REGISTERED NUMBER: SC595439 (Scotland)

GROUP STRATEGIC REPORT,

REPORT OF THE DIRECTORS AND

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2025

FOR

LOVIE HOLDINGS LIMITED

Page

Company Information

1

Group Strategic Report

2

Report of the Directors

3

Report of the Independent Auditors

4

to

6

Consolidated Income Statement

7

Consolidated Other Comprehensive Income

8

Consolidated Balance Sheet

9

Company Balance Sheet

10

Consolidated Statement of Changes in Equity

11

Company Statement of Changes in Equity

12

Consolidated Cash Flow Statement

13

Notes to the Consolidated Cash Flow Statement

14

Notes to the Consolidated Financial Statements

15

to

25

DIRECTORS:

Mr J W Lovie

Mr S J Lovie

Mrs K Lovie

Mrs J Lovie

REGISTERED OFFICE:

Construction House

New Pitsligo

Fraserburgh

Aberdeenshire

AB43 6PR

REGISTERED NUMBER:

SC595439 (Scotland)

AUDITORS:

Bain Henry Reid

Statutory Auditors

Chartered Accountants

28 Broad Street

Peterhead

Aberdeenshire

AB42 1BY

The directors present their strategic report of the company and the group for the year ended 31 March 2025.

REVIEW OF BUSINESS

The results for the year and financial position of the group are as shown in the annexed financial statements.

Key Performance Indicators

The directors consider the key performance indicators to be as follows:

2025

2024

Movement

£'000

£'000

%

Turnover

10,448

13,260

(21.21

)

Net profit before tax

1,538

998

54.11

Net assets

22,899

21,759

5.24

PRINCIPAL RISKS AND UNCERTAINTIES

Competitive pressure remains steady within the sector the group operates and, although the downturn in the market due to the downturn in the oil industry in the North East of Scotland affected the group in prior years, not all of the group's customers are in the oil industry. The group has a strategy to be a key builder in the North East of Scotland by offering high quality and personal service to its customers.

In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the group uses surplus cash funds at bank. The group therefore has sufficient financial resources and is well placed to manage its business risks. After making enquiries, we have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. According, we continue to adopt the going concern basis in preparing the annual report and financial statements.

The group's principal financial assets are cash balances held at bank and trade debtors. The group's credit risk is primarily attributed to trade debtors. The amounts presented in the balance sheet are net of allowances for doubtful debtors. The credit risk on liquid funds held at banks is considered to be limited.

ON BEHALF OF THE BOARD:

Mr J W Lovie - Director

22 December 2025

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

PRINCIPAL ACTIVITY

The principal activity of the group in the year under review was that of of building and steel construction.

DIVIDENDS

No dividends will be distributed for the period ended 31 March 2025 (31 March 2024: £nil).

EVENTS SINCE THE END OF THE YEAR

Information relating to events since the end of the year is given in the notes to the financial statements.

DIRECTORS

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

Mr J W Lovie

Mr S J Lovie

Mrs K Lovie

Mrs J Lovie

DISCLOSURE IN THE STRATEGIC REPORT

Information relating to risks and uncertainties is set out in the strategic report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Group 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 the group and of the profit or loss of the group 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 and the group's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group 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 the group 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 group'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 group's auditors are aware of that information.

AUDITORS

The auditors, Bain Henry Reid, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

Mr J W Lovie - Director

22 December 2025

Opinion

We have audited the financial statements of Lovie Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 March 2025 which comprise the Consolidated Income Statement, Consolidated Other Comprehensive Income, Consolidated Balance Sheet, Company Balance Sheet, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated Cash Flow Statement and Notes to the Consolidated 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 group's and of the parent company affairs as at 31 March 2025 and of the group's 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 group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and the parent company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The directors are responsible for the other information. The other information comprises the information in the Group 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 Group 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 Group 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 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 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 by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

-	the parent company financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page three, 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 group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent 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. Misstatement 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.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:

-

we identified the laws and regulations applicable to the company through discussions with directors, and from our commercial knowledge and experience of the construction sector;

-

we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company including the Companies Act 2006, FRS 102 requirements, taxation, panning and building regulations as they relate to Scotland, and HSE regulations. We also considered those with an indirect effect including employment, data protection, anti-money laundering and other environmental and health and safety legislation; and

-

we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management, review of financial statement disclosures, inspecting any tax/legal or regulatory correspondence, and review of legal invoices.

