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COMPANY INFORMATION
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CONTENTS
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GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 MARCH 2024
The report contains a comprehensive review of performance during period ended 31 March 2024, including principal business risks and opportunities.
The core nature of the Group is to: • Maximise value in the short to medium-term whilst minimising risk and providing best value for money to the public purse. • Provide its services to the wider community while remaining solvent and profitable. • Provide support to Woking Borough Council in its efforts to implement its turnaround strategy. • Deliver a built environment and provide energy services which are developed sustainably, meet local needs and enable the local economy and community to proposer. • Prepare and adapt to the socio-economic, environmental and demographic changes of the future.
Property Development
During the 2024 financial year the property development business unit continued with the development of the Canalside regeneration in Sheerwater. Copper Phase This development comprised 88 traditional houses and 13 Social Affordable lettings. It was intended that the remaining estate was intended for open market sales. However, a change in strategy was made due to a change of external factors that impacted market sentiment; these included the Section 114 notice issued by Woking Borough Council, resulting in uncertainty of completing the regeneration of the surrounding estate and the concomitant lower sales interest. The impact of an increase in interest rates has also dampened demand. The Group did sell 12 properties and the remaining properties in the portfolio were retained within the Group. There are plans to establish an independent management company to manage communal areas, public spaces and roads including service charge recoveries. This is expected to take place in the coming months. Red Phase This phase comprises 124 apartments including a 68-unit specialist needs component and a District Network Energy Centre, with connection to the Purple, Red and Yellow Phases, providing heat and hot water; this reached practical completion during the reporting period. The energy centre and residential units were transferred to ThamesWey Energy Limited and ThamesWey Housing Limited, respectively. The Group will retain five retail units for renting to the open market. Yellow Phase The Group continued with the development of this phase comprising a mixed-use block of 187 apartments and four retail spaces. The date for completion is expected in the coming months. Brookwood Lye Road Planning application and negotiations with the adjacent landowner are continuing at present. An amended planning application is currently under consideration by the local planning authority.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024
Commercial letting
The Group owned 15 commercial and retail units during the reporting period. Griffin House is a four-floor town centre office space. Currently the building is fully let. Concorde House, also situate in the town centre, is occupied under a protected tenancy agreement. This site is a potential development site and the necessary feasibility studies have been undertaken. High Street, Knaphill is a mixed block comprising four commercial/retail units and two residential units. The Group received planning permission to convert the premises, but this project is currently on hold pending financial considerations. Harrington Place is a large commercial unit which the Group continues to market. An application to convert the premises to a residential property was refused by the relevant authorities. 25 High Street, Woking This is a ground floor retail space with a residential component and remains vacant. The building was acquired to aid Woking Borough Council’s high street regeneration plans. All other units are currently leased. Housing At year end total stock was 1,258 properties, including properties held vacant for the Canalside re-development; this was an increase of 246 properties from the previous reporting period. The Group has continued to operate its residential stock focussing on ensuring tenant retention, low void rates and low arrears from existing tenants. This has been done by ensuring stock is well maintained and situated and price points are market competitive. The rental market has remained strong allowing growth within the portfolio. Thameswey Housing Limited has taken into management a further 212 units completed by Thameswey Developments Limited within Sheerwater. Overall, there has been a high success of residential letting with generally low tenant turnover. The Canalside development is an isolated market with little competition in the area thus continues to set its own price point. This has equally been shown on the Copper phase residential units where handover started from Thameswey Developments Limited in Q4 2023. The phase has set the Group in a good standing to market 124 units in the Red Phase and the 187 units in the Yellow Phase. Looking forward the business will look to review its rental policies and systems to ensure that it is making the best return for its shareholder and delivering against its business plan objectives. The Group undertakes regular review of its asset management strategy, with reflection on income levels, maintenance and management costs, location of properties and long-term potential. Energy Provision The increased occupancy in Victoria Square resulted in an increase in heat sales (+3%) and cooling sales (+13%). However, this was offset by a fall in electricity sales (-1%). The delays in the opening of the Hilton Hotel resulted in a lower than expected volume usage of energy. Unlet retail stock at Victoria Square has also dampened demand. Seasonal fluctuations were also noted, most notably during a mild winter; year on year heat sales were down by 4%. The newly constructed District Cooling Centre is not achieving the standard of efficiency expected. This affects the reliability of the supply to customers and impacts overall profitability of the supply from this asset. Investigations and assessments into the operational performance have commenced with the objective being to improve profitability and customer service levels. Energy market volatility subsided with gas prices averaging 3.1p/kWh which compares favourably with the 8.6p/kWh incurred in the comparative period.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024
Electricity commodity prices continued to track gas prices and this also showed a favourable average of 8p/kWh versus 19.2p/kWh in the comparative period.
