Viability statement

 

In addition to making a going concern statement, the Directors are also required to make a longer-term viability statement to comply with provision C.2.2 of the UK Corporate Governance Code 2014.

 

In response to that, the Directors have assessed the prospects and financial viability of the Group, taking into account both its current position and circumstances, and the potential impact of its principal risks. The Directors consider that a three-year period was appropriate for this assessment as our capital cycle from land completion to final sell-out of a development, for FY17 build starts, is approximately three years. Our land pipeline also provides us with sufficient land under control to meet sales targets for the next three years. Accordingly, we consider it appropriate that our viability review period is broadly aligned with the expected longevity of our owned land supply.

 

The Group is subject to a number of principal risks (as outlined above) and the Directors viability statement review considered the impact that these risks might have on the Group's ability to meet its targets. This was undertaken through the performance of a single downside case sensitivity, which reflects a severe but plausible impact assuming that appropriate steps are taken to mitigate the impact of the downside.

 

The Directors have a reasonable expectation that the Company and the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year assessment period.

 

 

 

 

 

 

Consolidated Statement of Comprehensive Income

For the year ended 31 August 2017

 

	Notes	2017 £m	2016 £m
Continuing operations
Revenue	4	660.9	635.9
Cost of sales		(530.2)	(499.5)
Gross profit		130.7	136.4
Other operating income	8	8.9	8.5
Administrative expenses		(38.8)	(44.7)
Other operating expenses		(6.6)	(5.1)
Operating profit		94.2	95.1
Amortisation		(2.0)	(2.1)
Exceptional administrative expenses	6	-	(10.0)
Underlying operating profit		96.2	107.2
Finance income	9	1.6	2.7
Finance expense	10	(3.7)	(4.9)
Profit before tax	6	92.1	92.9
Income tax expense	11	(17.7)	(19.4)
Profit for the year from continuing operations and total comprehensive income		74.4	73.5
Profit attributable to:
Owners of the Company		74.2	73.1
Non-controlling interest		0.2	0.4
		74.4	73.5

 

Notes 1 to 34 form part of the financial statements shown above. All trading derives from continuing operations.

Earnings per share
Basic (p per share)	12	13.8	13.9
Diluted (p per share)	12	13.8	13.9
Adjusted measures
Underlying operating profit	6	96.2	107.2
Underlying profit before tax	6	94.1	105.0

  

 

 

 

Consolidated Statement of Financial Position

As at 31 August 2017

	Notes	2017 £m	2016 £m
Assets
Non-current assets
Goodwill	13	41.7	41.7
Intangible assets	14	27.6	29.6
Property, plant and equipment	15	2.4	2.9
Investments in joint ventures	17	0.4	0.4
Investment properties		0.2	0.2
Trade and other receivables	19	32.1	32.7
Total non-current assets		104.4	107.5
Current assets
Inventories	18	760.4	685.8
Trade and other receivables	19	9.5	7.5
Cash and cash equivalents	28	40.7	119.0
Total current assets		810.6	812.3
Total assets		915.0	919.8
Equity and liabilities
Capital and reserves
Share capital	25	43.0	43.0
Share premium	26	101.6	100.8
Retained earnings		600.1	553.5
Equity attributable to owners of the Company		744.7	697.3
Non-controlling interests		1.0	0.8
Total equity		745.7	698.1
Current liabilities
Trade and other payables	21	85.4	98.7
UK corporation tax		6.7	8.4
Short-term borrowings	23	-	11.3
Land payables	22	67.4	49.3
Total current liabilities		159.5	167.7
Non-current liabilities
Long-term borrowings	23	8.0	52.5
Deferred tax liability	20	1.8	1.5
Total liabilities		169.3	221.7
Total equity and liabilities		915.0	919.8

 

Notes 1 to 34 form part of the financial statements shown above.

These financial statements were approved by the Board on 13 November 2017 and signed on its behalf by:

 

Clive Fenton                                                            Rowan Baker

Director                                                                   Director

 

 

 

 

 

Consolidated Statement of Changes in Equity

For the year ended 31 August 2017

 

	Notes		Share capital £m	Share premium £m	Retained earnings £m	Total £m	Non-controlling interest £m	Total equity £m
Balance at 1 September 2015			381.1	56.4	104.3	541.8	0.7	542.5
Profit for the year			-	-	73.1	73.1	0.4	73.5
Total comprehensive income for the period			-	-	73.1	73.1	0.4	73.5
Transactions with owners of the Company:
Issue of ordinary shares			4.9	104.8	(19.4)	90.3	(0.3)	90.0
Capital reduction of share capital and share premium			(343.0)	(56.4)	399.4	-	-	-
Share-based payments			-	-	1.5	1.5	-	1.5
Share issue related costs			-	(4.0)	-	(4.0)	-	(4.0)
Dividends			-	-	(5.4)	(5.4)	-	(5.4)
Balance at 31 August 2016			43.0	100.8	553.5	697.3	0.8	698.1
Profit for the year			-	-	74.2	74.2	0.2	74.4
Total comprehensive income for the period			-	-	74.2	74.2	0.2	74.4
Transactions with owners of the Company:
Share-based payments		31	-	-	0.9	0.9	-	0.9
Dividends		25	-	-	(28.5)	(28.5)	-	(28.5)
Share issue related costs - tax credit			-	0.8	-	0.8	-	0.8
Balance at 31 August 2017			43.0	101.6	600.1	744.7	1.0	745.7

 

Notes 1 to 34 form part of the financial statements shown above.

 

 

 

 

Consolidated Cash Flow Statement

For the year ended 31 August 2017

 

	Notes	2017 £m	2016 £m
Net cash (outflow) / inflow from operating activities	28	(3.8)	18.3
Investing activities
Purchases of property, plant and equipment		(0.7)	(1.5)
Purchases of intangible assets		(0.4)	(0.4)
Proceeds from sale of property, plant and equipment		0.1	0.1
Net cash used in investing activities		(1.0)	(1.8)
Financing activities
Proceeds from issue of share capital		-	86.0
Repayment of long-term borrowings		(45.0)	(35.0)
Dividend paid		(28.5)	(5.4)
Net cash (used in) / from financing activities		(73.5)	45.6
Net (decrease) / increase in cash and cash equivalents		(78.3)	62.1
Cash and cash equivalents at beginning of year		119.0	56.9
Cash and cash equivalents at end of year		40.7	119.0

 

 

Notes 1 to 34 form part of the financial statements shown above.

