REGISTERED NUMBER: 05014570 (England and Wales)

HERITAGE DEVELOPMENTS SOUTH WEST LIMITED

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

AUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 JANUARY 2025

Page

Company Information

1

Strategic Report

2

Report of the Directors

3

Report of the Independent Auditors

5

Income Statement

9

Other Comprehensive Income

10

Balance Sheet

11

Statement of Changes in Equity

12

Cash Flow Statement

13

Notes to the Cash Flow Statement

14

Notes to the Financial Statements

16

DIRECTORS:

S Anthony

A P Martinovic

J E Quinn

L C Duringer

REGISTERED OFFICE:

1A Newton Centre

Thorverton Road

Matford Business Park

Exeter

Devon

EX2 8GN

REGISTERED NUMBER:

05014570 (England and Wales)

AUDITORS:

WP Audit Services LLP

Chartered Accountant & Statutory Auditor

Chancery House

30 St Johns Road

Woking

Surrey

GU21 7SA

The directors present their strategic report for the year ended 31 January 2025.

REVIEW OF BUSINESS AND KPI'S

The company achieved a turnover in the period of £9.63 million (2024: £19.48 million).

There are fluctuations in turnover and profits, as a result of the cyclical nature of the company's current projects, and the fact that the company goes through periods of development, followed by periods of sales.

One of the company's key KPIs is gross profit margin. The gross profit percentage has increased from 17.5% in the previous financial period to 24.4% in this period. The gross profit margin was largely influenced by taking on of some construction contracts at lower margins in the prior period.

Another key KPI is the level of work in progress held. During the year, the company has completed development at Berkeley Park Phase 1 with the remainder of homes sold during the year. The attention has shifted to future development at Lynden Place being the next large scale development. Work in progress at the year end has marginally increased to £20.05 million (2024: £18.34 million).

Looking to the future, the company has invested in additional plots of land for development, to ensure that there is always a viable pipeline of work. The company prides itself in offering properties to a very high level of specification in prime locations and as such have confidence in the future success of the company.

The directors believe the company is well placed to manage its business risk successfully, and have a reasonable expectation that the company has adequate resource to continue in operational existence for the foreseeable future. We therefore continue to adopt the going concern basis in preparing the annual financial statements.

PRINCIPAL RISKS AND UNCERTAINTIES

The company continues to have a good relationship with its bankers and other loan providers, minimising risks around cashflow.

The directors consider a key risk to the business is around potential for increases to the Bank of England base rate, given the high level of loan funding the company has. We have mitigated risks around uncertainty of interest rates by taking out a larger portion of private equity loans, at fixed rates of interest. This could also represent a risk to demand and hence sales, if buyers have to take out mortgages at higher rates. However rates have begun to stabilise and are now into a falling trend, and so the risk is considered to be diminishing.

RESTRUCTURE

During the year there was a restructure and 100% of the shares in the company were acquired by Heritage Developments (South West) Holdings Limited, by way of a share for share exchange with the existing shareholders.

As part of the restructure, 3 fellow subsidiaries were also created within the group structure. These companies are dormant as at the year end, but intend to carry on activities in the future.

ON BEHALF OF THE BOARD:

A P Martinovic - Director

28 October 2025

The directors present their report with the financial statements of the company for the year ended 31 January 2025.

PRINCIPAL ACTIVITY

The principal activity of the company in the year under review was that of the development of residential properties including an element of social housing, primarily in the county of Devon.

DIVIDENDS

As part of the restructure, it was agreed that work-in-progress valued at £2.1m would be transferred up the new parent company, Heritage Developments (South West) Holdings Limited, as a dividend in specie.

The total distribution of dividends for the year ended 31 January 2025 will be £2,100,000 (2024: £Nil), settled by way of the transfer of the work-in-progress.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 February 2024 to the date of this report.

S Anthony

A P Martinovic

Other changes in directors holding office are as follows:

D S Lovell - resigned 21 October 2024

J E Quinn - appointed 25 October 2024

L C Duringer - appointed 25 October 2024

FINANCIAL INSTRUMENTS

The company's main financial instruments comprise bank balances, trade creditors, bank loans, and hire purchase arrangements. The main purpose of each of these instruments is to fund ongoing operations.

