The Directors present the strategic report for the year ended 31 January 2024.
The directors consider the performance of the Group to be in line with expectations for the year ending 31 January 2024. This is considering the significant challenges the industry has faced and continues to face.
This has led to reduced financials year on year with the key financial metrics seen below:
£’000 | 2024 | 2023 |
Turnover | £21,303 | £26,992 |
Retained Earnings | £24,612 | £27,282 |
Net Assets | £28,190 | £30,947 |
Return on Capital Employed | -9.89% | 7.07% |
Operational Metrics
During the year the following metrics were achieved:
Plot completions 35 (2023: 59)
Affordable Housing completions 45 (2023: 14)
Build starts 4 equating to 116 plots
Planning permissions 4 equating to 116 plots
Private plot completions have dropped year on year as the challenging market conditions continue to make buyers cautious. Sales activity remained uncertain owing to a lack of mortgage availability and affordability. However, confidence in the market is returning, although slower than we would like there are certainly signs of improvement given lower cancellation rates than we have seen historically. We also note first time buyer activity has remained low, mainly due to the lack of availability of products in the market place. We are, however, seeing increased levels of customer engagement as we prepare to launch our First Homes product.
Demand amongst existing homeowners remained challenging with those opting to purchase requiring elevated levels of sales incentives and increased use of enablers such as Early Bird, Part exchange or Assisted Move to secure a sale.
During the year, we operated from 5 outlets, albeit 2 are considered as tail end sites. Our larger schemes provide a varied product range, indicating we should appeal to a wide audience, subject to implementation of a good marketing strategy which we continue to do. Whilst in previous years, having lower brought forward stock, the rate of build and continued challenges in the planning cycle resulted in less plots available to sell we are now mindful to not over stock while demand is sensitive.
Supply chain issues endured during the Covid pandemic and more recently with the war in Ukraine have certainly eased in respect of availability of materials. However, the expectation of a reversal of price inflation has not eased off at the same pace which is having negative effects on margins. Our dedicated procurement team work tirelessly with key suppliers to overcome issues, constantly monitoring prices and keeping construction sites operational.
Planning consents remain challenging with local authorities struggling with resource constraints. However, we are pleased with the progress that has been made after years of liaison with all stakeholders that a number of our strategic sites are starting to come to fruition. So far, 4 of our strategic sites have now obtained planning permission equating to approximately 1,100 plots providing future certainty to the gorup. This will help hugely with the well documented housing shortages in the United Kingdom and our regional demographic.
We welcome the newly elected Labour Governments enthusiasm on housing and support its ambitious pledge to build 1.5m homes in the next 5 years. Fundamentally, in order to achieve these targets we see that radical change is required throughout the whole process to make it more efficient to allow construction activity to start earlier. We will continue to support the industry through engagement with industry bodies in a constructive manner, hopefully playing our part in making positive industry changes to target the continual shortfall of housing across the United Kingdom.
Our long-term strategy continues to be that of developing strategic land interests and convert them into consented sites.
Following the year end, the successful planning consents achieved on a number of large housing developments allow the continued throughput of stock in a consistent and well managed basis. Of these sites the group has forward sold 106 plots, being the single largest contract ever entered into and construction is well under way. This will allow us to maintain our strong cash position allowing us to be resilient to any adverse macro- economic changes.
The directors are confident of the prospects of the group will continue and will adapt to ever changing challenges as they present themselves.
As with any business, Pennyfarthing faces risks and uncertainties in the course of its operations. It is only by timely identification and effective management of these risks that we are able to deliver our strategy and grow the business.
The board have considered the prospects of the company and have taken into account its current financial position and its principal risks. Fundamentally, these arise from the deterioration of the health of the UK economy, brought about by uncertainty, loss of consumer confidence, higher interest rates and increasing unemployment, leading to decreased affordability, reducing demand for housing and falling house prices.
The main activities of the group is that of building and development of private dwelling houses for sale. With this comes the potential risks such as:
The adverse effects on consumer confidence could significantly impact the demand for new homes resulting in lower revenues and profits. Continually monitoring supply and demand trends as well as forward looking forecast will allow the Group to navigate any challenges it may face.
