REGISTERED NUMBER: SC148011 (Scotland)

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2025

FOR

JAMES LAING & SONS LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

5

Report of the Independent Auditors

7

Statement of 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

15

DIRECTORS:

Mrs K L Abel

Miss J A Cameron

S McKay

Mrs C A McKay

M Strachan

D A Walker

Mrs J Murray

REGISTERED OFFICE:

Laings Bathrooms, Bedrooms and Kitchens

Inverurie Business Park

Oldmeldrum Road

Inverurie

Aberdeenshire

AB51 0ZJ

REGISTERED NUMBER:

SC148011 (Scotland)

SENIOR STATUTORY AUDITOR:

Susan M Hepburn CA ATT

AUDITORS:

Leiper & Summers

Statutory Auditors

4 Charlotte Street

Fraserburgh

Aberdeenshire

AB43 9JE

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

Laings is a leading premium kitchen, bathroom and bedroom retailer and installer operating throughout the North East of Scotland, serving both private residential and commercial customers. The business has established a strong reputation for delivering high-quality bespoke interior solutions, combining innovative design, premium products and professional installation services.

Over the past decade, the Company has achieved significant industry recognition and is proud to be a nationally award-winning business, having received 10 industry awards in 10 years. These achievements reflect the Company's continued commitment to excellence in design, craftsmanship, customer service and project delivery.

The Company's reputation has been built upon long-standing customer relationships, experienced personnel and a consistent focus on quality and professionalism across all aspects of the business. Through its comprehensive end-to-end service offering, the Company continues to deliver tailored solutions for a diverse range of residential and commercial projects throughout the region.

Despite continued economic uncertainty and challenging market conditions across the wider construction and home improvement sectors, the Company has continued to perform resiliently during the financial year, delivering a strong operating profit and achieving a modest improvement on the prior year. The Directors believe this performance demonstrates the strength of the Company's operational management, premium market positioning and established reputation within the industry.

REVIEW OF BUSINESS

The results for the year to 31 August 2025 and the financial position of the company are as shown in the annexed financial statements.

Key Performance Indicators:

2025

2024

Movement

Turnover

£12,236,571

£11,919,124

£317,447

Gross Profit Margin

38%

37%

1%

Operating Profit

£575,314

£439,069

£136,245

Cash Balances

£3,357,939

£2,704,952

£652,987

Net Current Assets

£2,600,751

£2,221,198

£379,553

The performance achieved during the year to 31 August 2025 reflects a positive progression across several key financial indicators and demonstrates the continued resilience and adaptability of the business within a competitive and evolving marketplace. Growth in turnover, alongside an improvement in gross profit margin and operating profitability, highlights the benefits of the strategic investments and operational enhancements undertaken over recent periods.

Throughout the year, the company continued to strengthen its showroom experience, refine its bespoke design offering, and expand carefully curated product collections that reinforce its reputation for quality, craftsmanship, and exceptional customer service. These initiatives have contributed not only to improved financial performance, but also to the strengthening of the company's market position and long-term customer relationships.

The increase in cash balances and net current assets further reflects the company's solid financial footing and provides a strong platform for continued investment and sustainable growth. Looking ahead, the directors remain focused on building upon this momentum through innovation, disciplined operational management, and a continued commitment to delivering inspiring spaces and outstanding client experiences.

PRINCIPAL RISKS AND UNCERTAINTIES

The Company operates within a competitive and economically sensitive sector and therefore faces a number of risks and uncertainties which are actively monitored and managed by the Directors. The business continues to maintain a cautious and disciplined approach in order to protect profitability, maintain operational stability and support long-term sustainable growth.

Inflationary Pressure on Material Costs

The continued increase in the cost of raw materials, manufacturing and transportation remains one of the principal challenges facing the industry. Volatility in supplier pricing and extended lead times have the potential to impact project margins and delivery schedules.

