholes
494p–664p
0p
3 years
1.0–2.56%
n/a
n/a
Fair value
at grant date
576p
0p
3 years
2.6%
n/a
n/a
Fair value
at grant date
531p
0p
3 years
n/a
n/a
n/a
Option pricing model
Weighted average share price at grant date
Exercise price
Weighted average contractual life
Expected dividend yield
Risk-free interest rate
Volatility
112
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 28. Other reserves
The following table provides a breakdown of ‘other reserves’ shown on the consolidated statement of changes in equity.
Balance at 1 January 2014
Currency translation differences
Disposal of fair value of available-for-sale financial assets
Movement in fair value of available-for-sale financial assets
Treasury shares
Balance at 1 January 2015
Currency translation differences
Realisation of capital reorganisation reserve
on liquidation of Countrywide Holdings, Ltd
Disposal of fair value of available-for-sale financial assets
Movement in fair value of available-for-sale financial assets
Utilisation of treasury shares for IPO options
Purchase of treasury shares
Capital
reorganisation
reserve
£’000
Foreign
exchange
reserve
£’000
Available-for-sale
financial assets
reserve
£’000
92,820
—
—
—
—
92,820
—
(92,820)
—
—
—
—
(56)
(117)
—
—
—
(173)
(255)
—
—
—
—
—
28,428
—
(11,076)
3,200
—
20,552
—
—
(237)
7,836
—
—
Treasury
share
reserve
£’000
(226)
—
—
—
(14,290)
(14,516)
—
—
—
—
20,035
(7,760)
Total
£’000
120,966
(117)
(11,076)
3,200
(14,290)
98,683
(255)
(92,820)
(237)
7,836
20,035
(7,760)
Balance at 31 December 2015
—
(428)
28,151
(2,241)
25,482
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.
Capital reorganisation reserve
The capital reorganisation reserve represents the difference between the share capital of the Company and the share capital, share premium
and capital redemption reserve of Countrywide Holdings, Ltd at the point of the exchange of equity interests on 19 March 2013.
Treasury share reserve
The treasury share reserve represents the consideration paid when the Company acquires its own shares and holds them as treasury shares
as well as when the employee benefit trust purchases the Company’s equity share capital, until the shares are reissued. See note 26 for full
details of treasury shares held.
Foreign exchange reserve
The foreign exchange reserve represents the difference arising from the changes to foreign exchange rates upon assets and liabilities
of overseas subsidiaries.
Available-for-sale financial assets reserve
The available-for-sale financial assets reserve represents the unrealised gain arising on the revaluation of these assets.
Retained earnings
Cumulative net gains and losses recognised in the Group income statement and pension scheme gains and losses, movement in fair value
of available-for-sale financial assets and deferred tax on share-based payments recognised in the statement of comprehensive income.
Annual Report 2015 Countrywide plc
113
Financial statementsCorporate governanceStrategic report 29. Acquisitions during the year
During 2015, the Retail business unit acquired 27 operations as part of the targeted acquisition strategy to increase the Group’s footprint in
certain under-represented geographical areas. The total consideration in respect of these acquisitions was £38.3 million, the most significant
of which were on 10 November 2015, when the Group acquired 100% of the equity share capital of Sutton Kersh, and on 6 November 2015,
when the Group acquired 100% of the equity share capital of John Francis for the consideration noted in the table below. The London business
unit acquired five businesses as part of its targeted acquisition strategy to expand in certain under-represented geographical areas for a total
consideration of £23.0 million, the most significant of which was on 7 May 2015, when the Group acquired 100% of the equity share capital
of The Greene Corporation Limited and five subsidiary companies for the consideration noted below. In accordance with the strategy to increase
the Group’s commercial footprint and non-cyclical revenue streams, the B2B business unit also acquired four businesses for a total consideration
of £15.0 million, the most significant of which was on 10 March 2015, when the Group acquired the trade and assets of Edward Symmons Group
for the consideration noted below.
Intangible assets
Property, plant and equipment
Trade and other receivables
Cash at bank
Trade and other payables
Corporation tax
Deferred tax
Provisions
Net assets
Goodwill
Consideration
Settled by:
Initial consideration
Deferred consideration
Cash paid
Cash at bank
Net cash flow arising from acquisitions
Revenue post-acquisition
Profit post-acquisition
Proforma revenue to 31 December 2015
Proforma profit to 31 December 2015
Greene & Co
£’000
ES Group
£’000
John Francis
£’000
Sutton Kersh
£’000
5,110
1,132
4,021
—
(3,791)
(310)
(1,022)
(94)
5,046
11,214
4,843
204
—
—
—
—
—
—
5,047
5,143
16,260
10,190
16,260
—
16,260
16,260
—
16,260
8,372
1,141
12,445
1,542
4,239
5,951
10,190
4,239
—
4,239
16,425
2,705
20,336
3,016
231
96
444
985
(659)
(171)
(63)
—
863
4,162
5,025
4,850
175
5,025
4,850
(985)
3,865
833
197
4,521
595
635
172
647
1,237
(730)
(186)
(127)
—
1,648
3,002
4,650
4,500
150
4,650
4,500
(1,237)
3,263
774
181
4,502
762
Other
£’000
9,451
125
2,640
3,212
(2,894)
(701)
(1,271)
—
10,562
29,609
40,171
38,460
1,711
40,171
38,460
(3,212)
35,248
11,324
3,620
25,586
6,884
Total
£’000
20,270
1,729
7,752
5,434
(8,074)
(1,368)
(2,483)
(94)
23,166
53,130
76,296
68,309
7,987
76,296
68,309
(5,434)
62,875
37,728
7,844
67,390
12,799
The acquired receivables for all acquired businesses are all current and their fair value is not materially different. There are no contractual cash
flows that are not expected to be collected. The goodwill recognised by the Group upon acquisition has no impact on tax deductions. No other
contingent liabilities, not included in the net assets above, have been identified on these acquisitions.
The goodwill of £53.1 million arises from a number of factors including expected synergies, including cost reductions from purchasing and
processing efficiencies, and unrecognised assets such as the assembled workforces.
The deferred consideration noted above is payable over a period of up to six years as fixed payments at specified times in line with the
purchase agreements. In addition, contingent consideration arrangements arising on four of the acquisitions made during the year require
the Group to pay in cash a potential undiscounted maximum aggregate amount of £6.9 million.