We assessed the susceptibility of the company's financial statements to material misstatement including obtaining an understanding of how fraud might occur, by;

-

making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud;

-

considering the internal controls in place to mitigate the risks of fraud and of non-compliance with laws and regulations; and

-

exercised professional judgement and maintained professional scepticism throughout the audit.

To address the risk of fraud through management bias and override of controls, we:

-

conducted a review of large or unusual items, and transactions outwith the normal course of business;

-

performed analytical procedures to identify any unusual or unexpected relationships;

-

considered the possibility of undisclosed related party transactions;

-

tested journal entries to identify unusual transactions;

-

assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and

-

investigated the rationale behind significant or unusual transactions.

Auditors' responsibilities for the audit of the financial statements (cont'd)

To address the risk of fraud through revenue recognition we:

-

conducted audit procedures to confirm that it was being recognised in line with the accounting policy; and

-

carried out substantive procedures to confirm the accuracy of completion and cut-off

In response to the risk of irregularities and non-compliance with laws and regulations we designed procedures which included, but were not limited to:

-

agreeing financial statement disclosures to underlying supporting documentation;

-

enquiring of management as to actual and potential litigation and claims; and

-

reviewing correspondence with HMRC, relevant regulators and the company's legal advisers

There are inherent limitations in our audit procedures described above. The more removed the laws and regulations are from financial statements, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.

Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.

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.

Iain Arthur FCCA (Senior Statutory Auditor)

for and on behalf of Bain Henry Reid

Statutory Auditors

Chartered Accountants

28 Broad Street

Peterhead

Aberdeenshire

AB42 1BY

22 December 2025

TURNOVER

3

10,447,856

13,259,859

Cost of sales

7,629,777

11,097,841

GROSS PROFIT

2,818,079

2,162,018

Administrative expenses

1,643,672

1,430,040

1,174,407

731,978

Other operating income

4

433

408

OPERATING PROFIT

6

1,174,840

732,386

Interest receivable and similar income

7

362,877

274,527

1,537,717

1,006,913

Interest payable and similar expenses

8

-

8,825

PROFIT BEFORE TAXATION

1,537,717

998,088

Tax on profit

9

397,923

260,568

PROFIT FOR THE FINANCIAL YEAR

1,139,794

737,520

Profit attributable to:

Owners of the parent

1,139,794

737,520

PROFIT FOR THE YEAR

1,139,794

737,520

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

1,139,794

737,520

Total comprehensive income attributable to:

Owners of the parent

1,139,794

737,520

FIXED ASSETS

Tangible assets

11

3,686,445

3,998,046

Investments

12

-

-

Investment property

13

495,386

495,386

4,181,831

4,493,432

CURRENT ASSETS

Stocks

14

377,899

409,410

Debtors

15

8,284,624

8,811,175

Cash at bank

12,686,521

10,075,753

21,349,044

19,296,338

CREDITORS

Amounts falling due within one year

16

2,196,338

1,526,864

NET CURRENT ASSETS

19,152,706

17,769,474

TOTAL ASSETS LESS CURRENT LIABILITIES

23,334,537

22,262,906

PROVISIONS FOR LIABILITIES

17

(434,267

)

(502,103

)

ACCRUALS AND DEFERRED INCOME

18

(1,306

)

(1,633

)

NET ASSETS

22,898,964

21,759,170

CAPITAL AND RESERVES

Called up share capital

19

250,004

250,004

Share premium

20

11,870,986

11,870,986

Retained earnings

20

10,777,974

9,638,180

SHAREHOLDERS' FUNDS

22,898,964

21,759,170

The financial statements were approved by the Board of Directors and authorised for issue on 22 December 2025 and were signed on its behalf by:

