2015-2016 Group Accounts Abridged Group Report & Financial Statements Year Ended 31 August 2016 The Key to Building Success
& Abridged Group Report & Financial Statements The attached financial information for the year ended 31 August 2016 does not constitute the statutory financial statements for the year. The statutory financial statements have been delivered to the Registrar of Companies and include the auditors report which was unqualified and did not contain a statement under either section 498(2) of the Companies Act 2006 (accounting records or returns inadequate or accounts not agreeing with the records and returns) or Section 498(3) (failure to obtain necessary information and explanations). CONTENTS PAGES Chairman s statement 3-4 Group profit and loss account 5 Group balance sheet 6 Group statement of changes in equity 7-8 Group cash flow statement 9 Notes to the financial statements 10-33 2
&I am pleased to report another strong financial performance for the Bowmer and Kirkland Group. Chairman s Statement All divisions within the group performed in line with our expectations. The start of the financial year saw a reassuring upturn in the construction sector, although this came with a number of challenges notably increasing pressure on the supply chain and availability of resource. We continue to proactively promote both diversity and flexibility into our supply chain. Long standing Joint Venture developments are coming to fruition and our house building company had an excellent year. Our success is a testament to the quality, expertise and commitment of our staff, our corporate stability and our collaborative approach to business. I am extremely proud of our staff whose talent, energy and enthusiasm has enabled us to achieve these results. They deserve our appreciation. Our employees are our most important resource and essential to the future success of the business. We remain dedicated to continuing to develop talent through our training schemes. Group turnover increased by 10% to 931m. As a result of our robust financial management, the group achieved a pre-tax profit of 61.5m (2015: 40.2m). Our balance sheet further strengthened, with net assets reported of 360m - a 12% increase on the previous financial year. We continue to maintain a very healthy cash balance, with net cash at bank of 268m at the year end, this is an 8% increase on 2015. Our strong cash position provides a major advantage enabling us to provide equity funding to finance developments and to invest in Joint Venture arrangements when they arise. We are pleased with the contribution our property joint ventures have made and are actively looking for more opportunities. We will also continue to seek out appropriate equity funding prospects. We believe that social responsibility must be placed at the heart of our business. We are committed to acting in an ethical, socially responsible and environmentally sound manner. This will be to the benefit of our clients, the wider community and the company. We take our business responsibilities seriously and endeavour to work as a team with our clients, employees, supply chain and other stakeholders in promoting the overarching aims of social responsibility. Our caring values and conduct are vital in creating and sustaining long-term success in social awareness and achieving improvements for all our stakeholders and the environment in which we live. This is the 10th year that we have recorded our carbon footprint. Significant reductions in energy use, vehicle fuel, paper usage and waste have been achieved, resulting in an overall reduction of 51% in the last 10 years, exceeding our annual target for a 5% reduction. The financial year 2015-2016 continued the trend of carbon reductions, surpassing our annual target with an overall reduction of 9%. This reduction was partly helped through the installation of ground mounted solar panels at our Head Office in December 2015, reducing our intake annually from the National Grid by around 25,000Kwhr. Other highlights for the year included: A reduction in fuel of around 16%, together with a greater use of public transport. A continued reduction in paper usage by 18% over the year. Paper usage is now 69% lower than 10 years ago. Health & Safety is a core business value. We are committed to creating a future free of incidents, injuries and ill health as a result of our activities. 3
Chairman s Statement &We continue to work with our clients and external stakeholders to manage and control Health & Safety risks. Managing safety, health and wellbeing and engaging with, and training our workforce are integral to how we work. We wish to maintain workplaces where everyone is valued, all views are listened to and a safe and healthy working environment is the norm and not the exception. We recognise that understanding our clients core values and objectives is essential to our success. They can be assured of our continued commitment to provide them with an exceptional level of service and delivery. The effect of the UK s decision to leave the EU has yet to be seen, however with the groups strong infrastructure and healthy cash position the directors believe that the group is well placed to take advantage of any available opportunities in the market place in which we operate. J N Kirkland OBE Chairman 4
& 2016 Group Profit & Loss Account 2015 Note 000 000 Turnover 930,668 848,187 Cost of sales (824,744) (756,316) Gross profit 105,924 91,871 Administrative expenses (53,265) (50,789) Operating profit 52,659 41,082 Share of results of associate and joint ventures 1,167 1,288 Fair value gains and losses on investment properties and traded investments (970) 434 Income from fixed asset investments 5,028 - Interest receivable and similar income 9,363 5,323 Interest payable and similar charges (5,774) (7,939) Profit on ordinary activities before taxation 61,473 40,188 Taxation (13,376) (8,658) Profit for the financial year 48,097 31,530 ====== ====== Other comprehensive income (net of tax): Current translation differences (4,077) (1,522) Actuarial gains on defined benefit plans 3,656 17,153 Other comprehensive income (421) 15,631 Total comprehensive income for the year 47,676 47,161 ====== ====== Profit for the year attributable to: Owners of the parent 48,095 31,528 Non-controlling interests 2 2 Profit for the year 48,097 31,530 ====== ====== Total comprehensive income for the year attributable to: Owners of the parent 47,674 47,159 Non-controlling interests 2 2 Total comprehensive income for the yar 47,676 47,161 ====== ====== 5