 

 

Notes to the Consolidated Financial Statements

 

1. Significant accounting policies

The above results and the accompanying notes do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006.

 

The Auditors have reported on the Group's statutory accounts for the year ended 31 August 2017 under s495 of the Companies Act 2006, which do not contain a statement under s498 (2) or s498 (3) of the Companies Act 2006 and are unqualified. The statutory accounts for the year ended 31 August 2016 have been delivered to the Registrar of Companies and the statutory accounts for the year ended 31 August 2017 will be filed with the Registrar in due course.

 

The audited consolidated financial statements from which these results are extracted have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The principal accounting policies as set out in the McCarthy & Stone plc Annual Report and Accounts for the year ended 31 August 2017 have been applied consistently to all the periods presented.

 

The preparation of the financial statements in conformity with the Group's accounting policies requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenue and expenses during the reported period. Whilst these estimates and assumptions are based on the Directors' best knowledge of the amount, events or actions, actual results may differ from those estimates.

 

Going concern

 

The Group meets its day-to-day working capital requirements through cash in hand and its bank facilities. The Group's forecasts and projections, taking into account reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its financial statements. Further information on the Group's borrowings is given in note 23.

 

 

2. Adoption of future standards (new and amended)

There have not been any new standards and amendments adopted for the first time for the financial year ending 31 August 2017.

 

3. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the Group's accounting policies

No critical judgements have been made in the process of applying the Group's accounting policies that have a material effect on the amounts recognised in the financial statements.

 

Assumptions and other sources of estimation uncertainty

The following are assumptions the Group makes about the future, and other major sources of estimation uncertainty at the end of the reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities at the year end and within the next financial year.

 

Fair value of shared equity receivables

Shared equity receivables are recognised at the fair value of future anticipated cash receipts that takes into account the Directors' view of an appropriate discount rate, a new build premium, future house price movements and the expected timing of receipts.

Shared equity receivables are reviewed at each reporting date using a variety of estimates that anticipate future cash flows from the assets. Further information regarding the assumptions and sensitivity effects of a reasonable possible change can be seen within note 30.

 

Cost capitalisation of overheads

Inventory includes a proportion of design, procurement, construction, health & safety, commercial and planning costs. Costs associated with these functions are reviewed by management to attribute those costs relating directly to the cost of the developments to inventory and those that relate to general business overheads to expenses. The assumptions used are reviewed annually by the function heads before being proposed to the Risk and Audit Committee.

Cost capitalisation involves estimates of the proportion of costs that are directly attributable to sites. The key source of estimation uncertainty in this area relates to the percentage of time spent by our regions on directly attributable site activities. The percentage of their time which is capitalised ranges between 70-93% for the various functions. Overhead costs capitalised at 31 August 2017 amount to £23.2m (2016: £25.7m).

 

Change of estimate

From 1 September 2016, the Group refined its estimate of unit cost when units are sold and the cost is released to the Consolidated Statement of Comprehensive Income. Cost of sales is now recognised on a unit-by-unit basis, by reference to the forecast future margin across the development. The impact of the change in estimate on gross profit and inventory for the year ended 31 August 2017 is a decrease of £4.1m (0.8% of cost of sales).

 

 

4. Revenue

	Continuing operations Year ended 31 August
	2017 £m	2016 £m
Unit sales	631.8	608.2
FRI revenue	29.1	27.7
	660.9	635.9

 

All unit sales revenue arose from the sale of properties and is attributable to continuing operations. All revenue was generated within the UK. No individual customer is significant to the Group's revenue in any period.

 

Proceeds received on the disposal of part-exchange properties, which are not included in revenue were £11.6m (2016: £nil). These are recognised on a net basis within cost of sales on the basis that they are incidental to the main revenue-generating activities of the Group. The net profit on disposal of these properties was £0.1m (2016: £nil).

 

 

5. Segmental analysis

IFRS 8 'Operating Segments' establishes standards for reporting information about operating segments and related disclosures, products and services, geographic areas and major customers. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance.

 

The Group conducts its activities through a single operating segment. Consequently, no detailed segment information has been presented.

 

None of the Group's customers represented more than 10% of the Group's revenue generated from the building of retirement apartments for any reporting period presented herein.

  

 

6. Profit before tax

Profit before tax has been arrived at after charging/(crediting):

		Continuing operations Year ended 31 August
	Notes	2017 £m	2016 £m
Amortisation of intangibles	14	2.4	2.5
Depreciation of property, plant and equipment	15	1.1	1.1
Operating lease rental expense	27
??Land and buildings		1.4	0.9
??Plant and machinery		2.5	2.3
Cost of inventories recognised as an expense		457.1	436.0
Staff costs	7	92.6	79.0
Change in fair value of derivatives		-	0.3
Share-based payments charge to profit and loss	31	0.9	1.5
Movement in inventory provision (including part-exchange properties)		1.2	(0.3)

 

Reconciliation to underlying operating profit and profit before tax

The following tables present a reconciliation between the statutory profit measures disclosed on the Consolidated Statement of Comprehensive Income and the underlying measures used by the Board to appraise performance.

 

Exceptional items are items which, due to their one-off, non-trading and non-recurring nature, have been separately classified by the Directors in order to draw them to the attention of the reader.

 

Adjusted cost items are items which are material and are presented separately within the Consolidated Statement of Comprehensive Income. The Directors are of the opinion that the separate presentation of these items provides helpful information about the Group's underlying business performance. Amortisation of brand has been adjusted in order to reconcile to underlying operating profit and underlying profit before tax given the Directors do not believe this cost reflects the underlying trading of the business.

 

Exceptionals

Year ended 31 August 2017	Notes	Statutory £m	Exceptional Administrative costs £m	Adjusted cost amortisation of brand £m	Underlying £m
Operating profit		94.2	-	2.0	96.2
Finance income	9	1.6	-	-	1.6
Finance expense	10	(3.7)	-	-	(3.7)
Profit before tax		92.1	-	2.0	94.1
Income tax expense		(17.7)	-	(0.4)	(18.1)
Profit for the year from continuing operations and total comprehensive income		74.4	-	1.6	76.0
Earnings per share
Basic (p per share)		13.8	-	0.4	14.2
Diluted (p per share)		13.8	-	0.4	14.2

  

 

 

 

6. Profit before tax (continued)     Year ended 31 August 2016	Notes	Statutory £m	Exceptional Administrative costs £m	Adjusted cost Amortisation of brand £m	Underlying £m
Operating profit		95.1	10.0	2.1	107.2
Finance income	9	2.7	-	-	2.7
Finance expense	10	(4.9)	-	-	(4.9)
Profit before tax		92.9	10.0	2.1	105.0
Income tax expense		(19.4)	(0.7)	(0.4)	(20.5)
Profit for the year from continuing operations and total comprehensive income		73.5	9.3	1.7	84.5
Earnings per share
Basic (p per share)		13.9	1.8	0.4	16.1
Diluted (p per share)		13.9	1.8	0.4	16.1

 

The exceptional administrative costs in 2016 primarily relate to the transaction fees and other costs of listing (£8.5m). Other costs recognised within exceptionals relate to redundancy and restructuring costs (£0.9m), Management Incentive Plan payments (£0.4m) and refinancing and other costs (£0.2m). 

