Keepmoat plc Annual report and accounts 2010

Page 1

ANNUAL REPORT AND FINANCIAL STATEMENTS 2010

The leading service provider to the public sector offering comprehensive and sustainable regeneration solutions, innovative products and services in affordable housing and investing in community infrastructure.


Community regeneration is complex, creating numerous challenges and opportunities. Government policy, through strategic drivers and demanding performance measures, creates an environment where Local Authorities and public agencies ie Registered Social Landlords need to innovate constantly, in order to meet these Government targets and, at the same time, satisfy the needs of their customers. Regeneration means working with all stakeholders within communities to transform quality of life, across the built environment, place shaping and delivering services for younger people through to our older generation. Now more than ever, the UK’s public sector is facing greater pressure to achieve and deliver. For over 80 years, Keepmoat has been assisting its partners to meet the demands of their markets and customers, by working with them in innovative ways to deliver regeneration services that provide long-term and sustainable benefits for their communities.


Contents Keepmoat Limited Annual Report and Financial Statements for the year ended 31 March 2010

Annual Report

Financial Statements

— Financial Summary

2

— Consolidated profit and loss account

21

— Chief Executive’s Review

4

— Business Review

7

— Consolidated statement of total recognised gains and losses

22

— The Keepmoat Board

12

— Balance sheets

23

— Directors’ report

14

— Consolidated cash flow statement

24

— Statement of Directors’ responsibilities

16

— Statement of accounting policies

25

— Independent auditors’ report

18

— Notes to the financial statements

28

01 Annual Report and Financial Statements — 2010


Financial Summary

Performance £m

2010

2009 Growth

Revenue

604.4

570.5

6%

EBITDA†

70.7

65.7

7%

Adjusted operating profit*

68.9

63.7

11%

Financial indicators Net cash flow from operating activities Cash conversion to EBITDA Dividends paid

2010

2009

£59.7m

£52.5m

85%

80%

£42m

£44.4m

Profit before taxation (£m)

Turnover (£m)

557557

570 570

604 604

61.7 61.7

2008 2008

2009 2009

2010 2010

2008 2008

Refurbished homes (all social housing) (1000’s)

63.9 63.9

2009 2009 (adjusted) (adjusted)

68.8 68.8

2010 2010

New homes to the social housing sector

40.5 40.5

43.5 43.5

49.8 49.8

358 358

434 434

682 682

2008 2008

2009 2009

2010 2010

2008 2008

2009 2009

2010 2010

(† Earnings before Interest, Taxation, Depreciation and Amortisation. * Items have been adjusted to be shown before exceptional items).

02 Annual Report and Financial Statements — 2010


ÂŁ200,000 donated to community projects

245 97%

Considerate Constructor Customer satisfaction Awards

300 Trainees and apprenticeships

Outstanding training record with over

12,000 days training provided to employees 03 Annual Report and Financial Statements — 2010


Chief Executive’s Review

With the new coalition government in place, spending cuts are widely expected across all sectors of public services. The uncertainties over the limited visibility of public expenditure in our markets will lift with the budget and the autumn’s comprehensive spending review. Both parties to the coalition government have made pre-election commitments to the UK’s socio-economic agendas on public services, regeneration and social inclusion.

Keepmoat is at the forefront of the housing regeneration agenda. Being selected to 11 out of 14 Housing Market Renewal (HMR) Pathfinders as the preferred partner, we aspire to offer products and services of unparalleled quality and innovation to government, local authorities and local communities. Through efficiencies, value engineering, design and manufacturing innovations, Keepmoat will provide a range of affordable, quality and environmentally friendly homes.

The fragile recovery of the British economy and the unprecedented credit malfunction in the financial system has reflected for another year on consumer confidence. There has been marginal improvement of the housing market. Interest rates have remained at an unprecedented low level, yet first and second-time house buyers are faced with major obstacles in obtaining affordable mortgages.

Our partners express their commitment and confidence to Keepmoat, as a stakeholder, facilitator, innovator and partner to deliver comprehensive community regeneration solutions. It is our belief that the new political era will bring about more autonomy to local government to provide regeneration solutions and address pressing housing issues of their communities. In excess of 4.5 million people need social housing in the UK, including more than 600,000 families that are living in unsuitable and overcrowded accommodation and 57,000 families that local authorities across the UK classify as homeless.

Amidst indications of major difficulties for mainstream house builders, Keepmoat remains positive and realistic about the state of the markets in which it operates. Demand for affordable homes is strong, despite the limited availability of mortgages to first and second time buyers. Our markets clearly link housing with regeneration and the provision of affordable, ecological and modern homes. Irrespective of the economic background and the ensuing austerity environment on public services, one thing is pretty certain: demand for regeneration services will increase. Keepmoat is relishing the chance to prove that it can deliver integrated regeneration solutions in a difficult economic environment.

Through a range of internal and external measures aimed at increasing our efficiencies, we have been capable of shaping the Keepmoat Group in the most optimal way to face the challenges of the future. Our people, with their resilience to adversity and their eagerness to adopt change have pioneered over the past year a phenomenal transformation of the way we go about delivering community regeneration.

04 Annual Report and Financial Statements — 2010


We have established a distinctively integrated approach to business development, an approach which aspires to bring a variety of solutions and services to our public sector customers and stakeholders. Our business development approach brings together traditional features of networking and marketing with a range of sophisticated sustainable solutions including investment to solve current problems and issues faced by local authorities, RSLs and ALMOS. We have received very encouraging feedback from our customers that the Keepmoat offering is unique to the market. We forecast that there will be an increased demand for new build social housing across the UK, which, combined with a sustainable demand for refurbishment and responsive maintenance of existing housing stock, will allow the Keepmoat Group to offer a one-stop shop, and comprehensive range of solutions to our public sector partners. We also believe that there will be a huge demand for retrofitting the housing stock of the UK to comply with environmental requirements. We have pioneered the sustainability agenda by having completed several successful pilot ‘eco refurbishment’ projects to save energy, water and waste and we were the first provider of Sustainable Homes Level 4 in England. We are working on one of the first zero carbon developments in the UK. We see a huge potential to introduce energy from micro-generation technology to community level solutions, as well as integrating energy and CO2 considerations with broader sustainability impacts of EcoHomes and we look forward to developing and demonstrating projects to our stakeholders in the near future. On the Health and Safety front, Keepmoat has achieved OHSAS 18001, a milestone standard that points our delivery of affordable homes towards its future direction.

More than 3,000 new home completions projected for 2010 / 2011

We predict that modern solutions to the construction process, such as modular construction, together with efficient traditional build methods will offer our customers value for money options and unblock many new-build frameworks. We have embraced such innovative solutions and we have integrated them to our comprehensive range of affordable homes for sale, mixed use and tenure regeneration initiatives, extra care and retirement solutions and responsive and planned maintenance. Keepmoat is passionate in raising living standards, increasing community capacity, providing social enterprise and contributing towards social and environmental sustainability. We believe that community regeneration will be delivered through innovative synergies between the public and private sectors. We will offer holistic solutions to customers in existing and new geographical markets, aligning our strategy with government policy and remaining totally committed to the pivotal role regeneration and housing play in social cohesion in the UK. Keepmoat’s corporate ethos is underpinned by well embedded principles such as prudent management, customer satisfaction, quality products and services, innovation and continuous development. We firmly believe in market making opportunities and through tested public private partnerships, will offer genuine solutions in community regeneration to central and local government. The financial performance for the year 2009-2010 reflects on a remarkable effort of the Keepmoat Group amidst a difficult and uncertain economic environment which allowed us to deliver exemplary results for our shareholders and our people. Keepmoat’s focus for the year ahead will be on sustainable growth of our products and services in existing and new geographical markets. I take immense pride and pleasure to announce this set of results which reflect on the quality and dedication of our people and express an enormous debt of gratitude to my fellow Directors for their hard work and loyalty to Keepmoat.