The Company continues to mitigate these risks through maintaining strong relationships with key suppliers, forward planning of projects and regular review of supplier pricing and procurement strategies. The business also continues to focus on premium, value-led projects where quality and service remain the primary purchasing considerations for customers rather than price alone.

Rising Labour and Installation Costs

The ongoing shortage of skilled labour within the construction and interiors sector continues to place upward pressure on installation and subcontractor costs.

The Company seeks to manage this risk through maintaining long-standing relationships with experienced installers and subcontractors, careful scheduling of projects and maintaining high standards of project management. The Directors recognise the importance of retaining skilled and reliable tradespeople to ensure the continued delivery of quality workmanship and customer service.

Economic Uncertainty and Consumer Confidence

Higher interest rates, inflation and wider economic uncertainty have continued to affect consumer confidence and discretionary spending, particularly within the home improvement sector. This may lead to longer customer decision-making periods and delays to planned renovation projects.

The Company continues to position itself within the premium segment of the market, which has historically demonstrated greater resilience during periods of economic uncertainty. The Directors also believe that the Company's reputation for quality, reliability and end-to-end project delivery continues to support customer confidence and ongoing demand.

Competitive Market Conditions

The market for kitchens, bathrooms and bedrooms remains highly competitive, with pricing pressures increasing as businesses compete for a reduced number of projects in certain sectors.

The Company does not seek to compete primarily on price and instead focuses on delivering high-quality products, bespoke design solutions and professional installation services. Continued emphasis is placed on customer service, reputation and project delivery standards in order to differentiate the business from competitors and maintain healthy operating margins.

Supply Chain Disruption and Product Availability

The business remains exposed to the risk of disruption within the supply chain, including manufacturing delays, product shortages and transportation issues, all of which may affect installation programmes and customer delivery timescales.

To minimise disruption, the Company continues to work closely with established suppliers and maintains regular communication regarding lead times and product availability. The Company also seeks to manage customer expectations carefully through proactive project planning and communication throughout the delivery process.

Dependence on Skilled Personnel

The continued success of the Company is dependent upon the experience and expertise of its management team, designers, installers and operational staff.

The Directors recognise the importance of retaining and attracting skilled personnel and continue to invest in maintaining a positive working environment, strong professional relationships and a stable operational structure. The Company's reputation and long-standing presence within the region continue to support recruitment and retention within the business.

Commercial and Construction Sector Activity

The Company undertakes work within both the private residential and commercial sectors and is therefore exposed to fluctuations in construction activity, developer confidence and investment within the wider property market.

The Directors continue to manage this risk through maintaining a diversified customer base across both consumer and commercial markets. This balanced approach helps reduce over-reliance on any single sector and provides greater resilience during periods of market fluctuation.

The Directors continue to review these risks on an ongoing basis and believe that the Company's strong operational controls, established market position and prudent management approach provide a solid foundation to navigate current market conditions successfully.

FUTURE OUTLOOK

While the wider economic environment is expected to remain challenging in the short term, the Directors remain confident in the long-term prospects of the Company.

The business continues to benefit from:

- A strong regional reputation

- An established customer base across both residential and commercial sectors

- Proven installation capability

- Experienced management and operational teams

- Continued demand for high-quality bespoke interior solutions

The Company will continue to focus on maintaining operational efficiency, protecting profitability and delivering high standards of design, installation and customer service.

The Directors believe the Company is well positioned to continue performing strongly within the premium interiors market and remains committed to delivering sustainable long-term growth for the benefit of its customers, suppliers and stakeholders.

ON BEHALF OF THE BOARD:

D A Walker - Director

29 May 2026

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

PRINCIPAL ACTIVITY

The principal activity of the company in the year under review was that of the supply and installation of kitchens, bathrooms and bedrooms.

