Annual Reports Keepmoat Homes Annual Report 2018 | Page 19

Keepmoat.com
Strategic Report
Financial Review
Disposal of Regeneration
division
On 30 April 2017, the Group successfully disposed
of Keepmoat Regeneration Holdings Limited and its
subsidiaries (the Regeneration division) to ENGIE Services
Holding UK Limited. The final sale proceeds of £313.1m
exceeded the carrying amount of the related net assets at
the completion date and, accordingly, £240.7m has been
recorded as a gain on disposal of discontinued operations
in the Group financial statements. Following this disposal,
on 12 May 2017 the wider Keystone JVco Limited Group
made a cash return to shareholders of £145m in aggregate,
followed by the redemption of £163m of the wider Group’s
bond debt on 15 June 2017, strengthening the wider
Group’s balance sheet and reducing net debt.
Exceptional items
Exceptional items in the year amounted to a net charge
of £17.6m (FY17: £4.8m). This included £13.2m of losses
recognised on a number of sites within the West Midlands
region where significant trading issues, including significant
cost over-runs that were not adequately managed, resulted
in site losses which by size of loss and nature warranted
separate presentation as exceptional items. Losses on sites
were fully provided against in the year ended March 2018,
with trading on all such sites completed no later than the
end of the first quarter of the following financial year. To
ensure profitable on-going trading, following detailed
review, the decision was taken to close the West Midlands
regional office, with the site portfolio rationalised and
the management of on-going profitable sites successfully
transferred to other regional offices, fully sustaining the
presence of the Group within the Midlands region as a
whole. Other exceptional costs included restructuring costs
of £4.2m in aggregate which were incurred in the year,
relating both to the closure of the West Midlands regional
office and to wider Group restructuring following the
disposal of the Regeneration division.
Financing costs
External financing costs in the year were £4.7m (FY17:
£2.7m) leading to a cash outflow of £0.5m (FY17: £0.2m).
The annual charge includes non-cash amounts of £3.0m
(FY17: £2.5m) in respect of the unwind of discount on
deferred land payments.
Taxation
The current year tax credit relating to continuing operations
of £2.4m (FY17: £8.5m charge) is made up of a current tax
credit of £0.7m and a deferred tax credit of £1.7m. Since the
disposal of the Regeneration business the Group no longer
charges for group relief, and as such the tax credit is broadly
in line with the standard rate of corporation tax.
Net debt and leverage
The Group is part of the wider Keystone JVco Limited Group
(Keepmoat Limited’s ultimate parent company).
The Group and its principal subsidiaries have given
guarantees in respect of the borrowing in the Keystsone
JVco Limited Group. These are detailed in note 23.
Net debt in the wider Keystone JVco Group at the end
of FY18 was £112.8m (FY17: £240.0m), the wider Group
having redeemed £163.0m of its senior secured loan notes
during the year. Excluding shareholder