 

Auditor's remuneration

	Continuing operations Year ended 31 August
	2017 £m	2016 £m
Fees payable to the Group's auditor
Annual audit	0.2	0.2
Transaction related audit and advisory services	-	0.7
	0.2	0.9

 

There were no other non-audit fees payable to Group auditor in the year.

 

Audit fees in relation to joint ventures audited by the Group's auditor were £3,000 (2016: £3,000).

 

 

7. Staff costs

Staff costs for the year include Directors' emoluments, which are detailed below:

 

	Continuing operations Year ended 31 August
	2017 £m	2016 £m
Wages and salaries	80.4	67.4
Social security costs	8.0	7.1
Other pension costs	2.6	2.1
Share-based payments	0.9	1.5
Termination payments	0.7	0.9
	92.6	79.0

 

 

 

The average number of persons, including Executive Directors, employed by the Group during the year was as follows:

 

	Continuing operations Year ended 31 August
	2017 Number	2016 Number
Office management and staff	902	900
House managers	1,024	827
Construction staff	219	241
	2,145	1,968

 

Staff costs include an average of 823 persons employed during the year from YLMS (2016: 679), a 50% subsidiary held by the Group.

 

At 31 August 2017 the Group employed 2,264 people (2016: 2,094).

 

Directors' emoluments

Amounts recognised in respect of Directors' emoluments:

	Continuing operations Year ended 31 August
	2017 £m	2016 £m
Wages and salaries	1.7	1.5
Social security costs	0.2	0.2
Share-based payments	0.3	0.6
Other pension costs1	0.2	0.2
	2.4	2.5

 

¹ Includes salary supplements in lieu of pension

 

The emoluments of the highest paid director was £1.0m (2016: £0.9m), including pension contributions of nil (2016: nil). The number of Directors in the Company pension plan was two (2016: two).

 

 

 

8. Other operating income

	Continuing operations Year ended 31 August
	2017 £m	2016 £m
Net rental income	0.3	0.6
Other income	7.7	5.9
Non-core business revenue	0.9	2.1
Land sales profit/(loss)	-	(0.1)
	8.9	8.5

 

Other income arises on the services provided by Group subsidiaries to manage certain developments. Non-core business revenue relates to other income such as customer extras. 

 

 

 

 

 

9. Finance income

	Continuing operations Year ended 31 August
	2017 £m	2016 £m
Change in fair value of shared equity receivables	1.5	2.5
Interest income received	0.1	0.2
	1.6	2.7

 

 

 

10. Finance expense

	Continuing operations Year ended 31 August
	2017 £m	2016 £m
Loans and overdraft fees	3.1	3.6
Promissory note interest and fees	0.1	0.5
Refinancing issue costs	0.5	0.5
Fair value movement on interest rate cap	-	0.3
	3.7	4.9

 

 

 

11. Tax

	Notes	2017 £m	2016 £m
Corporation tax charges
??Current year		17.7	18.6
??Adjustments in respect of prior years		(0.3)	(0.4)
Deferred tax charges
Current year	20	0.3	1.2
		17.7	19.4

 

The tax charge for each year can be reconciled to the profit per the Consolidated Statement of Comprehensive Income as follows:

 

	2017 £m	2016 £m
Profit before tax on continuing operations	92.1	92.9
Tax charge at the UK corporation tax rate of 19.58% (2016: 20.00%)	18.0	18.6
Tax effect of
??Expenses that are not deductible in determining taxable profit	0.1	1.5
??Income not taxable in determining taxable profit	(0.1)	(0.1)
Adjustments in respect of previous periods	(0.3)	(0.4)
Share options timing difference	0.2	-
Other reconciling items	(0.2)	(0.2)
Tax charge for the year	17.7	19.4

 

Reductions in the rate of corporation tax to 19% and 18% from 1 April 2017 and 1 April 2020 were substantively enacted on 18 November 2015. A further reduction in the corporation tax main rate from 1 April 2020 to 17% was fully enacted on 15 September 2016. The deferred tax assets and liabilities at 31 August 2017 have been calculated based on the appropriate rate at which the asset/liability will unwind.

 

 

12. Earnings per share

Basic earnings per share is calculated as the profit for the financial period attributable to shareholders of the Company divided by the weighted average number of shares in issue during the period. The actual weighted average number of ordinary shares during the full year ended 31 August 2017 was 537.3m for the basic and 537.6m for the diluted calculations, giving a statutory earnings per share for the year ended 31 August 2017 of 13.8p for basic and 13.8p for diluted.

	2017	2016
Profit attributable to shareholders (£m)	74.2	73.1
Weighted average no. of shares (m)	537.3	525.6
Basic earnings per share (p)	13.8	13.9

 

For diluted earnings per share, the weighted average number of shares in issue is adjusted to assume the conversion of all potentially dilutive ordinary shares. At 31 August 2017, the Company had two categories of potentially dilutive ordinary shares: 3.9m nil cost share options under the LTIP and 4.1m 167.4p share options under the Sharesave plan.

 

A calculation is done to determine the number of shares that could have been acquired at fair value based on the aggregate of the exercise price of each share option and the fair value of future services to be supplied to the Group, which is the unamortised share-based payments charge. The difference between the number of shares that could have been acquired at fair value and the total number of options is used in the diluted earnings per share calculation.

	2017	2016
Profit used to determine diluted EPS (£m)	74.2	73.1
Weighted average number of shares (m)	537.3	525.6
Adjustments for
??Share options - LTIP (m)	0.3	0.3
Shares used to determine diluted EPS (m)	537.6	525.9
Diluted earnings per share (p)	13.8	13.9

 

 

13. Goodwill

	£m
Cost
At 1 September 2015 and 31 August 2016 and 2017	41.7
Carrying amount
At 1 September 2015 and 31 August 2016 and 2017	41.7

 

No impairment losses have been recognised in any of the reporting periods presented herein.