David Blunt Chief Executive Officer, Keepmoat Limited

05 Annual Report and Financial Statements — 2010


A forward order book of

£3bn

Committed to developing our people through the Keepmoat Academy

Experts in innovative asset-based Public Private Partnerships

Employing over

3,000 people across the business

NHBC accredited as

‘Excellent’ for 7 years running

Over

1,500 new homes for sale, rent and shared ownership every year

06 Annual Report and Financial Statements — 2010


Business Review

The Group’s expertise in comprehensive social housing solutions and affordable homes for sale demonstrates the compatibility and responsiveness of our strategy with public policies. The Group works closely as a service provider of integrated regeneration solutions with Local Authorities, Registered Social Landlords, Arms Length Management Organisations (ALMO’s), New Deal for Communities Boards, Regional Development Agencies and Homes and Communities Agency on numerous Decent Homes and Housing Market Renewal Initiatives (HMRI) across the North and Midlands of England. REVIEW OF THE YEAR AND FUTURE OUTLOOK

During the year the Group achieved a 6% increase in turnover to £604m (2009: £570m), and an 11% increase in adjusted operating profit to £70.6m (2009: £63.7m) which the Board believe to be an excellent performance given the very difficult economic environment. This strong performance is attributed to our strategic focus as a key public housing solutions provider in the UK. We have achieved year on year growth in turnover through an increase in business with public sector partners. This has offset the downturn in the private housing market caused by the shortage of mortgage finance. A detailed financial review of the year is contained in the Finance Director’s report. The Group has an impressive social housing regeneration order book of £1.3bn (2009 £1.5bn), and secured plots in hand totalling 11,557 (2009: 7,463) which positions Keepmoat as a major provider in the sector. We have achieved turnover of £130.0m (2009: £79.1m) on new build homes to the social housing sector representing 21.5% (2009: 13.9%) of total group turnover. We are planning to increase our activity in this sector to 50% of total group turnover over the next 3 years. The government’s Decent Homes programme has been a significant driver of growth over the last five years, and the target completion date for this scheme is now anticipated to be 2012. Local Authorities spending is expected to continue beyond this point, together with new multi-service agreements for repairs and maintenance

contracts. As a consequence, the Board is confident of achieving long-term growth. In January 2010, the Group acquired Milnerbuild Limited, a company providing responsive maintenance to the Public Sector in the North of England. This acquisition strengthens our position as a service provider of integrated maintenance solutions. We look forward to working closely with the Milnerbuild management team in developing their business within the Keepmoat Group. We have and will continue to commit significant resources to Public-Private Partnerships (PPPs) and the government’s agenda for affordable housing through the HMRI Pathfinders, as well as integrating a sustainable development programme in new lines of products and services, such as offsite modular construction of new build homes and responsive maintenance solutions. CORPORATE CULTURE AND PEOPLE

Our mission is Delivering Community Regeneration Services. Our values embrace a corporate philosophy which is based on business integrity, total commitment to our partners, respect of people and delivery to the highest standards. We are genuinely passionate about raising living standards, increasing the capacity of affordable housing, providing social enterprise and contributing towards sustainability. We believe community regeneration is best delivered through the partnership between the public and private sectors. Our role is of a stakeholder, facilitator, innovator and partner. We have embraced partnering as the best way to deliver social housing solutions and we have pioneered successful and award-winning housing and regeneration public-private partnerships. We are committed to equality of opportunities and a policy that encourages job creation from all sectors of the community. This is demonstrated in the diversity of the people recruited across the Group. We continue to grow our reputation as an employer of choice due to our ability to attract, develop and retain high quality people. This is supported by human resource initiatives such as the Keepmoat Academy, our senior management development 07

Annual Report and Financial Statements — 2010


‘09

programme and clear succession plans. We have also brought new blood in to our industry by offering 350 traineeships and apprenticeships across the Group. Our human resource policies are continually reviewed and refined in line with changing regulations and legislation. The Group directly employs around 3,000 people and provides many more employment opportunities through our subcontractors. We have an enviable track record for employee retention. Committed to lifelong learning and continuous professional development, during the past year we have invested more than 12,000 training days for our employees. The Keepmoat Academy is continuing to inspire and provide for educational and career development opportunities to help our people reach their potential. CORPORATE GOVERNANCE AND REGULATORY INTERFACE

The Group takes corporate governance seriously. Through our detailed knowledge of industry regulatory regimes, we are able to provide a workable and fully compliant approach to health and safety, employment, competition, environment, data protection and freedom of information. We have adopted and implemented detailed policies and compliance regimes in all the above areas.

imposed by the best value regime. We assist our customers and partners to comply with this regime by recording and monitoring key performance indicators and demonstrating best practice. We provide benchmarks for regulatory impact assessment for future best value inspections. We have a dedicated and well established research and development team that monitors government and industry regulatory trends and develops our responses for compliance and best practice. HEALTH AND SAFETY

Compliance with health and safety is a top priority on our corporate agenda. We strive to create a safe working environment for all. This year, we refurbished over 49,500 homes (2009: 43,500) and our work has been carried out around the daily lives of some 160,000 residents. As a testament to the careful, safe and caring approach of our people, we are pleased to report that the Group shows a 50% better than average site safety performance when compared to the industry. (NHBC H&S fourth quarter March 2010). We have also registered over 1,000 sites on the Considerate Constructors Scheme, leading the industry with 245 awards - 30 gold, 59 silver and 156 bronze.

We have instigated risk management as a theme in our business. Every group company closely monitors risk and assesses its probability and consequences in a wide spectrum of corporate patterns, ranging from regulatory compliance, to commercial risk and business continuity. We also have a unique approach to the requirements 08 Annual Report and Financial Statements — 2010


SUSTAINABILITY

Sustainable communities require the successful integration of environmental, social and economic considerations. We place great emphasis on implementing sustainability best practice into our products and services. Environmental protection and sustainable development is an increasingly significant part of our operations. The Group consistently applies ISO 14001 standards and has introduced innovative production methods that are beneficial to the environment, such as modern construction methods, heating and insulation, water harvesting and recycling features. Over 98% of our affordable homes are built on brownfield sites. Our other sustainability achievements include: — We are currently constructing homes in accordance with Level 3 of the Code for Sustainable Homes and were the first provider of a Level 4 dwelling in England — We have constructed over 100 Homes at Level 6 (Zero Carbon) — With 27% of all carbon emissions coming from existing homes we are also one the first companies to have completed several successful pilot ‘eco refurbishment’ projects to save energy, water and waste. DELIVERING COMMUNITY REGENERATION THROUGH SYNERGY WORKING

We work together with the public sector, communities, strategic allies and key stakeholders to deliver holistic and sustainable community regeneration. We deploy our own resources as well as mobilise resources available to strategic alliances. Our aim is to achieve seamless, ‘one-stop shop’ successful and sustainable regeneration through the delivery

of commercial and retail schemes, medical centres and educational or government buildings. Our resident satisfaction score has increased to 95% (2009: 93%). We invest considerably in local communities, utilising local labour and sub-contractors, and providing much needed training and meaningful employment to local people. We also provide strategic investment in the regeneration area through: — The integration of local supply chain and effective selection of local sub contractors and suppliers — Identification of skills and priority recruitment for local labour — The promotion of “micro” enterprise culture by assisting the start-up of small businesses. PUBLIC PRIVATE PARTNERSHIPS

One of the Group’s major strengths is our ability to establish and deliver successful public-private sector social housing and community regeneration partnerships that have set national standards and received government praise and recognition. The Group is in the forefront of the HMRI programme. We have developed legal and financial models which support our clients’ requirements. Our models offer local authorities and government regeneration agencies the opportunity to stretch public funding and achieve much more than traditional procurement and contractual methods. A distinctive feature of our partnerships is the profit-sharing arrangements we provide for our public sector partners. We have established joint venture companies such as the Durham Villages Regeneration, that reduce potential risks for the public 09

Annual Report and Financial Statements — 2010


Over

49,500

refurbished homes per year that’s 1 home every 2 minutes sector, yet deliver the regeneration and financial results required by the public sector.

their community and neighbourhood matters, raise environmental awareness and contribute towards social inclusion.

SUPPLY CHAIN MANAGEMENT

Our effective supply chain management strategy is founded upon the principles of collaboration, trust and transparency resulting in the operation of long term partnering frameworks with many of our key suppliers and sub contractors. Such arrangements generate economies through leveraging our expenditure and benchmarking deliverables, which ultimately provide more efficient better value solutions to the public sector. We continually innovate to deliver efficiency and value for money benefits to our clients. Over the past 12 months we have continued to develop the use of e-procurement having successfully launched Keepmoat E-Sourcing Solutions in 2009. This cutting edge procurement tool has transformed our supply chain interface resulting in significant efficiencies, process improvements and cost savings

We continue to invest in the communities where we work. One such investment is our SOAR Build social enterprise, an excellent example of partnership working with the public sector. Through SOAR Build we are helping to change communities for the long-term by improving skills and providing training and employment opportunities for local people. This approach goes well beyond the traditional private sector investment in corporate social responsibility. As a private sector Group, we are particularly proud that our work with, and investment in local communities, has been praised by the Government. We have undertaken an audit of industry-wide best practice with the committed support of senior management throughout the Group. We benchmark our performance year on year against best practice in the following six key areas: community; environment; health & safety; people; vision and values and marketplace.