Pursuant to the implementation of Ofgem’s Targeted Charging Review recommendations, electricity network charges increased by 12%. A major repair was required to the gas engine in the Victoria Way Energy Centre, resulting in increased operating costs; this financial loss is subject to an insurance claim. It is expected that power prices will continue to be driven by gas prices in the near term, with commodity prices for both gas and electricity expected to remain in the same range as witnessed in 2023/2024.
The directors assess the business risks and opportunities on a regular basis, to ensure the business is balanced in its activities.
Property development and commercial leasing The current ongoing development has strict governance requirements and monthly board updates to ensure it remains on track to deliver within the agreed timescale and budget with overruns being notified to the Board and meeting the evolving ultimate owners’ requirements. The scheme delivers minimal financial risk for the business; this is reflected in the lower operating margin delivered against the project. Inflation rises over recent years and through to 2024 suggest supply chain difficulties are expected to continue, notably in energy and construction costs. The business could be impacted by cost inflation increases and in areas where there could be a difficulty to pass on inflationary pressures. To mitigate the risk a number of actions are being taken including fixed price building contracts and increase of structured procurement. Thameswey Developments Limited is funded by a margin generated on development projects and rental income from commercial assets. The business plans to continue the margin generating activities. Focus on borrowing rates and the shareholder’s access to funds will continue and borrowing is likely to flex to be a combination of short- and long-term borrowing. Liquidity and credit risk are managed daily to ensure the business remains in funds and able to pay its suppliers. Griffin House requires investment to replace a failed heating and cooling system. There is the risk of tenants vacating resulting in a loss of income and the Company then having to carry the burden of business rates. Housing Current business plans and asset appraisals may result in the disposal of underperforming stock and non-core assets. Operating risks that the business faces arise from tenant voids and the cost of maintaining the assets. The cost of living crisis has meant that tenants find the cost of owning their own properties more expensive than renting, which should result in lower voids. However, the rate of inflation regarding construction materials and labour presents a cost risk to the Group from maintaining its existing stock. This has been managed via strict specifying and adherence to commercially tendered schedule of rates. The Group’s debt is provided by Woking Borough Council at fixed rates and the only risk faced is refinancing risk, where maturing loans are refinanced at a higher rate. Post year end, Woking Borough Council issued the Group with a debt standstill letter so that interest, whilst accrued, do not need to be paid until March 2026. Likewise, there is a standstill for loan principal re-payments. Energy Delays to restarting the operation of the Victoria Way gas engine will continue to impact profitability negatively. Possible contract amendments with customers may assist in limiting this effect. Due to its age, the original Victoria Way Network (25 years) is expected to see increased risk of breakdowns and failures. An application to the Government Heat Network Efficiency Scheme will be developed to identify areas for action.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024
The UK Government’s policy of regulating heat networks supplying domestic customers will set minimum required standards, which may require additional investment. ThamesWey will need to register with Ofgem as a heat network operator and submit regular data returns.