 

Goodwill arose as a result of an acquisition in 2009 of the assets and liabilities of Monarch Realisations 1 plc (in liquidation). As the goodwill relates to the business as a whole, it has not been allocated to a specific CGU. For key assumptions in determining recoverable amounts in goodwill impairment testing, refer to note 16.

  

 

14. Intangible assets

	Brand £m	Software £m	Total £m
Cost
At 1 September 2015	41.4	3.9	45.3
Additions	-	0.4	0.4
At 31 August 2016	41.4	4.3	45.7
Additions	-	0.4	0.4
At 31 August 2017	41.4	4.7	46.1
Amortisation
At 1 September 2015	(13.2)	(0.4)	(13.6)
Charge for the year	(2.1)	(0.4)	(2.5)
At 31 August 2016	(15.3)	(0.8)	(16.1)
Charge for the year	(2.0)	(0.4)	(2.4)
At 31 August 2017	(17.3)	(1.2)	(18.5)
Carrying amount
At 31 August 2016	26.1	3.5	29.6
At 31 August 2017	24.1	3.5	27.6

 

Brand assets represent the McCarthy & Stone brand name purchased as part of the business combination in 2009. Brand assets have 11 years and 7 months of useful life remaining.

 

All amortisation charged is recognised in administrative expenses in the Consolidated Statement of Comprehensive Income.

 

 

 

15. Property, plant and equipment

		Fixtures, fittings and equipment £m	Total £m
Cost
At 1 September 2015		6.0	6.0
Additions		1.5	1.5
Disposals		(0.3)	(0.3)
At 31 August 2016		7.2	7.2
Additions		0.7	0.7
Disposals		(0.1)	(0.1)
At 31 August 2017		7.8	7.8
Accumulated depreciation and impairment
At 1 September 2015		(3.4)	(3.4)
Charge for the year		(1.1)	(1.1)
Eliminated on disposals		0.2	0.2
At 31 August 2016		(4.3)	(4.3)
Charge for the year		(1.1)	(1.1)
Eliminated on disposals		-	-
At 31 August 2017		(5.4)	(5.4)
Carrying amount
At 31 August 2016		2.9	2.9
At 31 August 2017	2.4		2.4

 

16. Impairment testing

During the periods reported in the financial statements, no impairments have been recognised against the Group's assets. For each reported period, management have performed an impairment review of goodwill, being an indefinitely lived asset. The Group only has one CGU, being the McCarthy & Stone (Developments) Limited's business, which was acquired in 2009.

 

The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to earnings before interest, tax, depreciation and amortisation (EBITDA) used as a proxy of free cash flows beyond the budgeted years as well as the level of capital expenditure required to maintain the existing business into the future. These assumptions are reviewed and revised annually in light of current economic conditions and the future outlook for the business. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the business; rates used for 2017 are 7.0% (2016: 8.4%).

 

The forecast period employed in the impairment assessment was three years followed by an assessment of cash flows and growth into perpetuity. The growth rates used are based on management's assessment of the cash flow forecasts over the medium-term. Due to the headroom within the calculation no further growth has been assumed within the perpetuity calculation. These are based on conservative estimates of the Group's ability to participate in the growth expected in the industry. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

 

The value of goodwill recognised in the financial statements has been compared to the derived value in use with no impairment charges arising. The Group has conducted a sensitivity analysis on the key assumptions which are material to the impairment assessment including the discount rate, the cash flow projections and the terminal growth rate and concluded no material sensitivity exists in these calculations.

 

No impairment charges were recorded on items of property, plant and equipment throughout the period covered by these financial statements.

 

 

17. Investment in joint ventures

The Group has a 50% ownership interest in Kindle Housing Limited, which manages affordable housing. Kindle Housing Limited has 100% ownership interest of ordinary shares in each of Kindle Housing (Worthing) Limited, Kindle Housing (Christchurch) Limited and Kindle Housing (Exeter) Limited, which rent affordable housing to local key worker employees. As a result the Group also has a 50% ownership interest in these companies, all of which are registered in England and Wales.

 

The Group accounts for its interests in these companies using the equity method of accounting.

 

The share of the assets, liabilities, income and expenses of the jointly controlled entities is not material.

 

 

 

18. Inventories

	2017 £m	2016 £m
Land held for development	148.6	236.5
Sites in the course of construction	341.2	201.0
Finished stock	238.7	248.3
Part-exchange properties	31.9	-
	760.4	685.8

 

Days in inventory amounted to 582 days in 2016 (2016: 574 days).

 

Inventory days are calculated by taking year end inventory (excluding part-exchange properties) divided by cost of inventories recognised as an expense.

 

 

19. Trade and other receivables

	2017 £m	2016 £m
Trade and other receivables due in less than one year
Trade receivables	2.1	1.5
Other debtors and prepayments	7.4	6.0
	9.5	7.5

 

 

	2017 £m	2016 £m
Trade and other receivables due in greater than one year
Secured mortgages	3.2	3.4
Shared equity receivables	28.9	29.3
	32.1	32.7

 

Trade receivables and secured mortgages disclosed above are classified as loans and receivables and are measured at amortised cost.

 

The Directors consider that the carrying amounts of trade and other receivables and non-current receivables approximates their fair value.

 

  

 

20. Deferred tax

The following are the major deferred tax liabilities recognised by the Group:

	Accelerated tax depreciation £m	Other temporary differences £m	Unrelieved tax losses £m	Total £m
At 1 September 2015	-	(0.3)	-	(0.3)
Income statement charge	-	(1.2)	-	(1.2)
At 31 August 2016	-	(1.5)	-	(1.5)
Income statement charge	-	(0.3)	-	(0.3)
At 31 August 2017	-	(1.8)	-	(1.8)

 

Deferred tax assets are represented by positive values and deferred tax liabilities are represented by negative values in the table above.

 

Deferred tax assets of £0.1m in relation to capital losses carried forward were not recognised as there is uncertainty as to whether these losses could be utilised by the Group prior to expiry (2016: £0.1m). These losses have no expiry date.