SOCIAL ENTERPRISE AND CORPORATE SOCIAL RESPONSIBILITY

Keepmoat has pioneered the delivery of social enterprise in regeneration areas. We create a platform for the launch of socio-economic initiatives, such as training and employment schemes, which provide opportunities for local people to train and obtain a vocational qualification in construction and construction-related activities, and to find meaningful employment with long term prospects. We also establish an enterprise culture, whereby small sub contractors and suppliers can flourish and benefit from the regeneration investment. We raise the aspiration of young people to engage in

The Keepmoat Foundation is an institution that supports projects which develop skills, strengthen communities and improve the employment prospects of young people. This year the Keepmoat Foundation has invested over £200,000 (2009: £200,000) in community and youth projects and directly and positively affected many peoples’ lives. The Keepmoat Foundation also supports Outward Bound Trust, by offering an opportunity to over 60 young persons from the areas the Group regenerates to acquire transferable skills and employment aptitude. Our association with Outward Bound Trust has been awarded the Big Tick Business in the Community accreditation for two consecutive years.

10 Annual Report and Financial Statements — 2010


WALKER REPORT

On 20th November 2007 David Walker published his ‘Guidelines for Disclosure and Transparency in Private Equity’ (the Walker Report) which recommends that portfolio companies of private equity firms, amongst other things, can make certain enhanced disclosures in their financial statements. The Keepmoat Group, lead by Lakeside 1 Ltd, has chosen to comply with these guidelines. Full disclosure meeting the requirements of the Walker Report is contained in the annual report of our ultimate parent company, Lakeside 1 Ltd. MBO SHAREHOLDERS AND DIRECTORS

The Group was the subject of a management buy-out in August 2007. This was financially backed by Bank of Scotland Integrated Finance (BOSIF). A combination of Debt and Equity was raised to fund this transaction. Subesquent to the year end, BOSIF have transferred their 18% equity stake to Cavendish Square Partners LP, a special purpose vehicle owned approximately 70% by Coller Capital and approximately 30% by Lloyds Banking Group. All of the other shareholders are Directors and Senior Managers within the Group. David Cowie, a Non-Executive Director of Lakeside 1 Ltd, is a Partner in Caird Capital LLP, the advisor to Cavendish Square Partners LP’s General Partner.

The amount of working capital required to service the Group’s operations is closely monitored and controlled on a regular basis, and forms a key part of the information presented to the Board each month. The current assets mainly comprise trade receivables, work in progress and land held for development of private housing and of affordable housing through partnering schemes. The Groups’ strategic focus is on public sector customers and as a result there is no history of bad or doubtful debts. We invested £19.8m of our free cash flow in growing working capital during the year, and cash balances increased by £72.1m after paying £42m in dividends and receiving an inter-company debt repayment of £63.9m from our non-operating holding company. In the course of its ordinary activities, the Group is exposed to some financial risks which include liquidity and credit risks. Liquidity risk relates to the Group generating sufficient cash flow to meet our operational requirements, while meeting dividend payments to enable our parent companies’ to service their debt interest requirements. The Group does not hold any of the debt in relation to the MBO. This debt is held by the parent companies of Keepmoat Ltd. A cross guarantee in relation to this debt is disclosed in note 23 of our Annual Report and Financial Statements 2010. Management projections indicate significant headroom on banking covenants for the forseeable future.

FINANCIAL POSITION AND RISKS

The key measures of our financial performance are EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) and cash flow. For the Group as a whole, the operating cash in flow for 2010 was £59.6m (2009: £61.7m) and EBITDA was £70.2m (2009: £65.7m).

Credit risk is in relation to trade receivables from customers. As a result of the Group’s strategy to generate the majority of our revenue from services to the public sector and regulated organisations, the exposure to potential bad debts is extremely limited.

11 Annual Report and Financial Statements — 2010


The Keepmoat Board

Tom Allison Non-Executive Chairman

David Blunt Chief Executive

Tom’s appointment as Non-Executive Chairman of the Keepmoat Group has brought invaluable experience from his illustrious career as a business leader. Tom is currently Chairman of Peel Ports, which consists of Clydeport Ltd, Mersey Docks & Harbour Company, The Manchester Ship Canal Company and Medway Ports, as well as main Board Director of Peel Holdings.

David joined Bramall Construction in 1984 as Group Accountant and Company Secretary. He was promoted to Finance Director of Keepmoat in 1987. He has played a key role in the development of the Group and was appointed Chief Executive in September 2005.

Chris Bovis Director of Corporate Governance

Allen Hickling Director of Regeneration

Chris joined the Board in 1996. An internationally renowned specialist in public procurement law and policy, he advises the Board in this area. He is responsible for setting up PPPs and for advising the Board on legal and regulatory matters.

Allen joined Frank Haslam Milan Yorkshire in 1999 as Managing Director. He was promoted to the position of Director of Regeneration in April 2008. Allen’s key role is to deliver growth in profits from the regeneration businesses.

12 Annual Report and Financial Statements — 2010


Peter Hindley Director of Homes

John Thirlwall Finance Director

Peter joined the Keepmoat Group in 1986, as a Contracts Manager for Frank Haslam Milan. Promoted to the position of Group Managing Director of Keepmoat Homes, having previously been Managing Director of Haslam Homes (now Keepmoat Homes) Yorkshire, a position he had held since 1998.

John joined the Group in 1988 as Finance Director of Frank Haslam Milan. He was appointed as Group Finance Director in 2005. John’s key role is to deliver the planned Group profit, manage risk and drive the commercial focus of the Group.

Richard Brandon Company Secretary (Non-Executive) Richard joined the Group in 1993 as a subsidiary Company accountant, he was appointed Group Company Secretary in 1996. Richard is responsible for legal matters, joint venture accounting and administration.

13 Annual Report and Financial Statements — 2010


Directors’ report

The Directors present their report and the audited consolidated financial statements of the Group for the year ended 31 March 2010.

CHARITABLE CONTRIBUTIONS

The charitable contributions made by the Group during the year to community Groups, local community projects and schools amounted to £201,000 (2009: £200,000).

PRINCIPAL ACTIVITIES

Keepmoat Limited (Keepmoat) is an intermediate holding Company of a Group which is principally engaged in the refurbishment and construction of residential dwellings. The Group’s operating subsidiaries are listed in note 11 to the financial statements. BUSINESS REVIEW

The Group's profit for the financial year is £67, 710,000 (2009: £50,654,000). The Company paid ordinary dividends of £42,000,000 (2009: £44,400,000). A summary of the results and performance is presented in the Financial Summary, Chief Executive’s Review and Business Review on pages 3 to 11. DIRECTORS

The Directors of the Company during the year and at the date of signing the financial statements, were: T Allison D Blunt C Bovis A Hickling P Hindley J Thirlwall In accordance with the Articles of Association, none of the Directors are required to retire by rotation.

EMPLOYEES

The Group believes that its success depends upon its employees and their development. Employees are kept as fully informed as is practicable about the performance and prospects of the Group. The methods of communication and consultation include regular informal contact as well as periodic formal meetings. It is the Group’s policy to provide equal opportunities to people regardless of their age, race, religion or sexual orientation. The Group actively encourages the employment of disabled people and they share the same opportunities as all other employees. The Group places special emphasis on occupational health and safety matters with both policies and practices kept under constant review. It is the Group’s policy to actively plan, encourage and assist in the training, retraining and career development of all its employees. Annual training programmes have been implemented by each Company in the Group to develop the necessary managerial, technical and craft skills needed to achieve success in the Group’s business. BUSINESS RISKS

The Directors, in the execution of their duties, are responsible for identifying the key business risks faced by the Group and for determining the appropriate courses of action to manage these.

14 Annual Report and Financial Statements — 2010


The Directors set out the principal risks facing the business: (a) Procurement The Group’s supply chain strategy is an integral part of our overall business performance. The Directors have developed long-term strategic partnering agreements with customers and major suppliers, and the associated risk is managed through effective risk management processes and the use of key performance indicators. (b) People The Directors recognise that achieving Keepmoat’s growth strategy is heavily dependent on the performance of its people.