DIVIDENDS

Interim dividends per share were paid as follows:

Ordinary 'B' Shares 1 shares

5229

- 31 August 2025

Ordinary 'C' Shares 1 shares

2214

- 31 August 2025

Ordinary 'D' Shares 1 shares

2400

- 31 August 2025

The directors recommend that no final dividends be paid.

The total distribution of dividends for the year ended 31 August 2025 will be £ 97,475 .

DIRECTORS

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

Mrs K L Abel

Miss J A Cameron

S McKay

Mrs C A McKay

M Strachan

D A Walker

Mrs J Murray

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

Leiper & Summers is deemed to be reappointed under section 487(2) of the Companies Act 2006.

ON BEHALF OF THE BOARD:

D A Walker - Director

29 May 2026

Opinion

We have audited the financial statements of James Laing & Sons Limited (the 'company') for the year ended 31 August 2025 which comprise the Statement of 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 August 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 five, 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.

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

- Enquiry of management, those charged with governance around actual and potential litigation and claims.

- Reviewing minutes of meetings of those charged with governance.

- Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.

- Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business.

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.

Susan M Hepburn CA ATT (Senior Statutory Auditor)

for and on behalf of Leiper & Summers

Statutory Auditors

4 Charlotte Street

Fraserburgh

Aberdeenshire

AB43 9JE

29 May 2026

TURNOVER

3

12,236,571

11,919,124

Cost of sales

7,536,263

7,496,247

GROSS PROFIT

4,700,308

4,422,877

Administrative expenses

4,124,994

3,983,808

OPERATING PROFIT

6

575,314

439,069

Interest receivable and similar income

49,067

82,744

624,381

521,813

Interest payable and similar expenses

7

10,448

12,452

PROFIT BEFORE TAXATION

613,933

509,361

Tax on profit

8

157,455

127,202

PROFIT FOR THE FINANCIAL YEAR

456,478

382,159

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

456,478

382,159

FIXED ASSETS

Tangible assets

10

398,716

405,401

Investments

11

1

1

398,717

405,402

CURRENT ASSETS

Stocks

12

893,810

691,208

Debtors

13

1,220,349

1,402,405

Cash at bank and in hand

3,357,939

2,704,952

5,472,098

4,798,565

CREDITORS

Amounts falling due within one year

14

2,871,347

2,577,367

NET CURRENT ASSETS

2,600,751

2,221,198

TOTAL ASSETS LESS CURRENT LIABILITIES

2,999,468

2,626,600

CREDITORS

Amounts falling due after more than one year

15

(96,556

)

(82,054

)

PROVISIONS FOR LIABILITIES

19

(82,538

)

(83,175

)

NET ASSETS

2,820,374

2,461,371

CAPITAL AND RESERVES

Called up share capital

20

25

25

Capital redemption reserve

21

75

75

Retained earnings

21

2,820,274

2,461,271

SHAREHOLDERS' FUNDS

2,820,374

2,461,371

The financial statements were approved by the Board of Directors and authorised for issue on 29 May 2026 and were signed on its behalf by:

D A Walker - Director

Called up

Capital

share

Retained

redemption

Total

capital

earnings

reserve

equity

£

£

£

£

Balance at 1 September 2023

25

2,195,588

75

2,195,688

Changes in equity

Profit for the year

-

382,159

-

382,159

Total comprehensive income

-

382,159

-

382,159

Dividends

-

(116,476

)

-

(116,476

)

Balance at 31 August 2024

25

2,461,271

75

2,461,371

Changes in equity

Profit for the year

-

456,478

-

456,478

Total comprehensive income

-

456,478

-

456,478

Dividends

-

(97,475

)

-

(97,475

)

Balance at 31 August 2025

25

2,820,274

75

2,820,374

Cash flows from operating activities

Cash generated from operations

1

986,966

566,381

Interest paid

(52

)

-

Interest element of hire purchase payments paid

(10,396

)

(12,452

)

Tax paid

(140,904

)

(157,049

)

Net cash from operating activities

835,614

396,880

Cash flows from investing activities

Purchase of tangible fixed assets

(147,422

)