 

 

 

21. Trade and other payables

	2017 £m	2016 £m
Trade payables	22.7	26.8
Other taxes and social security costs	1.9	1.9
Accrued expenses	42.6	51.4
Other creditors and deferred income	18.2	18.6
	85.4	98.7

 

Trade payables and accrued expenses principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases was 20 days during 2017 (2016: 21 days). No material interest costs have been incurred in relation to such payables. The Group policy is to ensure that payables are paid within the pre-agreed credit terms and to avoid incurring penalties and/or interest on late payments. Other creditors include sales taxes, property taxes, social security and employment taxes due to local tax authorities. The Directors consider that the carrying amount of trade payables approximates their fair value.

 

No trade payables are purchased on extended payment terms.

 

 

22. Land payables

	2017 £m	2016 £m
Land payables	67.4	49.3

 

Land payables relate to payment due in respect of land which has been purchased under an unconditional contract.

 

 

23. Borrowings

 

Short-term borrowings	2017 £m	2016 £m
Promissory notes	-	11.3

  

 

 

Long-term borrowings	2017 £m	2016 £m
Loans	10.0	55.0
Unamortised issue costs	(2.0)	(2.5)
	8.0	52.5

 

			Outstanding at 31 August
		Maturity		2017 £m	2016 £m
Revolving Credit Facility		May 2021		10.0	55.0

 

The Group has in place a £200m revolving credit facility (RCF) initially with a five-year term, maturing December 2019. In May 2016, an amendment was made to the RCF agreement to improve the commercial terms and extend the facility's date from 19 December 2019 to 23 May 2021.

 

The nominal interest rate of the £200m RCF is 1, 3 or 6 month LIBOR + 1.6% (2016: 1, 3 or 6 month LIBOR + 1.6%) depending on the length of the drawdown. As at 31 August 2017, £10m (2016: £55m) was drawn. The RCF is secured by a floating charge over the assets of McCarthy & Stone plc, McCarthy & Stone Retirement Lifestyles Limited, McCarthy & Stone (Developments) Limited, McCarthy & Stone (Extra Care Living) Limited and McCarthy & Stone Total Care Management Limited.

 

 

24. Net cash

	2017 £m	2016 £m
Loans	8.0	63.7
Add back unamortised issue costs	2.0	2.5
Cash and cash equivalents	(40.7)	(119.0)
Net cash	(30.7)	(52.8)
Add back land-related promissory notes	-	(11.3)
Net cash excluding land-related promissory notes	(30.7)	(64.1)

 

Net cash is a non-GAAP measure and is calculated as cash and cash equivalents less long-term and short-term borrowings (excluding unamortised debt issue costs and land-related promissory notes).

 

 

25. Share capital

The Company has one class of ordinary shares which carry no right to fixed income. There is no limit to authorised share capital.

 

Allotted and issued ordinary shares	2017 £'000	2016 £'000
8p each fully paid: 537,329,434 ordinary shares (2016: 537,314,069)	42,986	42,985

 

Allotted of shares during the year	2017 Number '000	2016 Number '000
At 1 September	537,314	1,905,550
Issuance of new shares in relation to the Management Incentive Plan	-	43,707
Consolidation of share capital	-	(1,461,943)
Issuance of new shares in relation to primary proceeds from the IPO	-	50,000
Issuance to satisfy early exercises under Sharesave plan	15	-
At 31 August	537,329	537,314

 

 

Issuance of new shares in relation to Sharesave (SAYE) plan

During the year 15,365 ordinary shares were issued to satisfy early exercise of options under our December 2015 Sharesave (SAYE) plan by seven "good leaver" employees. The shares were all issued at 167.4p each, being the exercise price of the SAYE option granted on 10 December 2015.

 

Dividends on equity shares

The interim dividend of 1.8p (2016: 1.0p) was approved by the Board on 4 April 2017 and paid on 9 June 2017 to all ordinary shareholders on the register of members at the close of business on Friday 28 April 2017. The ex-dividend date was 27 April 2017. The final dividend proposed by the Board is 3.6p (2016: 3.5p) per share resulting in a total ordinary dividend for the year of 5.4p (2016: 4.5p).  It will be paid on 1 February 2018 to those shareholders who are on the register at 5 January 2018 subject to approval at the Company's Annual General Meeting. The ex-dividend date is 4 January 2018. These financial statements do not reflect the final dividend payment.

 

 

 

26. Share premium reserve

	2017 £m	2016 £m
Share premium	101.6	100.8

 

The share premium reserve represents the consideration that has been received in excess of the nominal value of shares in issue.

 

Movements in share premium are presented within the Consolidated Statement of Changes in Equity.

 

 

27. Operating lease arrangements

	2017 £m	2016 £m
Minimum lease payments under operating leases recognised as an expense during the year	3.9	3.2

 

At year end the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

	2017 £m	2016 £m
Within one year	4.3	3.9
In the second to fifth years inclusive	6.9	8.7
After five years	1.1	2.8
Outstanding commitments for future minimum lease payments	12.3	15.4

 

Operating lease payments typically represent rentals payable by the Group for its office properties and cars. Rent reviews and break clauses apply to leased property agreements.

 

  

28. Notes to the cash flow statement

	Notes	2017 £m	2016 £m
Profit for the financial year		74.4	73.5
Adjustments for
Income tax expense	11	17.7	19.4
Amortisation of intangibles	14	2.4	2.5
Share option charge	31	0.9	1.5
Depreciation of property, plant and equipment	15	1.1	1.1
Interest expense	10	3.7	4.9
Interest income	9	(1.6)	(2.7)
Operating cash flows before movements in working capital		98.6	100.2
Decrease in trade and other receivables		0.1	2.2
(Increase) in inventories		(85.9)	(99.5)
Increase in trade and other payables		5.4	37.5
Operating cash flows before interest and tax paid		18.2	40.4
Interest received		0.1	0.2
Interest paid		(2.9)	(4.1)
Income taxes paid		(19.2)	(18.2)
Cash (used) / generated by operations		(3.8)	18.3
Net cash (outflow) / inflow from operating activities		(3.8)	18.3

 

Cash and cash equivalents
Cash and bank balances	40.7	119.0

 

Cash and cash equivalents comprise cash and bank balances and short-term bank deposits with an original maturity of three months or less, net of outstanding bank overdrafts. The carrying amount of cash and cash equivalents approximates fair value.

 

The increase in inventories comprises movements in inventories (including part-exchange properties), offset by the repayment of promissory notes.

 

The increase in trade and other payables includes the movement in land payables.

 

 

29. Retirement benefit schemes

The Group operates a stakeholder defined contribution retirement benefit scheme which is open to all employees.