Each of these contingent consideration arrangements require the vendors to remain in employment and as such have been treated as a
post-combination employment expense, excluded from consideration noted above, and are being accrued over the relevant periods of one
to three years specific to each of the agreements. £2.3 million of this contingent consideration is also subject to performance conditions being
satisfied. These are target EBITDA levels which must be achieved in order to realise the full payment, with a reduced payment made if targets
are not fully met. The accrual has been made on the assumption that each target will be fully met and the £2.3 million will be payable over the
earn-out period. Accruals for contingent consideration will be reviewed at each period end as future earn-out assumptions are revisited and
any credits to the income statement in respect of downward revisions to estimates will be treated in the same way.
The costs of these acquisitions amounted to £1.1 million (2014: £0.8 million) and have been written off to profit and loss.
114
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 30. Acquisitions during the prior year
During the prior year the Group acquired 36 businesses. The total consideration paid was £48.9 million and goodwill recognised was
£38.7 million. The proforma revenue and EBITDA generated by these businesses in 2014 was £31.0 million and £9.5 million respectively.
31. Operating lease commitments – minimum lease payments
Commitments under non-cancellable operating leases due are as follows:
Within one year
Later than one year and less than five years
After five years
2015
2014
Property
£’000
24,432
51,723
47,292
Vehicles,
plant and
equipment
£’000
14,218
22,717
2
123,447
36,937
Property
£’000
21,444
46,654
24,001
92,099
Vehicles,
plant and
equipment
£’000
13,621
16,706
—
30,327
At 31 December 2015, the Group had sub-leased a number of surplus premises and was entitled to receive rents under non-cancellable
leases as follows:
Sub-leases
Within one year
Later than one year and less than five years
After five years
2015
£’000
528
769
205
2014
£’000
823
842
142
1,502
1,807
32. Client monies
At 31 December 2015, client monies held by subsidiaries in approved bank and building society accounts amounted to £257,454,000
(2014: £315,389,000). Neither the cash asset nor any corresponding obligation has been recognised by the Group.
33. Financial instruments
Financial instruments by category
Assets as per balance sheet
Available-for-sale financial assets
Trade and other receivables excluding prepayments
Cash and cash equivalents
Liabilities as per balance sheet
Borrowings (excluding finance lease liabilities)
Finance lease liabilities
Put options
Trade and other payables excluding non-financial liabilities
31 December 2015
Loans and
receivables
£’000
—
102,415
24,336
Available
for sale
£’000
57,760
—
—
Total
£’000
57,760
102,415
24,336
126,751
57,760
184,511
31 December 2015
Liabilities at
fair value through
profit and loss
£’000
Other financial
liabilities at
amortised cost
£’000
—
—
2,700
—
199,128
10,120
—
96,627
Total
£’000
199,128
10,120
2,700
96,627
2,700
305,875
308,575
Annual Report 2015 Countrywide plc
115
Financial statementsCorporate governanceStrategic report 33. Financial instruments continued
Financial instruments by category continued
Assets as per balance sheet
Available-for-sale financial assets
Trade and other receivables excluding prepayments
Cash and cash equivalents
Liabilities as per balance sheet
Borrowings (excluding finance lease liabilities)
Finance lease liabilities
Put options
Trade and other payables excluding non-financial liabilities
31 December 2014
Loans and
receivables
£’000
—
80,824
28,583
Available
for sale
£’000
33,290
—
—
Total
£’000
33,290
80,824
28,583
109,407
33,290
142,697
31 December 2014
Liabilities at
fair value through
profit and loss
£’000
Other financial
liabilities at
amortised cost
£’000
119,387
12,323
—
83,127
—
—
2,560
—
2,560
Total
£’000
119,387
12,323
2,560
83,127
214,837
217,397
34. Financial risk management
Financial risk factors
The Group is exposed through its operations to one or more of the following financial risks:
• cash flow and fair value interest rate risk;
• liquidity risk;
• counterparty credit risk; and
• price risk.
The policy for managing these risks is set by the Board following recommendations from the chief financial officer. Certain risks are managed
centrally, while others are managed locally following guidelines communicated from the centre. The policy for each of the above risks is
described in more detail below.
Cash flow and fair value interest rate risk
The Group’s interest rate risk arises from long term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate
risk which is partially offset by cash held at variable rates. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.
The interest profile of the Group’s financial assets and liabilities are as follows:
Floating rate assets
Fixed rate assets
Interest-free assets
Total financial assets
Floating rate liabilities
Fixed rate liabilities
Interest-free liabilities
Total financial liabilities
2015
£’000
21,246
3,090
160,175
2014
£’000
16,578
12,005
114,114
184,511
142,697
198,128
10,120
100,327
118,387
12,323
86,687
308,575
217,397
The average rate at which the fixed rate liabilities were fixed in 2015 was 5.53% (2014: 3.59%) and the average period for which the
liabilities were fixed was 365 days (2014: 365 days).
There is no material difference between the book and the fair values of the financial assets and liabilities.
The interest payable on the revolving credit facility is at variable rates.
116
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 34. Financial risk management continued
Cash flow and fair value interest rate risk continued
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s liabilities secured on a floating basis which
are managed centrally. The following table demonstrates the sensitivity to a reasonably possible change in interest rates on the portion of
liabilities exposed to the floating rates.
Increase in basis points
Effect on profit before tax (£’000)
Decrease in basis points
Effect on profit before tax (£’000)
2015
£’000
100
(2,000)
(50)
1,000
2014
£’000
100
(1,200)
(50)
600
Liquidity risk
The liquidity risk of each Group entity is managed centrally by the Group treasury function which monitors rolling forecasts of the Group’s
liquidity requirements to ensure it has sufficient cash to meet operational needs whilst maintaining sufficient headroom on its undrawn
committed borrowing facilities.
The Group aims to mitigate liquidity risk by managing cash generation of its operations and acquisition strategy. Acquisitions are carefully
selected with authorisation limits operating up to Group Board level and cash payback periods as applied as part of the investment appraisal
process. The Group is also cash generative as demonstrated by the cash from operations. The requirement to pay creditors is managed
through future cash generation and, if required, revolving credit facility.