Due to the nature of the financial instruments used by the company there is not considered to be significant exposure to price risk.

The approach to managing other risks applicable to the financial instruments concerned is explained below:

Credit Risk

Speculative housing customers pay upfront deposits and provide payment on completion. Risk associated with social housing contracts is low. The company's debtor ledger is reviewed on a regular basis and collection of debts are maintained to optimise the company's liquidity.

Interest Rate Risk

The interest rates on the bank loans are variable, as are the repayment terms, which state that they are repayable by the earlier of 24/36 months or the date of sale of the last plot in the relevant phase of development. It is the policy of the board to maintain good working arrangements with the company's bankers with loans monitored on an ongoing basis in order to secure the best rates available within the market. As discussed above, loans are also sought from private lenders at fixed rates, in order to minimise any uncertainty around finance costs.

The company also finances the acquisition of major fixed assets by using hire purchase agreements. Interest rates on these contracts are fixed, and hence the risk is also low.

Base rates have been reduced by the Bank of England since the year end.

Liquidity Risk

In respect of bank balances the liquidity risk is managed by maintaining a balance between the various elements of working capital.

The company manages the liquidity risk on its bank loans and hire purchase arrangements by ensuring that sufficient funds are available to meet the repayment terms of each bank loan.

Trade creditors' liquidity risk is managed by ensuring there are sufficient funds available from working capital to meet amounts due.

CHARITABLE DONATIONS AND EXPENDITURE

During the year the company made charitable donations amounting to £1,000 (2024: £6,112).

DISCLOSURE IN THE STRATEGIC REPORT

The review of performance, KPIs, and analysis of business risks have been reported in the Strategic Report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors 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 company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company 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 enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS

Pursuant to section 487 of the Companies Act 2006, the auditors will be deemed to be reappointed and WP Audit Services LLP will therefore continue in office.

ON BEHALF OF THE BOARD:

A P Martinovic - Director

28 October 2025

Opinion

We have audited the financial statements of Heritage Developments South West Limited (the 'company') for the year ended 31 January 2025 which comprise the Income Statement, Other Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Notes to the Cash Flow Statement, 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 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).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 January 2025 and of its profit 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 Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the 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 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 directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

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.

In connection with our audit of the financial statements, 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 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 the audit:

-	the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the 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.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page four, 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 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 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 company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

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 a Report of the Auditors 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.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Objectives

The objectives of our audit in respect of fraud, are;

- to identify and assess the risks of material misstatement of the financial statements due to fraud;

- to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and

- to respond appropriately to instances of fraud or suspected fraud identified during the audit.

However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company.

Audit Approach

Our approach was as follows:

- We obtained an understanding of the legal and regulatory requirements applicable to the Company and considered that the most significant are the LABC, Building Regulations, Health and Safety Regulations, Companies Act 2006, FRS 102, and UK taxation legislation.

- We obtained an understanding of how the Company complies with these requirements by discussions with management and those charged with governance, as well a review of relevant correspondence and certifications.

- We assessed the risk of material misstatement of the financial statements and how it might occur (including the risk of material misstatement due to fraud), by holding discussions with management and those charged with governance. We used our knowledge of the Company and the industry in which it operates to determine if management's explanations were consistent with our own conclusions.

- Based on our understanding developed from the above, we designed specific appropriate audit procedures to identify instances of non-compliance with the key laws and regulations which may result in potential fraud. This included making enquiries of management and those charged with governance, investigating unusual or unexpected relationships or movements in figures disclosed in the accounts and remaining alert for any transactions that appeared to be outside the normal course of business.

Furthermore, as required by auditing standards, and taking into account our overall knowledge of the control environment, we have performed procedures to address the risks of management override of controls and the risk of fraudulent revenue recognition. Procedures such as a review of journal entries and assessing estimates for management bias have enabled us to conclude in this area.

- No instances of fraud, non-compliance or suspected non-compliance with laws and regulations were identified from the above procedures.

As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

- Obtain an understanding of internal control environment relevant to the audit, in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company's internal control.

- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

- Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Context of the ability of the audit to detect fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.

