The members present their annual report and financial statements for the year ended 31 October 2024.
The principal activity of the limited liability partnership continued to be the development of freehold land at Harry Stoke, Stoke Gifford, Bristol. The partnership has received full planning consent to build approximately 920 plots with forecast completion in 2027. All developments costs will be jointly funded by both Members by way of loans incurring interest of the higher rate of 5% per annum or a rate of 2% above the Bank of England base rate. Profits will be shared equally between members. All activities are conducted within the UK.
The partnership is currently being used for the development of freehold land at Harry Stoke, Stoke Gifford, Bristol. Currently, no further development opportunities are being considered by the partnership. The future of the partnership will be reviewed on completion of the current development.
The performance in the current year reflects build work on residential units relating to affordable sales being recognised over time and open market sales at a point in time. Key financial statistics given below:
The partnership has revenue in the year of £15.4m (2023: £47.2m) and achieved an operating profit of £2.3m (2023: £6.1m). The partnership has net assets attributable to Members as at 31 October 2024 of £15.3m (2023: £9.2m). With the partnership's financial position, the long-term nature of the net assets attributable to Members and the continued financial support of the Members to enable the partnership to trade and meet its liabilities as they fall due (for twelve months from the date the Members approved these financial statements) the partnership therefore has prepared the financial statements on a going concern basis.
The main risk to the partnership is that costs are not as forecasted. The partnership is engaging closely with all stakeholders to minimise the risk of unforeseen or unpredicted expected costs. The main financial risks associated with the partnership's financial instruments are credit risk, liquidity risk, market risk and interest rate risk.
The principal risks of the partnership are liquidity risk and interest rate risk. Liquidity risk is the risk that the Partnership will not have sufficient funds to pay its obligations as they fall due. This risk is managed by the production of detailed financial forecasts, and the arranging of financing arrangements to cover these forecast requirements. Interest rate risk is the risk that adverse interest rate movements would impact the partnership's ability to service its interest-bearing obligations, primarily amounts owed to Members. An element of interest rate risk is accepted by the Members, with forecast rates and amounts being a part of the regular monitoring by the Members.
The members' drawing policy allows each member to draw a proportion of their profit share, subject to the cash requirements of the business.
The Members initially provided equal value loans in accordance with the requirements of the partnership agreement ("the Agreement"), to provide general working capital to the partnership in pursuit of its development objectives.
No available profits of the partnership shall be drawn without the prior written agreement of both Members.
No Member will be entitled to drawings from the partnership unless it has been expressly agreed by both parties. The Members will be entitled to share in the profit of the partnership in their relevant proportions. Each Member's share of the profit for any accounting period calculated in accordance with the partnership agreement shall be paid to it or credited to its Member's Current Account. The partnership shall maintain accounts in the name of each of the Members to which there shall be credited that Member's share of the profit (if any) and that Member's share of contributions. Distribution of profit may only be made once Member loans and contributions have been repaid to Members.
A Project Management Fee of 3% of the Gross Development Value of the project is payable to Crest Nicholson Operations Limited by the partnership over the life of the development programme. The development programme life is determined to be the date of the Agreement to the final residential unit sale date. The Gross Development value is calculated on an interim basis by reference to the Gross Development Value shown in the Development Appraisal and shall be adjusted upon the Final Sale Date.
A sales and marketing management fee of 1% is payable to Crest by the partnership on the actual Gross Development Value achieved along with a defect maintenance fee of £500 per plot.
An admin fee of £12,500 is payable to both Crest Nicholson Operations Limited and Sovereign Housing Partnerships Limited per annum for the provision of secretarial services payable on a quarterly basis over the length of the development on site.
Detailed arrangements for repayment of capital exist to cover resignation by a Member, appointment of a replacement Member, or, in the winding up of the partnership.
The designated members who held office during the year and up to the date of signature of the financial statements were as follows:
MGI Midgley Snelling LLP have been appointed as the auditors of the partnership and re-appointment will be proposed at a future meeting of the Members.