The Group monitors its risk to a shortage of funds by daily cash reporting. This reporting considers maturity of both its financial investments
and financial assets (e.g. trade receivables and other financial assets) and projected cash flows from operations. The Group’s objective is to
maintain a balance between continuity of funding and flexibility for potential acquisitions.
All surplus cash held by the operating entities is transferred to Group treasury and managed centrally to maximise the returns on deposits
through economies of scale. The type of cash instrument used and its maturity date will depend on the Group’s forecast cash requirements.
The Group maintains an overdraft facility with a major banking corporation to manage any unexpected short term cash shortfalls.
The Group has a £250 million revolving credit facility which incurs interest payments on defined one, three or six month periods.
The Group’s discounted financial liabilities at the year end were as follows:
Trade payables
Other financial liabilities
Deferred consideration
Borrowings
Finance lease liabilities
Accruals and other payables
2015
£’000
13,261
2,700
7,987
199,128
10,120
75,379
2014
£’000
13,875
2,560
5,103
119,387
12,323
64,149
308,575
217,397
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet
date to the contractual maturity date. The amounts disclosed in the table are contractual undiscounted cash flows.
In less than one year
In more than one year but not more than two years
In more than two years but less than three years
In more than three years but not more than four years
In more than four years but less than five years
Over five years
2015
£’000
2014
£’000
299,018
2,599
4,991
967
—
1,000
125,678
33,073
57,303
1,991
980
1,000
308,575
220,025
Annual Report 2015 Countrywide plc
117
Financial statementsCorporate governanceStrategic report 34. Financial risk management continued
Counterparty credit risk
The Group’s financial assets at the year end were as follows:
Cash and cash equivalents
Trade receivables
Amounts due from customers for contract work
Other receivables
2015
£’000
24,336
80,761
2,241
19,413
2014
£’000
28,583
65,330
1,251
14,243
126,751
109,407
As stated in note 18, trade and other receivables are current assets and expected to convert to cash over the next twelve months.
There are no significant concentrations of credit risk within the Group. The Group is exposed to credit risk from credit sales. It is Group policy,
implemented locally, to assess the credit risk of major new customers before entering contracts. The majority of customers use the Group’s
services as part of a housing transaction and consequently the sales are paid from the proceeds of the house sale. The majority of the
commercial customers and the major lenders, customers of the surveying and asset management businesses, are large financial institutions
and as such the credit risk is not expected to be significant. The maximum credit risk exposure relating to financial assets is represented by
the carrying value as at the balance sheet date. The following table presents a breakdown of the gross trade receivables between the three
main types of customer:
Individual customers
Major lenders
Other commercial customers
2015
£’000
28,525
13,381
41,979
83,885
2014
£’000
26,888
9,985
32,622
69,495
The Group treasury function manages the Group’s cash balances and seeks to achieve reasonable rates of interest, but preservation of the capital
is the overriding priority. A list of accepted deposit institutions is maintained and their credit ratings are kept under review. The following table
presents a breakdown of cash at bank and short term deposits (the rest of ‘cash and cash equivalents’ is cash in hand):
A1
A2
A3
BA1
2015
£’000
3,390
5,986
14,960
—
24,336
2014
£’000
6,249
6,225
837
15,272
28,583
Price risk
The Group is exposed to price risk because of investments held by the Group and classified on the consolidated balance sheet as
available-for-sale amounting to £57,760,000 (2014: £33,290,000). If the price used in the 2015 year-end valuation had decreased by 5%
the carrying value of the investment and the unrealised gain recorded within the statement of comprehensive income would have reduced
by £2.1 million.
118
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued 34. Financial risk management continued
Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns
for shareholders and other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of debt (subject to certain restrictions under the term loan
facility), adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group defines capital as the total of equity shareholders’ funds and long term borrowings net of available cash balances:
Borrowings (note 21)
Cash and cash equivalents (note 19)
Net debt
Shareholders’ equity
Total capital
Gearing ratio
2015
£’000
2014
£’000
209,248
(24,336)
184,912
544,476
131,710
(28,583)
103,127
531,378
729,388
634,505
25%
16%
During the year, the Group has complied with any capital restrictions and covenant requirements in respect of leverage and interest cover
ratios associated with the term loan facility.
Fair value estimation
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined, in accordance
with IFRS 13 ‘Fair value measurement’, as follows:
• quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
• inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices) (Level 2); and
• inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).
The following table presents the Group’s assets and liabilities that are measured at fair value at 31 December 2015:
Assets
Available-for-sale financial assets
Liabilities
Put options
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
42,856
14,455
449
57,760
—
—
2,700
2,700
The following table presents the Group’s assets and liabilities that are measured at fair value at 31 December 2014:
Assets
Available-for-sale financial assets
Investment property
Liabilities
Put options
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
33,165
—
—
13,235
125
—
33,290
13,235
—
—
2,560
2,560
There was a transfer of investment property into available-for-sale financial assets during the year arising from the loss of control of the investment
property fund as planned (see note 16). There was a change in valuation technique from that applied at 31 December 2014 and whilst the
fair value of the investment within the investment property fund has remained at Level 2, this is now based on receipt of a net asset valuation
statement from the trustees on a quarterly basis.
The fair value of the investment property fund at 31 December was arrived at on the basis of a valuation carried out at that date by CBRE Limited,
independent valuers not connected with the Group. The valuation conforms to International Valuation Standards. The fair value was determined
based on comparable market transactions on arm’s length terms and was based on the Market Rent valuation technique.
Level 1 financial assets comprise quoted equity instruments in Zoopla Property Group plc (‘Zoopla shares’).
Annual Report 2015 Countrywide plc
119
Financial statementsCorporate governanceStrategic report 34. Financial risk management continued
Fair value measurements using significant unobservable inputs (Level 3) and valuation processes
The following changes were made in Level 3 instruments for the years under review:
Opening balance at 1 January
Acquisitions
Disposals
Transfers from Level 3 to Level 1
Gains and losses recognised in profit or loss
Gains and losses recognised in total comprehensive income
Closing balance at 31 December
2015
2014
Available-for-sale
financial assets
£’000
Liabilities
£’000
Available-for-sale
financial assets
£’000
125
324
—
—
—
—
449
2,560
—
—
—
140
—
2,700
42,877
5,021
(17,786)
(38,990)
(22)
9,025
125
Liabilities
£’000
4,955
(780)
—
—
(1,615)
—
2,560
As noted in note 20, the fair value of put options is undertaken using a discounted cash flow based on management’s expectation of performance
of the underlying entities, consistent with operating plans approved. This method continues to be based on unobservable market data, and therefore
there have been no changes in valuation techniques adopted in the year and no changes in fair value hierarchies in respect of these liabilities.