& 2016 Group Balance Sheet 2015 Note 000 000 000 000 Fixed assets Positive goodwill 378 1,623 Negative goodwill - - Other intangible assets 38 52 Total intangible assets 3 416 1,675 Tangible assets 4 28,773 27,767 Investment properties 5 91,025 91,700 Investments 6 5,439 6,802 Investment in associates 171 (173) Investment in joint ventures: 6 14,146 14,354 139,970 142,125 Current assets Stocks 7 133,869 112,452 Debtors 8 221,861 252,799 Cash at bank and in hand 267,681 248,325 623,411 613,576 Creditors: amounts falling due within one year 10 (394,421) (424,352) Net current assets 228,990 189,224 Total assets less current liabilities 368,960 331,349 Creditors: amounts falling due after one year 11 (40,628) (40,703) Provision for liabilities Deferred taxation 9 (3,759) (1,915) Net assets excluding pension asset 324,573 288,731 Pension asset 15 35,307 31,281 Net assets including pension asset 359,880 320,012 ===== ===== Capital and reserves Called-up share capital 199 199 Revaluation reserve 8,234 9,244 Capital redemption reserve 36 36 Profit and loss account 351,404 310,528 Equity attributable to owners of the parent 359,873 320,007 Non controlling interest 7 5 359,880 320,012 ===== ===== These financial statements were approved by the Directors and authorised for issue on 16th May 2017 and are signed on their behalf by: J A C Kirkland, Director M A Mucklestone, Director 6
& Group Statement of Changes in Equity Capital Profit Share Revaluation redemption and loss Controlling Non-controlling capital Reserve reserve account Interests interests Total 000 000 000 000 000 000 000 Balance at 1 September 2014 199 8,871 36 268,305 277,411 3 277,414 Profit for the year - - - 31,528 31,528 2 31,530 Other comprehensive income, net of taxation: Actuarial gains on defined benefit plans - - - 17,153 17,153-17,153 Currency translation differences - - - (1,522) (1,522) - (1,522) Total comprehensive income for the year - - - 47,159 47,159 2 47,161 Transactions with owners: Dividends - - - (4,563) (4,563) - (4,563) Transfers - 373 - (373) - - - Balance at 31 August 2015 199 9,244 36 310,528 320,007 5 320,012 ====== ====== ====== ====== ====== ====== ====== Profit for the year - - - 48,095 48,095 2 48,097 Other comprehensive income, net of taxation: Actuarial gains on defined benefit plans - - - 3,656 3,656-3,656 Currency translation differences - - - (4,077) (4,077) - (4,077) Total comprehensive income for the year - - - 47,674 47,674 2 47,676 7
& Group Statement of Changes in Equity Capital Profit Share Revaluation redemption and loss Controlling Non-controlling capital Reserve reserve account Interests interests Total 000 000 000 000 000 000 000 Transactions with owners: Dividends - - - (7,808) (7,808) - (7,808) Transfers - (1,010) - 1,010 - - - Balance at 31 August 2016 199 8,234 36 351,404 359,873 7 359,880 ======= ======= ======= ======= ======= ======= ======= 8
& Group Cash Flow Statement 2016 2015 Note 000 000 Operating activities Cash generated from operations 14 40,766 95,540 Income taxes paid (12,273) (6,840) Net cash from operating activities 28,493 88,700 Investing activities Purchase of investment properties (246) - Purchase of intangible fixed assets (14) - Purchase of tangible fixed assets (5,983) (5,515) Proceeds on disposal of investments 1,334 - Proceeds on disposal of intangible fixed assets 5 - Proceeds on disposal of tangible fixed assets 1,761 1,024 Interest received 8,144 4,846 Dividend received from joint ventures 83 83 Dividends received from investments 5,027 - Net cash from investing activities 10,111 438 Financing activities Repayments of borrowings (67) (29,175) Decrease/increase in loans to joint ventures 480 (3,746) Interest paid (5,381) (6,927) Dividents paid (7,634) (2,694) Net cash used in financing activities (12,602) (42,542) Net increase in cash and cash equivalents 26,002 46,596 Cash and cash equivalents at beginning of year 240,984 194,388 Cash and cash equivalents at end of year 266,986 240,984 ====== ====== Relating to: Bank balances and short term deposits included in cash at bank and in hand 267,681 248,325 Bank overdrafts included in creditors due within one year 13 (695) (7,341) 266,986 240,984 ====== ====== 9
&1. Accounting policies Company Information Bowmer and Kirkland Limited ( the company ) is a limited company domiciled and incorporated in England. The address of the company s registered office and principal place of business is High Edge Court, Church Street, Heage, Belper, Derbyshire, DE56 2BW. The group consists of Bowmer and Kirkland Limited and all of its subsidiaries. The company s and the group s principal activities and the nature of the company s and the group s operations are disclosed in the Strategic Report. Basis of accounting These financial statements have been prepared in accordance with FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland ( FRS 102 ) and the requirements of the Companies Act 2006, including the provisions of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, and under the historical cost convention, modified to include investment properties and certain financial instruments at fair value. Monetary amounts in these financial statements are rounded to the nearest, except where otherwise indicated. These financial statements are the first financial statements of Bowmer and Kirkland Limited prepared in accordance with Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102). The financial statements of Bowmer and Kirkland Limited for the year ended 31 August 2015 were prepared in accordance with previous UK GAAP. Some of the FRS 102 recognition, measurement, presentation and disclosure requirements and accounting policy choices differ from previous UK GAAP. Consequently, the directors have amended certain accounting policies to comply with FRS 102. The directors have also taken advantage of certain exemptions from the requirements of FRS 102 permitted by FRS 102 Chapter 35 Transition to this FRS. Comparative figures have been restated to reflect the adjustments made, except to the extent that the directors have taken advantage of exemptions to retrospective application of FRS 102 permitted by FRS 102 Chapter 35 Transition to this FRS. Adjustments are recognised directly in retained earnings at the transition date and are detailed in Note 16. In accordance with FRS 102, the company has taken advantage of the exemptions from the following disclosure requirements; Section 7 Statement of Cash Flows Presentation of a Statement of Cash Flow and related notes and disclosures. Section 33 Related Party Disclosures - Compensation for key management personnel. Basis of consolidation The consolidated financial statements include the financial statements of Bowmer and Kirkland Limited and all of its subsidiaries (i.e. entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes. All financial statements are made up to 31 August. All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. 10