Economic and political uncertainty is always going to present challenges. Whether that is at a global or local level it will always be difficult to plan ahead. The impact of a change in Government on the industry is yet to be fully understood. However, whilst ambitious targets for housing is welcomed, delivery on the ground will not be achieved unless positive, hard hitting change is made quickly to all aspects of house building. Furthermore, government policy on taxes, inflation and spending will all play its part on the sector.
The cost of servicing a mortgage remains a risk to the business particularly as interest rates have risen in recent times to tackle inflation, making affordability one of the fundamentals of buying houses. The majority of house sales are bought using mortgages to finance the purchase. Whilst mortgage rates are at higher rates than the last decade we are starting to see some settling down of rates. The impact of the Bank of England rate charges in the coming months and years will play an important role in consumer confidence.
Since 2022, borrowing rates have been rising markedly and have a significant impact on the group as funding costs become more expensive making development project less profitable or in some cases unviable.
Continuing to operate best practice with our Health and Safety to best protect those on potentially dangerous construction sites is of paramount importance to us. Any legislative changes to these practices would filter through our external advisors to all relevant personnel via tool box talks, site inductions and formal training sessions. Employee wellbeing and mental health is particularly important in the construction sector and is regarded as one of the highest sectors of sufferers. Employee wellbeing is integral to ensuring the workforce have a safe, enjoyable environment to work in and the intangible benefit of this is a more effective workforce.
Material cost inflation and supply have seen prices escalate in recent years with the advent of a number of global factors causing economic volatility and demand. Prices are starting to stabilize although we are not seeing any evidence yet of a reduction in prices. Locking in prices on a long-term basis is proving difficult as the overall supply chain itself wrestles with uncertainty. This uncertainty is also leading to a worsening of credit terms when exploring new suppliers so continuing and leveraging existing relationships are paramount.
In October 2023, the UK Trade Skills Index estimates that in light of an aging construction workforce, coupled with decreasing apprenticeship intake and the Brexit leakages, an additional 1 million workers will need to be found over the next decade to meet demand. The tight labour market, cost of living crisis and increases in National Minimum Wage are all driving higher wages in the sector. Being able to attract and retain high calibre employees to meet the demands of the business as it grows is of paramount importance. As the business grows, the demands and skillsets of individuals need to change to cater for ever changing dynamics of the house building industry. Training and recruitment alongside other factors such as remuneration are constantly reviewed and monitored to ensure the group remains competitive when attracting and retaining staff. Employee engagement and feedback sit alongside our recruitment and retention processes.
Planning consents remain challenging with local authorities struggling with resource constraints coupled with demonstrating nutrient neutrality on development sites. Issues surrounding Nitrates flowing into the Solent and Phosphates into the River Avon has been a challenge for all development areas affected, practically grinding planning permissions to a halt. Buying into third party schemes has provided a much needed solution in relation to Nitrates. We have resolved the Phosphates problem by being one of the first in the UK to create a strategic Phosphate mitigation scheme.
Given the straightforward nature of the business, the directors are of the opinion that an analysis using KPI's is not necessary for an understanding of the development, performance or position of the company.
The company is funded by a mix of retained earnings and group funding.
Long term and short term cashflow forecasts are prepared and monitored ensuring the company has adequate funds in place to meet its working capital requirements.
The Group have a proud track record of paying suppliers on time and this has resulted in existing suppliers offering further credit terms supporting the future growth of the company. There is certainly more caution amongst new suppliers with more onerous due diligence undertaken before on-boarding. Payment terms are currently 30 days from the end of the month.
In addition, should the business fail to adhere to the stringent demand of the regulatory planning and technical requirements there is the potential for increased costs, disruption and reputational damage which all potentially have financial impacts. Constant review of the planning cycle, keeping up to date with regulatory or technical changes through on-going training as well as planning for at least 3 years ahead help mitigate these impacts.
Health and Safety
The company places particular emphasis on the health and safety of its employees, subcontractors, customers and others on its sites during the construction process strives for zero accidents through an improving safety culture.