(d) Financial Management In the course of its ordinary activities, the Group is exposed to some financial risks which include liquidity, credit, and interest rate risks. The Group monitors and manages these risks through robust policies and procedures. DIRECTORS' INDEMNITIES

The Company maintains liability insurance for its Directors and officers. Following shareholder approval in July 2005, the Company has also provided an indemnity for its Directors and the Company Secretary, which is a qualifying third party indemnity provision for the purposes of the Companies Act. KEY PERFORMANCE INDICATORS

A continuing drive to become an employer of choice is underpinned by an effective human resource strategy, which enables the recruitment and retention of people of sufficient calibre at all levels in the organisation.

The Group uses a number of Key Performance Indicators to measure the performance of its operations. Details of these are provided on page 2. By order of the Board

(c) Housing Market The Directors recognise that the medium term growth plans could be affected by the Group’s ability to generate additional turnover which is partly dependant on the market for new homes in the private and social housing sectors. The Group monitors this risk through a regular and thorough market analysis which results in robust forecasting.

R H J Brandon Company Secretary 13 September 2010

15 Annual Report and Financial Statements — 2010


Statement of Directors’ responsibilities

The Directors are responsible for preparing the Directors’

DISCLOSURE OF INFORMATION TO AUDITORS

Report and the financial statements in accordance with

All Directors, at the date this report is approved, confirm

applicable law and regulations.

that, as far as they are aware, there is no relevant audit information (information needed by the Company’s auditors

Company law requires the Directors to prepare financial

in connection with preparing their report) of which the

statements for each financial year. Under that law the

Company’s auditors are unaware, and that they have taken

Directors have prepared the financial statements in

all the steps that they ought to have taken as Directors in

accordance with United Kingdom Generally Accepted

order to make themselves aware of any relevant audit

Accounting Practice (United Kingdom Accounting Standards

information and to establish that the Company’s auditors are

and applicable law). Under company law the Directors must

aware of that information.

not approve the financial statements unless they are satisfied that they give a true and fair view of the state of

By order of the Board

affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to: — select suitable accounting policies and then apply them consistently; — make judgements and accounting estimates that are reasonable and prudent; — state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; — prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

R H J Brandon Company Secretary 13 September 2010

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

16 Annual Report and Financial Statements — 2010


17 Annual Report and Financial Statements — 2010


Independent auditors’ report to the members of Keepmoat Limited

We have audited the Group and parent Company financial

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS

statements (the ‘‘financial statements’’) of Keempoat Limited

An audit involves obtaining evidence about the amounts

for the year ended 31 March 2010 which comprise the

and disclosures in the financial statements sufficient to give

Group Profit and Loss Account, the Group and Parent

reasonable assurance that the financial statements are free

Company Balance Sheets, the Group Cash Flow Statement,

from material misstatement, whether caused by fraud or

the Group Statement of Total Recognised Gains and Losses,

error. This includes an assessment of: whether the

the Accounting Policies and the related notes. The financial

accounting policies are appropriate to the Group’s and

reporting framework that has been applied in their

parent Company’s circumstances and have been consistently

preparation is applicable law and United Kingdom

applied and adequately disclosed; the reasonableness of

Accounting Standards (United Kingdom Generally Accepted

significant accounting estimates made by the Directors; and

Accounting Practice).

the overall presentation of the financial statements.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS

OPINION ON FINANCIAL STATEMENTS

AND AUDITORS

In our opinion the financial statements: — give a true and fair view of the state of the Group’s and the parent Company’s affairs as at 31 March 2010 and of the Group’s profit and cash flows for the year then ended; — have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and — have been prepared in accordance with the requirements of the Companies Act 2006.

As explained more fully in the Directors’ Responsibilities Statement the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

18 Annual Report and Financial Statements — 2010


OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006

In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: — adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or — the parent Company financial statements are not in agreement with the accounting records and returns; or — certain disclosures of Directors’ remuneration specified by law are not made; or — we have not received all the information and explanations we require for our audit.

Derek Coe (Senior Statutory Auditor) For and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Sheffield 13 September 2010

19 Annual Report and Financial Statements — 2010


Constructing over 100 homes to the higher level of the Code for Sustainable Homes – Level 6, Zero Carbon 20 Annual Report and Financial Statements — 2010


21 Results

Items

items (Note 6)

2010

2009

2009

2009

£'000

£'000

£'000

£'000

604,417

570,470

-

570,470

Cost of sales

(499,760)

(472,397)

(18,881)

(491,278)

Gross profit

104,657

98,073

(18,881)

79,192

Administration expenses

(35,747)

(34,324)

(1,179)

(35,503)

68,910

63,749

Note

1

Turnover

4

Operating profit

5

Net interest (payable) / receivable Profit on ordinary activities before taxation

7

Tax on profit on ordinary activities

19

Profit for the financial year

(61) 68,849

125 63,874

(20,060) (20,060)

43,689 125 43,814

(19,924)

1,223

5,617

6,840

48,925

65,097

(14,443)

50,654

All items dealt with in arriving at operating profit above related to continuing operations. There is no difference between the profit on ordinary activities and the retained profit for the year stated above and their historical cost equivalents.

Annual Report and Financial Statements — 2010

Consolidated profit and loss account

Exceptional

for the year ended 31 March 2010

Before Exceptional


22

Consolidated statement of total recognised gains and losses

for the year ended 31 March 2010

Profit for the financial year Actuarial (losses) / gains on pension scheme (Note 24) Movement on deferred tax relating to pension scheme (Note 24) Total recognised gains for the year

2010

2009

ÂŁ'000

ÂŁ'000

48,925

50,654

366 (102) 49,189

(382) 107 50,379

Annual Report and Financial Statements — 2010


23 Group

Intangible assets

11

Tangible assets

12

Investments

2009

2010

2009

£'000

£'000

£'000

£'000

4,904

-

-

-

14,895

13,825

-

-

-

-

10,490

4,696

19,799

13,825

10,490

4,696

Current assets 13

Land held for and under development

36,815

41,781

-

-

14

Stocks and work in progress

27,081

31,199

-

-

15

Debtors - amount falling due after one year

12,501

7,980

2

68

15

Debtors - amount falling due within one year

101,221

146,251

14,568

73,983

Cash at bank and in hand

102,584

28,641

-

-

280,202

255,852

14,570

74,061

(20,897)

(73,571)

16

17

24

Creditors: amounts falling due within one year

(179,273)

(155,125)

Net current assets / (liabilities)

100,929

100,727

(6,327)

Total assets less current liabilities

120,728

114,552

4,163

Provisions for liabilities and charges

-

Net assets excluding pension asset

120,728

113,927

4,163

4,953

893

505

-

-

121,621

114,432

4,163

4,953

Pension asset Net assets including pension asset

(625)

-

490 5,186 (233)

Capital and reserves 18

Called up share capital

313

313

313

313

19

Share premium account

690

690

690

690

19

Profit and loss reserve

118,551

111,362

2,757

3,547

19

Merger reserve

186

186

186

186

19

Other reserve

19

Capital redemption reserve

19

Investment revaluation reserve Total shareholders' funds

51

51

-

-

217

217

217

217

1,613

1,613

-

-

121,621

114,432

4,163

4,953

The financial statements on pages 21 to 48 were approved by the Board of Directors on 31 August 2010 and were signed on its behalf by:

D Blunt

J Thirlwall

Chief Executive

Financial Director

Annual Report and Financial Statements — 2010

Balance sheets

Fixed assets

10

2010

as at 31 March 2010

Note

Company


24

Consolidated cash flow statement

for the year ended 31 March 2010

2010

2009

£'000

£'000

59,517

52,547

Note 20

Net cash inflow from operating activities Returns on investment and servicing of finance Interest (paid)/received

(91)

46

Net cash inflow from returns on investment and servicing of finance

(91)

46

(90)

(42)

(2,899)

(371)

Taxation UK corporation tax paid Capital expenditure and financial investment Purchase of tangible fixed assets Sale of tangible fixed assets Net cash outflow from capital expenditure and financial investment

197 (2,702)

204 (167)

Acquisitions Purchase of subsidiary undertakings Cash acquired with subsidiary undertakings Net Cash out flow from acquisitions

(5,436) 674 (4,762)

-

Financing Equity dividends paid

21

(42,000)