& 1. Accounting policies (continued) Basis of consolidation (continued) Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group. The cost of a business combination is the fair value at the acquisition date, of the assets given, equity instruments issued and liabilities incurred or assumed, plus directly attributable costs. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. A subsidiary is no longer consolidated when control is lost. The difference between any disposal proceeds and the carrying amount of the subsidiary s net assets (including related goodwill) is recognised in profit or loss as a gain or loss on disposal. As permitted by s408 Companies Act 2006, the company has not presented its own Statement of Comprehensive Income. The company s profit and total comprehensive income for the year were 19,585,000 (2015: 23,597,000) and 23,241,000 (2015: 40,750,000), respectively. Going concern The accounts have been prepared on a going concern basis. Having carried out a detailed review of the group s resources, the directors are satisfied that the group has sufficient cash flows to meet its liabilities as they fall due for at least one year from the date of approval of the accounts. Functional and presentational currencies The consolidated financial statements are presented in sterling which is also the functional currency of the company. Turnover Turnover is recognised at the fair value of the consideration received or receivable for sale of goods and services to external customers in the ordinary nature of the business. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates. Turnover is shown net of Value Added Tax. Turnover is recognised in relation to separately identifiable components of a single transaction when necessary to reflect the substance of the arrangement and in relation to two or more linked transactions when necessary to understand the commercial effect. When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income. Construction contracts The recognition of turnover from construction contracts is set out in the accounting policy below. Sale of houses Turnover is recognised when it and the associated costs can be measured reliably, future economic benefits are probable, and the risks and rewards of ownership have been transferred to the customer. Sales of houses are recognised on exchange of contracts and legal title has passed and the group has no continuing managerial involvement associated with ownership or effective control of the house sold. 11
& 1. Accounting policies (continued) Turnover (continued) Sale of development properties Turnover from the sale of development properties is recognised when the significant risks and rewards of ownership of the properties have passed to the buyer, being on exchange of contracts, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Sale of goods Turnover is recognised when it and the associated costs can be measured reliably, future economic benefits are probable, and the risks and rewards of ownership have been transferred to the customer. Sales of goods are recognised when goods are delivered and legal title has passed and the group has no continuing managerial involvement associated with ownership or effective control of the goods sold. This is generally when goods have been checked and accepted by the customer on delivery at the specified location. Rental income Rental income on assets leased under operating leases is recognised on a straight-line basis over the lease term and is presented within other operating income. Other income Interest income Interest income is accrued on a time-apportioned basis, by reference to the principal outstanding at the effective interest rate. Intangible fixed assets Goodwill Goodwill is capitalised and written off evenly over ten years in the opinion of the directors, this represents the period over which the goodwill is expected to give rise to economic benefits. Negative goodwill arises when the cost of a business combination is less than the fair value of the identifiable assets, liabilities and contingent liabilities acquired. The amount up to the fair value of the non-monetary assets acquired is credited to prior of loss in the period in which those non-monetary assets are recovered. Negative goodwill in excess of the fair values of the non-monetary assets acquired is credited to profit or loss in the periods expected to benefit, which the directors consider to be ten years. Intangible fixed assets (other than goodwill) Intangible assets purchased other than in a business combination are recognised when future economic benefits are probable and the cost or value of the asset can be measured reliably. Intangible assets are initially recognised at cost (which for intangible assets acquired in a business combination is the fair value at acquisition date) and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Intangible assets are amortised to profit or loss on a straight-line basis over their useful lives, as follows:- Software costs 5 years Amortisation is revised prospectively for any significant change in useful life or residual value. On disposal, the difference between the net disposal proceeds and the carrying amount of the intangible asset is recognised in profit or loss. 12
&1. Accounting policies (continued) Tangible fixed assets Tangible fixed assets are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses. Depreciation is provided on all tangible fixed assets, other than freehold land, at rates calculated to write off the cost of each asset to its estimated residual value on a straight line basis over its expected useful life, as follows:- Freehold property Freehold property improvements Plant and equipment 50 years straight line 10 years straight line 3 8 years straight line Leasehold property is amortised over 50 years or the period of the lease, whichever is the shorter. Residual value is calculated on prices prevailing at the reporting date, after estimated costs of disposal, for the asset as if it were at the age and in condition expected at the end of its useful life. Land and buildings are accounted for separately even when acquired together. Impairments of fixed assets An assessment is made at each reporting date of whether there are indications that a fixed asset may be impaired or that an impairment loss previously recognised has fully or partially reversed. If such indications exist, the group estimates the recoverable amount of the asset or, for goodwill, the recoverable amount of the cash-generating unit to which the goodwill belongs. Shortfalls between the carrying value of fixed assets and their recoverable amounts, being the higher of fair value less costs to sell and value-in-use, are recognised as impairment losses. Impairments are recognised in profit or loss. Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Reversals of impairment losses are recognised in profit or loss. On reversal of an impairment loss, the depreciation or amortisation is adjusted to allocate the asset s revised carrying amount (less any residual value) over its remaining useful life. The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment. Investment properties Investment properties (including properties held under an operating lease) are initially measured at cost and subsequently measured at fair value whilst a reliable measure of fair value is available without undue cost or effort. Changes in fair value are recognised in profit or loss. Fixed asset investments Group The group s trade investments are classified as financial instruments, and accounted for in accordance with the accounting policy at fair value through profit or loss, as set out below. Company In the separate accounts of the company, interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. 13