Exploiting opportunities and securing new connections is dependent on ThamesWey’s energy supply meeting carbon emissions standards prescribed in the Building Regulations. ThamesWey’s current energy supply will have to be decarbonised to meet the forthcoming standards to be implemented; a low interest loan of circa £9.4m has been secured from the UK Government’s Heat Networks Investment programme.
Turnover is down by 28% but this decrease is not comparable as the prior period relates to fifteen months due to the change in the year end reporting date. On a comparable annualised basis, turnover has decreased by 11%. Furthermore, if the development income adjustment of £3.6m is excluded from both years (refer to note 4 of the financial statements) and adjusting for the effect of the different months covered, then turnover has increased by 7%. The fall in turnover relating to energy supplies has mostly been offset by property sales of £5.5m. Gross profit margin has increased to 45% from 37%.
Administrative expenses have remained stable at 28% as a percentage of turnover. The change in the basis used to revalue investment properties has resulted in a large fair value adjustment of £91.9m. Another exceptional charge of £11.8m was also incurred relating to impairments to assets under construction. These items have been the main drivers for the operating loss £96.3m. Excluding these exceptional items shows a profit of £7.4m for the current year. Overall, the Group was cash generative with a net cash inflow of £14.5m. However, this has been aided by the debt standstill agreement that was in force between the Group and Woking Borough Council. Total net debt stands at £561.8m, being an increase of £45.2m. Total additional borrowings from Woking Borough Council were £53.6m for the year. Property interests across the Group (comprising freehold property, long term leasehold property, assets under construction and investment property) reflect a carrying value of £419.0m, which approximates 90% of fixed assets and 80% of all assets. Woking Borough Council continued to provide the Group with funding to deliver projects and services and continues with this commitment.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024
The directors have a framework for determining matters within its remit and has approved governance in place. Strategic decisions are determined at board meetings requiring consideration and approval by the board and its ultimate owner, being Woking Borough Council. The delegation of authority sets limits and approval processes across broader business procurement.
When making decisions each director ensures they act in the way they consider relevant, in good faith, and promoting the company’s success for the benefit of the environment and members as a whole. The directors understand the business and the evolving environment in which it operates and ensures decisions are made that benefit the short- and long-term objectives of the business. The directors recognise that delivering the strategy (and group business plans) requires mutually beneficial relationships with its owner, suppliers and customers. The directors review business updates monthly via detailed management reporting and strategic decisions conducted within board meetings. The business aims to meet the groups requirement to be economically, environmentally and socially responsible. The business principles and compliance ensure its high standards are maintained both internally and externally with business relationships. The group monitors compliance with governance standards to aid decision making and act in ways that promote high standards of business conduct.
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2024
The directors present their report and the financial statements for the year ended 31 March 2024.
The directors who served during the year were:
The directors are responsible for preparing the Group Strategic Report, the Directors' Report and the consolidated financial statements in accordance with applicable law and regulations.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgments 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 Group will continue in business.
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 the Group and to 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 the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The loss for the year, after taxation and minority interests, amounted to £115,670,347 (2023 - loss £37,183,508).
The Group has taken the option to exclude from its report any energy and carbon information relating to a subsidiary which would not itself be obliged to include reporting in its own financial statements. The parent company's energy consumption in the United Kingdom for the year in 40,000kWh or lower and therefore is a low energy user, and so is not required to make energy disclosures. Therefore, no disclosures are required in relation to Green House Gas Emissions, Energy Consumption and Energy Efficiency Action.
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024
The Company has chosen in accordance with section 414C(11) of the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 to set out within the Company's Strategic Report the Company's Strategic Report Information Required by Schedule 7 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulation 2008. This includes information that would have been included in the business review and details of the principal risks and uncertainties.
Under section 487(2) of the Companies Act 2006, Menzies LLP will be deemed to have been reappointed as auditors 28 days after these financial statements were sent to members or 28 days after the latest date prescribed for filing the accounts with the registrar, whichever is earlier.