The Group’s finance department performs the valuations of financial instruments measured at fair value required for financial reporting
purposes, including Level 3 fair values. This team reports directly to the CFO and Audit Committee.
The fair value of all other financial assets and liabilities approximates to their carrying value.
35. Related party transactions
Key management compensation is given in note 6(b). Other related party transactions are as follows:
Trading transactions
Related party relationship
Transaction type
Joint venture
Joint venture
Joint venture
Oaktree Capital Management
Purchases by Group
Rebate received/receivable
Dividend received
Director’s fee paid
Transaction amount
Balance (owing)/owed
2015
£’000
(2,567)
2,792
—
40
2014
£’000
(2,539)
394
507
40
2015
£’000
(192)
1,441
—
10
2014
£’000
(193)
23
—
—
The joint venture rebate for 2015 reflects the rebate against both 2014 and 2015 purchases. The rebate accrued at 31 December 2014
reflected agreed rebate positions in respect of 2014 purchases, with a further retrospective rebate in respect of 2014 purchases being agreed
and settled during 2015. At 31 December 2015 the value accrued is in respect of 2015 purchases, following agreement with the joint venture
prior to the year end.
The Company has not made any provision for bad or doubtful debts in respect of related party debtors nor has any guarantee been given
during 2015 regarding related party transactions.
36. Events after the reporting period
On 15 February 2016, Countrywide plc sold 8,659,302 ordinary shares in Zoopla Property Group plc (‘Zoopla’), representing 2.1% of
Zoopla’s ordinary share capital, for a price of 220 pence per share. Following the disposal, the Group continues to hold 9,234,473 Zoopla
ordinary shares, representing 2.2% of Zoopla’s ordinary shares.
During the first few weeks of the year the Group has acquired two businesses and made a strategic investment amounting to £4.3 million.
At the time of preparing these financial statements, management is in the process of assessing the impact of these acquisitions on the Group.
The Group debt facility, to which the Company is a party, has also been restructured in February 2016, resulting in an increase in the revolving
credit facility from £250 million to £340 million and a £60 million accordion facility. For further details please refer to the Group financial
review within the strategic report of the consolidated financial statements.
120
Countrywide plc Annual Report 2015
Financial statementsNotes to the financial statements continued Independent auditor’s report
to the members of Countrywide plc
Report on the parent company financial statements
Our opinion
In our opinion, Countrywide 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 31 December 2015;
• 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, comprise:
• the Company balance sheet as at 31 December 2015; 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 applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting
Practice), including FRS 101 “Reduced Disclosure Framework”.
Other required reporting
Consistency of other information
Companies Act 2006 opinion
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 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.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Directors’ responsibilities statement set
out on page 70, 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 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.
Annual Report 2015 Countrywide plc
121
Financial statementsCorporate governanceStrategic report Independent auditor’s report
to the members of Countrywide plc continued
Other matter
We have reported separately on the group financial statements
of Countrywide plc for the year ended 31 December 2015.
Christopher Burns (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
25 February 2016
Responsibilities for the financial statements
and the audit continued
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
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.
122
Countrywide plc Annual Report 2015
Financial statements Company balance sheet
As at 31 December 2015
Fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Treasury reserve
Profit and loss account
Total shareholders’ funds
Note
2015
£’000
2014
£’000
4
5
6
7
8
9
9
9
386,372
147,657
260,810
3,369
264,179
(200,180)
265,003
6,028
271,031
(44,292)
63,999
226,739
450,371
374,396
—
(78,387)
450,371
296,009
2,196
211,839
(2,241)
238,577
2,194
211,841
(14,516)
96,490
10
450,371
296,009
The notes on pages 124 to 127 form an integral part of the parent company (registration number: 08340090) financial statements.
These financial statements on pages 123 to 127 were approved by the Board of directors and signed on its behalf by:
Jim Clarke
Chief financial officer
25 February 2016
Annual Report 2015 Countrywide plc
123
Financial statementsCorporate governanceStrategic report Notes to the Company financial statements
(f) Dividend income
Dividend income from subsidiary undertakings
is recognised at the point the dividend has
been declared.
(g) Borrowings
Borrowings are initially recognised at fair
value, net of transaction costs incurred. Such
interest-bearing liabilities are subsequently
measured at amortised cost using the effective
interest rate method, which ensures that any
interest expense over the period to repayment
is at a constant rate on the balance of the
liability carried in the balance sheet.
(h) Dividend distribution
Dividend distribution to the Company’s
shareholders is recognised as a liability in the
Company’s financial statements in the period
in which the dividends are approved by the
Company’s shareholders. Interim dividends
are recognised when paid.
(i) 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 the employee benefit trust purchases
the Company’s equity share capital (treasury
shares), the consideration paid, including any
directly attributable incremental costs, is
deducted from equity attributable to the
Company’s equity holders until the shares
are cancelled or reissued.
1. General information
and accounting policies
(a) Basis of preparation
The separate financial statements of
Countrywide plc (‘the Company’) are presented
for the year ended 31 December 2015.
They have been prepared on a going concern
basis under the historical cost convention
and in accordance with the Companies Act
2006 and applicable accounting standards
in the United Kingdom. The principal accounting
policies are set out below and have been
applied consistently throughout the year.
As permitted under section 408 of the Act
the Company has elected not to present its
own profit and loss account for the year. The
profit for the financial year was £191,840,000
(2014: loss of £8,176,000). The results of
the parent company are disclosed in the
reserves reconciliation in note 9.
The Company has taken advantage of the
exemption in FRS 101, and has not disclosed
information required by the standard as the
consolidated financial statements, in which
the Company is included, provide equivalent
disclosures for the Group under IFRS 7
‘Financial instruments: disclosures’.
The Company has taken advantage of the
exemption available under FRS 101 and not
disclosed related party transactions with
wholly owned subsidiary undertakings.
(b) Going concern
After making enquiries, the directors have
a reasonable expectation that the Company
has adequate resources to continue in
operational existence for the foreseeable
future. For this reason, they continue to
adopt the going concern basis in the
financial statements.