& 1. Accounting policies (continued) Fixed asset investments (continued) Interests in subsidiaries, associates and jointly controlled entities are assessed for impairment at each reporting date. Any impairments losses or reversals of impairment losses are recognised immediately in profit or loss. A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities. Associates Undertakings in which the group has significant influence (i.e. the power to participate in the financial and operating policy decisions but not control or joint control over those policies) are classified as associates. The group s share of the results, other comprehensive income and equity of associates are accounted for using the equity method based on the associate s financial statements to 31 August. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. All unrealised profit or losses on transactions with the associate are eliminated to the extent of the group s interest, except where unrealised losses provide evidence of an impairment. Where necessary, adjustments are made to bring the accounting policies of the associate into line with those used by the group. Dividends received from the associate reduce the carrying amount of the investment. Losses in an associate that reduce the carrying amount of the investment in the associate to below zero are not recognised, but a provision is recognised to the extent that the group has an obligation or has made payments on behalf of the associate. Jointly controlled entities Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities. Jointly controlled entities are accounted for using the equity method as described in the accounting policy for associates above. Stocks Stocks are valued at the lower of cost and estimated selling price less costs to complete and sell. Cost is determined using the weighted average cost basis and for finished goods and work in progress, includes direct labour costs and overheads appropriate to the stage of manufacture. At each reporting date, the group assesses whether stocks are impaired or if an impairment loss recognised in prior periods has reversed. Any excess of the carrying amount of stock over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss. Construction contracts When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, turnover and costs are recognised over the period of the contract. When it is probable that total contract costs will exceed total contract turnover, the expected loss is recognised as an expense immediately. 14
&1. Accounting policies (continued) Construction contracts (continued) When the outcome of a construction contract cannot be estimated reliably, contract turnover is recognised only to the extent of contract costs that are recoverable and the contract costs are expensed as incurred. The group uses the percentage of completion method to determine the appropriate amount to recognise in a given period. The stage of completion is measured by the proportion of contract costs incurred for work performed to date compared to the estimated total contract costs. Costs incurred in the year in connection with future activity on a contract are excluded for contract costs in determining the stage of completion. These costs are presented as stocks, prepayments or other assets, depending on their nature, and provided it is probable they will be recovered. Taxation The tax expense represents the sum of the current tax expense and deferred tax expense. Current tax assets are recognised when tax paid exceeds the tax payable. Current tax is based on taxable profit for the year. Current tax assets and liabilities are measured using tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based on tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax liabilities are recognised in respect of all timing differences that exist at the reporting date. Timing differences are differences between taxable profits and total comprehensive income that arise from the inclusion of income and expenses in tax assessments in different periods from their recognition in the financial statements. Deferred tax assets are recognised only to the extent that it is probable that they will be recovered by the reversal of deferred tax liabilities or other future taxable profits. Deferred tax is recognised on income or expenses from subsidiaries, associates, branches and interests in jointly controlled entities, that will be assessed to or allow for tax in a future period except where the group is able to control the reversal of the timing difference and it is probable that the timing difference will not reverse in the foreseeable future. For investment properties measured at fair value (except investment property with a limited useful life held by the group to consume substantially all of its economic benefits), deferred tax is measured using the tax rates and allowances that apply to the sale of the asset or property. Current and deferred tax is charged or credited in profit or loss, except when it relates to items charged or credited to other comprehensive income or equity, when the tax follows the transaction or event it relates to and is also charged or credited to other comprehensive income, or equity. Current tax assets and current tax liabilities and deferred tax assets and deferred tax liabilities are offset, if and only if, there is a legally enforceable right to set off the amounts and the entity intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Leases The group as lessee operating leases Annual rentals on operating leases are charged to profit or loss on a straight line basis over the lease term. 15
&1. Accounting policies (continued) Leases (continued) Rent free periods or other incentives received for entering into an operating lease are accounted for as a reduction to the expense and are recognised, on a straight-line basis over the lease term. The group as lessor operating leases Rental income from assets leased under operating leases is recognised on a straight-line basis over the term of the lease. Rent free periods or other incentives given to the lessee are accounted for as a reduction to the rental income and recognised on a straight-line basis over the lease term. Employee benefits The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or are capitalised as fixed assets. The cost of any unused holiday entitlement is recognised in the period in which the employee s services are received. The best estimate of the expenditure required to settle an obligation for termination benefits is recognised immediately as an expense when the group is demonstrably committed to terminate the employment of an employee or to provide termination benefits. Retirement benefits Defined contribution plans For defined contribution schemes the amount