Decrease in inter company debtor funding

64,071

Net cash inflow / (outflow) from financing

22,071

Increase / (decrease) in cash

73,943

(44,400) (44,400) 7,984

Annual Report and Financial Statements — 2010


25 Basis of preparation with the Companies Act 2006 and applicable accounting standards in the United Kingdom. The principal accounting policies, which have been applied consistently throughout the year, are set out below. Basis of consolidation The Group profit and loss account and balance sheet include the audited financial statements of the Company and all of its subsidiaries made up to the end of the financial year. The results of subsidiaries acquired are included in the consolidated profit and loss account from the date control passes. Intra-Group sales and profits are fully eliminated on consolidation. On acquisition of a subsidiary, all of the subsidiary's assets and liabilities are recorded at their fair values reflecting their condition at that date. Joint ventures Joint ventures comprise investments in undertakings where the Group holds an interest on a long-term basis and jointly controls the commercial and financial policy of the venture with one or more other ventures under a contractual arrangement. The Group share of the result of its investment in joint ventures is included in the consolidated profit and loss account if material to the Group. In the consolidated balance sheet the investment in joint ventures is included as the Group share of net assets of the year end. Joint ventures are shown in the Parent Company balance sheet at cost less any amounts written off for permanent diminution in value. Turnover and profit recognition: Private house building, property development and land sales Turnover and profits on these activities are included in the financial statements on legal completion. Where house sales include an interest free loan provided by the Company to the customer in respect of an element of the sale value (shared equity house sales), this is recognised in turnover net of discounting using an estimated financing cost. Contracts Turnover and profit on short term contracts are recognised when the contracts have been completed. Turnover on long-term contracts represents the value of work done, and excludes value added tax and trade discounts. For long-term contracts, attributable profits are calculated based on the Directors' estimate of total forecast value less total forecast costs and are recognised based on the proportion of cost incurred to date compared to total costs expected to be incurred. Attributable profits are not recognised until the point at which the outcome of the contract can be assessed with reasonable certainty. Provision is made for losses on all long-term contracts as soon as such losses become apparent. Claims on customers or third parties for variations to the original contract are recognised in the profit and loss account once entitlement to the claim has been established. Claims by customers or third parties in respect of work carried out are recognised in the profit and loss account once the obligation to transfer economic benefit has become probable.

Annual Report and Financial Statements — 2010

Statement of accounting policies

These financial statements are prepared on the going concern basis, under the historical cost convention and in accordance


26 Rental income

Statement of accounting policies

Rental income is accounted for as it falls due in accordance with the lease. Any lease incentives are spread across the initial period of the lease so as to recognise income evenly up to the first rent review. Goodwill Goodwill arising on consolidation is recorded at cost, which includes associated costs of acquisition, less the fair value of assets acquired. Goodwill is being amortised over its useful economic life, which is estimated to be 20 years. Tangible fixed assets Tangible fixed assets are stated at their historic purchase cost less accumulated depreciation. The cost of fixed assets is their historic purchase cost, together with any incidental costs of acquisition. Depreciation is calculated so as to write off the cost of tangible fixed assets on a straight line basis over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are: % Freehold properties Long leasehold properties

2 Over the terms of the leases

Plant and equipment

10 - 25

Trade fixtures, office furniture and equipment

10 - 33

Motor vehicles

25

No depreciation is provided on freehold land. Operating leases Costs in respect of operating leases are charged to the profit and loss account on a straight line basis over the lease term. Exceptional items Exceptional items are material items which fall within the ordinary activities of the Group and which need to be disclosed by virtue of their size or incidence. Such items are included within operating profit unless they represent profits or losses on the sale or termination of an operation; costs of a fundamental reorganisation or restructuring having a material effect on the nature and focus of the Group's operations; profits or losses on the disposal of fixed assets; or provisions in respect of such items. In these cases separate disclosure is provided on the face of the profit and loss account after operating profit. Stocks, work in progress and land held for development Short term contract work in progress is valued at cost less any provision for foreseeable losses. Cost comprises direct expenditure together with an appropriate proportion of production overheads. Progress payments certified and receivable by the year end are deducted from work in progress balances; where progress payments exceed work in progress balances the net amount is included in current liabilities as payments on account. Long-term contracts are included in the balance sheet at the value of turnover less the value of progress payments certified and receivable. Where turnover exceeds progress payments the net balance is included in debtors as amounts recoverable on contracts; where progress payments exceed turnover the net balance is included in current liabilities as payments on account. The costs on long-term contracts not yet taken to the profit and loss account less related foreseeable losses and payments on account are shown in stocks as long-term contract work in progress. Property developments, private house building, land held for development and under development and other stocks are valued at the lower of cost (as defined for short term contracts above) and net realisable value. Net realisable value represents the estimated amount at which stock could be realised after allowing for the cost of completion and realisation.

Annual Report and Financial Statements — 2010


27 Shared Equity debtors the finance of a house sale, are included as debtors due after one year. These receivables are held at discounted present value less any impairment. The amount is then increased to settlement value over the settlement period via finance income. Deferred taxation Deferred tax is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Deferred tax is not provided on timing differences arising from revaluation of fixed assets where there is no commitment to sell the asset. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted. Provision for long-term performance plan Provisions for the cost of benefits arising under a long-term performance plan are calculated on the basis of performance to date and an assessment of the likelihood of the target out-turn, over the term of the plan, being met. Pension scheme arrangements The Group contributes to a defined benefit pension scheme, for the benefit of its employees, the assets of which are held in independently administered funds. Pension scheme assets are measured using market values. Pension scheme liabilities are measured using the projected unit actuarial method and are discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. The Company is unable to identify its share of the underlying assets and liabilities of the Group scheme, and the Group has applied the multi-employer exemption provisions of Financial Reporting Standard Number 17, and therefore the scheme is accounted for by the Company as a defined contribution scheme under Financial reporting Standard Number 17. The Company charges contributions to the scheme when they become payable. The increase in the present value of the liabilities of the Group's defined benefit pension schemes expected to arise from employee service in the period is charged to operating profit. The expected return on the scheme's assets and the increase during the period in the present value of the scheme's liabilities, arising from the passage of time, are included in net interest. Actuarial gains and losses are recognised in the consolidated statement of total recognised gains and losses. Pension scheme surpluses, to the extent that they are considered recoverable, or deficits are recognised in full and presented on the face of the balance sheet net of related deferred tax. Costs under the Company's defined contribution scheme represent the amounts payable in the year.

Annual Report and Financial Statements — 2010

Statement of accounting policies

Loans and receivables due from customers on 'Shared Equity' scheme sales, whereby the Group has provided a portion of


28

Notes to the financial statements

for the year ended 31 March 2010

1

Turnover

Turnover, as defined in the statement of accounting policies, excludes value added tax and relates wholly to operations in the United Kingdom. The Directors regard the Group as operating in one segment, the refurbishment and construction of residential dwellings.

2

Employee information Group

Wages and salaries

Company

2010

2009

2010

2009

£'000

£'000

£'000

£'000

95,373

96,528

5,104

4,685

Social security costs

9,541

9,551

620

609

Pension costs

1,501

1,586

173

169

106,415

107,665

5,897

5,463

Staff costs

The average monthly number of persons employed by the Group (including executive Directors) during the year, all of whom are engaged in the Group’s principal activities, was as follows: Group

Company

2010

2009

2010

2009

By activity

Number

Number

Number

Number

Production

2,231

2,274

-

-

Selling and distribution Administration

27

38

-

-

705

769

38

40

2,963

3,081

38

40

Annual Report and Financial Statements — 2010


29

Aggregate emoluments

2010

2009

£'000

£'000

2,373

2,529

71

81

2,444

2,610

Company pension contributions to money purchase scheme

Retirement benefits are accruing to five Directors (2009: five) under a money purchase pension scheme. Aggregate emoluments include Directors severance costs of £nil (2009: £519,000). Highest paid Director

Aggregate emoluments Company pension contributions to money purchase scheme

4

2010

2009

£'000

£'000

688

551

25

25

2010

2009

£'000

£'000

1,809

1,965

Operating profit

Operating profit is stated after charging / (crediting): Depreciation of tangible fixed assets - owned assets Profit on disposal of fixed assets

(177)

(41)

Hire of machinery and equipment

7,283

Other operating lease rentals

1,561

1,384

-

20,060

33

42

159

161

159

73

62

45

Exceptional items (Note 6)

8,059

Auditors' remuneration for: - Audit of parent Company and consolidated accounts - The auditing of the financial statements of subsidiaries of the Company pursuant to legislation - Services relating to taxation Other services to the Company and its subsidiary

Annual Report and Financial Statements — 2010

Notes to the financial statements

Directors' emoluments

for the year ended 31 March 2010

3


30

Notes to the financial statements

for the year ended 31 March 2010

5

Net interest (payable) / receivable

Bank interest receivable Net return on pension scheme assets

2010

2009

£'000

£'000

-

46

30

79

Bank interest payable

(70)

Other finance charges

(21)

-

(61)

125

6

-

Exceptional items 2010

2009

£'000

£'000

Impairment of land held for and under development

-

18,88

Restructuring costs

-

1,179

-

20,060

Impairment of land held for and under development As a result of the difficult market conditions in the house-building sector in 2009, the market value of land has significantly reduced. The land write down represented an impairment based upon the latest available cash flow information at that time. Restructuring costs Restructuring costs relate to redundancy and restructuring costs incurred during the prior year. No exceptional items have been incurred in the current year.