This report was approved by the board and signed on its behalf.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF THAMESWEY LIMITED
We have audited the financial statements of ThamesWey Limited (the 'parent Company') and its subsidiaries (the 'Group') for the year ended 31 March 2024, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Company Statement of Financial Position, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity, the Company Statement of Changes in Equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
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 Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council'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.
We draw attention to note 2.3 in the financial statements, which indicates that the directors have concluded that there is a material uncertainty in relation to the Group's ability to continue in operational existence for the foreseeable future. This material uncertainty primarily arises from the ongoing reliance on the revolving loan facilities from a single funder, Woking Borough Council, who are currently under a section 114 notice. As stated in note 2.3, these events or conditions, along with the other matters as set forth in note 2.3, indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
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. Our evaluation of the directors' assessment of the Group's ability to continue to adopt the going concern basis of accounting included the Group's recovery plan to strengthen their trading, liquidity and balance sheet position.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF THAMESWEY LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' 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.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group 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 Group 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 its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Directors' Report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF THAMESWEY LIMITED (CONTINUED)
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 Auditors' 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 Group 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 extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
The Group and parent company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation. We determined that the following laws and regulations were most significant including:
∙The Companies Act 2006;
∙Financial Reporting Standard 102;
∙UK health and safety legislation; and
∙General Data Protection Regulations.
We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
We understood how the Group and parent company are complying with those legal and regulatory frameworks by making inquiries to management and those responsible for legal and compliance procedures. We corroborated our inquiries through our review of board minutes. The engagement partner assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The assessment did not identify any issues in this area. We assessed the susceptibility of the Group and parent company's financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the engagement team included:
∙Identifying and assessing the design effectiveness of controls that management has in place to prevent and detect fraud;
∙Understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process;
∙Challenging assumptions and judgements made by management in its significant accounting estimates; and
∙Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations.
As a result of the above procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas:
∙Posting of journals to the accounting software which are of a non-routine nature in terms of timing and amount;
∙Timing of revenue recognition;
∙The use of management override of controls to manipulate results; and
∙Adjustment of property valuations to manipulate asset values.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF THAMESWEY LIMITED (CONTINUED)
Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' 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 Auditors' 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.
for and on behalf of
Chartered Accountants
Statutory Auditor
2nd Floor
Midas House
62 Goldsworth Road
Surrey
GU21 6LQ
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2024
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2024
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 MARCH 2024
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 21 to 44 form part of these financial statements.
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COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2024
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 21 to 44 form part of these financial statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2024
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2024
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CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2024
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CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2024
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CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 MARCH 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
ThamesWey Limited is a private company, limited by shares, incorporated in the United Kingdom under the Companies Act 2006 and is registered in England and Wales. The Company's registered address can be found on the Company Information page. The Company's principal place of business is The Energy Centre, Poole Road, Woking, Surrey, GU21 6DY.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
Thameswey Limited meets the definition of a qualifying entity under FRS 102 and has therefore taken advantage of the disclosure exemptions available to it in respect of its separate financial statements, which are presented alongside the consolidated financial statements. Exemptions have been taken in relation to share-based payments, financial instruments, presentation of a cash flow statement and remuneration of key management personnel.
The comparative amounts report on a period of 15 months ended 31 March 2023, therefore are not entirely comparable.
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases. In accordance with the transitional exemption available in FRS 102, the Group has chosen not to retrospectively apply the standard to business combinations that occurred before the date of transition to FRS 102.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
The financial statements have been prepared on a going concern basis. In determining that the going concern basis of accounting remains appropriate, the Directors have considered the latest guidance on going concern and financial reporting issued by the Financial Reporting Council.
The going concern basis adopted in preparing the financial statements is contingent upon the continued financial support of the Group's ultimate parent undertaking, being Woking Borough Council and by extension the UK Government.