charged to profit or loss is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments. Defined benefit plans For defined benefit retirement plans, the cost of providing benefits is determined using the projected unit credit method, and is based on actuarial advice. Asset/Liability The net defined benefit asset/liability represents the present value of the defined benefit obligation minus the fair value of plan assets out of which obligations are to be settled. Any asset resulting from this calculation is limited to the present value of available refunds or reductions in future contributions to the plan. The rate used to discount the benefit obligations to their present value is based on market yields for high quality corporate bonds with terms and currencies consistent with those of the benefit obligations. Gains/Losses Gains or losses recognised in profit or loss: The change in the net defined benefit liability arising from employee service during the year is recognised as an employee cost. The cost of plan introductions, benefit changes, settlements and curtailments are recognised as incurred. Net interest on the net defined benefit asset/liability comprises the interest cost on the defined benefit obligation and interest income on the plan assets, calculated by multiplying the fair value of the plan assets at the beginning of the period by the rate used to discount the benefit obligations. Gains or losses recognised in other comprehensive income: Actuarial gains and losses The difference between the interest income on the plan assets and the actual return on the plan assets. 16
&1. Accounting policies (continued) Cash and cash equivalents Cash and cash equivalents are basic financial instruments and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities. Financial instruments The group has elected to apply the provisions of Section 11 Basic Financial Instruments and Section 12 Other Financial Instruments Issues of FRS 102, in full, to all of its financial instruments. Financial assets and financial liabilities are recognised when the group becomes a party to the contractual provisions of the instrument, and are offset only when the group has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Financial assets Basic financial assets, which include trade and other debtors, amounts owed by group undertakings, amounts recoverable on contracts and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the financial asset is measured at the present value of the future receipts discounted at a market rate of interest. Other financial assets Other financial assets, including trade investments, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publically traded and whose fair values cannot be measured reliably are measured at cost less impairment. Impairment of financial assets Financial assets, other than those carried at fair value, are assessed for indicators of impairment at each reporting end date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset s original effective interest rate. The impairment loss is recognised in profit or loss. If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss. Derecognition of financial assets Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party. 17
&1. Accounting policies (continued) Classification of financial liabilities Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities. Basic financial liabilities Basic financial liabilities, including trade and other creditors, bank loans and amounts owed to group undertakings, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Debt instruments are subsequently carried at amortised cost, using the effective interest rate method. Derecognition of financial liabilities Financial liabilities are derecognised when, and only when, the group s contractual obligations are discharged, cancelled, or they expire. Foreign currencies Transactions in currencies other than the functional currency (foreign currencies) are initially recorded at the exchange rate prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies are translated at the rate ruling at the date of the transaction or, if the asset or liability is measured at fair value, the rate when that fair value was determined. All translation differences are taken to profit or loss, except to the extent that they relate to gains or losses on non-monetary items recognised in other comprehensive income, when the related translation gain or loss is also recognised in other comprehensive income. Assets and liabilities of overseas subsidiaries (including goodwill and fair value adjustments in relation to overseas subsidiaries) are translated into the group s presentation currency at the rate ruling at the reporting date. Income and expenses of overseas subsidiaries are translated at the average rate for the year as the directors consider this to be a reasonable approximation to the rate at the date of the transaction. Translation differences are recognised in other comprehensive income and accumulated in equity. Equity instruments Equity instruments issued by the group are recorded at the fair value of proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group. Employee benefit trusts The group has established trusts for the benefit of certain employees and directors. Monies held in these trusts are held by independent trustees and managed at their discretion. Where monies held in a trust are determined by the group on the basis of employees and directors past services to the business and the group can obtain no future economic benefit from these monies, such monies whether in the trust or accrued for by the group are charged to the Statement of Comprehensive Income in the period to which they relate. 18
&1. Accounting policies (continued) Employee benefit trusts (continued) Where the group has de facto control of the assets and liabilities of the trusts and bears their benefit and risks, the group records assets and liabilities of the trusts as its own. The value of assets and liabilities held by the trusts are not material at either 31 August 2016 or 31 August 2015 and therefore have not been recognised in these financial statements. 2. 