Mr J W Lovie - Director

FIXED ASSETS

Tangible assets

11

-

-

Investments

12

12,120,986

12,120,986

Investment property

13

-

-

12,120,986

12,120,986

CURRENT ASSETS

Debtors

15

32,224

125,424

Cash at bank

5,366,198

5,040,990

5,398,422

5,166,414

CREDITORS

Amounts falling due within one year

16

125,735

5,065,258

NET CURRENT ASSETS

5,272,687

101,156

TOTAL ASSETS LESS CURRENT LIABILITIES

17,393,673

12,222,142

CAPITAL AND RESERVES

Called up share capital

19

250,004

250,004

Share premium

20

11,870,986

11,870,986

Retained earnings

20

5,272,683

101,152

SHAREHOLDERS' FUNDS

17,393,673

12,222,142

Company's profit for the financial year

5,171,531

120,596

The financial statements were approved by the Board of Directors and authorised for issue on 22 December 2025 and were signed on its behalf by:

Mr J W Lovie - Director

Called up

share

Retained

Share

Total

capital

earnings

premium

equity

£

£

£

£

Balance at 1 April 2023

250,004

8,900,660

11,870,986

21,021,650

Changes in equity

Total comprehensive income

-

737,520

-

737,520

Balance at 31 March 2024

250,004

9,638,180

11,870,986

21,759,170

Changes in equity

Total comprehensive income

-

1,139,794

-

1,139,794

Balance at 31 March 2025

250,004

10,777,974

11,870,986

22,898,964

Called up

share

Retained

Share

Total

capital

earnings

premium

equity

£

£

£

£

Balance at 1 April 2023

250,004

(19,444

)

11,870,986

12,101,546

Changes in equity

Total comprehensive income

-

120,596

-

120,596

Balance at 31 March 2024

250,004

101,152

11,870,986

12,222,142

Changes in equity

Total comprehensive income

-

5,171,531

-

5,171,531

Balance at 31 March 2025

250,004

5,272,683

11,870,986

17,393,673

Cash flows from operating activities

Cash generated from operations

1

2,468,423

2,232,194

Interest paid

(1,252

)

(8,825

)

Tax paid

(168,698

)

(1,002,612

)

Net cash from operating activities

2,298,473

1,220,757

Cash flows from investing activities

Purchase of tangible fixed assets

(162,857

)

(700,504

)

Sale of tangible fixed assets

19,075

122,060

Interest received

456,077

149,103

Net cash from investing activities

312,295

(429,341

)

Increase in cash and cash equivalents

2,610,768

791,416

Cash and cash equivalents at beginning of year

2

10,075,753

9,284,337

Cash and cash equivalents at end of year

2

12,686,521

10,075,753

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

2025

2024

£

£

Profit before taxation

1,537,717

998,088

Depreciation charges

458,353

511,516

Profit on disposal of fixed assets

(2,970

)

(36,201

)

Government grants

(327

)

(408

)

Finance costs

-

8,825

Finance income

(362,877

)

(274,527

)

1,629,896

1,207,293

Decrease in stocks

31,511

147,208

Decrease in trade and other debtors

433,352

1,070,663

Increase/(decrease) in trade and other creditors

373,664

(192,970

)

Cash generated from operations

2,468,423

2,232,194

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 March 2025

31/3/25

1/4/24

£

£

Cash and cash equivalents

12,686,521

10,075,753

Year ended 31 March 2024

31/3/24

1/4/23

£

£

Cash and cash equivalents

10,075,753

9,284,337

3.	ANALYSIS OF CHANGES IN NET FUNDS

At 1/4/24

Cash flow

At 31/3/25

£

£

£

Net cash

Cash at bank

10,075,753

2,610,768

12,686,521

10,075,753

2,610,768

12,686,521

Total

10,075,753

2,610,768

12,686,521

1.	STATUTORY INFORMATION

Lovie Holdings Limited is a private company, limited by shares , registered in Scotland. The company's registered number and registered office address can be found on the General Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 - 'The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland' ('FRS102'), and with the Companies Act 2006. The financial statements have been prepared on the historic cost basis except for the modifications to a fair value basis for certain financial instruments as specified in the accounting policies below.

The financial statements are presented in Sterling (£).