The Group is financed by way of share capital and long-term loans from the ultimate parent undertaking, Woking Borough Council. The Group incurs interest on the loans at a rate that reflects the cost of Woking Borough Council's own borrowings plus an agreed margin. Subject to current plans and reviews to restructure the debt exposure, the interest charges and loan balance are due to be repaid from operating cash flows generated from the Group's trading activities to the extent possible.
As part of the Directors' review of the going concern status of the Group, they have carried out a comprehensive review of the financial position of the Parent Company and Group to identify funding required for the coming financial years and the ability of the Group to finance this debt.
The Directors and the ultimate parent undertaking are aware that the Group will require support from the ultimate parent entity with additional cash flow funding to settle current liabilities and interest costs in excess of profits generated by the Group or in the alternative to restructure the debt and associated terms or write off non-performing debt. Furthermore, the Group is reliant on the ultimate parent entity to not demand the repayment of loans and interest to the detriment of the Group and its other creditors. As part of the Directors' review they have assessed the ultimate parent entity's ability to provide the required funding and have ensured that the UK Government appointed Commissioners have endorsed this course of action.
Woking Borough Council have provided a letter granting all companies in the Group a debt and interest payment suspension until 31 March 2026, contingent upon various solvency and EBITDA tests and as part of the overall UK Government support package.
The Directors continue to monitor the Group's profitability, cash flows, risks and operations, and in turn reports back to the ultimate parent undertaking and the UK Government Commissioners. The Directors have concluded that at the date of approving the financial statements that it is appropriate to prepare the financial statements on a going concern basis. However, they acknowledge that the challenges facing the Group as regards future funding requirements, the ability to service the debt payable coupled with the significant net liability position, mean that there is material uncertainty with regard to its ability to continue as a going concern.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
Turnover relating to the sales value of units of energy is recognised at the time at which energy is supplied, this is based on periodic meter readings and includes estimates of the value of units supplied to customers between the date of the last meter reading and the year end. Turnover also includes the sales value of service charges relating to the maintenance and supply of energy. Turnover relating to the sales value of service charges is recognised at the point at which the service is performed. Rent received in respect of residential and commercial letting of the investment properties, is recognised on a straight line basis over the lease term on an accruals basis. Income arising from property development is measured at the fair value of consideration received or receivable and represents the amounts receivable for the property, net of discounts and VAT. Turnover in respect of long-term construction contracts is recognised by reference to the stage of completion. When the outcome of a construction contract sale can be estimated reliably in terms of its stage of completion, future costs to complete and recoverability of billings, the company recognises revenue and expenses on the contract sale by reference to the stage of completion of the contract activity at the end of the reporting period. The stage of completion is determined on the basis of the proportion of the contract costs incurred to date over the estimated total costs. When the outcome of a contract cannot be estimated reliably the company only recognises revenue to the extent of the recoverable contract costs incurred. Project management fee income comprises sales of services and consultancy support for local authorities, developers and architects. The company recognises revenue on the sales of services in the reporting period in which the services are rendered by reference to the stage of completion of the specific transaction. The stage of completion is determined on the basis of the actual completion of a proportion of the total services to be rendered. Turnover from bed and breakfast services received for the provision of bed and breakfast accommodation stated net of Value Added Tax. Revenue is recognised when rooms are occupied. Turnover in respect of residential property sales is recognised at the point of legal completion Grants of a revenue nature are recognised in the Consolidated Statement of Comprehensive Income in the same period as the related expenditure.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
incurred in relation to assets under construction or work in progress.
Goodwill
Goodwill represents the difference between amounts paid on the cost of a business combination and the acquirer’s interest in the fair value of the Group's share of its identifiable assets and liabilities of the acquiree at the date of acquisition. Subsequent to initial recognition, goodwill is measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is amortised on a straight line basis to the Consolidated profit and loss account over its useful economic life.
Other intangible assets
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
An entity is treated as an associated undertaking where the Group exercises significant influence in that it has the power to participate in the operating and financial policy decisions.