(c) Investments
Investments in subsidiaries are held at
historical cost less provision for impairment.
The carrying values of investments are
reviewed for impairment when events or
changes in circumstances indicate the
carrying value may not be recoverable.
(d) Income tax
Income tax on the profit or loss for the year
presented comprises current and deferred
tax. Income tax is recognised in profit or loss
except to the extent that it relates to items
recognised directly in equity, in which case
it is recognised in equity.
Current tax is the expected tax payable on
the taxable income for the year, using tax
rates enacted or substantially enacted at the
balance sheet date, and any adjustment to
tax payable in respect of previous years.
Deferred tax is provided using the balance
sheet liability method, providing for temporary
differences between the carrying amount
of assets and liabilities for financial reporting
purposes and the amounts used for
taxation purposes.
The amount of deferred tax provided is based
on the expected manner or realisation or
settlement of the carrying amount of assets
and liabilities, using tax rates enacted or
substantially enacted at the balance sheet date.
A deferred tax asset is recognised only to the
extent that it is probable that future taxable
profits will be available against which the asset
can be utilised. Deferred tax assets are reduced
to the extent that it is no longer probable that
the related tax benefit will be realised.
(e) Share-based payments
The cost of granting share options and other
share-based remuneration to employees and
directors is recognised through the profit and
loss account. These are equity settled and
therefore the fair value is measured at the
grant date. Where the share awards have
non-market related performance criteria the
Company has used the Binomial Lattice and
Black Scholes option valuation models to
establish the relevant fair values. Where the
share awards have a TSR market-related
performance criteria the Company has used
the Monte Carlo simulation valuation model
to establish the relevant fair values. The resulting
values are amortised through the income
statement over the vesting period of the
options and other grants. For awards with
non-market related criteria, the charge is
reversed if it appears probable that the
performance criteria will not be met.
The social security contributions payable in
connection with the grant of the share options
is considered an integral part of the grant
itself, and the charge will be treated as a
cash-settled transaction.
124
Countrywide plc Annual Report 2015
Financial statements 2. Employee costs
The only employees of Countrywide plc are the executive and non-executive directors. Details of the employee costs associated with the
directors are included in the directors’ remuneration report and summarised below.
Wages and salaries
Share-based payments
Social security costs
Post-employment benefits – defined contribution and salary supplement
2015
£’000
1,863
2,086
270
140
4,359
2014
£’000
1,791
4,453
247
112
6,603
The information disclosed in the Group’s consolidated financial statements under IFRS 2 ‘Share-based payment’ is within note 27, providing
further information regarding the Company’s equity-settled share-based payment arrangements.
3. Dividends
Amounts recognised as distributions to equity holders in the year:
– final dividend for the year ended 31 December 2014 of 10.0 pence (net) per share
(2014: 6.0 pence (net) per share)
– interim dividend for the year ended 31 December 2015 of 5.0 pence (net) per share
(2014: 5.0 pence (net) per share)
– special dividend for the year ended 31 December 2015 of nil pence (net) per share (2014: 9.0 pence (net) per share)
Total
2015
£’000
2014
£’000
21,963
13,167
10,981
—
10,972
19,750
32,944
43,889
A final dividend in respect of the year ended 31 December 2015 of 10.0 pence (net) per share, amounting to an estimated total dividend of
£22.0 million, is to be proposed at the Annual General Meeting (AGM) on 27 April 2016. In accordance with IAS 10 ‘Events after the balance
sheet date’, dividends declared after the balance sheet date are not recognised as a liability in these financial statements.
4. Investments
Cost
At 1 January 2015
Increase in investment by exchange of Countrywide Holdings, Ltd debt for underlying investment in Countrywide Group plc
At 31 December 2015
Accumulated impairment
At 1 January 2015 and at 31 December 2015
Net book amount
2015
£’000
147,657
238,715
386,372
—
386,372
In 2014, the Company owned directly the whole of the issued and fully paid ordinary share capital of its subsidiary undertaking, Countrywide
Holdings, Ltd, a company registered in the Cayman Islands whose principal activity was that of investment holding company. Countrywide
Holdings, Ltd was liquidated during October 2015 and the increase in investment has occurred by exchange of Countrywide Holdings, Ltd
debt for underlying investment in Countrywide Group plc as part of the restructuring prior to liquidation of Countrywide Holdings, Ltd.
At 31 December 2015, the Company owned directly the whole of the issued and fully paid ordinary share capital of its subsidiary undertaking,
Countrywide Group plc, a company registered in the UK whose principal activity was that of investment holding company.
Interests in Group undertakings, held indirectly by the Company, are detailed within the Appendix of the consolidated financial statements,
which form part of these financial statements.
Annual Report 2015 Countrywide plc
125
Financial statementsCorporate governanceStrategic report Notes to the Company financial statements continued
5. Debtors
Amounts falling due within one year
Amounts owed by Group undertakings
Group relief receivable
Deferred tax asset
Prepayments and accrued income
Other debtors
2015
£’000
2014
£’000
257,202
2,432
1,138
36
2
261,699
1,896
1,350
58
—
260,810
265,003
Amounts owed by subsidiary undertakings are unsecured and payable on demand. Interest is received at base rate plus 2.25% per annum.
6. Creditors: amounts falling due within one year
Trade creditors
Bank loans
Capitalised banking fees
Other creditors
7. Creditors: amounts falling due after more than one year
Bank loans
Capitalised banking fees
2015
£’000
2014
£’000
14
200,000
(1,872)
2,038
200,180
2015
£’000
—
—
—
—
40,000
—
4,292
44,292
2014
£’000
80,000
(1,613)
78,387
On 6 February 2015 the Company entered into an Amendment and Restatement Agreement relating to the term and revolving credit facility
agreement, originally dated 20 March 2013, which is due to expire in March 2018. The facility is now a £250 million revolving credit facility
(RCF), with no term loan elements, with any outstanding balance repayable in full on 20 March 2018. Interest is currently payable based on
LIBOR plus a margin of 1.75%. The margin is linked to the leverage ratio of the Group and the margin rate is reviewed twice a year (and can
vary between 1.5% and 2.25%). The RCF is available for utilisation subject to satisfying fixed charge and leverage covenants and £80 million
was drawn down during the year (see note 21 of the consolidated financial statements).