The Members who held office at the date of approval of this Members' Report confirm that, so far as they are each aware, there is no relevant audit information of which the partnership's auditors are unaware; and each Member has taken all the steps that he ought to have taken as a Member to make himself aware of any relevant audit information and to establish that the partnership's auditors are aware of that information.
The members are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law (as applied by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008) requires the members to prepare financial statements for each financial year. Under that law the members have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice. Under company law (as applied by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008) the members must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the limited liability partnership and of the profit or loss of the limited liability partnership for that period. In preparing these financial statements, the members 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 limited liability partnership will continue in business.
The members are responsible for keeping adequate accounting records that are sufficient to show and explain the limited liability partnership’s transactions and disclose with reasonable accuracy at any time the financial position of the limited liability partnership and enable them to ensure that the financial statements comply with the Companies Act 2006 (as applied by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008). They are also responsible for safeguarding the assets of the limited liability partnership and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
We have audited the financial statements of Crest Sovereign (Brooklands) LLP for the year ended 31 October 2024 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the members' 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 limited liability partnership’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 members with respect to going concern are described in the relevant sections of this report.
Other information
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
In planning and designing our audit tests, we identify and assess the risks of material misstatements within the financial statements, whether due to fraud or error. Our assessment of these risks includes consideration of the nature of the industry and sector, the control environment and the business performance along with the results of our enquiries of management, about their own identification and assessment of the risks of irregularities. We are also required to perform specific procedures to respond to the risk of management override.
As a result of this assessment, we considered the opportunities and incentives that may exist within the limited liability partnership for fraud and identified that the greatest area of risk was in relation to management override, completeness of income and valuation of WIP.
We have obtained an understanding of the legal and regulatory frameworks that the limited liability partnership operates in from discussions with the members and our knowledge of the limited liability partnership and its industry sector. We have focused on the provisions of those laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act and local tax legislation.
We performed the following audit procedures after consideration of the above risks which included the following:
review of the current value of the properties in development compared to the future sales price of the properties;
agreeing WIP to documentation and ensuring correct value is stated in the financial statements;
review of the sales during the period and at the year end to ensure revenue being recorded in the correct period and recorded appropriately;
enquiry of management of actual and potential litigation and claims;
reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; and
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
The engagement partner has assessed that all engagement team members were made aware of the relevant laws and regulations and potential fraud risks and were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
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. The 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 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 limited liability partnership's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006 as applied by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008. Our audit work has been undertaken so that we might state to the limited liability partnership'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 limited liability partnership and the limited liability partnership's members as a body, for our audit work, for this report, or for the opinions we have formed.
The Statement of Comprehensive Income has been prepared on the basis that all operations are continuing operations.
The notes on pages 11 to 18 form part of these financial statements.
The notes on pages 11 to 18 form part of these financial statements.
Crest Sovereign (Brooklands) LLP is a partnership incorporated in England. The address of the registered office is Sovereign House, Basing View, Basingstoke, RG21 4FA. The financial statements are presented in pounds sterling and amounts stated are denominated in millions (£m). The functional currency of the partnership is considered to be pounds sterling because that is the currency of the primary economic environment in which it operates. The accounting policies have been applied consistently in dealing with items which are considered material. Assets and liabilities are stated at amortised cost, which equals their fair value.
The financial statements have been prepared and approved by the Members in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006 as applied to limited liability partnerships by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008. The financial statements have been prepared on a historical cost basis.
The preparation of financial statements in conformity with UK-adopted international accounting standards requires members to make assumptions and judgements that affect the application of policies and reported amounts within the financial statements. Assumptions and judgements are based on experience and other factors that management consider reasonable under the circumstances. Actual results may differ from these estimates.
Judgements made by management, in the application of these accounting policies that have had a significant effect on the financial statements and estimates with a significate risk of material adjustment in the next year are discussed below.