In the consolidated accounts, interests in associated undertakings are accounted for using the equity method of accounting. Under this method an equity investment is initially recognised at the transaction price (including transaction costs) and is subsequently adjusted to reflect the investors share of the profit or loss, other comprehensive income and equity of the associate. The Consolidated statement of undertakings applying accounting policies consistent with those of the Group. In the Consolidated statement of financial position, the interests in associated undertakings are shown as the Group's share of the identifiable net assets, including any unamortised premium paid on acquisition. Any premium on acquisition is dealt with in accordance with the goodwill policy. Provisions are charged as an expense to profit or loss in the year that the Group becomes aware of the obligation, and are measured at the best estimate at the reporting date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Statement of Financial Position.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
2.Accounting policies (continued)
Financial instruments are recognised in the Group's Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with 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
Basic financial assets, which include trade and other receivables, cash and bank balances, are initially measured at their transaction price including transaction costs and are subsequently carried at their amortised cost using the effective interest method, less any provision for impairment, 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.
Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables due with the operating cycle fall into this category of financial instruments.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each reporting date.
Financial assets are impaired when events, subsequent to their initial recognition, indicate the estimated future cash flows derived from the financial asset(s) have been adversely impacted. The impairment loss will be the difference between the current carrying amount and the present value of the future cash flows at the asset(s) original effective interest rate.
If there is a favourable change in relation to the events surrounding the impairment loss then the impairment can be reviewed for possible reversal. The reversal will not cause the current carrying amount to exceed the original carrying amount had the impairment not been recognised. The impairment reversal is recognised in the profit or loss.
Financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instruments any contract that evidences a residual interest in the assets of the Group after the deduction of all its liabilities.
Basic financial liabilities, which include trade and other payables, bank loans, other loans and loans due to fellow group companies are initially measured at their transaction price after transaction costs. When this constitutes a financing transaction, whereby the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Discounting is omitted where the effect of discounting is immaterial.
Debt instruments are subsequently carried at their amortised cost using the effective interest rate method.
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if the payment is due within one year. If not, they represent non-current liabilities. Trade payables are initially recognised at their transaction price and subsequently are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
Investment properties The directors assess the fair value of investment properties annually, using their knowledge of the local property market, taking into account the nature and location of specific properties. If the directors believe there has been a significant change in the fair value of investment properties they will utilise the services of an independent chartered surveyor. The surveyor values the properties on an open market value basis by reference to market evidence of transaction prices for similar properties, and the directors base the valuation of the properties on this work. Whilst established methods of valuation have been used, there is an element of estimation involved in determining the fair value of the investment properties. The effect of the change in accounting estimate as at 31 March 2024 is a decrease in investment properties and increase in fair value loss of £91,884,000, compared to the vacant possession basis of valuation. Of this amount, £24,968,046 relates to prior periods. Had the investment valuation been used in previous years, the loss on revaluation would have been £65,779,485 in the year ended 31 March 2024. Residential properties recognised in property, plant and equipment Where residential properties are subject to orders restricting the maximum rental, thus not held for asset appreciation, they are recognised as property, plant and equipment (PPE) and held at cost less depreciation. Directors have assessed whether there are indicators of impairment as at the year end and determined that, whilst there is a significant loss on the fair value of investment properties, the properties in PPE are fully tenanted and continue to generate income for the company, thus there are no indicators of impairment. The directors assess the fair value of shared equity mortgages annually, using their knowledge of the local property market taking into account the nature and location of specific properties. The directors perform desktop valuation using available data from appropriate sources. There is an element of estimation involved in determining the fair value of the shared equity mortgages. Shared ownership properties The directors estimate the likelihood of shared owners defaulting on mortgage payments by reviewing historic default rates. The directors believe that no provision is required as a result of this review. Impairment of work in progress The directors review work in progress annually for indicators of impairment. Where indicators are identified, management will determine the level of impairment based on future intention and knowledge of previous projects. Management have engaged the use of an independent chartered surveyor to value the land bank.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
13.Taxation (continued)
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
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