Annual Report and Financial Statements — 2010


31

2010

2009

£'000

£'000

Current tax UK corporation tax on profit of the year at 28% (2009: 28%) Adjustments in respect of previous years Total current tax charge / (credit)

18,787

(1,322)

627

(387)

19,414

(1,709)

766

(4,890)

Deferred tax Origination and reversal of timing differences Adjustment to tax charge in respect of previous period Change in tax rate - impact on deferred tax asset Pension cost charge in excess of pension cost relief Total deferred tax charge / (credit) Tax charge / (credit) on profit on ordinary activities

(304) 48

(272) 31

510

(5,131)

19,924

(6,840)

The tax assessed for the year is higher (2009: lower) than the standard rate of corporation tax in the UK 28% (2009: 28%). The differences are explained below. 2010

2009

£'000

£'000

Profit on ordinary activities before tax

68,849

43,814

Profit on ordinary activities multiplied by the standard rate in the UK 28% (2009: 28%)

19,278

12,268

313

208

Effects of: Expenses not deductible for tax purposes Adjustment to tax charge in respect of previous period Accelerated capital allowances and other timing differences Group relief claimed for no consideration Current tax charge for the year

627 (804)

(387) 4,890

-

(18,688)

19,414

(1,709)

No provision has been made for deferred tax on gains recognised on revaluing property to its market value. Such tax would become payable only if the property was sold without it being possible to claim rollover relief. The total amount unprovided for is £452,000 (2009: £452,000).

Annual Report and Financial Statements — 2010

Notes to the financial statements

Tax on profit on ordinary activities

for the year ended 31 March 2010

7


32 Deferred taxation

Notes to the financial statements

for the year ended 31 March 2010

Group

Company

2010

2009

2010

2009

£'000

£'000

£'000

£'000

-

-

-

-

Deferred taxation comprises: Accelerated capital allowances

(1,031)

Other timing differences

(4,170)

(5,016)

Deferred tax asset

(5,201)

(5,663)

Pension deferred tax liability (see below)

346

Deferred tax asset including pension

(4,855)

At 1 April

(5,467)

Deferred tax credit to profit and loss account

(647)

-

-

(5,467)

-

-

196 (229)

-

-

510

(5,131)

-

-

102

(107)

-

-

(5,467)

-

-

Deferred tax charge /(credit) to statement of total recognised gains and losses At 31 March - asset

(4,855)

Deferred tax liability relating to pension deficit Group

At 1 April 2009 Deferred tax charge

Company

2010

2009

2010

2009

£'000

£'000

£'000

£'000

196

272

-

-

48

31

-

-

Deferred tax charge / (credit) to the statement of total recognised gains and losses

102

(107)

-

-

At 31 March 2010

346

196

-

-

The deferred tax liability of £346,000 (2009: £196,000) has been deducted in arriving at the net pension asset on the balance sheet.

Annual Report and Financial Statements — 2010


33

As permitted by Section 408 of the Companies Act 2006, the parent Company's profit and loss account has not been included in these financial statements. The parent Company's profit for the financial year was £40,916,000 (2009: £46,260,000).

9

Dividends 2010

2009

£'000

£'000

42,000

44,400

Dividends on ordinary shares: Ordinary paid of £134.19 per share (2009: £141.85)

10

Intangible assets

Group

£,000

Additions (Note 26)

4,904

Net book amount at 31 March 2010

4,904

The Company had no goodwill at 31 March 2010. Goodwill arising on acquisitions is being amortised over the Directors' estimate of its useful economic life of 20 years.

Annual Report and Financial Statements — 2010

Notes to the financial statements

Profit for the financial year

for the year ended 31 March 2010

8


34

Notes to the financial statements

for the year ended 31 March 2010

11

Tangible assets Plant and equipment, Long leasehold

Freehold

fixtures

land and and motor

properties

properties

vehicles

Total

£'000

£'000

£'000

£'000

798

9,407

12,596

22,801

Additions

-

1,957

941

2,898

Disposals

-

The Group Cost At 1 April 2009

At 31 March 2010

(12)

(232)

(244)

798

11,352

13,305

25,455

202

739

8,035

8,976

10

338

1,461

1,809

Accumulated depreciation At 1 April 2009 Charge for the year Disposals At 31 March 2010

-

(6)

(219)

(225)

212

1,071

9,277

10,560

At 31 March 2010

586

10,281

4,028

14,895

At 31 March 2009

596

8,668

4,561

13,825

Net book value

The Company has no tangible assets.

Annual Report and Financial Statements — 2010


35

Company

ÂŁ'000

Interests in subsidiary and associated undertakings 4,696

Cost at 1 April 2009

5,794

Additions (note 25) Net book value at 31 March 2010

10,490

The Directors consider that the book value of investments is supported by their underlying net assets. The following information relates to those subsidiary undertakings all of which are 100% owned by the Lakeside Group and registered in Great Britain whose results or financial position, in the opinion of the Directors, principally affect the figures of the Group: Name of Company

Principal activities

Bramall Construction Limited

Housing regeneration

Frank Haslam, Milan & Company Limited

Housing regeneration

Keepmoat Homes Limited

House building

Keepmoat Site Services Limited

Hire of site accommodation for Group use

Keepmoat Property Limited

Property development and the holding of properties for investment purposes

Keepmoat Regeneration Limited

Housing regeneration intermediate holding Company

Milnerbuild Limited

Maintenance, improvement, refurbishment and management of homes.

Annual Report and Financial Statements — 2010

Notes to the financial statements

Investments

for the year ended 31 March 2010

12


36 Details of operating joint venture undertakings, all of which are incorporated in Great Britain, are as follows:

Notes to the financial statements

for the year ended 31 March 2010

Description of shares

Name of undertaking

and proportion of

Proportion

nominal value of

value of voting

Accounting

that class held

rights held

year end

Ordinary shares

50%

31 March

50%

31 March

50%

31 March

50%

31 March

Trading SOAR Build Limited

of £1each (50% held) Durham Villages

A class ordinary shares

Regeneration Limited

of £1 each (51% held)

Dormant Hull & Gipsyville Housing

B class ordinary shares

Venture Limited

of £1 each (81% held)

Doncaster 2000 Limited

B class ordinary shares of £1 each (81% held)

Durham Villages Regeneration Limited is a joint venture between Keepmoat and Durham County Council. Its principal activity is house building. The Company’s registered office is: The Waterfront, Lakeside Boulevard, Doncaster DN4 5PL. SOAR Build Limited is a joint venture with SOAR Enterprises Limited. Its principal activity is delivery of construction services. The Company’s registered office is: 11 Southey Hill, Sheffield, S5 8BB. Hull & Gipsyville Housing Venture Limited is a venture with Hull City Council. Its principal activities are house building and property development. The Company’s registered office is: The Waterfront, Lakeside Boulevard, Doncaster DN4 5PL. Doncaster 2000 Limited is a venture with Doncaster Metropolitan Borough Council. Its principal activity is house building and property development. The Company’s registered office is: The Waterfront, Lakeside Boulevard, Doncaster DN4 5PL. Details of transactions with these companies are set out in Note 26.

Annual Report and Financial Statements — 2010


37

Group Land held for and under development

2010

2009

£'000

£'000

36,815

41,781

36,815

41,781

The Company has undertaken a detailed review of the net realisable value of land held for and under development both relating to plots currently in development, and land and phases of sites not yet in development. This review recognises the impact of lower selling prices and reduced activity levels being experienced across the business in recent years. Net realisable value for land where construction of homes had commenced at the year end or is anticipated to commence within the next 12 months was assessed by estimating selling prices and costs (including sales and marketing expenses) taking into account current market conditions. Land where house build had not commenced at the year end and was more likely to be sold undeveloped is assessed by re-appraising the land using current selling prices and costs for the proposed development and assuming an appropriate financial return to reflect the current housing market conditions and the prevailing financing environment. At the year end the net realisable value provision amounts to £15.8m (2009: £18.9m) with the movement of £3.1m in the year reflecting utilisation of provision. This provision will be closely monitored for adequacy and appropriateness as regards under and over provision to reflect circumstances at future balance sheet dates. Any material change to the underlying provision will be reflected through cost of sales as an exceptional item.