With the partnership's financial position, the long-term nature of the net assets attributable to Members and the continued financial support of the Members to enable the partnership to trade and meets its liabilities as they fall due (for twelve months from the date the Members approved these financial statements) the partnership has prepared the financial statements on a going concern basis.
Revenue is recognised on house and apartment sales at legal completion. Revenue comprises the fair value of the consideration received or receivable, net of value added tax, rebates and discounts.
Revenue is recognised on house and apartment sales at legal completion. For affordable and other sales in bulk, revenue recognition is dependent on freehold legal title being passed to the customer as it is considered that upon transfer of freehold title the customer controls the work-in-progress. Where freehold legal title and control is passed to the customer, revenue is recognised on any upfront sale of land (where applicable) and then on the housing units as the build of the related units progresses, via surveys of work performed on contract activity. Where freehold legal title is not passed on to the customer, revenue is not recognised on any upfront sale of land and the revenue on the housing units and sale of the land is recognised at handover of completed units to the customer. The transaction price for all housing units is derived from contractual negotiations and does not include any material variable consideration.
Inventories are stated at the lower of cost and net realisable value ("NRV"). Work in progress and completed buildings including show homes comprises land under development, undeveloped land, land option payments, direct materials, sub-contract work, labour costs, site overheads, associated professional fees and other attributable overheads, but excludes interests costs.
Cash is cash balances in hand and in the bank and are carried in the statement of financial position at nominal value.
Financial assets are initially recognised at fair value and subsequently classified into one of the following measurement categories:
Measured at amortised cost;
Measured subsequently at fair value through profit and loss ('FVTPL'); and
Measured subsequently at fair value through other comprehensive income ('FVOCI').
The classification of financial assets depends on the partnership's business model for managing the asset and the contractual terms of cash flows. Assets that are held for the collection of contractual cash flows that represent solely payments of principal and interest are measured at amortised cost, with any interest income recognised in the income statements using the effective interest rate method. Financial assets that do not meet the criteria to be measured at amortised cost are classified by the partnership as measured at FVTPL. Fair value gains and losses on financial assets measured at FVTPL are recognised in the income statement and presented within net operating expenses. The partnership currently has no financial assets measured at fair value.
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised costs, using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established based on an expected credit loss model applying the simplified approach, which uses a lifetime expected loss allowance for all trade receivables and other receivables. The amount of loss is recognised in the income statement. Current trade and other receivables do not carry any interest and are stated at their amortised cost, as reduced by appropriate allowances for estimated irrecoverable amounts. Non-current trade and other receivables are discounted to present value when the impact of discounting is deemed to be material, with any discount to nominal value being recognised in the income statement as interest income over the duration of the deferred payment.
Financial liabilities are initially recognised at cost and subsequently classified into one of the following measurement categories:
measured at amortised cost; and
Measured subsequently at fair value through profit and loss ('FVTPL').
Non-derivative financial liabilities are measured at FVTPL when they are considered held for trading or designated as such on initial recognition. The partnership has no non-derivative financial liabilities measured at fair value.
Trade and other payables are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. Trade and other payables on deferred terms are initially recorded at their fair value, with the discount to nominal value being charged to the income statement as interest expense over the duration of the deferred period.
Taxation on all partnership profits is solely the liability of individual Members. Consequently, neither taxation nor related deferred taxation arising in the partnership are accounted for in these financial statements. Amounts retained for tax are treated in the same way as other profits of the partnership and so are included in 'Members' interests' or in 'Loans and other debts due to Members' depending on whether or not division of profits has occurred.
Members' capital
The capital requirements of the partnership are determined from time to time by the partnership. No interest is paid on the capital. On leaving the partnership a Member's capital is repaid, subject to a valuation formula agreed between the Members.