 

Other than amounts that are deducted from employees' remuneration and accrued pending payment to the benefit scheme, no further obligations fall on the Group as the assets of these arrangements are held and managed by third parties entirely separate from the Group.

 

The benefit scheme charge for the period represents contributions payable to the benefit scheme and amounted to £2.6m for the year ended 31 August 2017 (2016: £2.1m). Unpaid contributions amounted to £0.3m as at 31 August 2017 (2016: £0.2m).

 

 

  

30. Financial risk management

The Group's financial instruments comprise cash, bank loans and overdrafts, trade receivables, other financial assets and trade and other payables.

 

 

Categories of financial instruments		2017 £m	2016 £m
Financial assets
Financial assets at fair value through profit or loss
Shared equity receivables		28.9	29.3
Loans and receivables
Cash and cash equivalents		40.7	119.0
Trade and other receivables		2.7	2.2
		72.3	150.5
Financial liabilities
Amortised cost
Trade and other payables		77.2	92.0
Land payables		67.4	49.3
Loans		8.0	52.5
Land-related promissory notes		-	11.3
		152.6	205.1

 

 

Capital risk management

The Group manages its capital (being debt, cash and cash equivalents and equity) to ensure entities within the Group have a strong capital base in order to continue as going concerns, to maintain investor and creditor confidence and to provide a basis for the future development of the business while maximising the return to stakeholders.

 

The revolving credit facility imposes financial covenants, which is normal for such agreements, all of which the Group is compliant with. The Group manages a robust internal forecasting and review process to ensure it operates within these capital requirements.

 

The Group does not routinely make additional issues of capital, other than for the purpose of raising finance for the management of the cost of capital of the Group or to fund significant developments designed to grow value in future.

 

Share-based payment schemes allow senior employees of the Group to participate in the ownership of the Group in order to ensure the senior employees are focused on growing the value of the Group to achieve the aims of all shareholders.

 

Financial risk management

The Group's finance function is responsible for all aspects of corporate treasury. It co-ordinates access to financial markets and monitors and manages the financial risks relating to the operations of the Group through internal reports which analyse exposures by degree and magnitude. The risks reviewed include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

 

Housing market risk management

The Group's activities expose it primarily to macroeconomic risks such as deflation and the cyclical nature of UK property prices. A deterioration in the economic outlook could have a significant impact on the Group's financial performance and the Group has the following procedures which mitigate its market-related operational risk:

 

·     The Group closely monitors industry indicators and assesses the potential impact of different economic scenarios

·     Decisions to allocate new capital to land and build are managed centrally through the Group Investment Committee, membership of which includes the Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer and the Land & Planning Director

·     The Group aims to maintain a national and product spread of developments to ensure that it is not reliant on one particular location, development or product

·     The Group undertakes a weekly review of sales, reservations and incentives at regional and Group level

 

The value of the Group's house price linked financial assets is sensitive to UK house prices since the amount repayable is dependent upon the market price of the property to which the asset is linked. At 31 August 2017 if UK house prices were 5% lower for a one-year period and all other variables were held constant, the Group's house price linked financial assets would decrease in value, excluding the effects of tax, by £1.1m (2016: £1.1m) with a corresponding reduction in both the result for the year and equity.

 

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has a low exposure to credit risk due to the nature and legal framework of the UK housing industry. As stated in the Group's accounting policy for revenue recognition, a sale is only recognised upon legal completion and this is accompanied by full cash receipt in virtually all cases.

 

In certain circumstances the Group offers sales incentives resulting in a long-term debt being recognised under which the Group will receive a proportion of the resale proceeds of an apartment. The Group's equity share is protected by a registered entry on the title and usually represents the first interest in the property. A reduction in property values leads to an increase in the credit risk of the Group in respect of such sales.

 

The credit risk relating to shared equity receivables is deemed immaterial as the value is recovered though subsequent disposal of the related asset. As a result, management consider the credit quality of these receivables to be good in respect of the amounts outstanding, resulting in low credit risk. Exposure to house price sensitivity is built into the fair value calculation.

 

Trade receivables consist of a large number of customers, spread across different regions. Ongoing credit evaluation is performed on the financial condition of trade receivables.

 

The Group does not have any significant credit risk exposure to any single counterparty or group of counterparties having similar characteristics. The Group defines counterparties as having similar characteristics if they are related entities. There is no material concentration of credit risk in respect of one individual customer.

 

The carrying amount recorded for financial assets in the financial statements is net of impairment losses and represents the Group's maximum exposure to credit risk. No guarantees have been given in respect to third parties. In addition, for contracted rental agreements deposits or advances may be held to mitigate risk. The Group also holds legal recourse and can exercise its right to recover rental equipment from non-performing customers.

 

Liquidity risk management

Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities. The Group's strategy in relation to managing liquidity risk is to ensure that the Group has sufficient cash flow liquid funds to meet all its potential liabilities as they fall due. The Group produces cash flow forecasts to monitor the expected requirements of the Group against the available facilities. The principal risks with these cash flows relate to achieving the level of sales volumes and prices in line with current forecast.

 

The maturity of the financial liabilities of the Group at 31 August 2016 and 2017 are as follows:

 

	2016
	Carrying value £m	Contractual cash flows £m	Within 1 year £m	2-5 years £m	5+ years £m
Loans	55.0	64.7	2.0	62.7	-
Other financial liabilities carrying interest	11.3	11.4	11.4	-	-
Financial liabilities carrying no interest	141.3	141.3	141.3	-	-
Total	207.6	217.4	154.7	62.7	-

 

 

 

	2017
	Carrying value £m	Contractual cash flows £m	Within 1 year £m	2-5 years £m	5+ years £m
Loans	10.0	15.2	1.4	13.8	-
Financial liabilities carrying no interest	144.6	144.6	144.6	-	-
Total	154.6	159.8	146.0	13.8	-

 

Other financial liabilities carrying interest are promissory notes, which attract availability and discount fees. Financial liabilities carrying no interest are trade and other payables and land payables. The timing and amount of future cash flows given in the table above is based on the year end position.

 

Interest rate risk management

Interest rate risk reflects the Group's exposure to fluctuations to interest rates in the market. The risk arises because the Group's RCF is subject to floating interest rates based on LIBOR.

 

In the year ended 31 August 2017, if UK interest rates had been 0.5% higher or lower, as this is a reasonably possible change, and all other variances were held constant, the Group's pre-tax profit would decrease/increase by £0.5m (2016: £0.5m). Calculations have been based on borrowing values at each month end.