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 amount 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 where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods. Critical judgements The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements. Construction contracts In determining the revenue and costs to be recognised each year for work done on construction contracts, estimates are made in relation to the final out-turn on each contract. On major construction contracts, it is assessed, based on past experience, that their outcome cannot be estimated reliably during the early stages of the contract, but that costs incurred will be recoverable. Once the outcome can be estimated reliably, estimates of the final out-turn on each contract may include cost contingencies to take account of the specific risks within each contract that have been identified during the early stages of the contract. The cost contingencies are reviewed on a regular basis throughout the contract life and are adjusted where appropriate. However, the natures of the risks on contracts are such that they often cannot be resolved until the end of the project and therefore may not reverse until the end of the project. Management continually reviews the estimated final out-turn on contracts and make adjustments where necessary. Leasing In categorising leases as finance leases or operating leases, management makes judgements as to whether significant risks and rewards of ownership have transferred to the group as lessee. Key sources of estimation uncertainty The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows. Impairment of intangible assets and goodwill The recoverable amount of goodwill and other intangible assets is based on value in use which requires estimates in respect of the allocation of goodwill to cash generating units, the future cash flows and an appropriate discount rate. The key inputs to the value in use calculations are the discount rate and the future earnings growth. 19
&2. Judgements and key sources of estimation uncertainty (continued) Key sources of estimation uncertainty (continued) Impairment of investments The carrying value of investments is based on value in use which requires estimates in respect of the future cash flows and an appropriate discount rate. The key inputs to the value in use calculations are the discount rate and the future earnings growth. Depreciation and amortisation The assessment of the useful economic lives, residual values and the method of depreciating or amortising fixed assets requires judgement. Depreciation and amortisation are charged to profit or loss based on the useful economic life selected, which requires an estimation of the period and profile over which the group expects to consume the future economic benefits embodied in the assets. Defined benefit pension scheme The group has obligations to pay pension benefits to certain employees, and former employees. The cost of these benefits and the present value of the obligation depend on a number of factors, including: life expectancy, salary increases, asset valuations and the discount rate on corporate bonds. Management estimates these factors in determining the net pension obligation in the balance sheet. The assumptions reflect historical experience and current trends. Impairment of debtors Debtors are stated at recoverable amounts, after appropriate impairment for bad and doubtful debts. Calculation of the bad debt impairment requires judgment from the management team, based on the creditworthiness of the debtor, the agency profile of the debtor, and the historical experience. Stock provision Stocks are valued at the lower of cost and net realisable value. Net realisable value includes, where necessary, provisions for slow moving and obsolete stocks. Calculation of these provisions requires judgements to be made, which include forecast consumer demand, the promotional, competitive and economic environment and inventory loss trends. Stocks Land categorised as stock is recognised when the legal title passes and where costs are deferred these are included at the directors best estimate of future payments. In order to assess the appropriateness of the carrying value of stock, the company is required to make estimations of sales prices, costs and margins expected on sites in order to determine whether any write-downs or reversals are required to ensure stock is stated at the lower of cost and net realisable value. The company has undertaken a detailed review on a site-by-site basis of the net realisable value of its land and work in progress. The net realisable value exercise is highly sensitive to the assumptions used and we therefore also consider when the stock is likely to be realised, whether or not there has been a sustained change in market conditions that previously caused the stock to be written down and the wide economic environment existing at the balance sheet date. 20
&3. Intangible fixed assets Negative Positive Software goodwill goodwill costs Total 000 000 000 000 Cost At 1 September 2015 (73) 22,168 96 22,191 Additions - - 14 14 Disposals - - (11) (11) At 31 August 2016 (73) 22,168 99 22,194 ===== ===== ===== ===== Amortisation At 1 September 2015 (73) 20,545 44 20,516 Charge for the year - 1,245 23 1,268 On disposal - - (6) (6) At 31 August 2016 (73) 21,790 61 21,778 ===== ===== ===== ===== Carrying amount At 31 August 2016-378 38 416 ===== ===== ===== ===== At 31 August 2015-1,623 52 1,675 ===== ===== ===== ===== The amortisation of goodwill and amounts recognised in profit or loss for the year in respect of negative goodwill are included within administrative expenses. The cumulative amount of goodwill written off directly against reserves in respect of the acquisition of undertakings remaining in the group at 31 August 2016 amounted to 1,185,000 (2015: 1,185,000) and will be charged to profit or loss upon disposal of the business to which it relates. The Word, South Shields 21
&4. Tangible fixed assets Short Freehold leasehold Plant and property property equipment Total 000 000 000 000 Cost At 1 September 2015 25,049 447 36,046 61,542 Additions 79-5,904 5,983 Disposals (17) - (6,505) (6,522) At 31 August 2016 25,111 447 35,445 61,003 ======= ======= ======= ======= Depreciation At 1 September 2015 6,540 232 27,003 33,775 Charge for year 447 23 3,709 4,179 On disposals (2) - (5,722) (5,724) At 31 August 2016 6,985 255 24,990 32,230 ======= ======= ======= ======= Carrying amount At 31 August 2016 18,126 192 10,455 28,773 ======= ======= ======= ======= At 31 August 2015 18,509 215 9,043 27,767 ======= ======= ======= ======= Freehold property includes land amounting to 2,172,000 (2015: 2,172,000) which is not being depreciated. 5. Investment properties Group Investment properties 000 Fair Value At 1 September 2015 91,700 Additions 246 Fair value losses (921) At 31 August 2016 91,025 ====== 22
&6. Investments Shares in trade Unlisted Group investments investments Total 000 000 000 Cost or valuation At 1 September 2015 82 7,175 7,257 Disposals - (1,334) (1,334) Revaluations (29) - (29) At 31 August 2016 53 5,841 5,894 ===== ===== ===== Provision for diminution in value At 1 September 2015-455 455 At 31 August 2016-455 455 ===== ===== ===== Carrying amount At 31 August 2016 53 5,386 5,439 ===== ===== ===== At 31 August 2015 82 6,720 6,802 ===== ===== ===== Roman House Student Accommodation Stay City, York Student Accommodation, Coventry 23