(83,145

)

Sale of tangible fixed assets

13,000

-

Interest received

49,067

82,744

Net cash from investing activities

(85,355

)

(401

)

Cash flows from financing activities

Loan repayments in year

(2,460

)

(2,460

)

New HP in year

124,775

-

Capital repayments in year

(122,112

)

(98,380

)

Equity dividends paid

(97,475

)

(116,476

)

Net cash from financing activities

(97,272

)

(217,316

)

Increase in cash and cash equivalents

652,987

179,163

Cash and cash equivalents at beginning of year

2

2,704,952

2,525,789

Cash and cash equivalents at end of year

2

3,357,939

2,704,952

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

2025

2024

£

£

Profit before taxation

613,933

509,361

Depreciation charges

143,007

163,945

Profit on disposal of fixed assets

(1,900

)

-

Finance costs

10,448

12,452

Finance income

(49,067

)

(82,744

)

716,421

603,014

(Increase)/decrease in stocks

(202,602

)

69,825

Decrease in trade and other debtors

182,056

58,283

Increase/(decrease) in trade and other creditors

291,091

(164,741

)

Cash generated from operations

986,966

566,381

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 August 2025

31.8.25

1.9.24

£

£

Cash and cash equivalents

3,357,939

2,704,952

Year ended 31 August 2024

31.8.24

1.9.23

£

£

Cash and cash equivalents

2,704,952

2,525,789

3.	ANALYSIS OF CHANGES IN NET FUNDS

At 1.9.24

Cash flow

At 31.8.25

£

£

£

Net cash

Cash at bank and in hand

2,704,952

652,987

3,357,939

2,704,952

652,987

3,357,939

Debt

Finance leases

(187,774

)

(2,663

)

(190,437

)

Debts falling due within 1 year

(2,460

)

-

(2,460

)

Debts falling due after 1 year

(5,125

)

2,460

(2,665

)

(195,359

)

(203

)

(195,562

)

Total

2,509,593

652,784

3,162,377

1.	STATUTORY INFORMATION

James Laing & Sons 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 Company Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

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

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared on the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.

Going Concern

At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Significant judgements and estimates

In the application of the company'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 current and future periods.

Key sources of estimation uncertainty

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:

Costs to complete

The recognition of costs expensed against ongoing contracts requires estimation of costs to complete. These estimates impact the expected margin and therefore the margin recognised on these contracts. The company regularly reviews these estimates and updated them as appropriate.

Useful lives and deprecation of fixed assets

Depreciation rates are based on the estimated useful lives of assets, which is judgement exercised by management taking into account actual experience.

Turnover

Turnover represents amounts receivable from the supply and installation of kitchens, bathrooms and bedrooms, net of VAT.

Revenue from the supply only of kitchens, bathrooms and bedrooms is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probably that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue from contracts for the supply and installation of kitchens, bathrooms and bedrooms is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life or, if held under a finance lease, over the lease term, whichever is the shorter.

Improvements to property

-

25% on reducing balance

Plant and machinery

-

20% on reducing balance

Fixtures and fittings

-

15% on reducing balance

Motor vehicles

-

at variable rates on reducing balance

Computer equipment

-

20% on cost

The gain or loss 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.

Investments in subsidiaries

Fixed asset investments are stated at cost less provision for any impairment.

Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. 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 price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

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 probably 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 stocks, prepayments or other assets depending on their nature, and provided it is probable they will be recovered.

Financial instruments

The company has elected to apply the provisions of Section 11 'Basic Financial Instruments' and Section 12 'Other Financial Instruments Issues' of FRS 102 to all of its financial instruments.

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

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Impairment of financial assets

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset's original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Classification of financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Other financial liabilities

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Derecognition of financial liabilities

Financial liabilities are derecognised when the company's contractual obligations expire or are discharged or cancelled.

Equity instruments

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.