 

Fair value of financial instruments

 

Valuation techniques and assumptions applied for the purposes of measuring fair value

 

Fair value of financial instruments carried at amortised cost

The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values.

 

Bank and other loans

Fair value is calculated based on discounted expected future principal and interest flows.

 

Interest rate swaps

At each period end, the Directors appoint a valuer to perform an external valuation of the fair value of each interest rate swap or cap outstanding.

 

Valuation of Levels 1, 2 and 3 financial assets and liabilities

·     The fair values of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices (includes listed redeemable notes, bills of exchange, debentures and perpetual notes)

·     The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments

·     The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives. Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts. Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates

 

Fair value measurements recognised in the Consolidated Statement of Financial Position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value. The grouping into Levels 1 to 3 is based on the degree to which their fair value is observable:

 

·     Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities

·     Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

·     Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs)

 

 

The financial instruments held by the Group that are measured at fair value all relate to financial assets measured at fair value through profit and loss ('FVTPL') using methods associated with Level 3. The sensitivities are not material on assets held at fair value.

	2016
	Level 1 £m	Level 2 £m	Level 3 £m	Total £m
Financial assets at FVTPL
Shared equity receivables	-	-	29.3	29.3
Total financial assets designated at FVTPL	-	-	29.3	29.3

 

	2017
	Level 1 £m	Level 2 £m	Level 3 £m	Total £m
Financial assets at FVTPL
Shared equity receivables	-	-	28.9	28.9
Total financial assets designated at FVTPL	-	-	28.9	28.9

 

There were no transfers between Levels 1, 2 or 3 in the year.

 

Financial assets comprise shared equity loans secured by way of a charge on the property and an interest rate cap.

 

Financial assets are recorded at fair value, being the estimated amount receivable by the Group, discounted to present day values.

 

For shared equity receivables the fair value of future anticipated cash receipts takes into account the Directors' views of an appropriate discount rate, a new build premium, future house price movements and the expected timing of receipts. These assumptions cover a variety of different schemes and the range of assumptions used are stated below. The assumptions are reviewed at each period end.

 

Assumptions	2017	2016
Discount rate	3.8 to 4.4%	4.7 to 5.1%
New build premium	5%	5%
House price inflation	0 to 5.75%	0 to 4.0%
Timing of receipt	5 to 14 yrs	5 to 12 yrs

 

Sensitivity-effect on value of other financial assets (less)/more	2017 Increase assumptions by 1%/1 year £m	2017 Decrease assumptions by 1%/1 year £m
Discount rate	(2.3)	2.6
House price inflation	2.3	(2.1)
Timing of receipt	(0.4)	0.4

 

The fair value of the shared equity receivable is based on the external available data. The sensitivity-effect of a 1% change is representative of our best estimate of a reasonably possible change.

 

The Directors review the anticipated future cash receipts from the assets at each reporting date and the difference between the anticipated future receipt and the initial fair value is credited to finance income.

 

At initial recognition, the fair values of the assets are calculated using a discount rate appropriate to the class of assets that reflects market conditions at the date of entering into the transaction. The Directors consider at the end of each reporting period whether the initial market discount rate still reflects up to date market conditions. If a revision is required, the fair values of the assets are re-measured at the present value of the revised future cash flows using this revised discount rate. The difference between these values and the carrying values of the assets is recorded against the carrying value of the assets and recognised directly in the Consolidated Statement of Comprehensive Income.

 

The following tables present the changes in Level 3 instruments for the years ended 31 August 2016 and 2017:

 

	2016
	Shared equity receivables £m	Interest rate cap £m	Total £m
Opening balance	28.0	0.3	28.3
Additions	0.5	-	0.5
Disposals	(1.7)	-	(1.7)
Revaluation gains or (losses) recognised in the income statement	2.5	(0.3)	2.2
Closing balance	29.3	-	29.3

 

	2017
	Shared equity receivables £m	Interest rate cap £m	Total  £m
Opening balance	29.3	-	29.3
Additions	0.8	-	0.8
Disposals	(2.7)	-	(2.7)
Revaluation gains recognised in the income statement	1.5	-	1.5
Closing balance	28.9	-	28.9

 

 

31. Share-based payments

Equity-settled share-based payment plans

The Group operates a number of share-based payment schemes as set out below:

 

Long Term Incentive Plan ('LTIP')

The Group's LTIP is open to key management at the discretion of the Board. Awards under the scheme are granted in the form of nil-priced share options. LTIP awards will normally vest, and LTIP Options become exercisable, on the third anniversary of the date of the grant of the LTIP award to the extent that any applicable performance conditions have been satisfied. LTIP Options will remain exercisable for ten years after the date of the grant. Awards are to be settled by the issue of new shares or acquisition of shares in the market. The performance conditions for the 2016 and 2017 LTIP grants are earnings per share ('EPS'), comparative total shareholder return ('TSR') and return on capital employed ('ROCE'). The TSR performance condition is a market-based condition. In order to value the TSR performance conditions against the FTSE 250 and peer group, a Monte Carlo simulation model is required which can simulate correlation between companies.

 

 

LTIP			Total
Date of grant	21 December 2016	25 November 2015
Options granted	1,933,352	1,930,524
Fair value at measurement date* (£)	1.32	2.12
Share price on date of grant (£)	1.56	2.32
Exercise price (£)	-	-
Vesting period	3 years	3 years
Expected dividend yield	n/a	n/a
Expected volatility	29.21%	26.07%
Risk free interest rate	0.23% p.a.	0.8% p.a.
Valuation model	Black-Scholes  and Monte Carlo	Black-Scholes and Monte Carlo
Movements in the year:
Options at beginning of the year	-	1,816,636	1,816,636
Granted during the year	1,933,352	-	1,933,352
Exercised during the year	-	-	-
Lapsed during the year	(57,143)	(308,326)	(365,469)
Expired in the year	-	-	-
Options at the end of the year	1,876,209	1,508,310	3,384,519
Exercisable at end of the year	-	-	-
* This is the average fair value of the fair values for the three tranches of the LTIP awards during 2017.

 

The weighted average of the average price for the LTIP award is nil.

 

Expected volatility was determined by calculating the average historical volatility over a period commensurate with the expected life of the award for the LTIP based on the FTSE 250, which McCarthy & Stone are a constituent of post-IPO.