8. Called up share capital
Called up issued and fully paid ordinary shares of 1 pence each
At 1 January 2015
Share capital issued
At 31 December 2015
Number
£’000
219,444,961
196,873
219,641,834
2,194
2
2,196
The Company acquired 1,465,000 of its own shares through purchases on the London Stock Exchange throughout January and February 2015.
The total amount paid to acquire the shares was £6,773,000. The shares were held as ‘treasury shares’ with those purchased in 2014. The
Company then reissued all of these shares in March 2015 in respect of the IPO option vesting. All shares issued by the Company were fully
paid. An additional 196,873 shares were issued at nominal value to complete the satisfaction of the IPO options crystallising in March 2015.
Where the employee benefit trust purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly
attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders until the shares are
cancelled or reissued. At the year end, 449,172 shares (2014: 225,151 shares), costing £2,241,000 (2014: £1,254,000), were held in relation
to matching shares of the SIP scheme.
126
Countrywide plc Annual Report 2015
Financial statements 9. Reserves
At 31 December 2014
Profit for the year
Issue of shares in satisfaction of IPO options
Share-based payment transactions
Purchase of treasury shares
Utilisation of treasury shares in satisfaction of IPO options
Dividends paid
Called up
share
capital
£’000
2,194
—
2
—
—
—
—
Share
premium
account
£’000
211,841
—
(2)
—
—
—
—
Profit
and loss
account
£’000
96,490
191,840
—
3,226
—
(20,035)
(32,944)
Treasury
share reserve
£’000
(14,516)
—
—
—
(7,760)
20,035
—
Total
£’000
296,009
191,840
—
3,226
(7,760)
—
(32,944)
Balance at 31 December 2015
2,196
211,839
238,577
(2,241)
450,371
10. Reconciliation of movements in total shareholders’ funds
Profit/(loss) for the financial year
Purchase of treasury shares
Dividends paid
Share-based payment transactions
Net increase/(decrease) in shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
2015
£’000
2014
£’000
191,840
(7,760)
(32,944)
3,226
154,362
296,009
(8,176)
(14,290)
(43,889)
11,364
(54,991)
351,000
450,371
296,009
For full details on dividends proposed since the year end refer to note 12 to the consolidated financial statements.
11. Auditor’s remuneration
The auditor’s remuneration for the audit of the Company is disclosed in note 7 to the consolidated financial statements. Fees paid to the
auditor for non-audit services to the Company are not required to be disclosed in the Company’s financial statements because consolidated
financial statements are prepared which disclose such fees.
12. Post balance sheet events
The Group debt facility, to which the Company is a party, has also been restructured in February 2016, resulting in an increase in the revolving
credit facility from £250 million to £340 million and a £60 million accordion facility. For further details please refer to the Group financial
review within the strategic report of the consolidated financial statements.
Annual Report 2015 Countrywide plc
127
Financial statementsCorporate governanceStrategic report Appendix
Related undertakings of the Group as at 31 December 2015
Company name
Countrywide Group plc
A3 Countrywide Limited
Abbotts Estate Agents Limited
Accord Properties Limited
Acornsrl Limited
Advanced Lettings (Ashford) Limited
Aeromind Limited
AgencyPro Limited
Alan de Maid Limited
Alan Harvey Property Services Limited
Anderson Estate Agents Limited
APW Holdings Limited
APW Management (Cobham) Limited
APW Management (Esher) Limited
APW Management (Sunninghill) Limited
APW Management (Weybridge) Limited
APW Management Services Limited
Ashton Burkinshaw (Franchising) Limited
Ashton Burkinshaw Limited
Associated Employers Limited
Austin & Wyatt Limited
Avon Property (Wilts) Limited
Bairstow Eves Countrywide Limited
Bairstow Eves Limited
Baker Harris Saunders Group Limited
Balanus Limited
Barrys (Surrey) Limited
Beresford Adams Limited
Berry Bros & Legge Limited
Blundells Property Services Limited
Bridgfords Countrywide Limited
Bridgfords Limited
Buckell & Ballard Limited
Bullock and Lees (Christchurch) Limited
Bureau Properties Limited
CAG Overseas Investments Limited
Capital Fine Homes Limited
Capital Private Finance Limited
Capital Private Wealth Limited
Cardinal Mortgage Service Limited (The)
Carol Whyte Property
Management Limited
Carson & Company Estate Agents Limited
Castle Moat at Taunton Limited
Cathedral Lettings and Management Limited
CEA Holdings Limited
Chamberlains Lettings Limited
Chamberlains SGS Holdings Limited
Chappell & Matthews Limited
Chattings Limited
CHK (Cobham) Limited
Country
of
incorporation
% owned
Direct/
indirect
(Group
interest)
Company name
Country
of
incorporation
% owned
Direct/
indirect
(Group
interest)
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
100%
Direct
CHK (Esher) Limited
100% Indirect
Cliftons International Limited
100% Indirect
Connell Wilson Limited
100% Indirect
Copleys of York Limited
100% Indirect
Cosec Management Services Limited
100% Indirect
Countrywide Conveyancing Limited
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
Countrywide Corporate Property
Services Limited
Countrywide Dorset Limited
Countrywide Estate Agents
Countrywide Estate Agents (South) Limited
Countrywide Estate Agents FS Limited
Countrywide Estate Agents
Nominees Limited
Countrywide Financial Services
(South) Limited
100% Indirect
Countrywide Home Movers Services Limited
100% Indirect
Countrywide Mortgage Services Limited
100% Indirect
Countrywide North Limited
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
Countrywide Part Exchange
Solutions Limited
Countrywide Principal Services Limited
Countrywide Property Auctions Limited