Members' remuneration and drawings
A project Management Fee of 3% of the Gross Development Value of the project is payable to Crest Nicholson Operations Limited by the partnership over the life of the development programme. The development programme life is determined to be the date of the Agreement to the final residential unit sale date. The Project Management Fee shall be 3% of the Gross Development Value which shall be calculated on an interim basis by reference to the Gross Development Value shown in the Development Appraisal and shall be adjusted upon the Final Site Date.
A sales and marketing management fee of 1% is payable to Crest Nicholson Operations Limited by the partnership on the actual Gross Development Value achieved along with a defect maintenance fee of £500 per plot.
An administration fee of £12,500 is payable to both Crest Nicholson Operations Limited and Sovereign Housing Partnerships Limited per annum for the provision of secretarial services payable on a quarterly basis over the length of the development on site.
Adoption of new and revised standards
There are no new standards, amendments to standards and interpretations that are applicable to the partnership and are mandatory for the first time for the financial year beginning 1 November 2023 which have a material impact on the partnership.
Impact of standards and interpretations in issue but not yet effective
There are no new standards or interpretations issued but not yet effective that are expected to have a significant impact on the entity's financial statements
The preparation of the financial statements under UK-adopted international accounting standards requires management to make estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses and related disclosures. In applying the Partnership's accounting policies, the key judgements that have a significant impact on the financial statements, including those involving estimates, which are described below, the judgement to present certain revenue polices relating to part exchange sales and the identification of performance obligations where a revenue transaction involves the sale of both land and residential units and revenue on the units is then subsequently recognised over time (See note 3 for the split of revenue recognised at a point in time and recognised over time).
Estimates and associated assumptions affecting the financial statements are based on historical experience and various other factors that are believed to be reasonable under the circumstances. The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based or as a result of new information.
Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only the year, or in the year of revision and future years if the revision affects both current and future years.
Management have made estimates and assumptions in reviewing the going concern assumption as detailed above. Management consider the key sources of estimation uncertainty that have a risk causing a material adjustment to the carrying value of assets and liabilities as described below.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Inventories of work in progress, completed buildings including show homes and part exchange inventories are stated in the statement of financial position at the lower of cost and NRV. On a monthly basis management update estimates of future revenue and expenditure for each development and if the future revenues are lower than forecast expenditure an inventory provision is made. This provision may be reversed in subsequent periods if there is evidence of improved revenue or reduced expenditure forecast on a development. Reasonably foreseeable changes in prices at the Statement of Financial Position date would not have a significant impact on the NRV provision. If revenue is 10% lower on forecast sales on this development, the impact on profit before tax would be £3.7m, which is less than current forecast profitability, and no NRV provision would be required.
An analysis of the limited liability partnership's revenue is as follows:
Auditor's remuneration of £18,625 (2023: £20,000) was charged in the year. The partnership had no employees during the year (2023: none).
No Members' remuneration was paid in the year (2023: none).
WIP of £12.5m (2023: £40.6m) were recognised as expenses in the year. WIP is stated net of a net realisable provision of £nil (2023: £nil).
The expected credit loss on current receivables is expected to be immaterial in both 2024 and 2023.
The partnership's financial instruments comprise cash, trade and other receivables, and trade and other payables. The main objective of the partnership's policy towards financial instruments is to maximise returns on the partnership's cash balances, manage the partnership's working capital requirements and finance the partnership's ongoing operations.
Capital Management
The partnership's policies seek to match long-term assets with long-term finance and ensure that there is sufficient working capital to meet the partnership's commitments as they fall due and continue to sustain trading.
Financial risk
The main risks associated with the partnership's financial instruments are credit risk, liquidity risk, market risk and interest rate risk. The members are responsible for managing these risks and the policies adopted are as set out below.
Crest Sovereign (Brooklands) LLP is jointly controlled by Crest Nicholson Operations and Sovereign Housing Partnerships.
Crest Nicholson Operations is 100% controlled by Crest Nicholson Holdings plc and Sovereign Housing Partnerships is 100% controlled by Sovereign Housing Association Limited (Trading as Sovereign Network Group). No one member has overall control.