In addition, as with any audit, there remains a risk of non-detection of fraud, as these may involve collusion, forgery, intentional

omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect noncompliance with all laws and regulations.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

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 a Report of the Auditors 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.

Stephanie Williams (Senior Statutory Auditor)

for and on behalf of WP Audit Services LLP

Chartered Accountant & Statutory Auditor

Chancery House

30 St Johns Road

Woking

Surrey

GU21 7SA

30 October 2025

TURNOVER

4

9,628,092

19,479,559

Cost of sales

(7,283,268

)

(16,067,092

)

GROSS PROFIT

2,344,824

3,412,467

Administrative expenses

(1,512,247

)

(937,819

)

832,577

2,474,648

Gain/loss on revaluation of investment property

391,953

-

OPERATING PROFIT

6

1,224,530

2,474,648

Interest receivable and similar income

38,787

54,003

1,263,317

2,528,651

Interest payable and similar expenses

7

(118,293

)

(108,664

)

PROFIT BEFORE TAXATION

1,145,024

2,419,987

Tax on profit

8

(329,999

)

(589,866

)

PROFIT FOR THE FINANCIAL YEAR

815,025

1,830,121

PROFIT FOR THE YEAR

815,025

1,830,121

OTHER COMPREHENSIVE INCOME

Revaluation of freehold property

191,572

-

Income tax relating to other comprehensive income

(8,000

)

-

OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX

183,572

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

998,597

1,830,121

FIXED ASSETS

Tangible assets

10

986,145

886,508

Investment property

11

4,025,000

2,109,117

5,011,145

2,995,625

CURRENT ASSETS

Stocks

12

20,053,380

18,344,294

Debtors

13

2,298,031

2,062,101

Cash at bank

5,569,293

3,289,682

27,920,704

23,696,077

CREDITORS

Amounts falling due within one year

14

12,297,848

10,169,096

NET CURRENT ASSETS

15,622,856

13,526,981

TOTAL ASSETS LESS CURRENT LIABILITIES

20,634,001

16,522,606

CREDITORS

Amounts falling due after more than one year

15

(5,389,763

)

(162,965

)

PROVISIONS FOR LIABILITIES

20

(152,000

)

(166,000

)

NET ASSETS

15,092,238

16,193,641

CAPITAL AND RESERVES

Called up share capital

21

1,500

1,500

Revaluation reserve

22

183,572

-

Retained earnings

22

14,907,166

16,192,141

SHAREHOLDERS' FUNDS

15,092,238

16,193,641

The financial statements were approved by the Board of Directors and authorised for issue on 28 October 2025 and were signed on its behalf by:

A P Martinovic - Director

Called up

share

Retained

Revaluation

Total

capital

earnings

reserve

equity

£

£

£

£

Balance at 1 February 2023

1,500

14,362,020

-

14,363,520

Changes in equity

Total comprehensive income

-

1,830,121

-

1,830,121

Balance at 31 January 2024

1,500

16,192,141

-

16,193,641

Changes in equity

Dividends

-

(2,100,000

)

-

(2,100,000

)

Total comprehensive income

-

815,025

183,572

998,597

Balance at 31 January 2025

1,500

14,907,166

183,572

15,092,238

Cash flows from operating activities

Cash generated from operations

1

(3,613,293

)

23,994

Interest paid

(2,378

)

(4,362

)

Interest element of hire purchase payments paid

(12,920

)

(14,826

)

Finance costs paid

(539,503

)

(532,844

)

Tax paid

(332,918

)

(1,086,531

)

Net cash from operating activities

(4,501,012

)

(1,614,569

)

Cash flows from investing activities

Purchase of tangible fixed assets

(205,061

)

(196,913

)

Construction of investment property

(1,523,930

)

(367,421

)

Sale of tangible fixed assets

152,774

139,500

Interest received

34,584

41,385

Net cash from investing activities

(1,541,633

)

(383,449

)

Cash flows from financing activities

New loans in year

9,777,180

-

Loan repayments in year

(3,411,093

)

(3,890,410

)

HP capital repayments in year

(264,389

)

(146,097

)

Amount introduced by directors

2,261,846

131,604

Amount withdrawn by directors

(41,288

)