Countrywide Property Care
Solutions Limited
Countrywide Property Lawyers Limited
Countrywide Relocation Solutions Limited
Countrywide Repossession
Solutions Limited
Countrywide Residential Lettings Limited
Countrywide Surveyors Limited
Countrywide UK Limited
CRL Company Directors Limited
CRL Company Secretaries Limited
Curtis and Bains Limited
Dickinson Harrison Limited
Duck & Hedges Group Limited
Duck & Hedges Limited
Edinburgh Property Letting Limited
51% Indirect
Elite Property (Berks) Limited
100% Indirect
100% Indirect
100% Indirect
Entwistle Green Limited
Executive Property Services
Residential Limited
Faron Sutaria & Company Limited
100% Indirect
Fitz-Gibbon Limited
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
Ford Property Services Limited
Frank Innes Countrywide Limited
Freeman Forman Letting Limited
Freeman Forman Limited
Fulfords Estate Agents Limited
Gascoigne Pees Estate Agents Limited
100% Indirect
Gatlink Limited
100% Indirect
Geering & Colyer (Kent) Limited
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
UK
100% Indirect
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
128
Countrywide plc Annual Report 2015
Financial statements Country
of
incorporation
% owned
Direct/
indirect
(Group
interest)
Company name
Company name
Gertingpet Limited
Gilpro Management Limited
GR2 Limited
Greene & Co Maintenance Limited
Griffiths & Charles Limited
Grosvenor Private Clients Limited
UK
UK
UK
UK
UK
UK
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
Hamptons Estates (Mauritius) Limited
Mauritius
100% Indirect
Hamptons Estates Limited
Hamptons Franchising Limited
Hamptons Group Limited
Hamptons International
(Hong Kong) Limited
Hamptons International (India)
Private Limited
UK
UK
UK
100% Indirect
100% Indirect
100% Indirect
Hong Kong
100% Indirect
India
100% Indirect
Hamptons International Mortgages Limited
Hamptons Professional Limited
UK
UK
100% Indirect
100% Indirect
Hamptons Property Consultancy Limited
Barbados
100% Indirect
Harecastle Limited
Harvey Donaldson & Gibson Limited
HCW Estate Agents Limited
HCW Group Limited
HCW Insurance Services Limited
Herring Baker Harris East Anglia Limited
Herring Baker Harris Europe Limited
Herring Baker Harris Nominees Limited
Hetheringtons
Hetheringtons Countrywide
Hetheringtons Estate Agents Limited
Holland Mitchell Limited
Holmes Pearman Limited
Home From Home Limited
Housemans Management Company Limited
Housemans Management Secretarial Limited
Howunalis Limited
Howuncea
Howunsay
Hurst Independent Financial
Services Limited
Ian Peat Property Management Limited
Ikon Consultancy Limited
Interlet Property Management Limited
IPCS Group Services Limited
Isite.UK.Com Limited
J M Property Lettings Limited
JK Lettings Limited
John Curtis Lettings & Management Limited
John Curtis Limited
John D Wood & Co. (Residential
& Agricultural) Limited
John D Wood & Co. Plc
John Frances Limited
John Francis (Wales) Limited
Joustroute Limited
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Lambert Smith Hampton Limited (Ireland)
Ireland
100% Indirect
JP & Brimelow (Lettings & Property
Management) Limited
Kean Kennedy Limited.
Kilroy Estate Agents Limited
King & Chasemore Limited
Knights of Bath Limited
Knightsbridge Estate Agents and
Valuers Limited
Labyrinth Management Limited
Lambert Smith Hampton (City) Limited
Lambert Smith Hampton (N Ireland) Limited
Lambert Smith Hampton Group
(Overseas) Limited
Lambert Smith Hampton Group Limited
Lambert Smith Hampton Limited
Lampons Residential Limited
Land and New Homes Countrywide Limited
Leasehold Legal Services Limited
Leasemanco Limited
Let Lucas Rental Specialists Limited
Let Verde Limited
Letmore Group Limited
Letmore Lettings Limited
Letmore Management Limited
Lets – Cover Limited
Letters of Distinction Limited
Life and Easy Limited
Lifestyle Management (York) Co. Limited
Lighthouse Property Services Limited
London & Country Property Auctions Limited
Loyalstone Limited
LS1 Limited
Maitland Lettings Limited
Mann & Co (Kent) Limited
Mann & Co. Limited
Mann Countrywide Limited
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
Merchant Executive Properties Limited
100% Indirect
Merchant Lettings (Ayrshire) Limited
100% Indirect
Merchant Lettings (Edinburgh) Limited
100% Indirect
Merchant Lettings (Paisley) Limited
100% Indirect
Merchant Lettings Limited
100% Indirect
Merchant Maintenance Limited
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
Michael Rhodes Property
Management Limited
Mid Cornwall Letting Limited
Miller Estate Agents Limited
Milton Ashbury (Property Agents) Limited
Modernmode Limited
100% Indirect
Morris Dibben Limited
100% Indirect
Mortgage Intelligence Holdings Limited
100% Indirect
Mortgage Intelligence Limited
100% Indirect
Mortgage Next Limited
Country
of
incorporation
% owned
Direct/
indirect
(Group
interest)
UK
100% Indirect
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
Annual Report 2015 Countrywide plc
129
Financial statementsCorporate governanceStrategic report Appendix continued
Company name
Mortgage Next Network Limited
Mortgage Next Packaging Limited
Mountford Limited
Nest Lettings & Management Limited
New Homes Mortgage Solutions Limited
New Space (Derby) Limited
New Space Margate Limited
Ohmes Limited
Palmer Snell Limited
Pebble Property Management
and Lettings Limited
Personal Homefinders Limited
Phillips Brown Limited
PKL Group Limited
PKL Limited
PKL Management Limited
Plaza Letting Agents Limited
Poolman Harlow Limited
Portfolio Letting Agents
& Consultants Limited.
Potteries Property Services Limited
Preston Bennett Holdings Limited
Preston Bennett Limited
Project Second JG Limited
Property Management (North East) Limited
Propertywide Limited
PSP Lettings Limited
R.A. Bennett & Partners Limited.