&6. Investments (continued) Group undertakings The directors consider that to give full particulars of all subsidiary and joint venture undertakings would lead to a statement of excessive length. The following information relates to those subsidiary and joint venture undertakings whose results or financial position, in the opinion of the directors, principally affected the figures of the group: The investment in group companies represents 100% of the ordinary share capital of the following companies: Subsidiary Nature of business Country of incorporation B&K Building Services Limited Peveril Securities Limited Johnsons (Chopwell) Limited B&K Structures Limited Peveril Decorators Limited Peveril Homes Limited Derry Building Services Limited Key Property Solutions Limited Keyclad Limited Cell Security Limited Lancer Properties Limited Rokeby (Swadlincote) Limited Building contractors Property development and investment Coal screening Hybrid structural frames Painting and decorating contractors House builders Mechanical engineering and electrical contractors Building maintenance contractors Cladding contractors Manufacture and provision of products for custodial suites and prisons Property development and investment Property development and investment Modus Green Acres (Jersey) Limited Property development Jersey Soncell NA Inc Holding company United States of America Sonic Communications (International) Limited Manufacture of specialised communication equipment All of the above companies are 100% owned. All companies are incorporated in England and Wales unless stated otherwise. All of the above companies have been included in the consolidated financial statements. New College Nottingham 24
& 6. Investments (continued) The carrying value of the group s investments in associates and joint ventures was as follows: Associates Joint Ventures 2016 2015 2016 2015 000 000 000 000 At 1 September (173) (65) 1,276 1,064 Share of profit 344 (108) 240 295 Divident received - - (83) (83) Capital introduced - - 116 - At 31 August 171 (173) 1,549 1,276 ===== ===== ===== ===== Loans to joint ventures - - 12,597 13,077 At 31 August 171 (173) 14,146 14,354 ===== ===== ===== ===== The principal activity of all of the joint ventures is property development and the group owns 50% of the voting rights and ordinary share capital of each, except Urbo (West Bar) Limited where the group owns 49% of the voting rights and ordinary share capital. The group holds a 24% ordinary share holding (and voting rights) in Peveril Securities Brockley Limited, a company established in the UK whose principal activity is property development. As noted under the consolidation accounting policy, one company is a quasi-subsidiary and consolidated into these financial statements. The quasi-subsidiary is Summit Real Estate Limited, the shares in which are owned by N Sladen. The financial information of the company is considered immaterial to the group, with the exception of stocks of 7,262,000 (2015: 7,224,000) and therefore the summarised accounts have not been disclosed. 7. Stocks 2016 2015 000 000 Raw materials and consumables 4,539 1,564 Work in progress 128,404 107,032 Finished goods 926 3,856 133,869 112,452 ===== ===== During the year, an impairment loss on stocks of 500,000 (2015: 1,090,000) was recognised within cost of sales. Earlier stock write downs of 1,300,000 (2015: nil) have been reversed during the current period. 25
&8. Debtors 2016 2015 000 000 Amount falling due within one year: Trade debtors 92,733 106,721 Amounts recoverable on contracts 22,004 39,873 Other debtors 44,542 42,060 Directors current account - 1,127 Prepayments and accrued income 52,285 53,139 211,564 242,920 ===== ===== Amounts falling due after more than one year: Trade debtors 9,245 8,124 Other debtors 1,052 853 Prepayments and accrued income - 902 221,861 252,799 ===== ===== During the year, an impairment loss of 429,000 (2015: 1,253,000) was recognised in respect of trade debtors due from customers who are known to be in financial difficulty and from whom payment was overdue by more than three months. Trinity Square, Gateshead Charter Place, Uxbridge 26
&9. Deferred taxation The movement in the deferred taxation account during the year was: 2016 000 Liability brought forward (1,915) Charged to profit or less (2,529) Charged to other comprehensive income 685 Liability carried forward (3,759) ===== The deferred taxation balance consists of the tax effect of timing differences in respect of: 2016 2015 000 000 Depreciation in excess of capital allowances 612 591 Other timing differences 2,539 4,216 Revaluations (555) (446) Retirement benefit obligation (6,355) (6,256) (3,759) (1,915) ===== ===== The deferred tax liability of 750,000 (2015: 450,000) is expected to reverse within 12 months and relates to decelerated capital allowances and timing differences that are expected to mature within the same period. 10. Creditors: amounts falling due within one year 2016 2015 000 000 Bank loans and overdraft (note 13) 766 7,405 Payments received on account 153,180 152,830 Trade creditors 157,578 189,356 Other creditors 12,207 9,470 Corporation tax 7,233 8,714 Other taxation and social security 19,055 24,321 Accruals and deferred income 39,489 27,693 Directors loan account 176 - Proposed dividend 4,737 4,563 394,421 424,352 ===== ===== 27
&11. Creditors: amounts falling due after one year 2016 2015 000 000 Bank loans (note 13) 40,628 40,703 40,628 40,703 ===== ===== Included in creditors are amounts repayable by instalments falling due after more than five years of 39,074,000 (2015: 39,531,000). 12. Financial instruments The carrying amounts of the group s and company s financial instruments at 31 August were: 2016 2015 000 000 Financial assets: Debt instruments at amortised cost 216,463 246,498 Equity instruments measured at cost less impairment 5,386 6,720 Instruments measured at fair value through profit or loss 53 82 221,902 253,300 ===== ===== Financial liabilities: Measured at amortised cost 250,845 274,626 250,845 274,626 ===== ===== Plot H, Rochdale 28
&13. Borrowings The bank loans and other creditors are due for repayment as follows: 2016 2015 000 000 Creditors: amounts falling due within one year: Bank overdraft 695 7,341 Bank loans 71 63 766 7,404 ===== ===== Creditors: amounts falling due after more than one year: Bank loans 40,628 40,703 40.628 40,703 ===== ===== Bank overdrafts of 695,000 (2015: 7,341,000) are secured by a floating charge over the group s assets and by way of a crossguarantee between group companies. Bank borrowings of 40,699,000 (2015: 40,766,000) are repayable in instalments between March 2015 until November 2033, and bears interest at 5.93% per annum (2015: 5.93% per annum). The group makes monthly repayments of the bank borrowings and are secured on the future income of the property to which it relates. 14. Reconciliation of profit after tax to net cash generated from operations 2016 2015 000 000 Profit after tax 48,096 31,530 Adjustments for: Amortisation of intangible fixed assets 1,268 1,034 Depreciation 4,179 4,069 Profit on sale of tangible fixed assets (963) (358) Fair value losses/(gains) on investments 970 (434) Defined benefit pension schemes 164 170 Income from interests in associated undertakings and joint ventures (1,167) (1,288) Income from fixed asset investments (5,027) - Interest receivable (9,363) (5,323) Interest payable 5,774 7,939 Taxation 13,376 8,658 Operating cash flows before movements in working capital 57,307 45,997 (Increase)/decrease in stocks and work in progress (21,417) 34,809 Decrease/(increase) in debtors 30,937 (55,962) (Decrease)/increase in creditors (26,061) 70,696 Cash generated from operations 40,766 95,540 ===== ===== 29