(218,072

)

Net cash from financing activities

8,322,256

(4,122,975

)

Increase/(decrease) in cash and cash equivalents

2,279,611

(6,120,993

)

Cash and cash equivalents at beginning of year

2

3,289,682

9,410,675

Cash and cash equivalents at end of year

2

5,569,293

3,289,682

1.	RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

2025

2024

£

£

Profit before taxation

1,145,024

2,419,987

Depreciation charges

185,635

165,577

Profit on disposal of fixed assets

(41,412

)

(69,212

)

Gain on revaluation of fixed assets

(391,953

)

-

Finance costs in cost of sales

539,503

555,948

Finance costs unpaid in accruals

(28,767

)

(112,580

)

Opening WIP transferred to fixed assets

-

(1,741,696

)

Finance costs

118,293

108,664

Finance income

(38,787

)

(54,003

)

1,487,536

1,272,685

Increase in stocks

(3,809,086

)

(48,660

)

Increase in trade and other debtors

(809,894

)

(825,453

)

Decrease in trade and other creditors

(481,849

)

(374,578

)

Cash generated from operations

(3,613,293

)

23,994

2.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts:

Year ended 31 January 2025

31.1.25

1.2.24

£

£

Cash and cash equivalents

5,569,293

3,289,682

Year ended 31 January 2024

31.1.24

1.2.23

£

£

Cash and cash equivalents

3,289,682

9,410,675

3.	ANALYSIS OF CHANGES IN NET DEBT

At 1.2.24

Cash flow

At 31.1.25

£

£

£

Net cash

Cash at bank

3,289,682

2,279,611

5,569,293

3,289,682

2,279,611

5,569,293

Debt

Finance leases

(264,389

)

264,389

-

Debts falling due within 1 year

(7,657,502

)

(1,065,680

)

(8,723,182

)

Debts falling due after 1 year

(14,710

)

(5,375,053

)

(5,389,763

)

(7,936,601

)

(6,176,344

)

(14,112,945

)

Total

(4,646,919

)

(3,896,733

)

(8,543,652

)

4.	MAJOR NON-CASH TRANSACTIONS

During the year, stocks increased by £1,709,086. This includes a £2,100,000 reduction following a dividend in specie. As this transaction did not involve cash, it has been excluded from the cash flow statement. Therefore, the increase in stocks above is £3,809,086.

1.	STATUTORY INFORMATION

Heritage Developments South West Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

The presentation currency of the financial statements is the Pound Sterling (£).

2.	STATEMENT OF COMPLIANCE

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006.

3.	ACCOUNTING POLICIES

Basis of preparing the financial statements

The financial statements have been prepared under the historical cost convention.

Related party exemption

The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned companies within the group.

Significant judgements, assumptions and estimates

The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The estimates and assumptions that may have a risk of causing adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below:

(i) Useful economic life of tangible assets

The annual depreciation charge for tangible assets is sensitive to changes in the estimates of useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets.

(ii) WIP provisioning

The company's developments are subject to changing industry demands and market trends. As a result it is necessary to consider the recoverability of the cost of WIP and the associated provisioning required. When calculating any WIP provision, management considers the anticipated saleability of the plots.

(iii) Impairment of debtors

The company makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, management considers factors including the current credit rating of the debtor, the ageing profile of debtors and historical experience.

(iv) Stage of completion and potential losses on construction contracts

Construction contracts have been entered into in the current year, and income is required to be recognised based on the stage of completion. This could be open to interpretation. The directors use the percentage of costs incurred vs budgeted costs to ascertain a stage of completion for the purpose of income recognition. Costs are budgeted for in a similar manner to normal developments, and any losses therefore occurring, as a result of overheads allocation, for example, are taken into consideration when identifying onerous contracts.

(v) Overheads allocation

The company allocates central overheads, including payroll costs, to ongoing development projects based on management’s assessment of resource usage and benefit. This involves judgement in determining appropriate allocation bases and the extent to which overheads relate to specific developments. Management base their decision of the size of the developments ongoing and level of input expected to be required as a result.