 

Sharesave Plan ('SAYE')

The SAYE Plan is an all-employee savings related share option plan. Employees are invited to make regular monthly contributions to a SAYE scheme operated by Link Asset Services. On completion of the contract period (three or five years) employees are able to purchase ordinary shares in the Company based on the average closing middle market price over the three days prior to the award, less 20% discount. There are no performance conditions.

 

SAYE			Total	Weighted average exercise price
Date of grant	10 December 2015	10 December 2015
Options granted	2,912,247	1,197,514
Fair value at measurement date (£)	0.68	0.75
Share price on date of grant (£)	2.34	2.34
Exercise price (£)	1.674	1.674
Vesting period	3 years	5 years
Expected dividend yield	26.20%	28.16%
Expected volatility	26.07%	26.07%
Risk free interest rate	0.8% p.a.	1.2% p.a.
Valuation model	Black-Scholes	Black-Scholes
Movements in the year
Options at beginning of the year	2,653,028	1,161,675	3,814,703	1.674
Granted during the year	-	-	-	-
Exercised during the year	(15,365)	-	(15,365)	1.674
Lapsed during the year	(740,448)	(234,829)	(975,277)	1.674
Expired in the year	-	-	-	-
Options at the end of the year	1,897,216	926,846	2,824,061	1.674
Exercisable at end of the year	-	-	-	-

 

Expected volatility was determined by calculating the average historical volatility over a period commensurate with the expected life of the savings term for the SAYE options, based on the FTSE 250, which McCarthy & Stone are a constituent of post-IPO.

 

Share Incentive Plan ('SIP')

The SIP allows all employees to purchase partnership shares each month from pre-tax pay, which are then held in trust. These shares can be sold or taken from the SIP or be left within the trust for as long as the plan remains open. All plan shares and any other assets held by the trustees will be held upon trust for the participants; there is therefore no impact to the Group's financial statements in respect of this plan.

 

Annual and Deferred Bonus Plan ('ABP')

The ABP incorporates the Company's executive bonus scheme as well as a mechanism for the deferral of bonus into awards over ordinary shares. The Committee can determine that part of the bonus under the ABP is provided as an award of deferred shares, which takes the form of a £nil cost option. The maximum value of deferred shares is 50% of the bonus earned. All employees (including the Executive Directors) of the Group are eligible to participate in the ABP at the discretion of the Board. At 31 August 2017 three Executive Directors were participating in the scheme. For the year ended 31 August 2017, one-third of the bonus earned by the CEO and COO in the financial year, totalling £0.1m, will be deferred in the form of deferred shares for three years, during which no performance conditions will apply. The amount deferred will be recognised over the three year deferral period.

 

Total Share-based payment schemes

Analysis of the income charge:	2017 £m	2016 £m
Equity-settled and cash-settled share-based payments
Management Incentive Plan	-	0.4
Equity-settled share-based payments
SAYE	0.5	0.4
LTIP	0.4	0.7
	0.9	1.1
	0.9	1.5

 

  

 

32. Subsidiaries

Name	Principal activity	Company number	Class of shares	2017 %	2016 %
McCarthy & Stone (Developments) Limited	Holding Company	06622183	Ordinary	100	100
McCarthy & Stone Retirement Lifestyles Limited	Developer	06622231	Ordinary	100	100
McCarthy & Stone (Equity Interests) Limited	Property Investment	05663330	Ordinary	100	100
McCarthy & Stone (Home Equity Interests) Limited	Property Investment	05984851	Ordinary	100	100
McCarthy & Stone Investment Properties No. 23 Limited*	Property Investment	06496130	Ordinary	100	100
McCarthy & Stone (Total Care Living) Limited*	Property Investment	06069509	Ordinary	100	100
McCarthy & Stone (Alnwick) Limited*	Property Investment	07517819	Ordinary	100	100
McCarthy & Stone (Extra Care Living) Limited	Property Investment	06897363	Ordinary	100	100
McCarthy & Stone Total Care Management Limited	Property Investment	06897301	Ordinary	100	100
McCarthy & Stone Rental Interests No. 1 Limited*	Property Investment	06897272	Ordinary	100	100
McCarthy & Stone Management Services Limited	Development Management	07166051	Ordinary	100	100
McCarthy & Stone Lifestyle Services Limited*	Holding Company	07165986	Ordinary	100	100
McCarthy & Stone Financial Services Limited*	Financial Services	07798214	Ordinary	100	100
Keyworker Properties Limited	Property Investment	04213618	Ordinary	100	100
McCarthy & Stone Estates Limited*	Property Resale	07165952	Ordinary	100	100
YourLife Management Services Limited	Development Management	07153519	Ordinary	50	50
McCarthy & Stone Properties Limited*	Dormant	01925738	Ordinary	100	100
The Planning Bureau Limited*	Dormant	02207050	Ordinary	100	100
Ortus Homes Limited*	Dormant	08658235	Ordinary	100	100
McCarthy & Stone Resales Limited*	Property Resale	10716544	Ordinary	100	n/a
Linden Court Limited*	Dormant	04322139	Ordinary	100	n/a

 

*     These UK subsidiaries will take advantage of the audit exemption set out within section 479A of the Companies Act 2006 for the year ended 31 August 2017.

 

The dormant companies have taken advantage of the section 394A exemption from preparing individual accounts.

 

Each of the above shareholdings gives the immediate Parent Company 100% voting rights, with the exception of YourLife Management Services Limited where the parent has 50% voting rights, but the power to appoint the majority of the Directors. Accordingly this gives the Group power over the relevant activities of this entity.

 

The registered address of all of the above subsidiaries is 4th Floor, 100 Holdenhurst Road, Bournemouth, Dorset, BH8 8AQ.

 

 

33. Related party transactions

Balances and transactions between the Parent Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and other related parties are disclosed below.

 

Remuneration of key management personnel

The key management personnel are the Executive Leadership Team. The remuneration that they have received during the year is set out below in aggregate for each of the categories specified in IAS 24 ' Related Party Disclosures' .

 

 

	2017 £m	2016 £m
Short-term employee benefits	2.7	2.5
Social security costs	0.4	0.3
Share-based payments	0.4	0.9
Pension contributions	0.3	0.2
Termination payment	-	0.4
	3.8	4.3
Aggregate emoluments of the highest paid director	1.0	0.9

 

In 2016, as part of the Management Incentive Plan shares totalling 33,098,147 were issued to key management personnel, prior to share consolidation. Note 25 details movements in share capital within the year.

 

 

34. Events after the balance sheet date

There were no events after the reporting period that required adjustment or disclosure in the financial statements.