14

Stocks and work in progress

Group House building developments in progress The Company had no stocks or work in progress at 31 March 2010 (2009: £nil)

Annual Report and Financial Statements — 2010

2010

2009

£'000

£'000

27,081

31,199

Notes to the financial statements

Land held for and under development

for the year ended 31 March 2010

13


38

Notes to the financial statements

for the year ended 31 March 2010

15

Debtors Group

Company

2010

2009

2010

2009

£'000

£'000

£'000

£'000

7,300

2,317

-

-

Amounts falling due after more than one year: Shared equity debtors

5,201

5,663

2

68

12,501

7,980

2

68

Trade debtors

76,776

60,778

14

7

Amounts recoverable on contracts

10,033

6,966

-

-

-

-

4,504

260

811

64,592

811

64,592

7,071

8,750

7,071

8,458

Deferred tax (Note 8) Amounts falling due within one year:

Amounts owed by group undertakings Amounts owed by parent undertakings Amounts owed by associated undertakings (Note 27) Corporation tax recoverable Other debtors Prepayments and accrued income

39

579

27

-

3,994

2,258

2,009

676

2,497

2,328

132

-

101,221

146,251

14,568

73,983

Amounts owed by Group, parent and associated undertakings are unsecured, interest free and repayable greater than one year. Long-term debtors due under the 'Shared Equity' scheme are due for repayment at the earlier of 10 years, or the date on which there is a future sale of the related property. Interest is not charged on these amounts, which are discounted to present value at a discount rate which reflects the estimated cost of finance for the loan.

16

Creditors - amounts falling due within one year Group

Bank overdraft (secured)

Company

2010

2009

£'000

£'000

£'000

£'000

-

-

17,595

70,352

2010

2009

Trade creditors

95,987

91,743

622

266

Payments on account

31,518

30,111

-

-

Amounts owed to Group undertakings

18,785

-

171

179

73

-

-

-

Amounts owed to associated undertakings Corporation tax Taxation and social security Other creditors Accruals and deferred income

-

-

-

69

13,382

8,465

1,249

113

1,361

933

358

-

18,167

23,873

902

2,592

179,273

155,125

20,897

73,571

The overdraft in the Company has been offset against cash balances held in the Company and on consolidation against other Group Companies. The Company and its subsidiaries have given floating charges over all their assets and undertakings, and fixed charges over book debts, in favour of the Group's bankers as security for Group debt and overdraft facilities.

Annual Report and Financial Statements — 2010


39

Long-term performance plan Group

£'000

At 1 April 2009

625

Utilised during the year

(625)

At 31 March 2010

-

Company At 1 April 2009

233

Utilised during the year

(233)

At 31 March 2010

-

The Group and Company have provided for the cost of benefits arising under a long-term performance plan. The 3 year plan finished on 31 March 2010.

18

Called up share capital 2010

2009

£'000

£'000

686

686

313

313

Authorised 686,000 ordinary shares of £1 each Issued and fully paid 313,000 ordinary shares of £1 each

Annual Report and Financial Statements — 2010

Notes to the financial statements

Provisions

for the year ended 31 March 2010

17


40

Notes to the financial statements

for the year ended 31 March 2010

19

Reserves Share

Profit

premium

and loss

Merger

account

reserve

reserve

reserves

reserve

reserve

£'000

£'000

£'000

£'000

£'000

£'000

Group At 1 April 2009

Capital Investment Other redemption revaluation

690

111,362

186

51

217

1,613

Retained profit for the year

-

48,925

-

-

-

-

Dividends

-

(42,000)

-

-

-

-

Actuarial gain on pension asset

-

366

-

-

-

-

-

(102)

-

-

-

-

186

51

217

1,613

Movement on deferred tax relating to pension asset At 31 March 2010

690

118,551

Pension asset

(893)

Profit and loss reserve excluding pension asset

117,658

Company At 1 April 2009 Profit for the year Dividends At 31 March 2010

20

690

3,547

186

-

217

-

-

41,120

-

-

-

-

-

(42,000)

690

2,757

-

-

-

-

186

-

217

-

Reconciliation of operating profit to net cash inflow from operating activities

Operating profit

2010

2009

£'000

£'000

68,910

43,689

Depreciation on tangible fixed assets (net of profit on disposals)

1,633

1,924

Decrease in land held for development

4,966

19,266

Decrease in stocks Decrease / (increase) in debtors Increase in creditors Increase / (decrease) in provision for long-term performance plan Difference between pension charge and cash contributions Net cash inflow from operating activities

4,571 (23,776) 3,355 (142) 59,517

8,694 (26,299) 5,942 (571) (98) 52,547

Annual Report and Financial Statements — 2010


41

2010

2009

£'000

£'000

Increase in cash in year

73,943

7,984

Net funds at 1 April

28,641

20,657

102,584

28,641

Net funds at 31 March

22

Other financial commitments

At 31 March 2010 the Group had annual commitments under non-cancellable operating leases expiring as follows: 2010

2010

2009

2009

Land and

Other

Land and

Other

buildings £'000

buildings £'000

£'000

£'000

Expiring within one year

287

427

187

398

Expiring between two to five years inclusive

935

1,748

762

2,105

Expiring over five years

23

318

-

618

1

1,540

2,175

1,567

2,504

Contingent liabilities

The Group has entered into performance guarantees in the normal course of business which, at 31 March 2010, amounted to £9,616,000 (2009: £8,609,000). In the opinion of the Directors, no loss will arise in respect of these guarantees. The Company has given guarantees in respect of its own bank borrowings and the bank borrowings of Castle 1 Limited, its subsidiary company. At 31 March 2010 borrowings covered by both these guarantees amounted to £863,126,000 (2009: £809,033,000). The guarantees are in the form of a fixed charge over freehold land and building and floating charges over the assets of the certain group companies. On 17 April 2008 the Office of Fair Trading (“OFT”) issued a Statement of Objections following an investigation into tender activity in the construction industry. Included in this document were details of alleged potential breaches of competition law in respect of three tenders submitted by Bramall Construction Limited and Frank Haslam Milan Limited (both wholly owned subsidiaries) between 2001 and 2004. The investigation has been concluded in the year with no fine being levied on Frank Haslam Milan, and Bramall Construction Limited, being fined £455,000. This amount has been fully recovered from the vendors of Keepmoat Limited under the terms of an indemnity provided as part of the purchase of Keepmoat Limited by the Company in 2007.

Annual Report and Financial Statements — 2010

Notes to the financial statements

Reconciliation of net cash flow to movement of net funds

for the year ended 31 March 2010

21


42

Notes to the financial statements

for the year ended 31 March 2010

24

Pension commitments

The Group operates a defined benefit pension scheme, the Keepmoat Pension Plan, with assets held in independently administered funds. In addition, the Company runs a money purchase scheme. A full actuarial valuation of the defined benefit scheme was carried out at 5 April 2007 and this has been updated to 16 August 2007 and 31 March 2010 by a qualified independent actuary. The scheme assets are stated at their market value at 31 March 2010. The major assumptions used by the actuary to calculate the liabilities of the Keepmoat Group Pension Plan are: 2010

2009

%

%

Discount rate

5.6

6.8

Rate of inflation

3.7

2.6

Rate of increase in salaries

2.0

2.0

Rate of increases in pension in payment

0.0

0.0

31 March

31 March

2010

2009

£'000

£'000

- Men

22.1

22.0

- Women

25.0

24.9

- Men

23.2

23.1

- Women

26.0

25.9

The mortality assumptions used were as follows:

Longevity at age 65 for current pensioners:

Longevity at age 65 for future pensioners:

Annual Report and Financial Statements — 2010


43 The assets in the Keepmoat Group Pension Plan and the expected rates of return were: Long-term expected

rate of

rate of

return

return

Value

31 March

31 March

31 March

31 March

2010

2010

2009

2009

%

£'000

%

£'000

Equities

7.0

4,993

7.5

3,351

Bonds and cash Total market value of assets

4.5

1,087 6,080

3.0

1,165 4,516

Present value of scheme liabilities Pension scheme surplus Related deferred tax liability Net pension asset