Environment
Evolving environmental regulations with an emphasis on sustainability presents challenges and in many cases leads to increased cost and margin erosion. However, taking Corporate responsibility seriously, all companies and staff within the business and wider group are encouraged to be environmentally aware and committed to environmental improvements. The business continues to focus on environmental improvements in the design of its developments and dealing with waste. In addition, the group's housing developments have to provide Biodiversity Net Gain (BNG) which is a concept proposed in the 25 Year Environmental Plan and mandated as a condition of planning permission in the 2019 Environmental Bill. BNG requires a 10% increase in biodiversity after development, compared to the level of biodiversity prior to development taking place. Also and specific to the geographical area in which we develop some of our developments in the Solent catchment area are required to provide nitrate neutrality and within the Avon River catchment phosphate neutrality.
Furthermore, the Company continues to deliver Alternative Natural Recreational Greenspace (ANRG) and Suitable Alternative Natural Greenspace (SANG) as part of our developments. Such new public open spaces are intended to mitigate impacts of additional population on protected habitat sites (including the New Forest and Dorset Heathlands) by providing alternative recreation and dog walking opportunities to reduce pressure on protected sites. They provide a health and wellbeing benefit for our residents, being closely located to our developments and a wider resource and benefit for existing communities where we are delivering new homes. Further funding, towards strategic habitats mitigation infrastructure delivery, is also typically secured from our developments.
On behalf of the board
The Directors present their annual report and financial statements for the year ended 31 January 2024.
The results for the year are set out on page 10.
Ordinary dividends were paid amounting to £590,000. The Directors do not recommend payment of a further dividend.
The Directors who held office during the year and up to the date of signature of the financial statements were as follows:
The energy and carbon reporting at group level only needs to include subsidiaries which are obligated to report the energy and carbon in their own financial statements. In this group there are no individual subsidiaries which are obligated to disclosure this information and therefore there is nothing to disclose.
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 January 2024 and of the group's loss 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The Directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors' report.
We have nothing to report in respect of the following matters in relation to which 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.
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, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extend to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to breaches of UK and overseas regulatory principles. We also considered the laws and regulations which have a direct impact on the financial statements such as the Companies Act 2006.
We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to management bias in accounting estimates and judgemental areas of the financial statements.
Audit procedures performed by the audit engagement team included:
Discussions with senior management, including consideration of known or suspected instances of non compliance with laws and regulation or instances of fraud;
Identifying and testing journal entries based on risk criteria;
Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing;
Testing transactions entered into outside of the normal course of the Group's business;
Reviewing any potential litigation or claims against the entity which indicate any potential non compliance issues.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or though collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £311,663 (2023 - £208,542 profit).
Pennyfarthing Developments Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is .
The group consists of Pennyfarthing Developments Limited and all of its subsidiaries.
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.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, [modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value]. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Pennyfarthing Developments Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 January 2024. 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.
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.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
At the time of approving the financial statements, the Directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
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.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), 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.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. 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. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
At each reporting period end date, the group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
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.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors 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 transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, 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 publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, 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.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group 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.
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 group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, 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. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
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 fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
Preparation of the financial statements requires the directors to make significant judgements, estimates and assumptions. 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 associated 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 that period and future periods where the revision affect both the current and future periods.
The main accounting estimates are:
Land stock values - The company establishes a reliable estimate of the market value of the land which it holds in stock for future development and provides for any loss in value based on internal valuations and the directors expertise in this area.
Assessment of costs to complete - This involves estimating final development costs and selling prices and impacts profit recognised in allocating costs to sales completions before and after the year end.
Accrued costs - involving a degree of estimation uncertainty in respect of final account settlement.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual credit for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Investment property was valued on an open market basis on 31 January 2022 by the directors.
Details of the company's subsidiaries at 31 January 2024 are as follows:
Registered office addresses (all UK unless otherwise indicated):
Details of joint ventures at 31 January 2024 are as follows:
The bank loans are secured by first charges over certain land and properties included in work in progress.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The deferred tax liability set out above is expected to reverse within 12 months and relates to accelerated capital allowances that are expected to mature within the same period.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The directors’ have carried out an assessment of work in progress balance recoverability and as such have undertaken to adjust the prior period reserves by £2,004,301 in 2022 and £1,664,278 in 2023, these balances are inclusive of corporation tax and deferred tax movements.