(vi) Cash flows from future sales of shared equity homes

The company has entered into a number of shared equity arrangements when selling homes in the past. There is uncertainty arising from these arrangements, as although there is a right to future cash flows, it is uncertain when this may occur, and how much the cash flow may be. Discounting is also required. The management have assessed the potential level of discounted future cash flows and the lack of certainty associated with these arrangements and consider them to be such that no debtor has been recorded, and the income will be recorded as and when it is received.

(vii) Valuation of property

Freehold property and investment property are held at valuation. An external valuer has been appointed in order to determine the value of the properties, and reduce the estimation uncertainty.

Going concern

After reviewing the company's forecasts and projections, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. The company therefore continues to adopt the going concern basis in preparing its financial statements.

Turnover

Sales of homes

Turnover is measured at the fair value of the consideration received or receivable and represents the amount receivable for houses sold to customers and work carried out in respect of services provided to customers, net of returns, discounts and rebates allowed by the Company and value added taxes. All turnover relates to activities within the UK. Turnover related to sales of homes is recognised on legal completion. At this point the appropriate percentage of income is included in turnover matched by the appropriate costs in cost of sales.

The Company recognises turnover when the following conditions are satisfied:

(a) the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

(b) the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

(c) the amount of revenue can be measured reliably;

(d) it is probable that the economic benefits associated with the transaction will flow to the Company; and

(e) the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Interest receivable

Interest income is recognised using the effective interest method.

Rental income

Rental income is recognised when the right to the income has occurred, i.e. once the period to which the rental relates has passed.

Construction Contracts

Contract revenue and expenses are recognised by reference to the stage of completion of the contract activity, where the outcome of the construction contract can be estimated reliably. Any adjustments required are recongised in either accrued or deferred income accordingly.

Otherwise revenue is recognised only to the extent of recoverable contract costs incurred.

Tangible fixed assets

Tangible assets are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes the original purchase price, costs directly attributable to bringing the asset to its working condition for its intended use, dismantling and restoration costs.

The company has adopted the revaluation model for freehold property. Freehold property is stated at the revalued amount, being fair value at the date of revaluation less subsequent accumulated depreciation and accumulated impairment losses. Revaluations are performed with sufficient regularity to ensure the carrying amount does not differ materially from fair value.

(i) Depreciation and residual values

Freehold land is not depreciated. Depreciation on other assets is calculated, using both the straight-line and reducing balance method, to allocate the cost of their residual values over their estimated useful lives, as follows:

Freehold property

-

1% - 2% Straight line

Plant & machinery

-

25% Reducing balance

Motor vehicles

-

25% Reducing balance

Office equipment

-

25% Reducing balance

The assets' residual values and useful lives are reviewed, and adjusted, if appropriate, at the end of each reporting period. The effect of any changes is accounted for prospectively.

(ii) Subsequent additions and major components

Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that economic benefits associated with the item will flow to the company and the cost can be measured reliably.

The carrying amount of any replaced component is derecognised. Major components are treated as a separate asset when they have significantly different patterns of consumption of economic benefits and are depreciated separately over its useful life.

Repairs and maintenance costs are expensed as incurred.

(iii) Assets in the course of construction

Assets in the course of construction are stated at cost. These assets are not depreciated until they are available for use.

(iv) Derecognition

Tangible assets are derecognised on disposal or when no future economic benefits are expected. On disposal, the difference between the net disposal proceeds and the carrying amount is recognised in profit or loss.

Investment property

In accordance with FRS 102, investment properties are included at their fair value in the financial statements. This valuation is prepared by an external expert on an open market basis, and movements in the value are recognised in profit and loss.

Work in progress

Work in Progress comprises site development expenses and plots available for sale. Work in progress is valued at the lower of cost and net realisable value plus attributable overheads, including costs to sell. Finance costs which relate to property developments are included in work in progress.

Revenue is recognised once a completed plot goes through legal completion with a solicitor. Any deposits made prior to legal completion are treated as deferred income.

Expected losses on affordable and social housing which are required as part of a development are recognised as a cost of the development. These costs are therefore spread over the profitable plots on a development. This is considered to be a necessary adjustment in order to show a true and fair view of the profitability of the units within the development.