Realty Property Solutions Limited
Regal Lettings and Property
Management Kent Limited
Relocation Solutions Countrywide Limited
Rentons Estate Agents Limited
Resi Capital Investments Limited
Resi Capital Limited
Resi Capital Member Limited
Richard Dolton Limited
Richard Trowbridge Estate & Lettings Limited
RPT Management Services Plc
Russells Lettings Limited
Saville Home Management Limited
Securemove Property Services 2005 Limited
Securemove Property Services Limited
ServPro Limited
Slater Hogg & Howison Limited
Slater Hogg Mortgages Limited
Snape Lettings Limited
Spencers Estate Agents Limited
Spencers Surveyors Limited
Statehold Limited
Stoberry Lettings Limited
Stratton Creber Limited
Country
of
incorporation
% owned
Direct/
indirect
(Group
interest)
Company name
Country
of
incorporation
% owned
Direct/
indirect
(Group
interest)
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
100% Indirect
Sundale Properties Limited
100% Indirect
SurveyingPro.co.uk Limited
100% Indirect
Sutton Kersh & Sales Limited
100% Indirect
Tablesign Limited
100% Indirect
Taylors Estate Agents Limited
100% Indirect
The Butler Club Limited
100% Indirect
The Flat Managers Limited
100% Indirect
The Greene Corporation Limited
100% Indirect
The Letting Store Limited
100% Indirect
The London Residential Agency Limited
100% Indirect
The Property Sales & Rentals
Company Limited
100% Indirect
Thomas James Lettings Limited
100% Indirect
Thomson & Moulton Limited
100% Indirect
Tingleys Lettings Limited
100% Indirect
TitleAbsolute Limited
100% Indirect
TLS Wilts. Limited
100% Indirect
TM Group (UK) Limited
100% Indirect
Town & County Residential Limited
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
Tucker Gardner Residential Limited
Umberman Limited
United Surveyors Limited
Vanet Property Asset Management Limited
Vista UK Residential Investment 1 (GP) LLP
Vista UK Residential Investment 1
Limited Partnership
100% Indirect
Vista UK Residential Real Estate (GP) LLP
100% Indirect
100% Indirect
100% Indirect
Vista UK Residential Real Estate
Limited Partnership
Waferprime Limited
Wallhead Gray & Coates
100% Indirect
Watson Bull & Porter Limited
100% Indirect
Watts Regeneration Limited
100% Indirect
Westcountry Property Auctions Limited
100% Indirect
Wildabout Properties Limited
100% Indirect
Wilson Peacock Estate Agents Limited
100% Indirect
Woods Block Management Limited
100% Indirect
WSB Property Management Limited
100% Indirect
Wyse Lettings Limited
100% Indirect
Young & Butt Limited
100% Indirect
Young Lettings Limited
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
33% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
50% Indirect
50% Indirect
50% Indirect
50% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
100% Indirect
130
Countrywide plc Annual Report 2015
Financial statements Company information
Contacts
Chief executive officer
Alison Platt
Chief financial officer
Jim Clarke
Company secretary
Gareth Williams
Website
www.countrywide.co.uk
Registered office
County House
Ground Floor
100 New London Road
Chelmsford
Essex CM2 0RG
Registered in England
08340090
Corporate headquarters
Countrywide House
88–103 Caldecotte Lake Drive
Caldecotte
Milton Keynes MK7 8JT
Registrar
Capita Asset Services*
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Corporate advisors
Independent auditor
PricewaterhouseCoopers LLP
Bankers
Royal Bank of Scotland plc
Lloyds Bank plc
HSBC Bank plc
Abbey National Treasury Services plc
Barclays Bank Plc
AIB Group (UK) plc
Broker
Jefferies Hoare Govett
Solicitors
Slaughter and May
Financial calendar
Ex-dividend date for final dividend
Record date for final dividend
AGM
24 March 2016
29 March 2016
27 April 2016
*Shareholder enquiries
The Company’s registrar is Capita Asset Services. They will be pleased
to deal with any questions regarding your shareholding or dividends.
Please notify them of your change of address or other personal
information. Their address details are above.
Payment date for final dividend
5 May 2016
Capita Asset Services is a trading name of Capita Asset Services Limited.
Interim results
28 July 2016
Capita shareholder helpline: 0871 664 0300 (calls cost 10 pence
Ex-dividend date for interim dividend
8 September 2016
Record date for interim dividend
9 September 2016
Interim dividend paid
7 October 2016
per minute plus network extras)
(Overseas: +44 02 8639 3399)
Email:
ssd@capitaregistrars.com
Share portal:
www.capitashareportal.com
Shareholders are able to manage their shareholding online and
facilities included electronic communications, account enquiries,
amendment of address and dividend mandate instructions.
Annual Report 2015 Countrywide plc
131
Financial statementsCorporate governanceStrategic report Forward-looking statements
This report includes forward-looking statements, which involve risks and uncertainties. These forward-looking statements can be identified
by the use of forward-looking terminology, including the terms ‘believes’, ‘estimates’, ‘anticipates’, ‘expects’, ‘intends’, ‘may’, ‘will’ or ‘should’ or,
in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current
expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies, the industry
in which we operate and potential acquisitions. We derive many of our forward-looking statements from our operating budgets and forecasts,
which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult
to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results.
All forward-looking statements are based upon information available to us on the date of this report.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that
may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our
actual results of operations, financial condition and liquidity, the development of the industry in which we operate and the effect of acquisitions
on us may differ materially from those made in or suggested by the forward-looking statements contained in this report. In addition, even if
our results of operations, financial condition and liquidity and the development of the industry in which we operate are consistent with the
forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in
subsequent periods. Important factors that could cause those differences include, but are not limited to:
• a decline in the number of transactions, prices or commission levels in the UK residential property market, whether due to the impact
of macro-economic factors or otherwise;
• increased or reduced competition in the industry in which we operate;
• changes in, or our failure or inability to comply with, Government laws or regulations;
• the loss of any of our important commercial relationships; and
• any increase in our professional liabilities or any adverse development in the litigation or other disputes to which we are a party.
We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. We urge you
to read the operating and financial review for a more complete discussion of the factors that could affect our future performance and the industry
in which we operate. In light of these risks, uncertainties and assumptions, the forward-looking events described in this report may not occur.
We undertake no obligation, and do not expect, to publicly update or publicly revise any forward-looking statement, whether as a result of new
information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or to persons acting on
our behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this report.
132
Countrywide plc Annual Report 2015
Financial statements Awards
The Times and The Sunday Times Awards 2015
The ESTAS 2015
The Negotiator Awards 2015
Mortgage Strategy
Awards 2015
• Mortgage Strategy Awards
– Winner
The British Mortgage
Awards 2015
• The British Mortgage
Awards 2015 – Winner
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Annual Report 2015 Countrywide plc
133
Financial statementsCorporate governanceStrategic report
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Countrywide plc
Countrywide House
88–103 Caldecotte Lake Drive
Caldecotte
Milton Keynes MK7 8JT
+44 (0)1908 961000
investor@countrywide.co.uk
www.countrywide.co.uk