Going Concern

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

Basis of consolidation

The consolidated financial statements include the financial statements of the company and its subsidiary undertaking made up to 31st March 2025. The acquisition method of accounting has been adopted. Under this method, the results of subsidiary undertakings acquired in the year are included in the consolidated profit and loss account from the date of acquisition.

Turnover and profits arising on trading between group companies is excluded.

Under section 408 (4) of the Companies Act 2006 the company is exempt from the requirement to present its own profit and loss account.

Significant judgements and estimates

In the appreciation of the group's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both the current and future periods.

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.

Construction contract values

As disclosed in the accounting policy above, the amounts recoverable on construction contracts are based on the management's estimates of the stage of completion of each contract and the expected final profit on each contract. The amounts recoverable on construction contracts at the year end are £ 1,396,011 (2024: £890,849).

Estimated useful life

The useful economic life of each class of asset is a judgement exercised by management. Depreciation in the year was £458,353 (2024: £511,516).

Carrying value of investment property

At each reporting date, the directors are required to consider the fair value of its investment properties, in order to assess whether there has been any change in fair value, the directors are required to consider market values in the local property market along with any valuations provided by an independent valuer (see note 13).

The directors consider that there are no other judgements, estimates and underlying assumptions which have a significant risk of causing a material adjustment to the carrying value of assets and liabilities.

Revenue recognition

Turnover

Turnover represents amounts receivable for construction goods and services net of VAT and trade discounts. Turnover and costs are recognised by reference to the stage of completion of the contract activity at balance sheet date.

Profit is recognised on long-term contracts, if the final outcome can be assessed with reasonable certainty by including in the profit and loss account turnover and related costs as contract activity progresses. Turnover is calculated as that proportion of total contract value which costs to date bear to total expected costs for that contract.

Interest income

Interest income is recognised as interest accrues using the effective interest method

Tangible fixed assets

Tangible fixed assets are measured at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is calculated to write down the cost less estimated residual value of all tangible fixed assets over their estimated useful life or, if held under a finance lease, over the term of the lease, whichever is the shorter. The rates applicable are:

Land and Buildings

-

20-50 years on cost

Plant and machinery

-

20% reducing balance

Fixtures and fittings

-

33% on cost

Freehold land and assets in the course of construction are not depreciated.

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charges to the profit and loss account.

Impairment of fixed assets.

At each reporting date fixed assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any affected asset is estimated and compared with its carrying amount. If the estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised immediately in profit and loss.

If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but not in excess of the amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit and loss.

Fixed and current asset investments

Investments held as fixed assets are stated at cost less accumulated impairment losses.

Investment property

Investment properties, which is property held to earn rentals and/or for capital appreciation, are initially recognised at cost, which includes the purchase cost and any directly attributable expenditure. Subsequently it is measured at fair value at the reporting end date. The movement in fair value is recognised in the profit and loss account.

Stocks and work in progress

Stocks have been valued at the lower of cost and estimated selling price less costs to sell, after making due allowance for obsolete and slow moving items. Cost comprises direct materials and where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling prices less costs to complete and sell is recognised as an impairment loss in the profit and loss account. Reversals of impairment loses are also recognised in the profit and loss account.

Construction contracts

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the reporting end date. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.

When it is probable that total contract costs will exceed total contract turnover, the expected loss is recognised as an expense immediately.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable that they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When costs incurred in securing a contract are recognised as an expense in the period in which they are incurred, they are not included in contract costs if the contract is obtained in a subsequent period.

The "percentage of completion method" is used to determine the appropriate amount to recognise in a given period. The stage of completion is measured by the proportion of contract costs incurred for work performed to date compared to the estimated total contract costs. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. These costs are presented as stock, prepayments or other assets depending on their nature and provided it is probable they will be recovered.

Cash and cash equivalents

Cash and cash equivalents are basic financial assets that include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less.

Financial instruments

The group has elected to apply the provisions of Section 11 "Basic Financial Instruments" and Section 12 "Other Financial Instruments Issues" of FRS102 to all its financial instruments.

Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with net amounts presented in the financial statements, when there is a legally enforceable right to offset 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 debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.