(4,841) 1,239

(3,851) 701

(346)

(196)

893

505

Reconciliation of present value of scheme liabilities

1 April Current service cost Interest cost Actuarial losses / (gains) recognised in the year Benefits paid 31 March

Annual Report and Financial Statements — 2010

31 March 2010

31 March 2009

£'000

£'000

3,815 81 259 1,030

4,895 81 337 (1,067)

(344) 4,841

(431) 3,815

Notes to the financial statements

Value

expected

for the year ended 31 March 2010

Long-term


44 Reconciliation of fair value of scheme assets

Notes to the financial statements

for the year ended 31 March 2010

1 April Expected return on scheme assets

31 March

31 March

2010

2009

£'000

£'000

4,516

5,801

289

416

1,396

Actuarial gains / (losses) recognised in the year

170

Employers contributions

53

Employee contributions

(344)

Benefits paid

6,080

31 March

(1,449) 107 72 (431) 4,516

Scheme assets do not include any of Keepmoat Limited own financial instruments, or any property occupied by Keepmoat Limited. The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed asset interest investments are based on gross redemption yields as at the balance sheet date. Expected returns on equity investments reflect long-term real rate experienced in respective markets. Analysis of amounts charged to operating profit: Operating profit

Current service cost

2010

2009

£'000

£'000

81

81

Other finance income

Expected return on pension scheme assets Interest on pension scheme liabilities Net return

2010

2009

£'000

£'000

289

416

(259)

(337)

30

79

2010

2009

2008

2007

2006

Defined benefit obligation

(4,841)

(3,815)

(5,516)

(17,922)

(15,434)

Plan assets

6,080

4,516

6,422

18,323

15,345

Surplus / (Deficit)

1,239

701

906

401

(89)

(442)

150

689

History of experience gains and losses

Experience adjustments on plan assets: Amount (£'000)

1,396

(1,449)

Experience adjustment on plan liabilities: Amount (£'000)

(380)

615

418

331

(309)

366

(382)

341

388

142

Total actuarial gains and losses recognised in the statement of recognised gains and losses: Amount (£'000)

The pension cost charged to the profit and loss account in respect of the defined contribution scheme was £1,562,000 (2009: £1,505,000) representing contributions payable in the period. Annual Report and Financial Statements — 2010


45

Keepmoat Limited purchased Force Solutions Limited and its trading subsidiary Milnerbuild Limited on 6 January 2010 and the results are included in the consolidated balance sheet from this date. The aggregated results of the subsidiaries acquired in the period prior to acquisition were as follows: £'000 Period from 1 February 2009 to 8 January 2010 6,468

Turnover

612

Operating profit

(161)

Taxation

451

Total recognised loss for the period

Total

Intangible assets

Fair value

Total fair

adjustments

value

£'000

£'000

£'000

4

-

4

71

-

71

Stock

453

-

453

Debtors

786

-

786

Cash

674

-

674

Fixed assets

(1,024)

-

(1,024)

Provisions

(74)

-

(74)

Net assets acquired

890

-

Creditors

890

Goodwill (note 10)

4,904

Consideration

5,794

Consideration satisfied by: Cash Deferred cash consideration

5,436 358 5,794

The book values of the assets and liabilities have been taken from the consolidated management accounts of Force Solution Limited at 6 January 2010.

Annual Report and Financial Statements — 2010

Notes to the financial statements

Acquisition

for the year ended 31 March 2010

25


46

Notes to the financial statements

for the year ended 31 March 2010

26

Related party disclosures

The Company has 50% of the voting rights in the following companies, except where indicated. Details of its significant transactions with these companies together with those of its subsidiaries, are summarised as follows: (a)

Durham Villages Regeneration Limited

Under agreements between Keepmoat Homes Limited, Durham Villages Regeneration Limited and Durham City Council (on 1 April 2009 Durham City Council merged into the Unitary Authority of Durham County Council), Keepmoat Homes Limited has a license to build on land owned by Durham Villages Regeneration Limited. Keepmoat Homes is a wholly owned subsidiary of Keepmoat Limited. Durham Villages Regeneration Limited is a company in which Keepmoat Limited holds a 50% interest. During year the value of services provided under this arrangement amounted to £1,035,000 (2009: £268,000). At 31 March 2010, the amounts due to Durham Villages Regeneration Limited amounted to £73,000 (2009: due from £237,000) and are included in amounts owed to related parties in note 15. Keepmoat Property Limited did not provide services to Durham Villages Regeneration Limited during the year (2009: £288,857). The net amount due to Keepmoat Property Limited at 31 March 2010 was £nil (2009: £45,666). Keepmoat Limited did not provide services to the Company, during the year (2009: £18,908). Keepmoat Limited also provided a medium term loan to Durham Villages Regeneration Limited for a principal sum of £7,887,088 (2009: £7,887,088). At 31 March 2010 the amount due from Durham Villages Regeneration Limited, which includes accrued interest was £7,030,743 (2009: £8,434,796) and are included in amounts owed by associated undertakings in Note 14. Interest is accruing at 1% above base rate.

Annual Report and Financial Statements — 2010


47 (b)

SOAR Build Limited

Frank Haslam Milan & Company also charged SOAR Build Limited for services during the year amounting to £539,653 (2009: £354,202). At the balance sheet date SOAR Build Limited owed the Group £12,000 (2009: £14,593). (c)

Doncaster 2000 Limited

At 31 March 2010, Keepmoat Limited was owed by Doncaster 2000 Limited amounts of £Nil (2009: £10,812). (d)

Other related party transactions

Show home sales During the year the Company sold nine (2009: ten) show homes to James Blunt (the son of David Blunt, who is a Director of Lakeside 1 Limited, the ultimate parent Company) for £900,000 (2009: £916,000 and five of these show homes were sold to James on behalf of his brother Philip). Under the terms of the sale, the show homes will be leased back to the Company for an unspecified period of time at a cost of £54,000 (2009: £73,000) per annum. On the sale of each show home, the sales price achieved over and above the original purchase price will be shared equally between the Company and either James or Philip Blunt, provided that the Company sell the property within 4 weeks of the termination of the lease agreement. Any losses are borne in full by the purchaser. In the current year one show home was sold under the above arrangement which resulted in the Company receiving additional consideration of £22,000, representing its share of the profit. Director house sale During the year the Company sold a property to John Thirlwall, a Director of the Company, for £65,000. The purchase was made under the Company's shared equity scheme with 15% of the purchase price being financed by the Company. The gross balance owing to the Company at the year end amounts to £9,750, which is included within shared equity debtors at its discounted net present value of £7,550.

27

Ultimate parent undertaking and controlling party

The immediate parent undertaking is Castle 1 Limited. The ultimate parent undertaking is Lakeside 1 Limited, a Company incorporated in the United Kingdom. Lakeside 1 Limited is the parent undertaking of the smallest and the largest group of undertakings to consolidate these financial statements at 31 March 2010. The consolidated financial statements of Lakeside 1 Limited are available from: The Company Secretary Keepmoat Limited The Waterfront Lakeside Boulevard Doncaster DN4 5PL The Directors do not consider that there is one overall controlling party following the acquisition of the Group by management in August 2007.

Annual Report and Financial Statements — 2010

Notes to the financial statements

Limited. Amounts charged by SOAR Build Limited to the Group during the year were £2,083,335 (2009: £1,180,590).

for the year ended 31 March 2010

During the year, SOAR Build Limited provided services to Frank Haslam Milan & Company Limited and Bramall Construction


48

Directors and advisers

for the year ended 31 March 2010

Directors

Independent auditors

T Allison

PricewaterhouseCoopers LLP

D Blunt

1 East Parade

C Bovis

Sheffield

A Hickling

S1 2ET

P Hindley J Thirlwall

Solicitors DLA Piper UK LLP

Secretary

1 St Paul’s Place

R Brandon

Sheffield South Yorkshire

Registered Office

S1 2JX

The Waterfront Lakeside Boulevard

Bankers

Doncaster

Bank of Scotland

South Yorkshire

Level Three

DN4 5PL

New Uberior House 11 Grey Street

Registered number

Edinburgh

1998780

EH3 9BN

Annual Report and Financial Statements — 2010


DESIGNED BY

The Ideas Facility www.theideasfacility.com


The Waterfront Lakeside Boulevard Doncaster South Yorkshire DN4 5PL Telephone 01302 346620 Facsimile 01302 346621 Email info@keepmoat.com Web www.keepmoat.com


Turn static files into dynamic content formats.

Create a flipbook
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.