&15. Retirement benefits Defined contribution scheme The group operates a defined contribution pension scheme for all qualifying employees in the United Kingdom. The assets of the scheme are held separately from those of the group in an independently administered fund. The contributions payable by the group charged to profit or loss amounts to 1,510,000 (2015: 1,087,000). Defined benefit scheme The group operates a defined benefit plan for qualifying employees of the group. Under the scheme, the employees are entitled to retirement benefits based on final salary on attainment of their retirement age. The most recent comprehensive actuarial valuation of the plan assets and the present value of the defined benefit obligation was carried out at 6 April 2015. 2016 000 Changes in the present value of the defined benefit obligation: Defined benefit obligation at 1 September 148,174 Current service cost 2,059 Interest cost 5,559 Contributions by scheme participants 46 Actuarial losses 64,274 Benefits paid (4,123) Defined benefit obligation at 31 August 215,989 ===== Changes in the fair value of plan assets: Plan assets at 1 September 179,455 Interest income 6,778 Return on plan assets (excluding net interest on the net defined benefit liability) 67,245 Contributions by employer 1,895 Contributions by scheme participants 46 Benefits paid (4,123) Plan assets at 31 August 251,296 ===== The analysis of the scheme assets at the reporting date were as follows: Fair value of assets 2016 2015 000 000 Bonds 220,890 142,345 Cash 53 245 Secured pensions 536 478 Market advantage growth fund 29,817 36,387 251,296 179,455 ===== ===== 30
&16. Reconciliations on adoption of FRS 102 Reconciliations and descriptions of the effect of the transition to FRS 102 on; (i) the consolidated equity at the date of transition to FRS 102; (ii) the consolidated equity at the end of the comparative period; (iii) the consolidated profit or loss for the comparative period reported under previous UK GAAP. are given below. Under FRS 102, the Consolidated Statement of Cash Flows presents changes in cash and cash equivalents (which include cash in hand, deposits repayable on demand and overdrafts and short-term, highly liquid investments), showing changes arising from operating activities, investing activities and financing activities separately. Under previous UK GAAP, the Consolidated Cash Flow Statement presented changes in cash (which includes cash in hand, deposits repayable on demand and overdrafts) under the headings of operating activities, returns on investments and servicing of finance, taxation, capital expenditure and financial investment, acquisitions and disposals, equity dividends paid, management of liquid resources, and financing. RECONCILIATIONS OF CONSOLIDATED EQUITY 1 September 31 August Notes 2014 2015 000 000 Consolidated equity as previously reported under previous UK GAAP 278,253 320,834 Deferred tax on investment properties A (419) (466) Fair value gains on traded investments B 59 73 Discounting of shared equity schemes C (346) (246) Holiday pay accrual D (132) (183) Consolidated equity reported under FRS 102 277,415 320,012 ===== ===== 31
&16. Reconciliations on adoption of FRS 102 (continued) RECONCILIATIONS OF CONSOLIDATED PROFIT OR LOSS 31 August Notes 2015 000 Consolidated profit or loss as previously reported under previous UK GAAP 30,517 Deferred tax on investment properties A (47) Fair value gains on traded investments B 14 Discounting of shared equity schemes C 100 Holiday pay accrual D (51) Fair value gain on investment properties E 420 Reduction in income on plan assets held in retirement benefit plans F 577 Consolidated profit or loss reported under FRS 102 31,530 ===== A - Deferred tax on investment properties Under FRS 102 deferred tax must be provided on all timing differences. Deferred tax should be provided in respect of the differences between the fair value of assets and their historic taxable value. Deferred tax has been provided in respect of the difference between the fair value of the investment properties and their taxable value, which has been adjusted to the revaluation reserve. B - Fair value gains/(losses) on traded investments Under previous UK GAAP traded investments were recorded at initial cost less impairment. Under FRS 102 these amounts have been recorded at the fair value. Accordingly a gain on movement of the fair value of 14,000 has been recognised for the year ended 31 August 2015 with an increase in assets at 1 September 2014 of 59,000 and 73,000 at 31 August 2015. C Discounting of shared equity schemes Under previous UK GAAP shared ownership developments were recorded at initial cost less impairment. Under FRS 102 these amounts have been recorded at the present value of future receipts discounted at a market rate of interest. Accordingly interest receivable has increased by 100,000 for the year ended 31 August 2015 with a decrease in assets at 1 September 2014 of 346,000 and 246,000 at 31 August 2015. D Holiday pay accrual FRS102 requires short term employee benefits to be charged to the Profit and Loss Account as the employee service is received. This has resulted in the group recognising a liability for holiday pay of 132,000 on transition to FRS102. Previously, not all holiday accruals were recognised and some were charged to the Profit and Loss Account as they were paid. In the year to 31 August 2015 an additional charge of 51,000 was recognised in the Income Statement and the liability at 31 August 2015 was 183,000. E - Fair value gain/(loss) on investment properties During the year ended 31 August 2015, fair value gains on investment properties of 420,000 were recognised directly in reserves under previous UK GAAP. Under FRS 102, those fair value gains and losses are recognised in profit or loss. 32
&16. Reconciliations on adoption of FRS 102 (continued) F - Reduction in income on plan assets held in retirement benefit plans The expected rate of return on plan assets held in retirement benefit plans was recognised in profit or loss under previous UK GAAP for the year ended 31 August 2015. In the same period a difference between the actual return and the expected return was recognised in other comprehensive income. Under FRS 102, interest income is recognised on the plan assets using the discount rate applied to the defined benefit obligations which is based on market yields for high quality corporate bonds. Additional interest income of 577,000 was been recognised for the year ended 31 August 2015, with a corresponding reduction on the amount recognised in other comprehensive income, being the difference between the actual return and the interest income recognised in profit or loss. Friars Walk, Newport 33